McKesson Corp. v. Islamic Republic of Iran

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 14, 2011 Decided February 28, 2012

No. 10-7174

MCKESSON CORPORATION, ET AL.,

APPELLEES

v.

ISLAMIC REPUBLIC OF IRAN,

APPELLANT

FINANCIAL ORGANIZATION FOR THE EXPANSION OF

OWNERSHIP OF PRODUCTIVE UNITS, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:82-cv-00220)

Christopher J. Wright argued the cause for appellant. On

the briefs were Thomas G. Corcoran Jr., Laina C. Wilk

Lopez, and Henry M. Lloyd.

Mark N. Bravin argued the cause for appellees McKesson

Corporation, et al. With him on the briefs was Mark R.

Joelson. David M. Kerr entered an appearance.

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H. Thomas Byron, III, Attorney, U.S. Department of

Justice, argued the cause as amicus curiae United States.

With him on the brief were Tony West, Assistant Attorney

General, Ronald C. Machen Jr., U.S. Attorney, Douglas N.

Letter, Attorney, and Harold Hongju Koh, Legal Adviser,

U.S. Department of State.

Before: SENTELLE, Chief Judge, TATEL and BROWN,

Circuit Judges.

Opinion for the Court filed by Circuit Judge BROWN.

BROWN, Circuit Judge: This decades-long dispute

boils down to a rather simple set of allegations: McKesson

Corporation, a U.S. company, claims that after the Islamic

Revolution, the government of Iran expropriated McKesson’s

interest in an Iranian dairy and withheld its dividend

payments. McKesson filed its complaint in 1982, and the

procedural nightmare that followed resembles the harshest

caricature of the American litigation system as one in which

justice can be continually delayed, if not denied. This case

has reached our Court on five prior occasions, and we have

remanded it for numerous trials by the district court. Yet after

almost thirty years of effort, this litigation has yet to

definitively address the foundational issues of this case—

namely, whether this Court has jurisdiction over McKesson’s

claim and whether any recognized body of law provides

McKesson with a private right of action against Iran.

I. Background

The facts of this case are set forth fully in earlier

decisions. See Foremost-McKesson, Inc. v. Islamic Republic

of Iran, 905 F.2d 438, 440–42 (D.C. Cir. 1990) (“McKesson

I”); McKesson Corp v. Islamic Republic of Iran, 52 F.3d 346,

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347–49 (D.C. Cir. 1995) (“McKesson II”); McKesson HBOC,

Inc. v. Islamic Republic of Iran, 271 F.3d 1101, 1104–05

(D.C. Cir. 2001) (“McKesson III”). Sherkat Sahami Labaniat

Pasteurize Pak (“Pak Dairy”), a joint venture between

McKesson and private Iranian citizens, was incorporated on

March 12, 1960. McKesson’s ownership interest in Pak,

initially 50 percent, had decreased to 31 percent at the time of

the Islamic Revolution. McKesson alleges that in the wake of

the Revolution, agents and instrumentalities of the

government of Iran seized control of the board of directors of

Pak. Through a series of hostile actions allegedly instigated

by the government, the board effectively froze out

McKesson’s stake in Pak and blocked McKesson’s receipt of

dividend payments. In 1982, McKesson, joined by the

Overseas Private Investment Corporation (“OPIC”), filed suit

in the United States District Court for the District of

Columbia, alleging that Iran had unlawfully expropriated its

property without compensation.

Pursuant to Executive Order 12,294, 46 Fed. Reg. 14,111

(Feb. 24, 1981), the case was stayed while the plaintiffs

presented their claims to the Iran-United States Claims

Tribunal (“Tribunal”). From McKesson’s perspective, the

Tribunal rendered a mixed result. Although the Tribunal held

that interference with McKesson’s rights had not amounted to

an expropriation by the last date of the Tribunal’s jurisdiction,

it did rule that Pak Dairy had unlawfully withheld from

McKesson cash dividends declared in 1979 and 1980. See

Foremost Tehran, Inc. v. Islamic Republic of Iran, 10 Iran-

U.S. Cl. Trib. Rep. 228, 1986 WL 424309 (1986) (“Tribunal

Award”). The Tribunal also found that Pak Dairy was a

corporation controlled by the Government of Iran, and

accordingly awarded McKesson $1.4 million in damages,

which included interest on its withheld dividends. According

to the provisions of the Algiers Accords, Iran paid the

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amounts awarded out of a security account established at the

Hague.

Although the Tribunal award was substantial, it did not

fully compensate McKesson for the ongoing expropriation of

its interest in Pak. In an attempt to recover the value of that

interest, McKesson revived this suit in April 1988 in the

district court. Iran filed a motion to dismiss, claiming that it

was immune from suit under the Foreign Sovereign

Immunities Act of 1976 (“FSIA”), 28 U.S.C. § 1605, but the

district court held that McKesson had properly pleaded

jurisdiction under the commercial activities exception of the

FSIA. Foremost McKesson, Inc. v. Islamic Republic of Iran,

No. 82-0220, 1989 WL 44086, at *4 (D.D.C. Apr. 18, 1989)

(“McKesson 1989”). On appeal, this Court remanded for

further development of the record regarding whether Pak’s

board of directors was an agency or instrumentality controlled

by the state for purposes of the stringent requirements of the

FSIA. McKesson I, 905 F.2d at 440 (noting that under FSIA,

“agencies and instrumentalities of a foreign nation are

presumed to be separate from each other and from the foreign

state”). On remand, the district court found that the evidence

established the necessary principal-agent relationship between

the Government of Iran and the board of directors of Pak, and

this Court affirmed the “extensive” and “well-supported”

findings of the district court. McKesson II, 52 F.3d at 351–

52.

The district court subsequently granted McKesson’s

motion for summary judgment on the issue of liability,

holding that, as a matter of law, Iran had wrongfully withheld

from McKesson the payment of dividends declared by Pak

Dairy in 1981 and 1982 and that Iran could be held liable in

federal court for the expropriation and failure to pay

dividends under the Treaty of Amity and customary

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international law. McKesson Corp. v. Islamic Republic of

Iran, No. 82-0220, 1997 WL 361177, at *12–*15 (D.D.C.

