# Unite d States Court of Appe als

F O R T H E D I S T R

I C T O F C O L U M B I A

C I R C U I T

Arg ued Apr il 12, 2022 Dec ided Aug ust 16, 2022

No. 21-7036

E S TA TE O F J E R E M Y I S A D O R E L E V I N , E T A L ., A P P E L L A N TS

v.

W E L L S F A R

G O B A N K , N.A., A P P E L L E E

Consolidated with 21-7041, 21-7044, 21-7052, 21-7053

Appea ls from the United States District Court for the D istrict of Columbia (No. 1:21-c v-00420) (No. 1:05-c v-02494) (No. 1:21-c v-00126) (No. 1:21-c v-00127) (No. 1:21-c v-00128)

Suzelle M. Smith ar gu ed the cause and filed the briefs for L evin appe llants.

Matthew D. McG ill arg ued the cause and filed the briefs for appellants James Owens, e t al.

Myanna Dell i nger , Jame s Dodge
, David Horton
, and2

Jeffrey Stempel
, pro s e, we re on the brief for amici curiae Commercial L aw Profe ssors in support of L evin appe llants.

A l ex C. Lakatos arg ued the cause and filed the brief fo r appellee Wells Farg o Ba

nk, N.A.

Brian P. Hudak
, Assistant U .S. Attorne y , arg ued the cause and filed the brief for appellee United States. Jane M. Lyons and Peter C. Pfaffenroth
, Assistant U.S. Attorney s, ent er ed
appea ranc es.

Christ opher D. Man was o n the brief for amicus curiae Cry stal Holdings L imited in support of neither par ty

.

Be fore : P I L L

A R D and W A L K

E R , Circuit Judges
, and R A N D O L P H , Senior Circuit Judge

. Op i nion for the Court filed by Senior Circuit Ju d g e R A N D O L P H

. Concurring opinion filed by Circuit Judge P I L L A R D

.

R A N D O L P H , Senior Cir

c u it J u d ge : T h e s e c o n s o li d a

ted case s,

on appea l from a judgme nt of the district court, prese nt competing claims to a blocked elec tronic funds transfe r. The parties are , on one side, th e Un i ted States, which blocked the
transac tion beca

use t err orists initiated it. On t he other side are victims of I ran- sp o nsored terror ism who have obtained multimilli on dollar judg ments ag ainst the I rania n g overnme nt.

Taif Mining Service s, L L C, an Omani company , initiated the elec tronic transfe r to consummate its purcha se of the Nautic
, an oil tanker reg istered in L iberia. Cry stal Holdings L imited, a L iberian subsidiary

of a G ree k company , was the seller. A law firm, Holman Fe nwick Wil lan L L P, based in L ondon, fac ilitated3

the sale.

The U.S. Trea sury Depa

rtment’s Offic e of For eig n As s ets Cont rol (“O FAC” ) maintains a list of “Specia lly Desig nated Nationals and Bloc ked Persons.” See Ex ec. Orde r No. 13,224 (2001), a s a mende d by Ex ec. Orde r No. 13,886 (2019); 31 C.F.R. § 594.201. OFA C listed the I slamic Revolutionary Guar d Corps. Two members of the I rania n Revolutionary Guar d formed Taif Mining in an appar ent attempt to hide its aff iliation with the I slamic Republic of I ran. Taif Mining itself is now on OFA C’s list.

Taif Mining initiated its elec tronic funds transfe rs to Cry stal Holdings pursuant to a sales ag ree ment fo r the Nautic

. The Holman Fenwick law firm s er v ed as t he parties’ escrow ag ent. Taif’ s d o wn pay

ment of $2.34 milli on moved throug h the international fi nancia l sy stem in September 2019 and rea ched Cry stal Holdings’ Swiss bank acc ount without int err uption.

I n October 2019, Taif Mining wired Holman Fe nwick $9.98 milli on, the balanc e of the Nautic ’s purcha se price

. Holman Fe nwick deposit ed the funds in its escr ow acc ount at L loy ds Ba nk PL C, in L ondon. Taif direc ted the law firm to send, “[f]or and on behalf of Taif,” the $9.98 milli on to t h e Credit Suisse

acc ount of Cry stal Holdings in Switz erla nd. Taif also instructed Holman Fe nwick to use Ba nk of New York Mello n as the “interme diary bank” for the transfe r. Whether Holman Fe nwick rela y ed this instruction to L loy ds Ba nk is not clear.

We have descr ibed b ef o re how funds are transfe rre d elec tronically throug h i n t erme diary banks when the parties to the financ ial transac tion h av e ac counts at differ ent banks. See Heiser v. Islamic Republic of Iran
, 735 F.3d 934, 936 (D.C. Cir.4

2013). Her e, the b ri d ge betwee n the L loy ds Ba nk of L ondon 1 and the Credit Suisse Ba

nk in Switz erla

nd was the Wells Fa

rg o bank in New

York.

