Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re 650 Fifth Avenue and Related Properties

United States Court of Appeals, Second Circuit

August 9, 2019

IN RE: 650 FIFTH AVENUE AND RELATED PROPERTIES [*]

          Argued: May 1, 2019

         This is a civil action brought by the United States of America seeking forfeiture of property owned by the Claimants Alavi Foundation and 650 Fifth Avenue Company. In 2016, we reversed an order of the United States District Court for the Southern District of New York (Forrest, J.) granting summary judgment to the Government and remanded for the court to address certain open matters. On remand, the district court denied the Claimants' motion to compel discovery on their statute-of-limitations defense, granted summary judgment to the Government on the merits of the timeliness issue, and denied the Claimants' motion to suppress evidence seized pursuant to a defective search warrant. At the jury trial that followed, the court prohibited the Claimants from calling two former Alavi board members to testify, allowed the Government to play videotaped depositions of five former board members repeatedly invoking their Fifth Amendment privilege, and barred the Claimants from arguing that the Government improperly intimidated these witnesses. The court also ruled in favor of the Government on dozens of other challenged orders during its adjudication of the case. The jury ultimately found for the Government, and the court entered judgment ordering the forfeiture of the Claimants' property.

         We hold that the district court abused its discretion by denying the Claimants' motion for discovery on their statute-of-limitations defense and, accordingly, erroneously granted the Government's motion for summary judgment on the timeliness issue. We REVERSE the court's discovery order, VACATE the summary judgment order, and REMAND for discovery.

         We also hold that the district court erroneously denied the Claimants' motion to suppress by incorrectly concluding that the exclusionary rule's good- faith exception forgave the warrant's defects and by applying the wrong legal standard for the inevitable-discovery exception. We REVERSE the portion of the suppression order concerning the good-faith exception and VACATE and REMAND on inevitable discovery for the court to apply the correct standard.

         In addition, we find that the district court abused its discretion in its orders forbidding the former Alavi board members from testifying at trial, allowing the Government to play the videotaped Fifth Amendment invocations, and prohibiting the Claimants from mounting their preferred defense. We REVERSE in part and VACATE in part the orders underlying these decisions.

         In light of these holdings, we VACATE the judgment and REMAND for further proceedings consistent with this opinion.

          DANIEL S. RUZUMNA, Patterson Belknap Webb & Tyler LLP, New York, NY; JOHN GLEESON, Debevoise & Plimpton LLP, New York, NY (Melissa Ginsberg, Michael N. Fresco, Patterson Belknap Webb & Tyler LLP, New York, NY; Matthew E. Fishbein, Derek Wikstrom, Justin R. Horton, Debevoise & Plimpton LLP, New York, NY, on the brief), for Claimants- Appellants Alavi Foundation and 650 Fifth Avenue Company.

          MICHAEL D. LOCKARD, Assistant United States Attorney (Daniel M. Tracer, Daniel B. Tehrani, Assistant United States Attorneys, on the brief), for Geoffrey S. Berman, United States Attorney for the Southern District of New York, New York, NY.

          Before: PARKER, WESLEY, and CHIN, Circuit Judges.

          WESLEY, CIRCUIT JUDGE.

         This civil-forfeiture action considers whether the Government may seize 650 Fifth Avenue, a skyscraper in Midtown Manhattan, along with other real property and various bank accounts located throughout the United States. These assets are owned by the Alavi Foundation and 650 Fifth Avenue Company (the "Claimants"), entities that allegedly violated federal law through their relationships with the Islamic Republic of Iran. After a month-long trial, a jury ruled largely in favor of the Government, and the United States District Court for the Southern District of New York (Forrest, J.) entered judgment for the Government and ordered forfeiture of the assets. The Claimants appeal from that judgment and challenge over a dozen pretrial, trial, and posttrial orders.

         The district court committed numerous errors requiring us to reverse or vacate several of these orders. These errors also require us to vacate the judgment.

