Case 17-3278, Document 171, 04/20/2018, 2285063, Page1 of 117 17-3278(L) 17-3243, 17-3251, 17-3254, 17-3255, 17-3260, 17-3261, 17-3262, 17-3264, 17-3265, 17-3267, 17-3268, 17-3269, 17-3271, 17-3272, 17-3276 IN THE United States Court of Appeals FOR THE SECOND CIRCUIT dKIRSCHENBAUM, et al., Plaintiffs-Appellees, —against— 650 FIFTH AVENUE COMPANY, et al., Defendants-Appellants. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK BRIEF FOR DEFENDANTS-APPELLANTS ALAVI FOUNDATION AND 650 FIFTH AVENUE COMPANY DANIEL S. RUZUMNA JOHN GLEESON DIANA M. CONNER MATTHEW E. FISHBEIN LEIGH E. BARNWELL DEBEVOISE & PLIMPTON LLP PATTERSON BELKNAP WEBB 919 Third Avenue & TYLER LLP New York, New York 10022 1133 Avenue of the Americas (212) 909-6000 New York, New York 10036 (212) 336-2000 Attorneys for Defendants-Appellants Alavi Foundation and 650 Fifth Avenue Company Case 17-3278, Document 171, 04/20/2018, 2285063, Page2 of 117 CORPORATE DISCLOSURE STATEMENT The Alavi Foundation is a not-for-profit corporation organized under the laws of New York. The Alavi Foundation has no parent corporation, and no publicly-held corporation owns 10% or more of its stock. The 650 Fifth Avenue Company is a partnership organized under the laws of New York. The 650 Fifth Avenue Company has no parent corporation, and no publicly-held corporation owns 10% or more of its stock. i Case 17-3278, Document 171, 04/20/2018, 2285063, Page3 of 117 TABLE OF CONTENTS Page TABLE OF AUTHORITIES ................................................vi PRELIMINARY STATEMENT............................................1 STATEMENT OF SUBJECT MATTER AND APPELLATE JURISDICTION .............................................6 STATEMENT OF THE ISSUES PRESENTED...................6 STATEMENT OF THE CASE..............................................7 A. The Parties..................................................................7 1. The Alavi Foundation ....................................7 2. The Fifth Avenue Company...........................9 3. The Iran Creditors ........................................11 B. The Initial Litigation and the Prior Appeal..............12 1. The Government’s Forfeiture Action...........12 2. The Iran Creditors’ Actions .........................13 3. The 2013 Summary Judgment Motions and the Prior Appeal ...........................................15 C. The Proceedings on Remand....................................17 1. The Proceedings in Advance of Trial...........17 2. The Consolidated Trial.................................18 a. The Iran Creditors’ Case ..............................18 b. The Defendants’ Case ..................................26 3. The District Court’s Decision ......................30 SUMMARY OF ARGUMENT ...........................................31 ii Case 17-3278, Document 171, 04/20/2018, 2285063, Page4 of 117 ARGUMENT .......................................................................36 I. The District Court Erred by Ordering Execution against the Fifth Avenue Company’s Properties Pursuant to the Foreign Sovereign Immunities Act in Disregard of This Court’s Mandate...............................................36 A. The Mandate Rule Prohibited the District Court from Reopening the FSIA § 1610(b)(3) Claims on Remand ..................................................................................36 B. FSIA § 1610(b)(3) Does Not Permit Execution on the Property of an Agency or Instrumentality in Satisfaction of a Judgment against a Foreign State..41 C. The Fifth Avenue Company Does Not Constitute an Agency or Instrumentality of Iran under the FSIA ..45 1. The District Court Disregarded This Court’s Binding Determination That the Partnership Does Not Qualify as an Agency or Instrumentality of Iran under the FSIA........46 2. The District Court Erred in Determining That the Partnership Is an Agency or Instrumentality of Iran under the FSIA........47 a. The Partnership Is a Citizen of New York...48 b. The Partnership Is Neither Majority-Owned by Iran Nor an Organ of Iran........................52 II. The District Court Erred by Ordering Execution against Defendants’ Properties Pursuant to the Terrorism Risk Insurance Act .........57 A. The District Court Improperly Denied Defendants’ Seventh Amendment Right to a Jury Trial on the TRIA Claims ............................................................57 iii Case 17-3278, Document 171, 04/20/2018, 2285063, Page5 of 117 1. Defendants Are Constitutionally Entitled to a Jury Trial on the TRIA Claims ....................58 2. Defendants Did Not Waive Their Right to a Jury Trial ......................................................63 a. Defendants Did Not Knowingly Waive Their Right to a Jury Trial in 2013 ........................63 b. The Iran Creditors’ Material Change in Their TRIA Theory on Remand Revived Defendants’ Right to a Jury Trial.................67 B. The District Court Incorrectly Determined That Defendants Constitute Agencies or Instrumentalities of Iran under the TRIA.............................................69 1. The District Court’s Overbroad TRIA Standard Is Not Supported by Precedent or Legislative Intent..........................................70 2. The District Court’s TRIA Standard Violated the Due Process Clause’s Prohibition on Disproportionate Civil Liability...................79 3. The District Court Failed to Analyze Defendants’ Status as of the Time of Filing of the Complaints .............................................82 4. Defendants Do Not Qualify as Agencies or Instrumentalities of Iran under a Proper TRIA Analysis........................................................84 C. The District Court Erred by Ordering Execution against Property That Does Not Constitute “Blocked Assets” under the TRIA ...........................................90 III. The District Court’s Judgments Should Be Vacated Because Its Erroneous Evidentiary Rulings Substantially Prejudiced Defendants’ Case..........................................................................92 iv Case 17-3278, Document 171, 04/20/2018, 2285063, Page6 of 117 IV. The Case Should Be Assigned to a Different District Judge on Remand to Ensure Impartiality...............................................................95 CONCLUSION....................................................................99 CERTIFICATE OF COMPLIANCE .................................100 v Case 17-3278, Document 171, 04/20/2018, 2285063, Page7 of 117 TABLE OF AUTHORITIES Page(s) Cases Aetna Ins. Co. v. Kennedy, 301 U.S. 389 (1937).......................................................63 Armstrong v. Guccione, 470 F.3d 89 (2d Cir. 2006).............................................98 Bailey v. Grand Trunk Lines New England, 805 F.2d 1097 (2d Cir. 1986).........................................66 Beacon Theatres v. Westover, 359 U.S. 500 (1959).................................................58, 59 BMW of N. Am. v. Gore, 517 U.S. 559 (1996).......................................................80 Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257 (1989).......................................................79 Calderon-Cardona v. Bank of New York Mellon, 770 F.3d 993 (2d Cir. 2014)...........................................71 Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558 (1990).......................................................60 City of Monterey v. Del Monte Dunes, 526 U.S. 687 (1999).......................................................59 vi Case 17-3278, Document 171, 04/20/2018, 2285063, Page8 of 117 ConnTech Dev. Co. v. Univ. of Conn. Educ. Props., 102 F.3d 677 (2d Cir. 1996)...........................................51 Cooper Indus. v. Leatherman Tool Grp., Inc., 532 U.S. 424 (2001)...........................................80, 81, 82 Curtis v. Loether, 415 U.S. 189 (1974)...........................................58, 59, 61 Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1962).......................................................60 Dimick v. Scheidt, 293 U.S. 474 (1935).......................................................63 Dole Food Co. v. Patrickson, 538 U.S. 468 (2003)................................................passim Eberhard v. Marcu, 530 F.3d 122 (2d Cir. 2008).....................................58, 59 Edison v. Douberly, 604 F.3d 1307 (11th Cir. 2010)................................76, 77 Edlow International Co. v. Nuklearna Elektrarna Krsko, 441 F. Supp. 827 (D.D.C. 1977) ....................................50 European Cmty. v. RJR Nabisco, Inc., 764 F.3d 129 (2d Cir. 2014).....................................54, 55 F5 Capital v. Pappas, 856 F.3d 61 (2d Cir. 2017).............................................46 FDIC v. Providence College, 115 F.3d 136 (2d Cir. 1997)...........................................90 vii Case 17-3278, Document 171, 04/20/2018, 2285063, Page9 of 117 Filler v. Hanvit Bank, 378 F.3d 213 (2d Cir. 2004)....................................passim Fischer Diamonds, Inc. v. Andrew Meyer Designs, L.L.C., No. 06 Civ. 2737, 2006 U.S. Dist. LEXIS 41362 (E.D.N.Y. June 21, 2006)....................................61 Garcia v. State Univ. of New York Health Scis. Ctr., 280 F.3d 98 (2d Cir. 2001)......................................passim Gates v. Syrian Arab Republic, No. 11 Civ. 8715, 2013 U.S. Dist. LEXIS 45327 (N.D. Ill. Mar. 29, 2013) .....................................70 Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989).........................................................59 Great-West Life & Annuity Ins.