The $9.98 milli on elec tronic funds transfe r was blocked in the inst an t afte r Wells Fa rg o debited its L loy ds acc ount but befor e it cre dited it s Credit Suisse acc ount. The blocking was d o n e pursuant to 50 U.S.C. § 1702, and Ex ecutive Orde r No. 13,224 (2001), as amended by Ex ecutive Orde r No. 13,886 (2019). How fede ral authorities wer e able to an t i cipate the

2 transfe r and act befor e its completion i s not disclosed. After blocking t h e t ransfer, Wells Fa rg o place d the funds in an

acc ount in South Dakota, as t h e bank appar ently does with all

Hei se r des cr ib ed the ro le of inte rm edia ry bank s w it

h this 1

exa m ple:

Supp os e O w ants to tr ans fe r $1 0 0 to B

. I f O and B hav e an ac co unt at Bank X, then the tr ans ac ti on is si m ple. O ca n i nstr uct Bank X, w

hich w il l debi t O’s

ac co unt and cr edit B’s ac co unt wit h $100

. But

su p p ose O has an ac co unt at Bank X, and B has an

ac co unt at Bank Y. Unle ss Bank s X and Y ar e memb er s of the sam e lending co nso rt ium
, they m ust inv ol ve a thir d “inte rm edia ry ” bank w it

h w hich Bank s X a

nd Y b ot h have ac co unts. The tr ans ac ti on

w oul d pro ce ed as fol lo w s: (1) O inst ruc ts Bank X to pay B; (2) Bank X debit s O’s acc ount and fo rw ar ds in st ruc ti ons to the inte rm edia ry bank ; (3) the inte rm edia

ry ban k d ebit s Bank X’s ac co unt, cr edit s Bank Y’s ac co unt, and fo rw ar ds inst ruc ti ons to Bank Y; a nd (4) Bank

Y cr edit s B’s a cc ount.

735 F.3d at

936

.

The Tre as ury Sec re ta

ry ’s autho ri ty to blo ck te rr or is t tr ans ac ti ons 2 has bee n dele ga

te d to t he Dir ec to r o f OFAC. 31 C.F .R. § 5 94.8 02.5

blocked a ssets.

Months later, in May 2020, the United States filed a forfei ture action for the blocked funds. United States v. $2, 3 4 0,000.00 Associated with Petroleum Tanker Nautic
, No. 20-cv- 1139 (D.D.C. filed May 1, 2 0 2 0 ); see 18 U.S.C. § 981(a) (1)( A), (C), (G )(i). The Wall Street J ournal repor ted 3 the g overnme nt’s forf

eiture action and its indictment of the two I rania n s who wer e behind Taif. Meng qi Sun & Dy lan Tokar, U.S. Charges Two Iranians over Oil Tanker Purchase, Seek ing $12 Million Forfeiture
, W A L L S T

. J

. (May 2, 2020), https:/ /perma.c c/B 75B- KMVT. The article stated that the funds

wer e being held at Wells Far g o. Id.

After lear

ning of the g overnme nt’s forf eiture actio n , attorney s for two g roups of victims of I rania n terror ism and their rela tives, holding judgme nts ag ainst I ran, filed separ ate writs of attachme nt in the United States District Court for the District of Columbi a. The Owens plaintiffs are victims of al-Qa eda’ s 1998 bombings of the U.S. embassies in Keny a and Tanzania. They have near ly $1 billion in judgme n t s against I ran. See Orde r, Owens v. Republic of Sudan
, No. 01-cv- 2244 (D.D.C. Mar

. 28, 2014), R. Doc. 30 1 ; Orde r, Mwila v. Islamic Republic of Iran
, No. 08-cv- 1377 (D.D.C

. M ar

. 28, 2014), R. Doc. 88; Orde r, Khaliq v. Republic of Sudan
, No. 10-cv- 356 (D.D.C. Mar. 28, 2014), R. Doc. 40. The Levin p laintiffs obtained near ly $30 milli on in judgme nts ag ainst I ran for the 1984 kid napping and
torture of J ere my L evin by I ran- backe d Hezbollah. Levin v. Islamic Republic of Iran , No. 05-c v-2494, 2008 WL 11493474

