Amicus Curiae Brief — Gurney v. United States, 41 Fed. Cl. 2366 (1998) (No. 97-1440)

Supreme Court, U.S.

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¢ cei & D

. MAY 27 1998

No. 97-1440

OFFICE OF THE CLERK

In The

Supreme Court of the United States

October Term, 1997

CLIFFORD F. GURNEY. et al..

Petitioners,

VS.

UNITED STATES OF AMERICA,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Federal Circuit

BRIEF OF

DEFENDERS OF PROPERTY RIGHTS

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

Nancie G. Marzulla*

DEFENDERS OF

PROPERTY RIGHTS

1350 Connecticut Ave. NW

Suite 410

Washington, DC 20036

(202) 822-6770

May 22, 1998

*Counsel of Record

QUESTION PRESENTED FOR REVIEW

Whether one who engages in international business has — as a

matter of law — no reasonable investment-backed expectation

that his property will not be taken by the United States

without payment of just compensation?

rABLE OF CONTENTS

QUESTION PRESENTED FOR REVIEW..

PABLE OF AUTHORITIES.. jug pbb dutieedpcoiiaaligiion ssa

IDENTITY AND INTEREST OF AMICUS CURIAE.. |

STATEMENT OF THE CASE ....

SUMMARY OF REASONS FOR GRANTING THE

a 6 Be PD on kuciccesinincdis poi ceadasapedtnaeetecuin ad taeckaaraaaa sae

REASONS FOR GRANTING THE PETITION .........

THIS COURT SHOULD RESOLVE THIS

ISSUE OF CRITICAL CONSTITUTIONAI

IMPORTANCE CONCERNING WHETHER

THE UNITED STATES MAY TAKE THE

CLAIMS AND REAL PROPERTY OF

\MERICANS WHO INVEST ABROAD

WITHOUT INCURRING THI

CONSTITUTIONAL OBLIGATION TO

PAY JUST COMPENSATION

INVESTMENTS ABROAD..

CONCLUSION ... RN I OR IE EE REDON eS eT

TABLE OF AUTHORITIES

CASES

Armstrong v. United States, 364 U.S. 40 (1960).................. 10

Dames & Moore v. Regan, 453 U.S. 654 (1981)... 4,9

La Abra Silver Mining Co. v. United States, 175 U.S. 423

(1899) 2

Monongahela Navigation Co. v. United States, 148 U.S.

bP 1 ANIA 2 RERAE SeoMM SRRS eee epi ates eine et a rales Se nee Oma 12

Penn Central Transp. Co. v. New York City, 438 U.S. 104

ca 8 SEEDS SS SPARE Tino ce AO RSP CRC ye? A Send arora a eee 10

United States v. Pink, 315 U.S. 203 (1942).................... it. i2

Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S.

Ne ee a ae ee ae a ee 10

Yancey v. United States, 915 F.2d 1534 (Fed. Cir. 1990).... 10

CONSTITUTIONAL PROVISIONS

Sms AU TNE oceans ns nbsnny'e vanes Deedaen ens passim

STATUTES

WEG © CONAN IIGOO) eo scence, ie

ee 8 et 1]

Ml

TABLE OF AUTHORITIES -- cont.

OTHER AUTHORITIES

Bureau of Economic Analysis, A Guide to BEA Statistics on

U.S. Multinational Companies, 75 Survey of Current

SONS Fae CERO CF Bas hin purbes ened carn iacecaions ae

L. Benjamin Ederington, Property as a Natural Institution:

The Senaration of Property from Sovereignty in

International Law, 13 Am. U.J. Intl L. & Pol’y 263

SS f A IRIUE RS carer s shaphainievaI DE Akesaaeaak Ske CaRiae NAGLE E aoa ROD 12

OECD, /nvestment (visited May 18, 1998)

http://www.oecd.org/publications/ figures

IIE RINNE sis cickonGooreicd icsbtnusseontecniaacuinnaniaesoorins fg P:

>

Proclamation No. 7004, 62 Fed. Reg. 27 (1997)...

Russell B. Scholl, Bureau of Economic Analysis, 7/he

International Investment Position of the United States in

1/995, 76 Survey of Current Business 36 (July 1996)....... |

Russell B. Scholl, Bureau of Economic Analysis, 7he

International Investment Position of the United States in

1996, 77 Survey of Current Business 24

(July 1997)........ 6,1 |

Pursuant to Rule 37.2' of the Rules of this Court.

amicus curiae submits this brief in support of Petitioners.

IDENTITY AND INTEREST OF AMICUS CURIAE

Defenders of Property Rights is the only national legal

defense foundation devoted exclusively to protecting private

property rights. Defenders particularly recognizes that

vigorous protection of private property rights in the

international context is essential to the continued growth and

economic well being of all Americans, for we are

increasingly competing in a world marketplace.

