Second Circuit Criminal Law Blog

Second Circuit Vacates Forfeiture Order

In In re 650 Fifth Avenue and Related Properties, 14-2027 (Kearse, Raggi, Wesley), the Second Circuit vacated an award forfeiting the appellants’—the Alavi Foundation and 650 Fifth Avenue Company—properties to the United States.  The lower court ordered the forfeiture of the properties, including inter alia, a 36-story office building located at 650 Fifth Avenue in Manhattan, on two grounds:  (1) pursuant to 18 U.S.C. § 981(a)(1)(C) as proceeds traceable to violations of the International Emergency Powers Act and certain Iranian Transactions Regulations issued by the Department of the Treasury, and (2) as property involved in money laundering transactions forfeitable under 18 U.S.C. § 981(a)(1)(A).  On appeal, the Circuit identified material issues of fact foreclosing a ruling as a matter of law with respect to whether the appellants acted with the requisite knowledge to support a forfeiture order.  The Court also held that the lower court erred in sua sponte considering and rejecting the appellants’ possible statute of limitations defense without affording notice and a reasonable time to respond.  Finally, the Court held that the lower court erred in denying the appellant’s motion to suppress evidence seized pursuant to a challenged warrant because the exclusionary rule applies in civil forfeiture cases and the lower court failed to make the particularized findings necessary to conclude that the inevitable discovery exception to the exclusionary rule applied in this instance.  The Circuit remanded the case to the Southern District of New York (Forrest, J.) for further proceedings consistent with the ruling. 

In a related appeal—Kirschenbaum, et al. v. 650 Fifth Avenue and Related Properties, 14-1963 (Kearse, Raggi, Wesley), the Second Circuit also vacated an award of summary judgment turning over certain of the appellants’ properties to the plaintiffs as judgement creditors.  The lower court ordered turnover of the assets in question pursuant to the Foreign Sovereign Immunities Act (FSIA) and the Terrorism Risk Insurance Act (TRIA).  The Court held that because the appellants are neither foreign sovereigns nor agencies or instrumentalities thereof under the FSIA, the plaintiffs could not pursue execution under that statute.  Additionally, the Court held that there are outstanding questions of material fact as to the status of the appellants as agencies or instrumentalities of Iran and their properties as “blocked assets” under the TRIA that prevent summary judgment of the plaintiffs’ claims under that statute.  The Circuit remanded the case to the Southern District of New York (Forrest, J.) for further proceedings consistent with the ruling. 

Patterson Belknap Webb & Tyler LLP represents the Alavi Foundation and 650 Fifth Avenue Company in these actions.

-By Jacqueline L. Bonneau and Harry Sandick