As is ev ident fr om the ca se ti tl e, the Unite d Sta te s al so so ught 3 fo rf ei ture of Tai f’s dow

npay m ent, wh ic h is now in Cry st al ’s
pos se ss io n.6

(D.D.C. Jan. 14, 2008). 4

Plaintiffs soug ht to attach the funds at Wells Fa rg o pursuant to two fede ral statutes. The first, 28 U.S.C. § 1610(g) of the Fo re ign Sovereig n I mmuniti es Act (“F SI A”)
, “subjec t[ s] to attachme nt” “the proper

ty of a fore ign state

. . . and the proper ty of an ag ency or instrumentality of such a state” ag ainst which a plaintiff h o l d s a judgme nt under 28 U.S.C. § 1605A. The second, § 201(a) of the Terr orism Risk I nsuranc e Act o f 2 0 02 (“TRI A”)
, Pub. L

. No. 107–297, 116 Stat. 2322, 2337 (codifie d
at 28 U.S.C. § 1610 No t e “Satisfac tion of J udg ments from Bloc ked Assets of Terr orists, Terr orist Org anizations, and State Sponsors of Terr o r is m” )
, “ s u b je ct[s] to execution or attachme nt” “the blocked assets of [ a] terrorist par ty (including the bl ocked
assets of any ag ency or instrumentality of that terror i s t p arty )”
ag ains t which a plaintiff holds a judgme nt under 28 U.S.C. §§ 1605(a) (7) or 1605A. Section 201(a ) spec ifies that such a ssets

can be attache d “[n] otwithstanding any other provision of law.”

The United States interv ened in both case s and moved to quash plaintiffs’ wr i t s of attachme nt. The g overnme nt also

asser ted that plaintiffs wer e attempting to circ umvent the “orde rly administration” of the United States Victims o f State Sponsored Ter

rorism Fund. See 34 U.S.C. § 20144. 5

After consolidating the cases , t h e district court ruled that

The Lev in plai ntif

fs al so fi le d w ri ts of at

ta chm ent in S ou th 4 Dak ot a and in the Southe rn Dis tr ic t of New Yor k. Thos e pro ce eding s hav e be en s ta

y ed pending the o utco m e o f thi s c as e.

The Fund pro vi des a m ea ns fo r vi ct im s of st at e- spo nso re d 5
te rr or is m to co ll ec t on thei r unpaid jud gm ents thro ugh m one y the fe der al go ve rnm ent o btai ns fro m te rr or is t sta te s and ac to rs , incl uding thro ugh fo rf

ei ture pro ce eding s. 34 U.S.C. § 20 144.7

I ran l acked any proper

ty interest in the blocked funds held by W el ls Fa rg o. The court there fore quashed plaintiffs’ writ s o f attachme nt. See Levin v. Islamic Republic of Iran
, 523 F. Supp. 3d 14 (D.D.C. 2021). The court based its ruling on the Uniform C o mmercia l Code Article 4A, and our opinion in Heiser
, of which more in a moment.

The district court trea ted eac h transac tion in this elec tronic funds transf

er a s “a stand- alone ag ree ment betwee n sender and

rec ipient.” Id. at 21. By this the court meant that when an elec tronic funds transfe r is unsucce ssfu l and an intermediar y bank is involved, the i ntermedia ry bank “is oblig ated to re fund
pay ment only to the immediately prior sender .” Id. at 22. Thus, the intermediar

y bank “has n o o b l iga

tion to” the entity that initiated the transfe r (the “orig inator”)

. Id. The orig inator must

rec over from its own bank, that is, the bank that sent pay ment to the intermedia

ry bank. Id.

But for the blo cking
, the elec tronic funds transfe r would have move d this way : 6

Iran Taif

(sh i p buy er, ori g i n ator & agen t/ i n stru m ent al i ty of Iran ) Ho lm an

Fenw ick (Tai f ’s law f i rm /

esc row agen

t, UK)

Credit Suisse (ben ef i ci ary ’s bank, Swi tzerl and) Crysta l

Ho ldings (ben ef i ci ary / shi p s el l er, L i beri a) Lloyds B ank (ori g i n ator’s bank, UK)

Wells Far go (i n term edi ary

bank, US)

This gr aphic is dra

w n fr om pag e 7 of the Com m er ci al L aw 6 Pro fe ss or s’ Amic us Brie f.8

Rely ing on Uniform Commercial Cod e Article 4A, and
espec ially § 4A-402, the district court “assume[d]” that T ai f, rathe r t han the Holman Fenwick law fi rm , was the “orig inator” of the funds transfe r. Levin
, 523 F. Supp. 3d at 21. The court conclude d that I ran (via Taif) had no claim to the funds at Wells Fa rg o, and there fore had “no proper ty interes t ” i n them. Id. at 21–22. T h i s wa s beca

use Taif was not “the entity immediately
prec eding the bank ‘holding ’ the EF T in the transa ction chain.” Id. at 21 (quoting Calderon-Cardona v. Bank of N.Y

. Mellon
, 770 F.3d 993, 1002 (2d Cir. 2014)). That entity was L loy ds Ba nk. Id. And so the district court held that i n t h e absenc e of
any I rania n proper ty interest (throug h Taif Mining) in the funds, plaintiffs could not attach them u n d er § 201 or § 1610(g ) to collect their

judgme nts ag ainst I ran. Id. at 20.

