Elahi

This fascinating case relates to whether the estate of Elahi can gain money arising from a judgment against the Islamic Republic of Iran by garnishing Iranian assets that are the subject of dispute in another case in the US. The case implicates not only the concept of sovereign immunity of foreign states and whether the Ministry of Defense is the state itself or an instrumentality of the state, but also to what extent two federal laws dealing with "terrorist states" and obtaining of judgments in cases still under dispute are available. Let's get to the facts so that this will begin to unfold clearly for us.

Relevant Facts

On Oct. 23, 1990 Dr. Cyrus Elahi was killed in Paris. His brother, Dariush Elahi, filed suit against Iran and its Ministry of Information and Security ("MOIS") in the District Court for the District of Columbia in 2000. The Iranian government didn't show up in court, and so the district court entered a default judgment in favor of Elahi in Dec. 2000. The amount? Compensatory damages $11,740,035 and punitive damages $300,000,000. Big award. But, of course, Iran felt that it was immune from suit and thus could ignore this proceeding.

The plot thickens. We have to retrace our steps now to get to the second big issue. In Oct. 1977 the predecessor of the petitioner in this case (the "Ministry of Defense" or "MOD") entered into a pair of contracts with Cubic Defense Systems, Inc, a CA-based defense firm, relating to the sale and servicing of air equipment. This was when Iran was "friendly" to the US; the Shah was in charge. Following the Iranian revolution of 1979, the delivery of equipment didn't take place, though the pre-revolutionary government had paid for a lot of it already. So, the revolutionary government, wanting its money back, took the issue to the International Chamber of Commerce in Zurich, Switzerland for a ruling. In 1991, the ICC ruled in favor of MOD and issued a Final Award requiring Cubic to pay MOD $2.8 million. In 1998, MOD filed a petition in the District Court for the Southern District of CA (where Cubic was located) to confirm the award. The district court confirmed the award late in 1998. Both sides have appealed that award, and the case is still pending.

Thus, we have a desire for money from Iran (Elahi) and a judgment in favor of Iran (Cubic case). So, Elahi decided, in Nov. 2001, to register in the Southern District of CA the defaut judgment he had obtained against the Islamic Republic of Iran in 2000. He also filed a lien notice and sought to garnish the judgment debt owed MOD by Cubic. The thought was that he would just step in and take that amount ($2.8 million plus interest) as going towards the $11,000,000+ default judgment. Now, things get interesting.

The Legal Issues

The Iranian MOD resisted Elahi's effort to garnish the judgment against Cubic, but in Nov. 2002, the district court in CA ruled that the MOD was not immune from Elahi's action. Yikes. The district court largely relied on a recently passed congressional law, the Terrorism Risk Insurance Act of 2002 ("TRIA"; Pub. L. No. 107-297, sec. 201, 116 Stat. 2322 (2002)), to hold that the Iranian asset was a "blocked asset" under that law--a blocked asset of a "terrorist party" according to the revision of a 1996 law. Sec. 201(d)(2) of TRIA talks about the meaning of "blocked assets." If a particular property is characterized as a "blocked asset" under TRIA, it is eligible for attachment or execution in satisfaction of a judgment procured under an exception in the Foreign Sovereign Immunities Act ("FSIA"--which is what happened here). In addition, a provision of TRIA provides that if the money sought to be garnished is "at issue" before a claims tribunal it is not subject to attachment. The district court ruled that the Cubic judgment was not "at issue." Hence, it could hold that Elahi had access to the money in the Cubic judgment.

On Appeal

MOD, the loser in the case, appealed to the Ninth Circuit, which held that MOD was liable for satisfaction of Elahi's judgment because it was a separate ministry of the government (and not the government itself--an important distinction in the FSIA) and thus more lenient standards applied to it from the perspective of one suing the MOD. The Ninth Circuit also ruled that Elahi's attempted attachment of the Cubic judgment didn't not violate Treasury Regulations regarding deposition of Iranian assets in the US. Thus, the Ninth Circuit held that Elahi has an interest in the money, and that MOD's status as only an agency of the Iranian government doesn't protect it from garnishment. We are now up to 2003 or 2004.

MOD then sought review in the Supreme Court. The Court vacated the Ninth Circuit decision and suggested that the panel of the Ninth Circuit may have improperly applied the FSIA in this case. On remand, the Ninth Circuit took the Court's hint and declared that the MOD was, in fact, the foreign state itself and therefore only subject to attachment and garnishment in narrow circumstances. Yet, the Ninth Circuit also agreed that Elahi's attachment was valid because it complied with the TRIA and another federal law. Thus, even though the MOD seemed to have "won" one of its points (that it actually was the sovereign government itself, and thus more immune to suits), it lost on the crucial one. Thus, it decided to challenge the decision of the Ninth Circuit, which is the way the case now stands before the Supremes in 2009.

At the Court

So, the Court will have to sort out whether the Cubic assets are garnishable by Elahi. It will come down to how the Court reads the TRIA and the earlier statute (2000--Victims of Trafficking and Violence Protection Act). I would think the Court would reverse the Ninth Circuit here.... Though all will be dolled up in nice legal clothes, one of the issues 'in the air' will be how the new Administration in Washington DC will relate to the Islamic Republic of Iran. The Court can really "help" in this regard by respecting the sovereign immunity here and siding with the MOD. Not much money is at stake, actually (a few million dollars), but it is an important symbolic gesture that is at stake....

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