Islamic Republic of Iran v. Boeing Co.

Decision Date04 October 1985
Docket NumberNo. 84-3542,84-3542
Citation771 F.2d 1279
Parties41 UCC Rep.Serv. 1178 ISLAMIC REPUBLIC OF IRAN, Air Force of the Islamic Republic of Iran, Plaintiffs-Appellants, v. The BOEING COMPANY and Logistics Support Corporation, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

David M. Balabanian, James L. Hunt, John R. Reese, Randall J. Litteneker, McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for plaintiffs-appellants.

John Dillow, Thomas J. MacLaughlin, Perkins, Coie, Stone, Olsen & Williams, Seattle, Wash., for defendants-appellees.

Appeal from the United States District Court for the Western District of Washington.

Before WALLACE, FARRIS, and HALL, Circuit Judges.

WALLACE, Circuit Judge:

The Islamic Republic of Iran (Iran) appeals an adverse judgment on counterclaims brought by the Boeing Company (Boeing) and Logistics Support Corporation (LSC). The district court had jurisdiction under 28 U.S.C. Sec. 1332(a)(4). Since the order from which Iran appeals disposes of all remaining claims in this action, we have jurisdiction pursuant to 28 U.S.C. Sec. 1291. We affirm in part, reverse in part, and remand with instructions.

I

On May 8, 1979, Iran filed complaints against Boeing and LSC for $75,000,000 in damages resulting from the crash of a Boeing 747 aircraft owned by Iran, alleging defects in the aircraft manufactured by Boeing and inadequate support services provided by LSC under the Operations Support Contract (contract). In its answer, LSC asserted a compulsory counterclaim. On June 2, 1980, the district court granted summary judgment in favor of Boeing and LSC on Iran's claims, but did not decide LSC's counterclaim. We initially dismissed Iran's appeal from the summary judgment because the compulsory counterclaim had not been decided; thus, a final judgment had not been reached. Islamic Republic of Iran v. Boeing Co., No. 80-3255 (9th Cir. Mar. 5, 1981) (unpublished). Iran then obtained a certification pursuant to Fed.R.Civ.P. 54(b) and filed a new appeal. We affirmed the summary judgment. Islamic Republic of Iran v. Boeing Co., 716 F.2d 910 (9th Cir.1983) (unpublished).

In January 1981, the United States and Iran reached an agreement on the release of the American hostages held in Iran. The settlement was contained in five separate agreements (the Accords), the first two of which established a framework for settling claims between the two nations, and claims in which a national of one party sued the other party. On February 24, 1981, President Reagan issued Exec. Order No. 12294, 3 C.F.R. 139 (1982) (Executive Order), which ratified President Carter's previous executive orders and his execution of the Accords. Id. at 140. The Treasury Department subsequently promulgated regulations in conjunction with the Executive Order to implement the Accords. See 31 C.F.R. pt. 535 (1984).

On April 20, 1981, Boeing and LSC moved to amend their answers to assert permissive counterclaims. The district court granted leave to amend. Iran, however, failed to answer Boeing's and LSC's requests for discovery. After the district court granted additional time to respond, Iran filed incomplete responses. The district court then entered a default judgment against Iran as a sanction, from which Iran does not appeal. The district court entered a final judgment in favor of Boeing and LSC on the counterclaims on November 1, 1983. Iran failed to file a timely notice of appeal and moved for an extension pursuant to rule 4(a)(5), Fed.R.App.P., within thirty days of the last day to file pursuant to rule 4(a). The district court granted the request, and Boeing appealed. We affirmed the extension. Islamic Republic of Iran v. Boeing Co., 739 F.2d 464, 465 (9th Cir.1984) (per curiam), cert. denied, --- U.S. ----, 105 S.Ct. 1755, 84 L.Ed.2d 819 (1985). Thus, Iran's appeal is timely.

II

We first discuss Iran's liability on the permissive counterclaims. Most of Iran's challenges focus on the interaction between the Accords and the Executive Order. We will address each of these arguments in turn.