Both sides in this ap peal, rely ing on Heiser
, have set forth opposing views on whether
, in light of U.C.C. Ar t i cl e 4A, I ran has a “suff

icient proper

ty interest” i n the blocked funds. A 7 “suff icient proper

ty interest,” that is, to war rant plaintiffs’ attachme nts under § 201 and § 1610( g ).

The focus on Heiser is understanda ble

. That case is simil ar to this one. I n both, OFA C blocked an elec tronic funds transfe r

The Owens plai ntif

fs ar gue in the al te rna ti ve that the U.C.C. 7 doe s no t a pply :

The U.C.C. w as not des ig ned to addre ss te rr or is t behav io r, and Art ic le 4A w as spe ci fi ca ll y dra ft ed to pre ve nt the inte rr

uptio n of funds tr ans fe rs

. B ut halt ing tr ans fe rs is th e enti re poi nt of sa ncti ons blo ck ing
, and that is pre ci se ly w hat OFAC did in this

ca se

. As a re sult
, Art ic le 4A is il l- equipped to addre ss the i ss ues of

ow ner ship her e.

Owens Appell ants ’ Br. 20

.9

when it rea ched an intermediar y U.S. bank. And i n He i s er , as here
, the plaintiffs relied on § 201 and § 1610(g ) to c ollect their judgme nts. But there the mater ial simil arities end.

Unl ike this case , the plaintiffs in Heiser wer e seeking to attach funds at intermediar y banks under § 201 and § 1610(g ) becaus e the benef

iciary ’s bank was I rania

n. OFA C’s blocking had preve nted the funds from rea ching the I rania n bank. This is why we descr ibed the I rania n banks as having only “a conting ent future possessory interest in the funds.” Heiser
, 735 F.3d at 937. 8

Pursuant t o t h e U.C.C. Article 4A, the I rania n bank in Heiser “wa s not the b en eficiary or orig inator” and under “the principles of Article 4A,” the blocking fore closed any claim that leg al title had passed to the I ranian b an k

. Id

. at 941. For this

rea son and in view of settled common law princ iples, we r uled 9

The inte rm edia

ry b anks in Hei

se r nev er co ntes te d that funds 8 blo ck ed at an inte rm edia ry b an k, w her e the or ig inat or or the

or ig inat or ’s bank wa s or ma y hav e been an age ncy

or inst rum enta li ty of Iran
, co uld be at

ta che d using § 201 and § 1610 (g ). Hei se r , 7 3 5 F.3d at 936 n.3. I n fa ct , ther e w er e m any “ uncontes te d ac co unts” w it h tho se cha ra ct er is ti cs that th e bank s re quest ed the dist ri ct co urt turn

ov er to te rr or is t vic ti m plai ntif fs

. Id. ; se e Join t A p p end ix at 160– 61, 257, 277– 78, Hei

se r v. Is lamic Republic of Ir an , 735 F.3d 934 (D.C. Cir

. 2013 ) (No

. 12- 7101 ); Third Par ty Pet it io n All eg ing Cla im s in the Nat ure of I nter

plea der at 3–4, Hei

ser v. Islamic Republic of Ir an , 00- cv

- 2329 (D.D.C. Aug. 31, 20 12), R. Doc . 235

.

We des cr ibed t

he c om m on la w thus: 9

I f a deb tor mer el y hol ds pro per ty as an inte rm edia

ry fo r a thir d part y , but does not o w n the prope rt y , then

a cr edit or ca

nnot at ta ch it

. See Carpent er v. Nat’l Cit y Bank of Chi.
, 48 App. D.C. 133, 134– 3 5
, 1 3610

ag ainst the plaintiffs. I n o u r view Congr ess, in § 201 of TRI A and § 1610(g ) of FSI A, could not possibly have “intended judgme nt cre ditors of fore ign states to be able to attach proper ty those states do not own.” Id. at 938.

These differ ence s betwee n Heiser and this case are significant. As Professor Paul Mishkin, a “thoug htful leg al scholar[],” put it, when feder al court s incorporate s tate law as

1 0 fede ral common law, such incorporation must be done “as to a single issue at a time” and the court must consider wh et h er the “issue’s outcome” is consistent with the “fe dera l prog ram.” Paul J

. Mishkin, The Variousness of “Federa l La w” : Co mpetenc e and Discretion in the Choice o f National and State Rules for Dec ision, 105 U. P A

. L

. R E V

. 797, 804–06 (1957); see Caleb Nelson, The Persistence of Gene ral Law
, 106 C O L U M

. L

. R EV

. 503, 510–11 & n.33 ( 2006). I t follows that we may use Article 4A if and onl y i f, o n the issue prese nted, doing so would be consistent with TRI A § 201 and FSI A § 16 1 0 (g ). Boyle v. United Techs. Corp.
, 487 U.S. 500, 507–13 (1988) ; Burks v. Lasker
, 441 U.S. 471, 4 7 9

– 8 0 (1979). As we held in Heiser
, “Ar ticle 4A does not apply of its own forc e.

