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United States District Court, Northern District of Illinois, E. D

April 23, 1982


The opinion of the court was delivered by: Shadur, District Judge.


One former and three present Iranian nationals living in the United States have sued the current government of Iran ("Iran") to recover money owed them for what they claim was wrongful expropriation of their property in Iran. Kianoosh Jafari ("Kianoosh") became a United States citizen March 17, 1981 (after the seizure but before filing this suit), while Javad Jafari ("Javad"), Ashraf Olhajieh Solemaini ("Ashraf") and Nooshin Jafari ("Nooshin") are still aliens.

Iran has moved to dismiss the action for want of subject matter jurisdiction. This Court agrees that (for differing reasons depending on plaintiffs' differing citizenship) it has no jurisdiction over any of the claims, and it therefore grants Iran's motion to dismiss.


Kianoosh and Javad own a building in Tehran that houses the Andisheh Now School. In 1966 Iran took the school and thereafter paid about $1,300 a month for rental of the building and the use of the school's name. About November 1979 the current Iranian government stopped making payments. Complaint Count I seeks recovery for the resulting expropriation of property.

Count II concerns Ashraf's ownership of a building in Tehran, one floor of which she had rented before 1979 for $1,300 a month. During that year Iran took the building without providing compensation, dismissed Ashraf's tenant, seized the building's furniture (owned by Ashraf) and "took possession of all rent owed to that date." Complaint Counts III-V assert Ashraf's other claims — that Iran refuses to pay money due her through her ownership of certain government bonds and a $12,000 Iranian bank deposit and for her rights to a salary as a "medical school employee" on leave of absence.

Count VI is Nooshin's claim for $100,000 based on a promise by Iran in exchange for Nooshin's "surrender" of her (unspecified) position. Count VII states Kianoosh's claim for a $70,000 pension owed him for his service in the Iranian public schools from 1962 to 1968. Count VIII is Javad's claim for a retirement salary due from Iran, which he claims has not been paid since November 1979.

Claims by Kianoosh

Despite his present United States citizenship, Kianoosh cannot rely on the legislative diversity grant, 28 U.S.C. § 1332, as a source of federal court jurisdiction. True enough, the constitutional diversity grant of Article III extends to "Controversies . . . between a State, the Citizens thereof, and foreign States, Citizens or Subjects." But Sections 1332(a)(2) and (4) make plain that Congress has not extended federal judicial power to its full permissible reach under Article III, for the legislative provisions vest jurisdiction only over civil actions between (emphasis added):

    (a) citizens of a State and citizens or
  subjects of a foreign state;

    (4) a foreign state . . . as plaintiff and
  citizens of a State. . . .

This action by a domestic citizen (Kianoosh) as plaintiff against a foreign state itself (Iran) as defendant fits neither category.

Thus Kianoosh must look instead to the portion of the Foreign Sovereign Immunities Act (the "Act," Pub.L. 94-583, 90 Stat. 2891) embodied in 28 U.S.C. § 1330(a):

  The district courts shall have original
  jurisdiction without regard to amount in
  controversy of any nonjury civil action against a
  foreign state . . . as to any claim for relief in
  personam with respect to which the foreign state
  is not entitled to immunity either under sections
  1605-1607 of this title or under any applicable
  international agreement.

In that respect he seeks to invoke 28 U.S.C. § 1605(a)(1) and (3). Such reliance seems clearly ill-founded:

    (1) Section 1605(a)(1) withdraws immunity if
  "the foreign state has waived its immunity either
  explicitly or by implication. . . ." Iran has not
  done that, for its August 15, 1955 Treaty of
  Amity, Economic Relations and Consular Rights
  with the United States does not so provide. Only
  one immunity section (Art. XI, ¶ 4) is contained in
  the Treaty (emphasis added):

    No enterprise of either High Contracting Party,
    including corporations, associations, and
    government agencies and instrumentalities, which
    is publicly owned or controlled shall, if it
    engages in commercial, industrial, shipping or
    other business activities within the territories
    of the other High Contracting Party, claim or
    enjoy, either for itself or for its property,
    immunity therein from taxation, suit, execution
    of judgment or other liability to which privately
    owned and controlled enterprises are subject

That waiver of immunity of enterprises of the High Contracting Party should not fairly be read to state or imply a like waiver as to the High Contracting Party (Iran) itself. That would do violence to the language of the Treaty and of Section 1605(a)(1).

