Hausler v. JP Morgan Chase Bank, N.A.

Citations: 127 F. Supp. 3d 17; 2015 U.S. Dist. LEXIS 102819; 2015 WL 5236481Docket: No. 09-cv-10289 (VM)

Court: District Court, S.D. New York; August 4, 2015; Federal District Court

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Jeannette Hausler, as the successor and personal representative of Robert Otis Fuller’s estate, seeks to enforce a $100 million Florida state court judgment against the Republic of Cuba and associated parties for alleged torture and extrajudicial killing. To achieve this, Hausler filed the Tranche VI Petition to compel JPMorgan Chase Bank (JPM Chase) to turn over funds from accounts it holds. JPM Chase responded with an Interpleader Petition, seeking to resolve conflicting claims from Hausler and the Fundación Benefica Nicolas S. Acea and its trustees. The document outlines various legal frameworks, including the Cuban Asset Control Regulations (CACRs), the Office of Foreign Assets Control (OFAC), the Foreign Sovereign Immunities Act (FSIA), and the Terrorism Risk Insurance Act (TRIA). It also addresses issues of judicial estoppel, standing, and requests for amendments and stays related to the interpleader actions. The court is tasked with adjudicating the appropriateness of interpleader relief, the status of blocked assets under TRIA, and the necessary inclusion of OFAC as a party. Further discussions and correspondence have prompted additional considerations for the court regarding these petitions.

The Court is evaluating the Tranche VI Petition, Interpleader Petitions, and other party requests, presuming familiarity with prior court orders and facts. In 2005, Hausler initiated a lawsuit against the Judgment Debtors under the Foreign Sovereign Immunities Act (FSIA) in Florida, resulting in a state court judgment of $100 million in compensatory damages and $300 million in punitive damages for torture and extrajudicial killing, without the Judgment Debtors' participation. Hausler sought and obtained a full faith and credit ruling for this judgment in federal court in Florida and subsequently registered it in New York. Hausler intends to enforce this judgment against the Judgment Debtors by requesting asset turnover held by garnishee banks under the Terrorism Risk Insurance Act (TRIA), focusing on funds blocked by the Cuban Asset Control Regulations (CACRs).

The CACRs, established in 1963 by the Office of Foreign Assets Control (OFAC), aim to block transactions involving Cuban interests and define such interests broadly, including various financial assets. They also outline procedures for unblocking assets mistakenly identified as Cuban. The FSIA governs jurisdiction over civil actions against foreign state defendants, allowing exceptions to sovereign immunity, particularly for states designated as sponsors of terrorism under circumstances that lead to harm to U.S. citizens, as specified in Section 1605A of FSIA.

Cuba was designated a state sponsor of terrorism by the U.S. Department of State from March 1, 1982, to May 29, 2015, under Section 6(j) of the Export Administration Act of 1979. Despite a valid judgment against a foreign sovereign under the Foreign Sovereign Immunities Act (FSIA), that state's property remains immune from attachment and execution, except as specified in Sections 1610 and 1611 of the FSIA. The Terrorism Risk Insurance Act (TRIA) allows for the execution of blocked assets of a terrorist party following a judgment based on acts of terrorism, subject to certain conditions. The current case focuses on whether specific funds can be classified as "blocked assets" of Cuba under TRIA.

On March 26, 2009, a writ of execution was issued allowing Hausler to enforce a $99 million Florida judgment against the Judgment Debtors. Subsequently, Hausler instructed the Marshal to levy the writ on JPM Chase, which was believed to hold funds for the Judgment Debtors. JPM Chase provided documentation of blocked property per the Cuban Asset Control Regulations (CACRs) but indicated it could not release the funds without a determination of their eligibility for execution under TRIA. Hausler filed the Tranche VI Petition on July 13, 2011, seeking turnover of the Blocked Assets held by JPM Chase in three accounts, which were allegedly established for Cuban entities (a hospice and two schools) and collectively valued at approximately $3 million as of June 30, 2009. Hausler claimed that the Fundación, the named account holder, was nationalized by the Republic of Cuba after being organized before Fidel Castro's regime.

Hausler claims that the funds in the accounts are owned by a terrorist state agency, making them subject to execution under TRIA Section 201(a). He requests the Court to order JPM Chase to surrender these funds, including interest and marshal’s fees, in partial fulfillment of a Florida Judgment, along with additional relief as deemed appropriate. Proper service of the related Tranche VI Petition on the Judgment Debtors is documented in Docket Numbers 432-39 from August 24-25, 2011. JPM Chase responded on August 18, 2011, denying the Tranche VI Petition and asserting two counterclaims. The first seeks a judgment against the petition, while alternatively, JPM Chase seeks findings to limit its liability, including identification of the funds and the recipient, validation of the execution rights under TRIA, confirmation of proper service of the Florida Judgment, and protection from further obligations regarding the turned-over amount. Additionally, JPM Chase requests costs and attorney’s fees related to Hausler’s enforcement efforts to be covered from any awarded amount. On September 1, 2011, JPM Chase filed an Interpleader Petition, acknowledging other claimants to the Blocked Assets and aiming to involve all parties with claims, including the Fundacion and its trustees. JPM Chase argues that conflicting claims could lead to multiple liabilities and seeks a Court order to protect its interests, echoing similar findings requested in its initial response to the Tranche VI Petition.

JPM Chase requested a judgment in its favor under Rule 22 of the Federal Rules of Procedure, aiming to prevent the Fundacion Claimants from pursuing claims related to the Blocked Assets, conditional upon those assets being turned over by court order. JPM Chase sought to be dismissed from the proceedings, directing the Fundacion Claimants and Hausler to resolve their disputes regarding the Blocked Assets independently. Additionally, JPM Chase requested an award for reasonable attorney’s fees and costs, to be paid from the amounts turned over as per the Tranche VI Petition, along with any other appropriate relief.