June 23, 1997) (“McKesson 1997”). Between January 18 and

February 17, 2000, the district court held a bench trial to

determine the appropriate amount of damages. McKesson

Corp. v. Islamic Republic of Iran, 116 F. Supp. 2d 13 (D.D.C.

2000) (“McKesson 2000”). The court awarded McKesson

$20,071,159.14, which included the value of McKesson’s

expropriated equity interest in Pak and the dividends withheld

from McKesson in 1981 and 1982, plus simple interest

calculated at 9 percent from August 12, 1981 to May 26,

2000. Id. at 43.

On appeal, Iran again argued that the court lacked

jurisdiction, and further claimed that (1) material issues of

fact existed with respect to liability, and (2) the district court

erred in valuing Pak’s assets. We again affirmed jurisdiction

under the FSIA and upheld the district court’s conclusion that

the 1955 Treaty of Amity, Economic Relations, and Consular

Rights, U.S.-Iran, Aug. 15, 1955, 8 U.S.T. 899 (“Treaty of

Amity”), between the United States and Iran provided

McKesson with a cause of action for expropriation.

McKesson III, 271 F.3d at 1106–08. We also upheld the

district court’s valuation of Pak’s assets. Id. at 1110. On the

question of liability, however, Iran lived to fight another day,

as we remanded the case for trial on two factual issues:

whether Pak had instituted a so-called “come-to-the-

company” requirement for the payment of dividends, and

whether it would have been futile for McKesson to “come” to

Pak to collect its dividends. Id. at 1108–10.

Iran immediately petitioned the Supreme Court for

certiorari to review McKesson III. The Solicitor General took

over representation of OPIC, which had previously retained

private counsel, and advocated for the denial of certiorari on

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grounds that the case was not ripe for review. In the course of

its argument, however, the Solicitor General also made clear

that the United States did not interpret the Treaty of Amity as

providing a private right of action. Brief for the Overseas

Private Investment Corporation, Islamic Republic of Iran v.

McKesson, Nos. 01-1521 & 01-1708, 2002 WL 32134807, at

*9–15 (July 24, 2002). The Supreme Court denied certiorari.

In light of the government’s change of position, this

Court vacated “the portion of [McKesson III] addressing

whether the Treaty of Amity between the United States and

Iran provides a cause of action to a United States national

against Iran in a United States court,” and instructed the

district court “to reexamine that issue in light of the

representation of the United States that it does not interpret

the Treaty of Amity to create such a cause of action.”

McKesson HBOC, Inc. v. Islamic Republic of Iran, 320 F.3d

280, 281 (D.C. Cir. 2003) (“McKesson IV”). On remand, the

district court essentially affirmed its earlier conclusion that

the Treaty provides a cause of action, finding “no basis to

disturb Judge Flannery’s earlier ruling” in McKesson 1997.

McKesson Corp. v. Islamic Republic of Iran, 520 F. Supp. 2d

38, 40 (D.D.C. 2007) (“McKesson 2007”).

In our most recent encounter with this case, we reversed

the district court’s ruling that the Treaty of Amity provides

McKesson with a private cause of action under United States

law, noting that the Treaty “leaves open the critical question

of how McKesson is to secure its due. For a federal court

trying to decide whether to interject itself into international

affairs, the Treaty of Amity’s silence on this point makes all

the difference.” McKesson Corp. v. Islamic Republic of Iran,

539 F.3d 485, 489 (D.C. Cir. 2008) (“McKesson V”). In light

of this conclusion, we again remanded the case and instructed

the district court to consider three specific issues: (1) whether

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McKesson has a cause of action under Iranian law; (2)

whether, in light of the Supreme Court’s decision in Sosa v.

Alvarez-Machain, 542 U.S. 692 (2004), customary

international law (“CIL”) provides McKesson a cause of

action; and (3) whether the act of state doctrine, which bars

courts from evaluating public acts committed by foreign states

within their own territory, applies to this case. We further

ordered the district court to invite the views of the United

States on the latter two issues. McKesson 2008, 539 F.3d at

491.

Upon review of the parties’ submissions and the

extensive record compiled during this case’s 27-year history,

the district court held that McKesson does have a cause of

action under Iranian law, that customary international law

continues to provide McKesson with a cause of action, even

in light of Sosa, and that the act of state doctrine does not

apply. McKesson Corp. v. Islamic Republic of Iran, No. 82-

0220, 2009 WL 4250767, at *1 (D.D.C. Nov. 23, 2009)

(“McKesson 2009”). Following that ruling, the parties

submitted additional briefing on the merits of the Iranian law

causes of action. After reviewing the parties’ submissions

and hearing arguments, the court entered judgment for

McKesson on its Iranian law causes of action and awarded

$43,980,205.58 in damages and prejudgment interest.

McKesson Corp. v. Islamic Republic of Iran, 752 F. Supp. 2d

12, 23 (D.D.C. 2010) (“McKesson 2010”). Iran appeals.

In the interest of procedural fairness and judicial finality,

we think this Sisyphean labor must come to an end. We

conclude (1) the act of state doctrine does not preclude

adjudication of this case; (2) McKesson has a private right of

action against Iran under the Treaty of Amity as construed

under Iranian law; and (3) Iran is liable for the expropriation

of McKesson’s interest in the dairy and the withholding of

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McKesson’s dividends. Finally, we reverse the district

court’s award of compound interest, as we find no evidence in

the record supporting the conclusion that compound interest is

a remedy recognized by Iranian law. Since Iran does not

dispute this Court’s prior finding that simple interest is

appropriate, we remand only for the calculation of an award

based on the value of McKesson’s expropriated equity interest

and withheld dividends, plus simple interest calculated at 9

percent from August 12, 1981 to the present day.

I. Act of State Doctrine

After 29 years of litigation between the same two parties,

this Court has yet to conclusively decide whether it has

jurisdiction. One issue, at least is settled: this Court has thrice

held that subject matter jurisdiction exists under the

commercial activities exception of the FSIA, McKesson I, 905

F.2d at 449–51; McKesson II, 52 F.3d at 350–51; McKesson

III, 271 F.3d at 1106–07, and our previous decision made

clear this is a question we will not revisit. See McKesson V,

539 F.3d at 488. Left open, however, is whether the act of

state doctrine applies and shields Iran from liability. Id. at

491. The district court held that it does not, McKesson 2009,

2009 WL 4250767, at *5. Reviewing the question de novo,

see Agudas Chasidei Chabad of U.S. v. Russian Fed., 528

F.3d 934, 952–55 (D.C. Cir. 2002), we affirm.