(2) Section 1605(a)(3) withdraws immunity if property rights are taken in violation of international law and the seized property or any property exchanged for it:

    (a) is in the United States in connection with
  commercial activity carried on here by the
  foreign state; or

    (b) is owned or operated by the foreign state's
  agency or instrumentality engaged in commercial
  activity here.

Of course the first of those alternatives is not met in this case. And the second, much like Section 1605(a)(1), appears to treat only with property of an "agency or instrumentality" — not of the sovereign itself (contrast the direct reference to the "foreign state" in the first alternative).

If that analysis of the Act is correct, Kianoosh is plainly out of court for want of jurisdiction. But even were it otherwise — even were it considered that Iran's immunity had somehow previously been waived — that waiver would have been superseded by the "Algerian Accords" and Executive Order 12294, 46 Fed.Reg. 14111 (1981) (the "Order," promulgated Feb. 24, 1981).

As is still fresh in the minds of all of us, the January 19, 1981 signing of the "Algerian Accords" ended the so-called "hostage crisis." Those Accords set up an Arbitral Tribunal to consider claims by American citizens against Iran. Accords Article VII, ¶ 2 provides:

  Claims referred to the Arbitral Tribunal shall,
  as of the date of filing such claims with the
  Tribunal, be considered excluded from the
  jurisdiction of the courts of Iran, or of the
  United States, or of any other court.

On January 18, 1982 Kianoosh filed a claim with the United States-Iran Claims Tribunal at The Hague. Consequently the precise language of the Accords "excludes" Kianoosh's claims from this Court's consideration.

Of course the Accords must be read in light of the Order and the Supreme Court's decision in Dames & Moore v. Regan, 453 U.S. 654, 101 S.Ct. 2972, 69 L.Ed.2d 918 (1981) upholding its validity. Order Section 1 states in part (emphasis added):

  All claims which may be presented to the
  Iran-United States Claims Tribunal under the terms
  of Article II of the [Accords] . . . and all claims
  for equitable or other judicial relief in
  connection with such claims, are hereby suspended,
  except as they may be presented to the Tribunal.

Order Section 3 provides:

  Suspension under this Order of a claim or a
  portion thereof submitted to the Iran-United
  States Claims Tribunal for adjudication shall
  terminate upon a determination by the Tribunal
  that it does not have jurisdiction over such
  claim or such portion thereof.

Kianoosh was not a United States citizen when the acts that triggered his claims occurred,*fn2 or indeed when the Accords were signed or the Order promulgated. He was however such a citizen both when he filed his claim with the Tribunal and when he later filed this action. Thus the application of the Accords to Kianoosh's claims may be open to question.*fn3 But consistent with the general concept of "jurisdiction to decide jurisdiction," Section 3 of the Order leaves it to the Tribunal to decide whether a particular claim is within its jurisdiction. Once Kianoosh has invoked its power, he must await its decision of that question before he can pursue his claims elsewhere.

  Dames & Moore, 101 S.Ct. at 2989, teaches that the Order does
not oust the federal courts of jurisdiction over Kianoosh's

   . . [W]e do not believe that the President has
  attempted to divest the federal courts of
  jurisdiction. Executive Order

  No. 12294 purports only to "suspend" the claims,
  not divest the federal court of
  "jurisdiction. . . ." The President has exercised
  the power, acquiesced in by Congress, to settle
  claims and, as such, has simply effected a change
  in the substantive law governing the lawsuit.
  Indeed, the very example of sovereign immunity
  belies petitioner's argument. No one would
  suggest that a determination of sovereign
  immunity divests the federal courts of

Although this Court's subject matter jurisdiction over Kianoosh's claims thus survives, a mere stay of those claims is inappropriate. Dames & Moore's analogy to sovereign immunity provides the key. Where sovereign immunity bars a plaintiff's lawsuit, dismissal is called for. So it is here — at least unless and until the Tribunal were to reject jurisdiction. Accordingly Iran's motion to dismiss will be granted as to Kianoosh.