         First, the district court abused its discretion by denying the Claimants' motion to compel discovery of evidence they contend supports their theory that this action was untimely under the governing statute of limitations, 19 U.S.C. § 1621. We reverse the underlying order and remand for discovery. We also vacate the grant of summary judgment to the Government on the timeliness issue.

         Second, the district court erred in denying the Claimants' motion to suppress evidence obtained pursuant to a defective search warrant. We reverse the court's suppression order to the extent it applied the good-faith exception to the Fourth Amendment's exclusionary rule. The Government's failure to identify the warrant's glaring defects, or its decision to execute the warrant in spite of them, precludes a finding of good faith. As to its application of the inevitable-discovery exception, the court failed to follow the legal standard laid out in our prior decision. We vacate its order with respect to this exception and remand for the court to apply the correct legal standard.

         Third, the district court abused its discretion by barring two former Alavi board members from testifying at trial. We reverse the underlying order. The court also abused its discretion by allowing the Government to play at trial five videotapes of former board members repeatedly invoking their Fifth Amendment privilege against self-incrimination. We vacate the underlying orders. Lastly, the court abused its discretion by precluding the Claimants from presenting certain rebuttal evidence. We vacate the underlying orders.

         BACKGROUND[1]

         A. The Claimants

         Alavi is a New York not-for-profit corporation created in 1973 by Mohammad Reza Pahlavi, then Shah of Iran.[2] The Internal Revenue Service ("IRS") has classified Alavi as a charitable organization under § 501(c)(3) of the Internal Revenue Code.

         In 1974, Alavi acquired property located at 650 Fifth Avenue, New York, New York. One year later, it borrowed $42 million from Bank Melli, owned by the Government of Iran, to retire mortgages on the property and construct a 36-story skyscraper featuring retail and office space (the "Building"). For various reasons, Alavi ran into financial trouble in the 1980s.

         Assa Corporation ("Assa Corp."), which was a party below but is not a party to this appeal, is a New York corporation formed in 1989. It is wholly owned by Assa Company Limited ("Assa Ltd.," and collectively with Assa Corp., "Assa"), a corporation formed in Jersey, Channel Islands. In 1993, Bank Melli acquired a holding company that had come to own Assa. Two years later, Bank Melli transferred the holding company to private individuals. Despite this transfer, the Claimants agree that Bank Melli continued to control Assa after 1995, the year the relevant economic sanctions against Iran took effect.[3] Whether Alavi knew this fact is a disputed question at the center of this lawsuit.

         In 1989, Alavi entered into a partnership agreement with Assa to form 650 Fifth Ave. Co. under New York law. After receiving authorization from the Charities Bureau of the New York Attorney General's Office and the New York Supreme Court, Alavi transferred the Building, valued at $83.2 million at the time but subject to the Bank Melli mortgage, to the partnership. Assa contributed $44.8 million, which 650 Fifth Ave. Co. used to pay off the Bank Melli mortgage. Ultimately, Alavi owned 60% of 650 Fifth Ave. Co. and Assa owned 40%.[4] 650 Fifth Ave. Co. owned 100% of the Building.

         Today, Alavi is the managing partner of 650 Fifth Ave. Co. The partnership has no employees, and its primary operational activity is engaging outside companies to manage the Building.

         B. Pleadings, Early Developments, and Summary Judgment

         This action began on December 17, 2008, when the Government filed a complaint in the United States District Court for the Southern District of New York (Holwell, J.) seeking the forfeiture of property belonging to Assa and Bank Melli under 18 U.S.C. § 981(a)(1). The centerpiece of this property is the Building. The Government alleged that the property was traceable to violations of the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. § 1701 et seq, and to money-laundering transactions in violation of 18 U.S.C. §§ 1956 and 1957. In November 2009, the Government amended its forfeiture complaint to add certain property interests of the Claimants, including their interests in the Building. Along with the above-noted statutes, the amended complaint relied on the Iranian Transactions Regulations ("ITRs"), promulgated by the Department of Treasury's Office of Foreign Assets Control ("OFAC").[5] The ITRs forbid certain business activities with entities that the Government of Iran owns or otherwise controls. See 31 C.F.R. § 560. As relevant here, ITRs effective May 7, 1995 proscribe the knowing "exportation, reexportation, sale, or supply, directly or indirectly, from the United States, . . . of any goods, technology, or services to Iran or the Government of Iran." Id. § 560.204. The amended complaint alleged that Bank Melli, Assa, and Alavi are owned and controlled by the Government of Iran and that all three provided services to Iran in violation of the ITRs.