Hausler filed an answer on September 22, 2011, asserting two affirmative defenses: the right to full recovery under the Terrorism Risk Insurance Act (TRIA) and the need to amend his answer due to the vagueness of the Interpleader Petition. On January 17, 2012, the Fundacion Claimants informed the Court of their intention to file a motion to dismiss the Interpleader Petition, citing a failure to join a necessary party and sought clarification on the timeline for their response. The Court denied their request, emphasizing the importance of judicial economy by waiting for rulings on pending motions.

Subsequently, on January 24, 2012, the Fundacion Claimants submitted their answer to the Interpleader Petition, asserting their claim to the funds in the Blocked Accounts and stating these funds were not subject to execution by Hausler. They identified themselves as the rightful account holders and claimed the Blocked Accounts were not subject to execution under TRIA, were not confiscated by Cuba, and that U.S. public policy does not recognize confiscatory takings. They also argued that the Tranche VI Petition should be dismissed for not including a necessary party, OFAC, and contended that the funds were improperly blocked as they did not constitute transactions under applicable regulations. The Fundacion Claimants reserved the right to amend their answer based on discovery.

In response to Hausler II, Hausler submitted a letter on March 2, 2012, arguing that the Fundacion Claimants’ affirmative defenses were legally unfounded and indicated plans to address these issues in a future submission seeking dispositive relief.

On March 15, 2012, Hausler submitted a letter to the Court opposing defenses raised by the Fundación Claimants in the Interpleader Answer, expressing intent to file a motion for summary judgment regarding the Tranche VI Petition, and requesting a pre-motion conference. In response, the Fundación Claimants sent a letter on March 19, 2012, stating their opposition to any summary judgment motion by Hausler. A status conference was held on April 10, 2012, with participants including Hausler, JPM Chase, and the Fundación Claimants, to discuss related correspondence and the necessary discovery for the Tranche VI and Interpleader Petitions. No further filings regarding these petitions occurred until February 13, 2015.

On that date, the Fundación Claimants requested a status conference about the funds held at JPM Chase related to the Tranche VI Petition. They informed the Court about a motion filed by judgment creditor Gustavo Villoldo in a related case, challenging the standing of the Fundacion Trustees. The Court directed Hausler to respond by February 20, 2015. On that date, Hausler reported that the Villoldo court had denied the Trustees' motion to dismiss and scheduled an evidentiary hearing regarding their authority over the Fundación's assets. Hausler provided a transcript showing that the Trustees claimed to represent a different foundation established in Miami, not the Fundación. The Court indicated no immediate action was required and requested updates on relevant developments in the Florida proceedings. Subsequently, on March 4, 2015, the Fundación Claimants submitted another letter to the Court, including a Notice of Consent to Relief.

On February 26, 2015, the Fundacion Trustees filed a notice in the Villoldo Florida proceedings indicating that Alcazar, Bastamante, and Silva lacked authority to act on behalf of the Fundacion controlled by Defendant Cuba. On March 4, 2015, counsel for the Fundacion Claimants requested a pre-motion conference to seek permission to withdraw from their representation and to stay the action to allow for an appropriate representative to appear for the Fundacion. They mentioned ongoing discussions with the U.S. Attorney's Office and a potential approach to the New York State Attorney General’s Office. Later that day, Hausler submitted a letter arguing against the Fundacion Claimants' requests, claiming that the Villoldo court had issued an order stating the Claimants were not Trustees, had no authority or interest in the Fundacion's assets, and that the Fundacion and its assets had been nationalized by Cuba. Hausler contended that the Claimants had no standing in the current proceedings and characterized their requests as delay tactics. He urged the court to deny their motions and grant the Tranche VI Turnover Petition. The Court subsequently ordered all parties with an interest in the matter to respond by March 10, 2015. On March 5, JPM Chase submitted a letter supporting the Fundacion Claimants' request for a pre-motion conference and expressed the need to evaluate the implications of the Florida Order on their responsibilities regarding the Fundacion’s deposits. On March 10, counsel for the Fundacion Claimants reiterated their request for a pre-motion conference and sought permission to withdraw as counsel.

Counsel for the Fundacion Claimants stated that due to developments in the Villoldo Florida case, there is currently no trustee available for consultation, which restricts their ability to act on behalf of the Fundacion in accordance with the Rules of Professional Conduct. They emphasized the necessity of a stay to allow time for a proper representative to be appointed, noting that a trust does not fail without a trustee. An affidavit from Kai Jacobs, representing the Impleader Defendants—who are the Fundacion Trustees—indicated communication with the U.S. Attorney’s Office regarding potential representation for the Fundacion, with the New York Attorney General’s Office also expressing interest. A 90-day period was deemed sufficient for these matters.

On the same day, JPM Chase submitted a letter asserting its neutral position regarding the entitlement of funds in the accounts held by the Fundacion, while questioning the adequacy of representation in the Villoldo case. JPM Chase highlighted concerns about the Villoldo court's findings, specifically regarding the representation of the Nicolas S. Acea Foundation and the expropriation of Fundación accounts by the Castro Government. They urged that these issues should be addressed in this Court through a motion, requesting permission to file an Amended Third-Party Petition if the Trustees are found to lack standing.

JPM Chase indicated it had acted in good faith regarding the Trustees' representation of the Fundacion since the 1960s and argued that justice warrants the opportunity to amend its petition to identify the true representatives and beneficiaries of the Fundacion.

