SEC. PAC. NAT. BANK v. Government & State of Iran

• Decision Date: 30 April 1981
• Docket Number: CV 80-0175-RJK (Kx) and CV 80-0524-RJK (Kx).,CV 79-4875-RJK (Px),No. CV 79-4661-RJK (Gx),CV 79-4661-RJK (Gx)
• Court: U.S. District Court — Central District of California
• Parties: SECURITY PACIFIC NATIONAL BANK, Plaintiff, v. The GOVERNMENT AND STATE OF IRAN et al., Defendants. HAWAIIAN AGRONOMICS COMPANY, (INTERNATIONAL), a Liberian corporation, Plaintiff, v. GOVERNMENT OF IRAN, Imperial Government of Iran et al., Defendants. HOOD CORPORATION, Plaintiff, v. ISLAMIC REPUBLIC OF IRAN, Central Bank of Iran, and Iran-Arab Bank, Defendants. HOFFMAN EXPORT CORPORATION, Plaintiff, v. The GOVERNMENT OF IRAN, Defendant.

513 F. Supp. 864

SECURITY PACIFIC NATIONAL BANK, Plaintiff, v. The GOVERNMENT AND STATE OF IRAN et al., Defendants.

HAWAIIAN AGRONOMICS COMPANY, (INTERNATIONAL), a Liberian corporation, Plaintiff, v. GOVERNMENT OF IRAN, Imperial Government of Iran et al., Defendants.

HOOD CORPORATION, Plaintiff, v. ISLAMIC REPUBLIC OF IRAN, Central Bank of Iran, and Iran-Arab Bank, Defendants.

HOFFMAN EXPORT CORPORATION, Plaintiff, v. The GOVERNMENT OF IRAN, Defendant.

Nos. CV 79-4661-RJK (Gx), CV 79-4875-RJK (Px), CV 80-0175-RJK (Kx) and CV 80-0524-RJK (Kx).

United States District Court, C. D. California.

April 30, 1981.

James W. Colbert, III, Alexander H. Good, O'Melveny & Myers, John F. Kimberling, Valerie L. Baker, Lillick, McHose & Charles, Ellen B. Friedman, Michael C. Kelley, Kadison, Pfaelzer, Woodard, Quinn & Rossi, Loyd P. Derby, Robert M. Mitchell, James J. Moak, Adams, Duque & Hazeltine, Los Angeles, Cal., for plaintiffs.

Chris G. Gasparich, William W. Schofield, Jr., Crosby, Heafey, Roach & May, Oakland, Cal., Eric M. Lieberman, Gordon J. Johnson, Ellen J. Winner, Rabinowitz, Boudin, Standard, Krinsky & Lieberman, New York City, Peter H. Strong, Anthony J. Van Patten, Fenwick, Stone, Davis & West, Los Angeles, Cal., Greg A. Danilow, Michael S. Oberman, Daniel P. Levitt, Kramer, Levin, Nessen, Kamin & Soll, Gary A. Woodfield, Gadsby & Hannah, Marcia B. Paul, Greenbaum, Wolff & Ernst, New York City, Marvin Sears, Michael D. Koomer, Martin S. Zohn, Pacht, Ross, Warne, Bernhard & Sears, Inc., Los Angeles, Cal., for defendants.

Andrea Sheridan Ordin, U. S. Atty., Frederick M. Brosio Jr., Dzintra I. Janavs, Asst. U. S. Attys., Los Angeles, Cal., Thomas S. Martin, Acting Asst. Atty. Gen., David J. Anderson, Mark C. Rutzick, Marta Berkley, Dept. of Justice, Washington, D. C., Mark B. Feldman, Acting Legal Advisor, Timothy E. Ramish, Dept. of State, Washington, D. C., on brief, for United States.

MEMORANDUM OF DECISION AND ORDER

KELLEHER, District Judge.

BACKGROUND

Each of these cases is related to the political turmoil in Iran, the seizure of United States diplomats and other nationals as hostages in the United States Embassy in Teheran on November 4, 1979, the freezing of Iranian assets by Presidential order, and the subsequent formal break in diplomatic relations and economic ties between the United States and Iran. Plaintiffs are private corporations that had done business in Iran during the reign of the late Shah of Iran. After the overthrow of that government, the present government refused or was unable to perform its duties to these plaintiffs. Plaintiffs filed these suits and obtained writs of attachment on Iranian assets held in this country.¹

Shortly after the taking of the hostages, then-President Carter issued Executive Order 12170, 44 Fed.Reg. 65729 (November 14, 1979). This Executive Order declared that the Iranian hostage situation posed a national emergency. It therefore ordered: "blocked all property and interests in property of the Government of Iran ... which are or become subject to the jurisdiction of the United States or which are or come within the possession or control of persons subject to the jurisdiction of the United States." The President claimed authority for the Order pursuant to the International Emergency Economic Powers Act IEEPA, 50 U.S.C. § 1701 et seq., the National Emergencies Act, 50 U.S.C. § 1601 et seq., and 3 U.S.C. § 301. Each of these suits was filed after the issuance of this Executive Order.

