Ministry Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Def. Sys., Inc.

• Decision Date: 27 November 2013
• Docket Number: Case No. 98–CV–1165–B (DHB).
• Parties: MINISTRY OF DEFENSE AND SUPPORT FOR the ARMED FORCES OF the ISLAMIC REPUBLIC OF IRAN, Petitioner, v. CUBIC DEFENSE SYSTEMS, INC., Respondent, and Jenny Rubin, et al.; and France Rafii, Lien Claimants.
• Court: U.S. District Court — Southern District of California

984 F.Supp.2d 1070

MINISTRY OF DEFENSE AND SUPPORT FOR the ARMED FORCES OF the ISLAMIC REPUBLIC OF IRAN, Petitioner,

v.CUBIC DEFENSE SYSTEMS, INC., Respondent,andJenny Rubin, et al.; and France Rafii, Lien Claimants.

Case No. 98–CV–1165–B (DHB).

United States District Court,

S.D. California.

Nov. 27, 2013.

Mina Almassi, Steven William Kerekes, Law Offices of Steven W. Kerekes, Los Angeles, CA, for Petitioner.

Charles A. Bird, Michelle Ann Herrera, McKenna Long & Aldridge LLP, San Diego, CA, for Respondent.

David J. Strachman, McIntyre, Tate & Lynch, LLP, Providence, RI, James E. McElroy, Law Offices of James E. McElroy, San Diego, CA, Jonathan R. Mook, DiMuro Ginsberg PC, Alexandria, VA, for Lien Claimants.

ORDER GRANTING LIEN CLAIMANTS' MOTION TO ATTACH CUBIC JUDGMENT

BARRY TED MOSKOWITZ, Chief Judge.

This motion concerns an attempt by ten American citizens ¹ to collect judgments against the Islamic Republic of Iran (“Iran”) for personal injuries arising out of the country's terrorist activities. The Lien Claimants seek to attach the $2.8 million judgment that the Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran (hereinafter “MOD” or “MODSAF”) obtained in this arbitration case.² MOD opposes the motion by invoking its sovereign immunity as well as its rights under the Algiers Accords, an international agreement between Iran and the United States. Declaration of the Government of the Democratic and Popular Republic of Algeria, U.S.—Iran, 20 I.L.M. 224 (Jan. 1981). In addition to extensive briefing by the parties,³ the United States Department of Justice filed a Statement of Interest. Doc. No. 277; 28 U.S.C. § 517. The Court heard oral argument on January 8, 2013.

Having carefully considered the arguments of counsel and the governing law, the Court holds that Lien Claimants are entitled to the relief they seek. The Court holds that the Cubic Judgment is subject to attachment under § 201 of the Terrorism Risk Insurance Act of 2002 (“TRIA”), as well as § 1610(g) of the Foreign Sovereign Immunities Act of 1976 (“FSIA”). The Court does not at this time release the funds, which are on deposit with the Clerk of the Court. The Court stays disbursement of funds pending appeal, but title to the funds is immediately vested in the Lien Claimants (in a manner to be determined by a future Order). Also, the Lien Claimants must submit additional information.

I. BACKGROUND

After two decades adjudicating the dispute in various forums, the parties are well-acquainted with the facts, thus, the Court describes only those essential to the pending motion. The first section summarizes the facts underlying the $2.8 million Cubic Judgment in MOD's favor; the second background section describes the terrorism-related judgments held by the Lien Claimants against Iran.

A. Military Equipment Contracts and the Cubic Judgment

In 1977, while the Shah governed Iran, Cubic Defense Systems, Inc. (“Cubic”) entered into two contracts to sell and maintain an air combat maneuvering range system (“ACMR”) to MOD.⁴ The contracts had arbitration clauses and were governed by Iranian law. MOD's Request for Judicial Notice, Ex. C ¶¶ 2.6, 7.4 (hereinafter “Final Award”). By October 1978, Iran had paid over $12 million of the purchase price and modest sums on the service contract. Id. ¶ 2.2; MOD v. Cubic, 29 F.Supp.2d 1168, 1170 (S.D.Cal.1998).⁵ By February 1979, Cubic obtained export permits and was poised to transfer ownership of the equipment to Iran.

In November 1979, the Iranian revolution—which replaced the monarchy with the theocratic Islamic Republic of Iran, disrupted foreign relations with the United States, and culminated in the hostage crisis at the American Embassy—permanently prevented full performance of the military equipment contracts. Final Award ¶¶ 8.3, 8.8, 8.12, 8.18; see generally MOD v. Gould, Inc., 887 F.2d 1357 (9th Cir.1989) (describing American foreign policy implications of revolution in Iran).

In 1991, MOD initiated arbitration proceedings with the International Chamber of Commerce (“ICC”). The ICC found that the parties agreed to discontinue the contracts in light of the Islamic revolution, and reached a modified agreement that allowed Cubic to sell the ACMR to another country. Final Award ¶¶ 9–10. “Depending on the result of the attempt to resell the System, either [Iran] became entitled to be (partly) reimbursed for the payments it had made to Cubic, or Cubic became entitled to claim, in balance, an additional payment from Iran.” Id. ¶ 11.28. In the Fall of 1982, Cubic sold the military equipment to Canada, yet Cubic ignored Iran's requests for an accounting.⁶E.g., id. ¶¶ 6.1, 10.8, 16.1(h); Elahi, 556 U.S. at 372, 129 S.Ct. 1732 (observing “that Cubic had not lived up this modified agreement”). In May 1997, the ICC held that Cubic owed MOD $2.8 million plus interest and costs. Final Award ¶ 21.