Additionally, the Villoldo Plaintiffs responded to the Court, stating they had an agreement with other judgment creditors, including Hausler, ensuring that any turnover of blocked assets would also benefit them. They contended that the Fundacion Claimants' counsel should have withdrawn their pleadings to comply with the Florida Order.

Hausler urged the denial of the Fundación Claimants’ request for a stay and their counsel's request to withdraw, asserting that these requests were inappropriate due to an injunction from the Florida Order and the acknowledgment that the Fundacion Trustees no longer claim to be trustees. On March 12, 2015, Hausler submitted a letter responding to JPM Chase and the Fundación Claimants, emphasizing that there were no legal or factual issues for the Court to resolve, as the Fundacion Trustees confirmed that they were not actual trustees and that the Fundacion had been nationalized. He attached an affidavit from Jaime Suchlicki which supported the claim of nationalization. Hausler argued there was no reason to delay the Tranche VI Petition, citing a lack of bona fide claimants and clarity regarding the nationalization of assets. JPM Chase responded on March 13, 2015, advocating for a formal motion due to the complexity of the issues. On June 10, 2015, Hausler noted that over 90 days had passed since the Fundación Claimants requested a stay, with no new appearances in the matter, and expressed concern over potential diplomatic changes affecting judgment creditors. He again urged the Court to grant the Tranche VI Petition. The Court is now considering the Tranche VI Petition, the Interpleader Petition, and various requests stemming from the 2015 correspondence. The parties are in sharp disagreement over the impact of the Florida Order and the Villoldo proceedings on the adjudication of the Turnover and Interpleader Petitions, with the Fundacion Claimants seeking a conference and a stay for appropriate representation, while Hausler contends that the Court should strike the Fundación Claimants’ answer and deny the stay request, as there is no legitimate client before the Court.

The Court is assessing the Tranche VI Petition, the Interpleader Petition, and various requests from parties involved, particularly concerning the implications of the Florida Order and the Villoldo proceedings on its decisions regarding these petitions. The Fundacion Claimants' counsel has requested a conference and a stay of proceedings for appropriate representation, while also seeking to withdraw from representing the Claimants. Hausler contends that the Florida Order warrants striking the Fundación Claimants' response to the Interpleader Petition and granting the turnover application, opposing the stay and withdrawal requests. The Villoldo Plaintiffs assert that the Fundacion Claimants’ counsel’s actions violate the Florida Order's injunction, and JPM Chase supports the Fundacion's request for a stay and urges the Court to resolve related factual and legal issues based on the Villoldo court's findings.

The Florida Order presents two key legal determinations: first, it states that the Fundacion Trustees do not hold trustee status for the Fundacion Benefica Nicolas S. Acea and lack authority to act on its behalf. Second, it establishes that the Fundacion was nationalized by the Cuban government in 1959, with all assets, including those in blocked accounts at JP Morgan Chase in New York, owned by the Republic of Cuba. The Villoldo court has restrained the Fundacion Trustees from interfering with efforts to enforce a judgment against Cuba, thereby preventing them from claiming any rights to the accounts associated with the Fundacion Benefica Nicolas S. Acea.

The Florida Order pertains to supplementary proceedings viewed as a preliminary step towards a tortious interference lawsuit related to judgment collection. The Villoldo Plaintiffs have a sharing agreement with other judgment creditors, including Hausler, who is not a party to the Villoldo Florida proceedings. The three Fundación Trustees were named as third-party defendants, while the Fundación and JPM Chase were not parties to these proceedings. 

The Fundacion Claimants’ Interpleader Answer, filed prior to the Florida Order, asserts the Trustees’ interest in the Blocked Accounts and claims that they represent the Fundación's interests, arguing it was not nationalized. This raises questions about whether the Trustees are estopped from making these assertions due to the Villoldo proceedings. 

Judicial estoppel is defined as preventing a party from asserting a position in a legal proceeding that contradicts a previously taken position. Its objectives are to maintain the integrity of oaths and prevent inconsistent judicial results. The application of judicial estoppel involves assessing the specific factual context, typically requiring that (1) the party took an inconsistent position in a prior proceeding, and (2) that position was accepted by the first tribunal. While unfair advantage is usually a typical requirement for estoppel, it is not universally necessary. The overarching aim of judicial estoppel is to safeguard the judicial process.

Relief under judicial estoppel in the Second Circuit requires certainty that inconsistent outcomes would compromise judicial integrity. The Fundacion Trustees are deemed judicially estopped from claiming they are the trustees of the Fundacion or acting on its behalf. During the Villoldo Florida proceedings, they explicitly stated they were not trustees but Cuban exiles who established a separate foundation in the U.S. after the Cuban Revolution. Counsel for the Fundacion Trustees provided a historical account, noting the establishment of the Fundacion Benefica Nicolas S. Acea following the probate of Nicolas S. Acea's will in New York, with funds now invested in stocks at JP Morgan Chase. In approximately 1970, Cuban exiles in Miami created the Nicolas S. Acea Eleemosynary Foundation to continue the Fundacion's mission. The Fundacion Trustees later acknowledged that they were not appointed by Acea as successor trustees, but were part of the exile community seeking to use the funds for their intended purpose. They subsequently consented to a restraining order in the Villoldo Florida court, which confirmed they had no authority to act for the Fundacion and had not acquired any interest in its assets. The Florida court's order adopted the Trustees' position but was not favorable, as it granted relief to the Villoldo Plaintiffs against them. This situation presents a unique context for the application of judicial estoppel.