. . . Fe dera l l aw, specific ally § 201 and § 1610(g ), is controll i n g. ” 7 3 5 F.3d at 940.

(D.C. Cir

. 1918 ). Thes e princ iple s ca rr y si gni fi ca

nt

w ei ght bec aus e “sta

tute s sho uld b e inte rpre te d

co nsis te ntly w it

h th e co m

m on la w .” Manoha ran v. Rajapaksa
, 711 F

. 3d 178, 179 (D.C. Cir. 2013 ) (per

cur ia m ) (quo ti ng Saman tar v. Yousuf
, 560 U.S. 30 5, 320 (2010)).

Hei se r , 735 F.3d at

938

. Danforth v. Minn eso ta , 552 U.S. 264, 275 n.12 (2008); id. at 1 0 294– 95 (Robe rt s, C.J., diss enti ng)

.11

To sum up thus far
, Heiser did not settle whet h er U.C.C. Article 4A, or any provisions of it, would apply in a case such as this a s matter of “fe dera l c ommon law .” Henr y J

. Fr iendly
, In 1 1 Praise of Erie —and of the New Fede ral Common Law
, 39 N.Y. U. L

. R E V

. 383, 410 (1964)) ; see Clearfield Tr. Co. v. United States
, 318 U.S. 363, 366–68 (1943); Caleb Nelson, The Legitimacy of (

Some) Fede ral Common Law
, 101 V A

. L

. R E V

. 1, 35–36, 63 & n.220 ( 2015).

M o s t o f what is set forth in the leng thy U.C.C. Article 4 A and its Commentaries, entitled “F unds Transf ers,” deals with technica l banking subjects, o f n o co ncer n here

. The parties in this case natura ll y fo cu s on § 4A-402, the section dealing with elec tronic funds transfe rs that have miscarr ied. This section, like oth er Article 4A sections, seeks to avoid disruptions to funds transfe rs. I ts function is to alloca t e ri s ks and to fac ilitate the unwinding of uncompleted funds transfe rs in a fa i r and order ly

manner

. Grain Traders, Inc. v. Citi bank, N.A.
, 160 F.3d 97, 101 (2d Cir. 1998). 1 2

As applied in this case
, the obj ectives of U.C.C. § 4A-402 and OFA C’s blocking are incompatible. Whil e § 4A-402 seeks
to minimi ze disru p t i ons in elec tronic funds transfe rs, OFA C’s bl o ck i n g does the opposite – its purpose is to disrupt terror ist

We ackn owle d ge that the Sec ond Cir cuit appea rs to hav e 1 1 ado pted U.C.C. Art ic le 4A, or at le as t New Yor k’s ve rs io n of it
, as fe der al co m

m on la w fo r al l el ec tr oni c funds tr ans fe rs in ca se s suc h a s this one w it

hin it s non- div er si ty ju ri sd ic ti on. See

, e.g. , Doe v. JPMor gan C h a se Bank, N.A.
, 899 F.3d 152, 156– 57 (2d Cir

. 2018 ). We al so ac kno w le dge that our opi nio n al ig ns w it h the diss enti ng opi nio n in that

ca se

. Id. at

158 –62 (Chin, J., d is se nting ).

Grai n Trader

s is not a fe der al co m

m on la w ca se; it is a 1 2 div er si ty ca se that appli es New Yor k la w , spe ci fi ca ll y New Yor

k’s

ve rs io n of Art ic le 4A. 1 60 F. 3d at 98.12

elec tronic fund transac tions. Wh ile § 4A-402 is desig ned to g overn the unrave ling of unco m pleted elec tronic transfe rs, 1 3 when OFA C blocks elec tronic funds transfe rs there will be no

unrave ling. That is the point of blocking

. Thus, the Permane nt

1 4 E d i t o ri al Boa

rd for the Uniform Commercial Code, in its 1 5 Co m mentary No. 16, conclude d that Article 4A should not be “hon o re d ” when “a reg ulation of the Trea sury Depa rtment’s Offic e of For eig n Assets Con trol (‘OF AC’)” disrupts an

A funds tr ans fe r m ay not be co m plet ed b ecause the 1 3 inte rm edia

ry bank bec om es inso lv ent af te r the or igi n ator ’s bank

cr edit s the inte rm edia

ry ’s ac co unt, ther e is a m is ta ke in the pay

m ent

or der
, or a bank ac ci denta ll y se nds a duplica te pay m ent or d er

. 3 J A M ES J. W H I TE ET A L ., U N I FO R M C O M M ER C I A L C O D E § 23:15, 21 (6th ed. 2014 ).

