646 F.2d 779 (2nd Cir. 1981), 80-3063, New England Merchants Nat. Bank v. Iran Power Generation and Transmission Co.

Docket Nº:80-3063, 80-9001 and 80-9004 to 80-9007.
Citation:646 F.2d 779
Party Name:NEW ENGLAND MERCHANTS NATIONAL BANK, Plaintiff-Appellee, v. IRAN POWER GENERATION AND TRANSMISSION COMPANY, The Iranian Ministry of Energy and Natural Resources, The Government of Iran, The Iranian Ministry of Economic Affairs and Finance, Defendants-Appellants, United States of America, Appellant (and related cases). In re UNITED STATES of America
Case Date:April 09, 1981
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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Page 779

646 F.2d 779 (2nd Cir. 1981)

NEW ENGLAND MERCHANTS NATIONAL BANK, Plaintiff-Appellee,

v.

IRAN POWER GENERATION AND TRANSMISSION COMPANY, The Iranian

Ministry of Energy and Natural Resources, The Government of

Iran, The Iranian Ministry of Economic Affairs and Finance,

Defendants-Appellants,

United States of America, Appellant (and related cases).

In re UNITED STATES of America, Petitioner.

Nos. 1049 to 1227 and 740, Dockets 80-6254 to 80-6349,

80-7912 to 80-7999,81-7054, 81-7062, 81-7064,

80-3063, 80-9001 and 80-9004 to 80-9007.

United States Court of Appeals, Second Circuit

April 9, 1981

Argued March 30, 1981.

Page 780

Michael F. Hertz, Atty., Civ. Div. Dept. of Justice, Washington, D.C. (John S. Martin, Jr., U. S. Atty., New York City, Thomas S. Martin, Acting Asst. Atty. Gen., Robert E. Kopp, John F. Cordes, Susan J. Herdina, Attys., Civ. Div., Dept. of Justice, Washington, D.C., Mark B. Feldman, Acting Legal Adviser, Timothy B. Ramish, Atty., Dept. of State, Washington, D.C., of counsel), for petitioner-appellant United States.

George Weisz, New York City (Cleary, Gottlieb, Steen & Hamilton, Jonathan I. Blackman, New York City, of counsel), for certain plaintiffs-appellees in support of remanding these appeals.

Samuel Hoar, Boston, Mass. (Goodwin, Procter & Hoar, Carol Goodman, Boston, Mass., of counsel), for plaintiff-appellee Chas. T. Main International, Inc.

Lawrence W. Newman, New York City (Baker & McKenzie, Robert B. Davidson, Jean Bernstein, New York City, of counsel), for certain plaintiffs-appellees in support of the right to compensation.

Stephen R. Kaye, New York City (Proskauer, Rose, Goetz & Mendelsohn, Lester M. Kirshenbaum, New York City, of counsel), for plaintiff-appellee Starrett Housing Corp.

Thomas G. Shack, Jr., Washington, D.C. (Abourezk, Shack & Mendenhall, P.C., New York City, Raymond J. Kimball, Washington, D.C., Gregory de Sousa, New York City, James A. Stenger, Washington, D.C., of counsel), for defendant-appellant Islamic Republic of Iran and Certain of Its Agencies and Instrumentalities.

Daniel P. Levitt, New York City (Kramer, Levin, Nessen, Kamin & Soll, Michael S. Oberman, Greg A. Danilow and Alan R. Friedman, New York City, of counsel), for certain defendant-appellant Iranian Banks.

(Full list of counsel appears as Appendix A.)

Before TIMBERS, Van GRAAFEILAND and MESKILL, Circuit Judges.

MESKILL, Circuit Judge:

The plaintiffs in these 96 consolidated cases are commercial entities with claims against the Islamic Republic of Iran and various of its agencies or instrumentalities (hereinafter collectively referred to as "Iran"). After witnessing a period of worsening political and economic relations, which culminated in the seizure of the American Embassy in Teheran and its personnel on November 4, 1979, the plaintiffs brought suit against Iran under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1330, 1602-11 (Supp. III 1979) (FSIA). Upon commencing suit, the plaintiffs sought and obtained pursuant to N.Y.Civ.Prac.L.R. § 6211(a) (McKinney 1980) ex parte orders of prejudgment attachment upon the "frozen" Iranian assets in New York. 1 At the subsequent confirmation hearings, 2 the Iranian defendants moved to vacate the attachments, arguing that a foreign state and its instrumentalities are immune from prejudgment attachment under the FSIA and the 1955 Treaty of Amity, Economic Relations, and Consular Rights Between the United States of America and Iran, 8 U.S.T. 899 ("Treaty of Amity"). 3

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These cases were referred to Judge Duffy for resolution of the sovereign immunity issue.