Claims of Javad, Ashraf and Nooshin

Kianoosh's co-plaintiffs are all aliens. Their claims pose a different breed of problems:

    (1) whether any statute supports jurisdiction
  over an action by resident aliens against a
  foreign state where foreign law will provide the
  rule of decision; and

    (2) if so, whether that statute is consistent
  with Article III of the Constitution.*fn5

Nothing in Section 1332 remotely approaches coverage of such wholly alien-oriented lawsuits. Thus the Iranian nationals too must call on the Act as their ticket of admission to the federal courts (again this Court will assume arguendo that Iran is not entitled to immunity, despite the views expressed earlier in this opinion).

At the threshold they are met with the question whether they are within the class of plaintiffs for whose benefit Section 1330(a) and its corollary sections were enacted. There is a good deal of legislative history to support the proposition that the Act was not intended to provide a federal forum for foreign plaintiffs in suits against foreign states. See, Verlinden B. V. v. Central Bank of Nigeria, 647 F.2d 320, 323-24 (2d Cir. 1981), cert. granted, ___ U.S. ___, 102 S.Ct. 997, 71 L.Ed.2d 291 (1982). Indeed a review of the evidence adduced by Verlinden on both sides of that issue indicates the contentions opposing jurisdiction are at least as persuasive as those favoring it. Moreover one argument to which Verlinden did not refer is the familiar principle favoring a statutory construction that would avoid a serious constitutional problem — in this case, a problem that led the Verlinden court to invalidate the Act as sought to be applied to alien plaintiffs. See United States v. Clark, 445 U.S. 23, 27, 100 S.Ct. 895, 899, 63 L.Ed.2d 171 (1980); Califano v. Yamasaki, 442 U.S. 682, 693, 99 S.Ct. 2545, 2553, 61 L.Ed.2d 176 (1979).

Nonetheless Verlinden concluded its analysis of the legislative history by deciding that the literal language of the Act ("any nonjury civil action against a foreign state") did open the federal courts to such suits, 647 F.2d at 324.*fn6 This opinion will assume the same premise to demonstrate that Javad, Ashraf and Nooshin lack jurisdictional access in any case.

Every statutory grant of federal jurisdiction must find its base in Article III, either as an echo or as an application of the constitutional language. Although Article III's diversity grant would have supported an action like Kianoosh's had Congress gone that far in Section 1332 (as it did not), the same language cannot sustain a suit solely between two aliens:

  Controversies . . . between a State, the Citizens
  thereof, and foreign States, Citizens or

Congress then has no power under the diversity grant to require this Court to hear the remaining claims of the Complaint. Hodgson v. Bowerbank, 9 U.S. (5 Cranch) 303, 3 L.Ed. 108 (1809); Montalet v. Murray, 8 U.S. (4 Cranch) 46, 2 L.Ed. 545 (1807).

Plaintiffs must therefore turn, as did the plaintiff in Verlinden, to the federal question jurisdictional grant of Article III:

  Cases . . . arising under . . . the Laws of the
  United States. . . .*fn7

On that score however they can point to no federal law under which their claimed causes of action arise — in the sense of creating substantive rights. Section 1330(a) and its corollary sections under the Act, like Sections 1331 (the congressional federal question grant) and 1332 (the congressional diversity grant), cannot play that role. See Verlinden, 647 F.2d at 325-27.

