In re: 650 Fifth Avenue and Related Properties

Background

After the Court of Appeals vacated the prior forfeiture judgment against Alavi Foundation and the 650 Fifth Avenue Company, the Government obtained an interim protective order restricting the claimants’ ability to receive rental income from the Building at 650 Fifth Avenue. The claimants challenged that order, arguing that the restrictions were a pretrial seizure of their real-property interest and violated 18 U.S.C. § 985 and the Fifth Amendment’s Due Process Clause.

In an earlier order, the court determined that the Building’s rental income was an interest in real property, that the restrictions were a pretrial seizure, and that additional proceedings were required. It directed that rental income generated since December 12, 2019, be released to the claimants until those proceedings occurred. The claimants appealed the ruling about the release date, and the Government filed a cross-appeal concerning the protective order. The Government then moved to stay, meaning temporarily suspend, the release of the rental income while the appeals proceeded.

Legal Standard

The court applied the four-factor test for a stay pending appeal: (1) whether the applicant has shown a strong or substantial case on appeal; (2) whether the applicant will suffer irreparable harm without a stay; (3) whether the stay will substantially injure other interested parties; and (4) where the public interest lies. The court explained that these factors operate on a sliding scale and that the first two are generally the most important.

Court’s Analysis

The court found that the Government’s appeal presented a substantial case because there was little precedent addressing the relationship between 18 U.S.C. §§ 983 and 985. The Government planned to argue that the relevant restraint provisions were governed by § 983(j), not § 985, and that § 985’s pre-seizure procedures did not apply to interests in real property such as the rental income. The court said the Court of Appeals’ decision on those questions could significantly affect the remedies available in civil forfeiture proceedings.

The court also found that the Government faced a strong risk of irreparable harm if the income were released. If the Court of Appeals later reversed the earlier ruling, the Government might be unable to recover funds that the claimants intended to use for legal fees. The court concluded that the claimants’ injury was primarily monetary and could be addressed later if the Court of Appeals affirmed the earlier ruling, although the claimants’ inability to pay counsel was still a significant injury.

The public-interest factor slightly favored a stay. The court identified a public interest in holding foreign governments accountable for terrorism affecting American citizens and compensating terrorism victims as fully as possible. It also noted that the rental income represented only a small part of the property value at issue and that the Government acknowledged the income would be used for the claimants’ attorneys rather than returned to Iran.

Disposition

Judge Loretta A. Preska concluded that the Government’s substantial appeal and the risk that released funds could not be recovered outweighed the harm to the claimants. The court granted the Government’s motion to stay the litigation pending appeal.