Pursuant to the Order, the Iranian Assets Control Regulations, 31 C.F.R. § 535 (1980) were issued. The Regulations prohibited transfer, payment, export, withdrawal or other dealings with regard to property of Iran that was subject to the jurisdiction of the United States. The Regulations further provided that "Unless licensed or authorized pursuant to these Regulations, any attachment, judgment, decree, lien, execution, garnishment, or other judicial process is null and void with respect to any property in which on or since the effective date there existed an interest of Iran." 31 C.F.R. § 535.203(e) (1980). The Regulations specifically authorized judicial proceedings against the blocked assets.

(a) ... judicial proceedings are authorized with respect to property in which on or since the effective date there has existed an interest of Iran or an Iranian entity.

(b) This section does not authorize or license:

(1) The entry of any judgment ...

(2) Any payment or delivery out of a blocked account based upon a judicial proceeding ...

31 C.F.R. § 535.504 (1980).

The Regulations also authorized the issuance of pre-judgment attachments against the blocked funds. However, the transfer or payment of such property to the court or to the Marshal was prohibited. 31 C.F.R. § 535.418 (1980). Finally, the Regulations provided that any licenses, including attachments, could be "amended, modified, or revoked at any time." 31 C.F.R. § 535.805 (1980).

Various diplomatic and military efforts were made to resolve the hostage problem during 1980. At the same time, prosecution of these suits was advanced. Alternative service on defendants was authorized. On several occasions, the United States sought an Order of this Court staying these actions. No such stay was granted.

Finally, on January 19, 1981, the United States, by Warren Christopher, Deputy Secretary of State,² agreed to a settlement of the hostage situation. The terms of the settlement were contained in two documents: the Declaration of the Government of the Democratic and Popular Republic of Algeria (January 19, 1981) the General Declaration and the Declaration of the Government of the Democratic and Popular Republic of Algeria Concerning the Settlement of Claims by the Government of the United States of America and the Government of the Islamic Republic of Iran (January 19, 1981) the Settlement Declaration.

Among the terms of the General Declaration, the United States agreed that:

It is the purpose of both parties ... to terminate all litigation as between the Government of each party and the nationals of the other, and to bring about the settlement and termination of all such claims through binding arbitration ... The United States agrees to terminate all legal proceedings in United States courts involving claims of United States persons and institutions against Iran and its state enterprises, to nullify all attachments and judgments obtained therein, to prohibit all further litigation based on such claims, and to bring about the termination of such claims through binding arbitration.

The General Declaration further provided that all funds transferred pursuant to the Declaration should be held in escrow by the Central Bank of a designated third country (the Bank of England) until the American hostages in Iran had been released. The United States was obligated to transfer all of the gold bullion and other assets, owned by Iran and in the custody of the Federal Reserve Bank of New York, to this escrow account immediately. The General Declaration further provided for the immediate transfer of Iranian assets held by foreign branches of United States banks to the escrow account.

With regard to Iranian assets in the possession of domestic branches of United States banks, the General Declaration requires that a separate security account be established at the Central Bank thirty days after the date of the Declaration. The United States is obligated to take action, within six months after the date of the agreements, to transfer all such funds and other assets to the bank. The Bank is to transfer half of these assets directly to Iran. The other half are to be deposited in the security account until the balance in that account reaches one billion ($1,000,000,000.00) dollars. All further funds transferred to the Bank are to be transferred without deduction to Iran. The security fund is to be used to pay claims against Iran in accordance with the Settlement Declaration. Iran is obligated to maintain a minimum balance of five hundred million ($500,000,000.00) dollars in the security account. The account will be closed only after the satisfaction of all judgments made pursuant to the Settlement Declaration.

The Settlement Declaration provides:

Iran and the United States will promote the settlement of the claims ... by the parties directly concerned. Any such claims not settled within six months from the date of entry into force of this agreement shall be submitted to binding third-party arbitration in accordance with the terms of this agreement. The aforementioned six months' period may be extended once by three months at the request of either party.

The Settlement Declaration establishes "an International Arbitral Tribunal (the Iran-United States Claims Tribunal) ..." The Tribunal is given jurisdiction over "claims of nationals of the United States against Iran ... outstanding on the date of this agreement, whether or not filed with any court ..." The Settlement Declaration sets forth the procedures for the establishment of the Tribunal, as well as the procedures for its operation.

The Settlement Declaration provides that all decisions of the Tribunal shall be binding on the parties. It provides further that the decisions may be enforced in the courts of any nation. Finally, the Tribunal is given the power to interpret the Settlement Declaration.

On the same date, January 19, 1981, President Carter issued a series of Executive Orders to enforce the Declarations.³ Each of the Orders provides that it is made "in order to implement agreements with the Government of Iran ...⁴

These Executive Orders provide for the revocation or nullification of "any right, power, or privilege," including any court ordered attachment, relating to the property. Each further orders that no additional attachments may be established against such property.

Upon the inauguration of President Reagan, on January 20, 1981, the United States re-examined the validity...