Ministry of Def. & Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Def. Sys., Inc.

• Decision Date: 15 December 2011
• Docket Number: Nos. 99–56380,99–56444.,s. 99–56380
• Citation: 2011 Daily Journal D.A.R. 17921,11 Cal. Daily Op. Serv. 15009,665 F.3d 1091
• Parties: The MINISTRY OF DEFENSE AND SUPPORT FOR THE ARMED FORCES OF THE ISLAMIC REPUBLIC OF IRAN, as Successor in Interest to the Ministry of War of the Government of Iran, Plaintiff–Appellee, v. CUBIC DEFENSE SYSTEMS, INC., as Successor in Interest to Cubic International Sales Corporation, Defendant–Appellant.The Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran, as Successor in Interest to the Ministry of War of the Government of Iran, Plaintiff–Appellant, v. Cubic Defense Systems, Inc., as Successor in Interest to Cubic International Sales Corporation, Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

11 Cal. Daily Op. Serv. 15,009

2011 Daily Journal D.A.R. 17,921

665 F.3d 1091

The MINISTRY OF DEFENSE AND SUPPORT FOR THE ARMED FORCES OF THE ISLAMIC REPUBLIC OF IRAN, as Successor in Interest to the Ministry of War of the Government of Iran, Plaintiff–Appellee,

v.CUBIC DEFENSE SYSTEMS, INC., as Successor in Interest to Cubic International Sales Corporation, Defendant–Appellant.The Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran, as Successor in Interest to the Ministry of War of the Government of Iran, Plaintiff–Appellant,

v.Cubic Defense Systems, Inc., as Successor in Interest to Cubic International Sales Corporation, Defendant–Appellee.

Nos. 99–56380

99–56444.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 8, 2011.Filed Dec. 15, 2011.

Charles A. Bird (argued) and Michelle A. Herrera, Luce, Forward, Hamilton & Scripps LLP, San Diego, CA, for Cubic Defense Systems, Inc.

Mina Almassi, Los Altos Hills, CA; Steven W. Kerekes (argued), Pasadena, CA, for the Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran.

George W. Madison, General Counsel, U.S. Department of the Treasury; Harold Hongju Koh, Legal Adviser, U.S. Department

of State; Tony West, Assistant Attorney General; Laura E. Duffy, United States Attorney; Douglas N. Letter and Lewis S. Yelin, Civil Division, U.S. Department of Justice, Washington, D.C., for amicus curiae United States.Appeal from the United States District Court for the Southern District of California, Rudi M. Brewster, District Judge, Presiding. D.C. No. CV–98–01165–RMB.Before: ALEX KOZINSKI, Chief Judge, MICHAEL DALY HAWKINS and RAYMOND C. FISHER, Circuit Judges.

OPINION

FISHER, Circuit Judge:

These appeals require us to decide whether confirmation of an arbitration award in favor of the Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran is “contrary to the public policy” of the United States under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, known as the “New York Convention.” We hold, consistent with the position of the United States as amicus curiae, that confirmation of the award does not violate any public policy of the United States. We also hold that the district court's judgment is a “money judgment” subject to postjudgment interest, and that a district court has discretion to award prejudgment interest and attorney's fees in an action to confirm an arbitration award under the Convention. Accordingly, we affirm the judgment in part, vacate it in part and remand to the district court for reconsideration of the Ministry's motions for prejudgment interest and attorney's fees.

Background

In 1977, Cubic International Sales Corporation, predecessor in interest to appellant Cubic Defense Systems, Inc. (“Cubic”), a United States corporation, contracted with the Ministry of War of the government of Iran, predecessor of appellee Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran (“Ministry”), for sale and service of an air combat maneuvering range for use by Iran's military. The Iranian Revolution resulted in nonperformance of the contracts. Consequently, the parties agreed in 1979 that the contracts would be discontinued and that Cubic would try to resell the equipment, with a later settlement of the accounts. In 1981, Cubic sold a modified version of the equipment to Canada.

In 1982, the Ministry filed breach of contract claims against Cubic with the Iran–United States Claims Tribunal at the Hague. In 1987, that tribunal issued an order stating that it lacked jurisdiction to hear the matter. See Ministry of Nat'l Def. of the Islamic Republic of Iran v. Gov't of the United States, 14 Iran–U.S. Cl. Trib. Rep. 276, 1987 WL 503814 (1987).

In 1991, the Ministry filed a request for arbitration before the International Court of Arbitration of the International Chamber of Commerce (ICC). The ICC, sitting in Switzerland, made a final award in those proceedings in May 1997. The final award makes a net award of $2,808,519 plus pre-award interest in favor of the Ministry. The ICC also directed Cubic to reimburse the Ministry $60,000 for arbitration costs.

