Unidyne Corp. v. GOVERNMENT OF IRAN, ETC., Civ. A. No. 80-1029-A.

• Decision Date: 30 March 1981
• Docket Number: Civ. A. No. 80-1029-A.
• Citation: 512 F. Supp. 705
• Parties: UNIDYNE CORPORATION, Plaintiff, v. GOVERNMENT OF IRAN (ISLAMIC REPUBLIC OF IRAN), acting By and Through the IMPERIAL IRANIAN NAVY (NAVY OF the ISLAMIC REPUBLIC OF IRAN), et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

512 F. Supp. 705

UNIDYNE CORPORATION, Plaintiff, v. GOVERNMENT OF IRAN (ISLAMIC REPUBLIC OF IRAN), acting By and Through the IMPERIAL IRANIAN NAVY (NAVY OF the ISLAMIC REPUBLIC OF IRAN), et al., Defendants.

Civ. A. No. 80-1029-A.

United States District Court, E. D. Virginia, Alexandria Division.

March 30, 1981.

COPYRIGHT MATERIAL OMITTED

John F. Mardula, Lewis, Mitchell & Moore, Vienna, Va., for plaintiff.

George P. Williams, Asst. U. S. Atty., Alexandria, Va., for United States.

MEMORANDUM OPINION

ALBERT V. BRYAN, Jr., District Judge.

Plaintiff Unidyne Corporation, a Virginia corporation with its principal place of business in the State of Virginia, entered into a contract with the Imperial Iranian Navy (now the Navy of the Islamic Republic of Iran) in 1977 to provide training and maintenance analysis for equipment of the Iranian Navy. Unidyne alleges that because of internal political conditions in Iran subsequent to the contract, it was unable to complete its contract and that it has incurred expenses and losses in excess of One Million Five Hundred Sixty Thousand Six Hundred Forty-Two and 60/100 Dollars ($1,560,642.60) which defendant, the Government of Iran, has failed and refused to pay. Unidyne seeks a judgment in this court for the alleged deficiency.

Jurisdiction is asserted under Article III, Section 2 of the Constitution; the Treaty of Amity, Economic Relations and Consular Rights between the United States and Iran, August 14, 1955 (1957), 8 U.S.T. 899, T.I. A.S. 3853; and 28 U.S.C. § 1330, § 1332 and § 1602 et seq.

On or about December 29, 1980, Unidyne requested, and the clerk of this court executed, prejudgment attachments against some twenty-seven (27) American corporations as joint defendants, pursuant to Va. Code § 8.01-533 et seq., and Fed.R.Civ.P. 64, alleging that the American defendants hold funds or property belonging to the principal defendant, Iran, which could satisfy Iran's debt to Unidyne. Most of the American defendants have answered that they hold no funds or property belonging to Iran. Plaintiff claims that all of the co-defendants had business dealings with Iran and that the practice of the Iranian government in most of its contractual dealings was for the Iranian government to forward a down payment of up to twenty per cent of the contract which is legally the property of Iran until an appropriate court rules upon the validity of any claims and offsets claimed by co-defendants. Unidyne has in fact sued out a supplemental writ of attachment against itself on this theory and answered that it holds $160,412.40 in unliquidated down payment monies from the Government of Iran.

On February 10, 1981, the United States filed in this court a Statement of Interest requesting a stay in the proceedings here to allow President Reagan to complete a review of the executive orders issued January 19, 1981 by President Carter transferring and otherwise disposing of Iranian assets in the United States as a part of the agreement between the United States and Iran which resulted in the release of American hostages held in Iran. Proceedings were stayed by order of this court until March 6, 1981, subject to certain exceptions.¹

On February 12 Unidyne filed a motion to "Compel Examination of the Co-Defendants" in connection with the writs of attachment.

On February 24, 1981 President Reagan issued Executive Order No. 12294 which ratified Executive Order Nos. 12276-12285 issued by President Carter on January 19, 1981, and ordered: "All claims which may be presented to the Iran-United States Claims Tribunal under the Terms of Article II of 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 ... are hereby suspended, except as they may be presented to the Tribunal. During the period of this suspension, all such claims shall have no legal effect in any action now pending in any court of the United States...."