In 1998, MOD filed a petition to confirm the arbitration award. This Court confirmed the arbitration award on December 7, 1998.⁷MOD, 29 F.Supp.2d 1168. The “Cubic Judgment” was entered on August 10, 1999.

After years of appeals, the contract dispute is now resolved and the funds have been deposited with this Court.⁸

B. Lien Claimants Seek to Satisfy Terrorism–Related Judgments⁹

1. Claimant France M. Rafii

In 2001, Rafii, a United States citizen, sued Iran and the Ministry of Information and Security (“MOIS”) for the wrongful death of her father Dr. Shapour Bakhtiar, the former prime minister of Iran. Compl. Rafii v. Islamic Republic of Iran, No. 01–CV–850–CKK (D.D.C. filed Apr. 18, 2001), ECF No. 1.¹⁰ Rafii filed suit pursuant to the terrorism exception in FSIA based on her allegation that agents of Iran assassinated Dr. Bakhtiar for his political opposition to the Islamic regime. 28 U.S.C. § 1605(a)(7) (2006) (repealed in 2008 and replaced by 28 U.S.C. § 1605A). Defendants did not appear.

In 2002, the Honorable Colleen Kollar–Kotelly conducted a two-day bench trial; made the necessary factual, jurisdictional, and statutory findings; and entered default judgment against Iran for $5 million compensatory damages. Order & Findings of Fact and Conclusions of Law Rafii, 01–CV–850–CKK (D.D.C. filed Dec. 2, 2002), ECF 21 (also awarding compensatory and punitive damages against MOIS).¹¹

In 2003, Rafii filed a notice of lien on the Cubic Judgment.¹² Doc. No. 124. She attached a copy of the registered default judgment and served MOD's counsel in this action. Id. at 4 & Ex. A.

2. The Nine Rubin Claimants

Using the then-existing terrorism exception to FSIA, 28 U.S.C. § 1605(a)(7), the Rubin suit was filed in 2001 based upon a suicide bomb attack by Hamas at a pedestrian mall in Jerusalem in 1997. Compl. Rubin v. Islamic Republic of Iran, No. 01–CV–1655–RMU (D.D.C. filed July 31, 2001), ECF No. 1 (hereinafter Rubin, No. 01–CV–1655–RMU). Several American citizens were injured, and nine pursue the Cubic Judgment (hereinafter the “Rubin Claimants”). These include five who were present at the bombing (J. Rubin, Miller, Mendelson, Hersh, and N. Rozenman), and four relatives who sought pain and suffering damages (D. Rubin, Frym, E. Rozenman, and T. Rozenman). Iran and its co-defendants (MOIS and three senior officials) did not appear.

In 2003, the Honorable Ricardo M. Urbina of the District of Columbia District Court conducted an evidentiary hearing before concluding that Defendants provided terrorist training and other material assistance to the bombers. Campuzano v. Islamic Republic of Iran, 281 F.Supp.2d 258 (D.D.C.2003) (findings of fact & conclusions of law in consolidated actions, including the Rubin claimants). The Court entered default judgment in 2003. Order & Judgment Rubin v. Islamic Republic of Iran, No. 01–CV–1655–RMU (D.D.C. filed Sept. 10, 2003), ECF No. 23. The Court ordered Iran to pay the nine Rubin Claimants compensatory damages ranging from $2.5 million to $15 million. Campuzano, 281 F.Supp.2d at 275–77.¹³

In 2008, Congress repealed § 1605(a)(7) and replaced it with an improved cause of action § 1605A to sue foreign terrorists. National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110–181, § 1083, 122 Stat. 3 (2008). The amendment permitted plaintiffs with a pending terrorism-related lawsuit to ask the court to give their case “effect as if the action had originally been filed” under the new provision. Id. § 1083(c)(2)(A) (Application to Pending Cases). The Rubin plaintiffs promptly took advantage of the opportunity because their case was still pending as defined by the statute. Id.; Motion Pursuant to § 1083(c)(2) Rubin, No. 01–CV–1655–RMU (D.D.C. filed Mar. 28, 2008), ECF No. 76. In June 2008, the District Court granted the motion. Memorandum Order at 2 n. 3, 5, Rubin, No. 01–CV–1655–RMU (D.D.C. filed June 3, 2008) (noting “seven-year litigious saga” that included remand to resolve the pending motion pursuant to Fed.R.Civ.P. 60(b)), ECF No. 81.

In 2003, and as amended in 2009, the nine Rubin Claimants filed a notice of lien totaling $71.5 million.¹⁴ Doc. Nos. 130 & 145. MOD's attorney was served with both versions of the notice and a copy of the 2003 default judgment. Doc. Nos. 130 at 42 & Ex. B, 144, & 145, Ex. A.

Now before the Court is the joint motion by Lien Claimants to attach the Cubic Judgment to satisfy a portion of their default judgments against Iran. The motion to attach is a simple matter as MOD does not contest that Lien Claimants complied with the procedural requirements. The complexities arise from MOD's assertion of sovereign immunity and its reliance on the Algiers Accords. As in the past, “[d]etermining the viability of MOD's claim requires us to follow a labyrinthine path through several statutes and regulations.” MOD, 385 F.3d at 1214.

II. LEGAL PRINCIPLES

A. Algiers Accords

In the course of the Iranian revolution, Iran took hostages at the American Embassy in Tehran in November 1979. President Carter responded by issuing Executive Order 12170, which...