The act of state doctrine “precludes the courts of this

country from inquiring into the validity of the public acts a

recognized foreign sovereign power committed within its own

territory.” Banco Nacional de Cuba v. Sabbatino, 376 U.S.

398, 401 (1964). It applies when “the relief sought or the

defense interposed would [require] a court in the United

States to declare invalid the official act of a foreign sovereign

performed within its own territory.” W.S. Kirkpatrick & Co.,

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Inc. v. Environmental Tectonics Corp., 493 U.S. 400, 405

(1990). When it applies, the doctrine serves as a “rule of

decision for the courts of this country,” id. at 406, which

requires courts to deem valid the acts of foreign sovereigns

taken within their own jurisdictions. Id. at 409.

Iran now claims that beginning in February 1980, the

government imposed currency control regulations “which Pak

had no choice but to follow.” Appellant’s Br. 38. It claims

that evidence from the 2007 trial demonstrates that the

currency control regulations prevented Pak from paying

McKesson in any currency from February 1980 through

September 29, 1981, and that after September 29, 1981, Pak

could not pay McKesson in dollars without proper application

and authorization by the Central Bank. We disagree with

both Iran’s interpretation of the act of state doctrine and the

underlying factual premises of its argument.

Although the Supreme Court has not defined the contours

of the “official action” requirement of the act of state

doctrine, the courts of appeals have understood the concept as

referring to conduct that is by nature distinctly sovereign, i.e.,

conduct that cannot be undertaken by a private individual or

entity. For example, this Court held that the denial of an

official license permitting the removal of uranium from

Kazakhstan was a sovereign act, as was a transfer of corporate

shares to a state entity. World Wide Minerals, Ltd. v.

Republic of Kazakhstan, 296 F.3d 1154, 1165–66 (D.C. Cir.

2002). In direct contrast to the facts in this case, the Court

emphasized that the “transfer and alleged conversion were

accomplished pursuant to an official decree of the Republic of

Kazakhstan.” Id. at 1166. Similarly, this Court applied the

act of state doctrine where a foreign government’s finance

minister officially ordered payment of a tax to the foreign

government through a “private letter ruling, which under

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Brazilian law binds the parties.” Riggs Nat. Corp. v. Comm’r

of Internal Revenue Serv., 163 F.3d 1363, 1366–68 (D.C. Cir.

1999). See also Society of Lloyd’s v. Siemon-Netto, 457 F.3d

94, 102–03 (D.C. Cir. 2006) (applying the act of state doctrine

to preclude a challenge to the validity of a foreign statute). In

each of these cases, the Court applied the act of state doctrine

to preclude challenges to actions that, by their nature, could

only be undertaken by a sovereign power.

The facts of this case differ dramatically from prior cases

in which the act of state doctrine applied. Although

McKesson has characterized its claim as one for

“expropriation,” this is not a typical expropriation case in

which a foreign government acts in its sovereign capacity to

take private property for a public purpose. Rather, this case

turns on claims that agents of the Iranian government—acting

as representatives of various agencies and companies—took

over Pak’s board of directors, “froze out McKesson’s board

members, and stopped paying McKesson’s dividends.”

McKesson III, 271 F.3d at 1103. The facts allege a pattern of

conduct by Iran’s agents that cannot fairly be characterized as

public or official acts of a sovereign government. Iran did not

pass a law, issue an edict or decree, or engage in formal

governmental action explicitly taking McKesson’s property

for the benefit of the Iranian public. Instead, it allegedly took

control of Pak’s board of directors and abused its position as

majority shareholder, making McKesson’s claims “akin to a

corporate dispute between majority and minority

shareholders,” McKesson 1997, 1997 WL 361177, at *10

n.17. This is not the type of “public act[] [of] a foreign

sovereign power” to which the act of state doctrine applies.

Sabbatino, 376 U.S. at 401; see also Alfred Dunhill of

London, Inc. v. Republic of Cuba, 425 U.S. 682, 706 (1976)

(declining to extend the act of state doctrine “to acts

committed by foreign sovereigns in the course of their purely

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commercial operations,” such as conduct by Cuba’s agents in

the operation of cigar businesses for profit); Malewicz v. City

of Amsterdam, 517 F. Supp.2d 322, 339 (D.D.C. 2007)

(holding that the act of state doctrine did not apply to actions

that could be taken by “any private person or entity”).

Moreover, in making its argument, Iran attempts to

dredge up factual issues that have long since been settled. In

finding Iran liable for the withholding of McKesson’s earned

dividends in 1979 and 1980, the Claims Tribunal implicitly

found that Pak could have paid McKesson had its board of

directors chosen to do so. See Tribunal Award, 10 Iran-U.S.

Cl. Trib. Rep. 228 (1986). Indeed, a dissenting Tribunal

member noted that Iran failed to cite any law that would

“render ‘illegal’ Pak’s honoring of its contractual

obligations—as, indeed, no legal authority has ever been cited

for the refusal to pay dividends to Foremost.” Id. After

McKesson revived its expropriation claim, the district court

likewise found that the withholding of McKesson’s dividends

was not the result of a “nationalization” of Pak Dairy, but

rather “sound[ed] in the nature of a corporate dispute between

majority and minority shareholders.” McKesson 1989, 1989

WL 44086, at *4. This Court affirmed that conclusion on

multiple occasions. McKesson I, 905 F.2d at 449–50; see also

McKesson II, 52 F.3d at 349 n.7. As such, the factual finding

that McKesson’s claims rest on corporate actions taken by

Iran’s agents on Pak’s board of directors has long been

established as law of the case. See McKesson II, 52 F.3d at

350 (“When there are multiple appeals taken in the course of

a single piece of litigation, law-of-the-case doctrine holds that

decisions rendered on the first appeal should not be revisited

on later trips to the appellate court.”). At no point during the

early stages of this litigation did Iran so much as intimate that

currency control regulations prevented Pak from paying

McKesson its earned dividends. It cannot raise this defense

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and re-litigate the associated factual issues four appeals—and

over twenty years—after it first had the opportunity to do so.

