McKesson Corp. v. Islamic Republic of Iran

• Decision Date: 28 February 2012
• Docket Number: No. 10–7174.,10–7174.
• Citation: 672 F.3d 1066
• Parties: McKESSON CORPORATION, et al., Appellees v. ISLAMIC REPUBLIC OF IRAN, AppellantFinancial Organization for the Expansion of Ownership of Productive Units, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

672 F.3d 1066

McKESSON CORPORATION, et al., Appellees

v.ISLAMIC REPUBLIC OF IRAN, AppellantFinancial Organization for the Expansion of Ownership of Productive Units, et al., Appellees.

No. 10–7174.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 14, 2011.Decided Feb. 28, 2012.

Appeal from the United States District Court for the District of Columbia (No. 1:82–cv–00220).Christopher J. Wright argued the cause for appellant. On the briefs were Thomas G. Corcoran Jr., Laina C. Wilk Lopez, and Henry M. Lloyd.

Mark N. Bravin argued the cause for appellees McKesson Corporation, et al. With him on the briefs was Mark R. Joelson. David M. Kerr entered an appearance.

H. Thomas Byron, III, Attorney, U.S. Department of Justice, argued the cause as amicus curiae United States. With him on the brief were Tony West, Assistant Attorney General, Ronald C. Machen Jr., U.S. Attorney, Douglas N. Letter, Attorney, and Harold Hongju Koh, Legal Adviser, U.S. Department of State.

Before: SENTELLE, Chief Judge, TATEL and BROWN, Circuit Judges.

Opinion for the Court filed by Circuit Judge BROWN.

BROWN, Circuit Judge:

This decades-long dispute boils down to a rather simple set of allegations: McKesson Corporation, a U.S. company, claims that after the Islamic Revolution, the government of Iran expropriated McKesson's interest in an Iranian dairy and withheld its dividend payments. McKesson filed its complaint in 1982, and the procedural nightmare that followed resembles the harshest caricature of the American litigation system as one in which justice can be continually delayed, if not denied. This case has reached our Court on five prior occasions, and we have remanded it for numerous trials by the district court. Yet after almost thirty years of effort, this litigation has yet to definitively address the foundational issues of this case—namely, whether this Court has jurisdiction over McKesson's claim and whether any recognized body of law provides McKesson with a private right of action against Iran.

I. Background

The facts of this case are set forth fully in earlier decisions. See Foremost–McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 440–42 (D.C.Cir.1990) (“ McKesson I ”); McKesson Corp. v. Islamic Republic of Iran, 52 F.3d 346, 347–49 (D.C.Cir.1995) (“ McKesson II ”); McKesson HBOC, Inc. v. Islamic Republic of Iran, 271 F.3d 1101, 1104–05 (D.C.Cir.2001) ( “ McKesson III ”). Sherkat Sahami Labaniat Pasteurize Pak (“Pak Dairy”), a joint venture between McKesson and private Iranian citizens, was incorporated on March 12, 1960. McKesson's ownership interest in Pak, initially 50 percent, had decreased to 31 percent at the time of the Islamic Revolution. McKesson alleges that in the wake of the Revolution, agents and instrumentalities of the government of Iran seized control of the board of directors of Pak. Through a series of hostile actions allegedly instigated by the government, the board effectively froze out McKesson's stake in Pak and blocked McKesson's receipt of dividend payments. In 1982, McKesson, joined by the Overseas Private Investment Corporation (“OPIC”), filed suit in the United States District Court for the District of Columbia, alleging that Iran had unlawfully expropriated its property without compensation.

Pursuant to Executive Order 12,294, 46 Fed.Reg. 14,111 (Feb. 24, 1981), the case was stayed while the plaintiffs presented their claims to the Iran–United States Claims Tribunal (“Tribunal”). From McKesson's perspective, the Tribunal rendered a mixed result. Although the Tribunal held that interference with McKesson's rights had not amounted to an expropriation by the last date of the Tribunal's jurisdiction, it did rule that Pak Dairy had unlawfully withheld from McKesson cash dividends declared in 1979 and 1980. See Foremost Tehran, Inc. v. Islamic Republic of Iran, 10 Iran–U.S. Cl. Trib. Rep. 228, 1986 WL 424309 (1986) (“Tribunal Award”). The Tribunal also found that Pak Dairy was a corporation controlled by the Government of Iran, and accordingly awarded McKesson $1.4 million in damages, which included interest on its withheld dividends. According to the provisions of the Algiers Accords, Iran paid the amounts awarded out of a security account established at the Hague.