STATEMENT OF THE CASE

Petitioners are United States citizens with claims

against the Government of Iran for real and personal property

confiscated or destroyed during the 1979 Iranian Revolution.

An international agreement known as the Algiers

‘No counsel for either party authored this brief amicus curiae. either in

whole in part. Furthermore, no person other than amicus curiae (their

members or counsel) contributed financially to the preparation of this

brief.

Declarations created the Iran-United States Claims Tribunal

to sit in adjudication of these claims against Iran. Every

award against Iran made by the Tribunal was paid tn full,

including interest, out of a fund supplied by Iran for this

purpose.

In May 1990, betore the Tribunal had a chance to

finish hearing all remaining claims pending before it, the

United States entered into a Settlement Agreement (Pet. App.

30a) which appropriated all remaining claims and related

property valued under $250,000 of American citizens against

lran. Through this appropriation, known as “espousal,”’ the

tederal government acquired title to petitioners’ claims and

other private property. Petitioners neither had a choice in

deciding whether their claims and property would be

espoused nor did they participate in the settlement

negotiations conducted by the United States.

Che United States then conveyed these claims

(including petitioners’ claims) and other privately owned real

S€E¢ La {pra Silver Viinine 9 [ nited States 175 { S 4? 3. 159

(1899)(discussing “espousal” as the formal taking up of a citizen's claim

against a foreign sovereign and vesting title to the claim in the United

States)

ces i

and personal property to Iran in exchange for a sum of $105

million from the Iranian government. The United States

retained $55 million as settlement of its own claims, and the

remaining $50 million was allocated for disbursement to the

remaining claimants, including petitioners.

As a result of the federal government’s taking of

petitioners’ claims (choses in action), and real and personal

property, petitioners did not receive full or just compensation

for the taking of their property; instead, they received only a

fraction of the value of their property — an arbitrary amount

determined solely by the United States. Pet. App. 91a.

Petitioners filed suit in the United States Court of

Federal Claims (CFC) under the Tucker Act, 28 U.S.C. §

1491(a)(1) (1994), for the taking of their property without

just compensation. The CFC held that the government was

not obligated to pay just compensation to petitioners because:

“Having considered the factors pertinent to our inquiry, the

court is left with the certain conclusion that the events that

befell plaintiffs were part of the risks they assumed in

choosing to do business abroad.” Pet. App. 29a. That

decision was upheld by the United States Court of Appeals

3

for the Federal Circuit, which agreed stating, “| T]hose who

engage in international commerce must be aware that

international relations sometimes become strained, and that

governments engage in a variety of activities designed to

maintain a degree of international amity.” Pet. App. I 3a.

SUMMARY OF REASONS FOR

GRANTING THE PETITION

Che United States Court of Federal Claims (CFC) and

the United States Court of Appeals for the Federal Circuit

both courts of critical importance given their unique

jurisdiction under the Tucker Act to hear all takings claims

against the United States — have announced a rule of law in

this case that is breathtaking 1n its implications for

\mericans engaged tn international business

this Court examined the decision of the United States to take

ver the judgments and outstanding claims of American citizens against

lran and to set up a system of binding arbitration through an Iran-United

States Claims Tribunal. Dames & Moore v. Regan, 453 U.S. 654 (1981)

In Dames, this Court upheld the President's authority to nullify and to

take over outstanding private judgements and further explained that “to

the extent petitioner believes it has sutfered an unconstitutional taking by

the suspension of the ¢ laims we see no JUrIsSdi tional ( bsta le to an

Plaintiffs cannot lay claim to an investment-

backed expectation free of the potential of

Government involvement. Those who

engage in international commerce do so in

full awareness that the security of their

enterprise is uniquely dependent on_ the

maintenance of stability and good order in

the relationships of the nations involved. . . .

Since the observance of good order among

nations can never be taken for granted, the

potential for Government involvement in

international Commerce remains an ever-

present fact of life for those who transact

their business abroad. . . . Plaintiffs are

charged with knowledge of this reality.

Pet. App. 26a (citations omitted).”

It is indisputable that Americans who invest abroad

cannot expect the United States to guarantee their

investments against the instability of foreign governments.

But the instant lawsuit is based on the uncompensated taking

by the United States of petitioners’ real property and claims

against a foreign government. Hence, the instability of the

appropriate action in the United States Court of Claims under the Tucker

Act.” /d. at 689-90

' The decision below was based on plaintiffs’ motion for partial summary

judgment and defendant's cross-motion for summary judgment. Pet

App. 18-19a.

‘Ay

foreign government was not the cause of the taking of their

property, but was merely the justification given by the federal

government which took over petitioners’ claims in order to

settle its own claims against Iran.

Given the importance of international business

dealings for Americans, the decision below has enormous

implications. According to one study prepared by the U.S.

Bureau of Economic Analysis (BEA), in 1996 Americans

had invested abroad $970.8 billion valued at the current cost

of tangible assets.”

Should the decision of the court below stand, this

entire sum (or any portion of it) could be espoused,

confiscated, or expropriated by the United States government

* Russell B. Scholl, Bureau of Economic Analysis, The International

Investment Position of the United States in 1996, 77 Survey of Current

Business 24, 28 (July 1997). The figure is based on a stock measure of

the total outstanding level of U.S. direct investment abroad (USDIA) at a

given point in time, specifically 1996. According to Ray Mataloni of the

International Division, Research Branch of the Bureau of Economic

Analysis, the best measure to reflect the trend in the amount of U.S.

money that is being invested abroad is the USDIA as measured in current

costs. When measured by current cost, only tangible assets are revalued

(factories, inventories, etc.) and price indices for the appropriate asset

classes are used. Bureau of Economic Analysis, 4 Guide to BEA

6

without incurring any legal responsibility to pay just

compensation for the assets taken. Nothing in the

Constitution or in logic suggests that property located outside

this country belonging to American citizens may be taken by

the United States without just compensation any more than

domestic property may be seized by the government without

liability for compensation.

REASONS FOR GRANTING THE PETITION

THIS COURT SHOULD RESOLVE THIS ISSUE OF

CRITICAL CONSTITUTIONAL IMPORTANCE

CONCERNING WHETHER THE UNITED STATES

MAY TAKE THE CLAIMS AND REAL PROPERTY

OF AMERICANS WHO INVEST ABROAD WITHOUT

INCURRING THE CONSTITUTIONAL OBLIGATION

TO PAY JUST COMPENSATION INVESTMENTS

ABROAD.

The rule of law announced in this case is a dangerous

precedent in an era of the increasing importance of global

business to the American economy (e.g., NAFTA)”:

Statistics on U.S. Multinational Companies, 75 Survey of Current

Business 38, 43 (March 1995).

° The current administration has repeatedly underscored the importance

of global business for the American economy. “The North America Free

Trade Agreement (NAFTA) has not only increased trade with our

member partners . . . but also has provided greater stability to the global

economy.” Proclamation No. 7004, 62 Fed. Reg. 27, 927 (1997).

7

Having considered the factors pertinent to

our inquiry, the court is left with the certain

conclusion that the events that befell

plaintiffs were part of the risks they assumed

in choosing to do _ business abroad.

Accordingly, no principle of justice would

support allocation to the public losses

plaintiffs have claimed. In short, there was

no taking of plaintiffs’ property.

Pet. App. 29a.

Certainly, anyone who chooses to do business abroad

takes risks and agrees to suffer the consequences of decisions

made by foreign governments. Most petitioners in the instant

case assumed that risk. Thus, if this case involved the

Iranian government taking Over petitioners’ assets without

payment, there would be no basis for this lawsuit since the

United States would not be responsible for guaranteeing that

risk.

However, such is not the case. Rather, this case

concerns monetary claims owed by the Iranian government to

petitioners and real property located in Iran that were

expropriated by the United States, without payment of just

compensation. Had the Iran-United States Claims Tribunal

failed to pay petitioners full value for their claims arising out

of the destruction of their assets during the 1979 revolution,

again petitioners — having assumed the risk of investing

abroad — would possibly have had no recourse against the

8

United States for that loss. Here. however, the United States

took title to (for its own benefit) petitioners’ property — in

order to settle its own claims — extinguishing petitioner's

valid claim to full payment from Iran.

Thus, the holding in this case sets forth the

extraordinary proposition that anyone who does business

outside the borders of the United States runs the risk that the

United States — as a means of negotiating an advantageous

deal on behalf of the federal government — may squeeze out

smaller private claims.

This Court has, on previous occasions, examined and

rejected the government’s argument that it is entitled to take

some portion of private property — without incurring the Fifth

Amendment’s obligation to pay the owner for any of the

property that is taken — in order to promote the general

welfare: “The government in that case had not “merely

‘adjust[{ed] the benefits and burdens of economic life to

promote the common good’. . . . Rather, the exaction is a

forced contribution to general governmental revenues, and it

is not reasonably related to the costs of using the courts.

Indeed, *[t]he Fifth Amendment’s guarantee . . . was

designed to bar Government from forcing some people alone

to bear public burdens which, in all fairness and justice,

Dames & Moore v. Regan, 453 U.S. 654 (1981).

