Marschalk Co., Inc. v. Iran Nat. Airlines Corp.

Decision Date11 June 1981
Docket NumberNo. 79 Civ. 7035 (CBM).,79 Civ. 7035 (CBM).
Citation518 F. Supp. 69
PartiesThe MARSCHALK COMPANY, INC., Plaintiff, v. IRAN NATIONAL AIRLINES CORP. and the Government of Iran, Defendants, and United States of America, Intervenor.
CourtU.S. District Court — Southern District of New York

COPYRIGHT MATERIAL OMITTED

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for plaintiff; Edward N. Costikyan, Robert S. Smith, Robert E. Bartkus, Harriet Goldberg, New York City, of counsel.

Abourezk, Shack & Mendenhall, P. C., Washington, D. C., for defendants; Thomas G. Shack, Jr., Raymond J. Kimball, Gregory deSousa, Washington, D. C., of counsel.

John S. Martin, Jr., U. S. Atty., S.D.N.Y., New York City, Thomas S. Martin, Acting Asst. Atty. Gen., Dept. of Justice, Civ. Div., Washington, D. C., for intervenor; David J. Anderson, Mark C. Rutzick, Theodore C. Hirt, Washington, D. C., of counsel.

Timothy E. Ramish, Dept. of State, Washington, D. C., Kramer, Levin, Nessen, Kamin & Soll, New York City, for garnishee Bank Melli; Daniel P. Levitt, Greg A. Danilow, New York City, of counsel.

Fenwick, Stone, Davis & West, New York City, for party of interest Bank Saderat Iran; Ronald Abramson, New York City, of counsel.

Rabinowitz, Boudin, Standard, Krinsky & Lieberman, New York City, for garnishee Bank Markazi; Eric M. Lieberman, New York City, of counsel.

OPINION

KEVIN THOMAS DUFFY, District Judge:

This is another opinion1 which addresses difficult issues in what has become known as the Iranian assets litigation. It is with a somewhat heavy heart that I undertake to render this decision not only because I find my views are quite different from those of some of my most respected and learned brethren, but more importantly, as an individual, I would prefer to see this sorry chapter of the history of our country finally closed. My duties as a judicial officer, however, compel me to face the difficult issues presented here devoid of such personal considerations.

I am asked to decide whether the President was acting within his constitutional and statutory powers when he entered into an agreement with Iran and issued executive orders in order to effect the release of the American hostages. The agreement and the executive orders require the termination or suspension of claims against Iran and its instrumentalities, presentation of those claims to an international claims tribunal, and the nullification of orders of attachment imposed on Iranian assets in the United States.2

The Court of Appeals for this Circuit has directed me to select one of the pending cases and "to join the United States as a party in that single case in which the issues raised by the Iranian Agreement and the Presidential Orders are squarely presented and to proceed with confirmation hearings in that case alone." New England Merchants National Bank v. Iran, 646 F.2d 779, 784 (2d Cir. 1981) and related cases. I will refer to the difficulties encountered in the selection of that single case later and only to the extent necessary to indicate some of the processes whereby the selection was made. At this point, suffice it to say, that this case was selected as the one which "squarely presented" the issues for which this litigation was remanded.

This case is somewhat different from those which have been considered by courts in other circuits. See, e. g., Charles T. Main International, Inc. v. United States, 651 F.2d 800 (1st Cir. 1981); American International Group, Inc. v. Islamic Republic of Iran, 657 F.2d 430 (D.C.Cir.1981); Security Pacific National Bank v. The Government and State of Iran, 513 F.Supp. 864 (C.D.Cal.1981); Unidyne Corporation v. Government or Iran, 512 F.Supp. 705 (E.D.Va.1981). Each of these cases involved services to be performed in Iran. This case, however, involves a contract whereby the plaintiff, a corporation formed in the United States, rendered advertising services solely in the United States, the object of which services was to obtain a larger share of the relevant United States market for the defendants by enticing United States citizens and others present in the United States to patronize defendant Iran Airlines. This was purely a commercial transaction wholly within the territory of the United States. The attachment obtained by Marschalk was issued by a United States court and levied upon property located in the United States. The attachment was specifically permitted by United States government license. While this fact pattern puts the issues at bar in much sharper focus than those of the other decided Iranian asset cases, the issues of law here are nonetheless identical to those in the other cases.