         In 2013, the district court (Forrest, J.)[6] granted summary judgment to the Government, ordering that Assa and the Claimants forfeit most of the property interests cited in the amended complaint. In re 650 Fifth Ave. & Related Props., No. 08 Civ. 10934 (KBF), 2013 WL 5178677, at *3 & n.14 (S.D.N.Y. Sept. 16, 2013); see also In re 650 Fifth Ave. & Related Props., No. 08 Civ. 10934 (KBF), 2014 WL 1516328, at *1 (S.D.N.Y. Apr. 18, 2014) (ordering forfeiture of additional Claimant property interests). Shortly thereafter, the Claimants-but not Assa-moved for final judgment as to their property interests. See In re 650 Fifth Ave., 830 F.3d at 86. The district court granted this motion, enabling the Claimants to appeal. Id.

         In 2016, we vacated the forfeiture judgment as it pertained to the Claimants. We remanded for the district court (1) to allow the Claimants to litigate their defense that the Government's action was untimely, which the court had rejected sua sponte, id. at 96-97; (2) to consider whether to suppress evidence the Government obtained pursuant to what we held was a defective search warrant, id. at 98-106; and (3) if the case survived these hurdles, to hold a trial on questions of material fact that we held the court improperly decided on summary judgment, id. at 93-95.

         C. Proceedings on Remand

         On remand, the Claimants moved to compel discovery pertinent to the statute-of-limitations issue and to suppress evidence the Government obtained during its illegal December 2008 search. The district court denied both motions. It also granted a motion by the Government to preclude two former Alavi board members from testifying at trial, issued orders permitting the Government to play five videotaped depositions of former Alavi board members repeatedly invoking their Fifth Amendment privilege against self-incrimination, and barred the Claimants from presenting certain evidence to rebut the adverse inferences suggested by the videotapes.

         The jury returned a verdict for the Government. It found that almost all the Claimants' property interests cited in the amended complaint were either traceable to or derived from the proceeds of an IEEPA violation. The jury also tied most of Alavi's property to money-laundering transactions. After resolving a handful of posttrial motions, the court entered final judgment for the Government and ordered the forfeiture of most of the property interests named in the amended complaint. The Claimants timely appealed.

         DISCUSSION

         This appeal raises three issues: (1) whether the district court abused its discretion by denying the Claimants' motion to compel discovery on their statute- of-limitations defense; (2) whether the court erroneously allowed the Government to rely on the good-faith and inevitable-discovery exceptions to the exclusionary rule in denying the Claimants' motion to suppress; and (3) whether the court abused its discretion in its orders concerning the former Alavi board members' Fifth Amendment invocations.

         I. The District Court Abused Its Discretion by Denying the Claimants' Request for Discovery on Their Statute-of-Limitations Defense.

         The relevant statute of limitations requires the Government to commence a civil-forfeiture action "within five years after the time when the alleged offense was discovered." 19 U.S.C. § 1621.

         A. Relevant Background[7]

         In 2016, we held that the district court erred in sua sponte denying the Claimants' defense that the Government's action was untimely without affording them notice or an opportunity to defend themselves. In re 650 Fifth Ave., 830 F.3d at 97. We emphasized that the record on this issue was "hardly developed at all," a fact that made the court's failure to authorize briefing particularly unjust. Id. The record was undeveloped, we explained, because "[t]he [district court] had repeatedly denied [the] Claimants' attempts to obtain discovery that might show when the Government learned of the Claimants' alleged forfeitable offenses." Id. at 97 n.28. We instructed the court on remand to "afford [the] Claimants a reasonable opportunity to respond before deciding the issue against them." Id. at 97.