The doctrine of judicial estoppel prevents a party from succeeding on one argument in a case and then using a contradictory argument in another phase. Its purpose is to maintain the integrity of the judicial process by disallowing parties from changing positions based on situational needs. The application of judicial estoppel is context-dependent, but the overarching goal is to avoid inconsistent outcomes that could undermine judicial integrity. In the current case, the Fundacion Trustees have adopted inconsistent positions between Florida proceedings and their interpleader answer, leading to the conclusion that they are judicially estopped from claiming any authority or interest in the Fundación's assets.

Additionally, judicial admissions are formal concessions by a party or counsel that remove specific facts from contention, eliminating the need for proof on those facts. These admissions must be clear and unambiguous and relate to matters within the declarant's knowledge. Once made, a party is typically bound by these admissions throughout the proceedings.

A judicial admission binds only the party that makes it within the action in which it is made and is not enforceable in separate subsequent cases. However, such admissions can be considered as evidence in other cases, though they may be contradicted by other evidence. Judicial admissions can be established through stipulations and admissions in pleadings, and statements in briefs can also be treated as binding. Courts recognize a broader approach where formal acts, concessions, or stipulations by parties serve as judicial admissions. An attorney's formal admission made in their professional capacity binds their client unless there are egregious circumstances. In the current case, the Fundación Trustees have made several admissions in both the Villoldo Florida proceedings and the current case, which the court will evaluate to determine their status as judicial admissions and their binding effect. The admissions in the Villoldo proceedings are characterized as clear and unambiguous, concerning facts within the knowledge or control of the Fundación Trustees.

The Fundación Trustees are positioned as the primary authority to assert their status as trustees. Statements made by the Fundación Trustees during the Villoldo Florida proceedings are recognized as affirmative concessions, which constitute formal admissions made on the record by their attorney. Although these judicial admissions are not binding in the current action, they may serve as evidentiary admissions. In the present case, the counsel for the Fundación Trustees has effectively admitted that they are not the actual trustees, as evidenced by a March 4 letter referencing a Notice of Consent to Relief from the Villoldo proceeding and a subsequent March 10 letter indicating the withdrawal of counsel due to the lack of a trustee to confer with. These letters reflect clear admissions of fact regarding the trusteeship, which is within the knowledge of the Fundación Trustees. However, the context of the withdrawal raises questions about the authority under which these statements were made, as the counsel's inability to confer with a client representative complicates the implication of their statements as binding admissions.

The Court has not resolved whether the March 4 and March 10 Letters from the Fundacion Claimants are binding judicial admissions due to unclear case law, but the outcome does not affect the current proceedings. The Fundacion Trustees are judicially estopped from claiming they are trustees of the Fundacion, rendering their Interpleader Answer irrelevant. The judicial admissions made by the Fundacion Trustees in the Florida proceedings are deemed evidentiary for this Court, which concludes that the Trustees lack standing to act on behalf of the Fundacion. The Florida court specifically ruled that the Trustees have never been authorized to act for the Fundacion. Despite opportunities to contest this, the Fundacion Claimants have not disputed the assertions from Hausler, the Villoldo Plaintiffs, or their own counsel. JPM Chase, while claiming neutrality, has acted as an advocate for the Fundacion Claimants, urging the Court to disregard the Florida Order based on historical claims of the Trustees’ authority over the Fundacion’s accounts since the 1960s.

The Nicolas S. Acea Eleemosynary Foundation, allegedly established in 1970, lacks evidence supporting the Florida court's claim that the Fundacion accounts were expropriated by the Castro Government. JPM Chase argues that these issues should be resolved through a formal motion for partial summary judgment or to strike the Fundacion's answer, but this argument is deemed unconvincing. Documentation contradicts the Fundacion Trustees’ recent judicial admissions regarding their status as trustees, revealing long-standing misrepresentations. The court concludes that the Fundacion Trustees are not the trustees and thus lack standing to represent the Fundacion’s interests. Consequently, Hausler and the Villoldo Plaintiffs' request to strike the Fundacion Claimants Interpleader Answer from the record is granted based on the Trustees' lack of standing.

Additionally, counsel for the Fundación Claimants has expressed a desire to withdraw from their representation due to the absence of a valid client representative, citing professional conduct rules that prohibit them from acting without a client. The court agrees that since the Fundacion Trustees are not actual trustees, counsel cannot confer with a legitimate representative, warranting their withdrawal from the case. The court emphasizes that trial decisions should be made by the client, reinforcing the necessity of a valid attorney-client relationship.

Counsel for the Fundación Claimants may withdraw from representation if continued involvement would conflict with ethical obligations, as supported by Jones v. Barnes and Whiting v. Lacara. Under Rule 1.4 of the Civil Rules of the United States District Court for the Southern and Eastern Districts of New York, an attorney cannot withdraw without court approval, which can be granted upon satisfactory reasons. The Court has found that counsel for the Fundación Claimants has satisfactorily demonstrated reasons for withdrawal, thus granting their request.

The document also addresses the potential preclusive effect of a Florida court order on the Fundación, particularly concerning the ownership of its assets purportedly belonging to Cuba due to expropriation. It notes that the Fundación was not a party in the Villoldo proceedings and that the Florida court did not recognize anyone as having standing to represent the Fundación's interests. Consequently, the Court determines that the Florida order lacks preclusive effect on the Fundación, as it was not involved in the litigation, aligning with legal principles that judgments only resolve issues among parties present in the lawsuit. Nevertheless, the Court may still consider documents from the Villoldo proceedings as they are public records.