And even on the assumption that "arising under" in Article III terms is broader than the same term in Section 1331, id. at 327-28, ancient doctrine negates the notion that a case can "arise under" a statute (like the Act) that simply confers jurisdiction over a class of cases. Mossman v. Higginson, 4 U.S. (4 Dall.) 12, 1 L.Ed. 720 (1800). To permit such bootstrapping would be to set no bounds on Congress' ability to confer jurisdiction without reference to the "case or controversy" limits of Article III. As the Verlinden court put it, 647 F.2d at 329:

  If we accepted the interpretation of the first
  phrase [of Article III, § 2, clause 1] necessary to
  find jurisdiction here — that a case can "arise
  under" a jurisdictional statute — then we could
  eliminate the other eight phrases from the clause.
  For example, if we decided that Verlinden's suit
  was one "arising under a law of the United States"
  because it was brought under § 1330, then we could
  similarly hold that a suit "arose under a law of
  the United States" because it was brought under §
  1332. The constitutional diversity grant would then
  be surplusage. If we are not to read the other
  phrases out of the clause, we must restrict the
  first phrase to cases arising under a substantive

Under that restriction, only one arguably "substantive law" might possibly support plaintiffs' action. 28 U.S.C. § 1350 provides:

  The district courts shall have original
  jurisdiction of any civil action by an alien for
  a tort only, committed in violation of the law of
  nations or a treaty of the United States.

Section 1350, like Section 1330(a), is a jurisdiction-conferring statute. But unlike Section 1330(a) it expresses substantive sources of decision for the federal courts for alien tort cases: the law of nations or a treaty of the United States.

  For the reason already discussed at n. 7, the Treaty of Amith
does not fill the bill. Accord, Eslami v. Government of Iran,
Civ. Act. No. 81-1505, slip op. at 2 (D.D.C. Jan. 28, 1982).

  Similarly, the "law of nations" does not prohibit a
government's expropriation of the property of its own
nationals. Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir. 1980)
decided that because physical torture violates the law of
nations, Section 1350 would confer jurisdiction through the
"arising under" clause. But Dreyfus v. von Finck, 534 F.2d 24,
30-31 (2d Cir.), cert. denied, 429 U.S. 835, 97 S.Ct. 102, 50
L.Ed.2d 101 (1976) had previously held that wrongful
expropriation of a Jewish businessman's interest in a banking
firm in Nazi Germany did not violate the law of nations and
therefore could not ground an action under Section 1350. And
the Verlinden court, which had decided both those cases, cited
Dreyfus for the proposition that "commercial violations, such
as those here alleged, do not constitute breaches of
international law." 647 F.2d at 325 n. 16.

It may be foreign to our way of life and thought, but the fact is that governmental expropriation is not so universally abhorred that its prohibition commands the "general assent of civilized nations" (Filartiga, 630 F.2d at 881) — a prerequisite to incorporation in the "law of nations." As noted by our Supreme Court in another context in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 428-30, 84 S.Ct. 923, 940-41, 11 L.Ed.2d 804 (1964), a sharp conflict of views exists in the world as to such expropriation, mainly between capital-exporting and capital-importing nations, and between socialist and capitalist nations. We cannot elevate our American-centered view of governmental taking of property without compensation into a rule that binds all "civilized nations."*fn8

Iran's complained-of behavior thus cannot ground an action under Section 1350. Under those circumstances the Verlinden analysis would invalidate the Act to the extent it conferred jurisdiction over plaintiffs' claims.

Thus adherence to Verlinden would preclude acceptance of jurisdiction over the claims of Irani nationals Javad, Ashraf and Nooshin. It is of course true that certiorari has been granted in Verlinden, and the viability of that decision is therefore unknown. But it must be remembered that the Javad, Ashraf and Nooshin claims come within this Court's subject matter jurisdiction only if those plaintiffs can survive each of three potentially fatal defects:

    (1) They must establish that Iran has waived
  its sovereign immunity, so that the Act provides
  a federal forum.

    (2) They must bring themselves within the class
  of plaintiffs for whose benefit the Act was

    (3) They must show that the Act can extend
  jurisdiction over their claims without doing
  violence to Article III.

Any one of those strikes puts plaintiffs out of the game.*fn9

For the reasons already expressed at some length, if this Court follows Verlinden the third requirement bars the alien plaintiffs' claims even if they could prevail on each of the first two. In the Court's view, however, they are likely on the losing side of all three issues. Dismissal on jurisdictional grounds is therefore appropriate.


Iran's motion to dismiss Kianoosh's claims is granted. All claims by Javad, Ashraf and Nooshin are dismissed for want of subject matter jurisdiction.

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