         In December 2016, more than five months before trial, the Claimants moved to compel discovery in support of their statute-of-limitations defense. The district court denied the motion, holding that the Claimants had waived discovery on this issue by not seeking it during a discovery period running from 2012 through June 2013. The court acknowledged our finding that it had repeatedly denied the Claimants' discovery requests made during that period. But the district court disagreed; it asserted that it "did not deny [the Claimants'] attempts to obtain discovery regarding their statute of limitations defense[, ] principally because [they had] never made such attempts during the discovery period." In re 650 Fifth Ave., No. 08 Civ. 10934 (KBF), 2017 WL 775820, at *15. In the district court's view, our finding was erroneous because the Claimants "misrepresent[ed] the pre-appeal record and status of discovery that preceded the Second Circuit's opinion." Id. at *1; see also id. at *15 ("[The Claimants'] arguments made to the Second Circuit- and the accompanying record citations-provided a substantially incomplete (and misleading) picture of discovery in this case.").

         B. Analysis

         We review a district court's decision denying discovery for abuse of discretion. See In re Agent Orange Prod. Liab. Litig, 517 F.3d 76, 102 (2d Cir. 2008). "A district court abuses its discretion only when the discovery is so limited as to affect a party's substantial rights." Id. at 103 (citation and quotation marks omitted). The substantial right at issue here is that "[a] party must be afforded a meaningful opportunity to establish the facts necessary to support [its] claim." Id. 1. The sole basis for the district court's decision was its waiver finding. In December 2016, the Claimants sought to discover the following materials:

1. Records, reports, memoranda, correspondence, notes, and other documents evidencing and/or related to allegations that Claimants and/or Assa were controlled or influenced by, providing services to, or acting as a front for Iran and/or Bank Melli, directly or indirectly, contained in Government investigative files for which the investigation began on or before November 12, 2004, including but not limited to documents contained in [a series of enumerated FBI] investigative files and their related or cross-referenced files . . . .
2. Records, reports, memoranda, correspondence, notes, or other documents exchanged among the Government, on the one hand, and New York State or other state authorities, on the other hand, in connection with investigations of allegations that Claimants and/or Assa were controlled or influenced by, providing services to, or acting as a front for Iran and/or Bank Melli, directly or indirectly, including but not limited to documents to and from [certain state and local agencies] . . . .
3. Records, reports, memoranda, correspondence, notes, or other documents reflecting or relating to communications between Government agents or employees and [enumerated journalists] who authored [enumerated] articles . . ., and all documents identifying or relating to investigative steps or other efforts taken in response to [enumerated] articles or the allegations raised in them . . . .

J.A. 1216-18.[8] The Claimants argue that several of their earlier discovery requests covered the same materials.

         First, the Claimants made a May 2011 request seeking, among other things, "[a]ll internal files, records, reports, memoranda, correspondence, notes, or other documents collected, maintained, or reviewed by the Government relating to the Claimants, Assa, Iran, and current and former employees, directors, agents, and representatives of Claimants and Assa, relating in any way to the allegations in the Complaint." Id. at 1240. They also sought materials relating to the ownership and management of Assa. The Claimants argue that the Government produced some, but not all, of these materials in January 2013.

         Second, the Claimants sought to compel discovery in an April 2013 letter to the district court. The letter noted that "[t]he Government has . . . failed to make a complete production of documents [and particularly investigative files] from other federal agencies, including the IRS, Department of State, and OFAC," as well as the FBI's non-New York field offices. Id. at 846. It specifically contended that the Government had not produced the IRS's records "concerning the 1989 transaction by which the Fifth Avenue Company was formed." Id.