II. Cause of Action

Having established that this Court has jurisdiction over

McKesson’s claim, we must now decide which body of law, if

any, provides McKesson with a private right of action against

Iran. We previously held that the Treaty of Amity, as

construed under U.S. law, does not provide McKesson with a

cause of action, McKesson V, 539 F.3d at 491, but remanded

the case to the district court to determine whether McKesson

has a viable cause of action under either customary

international law or Iranian law. The district court answered

both questions in the affirmative. Although we reverse the

court’s conclusion with respect to a CIL cause of action, we

agree that McKesson’s suit may proceed under Iranian law.

a. Customary International Law

In McKesson 1997, the district court noted that customary

international law “is a part of the law of the United States, and

must be ascertained and enforced by federal courts.”

McKesson 1997, 1997 WL 361177, at *15. Relying heavily

on the Restatement (Third) of Foreign Relations Law, the

court held that Iran is liable under customary international law

because “its actions, aimed at McKesson, a foreign national,

were clearly discriminatory” and “Iran neither offered nor

provided any compensation to McKesson for its interest in

Pak Dairy.” Id. In McKesson V, we asked the district court to

consider whether the Supreme Court’s intervening decision in

Sosa v. Alvarez-Machain, 542 U.S. 692 (2004), affected the

viability of McKesson’s cause of action under customary

international law. See McKesson V, 539 F.3d at 491. Sosa

involved a claim brought under the Alien Tort Statute

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(“ATS”), 28 U.S.C. § 1350, a jurisdictional statute originally

passed as part of the Judiciary Act of 1789. The Supreme

Court held that the ATS, although by its terms purely

jurisdictional, can support common law causes of action

under customary international law, but only if the norms

allegedly violated are sufficiently specific, universal, and

obligatory. See Sosa, 542 U.S. at 732–33. On remand, the

district court found that, like the ATS, the commercial

activities exception to the FSIA is “more than a jurisdictional

statute,” because in enacting it, Congress “demonstrated its

intention that courts hear causes of action involving

customary international law violations.” McKesson 2009,

2009 WL 4250767, at *3. We disagree.

The FSIA established a broad grant of immunity for

foreign sovereigns that can only be abrogated by one of the

statute’s narrowly drawn exceptions. 28 U.S.C. § 1330(a);

World Wide Minerals, 296 F.3d at 1161. Jurisdiction in this

case is based on the commercial activities exception, which

provides that a foreign state shall not be immune from federal

jurisdiction in any case in which the action is based upon, as

pertinent here, “an act outside the territory of the United

States in connection with a commercial activity of the foreign

state elsewhere and that act causes a direct effect in the

United States.” 28 U.S.C. § 1605(a)(2).

The FSIA is purely jurisdictional in nature, and creates

no cause of action. Republic of Austria v. Altmann, 541 U.S.

677, 695 n.15 (2004); Cassirer v. Kingdom of Spain, 616 F.3d

1019, 1026 (9th Cir. 2010) (en banc); Cicippio-Puleo v.

Islamic Republic of Iran, 353 F.3d 1024, 1033–34 (D.C. Cir.

2004). The Supreme Court has explained that “[t]he language

and the history of the FSIA clearly establish that the Act was

not intended to affect the substantive law determining the

liability of a foreign state or instrumentality.” First Nat’l City

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Bank v. Banco Para El Comercio, 462 U.S. 611, 620 (1983).

The FSIA simply codified the “restrictive theory” of

sovereign immunity, under which the immunity of a

sovereign is recognized with regard to sovereign or public

acts, but not with respect to private acts. Altmann, 541 U.S. at

690–91. The language of § 1605(a)(2) thus refers to

commercial activity of foreign governments as a reason why

the defense of foreign sovereign immunity is unavailable. It

makes no mention, however, of either a private cause of

action or customary international law.

Nonetheless, the district court found that “in enacting the

commercial activities exception, Congress, in essence,

demonstrated its intention that courts hear causes of action

involving customary international law violations.” McKesson

2009, 2009 WL 4250767, at *3. Yet we find no evidence—

textual or otherwise— suggesting that Congress enacted the

commercial activities exception on the understanding that

courts would use it to create causes of action based on

customary international law. Moreover, Congress enacted the

FSIA in 1976, just one year after the Supreme Court signaled

its reluctance to imply causes of action when faced with

statutory silence. See Cort v. Ash, 422 U.S. 66, 78–80 (1975).

Assuming, as we must, that Congress was aware of all

pertinent legal developments when it drafted the FSIA,

Congress’ decision not to include an express private right of

action in any provision of the FSIA reveals that its enactors

intended it to be purely jurisdictional. See South Dakota v.

Yankton Sioux Tribe, 522 U.S. 329, 351 (1998).

While the Supreme Court’s holding in Sosa is not binding

here, the Court’s extensive and careful scrutiny of the Alien

Tort Statute illustrates the unusual circumstances necessary to

find that a jurisdictional statute authorizes federal courts to

derive new causes of action from customary international law.

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See Sosa, 542 U.S. at 712–31. For example, the Court noted

that the particular “anxieties of the preconstitutional period,”

particularly the Continental Congress’s inability to deal with

cases involving offenses committed against foreign

ambassadors, counseled against interpreting the ATS in a way

that would strip it of any practical effect. Id. at 715–19. The

Court also explained that, at the time the ATS was passed, a

certain small set of actions was universally understood to be

within the common law. Id. at 720. By contrast, nothing in

the legislative history of the FSIA suggests that Congress

intended courts to use the commercial activities exception as a

vehicle to create new causes of action.

Also instructive is the Supreme Court’s admonition to the

lower courts to use caution when considering customary

international law claims. To be sure, the Court did so in the

context of the Alien Tort Statute, which it understood to

contemplate a “narrow set of violations of the law of nations,

admitting of a judicial remedy and at the same time

threatening serious consequences in international affairs.”

Sosa, 542 U.S. at 715. The broader principles the Court

expressed, however, are still relevant to this case, in which the

Court is also being asked to fashion a federal common law

cause of action out of the ambiguous principles of customary

international law.

The Court first noted that because common law

principles are now regarded as “made” rather than

“discovered,” a judge deciding on reliance on a perceived

international norm “will find a substantial element of

discretionary judgment in the decision.” Id. at 726. The

invocation of such judicial discretion—indeed, judicial

lawmaking power—would be particularly dangerous in cases

such as this one, in which jurisdiction is being asserted over a

foreign sovereign.

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The Court then noted that the “significant rethinking of

the role of federal courts in making [common law]” caused by

Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), spawned a

general practice of seeking legislative guidance “before

exercising innovative authority over substantive law.” Id. No

such guidance exists here, as the text and legislative history of

the FSIA merely establish the conditions in which a court may

assert jurisdiction over a foreign sovereign. They do not

reveal an intent to encourage—or even allow—courts to infer

new common law causes of action.

The Court also emphasized the decision to create a

private right of action is better left to legislative judgment—a

particularly apt admonition in a case like this one, as creation

of a right of action against a foreign government would

certainly “raise[] issues beyond the mere consideration

whether underlying primary conduct should be allowed or

not[.]” Id. at 727. Collateral consequences can themselves be

a bar, the Court recognized, particularly when the cause of

action has “potential implications for the foreign relations of

the United States.” Id. The Court cautioned that because

“many attempts by federal courts to craft remedies for

violation of new norms of international law would raise risks

of adverse foreign policy consequences, they should be

undertaken, if at all, with great caution.” Id. at 727–28. In

sum, we find that the language and history of the FSIA,

particularly when viewed in light of the principles enunciated

in Sosa, do not support the creation of a private right of action

for expropriation based on customary international law.

McKesson takes a different view of the legislative history

of the FSIA, arguing that the statute’s legislative history

demonstrates that Congress “recognized that a discriminatory

and uncompensated expropriation violates international law

and understood that district courts would recognize private

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causes of action against foreign states for expropriation in

violation of [customary international law].” Appellee’s Br. at

26. This argument is unpersuasive, however, because the

legislative history on which McKesson relies refers to the

“expropriation exception” of §1605(a)(3), an entirely different

FSIA provision than the one conferring jurisdiction in this

case. The expropriation exception applies only when rights in

property “taken in violation of international law” are at issue

and that property or any property exchanged for it “is present

in the United States . . . or . . . is owned or operated by an

agency or instrumentality of the foreign state and that agency

or instrumentality is engaged in a commercial activity in the

United States.” 28 U.S.C. § 1605(a)(3).

McKesson’s attempt to blur the boundaries between

sections 1605(a)(2) and 1605(a)(3) disregards the significance

of the carefully crafted limitations Congress imposed on each

of the separate statutory exceptions to foreign sovereign

immunity. Congress’s careful drafting makes clear that each

exception only applies when specific conditions are satisfied.

The facts of this case clearly do not fall within the

jurisdictional ambit of the expropriation exception. The

property allegedly taken by Iran—McKesson’s equity interest

in Pak—is not present in the United States, and the entities

that allegedly froze out McKesson’s interest (on behalf of the

government of Iran) are not engaged in commercial activity in

the United States. As such, the expropriation exception is

entirely irrelevant to McKesson’s case, and has no effect on

whether Congress intended courts to use the commercial

activities exception as a vehicle to create causes of action

based on customary international law.

The district court found that the Second Hickenlooper

Amendment, 22 U.S.C. § 2370(e)(2), evinced congressional

intent that courts hear causes of action for expropriation under

18

customary international law. McKesson 2009, 2009 WL

4250767, at *4. McKesson picks up that refrain, adding that

the Amendment embodies a sufficiently specific

congressional authorization for federal courts to adjudicate

expropriation claims against foreign states to constitute an

independent cause of action. Appellee’s Br. at 31. We

disagree. The Second Hickenlooper Amendment is not a

grant of jurisdiction and it does not purport to enact or codify

any cause of action. Its sole purpose was to counter the

Supreme Court’s decision in Sabbatino by limiting the act of

state doctrine to certain claims of expropriation. It is

completely silent regarding the right to bring such claims in

the first instance. As the Supreme Court has “sworn off”

implied rights of action, Alexander v. Sandoval, 532 U.S. 275,

287 (2001), absent the compelling and unusual circumstances

that animated the Court’s analysis in Sosa, we decline to

imply causes of action in the face of congressional silence.

b. Iranian Law

Having determined that customary international law does

not provide McKesson with a cause of action, we turn now to

the question of whether McKesson’s suit may proceed in a

U.S. court under Iranian law. We hold that the Treaty of

Amity, construed under Iranian law, provides McKesson with

a private right of action against the government of Iran.

Having so held, we need not determine whether McKesson

may seek relief under any other Iranian statutes.

Iran concedes that the Treaty provides McKesson with a

cause of action, but argues that the Treaty requires McKesson

to bring its suit in an Iranian court. Specifically, Iran claims

that the text, context, and practical implications of the Treaty

of Amity preclude McKesson from bringing its suit in a U.S.

19

court. All three elements of Iran’s argument fail to withstand

scrutiny.

Iran first points to three textual provisions in the Treaty

that, it claims, “unambiguously” show that the parties agreed

that home country courts would hear disputes brought by

investors of the other country. The first is Article III, Clause

2, which provides that “[n]ationals and companies of either

High Contracting Party shall have the freedom of access to

the courts of justice and administrative agencies within the

territories of the other High Contracting Party… both in

defense and pursuit of their rights . . .”. Treaty of Amity, art.

III, cl. 2, 8 U.S.T. 899. The language of this provision offers

no support for Iran’s cause. Ensuring access to the courts of

each contracting party is fundamentally different from

mandating use of those courts. The former is the only

“unambiguous” purpose of this clause. Certainly nothing in

Article III, clause 2 prohibits a U.S. company from bringing

suit in a U.S. court.

Iran then points to Article IV, Clause 2, which provides

that “[p]roperty of nationals and companies of either High

Contracting Party… shall receive the most constant protection

and security within the territories of the other High

Contracting Party… . Such property shall not be taken except

for a public purpose, nor shall it be taken without the prompt

payment of just compensation.” Treaty of Amity, art. IV, cl.

2, 8 U.S.T. 899. This clause simply establishes the property

rights of nationals and companies of each of the parties. It is

completely silent as to how— or where— those rights can be

enforced. This provision is thus irrelevant to Iran’s claim that

its courts are the exclusive forum for claims brought by U.S.

citizens.

