Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-57182/USCOURTS-ca9-13-57182-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

---

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

THE MINISTRY OF DEFENSE AND

SUPPORT FOR THE ARMED FORCES OF

THE ISLAMIC REPUBLIC OF IRAN, as

Successor in Interest to the Ministry

of War of the Government of Iran,

Petitioner-Appellant,

v.

RENAY FRYM; STUART E. HERSH;

ABRAHAM MENDELSON; DANIEL J.

MILLER; FRANCE MOKHATEB RAFII;

ELENA ROZENMAN; NOAM

ROZENMAN; TZVI ROZENMAN;

DEBORAH RUBIN; JENNY RUBIN,

Claimants-Appellees,

and

CUBIC DEFENSE SYSTEMS, INC., as

Successor in Interest to Cubic

International Sales Corporation,

Respondent.

No. 13-57182

D.C. No.

3:98-CV-01165-

B-DHB

OPINION

Appeal from the United States District Court

for the Southern District of California

Barry Ted Moskowitz, Chief District Judge, Presiding

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 1 of 15
2 MINISTRY OF DEFENSE V. FRYM

Argued and Submitted

February 2, 2016—Pasadena, California

Filed February 26, 2016

Before: Dorothy W. Nelson, Consuelo M. Callahan,

and N. Randy Smith, Circuit Judges.

Opinion by Judge D.W. Nelson

SUMMARY*

Attachment of Judgments

The panel affirmed the district court’s grant of lien

claimants’ motion to attach a judgment that the Ministry of

Defense of Iran obtained in an underlying arbitration with an

American company.

The lien claimants moved to attach the judgment, known

as the “Cubic Judgment,” in order to collect on judgments

they hold against the Islamic Republic of Iran for their

injuries arising out of terrorism sponsored by Iran.

The panel held that the Algiers Accords, by which the

United States and Iran resolved the Iranian Hostage Crisis,

did not prevent the lien claimants from attaching the Cubic

Judgment. The panel also held that the Cubic Judgment was

a blocked asset pursuant to President Obama’s 2012

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 2 of 15
MINISTRY OF DEFENSE V. FRYM 3

Executive Order No. 13359, subject to attachment and

execution under the Terrorism Risk Insurance Act.

COUNSEL

Steven W. Kerekes (argued), Pasadena, California, for

Petitioner-Appellant.

Jonathan R. Mook (argued), DimuroGinsberg, P.C.,

Alexandria, Virginia; Philip J. Hirschkop, Hirschkop &

Associates, Lorton, Virginia, for Claimant-Appellee France

M. Rafii.

David J. Strachman (argued), McIntyre Tate LLP,

Providence, Rhode Island, for Claimants-Appellees Jenny

Rubin, Deborah Rubin, Daniel Miller, Abraham Mendelson,

Stuart E. Hersh, Renay Frym, Noam Rozenman, Elena

Rozenman, and Tzvi Rozenman.

Stuart F. Delery, Assistant Attorney General; Laura E. Duffy,

United States Attorney; Sharon Swingle and Benjamin M.

Schultz (argued), Attorneys, Appellate Staff Civil Division,

United States Department of Justice; Lisa. J. Grosh, Assistant

Legal Advisor, Department of State; Bradley T. Smith, Chief

Counsel, Office of Foreign Assets Control, Department of the

Treasury, Washington D.C, for Amicus Curiae United States.

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 3 of 15
4 MINISTRY OF DEFENSE V. FRYM

OPINION

D.W. NELSON, Senior Circuit Judge:

This case involves an attempt by ten American citizens

(hereinafter Lien Claimants) to collect on valid judgments

they hold against the Islamic Republic of Iran (Iran) for their

injuries arising out of terrorism sponsored by Iran. The Lien

Claimants seek to attach a $2.8 million judgment1

that the

Ministry of Defense of Iran (the Ministry) obtained in an

underlying arbitration with an American company, Cubic

Defense Systems, Inc (Cubic).

The district court granted Lien Claimants’ motion to

attach the Cubic Judgment. The Ministry timely appealed. 

We have jurisdiction pursuant to 28 U.S.C. § 1291 and we

affirm.2

1 With accrued interest and the addition of attorneys’ fees, over $9.4

million is available. We refer to the underlying judgment as the “Cubic

Judgment.”

