Levin et al v. Bank of New York et al

MEMORANDUM OF LAW in Support re: 394 CROSS MOTION to Discharge.CROSS MOTION for Attorney Fees.. Document

S.D.N.Y.June 17, 2011

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK --------------------------------------------------------------x JEREMY LEVIN and DR. LUCILLE LEVIN, : Plaintiffs, : -against- : BANK OF NEW YORK, et al., : Defendants. : --------------------------------------------------------------x Case No. 09 Civ. 5900 (RPP) (MHD) AND RELATED THIRD-PARTY PROCEEDINGS --------------------------------------------------------------x MEMORANDUM OF LAW IN SUPPORT OF JPMORGAN CHASE AND THE BANK OF NEW YORK MELLON’S CROSS-MOTION FOR A DISCHARGE ORDER AND RECOVERY OF ATTORNEYS’ FEES AND EXPENSES Levi Lubarsky & Feigenbaum LLP 1185 Avenue of the Americas, 17th Floor New York, NY 10036 Tel. No. (212) 308-6100 Facsimile No. (212) 308-8830 Attorneys for Defendants and Third-Party Plaintiffs JPMorgan Chase & Co., JPMorgan Chase Bank, N.A., and The Bank of New York Mellon Case 1:09-cv-05900-RPP -MHD Document 396 Filed 06/17/11 Page 1 of 8 MEMORANDUM OF LAW IN SUPPORT OF JPMORGAN CHASE AND THE BANK OF NEW YORK MELLON’S CROSS-MOTION FOR A DISCHARGE ORDER AND RECOVERY OF ATTORNEYS’ FEES AND EXPENSES Defendants and Third-Party Plaintiffs JPMorgan Chase & Co., JPMorgan Chase Bank, N.A. (together, “JPMorgan”) and The Bank of New York Mellon (“BNY Mellon”) (the “Cross-Moving Parties”) submit this memorandum of law, together with the declaration of J. Kelley Nevling, Jr. executed on June 17, 2011 (the “Nevling Declaration”), in support of their motion that in the event and to the extent that this Court determines to award any of the JPM Phase 1 Assets or the BNYM Phase 1 Assets (using those terms as they are defined in the Nevling Declaration) to the plaintiffs or any of the third-party defendants in these proceedings, for the entry of a judgment in the form of Exhibit A to the Nevling Declaration, (1) discharging the Cross-Moving Parties from liability to other parties with respect to any of the JPM Phase 1 Asset or the BNYM Phase 1 Assets that may be awarded to any judgment creditor of the Islamic Republic of Iran, (2) making provision for the award to the Cross-Moving Parties of the reasonable attorneys’ fees and disbursements incurred by them in connection with the third-party proceedings for interpleader relief that they have commenced in connection with these proceedings, as provided in Exhibit A, and (3) incorporating the other modifications made by Exhibit A. Case 1:09-cv-05900-RPP -MHD Document 396 Filed 06/17/11 Page 2 of 8 2 ARGUMENT I THIS COURT SHOULD ENTER AN ORDER DISCHARGING THE CROSS-MOVING PARTIES FROM LIABILITY TO ANY PERSON WITH RESPECT TO AMOUNTS TURNED OVER TO SATISFY ANY JUDGMENT AGAINST IRAN The Cross-Moving Parties have commenced a number of interpleader actions against other judgment creditors of the Islamic Republic of Iran and various persons who were parties to or participants in the blocked wire transfers that give rise to the JPM Phase 1 Asset and the BNYM Phase 1 Assets. These actions were based on various provisions of federal and state law 1 including Rule 22 (“rule interpleader,” authorizing the use of interpleader by a party exposed to a risk of “double or multiple liability”), 28 U.S.C. §§ 1335 and 2361 (“statutory interpleader,” authorizing a court, in a case where there is minimal diversity among the interpleaded parties, to “discharge [the] plaintiff [in the interpleader action] from further liability,” issue a permanent injunction “against instituting or prosecuting any other proceeding affecting the property at issue” and “make all appropriate orders to enforce its judgment”), N.Y. Banking Law § 134, subd. 6 (“In all actions against any bank . . . to recover for moneys on deposit therewith,” court may join all potential claimants to the funds in question as “parties defendant thereto . . . [and] determine the rights and interests of the several parties . . . in and to such funds”); CPLR § 1006(f) (In an interpleader