Court: Brother of Slain Man Cannot Attach Iran Award

Wednesday, April 22, 2009

Page 1

Court: Brother of Slain Man Cannot Attach Iran Award

By a MetNews Staff Writer

The brother of a victim of Iranian terrorism cannot collect $2.8 million from a California company that owes Iran for a cancelled weapons shipment, the U.S. Supreme Court ruled yesterday.

Reversing the Ninth U.S. Circuit Court of Appeals, the justices ruled that sovereign immunity precludes Dariush Elahi from collecting the money from Cubic Defense Systems, Inc.

Elahi is the brother of Cyrus Elahi, an Iranian-born U.S. citizen murdered in Paris in 1990, reportedly by agents of Iran’s Islamist regime. The Ninth Circuit twice ruled in Elahi’s favor.

The Supreme Court reversed the first ruling, handed down in October 2004. It directed the lower panel to determine whether Iran’s Ministry of Defense is a “core” part of the Iranian government, and thus immune from being sued in this country under the Foreign Sovereign Immunities Act.

In its second ruling, in 2006, the Ninth Circuit said that FSIA immunity indeed applies, but said that a law enacted by Congress in 2002 allows Elahi to attach the money anyway. Yesterday, however, the Supreme Court ruled unanimously that the 2002 law might not apply, and held 6-3 that even if it does, Elahi waived his rights under it by accepting partial payment of his judgment from the U.S. government.

U.S. District Judge Rudi M. Brewster of the Southern District of California allowed Elahi to attach the $2.8 million awarded the ministry in an International Chamber of Commerce arbitration proceeding on Iran’s claim for undelivered military hardware sold by Cubic, a San Diego company, in the 1970s.

Cubic’s dispute with Iran goes back to 1977, when it entered into a contract to sell and service an Air Combat Maneuvering Range for use by the Iranian Air Force. Like other military items, however, the system went undelivered after the Iranian revolution of 1979.

In 1991, Iran invoked the arbitration clauses of its contracts with Cubic and called for proceedings before the Zurich-based International Chamber. The panel ruled in favor of Iran, and in 1998 Iran petitioned the Southern District court to confirm the award.

Judgment confirming the award, entered in December 1998, was appealed by Cubic. Elahi filed a lien against the award to enforce a judgment obtained under the Antiterrorism and Effective Death Penalty Act of 1996.

AEDPA allows Americans to sue a foreign state if it committed a terrorist act that injured or killed a U.S. citizen, or provided material support to the person or entity that did.

Cyrus Elahi was an official of Flag of Freedom, a group favoring restoration of the Iranian monarchy. He was shot six times in the head in his Paris apartment building, and authorities in France and in the United States have linked the killers to the Iranian government.

Dariush Elahi was awarded more than $11 million in compensatory damages, and $300 million in punitive damages. He later accepted partial payment of that judgment from the U.S. government under the Terrorism Risk Insurance Act of 2002.

Among other things, TRIA amended the Victims Protection Act enacted two years earlier, which created a $400 million fund to compensate victims of Iran- and Cuba-sponsored terrorism.

Recipients of the money were given two options—accept 110 percent of their compensatory damages in full satisfaction of their judgments, or accept 100 percent of their compensatory damages from the fund while pursuing collection of punitive damages against the defendants.

Elahi was not eligible for payment under the VPA because he received final judgment three weeks after the July 2000 cutoff date established by the statute.

TRIA, however, amended the VPA by allowing Elahi and others in his position to receive pro rata payments of compensatory damages from the fund and to seek collection of their remaining damages from “blocked” assets of the terrorism-backing regimes.

Such rights were conditioned, however, upon claimants giving up all rights to punitive damages, as well as the right to execute against or attach “property that is at issue in claims against the United States before an international tribunal.”

Elahi accepted $2.3 million as his pro rata share of the compensation fund, but continued to pursue his claim to attach the $2.8 million held by Cubic.

Both the Iranian government and the Bush administration argued that Elahi’s waiver under TRIA extended to the Cubic award because Iran is seeking damages from the United States as a result of the non-delivery of the Cubic ACMR, in a proceeding before the Iran-U.S. Claims Tribunal.

The justices yesterday agreed that the Cubic award was not subject to TRIA because it was not “blocked,” at least at the time of the Ninth Circuit decision.

Justice Stephen Breyer, writing for the court, rejected the conclusion that Elahi was seeking to collect from a blocked asset, because the missile system was never “unblocked” by the executive branch after it froze all Iranian assets in this country in response to the embassy hostage crisis.

“The basic reason we cannot accept the Ninth Circuit’s rationale is that we do not believe Cubic’s air combat training system is the asset here in question,” Breyer wrote. “Elahi does not seek to attach that system. Cubic sent the system itself to Canada, where, as far as we know, it remains. Rather, Elahi seeks to attach a judgment enforcing an arbitration award based upon Cubic’s failure to account to Iran for Iran’s share of the proceeds of that system’s sale.”

Neither Cubic’s judgment nor the sale proceeds it represents were blocked assets at the time of the Ninth Circuit decision, Breyer said, because a 1981 Treasury Department order following the resolution of the hostage crisis authorized “[t]ransactions involving property in which Iran . . . has an interest” where “[t]he interest in the property. . . arises after January 19, 1981.”

Since Iran’s “interest” in the Cubic award arose in 1998, when judgment was entered confirming the arbitrators’ ruling, it was not blocked at the time the Ninth Circuit ruled, Breyer said.

The justice acknowledged that orders of the Bush administration with respect to Iranian assets, issued in 2005 and 2007, may have returned the Cubic award to the status of a blocked asset. But even if it did, Elahi waived his rights, Breyer said.

Breyer explained that if the United States were to be held liable by the claims tribunal for failing to pay for the ACMR, and if Elahi were permitted to collect the award from Cubic, the government could not use the Cubic judgment as an offset against what it owes Iran, which it is claiming a right to do in the proceedings before the tribunal.

“[T]hat dispute is sufficient to put the Judgment ‘at issue’ in the case,” and thus to bar further efforts by Elahi to collect under TRIA, Breyer said.

Chief Justice John Roberts and Justices John Paul Stevens, Antonin Scalia, Clarence Thomas, and Samuel Alito joined Breyer’s opinion in its entirety.

Justice Anthony Kennedy, joined by Justices Ruth Bader Ginsberg and David Souter, joined with respect to the blocking issue but dissented with respect to waiver. Since the Cubic judgment is final and binding, he said, it is not “at issue” before the claims tribunal.

“True, the Tribunal, when it enters its own orders, might or might not give credit to the United States for a payment, or a right to payment, arising out of the Cubic Judgment; but that does not put the judgment itself at issue,” Kennedy wrote.

The case is Ministry of Defense of Iran v. Elahi, No. 07–615.