At le as t not in the Unite d Sta te s. We hav e no info rm at io n on 1 4 pot enti al ca

use s o f a ct io n in fo re ig n j uris dict io ns.

The Per m ane nt Edito ri al Boa

rd 1 5

is a joint committ ee of the Am er ic an L aw I nsti tute and the Unifo rm L aw Com m is si on (a ls o know n as the Nat io nal Confer ence of Com m is si one rs on Unifo rm Sta

te L aw s) that as si st s in at ta ining and

m ai ntaining unifo rm it

y in st at e st at

utes go ve rning

c o m m e r c i a l t r a n s a c t i o n s b y d i s c o u r a g i n g

n o n

- u n i f o r m a m e n d m e n t s t o t h e U n i f o r m Com m er ci al Code by the st at es , and b y ap pro vi ng and pro m ulg at ing am endm ents to the UCC w hen

nec es sa ry

.
Export –Import Bank of t

he U.S. v. Asi a Pulp & Paper Co.
, 609 F.3d 111, 119 n.8 (2d Cir. 2010) (int er nal quo ta ti on m ar

ks om it te d)

.13

elec tronic transf

er. That of c ourse de scribes this ca se. 1 6

When one steps back from § 4A-402’s elabor ate – but i n appli cable – methods for unwinding misfired elec tron i c t ransfers, the path to our judgme nt seems clea r. OFA C’s blocking is aimed at terror ists and their financ ial transac tions. The TRI A “subjec t[ s] to execution or attac hment” “the blocked
assets of [a] terror ist party ,” such as a State Sponsor of Terr orism like I ra n , “including the blocked assets of any ag ency or i n s t rumentality of that terror ist party ” ag ainst which plaintif fs hold a judgme nt under 28 U.S.C. § § 1 605(a) (7) or 1605A. § 201(a)
, 116 Stat. 2337. Agai n , s ection 201(a) specifie s that such assets can be attached “[ n]ot withstanding any other provision of law.”

Wells Fa rg o Ba nk is mere ly a s t ak eh older. I t risks no financ ial loss. L loy ds Ba nk is not on the hook – it rec eived $9.98 milli on from the Holman law firm and it transmitted $9.98 milli on to Wells Fa

rg o. T h e Hol man law firm held the $9.98 milli on as an escr ow ag ent; it never owned the money

. The 1 7 only entity that is out of pocket as a res u l t of OFAC’s bl ocking is the I rania

n front Taif, and that is beca use it is subject to U.S. 1 8 sanctions. I n t erms of t he TRI A, j ust quoted, t he $9.98 milli on

The dist ri ct co urt r el ie d o n Co m

m enta ry No. 16 in co ncluding 1 6 th at I ra n (t hro ugh Tai f) had no pro per ty inte re st in the $9.9 8 m il li on held at We ll s Far go

. Lev in
, 523 F. Supp

. 3d at 21. The co urt m ay not hav e bee n aw ar e of the Per m ane nt Edito ri al Boa

rd’s ca ve at re ga rding OFAC, quote d in the te xt abo ve

.

Since thes e ar e fo r the m os t p ar t inst ant tr ans ac ti ons w e 1 7 disr eg ar d the e ff

ec t o f int er es t o n the funds.

At le as t ac co rding to U.S. l aw , w hich to our

ana ly si s is al l that 1 8

m at te rs

.14

there fore repr esents “bloc ked asse ts of [a] terror ist party .” 1 9

The opposition of the United States rests on U.C.C. Ar ticle 4A, which we find inapplicable. The g overnme nt ag ree s with the district court’s decision to apply Article 4A and the conc l usion

rea ch ed

. There is another problem with the position of the United States. The g overnme nt’s arg ument here and the district court’s holding that I ran (Taif ) has n o p roperty interest in the 2 0 blocked funds “is inhere ntly at odds with OFA C reg ulations that require the ‘prope rty and interests in proper ty ’ o f [S pecia lly Desig nated Global Terr orists] to be block ed i n the first place

. See 31 C.F.R. § 594.201(a)

. I f [a terror ist’s] interest in funds is, in eff ect, entirely exti ngu i shed while temporar ily midstream, there would be no authorization to block those midstream funds

as ‘prope rty [or] interests in proper ty ’ of a desig nated terror ist party beca

use that proper

ty wou l d belong solely to the intermediar

y bank, not a desig nated t er ro ri st party .” Doe
, 899 F.3d at 161 (Chin, J., dissenting ) (third a nd fourth altera tions in orig inal).

