Islamic Republic of Iran v. Pahlavi

• Decision Date: 05 July 1984
• Parties: , 467 N.E.2d 245, 57 A.L.R.4th 955 ISLAMIC REPUBLIC OF IRAN, Appellant, v. Mohammed Reza PAHLAVI et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 597

478 N.Y.S.2d 597

62 N.Y.2d 474, 467 N.E.2d 245, 57

A.L.R.4th 955

ISLAMIC REPUBLIC OF IRAN, Appellant, v. Mohammed Reza PAHLAVI et al., Respondents.

Court of Appeals of New York.

July 5, 1984.

Brian O'Dwyer, Paul O'Dwyer, Gary Silverman, New York City, Abram Chayes and Bruno A. Ristau, Washington, D.C., for appellant

Roger Boyle for Farah Diba Pahlavi, respondents.

OPINION OF THE COURT

SIMONS, Judge.

Plaintiff, the Islamic Republic of Iran, brings this action against Iran's former ruler, Shah Mohammed Reza Pahlavi, and his wife, Empress Farah Diba Pahlavi. It alleges in its complaint that defendants accepted bribes and misappropriated, embezzled or converted 35 billion dollars in Iranian funds in breach of their fiduciary duty to the Iranian people and it seeks to recover those funds and 20 billion dollars in exemplary damages. It asks the court to impress a constructive trust on defendants' assets located throughout the world, for an accounting of all moneys and property received by the defendants from the government of Iran, and for other incidental relief.

The action was commenced in November, 1979 by substituted service on the Shah made at New York Hospital where he was undergoing cancer therapy. The Empress was personally served at the same time at the New York residence of the Shah's sister, Ashraf Pahlavi. Thereafter, defendants moved to dismiss the complaint alleging that it raised nonjusticiable political questions, that the court lacked personal jurisdiction due to defective service of process on them and that the complaint should be dismissed on grounds of forum non conveniens. ¹ Special Term granted defendants' motion based on forum non conveniens concluding that the parties had no connection with New York other than a claim that the Shah had deposited funds in New York banks, a claim which it found insufficient under the circumstances to justify the court in retaining jurisdiction. A divided Appellate Division affirmed, Justice Fein arguing in dissent that jurisdiction must be assumed because no other forum was available to plaintiff. ²

On this appeal plaintiff claims that the courts below erred, that the New York courts must entertain this action because the record does not indicate that there is any alternative forum available and because the United States Government undertook to guarantee plaintiff an American forum to litigate its claims against the former royal family in the hostage settlement agreements between it and plaintiff known as the Algerian Accords.

There should be an affirmance. The application of the doctrine of forum non conveniens is a matter of discretion to be exercised by the trial court and the Appellate Division. We do not find that those courts abused their discretion as a matter of law under the circumstances presented, even though it appears that there may be no other forum in which plaintiff can obtain the relief it seeks. Nor is reversal required by the provisions of the Algerian Accords.

I

Ordinarily, nonresidents are permitted to enter New York courts to litigate their disputes as a matter of comity. Obviously, however, our courts are not required to add to their financial and administrative burdens by entertaining litigation which does not have any connection with this State. The common-law doctrine of forum non conveniens, also articulated in CPLR 327, ³ permits a court to stay or dismiss such actions where it is determined that the action, although jurisdictionally sound, would be better adjudicated elsewhere (see, generally, Siegel, NY Prac, § 28; 1 Weinstein-Korn-Miller, NY Civ Prac, par 327.01, pp 3-469-3-470). The burden rests upon the defendant challenging the forum to demonstrate relevant private or public interest factors which militate against accepting the litigation (see Piper Aircraft Co. v. Reyno, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419; Bader & Bader v. Ford, 66 A.D.2d 642, 414 N.Y.S.2d 132) and the court, after considering and balancing the various competing factors, must determine in the exercise of its sound discretion whether to retain jurisdiction or not. Among the factors to be considered are the burden on the New York courts, the potential hardship to the defendant, and the unavailability of an alternative forum in which plaintiff may bring suit (Banco Ambrosiano, S.p.A. v. Artoc Bank & Trust, 62 N.Y.2d 65, 476 N.Y.S.2d 64, 464 N.E.2d 432; Irrigation & Ind. Dev. Corp. v. Indag S.A., 37 N.Y.2d 522, 525, 375 N.Y.S.2d 296, 337 N.E.2d 749; Varkonyi v. S.A. Empresa De Viacao Airea Rio Grandense 22 N.Y.2d 333, 335, 292 N.Y.S.2d 670, 239 N.E.2d 542). The court may also consider that both parties to the action are nonresidents (Bata v. Bata, 304 N.Y. 51, 105 N.E.2d 623) and that the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction (Silver v. Great Amer. Ins. Co., 29 N.Y.2d 356, 361, 328 N.Y.S.2d 398, 278 N.E.2d 619). No one factor is controlling (see Irrigation & Ind. Dev. Corp. v. Indag S.A., supra; see, also, Piper Aircraft Co. v. Reyno, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419, supra; Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055). The great advantage of the rule of forum non conveniens is its flexibility based upon the facts and circumstances of each case (Martin v. Mieth, 35 N.Y.2d 414, 418, 362 N.Y.S.2d 853, 321 N.E.2d 777; Silver v. Great Amer. Ins. Co., supra ). The rule rests upon justice, fairness and convenience and we have held that when the court takes these various factors into account in making its decision, there has been no abuse of discretion reviewable by this court (Banco Ambrosiano, S.p.A. v. Artoc Bank & Trust, supra; Irrigation & Ind. Dev. Corp. v. Indag S.A., supra; Varkonyi v. Varig, supra, 22 N.Y.2d at p. 337, 292 N.Y.S.2d 670, 239 N.E.2d 542).