In June 1998, after Cubic failed to pay, the Ministry filed a petition in federal district court to confirm the ICC's award under the New York Convention. See 9 U.S.C. § 207.¹ The district court issued an order granting the Ministry's petition in December 1998.

The Ministry subsequently filed a motion for prejudgment interest covering the period between the ICC's final award and the district court's confirmation. The motion also requested attorney's fees based on Cubic's alleged failure to comply with the ICC's decision. The district court denied the motion, concluding that prejudgment interest and attorney's fees were unavailable in an action to confirm a foreign arbitration award under the Convention.

The district court entered judgment in August 1999. Cubic timely appealed confirmation of the award, and the Ministry timely cross appealed denial of prejudgment interest and attorney's fees. Proceedings were suspended pending litigation over whether certain judgment creditors of Iran could attach the Ministry's judgment. That litigation has now been concluded. See Ministry of Def. & Support for Armed Forces of Islamic Republic of Iran v. Cubic Def. Sys., Inc., 236 F.Supp.2d 1140 (S.D.Cal.2002), aff'd, 385 F.3d 1206 (9th Cir.2004), vacated and remanded, 546 U.S. 450, 126 S.Ct. 1193, 163 L.Ed.2d 1047 (2006), remanded to, 495 F.3d 1024 (9th Cir.2007), rev'd, 556 U.S. 366, 129 S.Ct. 1732, 173 L.Ed.2d 511 (2009), remanded to, 569 F.3d 1004 (9th Cir.2009).

Following oral argument in February 2011, we invited the United States to express its view on whether confirmation of the ICC's award would be contrary to the public policy of the United States under Article V(2)(b) of the Convention. The United States filed an amicus brief supporting affirmance. We then directed the parties to file supplemental briefs addressing the United States' brief, which they have done. These appeals accordingly are ripe for decision.

Discussion

Cubic argues that the district court erred by confirming the ICC's award because confirmation is contrary to the public policy of the United States and, in the alternative, because the award has not yet become binding on the parties. Cubic also argues that the district court's judgment is not subject to post-judgment interest because the district court did not specify the dollar amount of the confirmed award. On cross appeal, the Ministry argues that the district court abused its discretion by denying its motion for prejudgment interest and attorney's fees. We address these arguments in turn.

I.

Confirmation of foreign arbitration awards is governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, known as the New York Convention, and federal law implementing the Convention, 9 U.S.C. §§ 201–208. Section 207 provides:

Within three years after an arbitral award falling under the Convention is made, any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration. The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention.

9 U.S.C. § 207.

The seven grounds for refusing to confirm an award are set out in Article V of the Convention.² These defenses are construed narrowly, and the party opposing recognition or enforcement bears the burden of establishing that a defense applies. See Polimaster Ltd. v. RAE Sys., Inc., 623 F.3d 832, 836 (9th Cir.2010).

Cubic invokes two of these defenses here, arguing that “recognition or enforcement of the award would be contrary to the public policy of [the United States],” and, in the alternative, that the “award has not yet become binding on the parties.” N.Y. Convention, art. V(1)(e), V(2)(b). Although Cubic did not raise these issues in the district court, we exercise our discretion to consider them for the first time on appeal because they are purely questions of law and do not depend on further factual development of the record. See Hesse v. Sprint Corp., 598 F.3d 581, 590 (9th Cir.2010). We hold that neither defense applies, and accordingly affirm the district court's confirmation of the ICC's award.

A.

1.

Cubic argues that confirmation of the award would be contrary to the public policy of the United States. The Convention's public policy defense, Article V(2)(b), states:

Recognition and enforcement of an arbitral award may ... be refused if the competent authority in the country where recognition and enforcement is sought finds that ... (b) The recognition or enforcement of the award would be contrary to the public policy of that country.

N.Y. Convention, art. V(2).

In recognition of a presumption favoring upholding international arbitration awards under the Convention, this defense is “construed narrowly.” Parsons & Whittemore Overseas Co. v. Societe Generale De L'Industrie Du Papier (RAKTA), 508 F.2d 969, 974 (2d Cir.1974). It applies only when confirmation or enforcement of a foreign arbitration award “would violate the forum state's most basic notions of morality and justice.” Id.; accord TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 938 (D.C.Cir.2007); Admart AG v. Stephen & Mary Birch Found., Inc., 457 F.3d 302, 308 (3d Cir.2006); Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274, 306 (5th Cir.2004); Slaney v. Int'l. Amateur Athletic Fed'n, 244 F.3d 580, 593 (7th Cir.2001); M & C Corp. v. Erwin Behr GmbH & Co., KG, 87 F.3d 844, 851 n. 2 (6th Cir.1996). Although this defense is frequently raised, it “has rarely been successful.” Andrew M. Campbell, Annotation, ...