Since U.C.C. Article 4A does not apply
, the next question is what does. Our answe r is that under § 201, which deals only with assets that have alre ady been blocked by the United States,
terror ist victims may attach OFA C blocked el ec t ronic funds transfe rs if those funds c an be tr ace d to a terr orist owner.

Trac ing is used throug hout fede ral law to attach
conseque nces to those having or having had interests in proper ty

. The Supreme Court has commented: “Courts use trac ing rules in

case s involving fra

ud, pension rig hts, bankruptc y , t rust s, etc.”

Bec aus e the funds ca

n be at ta che d using the TRI A, w e nee d not 1 9 dec ide w hethe r at

ta chm ent is per

m is si ble under § 1610 (g ) of the FSI A.

Lev in , 523 F. Su pp. 3 d at 21. 2 015

Luis v. United States
, 578 U.S. 5, 22 (2016) (p l urality opinion) (per curia m). The fede ral forf eiture statutes ex p re s sly incorpora te trac ing. See, e.g. , 18 U.S.C. §§ 981, 982; 21 U.S.C. § 881(a) (6); United States v. Dacc arett , 6 F.3d 37, 55 (2d Cir. 1993). Consist ent with other situations when trac ing i s used,

2 1 innocent third parties must be protec ted. There fore
, blocked funds ca n be attached only if no intermediar y or upst rea

m bank

asser ts an interest as an innocent third party

. See Heiser
, 735 F.3d a t 938–39; Doe , 899 F.3d a t 160–61 (Chin, J ., dissenting)

.

Trac ing resolve s t h i s case in plaintiffs’ favor

. The
g overnme nt admits that the $9.98 milli on blocked funds at Wells Fa rg o “ar e trac eable to Taif” and thus to I ran. United States Br

. 47. The premise of the g overnme nt’s forf eiture action is that the fund s are trac eable to I ran. See J .A. 51 ¶¶ 1–2; id. at 58–60 ¶¶ 47–59. Neither

Wells Farg o nor L loy ds has asser ted a c laim
to the blocked fu n d s. The district court there fore err ed in concluding that the plaintiffs had failed to show that the blocked funds were, under § 201(a) of t h e T RI A, “the blocked assets of [a] terror ist party (including the blocked assets of any ag ency or instrumentality of that terror ist party ).” 116 Stat. 2337. The district court ’s j u dg ment rested entirely on this holding and its decision is all that we have addr essed.

Rev ersed and re manded.

The U.C.C.’s Per

m ane nt Edito ri al Boa

rd, in it s Com

m enta ry 2 1 No. 16, indic at ed that Art ic le 4A doe s not apply in drug fo rf ei ture

ca se s, and that w it

h re spe ct to blo ck ed el ec tr oni c funds, the

“ Dacc are tt co urt, as appro pria te in a fo rf

ei ture ca se, ident if

ie d the

am ount of the funds as ‘tra ce able ’ to an il li ci t ac ti vi ty and ther ef or e subject to at ta chm ent under

21 U.S .C. § 8 81(a) .”16

E P I L O G U E

I n J anuar y 2020 the United Ara

b Emirates seized the Nautic pursuant to a civil court order

. Cry stal initiated an arbitra tion
ag ainst Taif Mining to collect the $9.98 milli on balanc e. Whil e the arbit ra t ion was pending
, and while the Nautic was moored off the U AE coa st, I rania ns hijacked the ship.P ILLARD , Circuit Judge , concurring: I agree with the majority that the Uniform Commercial Code’s Article 4A is a n inappropriate rule of decision for determining whether funds owned by a terrorist party that initiates an EFT, during which the government blocks the funds based on 31 C.F.R. § 594.201
, are property “of” a terrorist party for purposes of TRIA § 201. But in the place of Article 4A , I would make explicit that

common

- law ownership and agency principles apply instead of or in addition to tracing. Because the majority’s rule apparently produce s the same result in this case
, I concur.

No party proposed we adopt tracing alone as our rule of decision in this context , and for good reason

. That approach does not fulfill a key requirement of TRIA that we highlighted in Heiser v. Islamic Republic of Iran : that the terrorist party be shown to have “an ownership interest” in the funds sought. 735 F.3d 934, 941 (D.C. Cir. 2013) ; see id. at 938

- 40. Tracing typically involves a sort of forensic accounting

— a process of identifying how an asset has been transformed, transferred, or substituted suc h that a claim against the asset can instead be made against the new one . “With the help of [tracing] rules, the victim of a robbery, for example, will likely obtain the car that the robber used stolen money to buy.” Luis v. United States
, 578 U.S. 5, 22 (2016)

. But tracing presupposes ownership; it does not identify any legal rule for establishing ownership , or even require that ownership be shown

