McDonnell Douglas Corp. v. Islamic Republic of Iran, 82-2096C(D).

• Citation: 591 F. Supp. 293
• Decision Date: 29 June 1984
• Docket Number: No. 82-2096C(D).,82-2096C(D).
• Parties: McDONNELL DOUGLAS CORPORATION, Plaintiff, v. ISLAMIC REPUBLIC OF IRAN, Ministry of Defense of the Islamic Republic of Iran and Islamic Republic of Iran Air Force, Defendants.
• Court: U.S. District Court — Eastern District of Missouri

591 F. Supp. 293

McDONNELL DOUGLAS CORPORATION, Plaintiff, v. ISLAMIC REPUBLIC OF IRAN, Ministry of Defense of the Islamic Republic of Iran and Islamic Republic of Iran Air Force, Defendants.

No. 82-2096C(D).

United States District Court, E.D. Missouri, E.D.

June 29, 1984.

Veryl L. Riddle, St. Louis, Mo., for plaintiff.

Joseph B. McGlynn, Jr., Belleville, Ill., Brian O'Dwyer, New York City, for defendants.

MEMORANDUM AND ORDER

WANGELIN, District Judge.

This matter is before the Court upon plaintiff's motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. This Court's jurisdiction is invoked pursuant to Title 28, United States Code, Section 1330.

Plaintiff, McDonnell Douglas Corporation, (hereinafter MDC) moves this Court to enter summary judgment in its declaratory judgment action against the Islamic Republic of Iran, the Ministry of Defense of the Islamic Republic of Iran, and the Islamic Republic of Iran Air Force (hereinafter collectively denominated as Iran). The thrust of MDC's complaint for a declaratory judgment is that it is not liable with respect to defendant's claims that it breached a contract to supply defendant with military aircraft parts. Also before the Court is defendant's motion to strike the affidavit of one Lewis Johnson. Because of the interrelated arguments and considerations of the two motions, both are resolved herein.

FACTUAL HISTORY

On or about November 23, 1975, MDC entered into a contract with the Imperial Iranian Air Force (hereinafter IIAF) for the sale by MDC of spare parts for F-4 fighter aircraft. The contract, MCAIR-F4-75-001 (hereinafter the Basic Ordering Agreement), was for a one year period. It was subsequently renewed for three additional one-year periods in 1976, 1977, and 1978. It expired by its terms on November 23, 1979.

The Basic Ordering Agreement was intended to cover spare parts needed on an emergency basis for crash-damaged or grounded F-4 aircraft. In contrast to this, and also having some bearing on the present cause, was the government of Iran's separate contract with the United States government. This contract, referred to as a Foreign Military Sales Agreement, provided for the sale of routine spare parts and the repair of other parts ordered by the IIAF.

Payment under the Basic Ordering Agreement was made pursuant to an irrevocable letter of credit issued on behalf of the IIAF and payable at the First National Bank in St. Louis. The terms of the contract provided that payments under the letter of credit were to be made upon presentation of (1) an MDC invoice; (2) a collect air bill for the parts consigned to the freight forwarder specified in the contract; (3) a certificate of United States origin; and (4) detailed packing sheets establishing proof of delivery of the parts to the IIAF.

On November 22, 1978, the letter of credit expired. The IIAF failed to renew the letter and, consequently, the First National Bank in St. Louis refused to make payment on MDC invoices presented under the provisions of the Basic Ordering Agreement. Plaintiff alleges that it is still owed Five Hundred Thousand Dollars ($500,000) for work performed for the IIAF under the Agreement.

Because of the political turmoil that erupted in Iran in the latter part of 1978, MDC became concerned for the safety of its employees in Iran and subsequently ordered their evacuation. Moreover, the change of political regimes caused a number of IIAF officers to leave the country or resulted in their execution. As a consequence of the revolution, MDC alleges that it was unable to communicate with any responsible Iranian government official regarding the Basic Ordering Agreement.

On March 15, 1979, the United States Air Force ordered that no further Foreign Military Sales items be released for shipment. On March 26, 1979, the Air Force notified MDC that Behring International, Inc., the shipper designated by Iran in the Basic Ordering Agreement, had advised the Air Force that it would no longer honor collect inland transportation freight bills on behalf of the Iranian government. The United States Air Force then directed MDC not to ship any Iranian Foreign Military Sales items to Behring International, Inc. Thus, both the private Basic Ordering Agreement and the government to government Foreign Military Sales Agreement were effectively terminated at approximately the same time.

Following these events, MDC suspended all work in progress under the Basic Ordering Agreement. There were five pending orders at the time of the suspension.