action, the “stakeholder may move for an order discharging him from liability in whole or in part to any party”). In interpleader proceedings that are properly commenced under these statutes, the courts routinely enter orders discharging the interpleading party from 1 Under Rule 69, proceedings in aid of execution on a judgment “must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies.” Case 1:09-cv-05900-RPP -MHD Document 396 Filed 06/17/11 Page 3 of 8 3 liability at such time as the funds are awarded to the proper claimants. See, e.g., John Hancock Mut. Life Ins. Co. v. Kraft, 200 F.2d 952, 953 (2d Cir. 1953) (affirming a district court decision that “discharged the [interpleading party] from liability” in Rule 22 interpleader action). Such orders have been entered in interpleader actions brought in conjunction with turnover proceedings based on TRIA § 201(a) to enforce judgments against state sponsors of terrorism. See; e.g., Hausler v. JP Morgan Chase Bank, N.A., 740 F. Supp. 2d 525, 541-42 (S.D.N.Y. 2010); Weininger v. Castro, 462 F. Supp. 2d 457, 503 (S.D.N.Y. 2006) (In action under TRIA § 201(a) to enforce a judgment against Cuba, a bank that brought a Rule 22 interpleader action was entitled to be “fully discharged . . . from any and all deposit obligations or other liabilities” to adverse claimants); Daliberti v. J.P. Morgan Chase & Co., 02 Civ. 7642, 9773 and 10157 (JES), 2003 WL 340734 (S.D.N.Y. 2003) (In action based on TRIA § 201(a) to enforce a judgment against Iraq, Court “discharged [the interpleading bank] pursuant to CPLR § 5209 to the full extent permitted by law or equity . . . , from any and all obligations or liability to the Republic of Iraq . . . or to any other person, including the United States, with respect to the funds turned over pursuant hereto”). The final order entered in the Weininger case not only granted the bank stakeholder in that action, which was JPMorgan Chase Bank, N.A., a discharge from liability, but also “restrained and enjoined [the interpleaded defendants] from instituting or prosecuting any claim or action against JPM Chase . . . in any jurisdiction arising from or relating to any claim to the blocked assets” turned over to the plaintiffs. Id. at 503. Case 1:09-cv-05900-RPP -MHD Document 396 Filed 06/17/11 Page 4 of 8 4 The Cross-Moving Parties have therefore established their right to a discharge order to the extent that any judgment creditors of the Islamic Republic of Iran are awarded any of the JPM Phase 1 Asset or the BNYM Phase 1 Assets. II THE CROSS-MOVING PARTIES ARE ENTITLED TO RECOVER THEIR COSTS AND ATTORNEYS’ FEES INCURRED IN CONNECTION WITH THEIR INTERPLEADER ACTIONS It is also well established that a party that institutes an interpleader action has the right to recover its costs and attorneys’ fees. See, e.g., Septembertide Publishing, B.V. v. Stein & Day Publishing, Inc., 884 F.2d 675, 683 (2d Cir. 1989) (“A disinterested stakeholder who asserts interpleader is entitled to be awarded costs and attorney’s fees”); A/S Krediit Pank v. Chase Manhattan Bank, 303 F.2d 648, 649 (2d Cir. 1962) (“[A] defendant properly invoking interpleader is entitled to costs and attorneys’ fees”); Hausler, 740 F. Supp. 2d at 452 (“Respondents [defendant banks in turnover proceeding to enforce a judgment against the Republic of Cuba by executing on blocked funds held by the banks] will be entitled to submit an application for reasonable attorneys’ fees and costs”); Weininger, 462 F. Supp.2d 501-02 (In an action to enforce a judgment under TRIA § 201(a), bank that commenced third-party interpleader action was directed to submit an application for costs and attorneys’ fees). The Court in Weininger observed that “[a]ttorneys’ fees and costs are generally awarded to a disinterested stakeholder who has ‘expended time and money participating in a dispute not of [its] own making.” Id. at 501, quoting from Fidelity Brokerage Services, LLC v. Bank of China, 192 F. Supp. 2d 173, 183 (S.D.N.Y. 2002). 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