On September 26, 1980, the district court rendered an Opinion and Order resolving the sovereign immunity issue. New England Merchants National Bank v. Iran Power Generation and Transmission Co., 502 F.Supp. 120 (S.D.N.Y.1980). While ruling that Iran had not waived its immunity from prejudgment attachment under the FSIA or the Treaty of Amity, the court concluded that the Presidential freeze had "suspended" Iran's immunity from prejudgment attachment. Judge Duffy did not pass upon the plaintiffs' additional argument that Iran had forfeited its immunity by reason of its hostile acts toward the United States. The Government's request for an indefinite stay was denied, with Judge Duffy stating that on balance his decision did not "in any way, impinge on the enormous prerogatives vested in the President" to handle foreign affairs. Id. at 133. Having decided the common question presented to him, Judge Duffy referred the cases back to the various district judges for resolution of the non-common issues. 4

Immediately following this decision, the United States moved on October 6, 1980 for a stay of further district court proceedings pending appellate review. The Government also sought leave to intervene and moved for certification under 28 U.S.C. § 1292(b) (1976) of the court's refusal to grant its request for an indefinite stay. On November 5, 1980, Judge Duffy denied these motions. On November 25, 1980, the Government filed a notice of appeal of the September 26 Opinion and Order, claiming that the denial of its request for a stay was appealable under Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). Finally, on December 19, 1980, the Government petitioned for a writ of mandamus to compel the district court to stay the proceedings. A panel of this Court on December 23 scheduled briefing on the petition for mandamus and temporarily stayed proceedings in the district court pending its decision on the petition.

Recognizing that there was "substantial room for differences of opinion" on the sovereign immunity issue and that immediate appeal could "materially advance the termination of this litigation," Judge Duffy on December 22, 1980 certified four questions to this Court:

1. Did Executive Order No. 12,170 (November 14, 1979), 44 Fed.Reg. 67729, the Treasury Regulations promulgated thereunder and President Carter's subsequent reports to Congress suspend, dissolve or terminate the immunity from pre-judgment attachment that would otherwise be available to defendants under the Foreign Sovereign Immunities Act of 1976 and the Treaty of Amity?

2. If the answer to No. 1 above is yes, does the International Emergency Economic Powers Act (50 U.S.C. §§ 1701, et seq.) authorize the suspension, dissolution or termination of defendants' immunity from pre-judgment attachment in the manner that the Court found had occurred here?

3. If the answers to Nos. 1 and 2 above are yes, is the International Emergency Economic Powers Act constitutional as applied?

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(4.) Whether sovereign immunity of the defendants under the Foreign Sovereign Immunities Act with respect to pre-judgment attachment has been waived, terminated or suspended by virtue of (a) the 1955 Treaty of Amity, Economic Relations and Consular Rights between the United States and Iran, or (b) the severance of diplomatic relations between the United States and Iran and actions taken by Iran in violation of international law.

Judge Duffy specifically refused to certify whether the lifting of the freeze would terminate the attachments, stating that "(s)uch a contingency is simply not a 'case or controversy' properly before any court at the present time." On January 5, 1981, this Court issued an order permitting interlocutory appeal of the certified questions, granted the Government's motion for an expedited appeal, continued the previously granted stay, and scheduled argument on all points raised by the petition and the appeal.

Subsequent events radically changed the focus and posture of this appeal. On January 19, 1981, President Carter entered into a series of agreements to secure the release of the American hostages. 5 Under the agreements, most claims are to be submitted to binding, non-reviewable arbitration before a Claims Tribunal. Iran agreed to establish a security account which would be initially funded by a deposit of $1 billion in previously frozen funds and securities, and promised to replenish the fund whenever it fell below $500 million, until all awards are paid. In return, the United States promised to "act to bring about the transfer (of Iranian funds and securities held in U. S. banks) within six months." Crucial to the settlement was the promise of the United States to

terminate all legal proceedings in United States courts involving claims of United States persons and institutions against Iran and its state enterprises, to nullify all attachments and judgments obtained therein, to prohibit all further litigation based on such claims, and to bring about the termination of such claims through binding arbitration.

To implement these agreements, President Carter issued Executive Orders 12276 through 12285 which, inter alia, revoked the previously issued license to attach the frozen assets, nullified all post-freeze rights of non-Iranians in the assets, precluded United States citizens from acquiring further rights in the assets, directed those entities holding Iranian funds and securities to transfer them to the Federal Reserve Bank of New York, and required those holding other frozen assets to transfer the property as directed by Iran. 6 On February 24, 1981, President Reagan ratified the terms of the agreement, and issued the following Executive Order concerning claims pending against Iran:

Section 1. All claims which may be presented to the Iran-United States Claims Tribunal under the terms of Article II of the Declaration of the Government of the Democratic and Popular Republic of Algeria Concerning the Settlement of Claims by the Government of the United States of America and the Government of the Islamic Republic...

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