The plaintiff argues that the President did not have the authority under the Constitution or any statute to terminate or suspend claims or nullify orders of attachment; furthermore, plaintiff contends that the President's actions constitute a taking of private property for a public purpose without just compensation.

The defendants and government's position is that the President was acting within the aggregate of his foreign affairs powers under the Constitution and his powers under the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq. (Supp. III 1979) "IEEPA" and that no compensable taking occurred.

Background

On Sunday, November 4, 1979, some 400 Iranians seized the American Embassy in Teheran, Iran, taking fifty-two American diplomats and other personnel hostage.3 Support from the mobs nearby, the religious leaders and the Government of Iran escalated a three-day sit-in to an international crisis which would last 444 days.4

In response to this crisis and the Iranian threat to withdraw all of its deposits from the United States, President Carter issued Executive Order No. 12,170, 44 Fed.Reg. 67,729 (1979).5 The order froze all Iranian property within the United States and any interests in such property. The order also directed the Secretary of the Treasury to take the necessary measures to carry out the provisions of the order.

The Secretary promptly promulgated regulations, 31 C.F.R. Part 535, authorizing the maintenance of law suits against Iran, 31 C.F.R. § 535.504(a) (1979),6 and the imposition of attachments on Iranian property located within the United States, 31 C.F.R. § 535.418 (1979).7

The events in Iran and the Secretary's regulations opened the litigation floodgates; law suits poured into this and other circuits seeking monetary damages for alleged civil wrongs ranging from the nationalization of private property to the repudiation of executory contracts. By September of 1980, 96 civil actions were pending in this district alone. The damages claimed in these actions amounted to many billions of dollars.

In most of the suits in this court, the plaintiffs obtained ex parte orders of attachment pursuant to New York's attachment statute, N.Y.Civ.Prac.Law & R. "C.P.L.R." §§ 6201, et seq. (McKinney). Under New York law, an ex parte attachment order must be confirmed by the court after due notice has been given to the defendants.

Plaintiffs' motions for confirmation of the attachments in the 96 cases before this court were opposed by the Iranian defendants who claimed that their assets were immune from pre-judgment attachment under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602, et seq. (1976) "FSIA", and the Treaty of Amity, Economic Relations and Consular Rights, Aug. 15, 1955, United States-Iran, 8 U.S.T. 899 "Treaty of Amity" between the United States and Iran. The 96 cases were referred to me to resolve the sovereign immunity and other common legal issues.8

In an Opinion and Order issued on September 26, 1980,9 I ruled that, while Iran had not expressly waived its immunity from pre-judgment attachment as set out in the FSIA, Iran's sovereign immunity was unequivocally suspended when the President issued Executive Order No. 12,170, 44 Fed. Reg. 67729 (1979), freezing Iran's assets located in the United States. New England Merchants National Bank v. Iran Power Generation and Transmission Co., 502 F.Supp. 120 (S.D.N.Y.1980). I referred the cases back to the district court judges to determine whether the prerequisites of New York's attachment law had been satisfied.10

At this juncture, the parties to the 96 law suits sought certification to the Court of Appeals of a number of questions regarding the validity of the attachments. 28 U.S.C. 1292(b).11 In view of the controversial nature of some of the questions and the fact that immediate appeal of my decisions might have materially advanced the termination of the litigation, I certified certain questions to the Court of Appeals.12New England Merchants National Bank v. Iran Power Generation and Transmission Company, 508 F.Supp. 49 (S.D.N.Y.1980). On January 5, 1981, the Court of Appeals accepted the interlocutory review of the certified questions, scheduled argument, and stayed all proceedings in the district court pending its decision.13