The Court is tasked with determining factual findings regarding the Fundacion, specifically whether it has been nationalized by the Republic of Cuba. JPM Chase requested permission to amend its interpleader petition to name proper representatives or beneficiaries of the Fundacion if the current Trustees were deemed to lack standing. This request was denied due to the significant time elapsed since the initial petition was filed, during which JPM Chase failed to identify any additional adverse claimants or take action despite being aware of relevant court orders. Hausler, who contends that the Blocked Assets are subject to execution under TRIA, has waited for a ruling on the merits, and concerns have been raised about potential diplomatic changes affecting judgment creditors.

Additionally, the Fundacion Claimants and JPM Chase sought a stay to allow for the identification of an appropriate representative for the Fundacion. They requested a 90-day period for this purpose, citing ongoing discussions with federal and state agencies. However, more than 90 days have passed without any agency involvement or identification of a representative, which the Court attributed to the Claimants' inaction. The Court emphasized that it will not permit further delays that could prejudice Hausler due to the Fundacion Claimants' failure to act responsibly in the litigation.

The Court has determined that there is no justification to postpone the Tranche VI Turnover Petition and has denied the Fundación Claimants and JPM Chase's request for a stay. Additionally, their request for a pre-motion conference is also denied, as the Court aims to resolve all requests from the 2015 Correspondence without unnecessary delays. 

In addressing the Interpleader Petition, the Court acknowledges its previous practice of first assessing whether funds are executable under the Terrorism Risk Insurance Act (TRIA) before considering interpleader relief. However, in this case, the question of execution hinges on whether the Fundación was nationalized by the Republic of Cuba, with JPM Chase identifying the Fundación and its alleged trustees as adverse claimants. This unique situation necessitates that the Court consider the Interpleader Petition before the Tranche VI Petition, since the outcome could significantly affect the executability of the Blocked Assets under TRIA.

JPM Chase has filed for discharge in interpleader under Federal Rule of Civil Procedure 22 and New York’s Civil Practice Law and Rules, seeking to interplead the Fundación Claimants and resolve the competing claims to the Blocked Assets. The purpose of interpleader is to protect a stakeholder from facing multiple liabilities, and it is invoked when there is a genuine fear of conflicting claims. The Court emphasizes that the merits of these claims are not central to the appropriateness of interpleader relief, which is intended to safeguard against the risk of double liability.

A claim may be deemed too baseless to support a good faith belief in multiple liability, as established in Merrill Lynch v. Clemente. Interpleader is appropriate when the stakeholder’s concerns are genuine, as outlined in Bache Halsey Stuart Shields Inc. v. Garmaise. Interpleader litigation typically involves a two-step process: first, determining the appropriateness of interpleader relief, followed by adjudicating adverse claims, though a court may resolve the entire action at once for efficiency, as noted in Weininger v. New York Life Ins. Co.

JPM Chase has identified four parties with potentially adverse claims related to the Fundacion and its trustees, who are also the account holders of three Blocked Accounts. Despite the Fundacion Claimants’ assertions of interest in the Blocked Assets, their interpleader answer has been stricken, and the court has established that the Fundación Trustees are not actual trustees and are barred from making that claim. Consequently, JPM Chase’s concerns about the Fundación Trustees are unfounded, negating any real fear of double liability.

The court highlights doubts about whether proper service of the Interpleader Petition was executed with respect to the Fundacion, given that the Fundación Trustees lack standing to represent it. The situation raises significant questions about the legitimacy of claims against JPM Chase by the Fundación Trustees, especially considering their admissions in related proceedings that they do not serve as trustees.

Service of process for the Fundacion Beneficia, Nicolas S. Acea, was waived on November 10, 2011, through an alleged trustee who has since been shown not to hold that position. There is no record of any other service of process on the Fundacion, raising jurisdictional concerns under Rule 4 of the Federal Rules of Civil Procedure. As federal courts require proper service for jurisdiction, the court cannot grant JPM Chase’s interpleader request concerning the Fundacion. The court cites precedents emphasizing that a judgment cannot bind a party not served. There are questions about the Fundacion's representation and the potential claims to the Blocked Assets. Despite the Fundacion’s prior property interest in the Blocked Assets and lack of representation in related proceedings, the court seeks further submissions from the parties before making a decision on the interpleader request. Currently, the court can only adjudicate Hausler’s claim, as the Fundacion's trustees do not present an adverse claim. Hausler's claim's validity hinges on whether the Blocked Assets are executable under the Terrorism Risk Insurance Act (TRIA). At present, no competing claims have been filed, placing Hausler first in priority for the Blocked Assets, but the court must ensure TRIA's requirements are met before considering Hausler's turnover request.

Hausler's potential right to execute on Blocked Assets under the Terrorism Risk Insurance Act (TRIA) necessitates a turnover order, as established by TRIA and federal statutes. Hausler holds a Florida Judgment, which qualifies under TRIA since it stems from a claim against a terrorist party that is not immune under 28 U.S.C. § 1605(a)(7). The judgment awards Hausler $100 million in compensatory damages, which remains largely unsatisfied, and the Blocked Assets are confirmed as “blocked” under the Cuban Assets Control Regulations (CACRs) in alignment with TRIA.

Determining whether the Blocked Assets are deemed “assets of that terrorist party” under TRIA involves assessing the property interests of the Judgment Debtors, guided by state law due to Congress's lack of specific definitions regarding property rights under TRIA. The banks holding the Blocked Assets are located in New York, necessitating reference to New York property law. Previous rulings, particularly in Hausler III, highlighted that Electronic Fund Transfers (EFTs) are not considered the property of either the originator or beneficiary while held by intermediary banks. Consequently, for an EFT to qualify as a “blocked asset” under TRIA, the property interest must align with the entity that initiated the transfer to the current bank.

