The Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran, as Successor in Interest to the Ministry of War of the Government of Iran, Petitioner-Appellant, v. Frym, No. 13-57182 (9th Cir. Feb. 26, 2016)

Plaintiff, Mr. Rafii, was the son of a former prime minister of Iran who was killed in 1991 in his home in Paris by Iranian agents.  Mr. Rafii sued Iran in U.S. district court and won a $5 million default judgment.  The remaining nine claimants in this case were either injured themselves, or are relatives of Americans injured when Hamas detonated a suicide bomb in Jerusalem in 1997.  These nine claimants sued Iran in a U.S. district court for Iran’s role in the training and material assistance provided to the bomber, and won default judgments ranging from $2.5 million to $15 million. 

Plaintiffs were able to bring these claims under the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. § 1601, et seq. because there was an exception to immunity under the FSIA for state-sponsored terrorism.  Prior to 2002, however, the sovereign’s immunity from attachment remained in place.  As a result, although the ten American Plaintiffs in this lawsuit were able to obtain judgments against Iran based on Iran-sponsored terrorist activity, they could not enforce those judgments against Iran.

Eventually, in 2002, Congress enacted the Terrorism Risk Insurance Act (“TRIA”), which provides that if a person has obtained a judgment against a terrorist party on a claim based on an act of terrorism, then “the blocked assets of that terrorist party . . . shall be subject to execution or attachment ….” TRIA § 201.  In 2012, President Obama invoked the International Emergency Economic Powers Act to block all property and interests in property of Iran that are in the United States, exempting only Iranian property that had been blocked from 1979 to 1981.

In 1997, the Iranian Ministry of Defense obtained a $2.8 million ICC award against Cubic, an arms manufacturer.  Iran moved to have the award confirmed in federal court in California, which entered judgment in 1999.  When the case was finally resolved, Cubic deposited the funds with the court.  It is this judgment (the “ICC Judgment”) that the ten claimants sought to attach in this case.

The district court granted the motion to attach the ICC Judgment, over Iran’s arguments that, inter alia, the Algiers Accords required the U.S. to protect the judgment from attachment.  The Algiers Accords was a treaty signed between Iran and the U.S. that, among other things, created the Iran-U.S. Claims Tribunal to decide claims by U.S. companies against Iran.  The district court found that, under the Accords, the U.S. was obligated to restore Iran to its pre-November 1979 position.  According to the court, Iran did not have an interest in the confirmed arbitration award in 1979, as this interest did not arise until 1998. 

The Ninth Circuit similarly found that, because Iran’s asset was the judgment, and it could not have gained an interest in the judgment until long after the Algiers Accords were concluded, the U.S. did not derogate from its obligations under the Algiers Accords to restore Iran to its prior position.  The U.S. submitted an amicus brief in this case, arguing that it is the government’s “longstanding position . . . that the Algiers Accords simply required the United States to return . . . properties that were in existence and subject to jurisdiction as of January 19, 1981 (the date of the Accords).”  The Ninth Circuit held that the government’s interpretation of its own agreement is entitled to “great weight.”

Because the ICC Judgment did not fall within the properties identified in the Algiers Accords, and because, by the same reasoning, the ICC Judgment was not an asset of Iran blocked between 1979 and 1981 (and thus not exempted from President Obama’s blocking order), the ICC Judgment was subject to attachment under the TRIA.  The ten American claimants could thus attach the judgment to satisfy (albeit partially) their respective judgments against Iran.