IN RE: 650 FIFTH AVENUE AND RELATED PROPERTIES [*]
Argued: May 1, 2019
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
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
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
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
light of these holdings, we VACATE the
judgment and REMAND for further proceedings
consistent with this opinion.
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
Before: PARKER, WESLEY, and CHIN, Circuit Judges.
WESLEY, CIRCUIT JUDGE.
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.
district court committed numerous errors requiring us to
reverse or vacate several of these orders. These errors also
require us to vacate the judgment.
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.
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.
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.
is a New York not-for-profit corporation created in 1973 by
Mohammad Reza Pahlavi, then Shah of Iran. The Internal
Revenue Service ("IRS") has classified Alavi as a
charitable organization under § 501(c)(3) of the
Internal Revenue Code.
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
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. Whether Alavi knew this fact
is a disputed question at the center of this lawsuit.
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
650 Fifth Ave. Co. owned 100% of the Building.
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
Pleadings, Early Developments, and Summary Judgment
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"). 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.
2013, the district court (Forrest, J.) 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
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
Proceedings on Remand
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.
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.
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.
The District Court Abused Its Discretion by Denying the
Claimants' Request for Discovery on Their
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.
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.
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.").
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. The Claimants argue that several of their
earlier discovery requests covered the same materials.
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.
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."
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."
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
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.
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.
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.
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. 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.
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.
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.
The District Court Erroneously Denied the Claimants'
Motion to Suppress Evidence Obtained Under the Defective