McKesson Corp. v. Islamic Republic of Iran

• Decision Date: 18 July 2007
• Docket Number: Civ. Action No. 82-220 (RJL).
• Citation: 520 F.Supp.2d 38
• Parties: McKESSON CORP., et al, Plaintiffs, v. ISLAMIC REPUBLIC OF IRAN, et al., Defendants.
• Court: U.S. District Court — District of Columbia

520 F.Supp.2d 38

McKESSON CORP., et al, Plaintiffs, v. ISLAMIC REPUBLIC OF IRAN, et al., Defendants.

Civ. Action No. 82-220 (RJL).

United States District Court, District of Columbia.

July 18, 2007.

COPYRIGHT MATERIAL OMITTED

Brooke Clagett, Joseph P. Griffin, Mark N. Bravin, Ralph N. Albright, Jr., Morgan Lewis & Bockius LLP, Mark Rene Joelson, Rupa Bhattacharyya, U.S. Department of Justice, Washington, DC, for Plaintiffs.

Henry M. Lloyd, Cadeaux & Taglieri, PC, Thomas Gardiner Corcoran, Jr., Jason Aaron McClurg, Laina C. Wilk, Berliner, Corcoran & Rowe, L.L.P., Washington, DC, for Defendants.

MEMORANDUM OPINION

RICHARD J. LEON, District Judge.

The McKesson Corporation ("McKesson"), has sued the Islamic Republic of Iran claiming that the Iranian government expropriated its dividends and interests in an Iranian dairy company, the Sherkat Sahami Labaniat Pasteurize Pak ("Pak Dairy" or "Pak"). On November 16, 2001, our Circuit Court remanded the case to this Court for: (1) a trial regarding Iran's "come to the company" defense and McKesson's "futility" claim; and (2) a reexamination of an earlier ruling by the original judge assigned to the case, Judge Thomas A. Flannery, as to whether McKesson has a cause of action under the Treaty of Amity. After an additional period of discovery and several rounds of motions, this Court held a bench trial between February 12 and March 2, 2007 and heard oral arguments thereafter on the Treaty of Amity issue from both the parties and the United States. Based on the preponderance of evidence presented at trial, the Court finds: (1) that Iran failed to establish that the Pak Dairy Board of Directors implemented a "come to the company" requirement for the payment of shareholder dividends; and (2) even if they had established such a requirement, compliance by McKesson would have been futile.

In addition, after reviewing the extensive briefs and oral argument, this Court finds no basis to disturb Judge Flannery's earlier ruling that McKesson has a cause of action under the Treaty of Amity. Accordingly, the Court will issue an order reinstating nunc pro tune, the judgment for McKesson filed by Judge Flannery on May 26, 2000 under customary international law, and award post judgment interest. Finally, the Court finds that McKesson, as the prevailing party, is entitled to reasonable attorney's fees and costs and will issue an order establishing a procedural framework within which to determine the appropriate amount of each.

L BACKGROUND

In March 1960, the McKesson Corporation and a group of Iranian investors joined to form Pak Dairy. McKesson provided capital and trained personnel, and until the Iranian Revolution, controlled Pak's Board of Directors and appointed the firm's managing director. In 1979, however, McKesson personnel at Pak fled the country during the Revolution and the Iranian government took control of Pak's Board of Directors. McKesson Corp. v. Islamic Republic of Iran, 1997 WL 361177 at *1 (D.D.C. June 23, 1997).

In 1982, McKesson sued Iran in this court alleging that Iran had expropriated its 31% interest in Pak and illegally withheld dividends declared in 1981 and 1982. In 1997, after years of litigation and two appeals to our Circuit Court, Judge Flannery found Iran liable for expropriation and granted McKesson's motion for summary judgment.¹ McKesson Corp. v. Islamic Republic of Iran, 1997 WL 361177 at * 12 (D.D.C. June 23, 1997). Judge Flannery awarded McKesson more than $20 million in damages and later awarded $2.9 million for attorneys' fees and expenses. McKesson v. Islamic Republic of Iran, 116 F.Supp.2d 13 (D.D.C.2000); Mem. Op., Nov. 30, 2000; Judgment, Nov. 30, 2000.

On appeal, Iran argued that Pak was justified in withholding McKesson's dividends because McKesson had failed to appear, in person, to collect them, as required by Iranian law (the so-called "come to the company" requirement). In 2001, our Circuit reversed Judge Flannery in part, concluding that there was a material issue of fact as to whether the Pak Dairy Board had exercised its discretion to implement a "come to the company" requirement with which McKesson had to comply and, in turn, whether compliance by McKesson would have been futile. McKesson HBOC, Inc. v. Islamic Republic of Iran, 271 F.3d 1101 (D.C.Cir.2001). Accordingly, the Circuit Court remanded the case for trial on these two narrowly drawn issues. Id. In a later opinion; our Circuit Court ordered this Court, which in the meantime had been assigned to this case, to reexamine Judge Flannery's decision that the Treaty of Amity provides McKesson a cause of action in this Court. McKesson v. Islamic Republic of Iran, 320 F.3d 280 (D.C.Cir.2003).