Pursuant to that executive order the United States filed in this court on February 26, 1981, a second Statement of Interest of the United States which requested this court to (1) stay litigation of those claims against Iran arguably within the Tribunal's jurisdiction, and (2) vacate the attachments against Iranian assets.

Plaintiff opposed the government's motions challenging the President's authority via executive order to either stay proceedings in this Article III court or to vacate the attachments issued by this court. A hearing was held on March 13, 1981, on the government's motions.² The court continued plaintiff's motion to compel examination of the co-defendants pending a ruling on the government's motions.

The government makes two motions in this case which will be considered separately: first, the motion to vacate the prejudgment attachments, and second, the motion to stay. While the ultimate issues in the matter are constitutional — whether the President has the power to negotiate the settlement of an international crisis by agreeing to transfer foreign owned assets (frozen by an earlier executive order) out of this country despite court ordered attachments and to agree that claims on these assets by American citizens will proceed not in the domestic courts but in an international tribunal — the court need not here, and does not, reach the constitutional question with respect to the government's motion to stay.

With respect to the attachments the constitutional question cannot be avoided. Does the President have the power to make an international agreement, one of the elements of which is the marshalling and transferring of foreign assets out of the country notwithstanding prejudgment attachments issued by a federal district court? And does that executive agreement have the force of law in this country?

Under Article II of the Constitution the President has the power to exercise the sovereign power of the United States in foreign relations and has the power to enter into agreements with foreign governments. United States v. Pink, 315 U.S. 203, 62 S.Ct. 552, 86 L.Ed. 796 (1942); United States v. Curtiss-Wright Export Corp., 299 U.S. 304, 57 S.Ct. 216, 81 L.Ed. 255 (1939). The President's constitutional power in this case is augmented by statutory power granted him by the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. § 1701 et seq., which explicitly authorizes the President to "compel ... any ... transfer of any property in which any foreign country or a national thereof has any interest." He is also given the power to "nullify, void, prevent or prohibit any right ... with respect to ... any property in which any foreign country or a national thereof has any interest." It is true that IEEPA does not, in terms, give the President the power to annul prejudgment attachments issued by federal courts. Nevertheless the power to compel any transfer and to nullify any right to any such foreign property can fairly be read to include the power to vacate prejudgment attachments. The court does not agree with the analysis of the legislative history advanced by plaintiff in this case to the effect that the passage of IEEPA as Title II of Public Law 95-223 on December 28, 1977, withdrew any power the President had previously under the Trading with the Enemy Act of 1917 (TWEA) with respect to the nullification of attachments. It is true that IEEPA was the result of congressional intent to particularize and limit to some extent the President's emergency powers in times of national emergency short of war. Section 5(b) of the TWEA, 50 U.S.C. App. § 5(b), gave the President virtually unlimited emergency powers both in time of war "or during any other period of national emergency declared by the President." What the IEEPA did was to restrict some of the powers of the President in these "other" emergencies short of war. But IEEPA regranted to the President in the identical language of the TWEA the power to compel the transfer of foreign assets, and to nullify any rights in them.

IEEPA does limit the powers previously conferred by TWEA in national emergencies short of war in the following respects: (1) the power to vest, i. e., to take title to foreign property; (2) the power to regulate purely domestic transaction; (3) the power to regulate gold or bullion; and (4) the power to seize records.³ See House Report on Trading with the Enemy Act Reform Legislation, H.R.Rep.No.459, 95th Cong.2d Sess. 15 (1977). These limitations in no way restrict the President's power and authority to do what he did here.

Plaintiff's counsel suggested at the hearing that he questioned the President's power to marshall and transfer Iranian assets without vesting them in the government. The power to transfer does not require vesting in the government. The fact that IEEPA excludes the power to vest does not restrain the President from doing what he attempts to do here — transfer assets frozen in this country back to Iran and into escrow accounts abroad. The court also rejects the proposition that IEEPA and its predecessor statute in the TWEA is an unconstitutional grant of authority by the Congress to the President. Although plaintiff does not explicitly raise this point in this case, the district court in Electronic Data Systems Corporation Iran v. The Social Security...