Cuban entities must directly transmit blocked electronic funds transfers (EFTs) to the blocking bank for a property interest in those EFTs under the Terrorism Risk Insurance Act (TRIA). In Hausler III, the Second Circuit ruled that since no Cuban entity transmitted the EFTs in question, the Cuban judgment debtors had no property interest, rendering the assets non-executable under TRIA. The current case differs significantly as the Blocked Assets consist of cash deposits and equities at JPM Chase in New York, which are explicitly included in the types of property that may be attached under the Cuban Assets Control Regulations (CACRs). The Fundacion, the named account holder of these assets, undeniably had ownership of the Blocked Assets, as New York law recognizes the account holder's property interest.

Hausler argues that the Fundacion was nationalized after the Cuban Revolution, claiming that the assets have since become Cuba’s. The core issue for the Court is whether these assets, originally belonging to the Fundacion under New York law, are now owned by the judgment debtors due to this alleged nationalization. This determination cannot rely solely on New York law, as the question of nationalization involves federal and international law. The Court must first assess the Fundacion’s nationalization status by the Cuban government and then determine if the Blocked Assets are now Cuba's property. The definition of "nationalization" involves bringing an industry under governmental control, a concept previously addressed in various cases involving the Cuban government's actions post-revolution.

Nationalization of property or entities in Cuba typically occurred through Public Law, which led to the expropriation of assets that then fell under the control of the Cuban government. Specifically, following the Cuban Revolution, it was determined that the Fundación was nationalized by the Cuban government, a fact acknowledged by all parties except for neutral stakeholder JPM Chase. This agreement on the confiscatory taking was established early in the litigation process. 

The Fundación continued its operations until the communist regime's confiscation in 1960, leading to the blocking of its U.S. bank account reserves under OFAC regulations. The funds in these accounts are protected from execution or garnishment in the U.S. due to the public policy that does not recognize confiscatory takings, meaning the confiscation by the Cuban government should not be acknowledged. 

While the Fundación Claimants concede to the confiscatory taking, they argue that U.S. public policy does not recognize such actions against U.S. nationals. Initially, they did not admit that the Fundación was nationalized by Cuba; however, during legal proceedings in Florida, the Trustees of the Fundación conceded that the nationalization occurred. The ongoing legal debate centers on whether the extraterritorial expropriation of assets located in the U.S. will be recognized under New York law.

Counsel for the Fundacion Trustees acknowledged that the Cuban government seized the entire Fundacion, raising the central issue of whether the Blocked Assets are considered Cuban property. During the exchange, Mr. Jacobs confirmed that the Cuban government took control of the school, cemetery, hospital, and the foundation itself. The court inquired about the status of the funds, which were meant to benefit the schools, noting that the trustees now act for assets under government control. Mr. Jacobs argued the funds should be classified as TRIA assets according to the Terrorism Risk Insurance Act, asserting that even though the money is located in New York, it belongs to the foundation due to its nationalization. This matter is disputed under New York property rights, emphasizing that federal law does not dictate property rights, especially concerning assets related to a terrorist state.

The Fundacion Trustees also filed a Notice of Consent to Relief in the Villoldo proceedings, indicating they lack authority to act on behalf of the Fundacion controlled by Cuba. Additionally, expert testimony from Professor Jaime Suchlicki, an authority on Cuban affairs, was submitted in the Villoldo court, highlighting three potential outcomes for private charitable foundations in Cuba post-1959 Revolution: closure, nationalization with redirected services, or consolidation into a government entity. The Fundacion Benefica S. Acea was nationalized, transforming it into a state-run pediatric hospital. Courts have routinely considered expert affidavits in international law determinations related to TRIA, citing relevant case law.

The Fundacion Benefica Nicolas C. Acea San Lorenzo (a boys' school) and the Fundacion Benefica Nicolas C. Acea Santo Tomas (a girls' school) have been nationalized and converted into a state-run secondary school, now named “Secundaria Basica 5 de Septiembre.” Consequently, all assets of the Fundacion Benefica Nicolas-S. Acea are owned by the Republic of Cuba. Professor Suehlieki indicated that trustee positions in private charitable foundations in Cuba are effectively insignificant, as all decisions are made at the government level, with no private citizen recognized as a meaningful trustee. Although JPM Chase questions the nationalization status of the Fundacion, no party, including JPM Chase, contests Suehlieki's assertions or provides contradictory evidence.

In related proceedings involving the Villoldo Plaintiffs, the court found that the Fundacion was nationalized, despite the Fundacion not being a formal party to the case. No representative of the Fundacion has claimed otherwise in this court, and the lack of a legitimate representative raises doubts about the Fundacion's existence as a separate entity. The Blocked Assets have been frozen for over forty years, and a public record petition was filed in 2011. The Villoldo court conducted an evidentiary hearing and confirmed that the Fundacion is a nationalized Cuban entity, with its assets owned by the Republic of Cuba.

Under the act of state doctrine, U.S. courts do not assess the validity of property takings by recognized foreign governments without a treaty or clear legal agreement. The conclusion, supported by substantial evidence, is that the Fundacion was nationalized by the Cuban government, affirming that the Blocked Assets are indeed property of the Republic of Cuba.

The act of state doctrine is rooted in the separation of powers between government branches, reflecting the Judicial Branch's concern that adjudicating the validity of foreign state actions may impede U.S. international objectives. It traditionally applies to takings by foreign sovereigns within their own territory; however, it does not prevent U.S. courts from examining the validity of extraterritorial confiscations. When property is confiscated within the U.S., courts will recognize such acts of state only if they align with U.S. law and policy.

