McKesson Corp. v. Islamic Republic of Iran

• Decision Date: 26 August 2008
• Docket Number: No. 07-7113.,07-7113.
• Citation: 539 F.3d 485
• Parties: McKESSON CORPORATION, et al., Appellees v. ISLAMIC REPUBLIC OF IRAN, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

539 F.3d 485

McKESSON CORPORATION, et al., Appellees v. ISLAMIC REPUBLIC OF IRAN, Appellant.

No. 07-7113.

United States Court of Appeals, District of Columbia Circuit.

Argued May 6, 2008.

Decided August 26, 2008.

Appeal from the United States District Court for the District of Columbia (No. 82cv00220).

H. Thomas Byron III, Attorney, U.S. Department of Justice, argued the cause for amicus curiae United States of America in support of appellant. With him on the brief were Jeffrey S. Bucholtz, Acting Assistant Attorney General, Jeffrey A. Taylor, U.S. Attorney, and Douglas N. Letter, Attorney.

Thomas G. Corcoran, Jr. argued the cause for appellant. With him on the briefs were Laina C. Wilk and Henry M. Lloyd.

Mark N. Bravin argued the cause for appellees. With him on the brief were Peter Buscemi, Thomas J. O'Brien, and Mark R. Joelson.

Before: TATEL, GARLAND, and GRIFFITH, Circuit Judges.

Opinion for the Court filed by Circuit Judge GRIFFITH.

GRIFFITH, Circuit Judge:

In this long-running dispute, now before us for a fifth time, McKesson Corporation alleges that the state of Iran unlawfully expropriated its investment in an Iranian dairy company. In this appeal, Iran raises a number of challenges to the latest decisions of the district court. We hold that the district court properly asserted subject matter jurisdiction, but reverse its conclusion that the treaty provides a cause of action and its refusal to reconsider its earlier ruling that customary international law does so as well. We remand for further proceedings consistent with this opinion.

I.

The facts of this case are set forth fully in our previous decisions. See Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 440-42 (D.C.Cir.1990) ("McKesson I"); McKesson Corp. v. Islamic Republic of Iran, 52 F.3d 346, 347-50 (D.C.Cir.1995) ("McKesson II"); McKesson HBOC, Inc. v. Islamic Republic of Iran, 271 F.3d 1101, 1104-05 (D.C.Cir. 2001) ("McKesson III"). Suffice it to say for purposes of this appeal that McKesson, an American company, is a significant shareholder in an Iranian dairy company called Sherkat Sahami Labaniat Pasteurize Pak ("Pak"). As alleged, Iran effectively froze out McKesson's stake in Pak and blocked its receipt of dividend payments. In 1982, McKesson filed suit in the United States District Court for the District of Columbia, alleging that Iran had unlawfully expropriated its property without compensation. The Overseas Private Investment Corporation ("OPIC"), a federal agency that helps American businesses invest abroad, participated as a co-plaintiff because it had insured a significant portion of McKesson's stake in Pak. OPIC has since been dismissed from the litigation.

In our first two decisions, we held that McKesson had properly pleaded federal jurisdiction under the commercial activity exception of the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1605(a)(2). See McKesson I, 905 F.2d at 449-51, 453; McKesson II, 52 F.3d at 350-51. In the third decision, we affirmed jurisdiction under the FSIA and also held that the 1955 Treaty of Amity, Economic Relations, and Consular Rights, Aug. 15, 1955, U.S.-Iran, 8 U.S.T. 899 ("Treaty of Amity"), between the United States and Iran provided McKesson a cause of action for expropriation. McKesson III, 271 F.3d at 1106, 1107-08. We remanded the case to the district court for a trial on two factual issues: whether Pak had instituted a so-called "come-to-the-company requirement" for the payment of dividends, and whether it would have been futile for McKesson to "come" to Pak to collect its dividends. Id. at 1108-10.

Iran petitioned the Supreme Court for certiorari to review McKesson III. Until then, OPIC had been represented by private counsel that had taken the position that the Treaty of Amity provided a cause of action. In the Supreme Court, the Solicitor General took over OPIC's representation and opposed certiorari, arguing that even though the Treaty of Amity did not provide a cause of action, certiorari was not appropriate because a final judgment had yet to be entered. The Court denied certiorari, and in light of the government's change in position we vacated "the portion of [McKesson III] addressing whether the Treaty of Amity between the United States and Iran provides a cause of action to a United States national against Iran in a United States court," and instructed the district court "to reexamine that issue in light of the representation of the United States that it does not interpret the Treaty of Amity to create such a cause of action." McKesson HBOC, Inc. v. Islamic Republic of Iran, 320 F.3d 280, 281 (D.C.Cir.2003) ("McKesson IV").