2 The district court stayed disbursement of funds to Lien Claimants

pending the outcome of the Ministry’s appeal. At oral argument, the

Ministry requested that this Court maintain the stay of disbursement

pending the Ministry’s petition for certiorari to the Supreme Court. We

decline the Ministry’s request. The Ministry has not shown “both a

probability of success on the merits and the possibility of irreparable

injury,” or “that serious legal questions are raised and that the balance of

hardships tips sharply in its favor.” Cf. Lopez v. Heckler, 713 F.2d 1432,

1435 (9th Cir. 1983).

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 4 of 15
MINISTRY OF DEFENSE V. FRYM 5

I. Background

Like all foreign states, Iran is protected by sovereign

immunity. See Saudi Arabia v. Nelson, 507 U.S. 349, 355

(1993) (“A foreign state is presumptively immune from suit

in United States’ courts.”). Absent an exception to the

Foreign Sovereign Immunities Act (FSIA), 28 U.S.C.

§§ 1602–1611, a foreign state cannot be sued nor can its

assets be attached to satisfy a judgment.3

Saudi Arabia,

507 U.S. at 355. One such exception is for claims arising out

of state-sponsored terrorism. 28 U.S.C. § 1605A.

The Lien Claimants hold judgments against Iran based on

terrorist activity that Iran sponsored.

Claimant France M. Rafii’s father, Dr. Shapoir Bakhtiar,

was a former prime minister of Iran. In 1991, Iranian agents

murdered Dr. Bakhtiar in his home in Paris, France, because

of his political opposition to the Islamic regime. In 2001,

Rafii sued Iran under the state-sponsored terrorism exception

to the FSIA. Iran did not appear. The district court

conducted a two-daybench trial and entered default judgment

against Iran for $5 million in compensatory damages (after

making the necessary factual, jurisdictional, and statutory

findings). The Ministry does not dispute the validity of the

judgment.

3 The Ministry of Defense is an inseparable part of the Republic of Iran,

and it therefore qualifies as a “foreign state” within the meaning of the

FSIA. Ministry of Def. & Support for Armed Forces of Islamic Republic

of Iran v. Cubic Def. Sys., Inc., 495 F.3d 1024, 1034–36 (9th Cir. 2007),

rev'd on other grounds sub nom. Ministry of Def. &Support for the Armed

Forces of the Islamic Republic of Iran v. Elahi, 556 U.S. 366 (2009).

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 5 of 15
6 MINISTRY OF DEFENSE V. FRYM

In 1997, Hamas detonated a suicide bomb at a pedestrian

mall in Jerusalem, injuring many American citizens. The

Rubin Claimants are a group of nine individuals who either

were themselves injured in the bombing, or whose relatives

were injured. In 2001, the Rubin Claimants sued Iran for its

part in the bombing under the state-sponsored terrorism

exception to the FSIA. Iran did not appear. The district court

conducted a four-day evidentiary hearing and concluded that

Iran provided terrorist training and other material assistance

to the bombers. After evaluating all of the Rubin Claimants’

compensatory damages, based on each plaintiff’s injuries, the

district court entered default judgment against Iran and

ordered Iran to pay the damages ranging from $2.5 million to

$15 million. The Ministry does not dispute the validity of the

judgment.

Despite these valid judgments against Iran, Lien

Claimants initially lacked any means to collect because the

state-sponsored terrorism exception to the FSIA created

an anomaly. While the exception abrogated a foreign

sovereign’s immunity from judgment, it left in place the

foreign sovereign’s immunity from attachment of its assets. 

In 2002, Congress addressed this problem, enacting the

Terrorism Risk Insurance Act (TRIA), Pub. L. No. 107–297,

§ 201, 116 Stat. 2322, 2337 (codified in relevant part at

28 U.S.C. § 1610 note). As originally enacted, section 201(a)

provides:

Notwithstanding any other provision of law

. . . , in every case in which a person has

obtained a judgment against a terrorist party

on a claim based upon an act of terrorism, or

for which a terrorist party is not immune

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 6 of 15
MINISTRY OF DEFENSE V. FRYM 7

under [28 U.S.C. § 1605(a)(7) (2000)], the

blocked assets of that terrorist party

(including the blocked assets of any agency or

instrumentality of that terrorist party) shall be

subject to execution or attachment in aid of

execution in order to satisfy such judgment to

the extent any compensatory damages for

which such terrorist party has been adjudged

liable.