20

Iran’s final textual argument involves Article XXI,

clauses 1 and 2. The former provides that “[e]ach High

Contracting Party shall accord sympathetic consideration to,

and shall afford adequate opportunity for consultation

regarding” interpretation of the Treaty. Treaty of Amity, art.

XXI, cl. 1, 8 U.S.T. 899. While the provision does represent

an agreement to attempt to resolve differences through

diplomacy, it does not purport to affect the judicial rights of a

national of one country to seek judicial redress against the

other government. Similarly, clause 2, which provides that

any dispute between the parties “not satisfactorily adjusted by

diplomacy [] shall be submitted to the International Court of

Justice, unless the High Contracting Parties agree to

settlement by some other pacific means[,]” does not expressly

preclude a national from seeking judicial redress from either

country’s courts. Id. art. XXI, cl. 2. Indeed, the reference to

the International Court of Justice indicates that this clause

refers only to disputes among the governments themselves—

and not to disputes among governments and nationals of the

other contracting party—because the ICJ only arbitrates

disputes between sovereigns.

Iran’s arguments about the context of the Treaty of Amity

are similarly unavailing. Iran first points to dicta in Banco

Nacional de Cuba v. Sabbatino, 376 U.S 398, 422–23 (1964),

which states that “the usual method for an individual to seek

relief is to exhaust local remedies and then repair to the

executive authorities of his own state to persuade them to

champion his claim in diplomacy or before an international

tribunal.” Iran corroborates this statement with testimony by

Michael Ramsey, a law professor with multiple publications

on international law. While we recognize that the Supreme

Court’s very general statement might be true in the abstract, it

reveals nothing about the available methods of relief where

two countries have entered into a treaty.

21

Iran also notes that as of 1957, no case had been

successfully brought by a U.S. investor against a foreign

government in a U.S. court challenging an expropriation that

had occurred abroad. The reason for this is quite obvious—

the Foreign Sovereign Immunities Act was not passed until

1976. Moreover, for all we know, the Treaty could have been

enacted to facilitate such suits as a means of encouraging

foreign investment. And perhaps there was not much cross-

investment prior to the mid-twentieth-century ratification of

Friendship, Commerce, and Navigation Treaties (like the

Treaty of Amity), which would make the absence of such

cases attributable to a lack of opportunity rather than any

governing legal norm.

Finally, Iran claims that McKesson’s interpretation of the

Treaty would lead to absurd results, because it would allow

Iran to sue the United States for a taking in an Iranian court—

or, for that matter, in the court of any country with personal

jurisdiction over the United States. Assuming that the

prospective forum country had a jurisdictional statute

equivalent to the FSIA, Iran’s description of the implications

of McKesson’s interpretation is correct. We do not find the

purported “absurdity” of these consequences sufficient reason

to interpret the Treaty of Amity in the manner suggested by

Iran. Although we understand that forum selection is a major

issue in any treaty negotiation, we also recognize that

negotiations between two countries will necessarily result in

an agreement containing provisions that are less than ideal for

one, or both, of the parties. We find it more reasonable to

interpret the Treaty’s silence on the forum selection issue as

allowing nationals or corporations of either country to sue in

their preferred forum, as such an interpretation benefits both

contracting parties by ensuring that nationals of each country

will have the fullest opportunity to recover their losses in the

event of an unlawful expropriation. Under Iran’s

22

interpretation, by contrast, Iranian citizens would be forced to

sue in the United States—a consequence that seems just as

“absurd,” if not more so, than the consequences arising out of

our decision to allow McKesson’s Treaty-based claim to

proceed in U.S. court.

There is no tension between our decision here and our

prior decision in McKesson V, in which we held that the

Treaty of Amity did not provide a cause of action under U.S.

law. The United States Supreme Court has long recognized a

presumption against finding treaty-based causes of action, see

Medellin v. Texas, 552 U.S. 491, 506 n.3 (2004), because the

decision to create a private right of action “is one better left to

legislative judgment in the great majority of cases.” Sosa,

542 U.S. at 727. Iranian law—by Iran’s own explanation—

operates differently. Iran has conceded that the Treaty of

Amity creates a private right of action under Iranian law, and

only contests whether the Treaty permits McKesson to bring

its claim in a U.S. court. See Appellant’s Br. at 9–10 (arguing

that “the Treaty unambiguously provides for a Treaty suit

against Iran in Iran and that failing, the ICJ”). Moreover, Iran

has produced no evidence indicating that its domestic law

recognizes a similar presumption against implying causes of

action under treaties. To the contrary, Iran’s own expert

testified that “the Treaty is a special law which supersedes the

general Iranian laws,” Sanaei Op. at 4, and Iran argued in its

brief that the general laws of Iran do not provide separate

causes of action because “the Treaty—as lex specialis—

provides the sole [cause of action].” Appellant’s Br. at 25.

In sum, we hold that the Treaty of Amity provides

McKesson with a private right of action against Iran under

Iranian law, and that McKesson’s suit can proceed in the U.S.

courts. Because we find that the Treaty of Amity provides

McKesson with a cause of action, we need not determine the

23

viability of McKesson’s claims that Iran violated Article I of

the Civil Responsibility Act of Iran, Article 308 of the Civil

Code of Iran, or the Commercial Code of Iran. Accordingly,

we also need not address Iran’s argument that the Treaty

cause of action for expropriation is exclusive and supersedes

all other possible Iranian law causes of action.

III. Liability under the Treaty of Amity

The Treaty of Amity provides:

Property of nationals and companies of either High

Contracting Party, including interests in property, shall

receive the most constant protection and security within

the territories of the other High Contracting Party, in no

case less than that required by international law. Such

property shall not be taken except for a public purpose,

nor shall it be taken without the prompt payment of just

compensation. Such compensation shall be in an

effectively realizable form and shall represent the full

equivalent of the property taken; and adequate provision

shall have been made at or prior to the time of taking for

the determination and payment thereof.

Treaty of Amity, art. IV, para. 2. The district court noted that,

aside from arguing that McKesson’s Treaty claim must be

brought in Iran and is the exclusive remedy, Iran offered no

defense to this cause of action. McKesson 2010, 752 F. Supp.