Pursuant to the Circuit Court's orders and after additional rounds of briefing and discovery, this Court held the first half of a six-week bench trial between February 12 and March 2, 2007 to hear the factual evidence regarding the defendants'"come to the company" defense and the plaintiffs "futility" claim. The second half of the bench trial was scheduled for June 11, 2007 for whatever expert testimony might be necessary. At the conclusion of the defendants' case, plaintiff moved for judgment pursuant to Rule 52(c) of the Federal Rules of Civil Procedure. The Court heard arguments, but decided to take the decision under advisement until after the plaintiff's presentation of its evidence regarding its futility claim. At the conclusion of the plaintiffs case, the Court heard oral arguments on the Treaty of Amity issue on March 2 and March 20, 2007 from both the parties and the Department of Justice. That issue was also taken under advisement.

On June 6, 2007, the Court informed the parties at a pre-trial conference that based on the evidence offered at the preceding bench trial, the applicable law and the record, it found that the defendant had not established by a preponderance of the evidence that the Pak Dairy Board of Directors implemented a "come to the company" requirement with which McKesson was bound to comply. Furthermore, the Court announced its conclusion that it did not need to hear expert testimony before reaching this conclusion. Accordingly, the Court granted plaintiffs Rule 52(c) motion.

Additionally, the Court announced that based on the documentary and testimonial evidence plaintiffs offered at trial, it had concluded that even if a "come to the company" requirement had been implemented by the Pak Dairy Board, compliance with that requirement by McKesson would have been futile. Again, the Court disagreed with the defendant as to its need to hear expert testimony prior to reaching this conclusion. Accordingly, the Court announced that it saw no reason for the second half of the trial to continue the following week and thus discontinued the trial.

Finally, having heard oral arguments from both the parties and the United States on the Treaty of Amity issue, and having reviewed the exhaustive briefs submitted by both, the Court announced its conclusion that it found no legal basis to disturb Judge Flannery's earlier conclusion that the Treaty of Amity provides McKesson a cause of action in this Court.

The following are the Court's findings of fact and conclusions of law in support of its judgment for McKesson on the issue of liability and its right to sue under the Treaty of Amity.

II. FINDINGS OF FACT

Although the history of this case is a long and somewhat tortured one, the remaining factual issues to be decided by this Court are relatively narrow and discrete: did the Pak Dairy Board of Directors choose to implement a "come to the company" requirement and would compliance with that requirement have been futile. Moreover, both parties acknowledged at trial, Tr. 2/23/07 at 37:12-22; 2/26/07 at 38:9-13, that the defendant has the burden of establishing, by a preponderance of the evidence, that Pak Dairy imposed this so-called requirement on McKesson.

In support of its claims, Iran presented four factual witnesses: Alyreza Dadyar ("Mr.Dadyar"), Mohammad Sanaie ("Dr.Sanaie"), Mohammad Hejazi Motlagh ("Mr.Hejazi"), and Hassan Tahmasebi ("Mr.Tahmasebi"), who testified via videotaped deposition. McKesson presented testimony from one live witness, Leonard M. Patterson Jr. ("Mr.Patterson") and the video taped depositions of Ali Vandati ("Mr.Vandati") and Nami Moshiri ("Mr.Moshiri"). All three addressed both the "come to the company" defense and McKesson's futility argument.

After reviewing the evidence offered at trial and evaluating the credibility — or lack thereof — of the witnesses, it is hard to imagine — to paraphrase Winston Churchill — that less evidence has ever delayed the awarding of so much, to one so deserving, for so long!

A. THE "COME TO THE COMPANY" REQUIREMENT

At the outset it is important to note that Pak Dairy's Articles of Association (the "Articles") contain no reference, whatsoever, to a "come to the company" requirement. The Articles merely require that Pak's Board of Directors "determine the mode of payment of dividends" and that "dividends shall be paid within four months after resolution of [the] general meeting." Pl.Ex. 1, Art. 57. Moreover, none of the contemporaneous documents offered by Pak Dairy and admitted into evidence at trial state that there was a "come to the company" requirement for shareholders in order to receive their dividends. Indeed, Iran's own witness,. Mr. Dadyar, an accountant at Pak Dairy² from 1968 to 2003, not only testified that he had never seen anything in writing from Pak Dairy regarding shareholders coming to the company to receive dividends, but acknowledged that the Articles contained no such requirement. Dadyar Tr. 2/15/07 a.m. at 45:10-14.

Furthermore, there was virtual agreement among all of the witnesses who testified that as long as it controlled the Pak Dairy board, McKesson received its dividends in dollars via wire transfer pursuant to a procedure created in compliance with Iran's law for the...