“Blocked” assets include assets “seized or frozen by the

United States” under the International Emergency Economic

Powers Act (IEEPA), 50 U.S.C. §§ 1701–1706. See TRIA

§ 201(d)(2). The TRIA therefore permits attachment when it

might have otherwise been barred by the FSIA.4

In 1977, Cubic agreed to sell the Ministry an air combat

maneuvering range system (ACMR) for $17 million. 

Additionally, under a separate service contract, Cubic agreed

to maintain the ACMR for Iran. By October 1978, Iran had

paid over $12 million of the purchase price and modest sums

on the service contract. By February 1979, Cubic obtained

export permits and was poised to transfer the equipment to

Iran.

4 Congress amended the FSIA as part of the National Defense

Authorization Act for Fiscal Year 2008, Pub. L. No. 110–181, 122 Stat.

3 (2008). Specifically, Congress replaced the terrorism exception to

sovereign immunity that had been codified at 28 U.S.C. § 1605(a)(7) with

a new terrorism exception codified at 28 U.S.C. § 1605A. The new

exception provides an explicit private right of action for U.S. citizens

injured by state sponsors of terrorism. In addition, Congress created a

special attachment provision for plaintiffs holding a Section 1605A

judgment against a foreign state. See 28 U.S.C. §1610(g).

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 7 of 15
8 MINISTRY OF DEFENSE V. FRYM

But, by November 1979, the Iranian revolution had

disrupted relations between Iran and the United States. The

revolution permanently prevented full performance of the

sales and maintenance contracts. Iran and Cubic eventually

entered into a modified agreement, under which Cubic would

attempt to sell the ACMR to another country. Depending on

the result of Cubic’s attempt to resell the ACMR, either Iran

would be entitled to partial reimbursement for payments it

made to Cubic, or Cubic would be entitled to additional

payment from Iran.

In the Fall of 1982, Cubic sold the equipment to Canada

but ignored Iran’s requests for an accounting.

In 1991, pursuant to its contracts with Cubic, Iran

initiated arbitration proceedings with the International

Chamber of Commerce (ICC). In 1997, the ICC found that

Iran and Cubic agreed to discontinue the acquisition and

maintenance contracts in light of the revolution, and that they

had reached a modified agreement permitting Cubic to sell

the equipment to another country. The ICC held that Cubic

owed Iran $2.8 million plus interest and costs.

In 1998, the Ministry filed a petition to confirm the

arbitration award. The U.S. District Court for the Southern

District of California confirmed the award. It entered the

Cubic Judgment in August 1999. After the final resolution of

this dispute, Cubic deposited funds covering the Cubic

Judgment with the Southern District of California.

The Lien Claimants moved to attach the Cubic Judgment. 

The Ministry opposed Lien Claimants’ attempts, arguing:

(1) that the Algiers Accords, by which the United States and

Iran resolved the Iranian Hostage Crisis, required the United

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 8 of 15
MINISTRY OF DEFENSE V. FRYM 9

States to protect the Cubic Judgment from attachment; and

(2) that the Cubic Judgment was in any event not attachable

under the TRIA or any other statute.

The district court granted Lien Claimants’ motion to

attach. It held that allowing attachment would not violate the

United States’ obligations under the Algiers Accords because

the United States committed only to restore Iran to its preNovember 1979 position. As of 1979, the district court

explained, Iran did not have an interest in the confirmed

arbitration award.

The district court further held that the Cubic Judgment

was a “blocked asset” within the meaning of the TRIA. The

court reasoned that the Cubic Judgment was blocked pursuant

to President Obama’s 2012 Executive Order No. 13359, as

well as pursuant to President Bush’s 2005 Executive Order

No. 13382. It therefore found that the Cubic Judgment was

subject to attachment under the TRIA.

In the alternative, the district court held that the Rubin

Claimants could attach the Cubic Judgment under 28 U.S.C.

§ 1610(g), the special attachment provision of the FSIA for

creditors holding a Section 1605A terrorism-related judgment

against a foreign state.