Precisely two weeks later, on January 19, 1981, President Carter finalized an agreement with Iran to secure the release of the American hostages the "Agreement". Under the Agreement, President Carter promised to "terminate all legal proceedings in the United States involving claims of United States persons and institutions against Iran" and to "nullify all attachments and judgments" obtained in such proceedings. To implement the Agreement, President Carter issued Executive Orders Nos. 12,276 through 12,285. 46 Fed.Reg. 7913-32 (1981). These orders, inter alia, revoked the license permitting attachment of the frozen assets, nullified the attachments acquired under the license, and required that the Iranian funds and securities be transferred out of the United States in accordance with the Agreement.

On February 24, 1981, President Reagan ratified the Agreement and issued Executive Order No. 12,294, 46 Fed.Reg. 14,111 (1981), "suspending" all claims which were eligible for resolution by the Iran-United States Claims...

To continue reading

Request your trial
9 cases
  • Dames Moore v. Regan
    • United States
    • U.S. Supreme Court
    • July 2, 1981
    ...which petitioner obtained its attachments suffices to render revocable the attachments themselves. See Marschalk Co. v. Iran National Airlines Corp., 518 F.Supp. 69 (SDNY 1981). 2. As the Court held in Armstrong v. United States, supra, at 49, 80 S.Ct., at 1569: "The Fifth Amendment's guara......
  • In re The INTERNATIONAL BANKING CORPORATION B.S.C.
    • United States
    • U.S. Bankruptcy Court — Southern District of New York
    • November 23, 2010
    ...61, 64 (2d Cir.1965) (attachment under CPLR Article 62 creates a lien that is contingent and inchoate); Marschalk Co. v. Iran Nat'l Airlines Corp., 518 F.Supp. 69, 98 (S.D.N.Y.) (“Under the law of New York, when a levy is made under an order of attachment, a lien is created in favor of the ......
  • Lashgari v. Lashgari
    • United States
    • Connecticut Supreme Court
    • August 13, 1985
    ...& Transmission Co., 502 F.Supp. 120, 122 (S.D.N.Y.1980), rem'd for further proceedings, 646 F.2d 779 (2d Cir.1981), on remand, 518 F.Supp. 69 (S.D.N.Y.), rev'd, 657 F.2d 3 (2d Cir.1981).3 Although the parties and the trial court refer to the defendant's claim as a "cross complaint," it is u......
  • Dean Witter Reynolds, Inc. v. Fernandez
    • United States
    • U.S. Court of Appeals — Eleventh Circuit
    • September 10, 1984
    ...Chas. T. Main Int'l, Inc. v. Khuzestan Water & Power Auth., 651 F.2d 800, 809-14 (1st Cir.1981); Marschalk Co. v. Iran National Airlines Corp., 518 F.Supp. 69, 79 (S.D.N.Y.1981); Electronic Data Sys. Corp. v. Social Security Organization of Iran, 508 F.Supp. 1350, 1361 (N.D.Tex.1981). Appel......
  • Request a trial to view additional results
1 books & journal articles
  • Shakespeare in the Law
    • United States
    • Connecticut Bar Association Connecticut Bar Journal No. 67, 1992
    • Invalid date
    ...Re Alleged PCB Pollution, 712 F.Supp. 1010, 1014 (D. Mass. 1989). 58 "The Marschalk Company, Inc. v. Iran National Airlines Corp., 518 F.Supp. 69, 83 (S.D.N.Y. 1981). 59 Conard-Pyle Company v. Thuron Industries, 201 U.S.P.Q. 733 (N.D.Tex. 1978). 60 Lampton v. Bonin, 304 F.Supp. 1384, 1399 (......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT