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.
 2
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,
 3
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
 4
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
 5
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
 6
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
 7
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
 8
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.,
 9
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
 10
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
 11
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
 12
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
 13
(“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
 14
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.
 15
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.
 16
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
 17
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.