         Third, the Claimants made several requests after the discovery period closed. On July 9, 2013, they reiterated their demand for documents maintained by the above-noted federal agencies. On August 8, they asked the district court to compel the production of documents relating to OFAC's investigations of the Claimants. On August 30, they informed the court of their "belie[f] that OFAC (and the IRS) were aware or should have been aware of [the] Claimants' alleged violations of [IEEPA] as early as the mid-1990s." Id. at 893. They also reemphasized their wish to learn about OFAC's involvement in the investigation, explaining that this information "directly impact[s] whether the statute of limitations has run." Id.

         The district court dismissed the requests made during the discovery period. It framed them as "exceedingly broad and general" catchalls made for different purposes and faulted the Claimants for failing to "link[] specific categories of documents to [their] statute of limitations defense." In re 650 Fifth Ave., No. 08 Civ. 10934 (KBF), 2017 WL 775820, at *4. The court also refused to credit the requests submitted after its June 2013 discovery deadline.

         2. The district court abused its discretion by denying the Claimants' motion to compel discovery. As we held in 2016, a principal error in the court's sua sponte decision to reject the Claimants' statute-of-limitations defense was that the court acted on a "hardly developed" record and "without affording the Claimants any- let alone a full and fair-opportunity to present evidence as to the applicability of the defense." In re 650 Fifth Ave., 830 F.3d at 97. These shortcomings are as real today as they were in 2016. Although we did not instruct the court to authorize discovery on the timeliness issue, our characterization of the "hardly developed" record left little room for denying their request. The district court's bold finding that this Court was somehow duped by the Claimants on the first appeal-without serious pushback from the Government-is unsupported by the record.

         To be sure, discovery on remand would have taken time. But the parties had time. The Claimants moved to compel more than five months before the planned trial. At that point, the proceedings were already paused because our remand order left numerous pretrial issues pending before the district court. The court offered no compelling reason why the Government would have been unduly prejudiced or burdened by the delay, if any, of limited discovery on the Claimants' potentially dispositive affirmative defense. Similarly, the Government's brief barely gives lip service to the notion that it would have been prejudiced or burdened.

         Instead, the district court relied exclusively on a finding of waiver. The premise of this finding was not that the Claimants had never sought to discover materials relevant to the statute-of-limitations issue, but that their requests were either too broad to put the Government on notice of what they wanted or were made for different purposes. See In re 650 Fifth Ave., No. 08 Civ. 10934 (KBF), 2017 WL 775820, at *3-4. Neither finding stands up to scrutiny.

         The Claimants' May 2011 request best illustrates the district court's error. Subject to any confidentiality rules, the Claimants were entitled to review the information that formed the basis of a complaint seeking forfeiture of their property. Had the Government provided those materials, the Claimants likely could have discerned when the statute of limitations began to run.[9] While the Claimants' request was broad, the district court clearly erred by deeming it so "exceedingly broad and general" to justify a finding that the Claimants never sought the materials at all. See id. at *4. The qualification that the documents must "relat[e] in any way to the allegations in the Complaint" adequately communicated to the Government the scope of the discovery that the Claimants had demanded. J.A. 1240.[10]

         The district court also faulted the Claimants because they did not alert the Government that they wished to use this information to support their statute-of- limitations defense. But their request was clearly relevant to this defense, as it went to the basis for the Government's allegations. The Claimants were not required to disclose every use they might find for the evidence they requested. Particularly at the early stages of the litigation when the Claimants made some of these demands, their request for a broad array of documents relevant to many potential issues in this complex case was reasonable.[11]

         The district court denied the Claimants "a meaningful opportunity to establish the facts necessary to support [their] claim." See In re Agent Orange, 517 F.3d at 103. We reverse the order denying the motion to compel and vacate the order granting summary judgment to the Government on the statute-of- limitations issue. On remand, the district court shall ensure that the Government fulfills its discovery obligations to the extent the law requires.

         II. The District Court Erroneously Denied the Claimants' Motion to Suppress Evidence Obtained Under the Defective Search Warrant.

         A. Relevant ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.