At issue on this appeal are the proceedings in the district court on remand from McKesson III and McKesson IV. The district court concluded that the Treaty of Amity provides a cause of action for McKesson. The court also denied Iran's motion for reconsideration of its 1997 decision that customary international law ("CIL")¹ provides a cause of action. The court then held a three-week bench trial on the two factual issues and ruled against Iran on both. Iran appeals, and we have jurisdiction under 28 U.S.C. § 1291. Iran urges us to revisit the question whether there is subject matter jurisdiction under the FSIA. Having thrice held that jurisdiction exists, we decline Iran's request. McKesson I, 905 F.2d at 449-51; McKesson II, 52 F.3d at 350-51; McKesson III, 271 F.3d at 1106; see also LaShawn A. v. Barry, 87 F.3d 1389, 1393 (D.C.Cir.1996) (en banc) ("[T]he same issue presented a second time in the same case in the same court should lead to the same result.").

Iran argues that the district court erred by interpreting the Treaty of Amity to provide McKesson a cause of action, by denying its motion to reconsider the earlier CIL ruling, by misconstruing our remand mandate in McKesson III, and by committing several errors during the trial. We reverse the district court on the first two issues, defer consideration of the remaining issues, and remand for further proceedings consistent with this opinion.

II.

We must determine whether the Treaty of Amity provides a private cause of action. If it does, then McKesson's appearance as a plaintiff in federal court was a proper exercise of its "right ... to seek judicial relief from injuries caused by another's violation of a legal requirement." Cannon v. Univ. of Chi., 441 U.S. 677, 730 n. 1, 99 S.Ct. 1946, 60 L.Ed.2d 560 (1979) (Powell, J., dissenting). If it does not, and if a cause of action cannot otherwise be found, then McKesson's complaint must be dismissed. The district court concluded that McKesson had a cause of action under the Treaty of Amity. McKesson Corp. v. Islamic Republic of Iran, 520 F.Supp.2d 38, 52-55 (D.D.C.2007). Reviewing this interpretation de novo, we reverse. See United States v. Al-Hamdi, 356 F.3d 564, 569 (4th Cir.2004) ("Interpretation of an international treaty is an issue of law subject to de novo review.").

To determine whether a treaty creates a cause of action, we look to its text. See United States v. Alvarez-Machain, 504 U.S. 655, 663, 112 S.Ct. 2188, 119 L.Ed.2d 441 (1992) ("In construing a treaty, as in construing a statute, we first look to its terms to determine its meaning."). The Treaty of Amity, like other treaties of its kind, is self-executing. See Medellín v. Texas, ___ U.S. ___, 128 S.Ct. 1346, 1365-66, 170 L.Ed.2d 190 (2008); Blanco v. United States, 775 F.2d 53, 60 (2d Cir.1985) (Friendly, J.); CURTIS A. BRADLEY & JACK L. GOLDSMITH, FOREIGN RELATIONS LAW 379 (2d ed. 2006) ("[C]ourts commonly assume that certain types of bilateral treaties, such as ... Friendship, Commerce, and Navigation (FCN) treaties, are self-executing."). As such, it "operates of itself without the aid of any legislative provision," Foster v. Neilson, 27 U.S. (2 Pet.) 253, 314, 7 L.Ed. 415 (1829) (Marshall, C.J.), and its text is "the supreme Law of the Land," U.S. CONST. art. VI, cl. 2, on par with that of a statute, Whitney v. Robertson, 124 U.S. 190, 194, 8 S.Ct. 456, 31 L.Ed. 386 (1888). That the Treaty of Amity is self-executing begins but does not end our search for a treaty-based cause of action, because "[w]hether a treaty is self-executing is a question distinct from whether the treaty creates private rights or remedies." RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW OF THE UNITED STATES § 111 cmt. h (1986) [hereinafter RESTATEMENT]; accord Renkel v. United States, 456 F.3d 640, 643 n. 3 (6th Cir.2006); United States v. Li, 206 F.3d 56, 67 (1st Cir.2000) (en banc) (Selya & Boudin, JJ., concurring). "Even when treaties are self-executing in the sense that they create federal law, the background presumption is that `[i]nternational agreements, even those directly benefiting private persons, generally do not create private rights or provide for a private cause of action in domestic courts.'" Medellín, 128 S.Ct. at 1357 n. 3 (quoting RESTATEMENT, supra, § 907 cmt. a).

We find nothing in the Treaty of Amity that overcomes this presumption. To be sure, article IV(2) of the Treaty of Amity directly benefits McKesson by declaring that "property shall not be taken except for a public purpose, nor shall it be taken without the prompt payment of just compensation." McKesson contends that the Treaty of Amity creates a right ("property shall not be taken") and provides a remedy ("just compensation"), and that together these make a cause of action. Not so. The Treaty of Amity tells us what McKesson will receive — money — but leaves open the critical question of how McKesson is to secure its due. For a federal court trying to decide whether to interject itself into international affairs, the Treaty of Amity's silence on this point makes all the difference. A treaty that "only set[s] forth substantive rules of conduct and state[s] that compensation shall be paid for certain wrongs ... do[es] not create private rights of action for foreign corporations to...