II. Standard of Review

We review the district court’s interpretation of treaties,

statutes, regulations, and executive orders de novo. See

Motorola, Inc. v. Fed. Express Corp., 308 F.3d 995, 999, n.5

(9th Cir. 2002) (treaties); City of Los Angeles v. United States

Dep’t of Commerce, 307 F.3d 859, 868 (9th Cir. 2002)

(statutes); United States v. Willfong, 274 F.3d 1297, 1300 (9th

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 9 of 15
10 MINISTRY OF DEFENSE V. FRYM

Cir. 2001) (regulations); United States v. Washington,

969 F.2d 752, 754–55 (9th Cir. 1992) (executive orders).

III. Discussion

We hold that the United States does not violate its

obligations under the Algiers Accords by permitting Lien

Claimants to attach the Cubic Judgment. We also hold that

the Cubic Judgment is a blocked asset pursuant to President

Obama’s 2012 Executive Order No. 13359 subject to

attachment and execution under the TRIA.

Because it is not necessary to our decision, we do not

address whether the Cubic Judgment is also a blocked asset

pursuant to President Bush’s 2005 Executive Order No.

13382. Similarly, we decline to address the district court’s

alternative holding that the Rubin Claimants can attach the

Cubic Judgment under 28 U.S.C. § 1610(g).

1. Permitting Lien Claimants to attach the Cubic

Judgment does not violate the United States’

obligations under the Algiers Accords.

The Algiers Accords do not prevent Lien Claimants from

attaching the Cubic Judgment because the Ministry’s interest

in the Cubic Judgment did not arise until after November 14,

1979. As the Supreme Court specifically held in Ministry of

Defense & Support for the Armed Forces of the Islamic

Republic of Iran v. Elahi, the appropriate property interest to

consider is Iran’s interest in the Cubic Judgment, which did

not arise until 1998. 556 U.S. 366, 376–77 (2009).

In November 1979, Iran took hostages at the American

Embassy in Tehran. Invoking the International Emergency

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 10 of 15
MINISTRY OF DEFENSE V. FRYM 11

Economic Powers Act (IEEPA), President Carter responded

by issuing Executive Order 12170, which “blocked all

property and interests in property of the Government of Iran.” 

Exec. Order 12170, 44 Fed. Reg. 65729 (Nov. 14, 1979).5

The Department of Treasury promulgated the Iranian

Assets Control Regulations to execute President Carter’s

Executive Order. 31 C.F.R. pt. 535, 44 Fed. Reg. 65279–01

(Nov. 15, 1979). The Regulations provide that “[n]o property

subject to the jurisdiction of the United States or which is in

the possession or control of persons subject to the jurisdiction

of the United States in which on or after the effective date

Iran has any interest of any nature whatsoever may be

transferred, paid, exported, or withdrawn or otherwise dealt

in except as authorized.” 31 C.F.R. § 535.201 (2013). The

freeze took effect on November 14, 1979.

On January 19, 1981, the United States and Iran settled

the hostage crisis and entered into the Algiers Accords. The

United States agreed to “restore the financial position of Iran,

in so far as possible, to that which existed prior to November

14, 1979.” The purpose of the Algiers Accords was to return

Iran to the position it was in before President Carter froze

Iran’s assets in response to the taking of hostages at the

American Embassy.

In essence, the Ministry argues that based on a number of

factors—most importantly, $12 million in payments Iran

made to Cubic on the $17 million sales contract—Iran had a

5 Under the IEEPA, the President can impose economic sanctions to

respond to “unusual and extraordinary” international threats. 50 U.S.C.

§§ 1701, 1702(a). These sanctions are administered by the Treasury

Department’s Office of Foreign Assets Control (OFAC).

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 11 of 15
12 MINISTRY OF DEFENSE V. FRYM

property interest in the ACMR before November 14, 1979. 

Therefore, according to the Ministry, for the United States to

honor its commitments under the Algiers Accords, it must

protect the Cubic Judgment from attachment.

But, under the Supreme Court’s decision in Elahi, when

Iran gained a property interest in the ACMR is irrelevant to

our inquiry.

Elahi involved an attempt by a different lien claimant to

attach the Cubic Judgment under the TRIA.6 The Supreme

Court rejected this Court’s determination that the ACMR was

the relevant asset at issue. In so holding, the Court explained

that the lien claimants in that case did not seek to attach the

ACMR, but instead tried to attach the “judgment enforcing

[the] arbitration award based upon Cubic’s failure to account

to Iran for Iran’s share of the proceeds of that system’s sale.” 

Elahi, 556 U.S. at 376. The Court explained that Iran’s

interest in the Cubic Judgment did not arise until 1998, when

the district court confirmed the arbitration award. Id.

