Background
Judgment creditors of the Islamic Republic of Iran sought to enforce billions of dollars in judgments by attempting to turn over approximately one point six eight billion dollars in bond proceeds allegedly owned by Bank Markazi. The proceeds were processed through a chain of banks including Clearstream Banking, S.A., Banca UBAE, S.p.A., and JPMorgan Chase Bank, N.A. The plaintiffs argued the assets were held as United States dollars in New York City, while the defendants contended the assets were book entries located in Luxembourg. Prior litigation, Peterson I, resulted in settlement agreements between some plaintiffs and the banks that released certain claims, but the current plaintiffs included individuals who were not parties to that earlier case.
The court’s reasoning
The Court of Appeals reviewed the district court’s dismissal of non-turnover claims and its finding that the assets were located abroad. The court determined that the Clearstream settlement agreement was binding only on plaintiffs who were parties to the prior Peterson I litigation. The court found plain error in the district court’s application of the settlement to plaintiffs who were not parties to that earlier case. Regarding the turnover claims, the court concluded that while the assets may be located abroad, New York State law allows a court to exercise in personam jurisdiction to direct a non-sovereign in possession of foreign sovereign assets to bring those assets to New York. However, the assets will not be subject to turnover unless the district court finds that in personam jurisdiction exists and that the assets are not protected by execution immunity.
What it means going forward
The decision requires the district court to conduct further proceedings to determine the location of the assets and whether they are subject to turnover under New York law, while ensuring that non-party plaintiffs are not bound by prior settlement agreements they did not sign.
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