Here, the trial court and the Appellate Division considered all of the relevant factors, including the fact that there may be no alternative forum in which this claim can be tried because of the political situation in Iran under the Khomeini regime. They also noted the substantial financial and administrative burden on the New York courts, the genesis of the claims in Iran, the likely applicability of Iranian law, the nonresidence of both parties and that plaintiff was requesting a sweeping review of the conduct of the Shah's government during the 38 years of his reign, a review which undoubtedly would require extended trial and pretrial proceedings and which would necessitate the appearance of many foreign witnesses not only to establish liability but also to discover and evaluate defendant's assets. Indeed, plaintiff's appendix lists two and one-half pages of single-spaced typewritten entries of property of all kinds throughout the world allegedly owned or controlled by defendant and the royal family through the Pahlavi Foundation. The courts below, after reviewing these factors, concluded that the public interest factors involving the court system and the private interest factors affecting defendant outweighed plaintiff's claim to litigate this action in the New York courts notwithstanding the unavailability of an alternative forum.

Plaintiff contends that this was error because the availability of an alternative forum is not merely an additional factor for the court to consider but constitutes an absolute precondition to dismissal on conveniens grounds.

The perceived requirement that an alternative forum must be available had its origin in dicta by the United States Supreme Court in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507, 67 S.Ct. 839, 842, 91 L.Ed. 1055, supra. Writing for the court, Justice Jackson stated (at pp. 506-507, 67 S.Ct. at p. 842): "In all cases in which the doctrine of forum non conveniens comes into play, it presupposes at least two forums in which the defendant is amenable to process; the doctrine furnishes criteria for choice between them." The Gulf Oil case involved a New York dismissal of a Virginia-based action on the ground that all the relevant contracts were with Virginia. Unlike the present case, there was plainly an alternative forum present in Gulf Oil and the court's statement was unnecessary to the result. Nevertheless, the dictum has persisted and has been quoted in subsequent cases (see, e.g., Piper Aircraft Co. v. Reyno, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419, supra; Calavo Growers v. Belgium, 632 F.2d 963, 968) and scholarly treatises (1 Weinstein-Korn- N.Y.Civ.Prac., par. 327.02, p. 3-479). Indeed, dicta in many of this court's decisions have also stated it as a general rule (see, e.g., Irrigation & Ind. Dev. Corp. v. Indag S.A., 37 N.Y.2d 522, 525, 375 N.Y.S.2d 296, 337 N.E.2d 749, supra; Silver v. Great Amer. Ins. Co., 29 N.Y.2d 356, 361, 328 N.Y.S.2d 398, 278 N.E.2d 619, supra; Varkonyi v. Varig, 22 N.Y.2d 333, 292 N.Y.S.2d 670, 239 N.E.2d 542, supra ).

Without doubt, the availability of another suitable forum is a most important factor to be considered in ruling on a motion to dismiss but we have never held that it was a prerequisite for applying the conveniens doctrine and in Varkonyi we expressly described the availability of an alternative forum as a "pertinent factor", not as a precondition to dismissal (at p. 338, 292 N.Y.S.2d 670, 239 N.E.2d 542). Nor should proof of the availability of another forum be required in all cases before dismissal is permitted. That would place an undue burden on New York courts forcing them to accept foreign-based actions unrelated to this State merely because a more appropriate forum is unwilling or unable to accept jurisdiction (see Korbel, Law of Federal Venue and Choice of Most Convenient Forum, 15 Rutgers L.Rev. 607, 611, n. 28; see, also, Ferguson v. Neilson, 58 Hun. 604, opn in 33 N.Y.St.Rep. 814, 11 N.Y.S. 524; Noto v. Cia Secula di Armanento, 310 F.Supp. 639). Moreover, even if we were to hold that the motion should be denied if no alternative forum is available, then the...