In this context, while the court cannot assess the legality of Cuba's nationalization regarding assets seized within Cuba, it can evaluate whether a specific expropriation occurred. In this case, the Cuban government attempted to nationalize the Fundación and its assets. The recognition of this confiscation's validity in relation to U.S. policy is complex. The Fundación Claimants reference Bandes v. Harlow Jones, which determined that foreign confiscations deemed shocking to U.S. justice need not be enforced. They argue that U.S. law does not endorse extraterritorial confiscations on American soil without just compensation, supported by JPM Chase's assertion that Cuba cannot expropriate properties owned by Cuban nationals if those properties are located in the U.S. JPM Chase cites a U.S. government "Statement of Interest" from an ongoing case, emphasizing this position.

The Statement of Interest references several cases also cited by the Fundación Claimants, alongside cases from the First Circuit that lack binding authority on the current Court. Hausler cites the Second Circuit case Chemical Bank I, 658 F.2d 903, asserting that the issue of whether a foreign sovereign can nationalize assets of its own nationals on U.S. soil, which could satisfy judgments against that sovereign, has been definitively resolved affirmatively in this Circuit. 

Chemical Bank I specifically addresses the Cuban nationalization of assets post-Cuban Revolution, particularly involving the Cuban Electric Company, which was expropriated in 1960 while owing loans to Chemical Bank and other banks. The Cuban government nationalized several private banks through Banco Nacional, which acted as the "alter ego" of the Cuban government. Banco Nacional subsequently sued the Chemical Defendants to recover funds deposited before the nationalization. 

The Chemical Defendants counterclaimed, arguing that their debts from Cuban Electric exceeded Banco Nacional's claims. If the court recognized the Cuban government's expropriation, Banco Nacional could proceed as successor in interest against the Chemical Defendants, allowing them to assert their counterclaims and potentially recover their losses. Conversely, if the expropriation was not recognized, Banco Nacional could not pursue its claims, leaving the Chemical Defendants without recourse.

Ultimately, the court in Chemical Bank I permitted Banco Nacional to sue as the successor to the Private Banks, acknowledging the extraterritorial expropriation of U.S.-located assets by Cuba. The Second Circuit noted that such expropriations violate U.S. law or policy when the original owner or successor protests the taking without compensation. However, in the context of Chemical Bank I, there was no justification for applying the act of state doctrine to prevent Banco Nacional's right to sue.

United States law prohibits the taking of private property without compensation; however, the former owners of the Private Banks have not objected through litigation or intervention in Banco Nacional's ongoing suits over the past twenty years. Their lack of conflicting claims suggests that acknowledging the Cuban nationalization of the Private Banks does not contravene U.S. policy. The court in Chemical Bank I concluded that allowing Banco Nacional to act as a successor would align with U.S. interests by facilitating the provision of funds to compensate American nationals with valid claims against Cuba. The court warned that failing to recognize the nationalization might lead to New York escheatment of the contested funds, which would not support national policy objectives.

In contrast, the Bandes case, heavily cited by the Fundacion Claimants, involved different circumstances, specifically the expropriation of property following Nicaragua's Sandinista victory. The Bandes family, having fled Nicaragua, sought compensation for undelivered steel shipments located in the U.S., which had been ordered before the expropriation. The court refused to recognize the Sandinista government's claim, emphasizing that the Bandes family had not received compensation for their losses and that such a taking, without just compensation, was unjust. The Bandes decision allowed the family to recover some losses, thus furthering U.S. policy, and the court acknowledged the distinctions between the Bandes and Chemical Bank I cases, noting that the act of state doctrine did not prevent Banco Nacional's right to sue in the latter.

The Court acknowledged that denying Banco Nacional's claims would lead to the escheatment of deposits to New York, contrary to national policy. In comparison to Chemical Bank I, no prior owner has been identified as uncompensated, and no protests against the enforcement of the Fundacion’s nationalization have been made. Unlike Bandes, which involved a refusal to recognize expropriation, the case at hand supports Hausler in seeking compensation for her losses due to extraterritorial expropriation. The Court emphasized that failing to recognize the expropriation could result in the Blocked Assets escheating to New York, further undermining national policy. The recognition of the expropriation would enable Hausler, a victim's family member, to recover damages per the Florida Judgment. The Terrorism Risk Insurance Act (TRIA) was noted as a legislative framework designed to facilitate the enforcement of judgments for terrorism victims against frozen assets. The Court concluded that Hausler has the right to execute on the Blocked Assets under TRIA Section 201(a) due to the absence of competing claims. However, an order of turnover will not be issued at this time as the Court awaits JPM Chase’s interpleader petition and further submissions from the parties.

The Court may reconsider the findings in this Decision and Order after reviewing submissions from the parties, potentially allowing Hausler to execute upon the Blocked Assets if the facts support such an order. The Fundación Claimants argue that OFAC is a necessary party to the suit, claiming that the absence of OFAC warrants dismissal of the Tranche VI Petition. Under Rule 19(a)(1) of the Federal Rules of Civil Procedure, a necessary party must be joined if their absence precludes complete relief or impairs their ability to protect their interests, or risks imposing inconsistent obligations on existing parties. 

The Fundación Claimants assert OFAC's involvement is necessary due to its regulatory authority over the blocked accounts. However, the Court finds that OFAC does not meet the criteria outlined in Rule 19(a) for being a necessary party. There is insufficient evidence to support the claim that OFAC has special knowledge regarding the blocking mechanisms or that it is essential for resolving the action. The Court acknowledges that OFAC is aware of and monitoring the case, and if it deemed itself necessary, it would have intervened. Any disputes regarding the proper blocking of assets fall under the administrative procedures of the CACRs, not the Court's jurisdiction. Consequently, the Court concludes that OFAC is not a necessary party, allowing the Tranche VI Petition to proceed without its involvement.