2d at 17. Accordingly, based on its prior findings that Iran

caused McKesson’s dividends and investment to be taken

without compensation, the district court found McKesson

liable under the Treaty of Amity and reinstated its earlier

award of damages, which was equivalent to the full value of

the expropriated property plus simple interest, calculated

through May 26, 2000. Id. at 18.

24

Iran now raises three challenges to the findings of the

district court. First, it claims the district court erred by

ignoring attribution principles under Iranian law. Second, it

claims the non-payment of dividends resulted from a

sovereign decision to control capital flight. Finally, it argues

that under Iranian law, Pak’s board exercised its discretion to

implement a “come to the company” requirement by at least

October 26, 1981. Acceptance of any of these arguments,

however, would require this Court to revisit—and indeed,

overwrite—factual findings that have long since been settled.

Accordingly, we reject Iran’s arguments and uphold the

district court’s holding that Iran is liable to McKesson under

the Treaty of Amity.

Iran’s first argument—that under Iranian law, the

government of Iran cannot be held responsible for the actions

of Pak’s board of directors—is by far its most compelling,

because it does reveal a significant flaw in the reasoning of

the district court. The district court did not explicitly analyze

whether, under Iranian law, the government could be held

responsible for actions of its purported agents. Rather, the

court noted that prior rulings of the district court “have

established fault in this case on the part of Iran, as ‘Pak

Dairy’s board and its government shareholders forced the

dairy to disregard its commercial mission and its duties to

McKesson as a shareholder.’” McKesson 2010, 752 F. Supp.

2d at 19 (quoting McKesson II, 52 F.3d at 351). However,

any reliance on McKesson 1997, or any prior legal finding of

attribution by either this Court or the district court, was

misplaced, as none of those cases evaluated attribution under

the principles of Iranian law.

But acceptance of Iran’s argument would lead to an

untenable result, as it would prevent foreign investors from

obtaining any recourse under the Treaty-based cause of action

25

that Iran has repeatedly acknowledged. By claiming that it

cannot be held responsible under the Treaty—or under any of

the private laws of Iran—for the actions of its agents, Iran

attempts to engage in a legal sleight of hand. Even a suit in

Iranian court would be pointless, as the government could not

be held liable for the actions of McKesson’s board of

directors regardless of the forum adjudicating the cause of

action.

Iran’s claim that its domestic law precludes attribution of

the Board’s unlawful behavior to the government is fatally

flawed, because it contradicts the plain language of the Treaty

and thus ignores the Iranian law principle that “the Treaty is a

special law which supersedes the general Iranian laws.”

Appellant’s Br. at 24. The language of the Treaty does not

distinguish between direct and creeping expropriation; it

simply provides that property of foreign nationals “shall not

be taken except for a public purpose, nor shall it be taken

without the prompt payment of just compensation.” Treaty of

Amity, art. IV, para.2. Whether the property was taken

through interference by a state in the use of that property or

through a formal expropriatory decree is immaterial. See

Tribunal Award, 10 Iran-U.S. Cl. Trib. Rep. 228 (explaining

that “[i]t is well settled, in this Tribunal’s practice as

elsewhere, that property may be taken under international law

through interference by a state in the use of that property or

with the enjoyment of its benefits. This remains true in the

absence of a formal expropriatory decree, even where the

formal legal title to the property is not affected.”). Here, the

factual finding that Iran controlled six of the seven seats on

Pak Dairy’s board of directors and dictated the company’s

routine business decisions, including declaring and paying

dividends and honoring the dairy’s contractual commitments,

is well-settled law of the case. McKesson II, 52 F.3d at 351–

52. Twenty years ago, the district court found that “[t]he

26

board decided that Pak Dairy would not pay any money to

foreign shareholders, including McKesson” and that the

“extensive involvement in day-to-day operations of Pak

Dairy” is evidence that the business was under the complete

control of the Iranian government. Id. at 352. Iran’s

challenge to that factual finding was subsequently addressed

and rejected by this Court. Id. Put simply, we agree with the

Tribunal that the language of the Treaty renders Iran liable for

the taking of McKesson’s property.

Iran’s attempt to circumvent the language of the Treaty

is, ironically, undermined by its own explanation of how the

Treaty interacts with Iranian private law. Iran claims that the

rule under Iranian law is that “no one is liable for the actions

of another.” Appellant’s Br. at 51. But while arguing that the

Treaty supersedes all causes of action under Iranian private

law, Iran’s expert testified that “the Treaty is a special law

which supersedes the general Iranian laws.” Sanaei Op. at 4.

Assuming the internal consistency of Iranian law, this

principle must not only hold true when evaluating causes of

action, but also when determining liability. Iran cannot have

it both ways—it cannot claim that the Treaty trumps its

domestic laws by foreclosing other causes of action while

simultaneously claiming that its domestic laws regarding

vicarious liability trump the plain language of the Treaty,

which would hold Iran liable for any taking of the property of

foreign nationals. We thus find Iran’s attribution defense

unavailing because it conflicts with both the language of the

Treaty and Iran’s description of the hierarchy of its own laws.

Iran’s two other defenses are barred by the law of the

case doctrine. First, Iran argues the non-payment of

dividends was caused by a sovereign decision to prevent

capital flight. As explained above, the district court

previously determined that Pak’s failure to pay dividends to

27

McKesson resulted from a corporate decision by Pak’s board

of directors, not from a sovereign decision to stanch the flow

of capital from the country. See McKesson 2010, 752 F.

Supp. 2d at 16 (“[I]t is hard to imagine how Iran could

legitimately believe the currency controls defense is still

viable at this stage of the litigation, given my ruling in 2009

that Iran’s actions were ‘commercial in nature’ and that the

act of state doctrine therefore does not apply.”).