Further, the Supreme Court explained, even Iran’s

property interest underlying the Cubic Judgment—the

proceeds from the sale to Canada—did not arise until October

1982 at the earliest. Only after Cubic sold the equipment

could it “reasonably, comprehensively, and precisely

account” for the result of its resale attempts. Id. at 376–77

(internal quotations omitted).

6 We note that, before the Supreme Court in Elahi, the Ministry made a

contrary argument to the one it makes here. There, the Ministry asserted

that Iran’s interest in the Cubic Judgment could not be “backdated” to

1981.

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 12 of 15
MINISTRY OF DEFENSE V. FRYM 13

Under Elahi, Iran did not have an interest in the Cubic

Judgment or in the property underlying the judgment until

well after the Algiers Accords were consummated. 

Permitting Lien Claimants to attach the Cubic Judgment

would therefore not cause the United States to run afoul of its

obligations under the Algiers Accords.7

2. The Cubic Judgment is a blocked asset subject to

attachment and execution under the TRIA.

The Cubic Judgment is a “blocked asset” pursuant to

President Obama’s 2012 Executive Order No. 13539. It is

therefore subject to attachment and execution pursuant to the

TRIA.

In 2012, President Obama invoked the IEEPA to block

“[a]ll property and interests in property of the Government of

Iran . . . that are in the United States.”8 Exec. Order No.

13359, 77 Fed. Reg. 6659, 6659 (Feb. 5, 2012). However,

7 The United States agrees with this conclusion. In its amicus brief, the

United States contends that its “longstanding position . . . is that the

[Algiers Accords] simply required the United States to return, as directed

by Iran, specified Iranian properties that were in existence and subject to

jurisdiction as of January 19, 1981 (the date of the Accords). The United

States has no transfer obligation with respect to property that Iran acquired

after the date of the Accords.” Brief of the United States as Amicus

Curiae at 18–19. The government’s interpretation of its own agreement

is entitled to “great weight.” Sumitomo Shoji Am., Inc. v. Avagliano,

457 U.S. 176, 184–85 & n.10 (1982).

8

 This Court has already found that the Ministry is “an inherent part of

the state of Iran.” Ministry of Defense, 495 F.3d at 1036, rev’d on other

grounds by Elahi, 556 U.S. 366 (2009). Therefore, the Ministry’s

ownership ofthe Cubic Judgment—rather than Iran’s—does not foreclose

the application of President Obama’s blocking order.

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 13 of 15
14 MINISTRY OF DEFENSE V. FRYM

President Obama’s blocking order exempted Iranian property

and interests in property that had been blocked in 1979, and

that were then unblocked in 1981. 77 Fed. Reg. at 6660.

The Ministry argues that Iran held a property interest in

the ACMR that was blocked in 1979 then unblocked in 1981. 

The Ministrytherefore contends that the Cubic Judgment falls

within the exemption to President Obama’s 2012 Executive

Order.

We reject this argument, which just like the Ministry’s

argument that the Algiers Accords prevent attachment, relies

on misidentifying the asset actually at issue in this case.

Under Elahi, the key asset is the one the Lien Claimants

seek to attach: the Cubic Judgment, not the ACMR as the

Ministry now argues. And the Cubic Judgment does not fall

within the exemption to President Obama’s blocking order. 

Iran did not gain a property interest in the Cubic Judgment

until 1998, when the district court confirmed the underlying

arbitration award. Elahi, 556 U.S. at 376. Accordingly,

Iran’s property interest in the Cubic Judgment existed neither

in 1979, when Iran’s assets were blocked, nor in 1981 when

those assets were unblocked. Whether and when Iran gained

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 14 of 15
MINISTRY OF DEFENSE V. FRYM 15

a property interest in the ACMR is simply not relevant to this

case.9

AFFIRMED.

9 The Ministry’s contention that 31 C.F.R. § 535.540(f) governed the

proceeds of Cubic’s sale to Canada is irrelevant for the same reason. The

relevant asset is not the proceeds of the sale, but rather the judgment

confirming the arbitral award. Elahi, 556 U.S. at 376. Even if it were

relevant, the district court correctly found that Section 535.540(f) would

not apply. The regulation only requires sale proceeds to be transferred to

Iran when the sale of otherwise blocked property is made pursuant to a

specific type of OFAC license. The ACMR was not blocked after January

1981, and there is no evidence that Cubic’s sale of the ACMR involved

any such license.

 Case: 13-57182, 02/26/2016, ID: 9879518, DktEntry: 56-1, Page 15 of 15