On August 31, 1979, MDC sent a letter addressed to the "Commander of the Islamic Republic of Iran Air Force" notifying the Commander that all work on the five orders for spare parts or repair kits had been suspended by MDC, that the letter of credit had expired, and that the shipper refused to make shipments to Iran. MDC requested instructions on whether manufacturing should continue, for identification of a new shipper, and for reinstitution of the letter of credit. MDC received no response from its letter.

MDC alleges that, except for the five orders being processed at the time that the contract was cancelled, all of the remaining orders were completed and fulfilled, including the orders which are the subject of the Iranian suit discussed infra. MDC further alleges that the five unfulfilled orders were not among the orders identified in the Iranian suit.

On December 5, 1979, all licenses for export of military aircraft parts to Iran were officially suspended by the Office of Munitions control. Prior to this suspension, however, on November 4, 1979, the Office of Munitions Control refused to grant or extend licenses for the export of military equipment to Iran. Therefore MDC avers that it was prohibited by the constrictions of the United States International Traffic in Arms Regulations, 22 C.F.R. Part 121 et seq., from exporting any F-4 parts to the Islamic Republic of Iran.

PROCEDURAL HISTORY

On approximately March 16, 1982, MDC received a copy of a notice from the Iranian Ministry of Justice claiming that the Islamic Republic of Iran Air Force had suffered damages as a result of the alleged breach by MDC of the Basic Ordering Agreement. MDC subsequently received a summons and a copy of a complaint (hereinafter the Islamic Complaint) from the Islamic Court of First Instance in Tehran, Iran on or about September 20, 1982. The Complaint specifically alleged that MDC had breached the Basic Ordering Agreement by failing to fulfil "approximately 40 orders" for parts submitted to plaintiff under the contract during the year 1977. Additionally, the Islamic Complaint alleged that "some parts" were sent to MDC for repair and/or exchange and that MDC had failed to perform as required under the contract.

The Islamic Complaint further alleged that the resulting absence of parts deprived the Islamic Republic of Iran Air Force of the use of its aircraft during the Iran-Iraq war. The complaint prayed for Six Million Dollars ($6,000,000.00) in damages, with the real amount of damages to be determined by an expert or group of experts. Defendants also demanded specific performance of the orders, return of the parts, and the payment of the costs, attorney's fees and the fees of the expert(s).

MDC subsequently filed this action seeking a declaratory judgment stating that:

(1) MDC has fully performed and satisfied all of the forty-three (43) orders identified in the Islamic Complaint as having been submitted to MDC under the Basic Ordering Agreement, except for four orders which were cancelled by the Imperial Iranian Air Force, and the work ordered under thirty-nine (39) orders have been accepted by and delivered to the Imperial Iranian Air Force, and MDC has no liability or obligation to defendants for any of the forty-three (43) orders.

(2) The parts identified in the Islamic Complaint as having been sent to plaintiff for repair and/or exchange under Article XII of the Basic Ordering Agreement were not in fact sent to MDC under that agreement, but, rather, were sent to MDC by the United States Government pursuant to a contract between the United States Air Force and MDC. MDC is not a party to the government-to-government Foreign Military Sales Agreement between the United States and Iran under which Iran contracted directly with the United States Government for such repair services and, thus, MDC has no obligation or liability to defendants.

(3) MDC has performed all of its obligations under the Basic Ordering Agreement; MDC is excused from performing any unfulfilled orders under the agreement; MDC's obligation under the agreement have terminated; and MDC has no remaining obligations or liability under the agreement to defendants.

(4) The Basic Ordering Agreement between MDC and defendants is subject to and governed by the laws of the United States and the State of Missouri, including the Uniform Commercial Code, and not the laws of the Islamic Republic of Iran.

(5) Any order, decree, decision or judgment entered by the courts of the Islamic Republic of Iran against MDC purporting to adjudicate rights and obligations under the Basic Ordering Agreement is null, void, and unenforceable.

(6) The Basic Ordering Agreement provides that MDC is not liable for any consequential damages or for any other damages, loss, liability or claims for personal injuries, death and/or property damage arising or resulting from any negligent act of MDC or failure of MDC to act in performance of its obligations under the Basic Ordering Agreement.

(7) The damages sought by the Islamic Complaint submitted to the Court of First Instance of the Islamic Republic of Iran against MDC which are claimed to have been caused by the inability of defendants to fly aircraft in the war with Iraq for lack of spare parts are not recoverable either under the terms of the Basic Ordering Agreement or under the governing applicable law of the United States, and MDC...