Although the Tribunal award was substantial, it did not fully compensate McKesson for the ongoing expropriation of its interest in Pak. In an attempt to recover the value of that interest, McKesson revived this suit in April 1988 in the district court. Iran filed a motion to dismiss, claiming that it was immune from suit under the Foreign Sovereign Immunities Act of 1976 (“FSIA”), 28 U.S.C. § 1605, but the district court held that McKesson had properly pleaded jurisdiction under the commercial activities exception of the FSIA. Foremost McKesson, Inc. v. Islamic Republic of Iran, No. 82–0220, 1989 WL 44086, at *4 (D.D.C. Apr. 18, 1989) (“ McKesson 1989 ”). On appeal, this Court remanded for further development of the record regarding whether Pak's board of directors was an agency or instrumentality controlled by the state for purposes of the stringent requirements of the FSIA. McKesson I, 905 F.2d at 440 (noting that under FSIA, “agencies and instrumentalities of a foreign nation are presumed to be separate from each other and from the foreign state”). On remand, the district court found that the evidence established the necessary principal-agent relationship between the Government of Iran and the board of directors of Pak, and this Court affirmed the “extensive” and “well-supported” findings of the district court. McKesson II, 52 F.3d at 351–52.

The district court subsequently granted McKesson's motion for summary judgment on the issue of liability, holding that, as a matter of law, Iran had wrongfully withheld from McKesson the payment of dividends declared by Pak Dairy in 1981 and 1982 and that Iran could be held liable in federal court for the expropriation and failure to pay dividends under the Treaty of Amity and customary international law. McKesson Corp. v. Islamic Republic of Iran, No. 82–220, 1997 WL 361177, at *12–*15 (D.D.C. June 23, 1997) (“ McKesson 1997 ”). Between January 18 and February 17, 2000, the district court held a bench trial to determine the appropriate amount of damages. McKesson Corp. v. Islamic Republic of Iran, 116 F.Supp.2d 13 (D.D.C.2000) (“ McKesson 2000 ”). The court awarded McKesson $20,071,159.14, which included the value of McKesson's expropriated equity interest in Pak and the dividends withheld from McKesson in 1981 and 1982, plus simple interest calculated at 9 percent from August 12, 1981 to May 26, 2000. Id. at 43.

On appeal, Iran again argued that the court lacked jurisdiction, and further claimed that (1) material issues of fact existed with respect to liability, and (2) the district court erred in valuing Pak's assets. We again affirmed jurisdiction under the FSIA and upheld the district court's conclusion that the 1955 Treaty of Amity, Economic Relations, and Consular Rights, U.S.–Iran, Aug. 15, 1955, 8 U.S.T. 899 (“Treaty of Amity”), between the United States and Iran provided McKesson with a cause of action for expropriation. McKesson III, 271 F.3d at 1106–08. We also upheld the district court's valuation of Pak's assets. Id. at 1110. On the question of liability, however, Iran lived to fight another day, as we remanded the case for trial on two factual issues: whether Pak had instituted a so-called “come-to-the-company” requirement for the payment of dividends, and whether it would have been futile for McKesson to “come” to Pak to collect its dividends. Id. at 1108–10.

Iran immediately petitioned the Supreme Court for certiorari to review McKesson III. The Solicitor General took over representation of OPIC, which had previously retained private counsel, and advocated for the denial of certiorari on grounds that the case was not ripe for review. In the course of its argument, however, the Solicitor General also made clear that the United States did not interpret the Treaty of Amity as providing a private right of action. Brief for the Overseas Private Investment Corporation, Islamic Republic of Iran v. McKesson, Nos. 01–1521 & 01–1708, 2002 WL 32134807, at *9–15 (July 24, 2002). The Supreme Court denied certiorari.

In light of the government's change of position, this Court vacated “the portion of [ McKesson III ] addressing whether the Treaty of Amity between the United States and Iran provides a cause of action to a United States national against Iran in a United States court,” and instructed the district court “to reexamine that issue in light of the representation of the United States that it does not interpret the Treaty of Amity to create such a cause of action.” McKesson HBOC, Inc. v. Islamic Republic of Iran, 320 F.3d 280, 281 (D.C.Cir.2003) (“ McKesson IV ”). On remand, the district court essentially affirmed its earlier conclusion that the Treaty provides a cause of action, finding “no basis to disturb Judge Flannery's earlier ruling” in McKesson 1997. McKesson Corp. v. Islamic Republic of Iran, 520 F.Supp.2d 38, 40 (D.D.C.2007) (“ McKesson 2007 ”).

In our most recent encounter with this case, we reversed the district court's ruling that the Treaty of Amity provides McKesson with a private cause of action under United States law, noting that the Treaty “leaves open the critical question of how McKesson is to secure its due. For a federal court trying to decide whether to interject itself into international affairs, the Treaty of Amity's silence on this point makes all the difference.” McKesson Corp. v. Islamic Republic of Iran, 539 F.3d 485, 489 (D.C.Cir.2008) ( “ McKesson V ”). In light of this conclusion, we again remanded the case and instructed the district court to consider three specific issues: (1) whether McKesson has a cause of action under Iranian law; (2) whether, in light of the Supreme Court's decision in Sosa v....