The first issue is whether the district court had jurisdiction over the counterclaims. Iran argues that the Accords divested the district court of jurisdiction to interpret the Accords. This argument is based largely on the language of article VI, p 4 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 of Iran (Claims Declaration), Jan. 19, 1981, United States-Iran, 20 I.L.M. 230, which provides that "[a]ny question concerning the interpretation or application of this agreement shall be decided by the [Iran-United States Claims] Tribunal upon the request of either Iran or the United States." Boeing and LSC, however, assert that the terms of the Accords are not self-executing because they were expressly contingent on statements of adherence, see Declaration of the Government of the Democratic and Popular Republic of Algeria p 6 (General Declaration), Jan. 19, 1981, United States-Iran, 20 I.L.M. 224, and because the terms of the Accords anticipate further action. If the Accords are not self-executing, they are merely executory agreements between the two nations and have no effect on domestic law absent additional governmental action. Cf. Foster v. Neilson, 27 U.S. (2 Pet.) 253, 313-14, 7 L.Ed. 415 (1829) (Foster ) (If the agreement terms "import a contract ... the legislature must execute the contract, before it can become a rule for the court"), overruled on other grounds, United States v. Percheman, 32 U.S. (7 Pet.) 51, 89, 8 L.Ed. 604 (1833).

There are at least four relevant factors to be considered when determining whether a treaty, and by analogy an executory agreement, is self-executing: (1) "the purposes of the treaty and the objectives of its creators," (2) "the existence of domestic procedures and institutions appropriate for direct implementation," (3) "the availability and feasibility of alternative enforcement methods," and (4) "the immediate and long-range social consequences of self- or non-self-execution." People of Saipan v. United States Department of Interior, 502 F.2d 90, 97 (9th Cir.1974), cert. denied, 420 U.S. 1003, 95 S.Ct. 1445, 43 L.Ed.2d 761 (1975) (Saipan ). We conclude, however, that it is the first factor that is critical to determine whether an executive agreement is self-executing, while the other factors are most relevant to determine the extent to which the agreement is self-executing. Compare Foster, 27 U.S. (2 Pet.) at 314, 7 L.Ed. 415 ("when the terms of the stipulation import a contract ... the treaty addresses itself to the political, not the judicial department; and the legislature must execute the contract, before it can become a rule for the court") (emphasis added), with Saipan, 502 F.2d at 97 (these factors determine "[t]he extent" of self-execution, relying primarily upon the language and intent of the parties).

Both the language and intent of the Accords support a conclusion that they are not self-executing. The effectiveness of the Accords was contingent on the receipt of statements of adherence. General Declaration p 6. The key provision of the Accords at issue in this case, the suspension of claims in American courts pending the Tribunal's decision, also is couched in executory language: "the United States agrees to terminate all legal proceedings in United States courts involving claims ... against Iran ..., [agrees] to nullify all attachments and judgments obtained therein, [agrees] to prohibit all further litigation based on such claims, and [agrees] to bring about the termination of such claims through binding arbitration." General Declaration p B (emphasis added).

Iran, however, asserts that article VI, p 4 of the Claims Declaration is self-executing because it states that questions of interpretation "shall be decided" by the Tribunal. While this mandatory language arguably supports Iran's position, it is insufficient. Our review of the history of the Accords reveals that neither President of the United States intended to make the Accords self-executing. In his Statement of Adherence, President Carter did not make the Accords United States law, but only made them legally binding on the United States as a sovereign: "The two Declarations shall constitute international agreements legally binding upon the United States and Iran...." Statement of Adherence, 1980-81 Pub. Papers 3026 (Jan. 19, 1981). Similarly, President Reagan expressly stated that Executive Order No. 12294 was an implementation of the Accords, an unnecessary statement if the suspension covenant was self-executing:

The circumstance necessitating the exercise of this authority [issuing Exec. Order No. 12294] is the implementation of the Claims Settlement Agreement between the United States and Iran. After a complete review of the agreements with Iran leading to the release of the hostages held by Iran I have decided to implement them.

Message to the Congress on the Suspension of Litigation Against Iran, 1981 Pub. Papers 159 (Feb. 24, 1981) (emphasis added).

We conclude that the language, purpose and intention behind the Accords was to make them executory agreements, and that they are not self-executing, either in whole or in part. This result is consistent with Electronic Data Systems Corp. Iran v. Social Security Organization, 651 F.2d 1007, 1009-10 & n. 1 (5th Cir.1981), in which the Fifth Circuit concluded, without analysis, that the relevant provisions of the Accords were not self-executing. Based on our analysis, therefore, we reject Iran's argument that the Accords divested the district court of jurisdiction over the counterclaims. See, e.g., Itek Corp. v. First National Bank of Boston, 730 F.2d 19, 23 (1st Cir.1984) (interpreting the Claims Declaration...

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