)

should be borne by the public as a whole.’” Webb's Fabulous

Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 163

(1980)(quoting Penn Central Transp. Co. v. New York City,

438 U.S. 104, 124 (1977); Armstrong v. United States, 364

U.S. 40, 49 (1960)). See also Yancey v. United States, 915

F.2d 1534 (Fed. Cir. 1990)(holding that a government

imposed poultry quarantine prohibiting interstate shipment of

poultry stock constituted a compensable taking).

In the instant case, there is likewise no reasonable

relationship between the government’s taking of private

claims, in order to provide leverage to settle its own claim,

and the risk of doing business abroad. Indeed, the broad

reach of the holding in this case suggests that anyone who

invests assets abroad” has - as a matter of law - no reasonable

expectations that the federal government may not one day

take over his property and without payment of just

compensation as the Fifth Amendment to the Constitution

requires. Pet. App. 13a— 14a. Given the magnitude of

* It is not just Iran-United States Claims Tribunal claims or even just

choses of action that the holding below reaches. All amounts owed to

Americans by foreign governments or foreign nationals — e.g., stock

traded on foreign exchanges, real property owned abroad including sales

and manufacturing facilities, letters of credit from or deposits in foreign

banks, payments owed for goods delivered overseas, proceeds of

construction contracts, or monies loaned by United States banks to

foreign nationals - all could apparently be taken over by the United States

and used to reach an international agreement without any obligation to

pay the owner just compensation.

10

private investment abroad, this is an extraordinary legal

principle for the U.S. Court of Appeals for the Federal

Circuit to adopt.’ According to the one report from the

United States Bureau of Economic Analysis, in 1995

Americans increased their direct investment abroad (USDIA)

by $100.8 billion to $880.1 billion.'” The USDIA increased

again in 1996 to reach $970.8 billion.

Contrary to the court below, which held that the

President has the “indisputable power to take up and to settle

the claims of American citizens against foreign states and

nationals” Pet. App. 26a. (citing United States v. Pink, 315

U.S. 203. 240 (1942)), there is nothing in this Court’s

decisions that allows this result. In United States v. Pink,

315 U.S. 203, 240 (1942), relied on by the court below, this

Court did not even reach the issue herein presented for

review, fo wit, whether this power can be exercised without

’ The significance of this decision is underscored by the fact that the U.S

Court of Federal Claims has unique jurisdiction to hear all claims for just

compensation against the United States. 28 U.S.C. § 1491 (a)(1) ( 1998).

Hence, this ruling will bind all future decisions on this issue.

° Russell B. Scholl, Bureau of Economic Analysis, The J/nternational

Investment Position of the United States in 1995, 76 Survey of Current

Business 36 (July 1996).

Russell B. Scholl, Bureau of Economic Analysis, The International

Investment Position of the United States in 1996, 77 Survey of Current

Business 24, 28 (July 1997). The Organization for Economic

Cooperation and Development (OECD) reports that, for the years

between 1985 and 1995, the United States direct investment abroad

increased from $12.72 billion to $96.897 billion. These figures represent

1]

incurring the obligation to pay for any private property taken.

See Monongahela Navigation Co. v. United States, 148 U.S.

312, 326 (1893) (taking of private property by the

government requires the payment of the “full and perfect

equivalent for the property taken.”).

Not only is the holding of the court below a

dangerous precedent in the context of our world economy,

which looks to private property rights as the basis of secure

international dealings,'” but the premise that the court can

define away as a matter of law the reasonable, investment-

backed expectations of an entire class of owners of clearly

defined property interests could swallow the Just

Compensation Clause.

CONCLUSION

Accordingly, because of the breadth of the

constitutional holding in this case and because of the

.32% and 1.39% of GDP respectively. OECD, /nvestment (visited May

18, 1998) <http://www.oecd.org/publications/figures/invest.html>.

~ '° International law emphasizes the protection of private property rights in

order in part to afford security in the arena of international trade: “In

fact, the protection of private property from state interference ha. been

one of the most pronounced themes throughout the history of modern

international law since its inception in the seventeenth century. One

could even argue . . . that modern international law developed for the

express purpose of protecting private property rights from state

interference.” L. Benjamin Ederington, Property as a Natural

Institution: The Separation of Property from Sovereignty in International

Law, 13 Am. U.J. Int] L. & Pol’y 263, 264 (1997).

12

significance of the decision given the magnitude of U.S.

investments abroad, amicus curiae strongly urge this Court to

grant the requested Petition for Writ of Certiorari.

Respectfully submitted,

Nancie G. Marzulla

DEFENDERS OF

PROPERTY RIGHTS

1350 Connecticut Ave., NW

Suite 410

Washington, DC 20036

202-822-6770

~

May 22, 1998