Metropolitan News-Enterprise


Friday, October 8, 2004


Page 1


Ninth Circuit Court of Appeals Rules:

Slain Dissident’s Brother Can Attach Award to Iran’s Government


By KENNETH OFGANG, Staff Writer/Appellate Courts


The brother of an Iranian-born U.S. citizen murdered in Paris in 1990, reportedly by agents of Iran’s Islamist regime, can attach the proceeds of an arbitration award the Iranian Ministry of Defense won against an American defense contractor, the Ninth U.S. Circuit Court of Appeals ruled yesterday.

The decision affirms a ruling by U.S. District Judge Rudi M. Brewster of the Southern District of California, who allowed Dariush 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 Defense Systems, Inc. of San Diego in the 1970s.

At the same time, however, the panel upheld Brewster’s ruling that the father of an American student killed in a Gaza Strip bus bombing in 1995 cannot attach the same proceeds because, unlike Elahi, he accepted payment from a U.S. government fund designed to compensate American victims of state-sponsored terrorism.


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, and that appeal is still pending. Elahi and New Jersey lawyer Stephen Flatow, the father of bus bombing victim Alisa Flatow, both filed liens against the award.

The liens are based on judgments obtained by both men under the Antiterrorism and Effective Death Penalty Act of 1996. Federal district judges, after hearing evidence, found that Alisa Flatow and Cyrus Elahi were both victims of Iran-sponsored terrorism.

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.

Flag of Freedom

Cyrus Elahi was an official of Flag of Freedom, a group that favors restoring 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.

The bomber who rammed his car into the bus Alisa Flatow was riding on was shown to be affiliated with Palestinian Islamic Jihad, a terrorist group financed by Iran.

Stephen Flatow was awarded $247.5 million, including $225 million in punitive damages. Dariush Elawi was awarded more than $11 million in compensatory damages, and $300 million in punitive damages.

Flatow has been unsuccessful in efforts to collect his judgment from Iranian assets frozen by the U.S. government following the seizure of hostages from the U.S. embassy in Tehran in 1979, as well as from U.S. assets of Iranian banks that deny responsibility for the debts of the government.

The U.S. government, while expressing sympathy for Flatow’s position, and that of other terrorism victims, has resisted their claims against frozen assets. Congress did, however, pass a Victims Protection Act in 2000, creating a $400 million fund to compensate victims of Iran- and Cuba-sponsored terrorism.

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

If the latter option is chosen, however, the plaintiff is precluded from executing on certain types of property, including “property . . .that is subject to 28 U.S.C. [Sec.] 1610(f)(1)(A).” That provision, in turn, generally bars execution against “any property with respect to which financial transactions are prohibited or regulated pursuant to” certain laws, one of which is the International Economic Emergency Powers Act.

IEEPA is the statute under which President Carter imposed sanctions against Iran after the hostages were taken; those sanctions, with some modifications, have been continued by Carter’s successors.

Under the Iranian Assets Control Regulations, adopted pursuant to IEEPA, a license from the Treasury Department is required before Iranian government assets “subject to the jurisdiction of the United States the possession of or control of persons subject to the jurisdiction of the United States....may be transferred, paid, exported, withdrawn or otherwise dealt in....”

The effect of putting the various statutes and regulations together, Senior Judge Betty B. Fletcher wrote yesterday for the Ninth Circuit, is that virtually all Iranian assets “within the jurisdiction of the United States” are beyond the reach of Flatow’s judgment, since he elected to collect compensatory damages from the Victims Protection Act fund.

Elahi, however, did not accept payments from the fund and is entitled to pursue collection of his judgment, Fletcher said.

The judge rejected the argument that Iran is immune under the Foreign Sovereign Immunities Act. The act, she noted, contains exceptions to immunity permitting attachment of property “of an agency or instrumentality of a foreign state engaged in commercial activity in the United States,” and abrogating immunity in cases involving state-sponsored terrorism, both of which Fletcher said apply.

Judges Kim M. Wardlaw and Raymond C. Fisher concurred in the opinion.

The case is Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Defense Systems, Inc., 99-56498.


Copyright 2004, Metropolitan News Company