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Behring International Inc. v. Imperial Iranian Air Force and Iran Aircraft Industries

decided as amended: February 9, 1983.

BEHRING INTERNATIONAL, INC., A TEXAS CORPORATION, APPELLANT IN NOS. 82-5127, 82-5281, AND 82-5483
v.
IMPERIAL IRANIAN AIR FORCE AND IRAN AIRCRAFT INDUSTRIES, AGENCIES AND INSTRUMENTALITIES OF IRAN AND THE IMPERIAL AND ISLAMIC GOVERNMENTS OF IRAN, FOREIGN STATES AND/OR THEIR SUCCESSORS, APPELLANTS IN NO. 82-5467



Appeal From The United States District Court For The District Of New Jersey -- Newark

Aldisert, Sloviter, and Rosenn, Circuit Judges.

Author: Rosenn

Opinion OF THE COURT

ROSENN, Circuit Judge.

This diversity case raises questions involving the applicability and constitutionality of the Algerian Declarations, an executive agreement between the United States and Iran, and of an Executive Order and regulations promulgated in response to the Iranian crisis. The action arises in connection with a freight forwarding contract entered into by Behring International, Inc. (Behring), a Texas corporation, and the Imperial Iranian Air Force (IRIAF) and Iran Aircraft Industries (IACI), instrumentalities of Iran.

I.

In August of 1975 Behring and Iran entered into a written contract under which Behring was to provide freight forwarding services for the IRIAF and IACI. Pursuant to the agreement, Behring established facilities in Edison, New Jersey, to warehouse Iranian property. In the early weeks of 1979, the Shah of Iran was deposed and a new Islamic government installed. The new government repudiated the Behring contract, and on February 28, 1979, Behring brought suit against the IRIAF, IACI, and the Government of Iran, in the United States District Court for the District of New Jersey to recover monies due it under the forwarding contract.

Eight and a half months later, on November 7, 1979, Behring and the Iranian defendants settled out of court. The terms of the Settlement Agreement provided in relevant part:

1. I.R.I.A.F. will, within one week of the execution of this Agreement, deposit to [a] Trust Account $635,000, and the Trustee will draw a check payable to Behring for the $635,000 which I.A.C.I. has verified as being owed.

3. Behring will consent to an order of the District Court removing temporary restraints which have been placed on I.R.I.A.F. and I.A.C.I. materials by previous order of that Court which order shall incorporate the terms of this Agreement by reference so that any party hereto may on short notice, seek the assistance of the Court (including contempt proceedings) in compelling specific performance of this Agreement.

4. Concurrent with the lifting of restraints, I.R.I.A.F. will put into the Trust Account . . . an additional $230,000 to secure additional claims which Behring has against I.R.I.A.F., I.A.C.I. and the Iranian Navy until all the terms of the settlement have been satisfied.

5. Behring will furnish documentation, in accordance with past practice, to support its claims for expenses and line item charges against I.R.I.A.F., I.A.C.I. and the Iranian Navy in excess of $635,000. . . . With respect to all such excess sums as to which there is no dispute over the adequacy of documentation, those sums shall be paid to Behring within 30 days after submission of the documentation. . . .

6. In the event of a dispute between the parties as to the adequacy of the documentation to be provided by Behring pursuant to Section 5 above, . . . that dispute shall be settled by arbitration . . . and the arbitrator's decision shall be binding and final.

11. I.R.I.A.F. and I.A.C.I. will arrange . . . to remove the I.R.I.A.F., I.A.C.I. and Iranian Navy (if any) materials from [Behring's] warehouse and transport them to McGuire AFB for transshipment to Iran.

16. When all of the foregoing conditions of settlement have been either fulfilled, waived or otherwise satisfied . . ., I.R.I.A.F. and Behring will join in a request for a consent order directed to the district court to order such sum to be paid to Behring out of the Trust Account as is necessary to complete payments of the amounts owed by I.R.I.A.F., I.A.C.I. and the Iranian Navy to Behring, plus $1,000,000 and any additional amount remaining in the Trust Account is to be returned to I.R.I.A.F., exclusive of interest which accrues after the execution of this Agreement on all sums to which Behring is entitled pursuant to the terms hereof, which accrued interest shall be paid to Behring.

On November 9, 1979, the district court, in accordance with Article 3 of the Settlement Agreement, issued an order incorporating the terms of the Settlement Agreement. The order stated that the district court would retain jurisdiction over the subject matter of the Settlement Agreement so that either party might apply to the court for specific performance under the Agreement.

On November 14, only five days after entry of the court's order, President Carter, responding to the seizure of American diplomatic personnel in Iran, declared a national emergency and blocked the removal or transfer of all property of the government of Iran which was subject to the jurisdiction of the United States. The Secretary of the Treasury promulgated regulations designed to carry out the President's order. 31 C.F.R. §§ 535 et seq. These regulations established a procedure under which persons wishing to withdraw funds from a blocked account might apply to the Treasury Department's Office of Foreign Assets Control (OFAC) for a special license authorizing withdrawal. 31 C.F.R. § 535.801(b).

As of late December 1979, Behring had received $635,000 under the Settlement Agreement, but was unable to collect another $1,003,000 which the district court had on December 16 ordered paid out of the Trust Account, because the Trust Account was blocked by Executive Order. Behring then applied to OFAC for a transfer license. In April of 1980, OFAC issued a license authorizing transfer of $500,000. On May 7, 1980, Behring accomplished the transfer.*fn1

Behring next applied to the OFAC for a second license to unblock the balance of the trust account. When OFAC refused, Behring filed suit in the United States District Court for the District of New Jersey seeking a writ of mandamus and a declaratory judgment that the balance in the trust account was not subject to the regulations. The court denied Behring's request on the ground that as Iran retained an interest in the trust account, the granting or withholding of a license was within the discretion of the Treasury Secretary. Behring International, Inc. v. Miller, 504 F. Supp. 552, 557 (D.N.J. 1980).

On January 19, 1981, the United States and Iran settled the hostage crisis by Executive Agreement (the "Algerian Declarations").*fn2 The United States agreed to the termination of all legal proceedings in United States Courts involving claims of United States nationals against Iran, and to the nullification of all attachments and judgments obtained in American courts. These claims were to be resolved through binding arbitration in an Iran-United States Claims Tribunal created by the Executive Agreement. All claims, including unpaid judgments, outstanding as of January 19, 1981, the date of the Declarations, were to be submitted to the Tribunal, which would sit at the Hague, Netherlands. Iran ...


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