Additionally, JPM Chase has requested reasonable attorney’s fees and costs incurred in responding to Hausler’s enforcement efforts, to be paid from amounts turned over under the Tranche VI Petition.

Attorney’s fees and costs are awarded to a disinterested stakeholder involved in a dispute not of their own making, with the outcome not affecting them. JPM Chase, meeting these criteria, is granted reasonable attorney’s fees and costs, pending an application under Rule 54 of the Federal Rules of Civil Procedure. However, if JPM Chase is found to have acted beyond a neutral role or attempted to reopen settled issues from a Florida court case, recovery of fees may be denied for excessive litigation.

The Court orders the following: Jeannette Hausler’s request to strike the “Answer and Affirmative Defenses to Third-Party Petition” is granted; the requests of third-party defendants Fundación Benéfica Nicolas S. Acea, Pablo Alcazar, Mayra Bustamante, and Rene Silva, Jr. to withdraw as counsel are granted; JPM Chase’s request to amend the Interpleader Petition is denied; requests for a stay and a pre-motion conference from JPM Chase and the third-party defendants are denied; and JPM Chase’s Interpleader Petition is denied concerning the third-party defendants. 

The parties are instructed to submit a joint statement, or separate statements if they cannot agree, detailing the measures taken to notify the Fundación about the Interpleader Petition and whether any entity claims to represent the Fundación. The Court may reconsider its decision based on these submissions. If no legitimate entity emerges claiming rights to the funds, the Interpleader Petition will be denied concerning the Fundación, and Hausler’s petition for a turnover order will be granted without further filings.

The Court identifies the term "Fundacion Trustees" as a misnomer, clarifying that these individuals are not actual trustees of the Fundación but rather of the Nicolas S. Acea Eleemosynary Foundation, established in Miami in 1970. The factual summary in the decision is based on several key documents, including a Notice of Petition for Turnover Order, responses from JPMorgan Chase Bank, and various interpleader petitions and letters, all cited with specific docket numbers. Previous rulings, notably Hausler I and Hausler II, addressed earlier turnover petitions and legal issues surrounding the case, with Hausler II being reversed by the Second Circuit regarding state law preemption under TRIA. The Court's analysis incorporates aspects of the CACRs and OFAC relevant to the Tranche VI Petition, referencing prior decisions for comprehensive understanding. It also notes a distinction between 28 U.S.C. Section 1605(a)(7) and Section 1605A, emphasizing their similar implications for foreign sovereign immunity. Additionally, schedules pertinent to the Tranche VI Petition are filed under seal as an exhibit.

As of the filing date of the Tranche VI Petition, over $95 million of the $100 million compensatory award from the Florida Judgment, along with an additional $30 million in accrued post-judgment interest, remains unsatisfied. Hausler II ordered Hausler to provide a letter detailing the status of the case concerning remaining adverse claimants. The Court refers collectively to all correspondence discussed in Section 1(G) as "2015 Correspondence." The Fundación Trustees may be judicially estopped from claiming the Fundación was not nationalized, but this issue will not be addressed as it does not impact the current matters before the Court. Statements made by the Fundación Trustees in the Villoldo Florida proceedings regarding nationalization are not considered judicial admissions, as they do not pertain to matters uniquely within the Trustees' knowledge or control.

The Court struck the Fundación Claimants’ Interpleader Answer due to a lack of standing, contrary to the Villoldo Plaintiffs' assertion that the Trustees violated an injunction by failing to withdraw the answer. The Florida Order specifically restrained the Trustees from interfering with the Villoldo Plaintiffs' efforts to execute their judgment against the Republic of Cuba, including pursuing claims to Blocked Accounts. The Villoldo Plaintiffs' sharing agreement with Hausler is irrelevant to the current case, in which they are not parties, and the Trustees' actions are not covered by the Florida Order's injunction.

The Court finds that the Fundación has been nationalized by the Republic of Cuba, rendering it effectively non-existent as a private organization. This determination may be revisited based on future submissions from the parties. No legitimate representative of the Fundación has emerged, despite the Blocked Assets being subject to litigation related to the Tranche VI Petition since 2011. The Court concludes that after nationalization, the Cuban government would not recognize any private citizen of the Fundación as a trustee.

Decisions regarding the Fundación will be made at the government level, as stated in the Suchlicki Affidavit. The Court will not issue a turnover order at this time, pending further submissions from the parties as outlined in Section IV of the Decision and Order. Hausler claims that the Blocked Assets are Cuba's, but both he and JPM Chase agree that the Fundación is not an "agent or instrumentality" of Cuba under TRIA Section 201. The Court may reconsider its analysis if a representative of the Fundación appears following the required submissions. The Fundación Claimants argue that the Cuban government claims to have confiscated the Fundación's assets, but they contend that this confiscation should not be recognized by the U.S. They acknowledge the Cuban government's perspective on the confiscation but do not dispute it. The issue of whether the Fundación was properly served with the Interpleader Petition is examined in detail elsewhere in the Decision and Order. The Court will require further submissions regarding service upon the Fundación and may revisit its findings on the Fundación's nationalization if a representative comes forward. Although the Fundación Claimants' claim to the Blocked Assets is dismissed due to lack of standing, the Court will still consider their arguments on whether the Blocked Assets can be executed under TRIA. Banco Nacional seeks to recover a deposit withheld by Chemical Bank New York Trust Company. If necessary parties cannot be joined, the Court will evaluate dismissal based on the factors in Rule 19(b).