Calderon-Cardona, et al. v. JP Morgan Chase Bank, N.A., et al., 11 Civ. 3283 (S.D.N.Y. 2011)(DLC), presents an extended discussion of the requirements, and pitfalls, of a judgment-creditor’s efforts to collect on a judgment.  We posted on the earlier decision on liability in the case, which was decided by the District of Puerto Rico federal court.

The underlying case involved claims arising out of the terrorist attack at Lod Airport in Israel on May 30, 1972. The plaintiffs in this case included Puerto Rican persons who were pilgrims (or their families) visiting Israel and happened to be at the airport. Defendants in the action were North Korea and its instrumentality (the CGIB), who allegedly gave material support to the Japanese Red Army and the Popular Front for the Liberation of Palestine, the groups with most immediate responsibility. Defendants did not appear to defend themselves in the action, and the questions presented to the District Court included how a default judgment could be entered given the strictures of the Sovereign Foreign Immunities Act. 28 U.S.C. § 1605 et seq.  The federal district court found:

”North Korea’s demonstrated and well-known policy to encourage, support and direct a campaign of murder against civilians amply justifies the imposition of punitive damages against it and the CGIB. North Korea’s budget for the export of terrorism is not known. However, this Court will adopt the ‘typical punitive damages award of $300 million’ that has been awarded against the Islamic Republic of Iran because ‘[t]here is no reason to depart from settled case law regarding the amount of punitive damages in terrorism cases’.”

In the current decision by the Southern District of New York, the Court addressed judgment enforcement efforts that began with the petitioners serving a subpoena on the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”).   Petitioners there received a list of financial institutions holding blocked electronic funds transfers.  The question presented was whether these blocked funds were attachable for purposes of satisfying all or any part of the earlier federal court judgment.

The Southern District held they were not.  First, under the Terrorism Risk Assessment Act, the assets of North Korea were not assets of a terrorist or a terrorist organization — North Korea had been designated a state sponsor of terrorism in 1979, but the designation was rescinded in 2008.   The Court also found that blocked EFTs were not “blocked assets of [North Korea]”, relying on the Second Circuit’s decision Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009), on which we have also posted, which ruled that EFT’s “are neither the property of the originator nor the beneficiary while briefly in the possession of the intermediary bank”.

Finally, the Court held that the blocked funds were not attachable property under Section 1610(g) of the FSIA, essentially for the same reason:  “the blocked EFTs are neither property of North Korea nor any of its agencies or instrumentalities”.