Second, Iran claims Pak implemented a “come to the

company” requirement for the payment of dividends under

Iranian law. Iran’s attempt to re-litigate this defense is even

more brazen, as Iran’s argument that “custom and practice” in

Iran established a “come to the company” requirement at Pak

as a matter of Iranian law was rejected on summary judgment

in 1997 and affirmed by this Court in McKesson III, 271 F.3d

at 1109 (holding that the affidavits provided by Iran’s experts

“fall short of proving that this general practice reflects a legal

requirement” and that “no general principle of Iranian

corporate law excuses [Pak’s] withholding of McKesson’s

dividends due to failure to come to the company”). We did,

however, find that Iran made a credible showing that Pak

exercised its discretion to implement a “come to the

company” requirement and denied McKesson’s motion for

summary judgment. Id. But during the 2007 trial before the

district court, Iran failed to prove its factual defense that Pak

had in fact adopted such a requirement. See McKesson 2007,

520 F. Supp. 2d at 50–51. This Court remains bound by its

prior factual findings even where the governing body of law

changes. See LaShawn A. v. Barry, 87 F.3d 1389, 1393 (D.C.

Cir. 1996) (“The Supreme Court has instructed the lower

courts to be loathe to reconsider issues already decided in the

absence of extraordinary circumstances such as where the

initial decision was clearly erroneous and would work a

manifest injustice.”). Our adjudication of this case under

28

Iranian law does not provide Iran with the opportunity to re-

litigate questions of fact that have previously been found in

McKesson’s favor.

IV. Award of Compound Interest

We now turn to the district court’s decision to award

McKesson compound interest from May 27, 2000 through the

present day. The district court found that “[u]nder Iranian

law, this Court is not constrained to award simple interest, and

Iran does not argue to the contrary.” McKesson 2010, 752 F.

Supp. 2d at 22. Noting that Iranian law provides no guidance

on when an award of compound interest is appropriate, the

court looked to federal common law, under which compound

interest is appropriate where simple interest is insufficient to

make plaintiffs whole. Id. Although awards of damages are

generally reviewed for abuse of discretion, we review the

district court’s award of compound interest de novo because it

requires us to interpret foreign law. See City of Harper

Woods Employees’ Retirement Sys. v. Olver, 589 F.3d 1292,

1298 (D.C. Cir. 2009). Upon review of the record, we

reverse, and in accordance with our prior ruling in McKesson

III, remand for calculation of an award based on simple

interest.

Iran argues its domestic laws do not recognize compound

interest, and the record contains ample support for its claim.

Nowhere in the record does either expert on Iranian law

explicitly state that Iranian law permits the award of

compound interest. The closest analogue appears to be “late

payment damages” or “damages for delay of payment,”

which, at first glance, might reasonably be translated as

“interest.” Sanaei Op. at 15. Further review of the record,

however, reveals that Iranian law awards damages for delay

of payment under a very narrow set of circumstances. To

29

receive an award of delay damages, a plaintiff must establish:

(a) a debt owed in Iranian currency; (b) a valid demand for the

debt by the creditor and a refusal to pay by the debtor; and (c)

an evident difference between the price indices [published by

Iran’s central bank] from the time of maturity to the time at

which the creditor demanded payment. Id. As explained

even by McKesson’s expert, Article 520 of the Iranian Civil

Procedure Code further explains that “[w]ith respect to

demanding the [delay] damages sustained, plaintiff must

prove the reason that the sustained loss has directly resulted

from [defendant’s] failure or delay to perform the obligation

and/or deliver the relief sought. Otherwise the damages

would be dismissed by the court.” Katirai Second Supp. Op.

at 15. When viewed in context of the circumstances in which

it can be awarded, “delay damages” clearly does not refer to

“compound interest,” because compound interest does not

purport to quantify an actual loss. The Iranian concept of

“delay damages” refers to actual damages based on

fluctuations in the value of the Iranian currency, not to any

type of interest.

In fact, the Iranian Code of Civil Procedure Article 712

explicitly states that “[d]amages which are arisen out of

damages shall not be recovered,” Katirai Op. at 709, 1 which

implies that any recovery of interest is forbidden under

Iranian law, much less compound interest. Iran’s expert

opined that under Islamic and Sharia law, payment of interest

is forbidden, Sanaei Op. at 15, and statements made by Iran’s

religious leaders implicitly support his interpretation. See

1

Katirai notes that this provision “[has] not been repeated” in the

Iranian Civil Procedure Act of 2000, but he does not claim that it

has been repealed. In its brief, Iran references a 2005 judgment

from the Tehran Court of Appeals that interpreted this provision.

See Appellant’s Br. at 61.

30

Katirai Op. at 38 (quoting Ayatollah Ali Khamenei’s

statement that “[d]amages resulting from a delay in payment

of a debt . . . is owed by the debtor and is not subject to the

rules applicable to interest”). Perhaps fortunately for

McKesson, Iran does not argue that an award of simple

interest is contrary to Iranian law. In response, McKesson’s

expert on Iranian law simply states, ipse dixit, that Iran “has

adopted the principles of customary international law

concerning the payment of interest as a component of full

compensation for the expropriation of a foreign investment in

Iran,” and points to Iran’s enactment of legislation adopting

the Treaty of Amity and other bi-lateral investment treaties.

Katirai Second Supp. Op. at 13. His reliance on the Treaty of

Amity is misplaced, however, because the standard for “full

compensation” prescribed by the Treaty is ambiguous

regarding the award of interest. Moreover, the Treaty was

enacted long before the Islamic Revolution took place,

making it erroneous to assume that Iran’s current legal system

is identical to the one in place when the Treaty was enacted.

In light of the utter lack of evidence indicating that compound

interest is a recognized remedy under Iranian law, we reverse

that portion of the award; however, because Iran does not

challenge the award of simple interest in this case, we remand

for calculation of an award consisting of the value of

McKesson’s expropriated interest in Pak and its withheld

dividends plus simple interest.

VI. Conclusion

We affirm the district court’s holding that the act of state

doctrine does not apply in this case. While we reverse the

court’s holding that McKesson may base its claim on

customary international law, we affirm its alternative holding

that the Treaty of Amity, construed as Iranian law, provides

McKesson with a private right of action, and we further

31

affirm its finding that Iran is liable for the expropriation of

McKesson’s equity interest in Pak and the withholding of

McKesson’s dividend payments. Finally, we reverse the

court’s award of compound interest and remand for

calculation of an award consisting of the value of McKesson’s

expropriated property and withheld dividends plus simple

interest. Because the district court already conducted a

detailed valuation of McKesson’s equity interest in Pak in

McKesson 2000, we hope the district court can put an end to

nearly thirty years of litigation through some simple

multiplication.

So ordered.