. The majority’s holding that the relevant funds may be attached so long as they are “traceable to Taif,” supra at 15
, stops short of specifying any rule of decision to substitute for U. C .C. Art icle 4A in provid ing the statutorily required showing of ownersh ip under Heiser

. Specifying only the tracing approach creates needless uncertainty. As we observed in Heiser , “[t]he blocking regulations cast a wide net,” and are “not based on legal ownership.” 735 F.3d at 936. The fact that the government has blocke d funds is not itself assurance that the funds are or were2 owned by terrorists. Victims of terrorism seeking to attach OFAC blocked electronic funds must also show the funds can be traced to a terrorist owner , id. at 941, a showing the government itself n eed not make prior to the blocking.

The court’s opinion helpfully limits its tracing

- based TRIA rule to circumstances in which “no intermediary or upstream bank asserts an interest as an innocent third party,”
supra at 15. But it does not explain the l egal basis of that limitation . And it leaves unclear, for example, whether a bank could make such an assertion after the TRIA plaintiffs had recovered against the property. We must avoid a rule that “risks punishing innocent third parties”

— the result Heiser read TRIA to prevent. 735 F.3d at 939 (citing cases establishing that we strictly construe attachment statutes to protect innocent parties).

In a case in which the tracing rule alone does not eliminate such risk, a n apt federal rule of decision was presented to us: the application of common

- law ownership and agency principles in lieu of the U.C.C. Art icle 4A

- based rule applied in Heiser

. See Owens Appellants’ Br. 36

- 40. The relevant TRIA provision seek s to hold terrori st parties accountable by subjecting their assets to attachment. Treating banks effectuating EFTs as agents rather than owners in this context would ensure that even in financial transactions like EFTs that are designed to be quick and difficult to interr upt, that design does not defeat the ability of TRIA claimants to reach funds during terrorist

- initiated EFTs that the blocking regime succeeds in interrupt ing . This rule would allow the law to keep its eye on the ball as Congress plainly intended: The banks are just the tools for carrying out the transaction. Whether it is transferred by EFT or some more traditional means like a check, property in a transaction that a terrorist part y fund s ,3

initiate s , and primarily benefit s from is appropriately su bject to claims under TRIA

. The logic of this approach echoes the common law’s treatment of certain banking relationships in the decades before the U.C.C. added specialized treatment of electronic fund transfers. In Commercial National Bank v. Armstrong
, for example, the Supreme Court recognized that “the relation created between the banks as to [a check to be cashed] was that of principal and agent,” which created a “trust obligation” over the funds to be transferred and permitted those funds to be “spec ifically trac[ed]” back to the principal’s rightful ownership. 148 U.S. 50, 56 (1893). Because of that agency relationship,

[w]hether it be said that such funds are specifically traceable in the possession of the subagent, or that the agent has never r educed those funds to possession, or put itself in a position where it could rightfully claim that it has changed the relation of agent to that of debtor, the result [was] the same.

Id. at 57. The result was that traceable funds intended as cash payment on that check belonged to the principal, rather than the agent bank, even if those funds were stopped mid

- transfer. Id. at 57

- 58 ; see also, e.g.
, City of Miami v. First Nat. Bank , 58 F.2d 561 (5th Cir. 1932).

Under that approach, for purposes of TRIA § 201, plaintiffs must establish not only that funds have been blocked based on “any interest” that a terrorist party may have in them
, 50 U.S.C. § 170 2 (a)(1)(B), but also that the funds are owned by the terrorist

— not by an innocent EFT initiator, see Heise r , 735 F.3d at 936 , or other innocent party. Any bank4 downstream from a terrorist party originator of an EFT, for example, is not treated as owner of the funds, as it would be under U

. C

. C

. Article 4A . Rather, under general common law rules applicable to non

- EFT money transfers , it would be treated as an agent or subagent of the originator

- owner. Here, Taif was the owner of the funds it asked Ho l man Fenwick to electronically transfer , and for current purposes it thus retained ownership of th e contested funds
, even as the funds passed through the hands of its agents and subagents until they were frozen in Wells Fargo’s possession. Thus, applying common law ownership and agency principles would treat Taif

— and only Taif

— as holding an ownership interest in the blocked funds.

I therefore concur in revers ing the district court’s determination that the blocked funds were not “of” a terrorist party. Supra at 15

. I write separately to emphasize that, in my view, tracing alone is a conceptually inco mplete rule of decision. But I do not take the court’s tracing approach to be inconsistent with additional reliance on a federal rule based on

common

- law ownership and agency principles

— to the extent it might be needed in future litigation

— to harmoniz e today’s decision with Heiser and reduc e legal uncertainty for innocent

owners and third parties like Wells Fargo

.