PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

COMET ENTERPRISES LTD.; COMET

ENTERPRISE LTD.,

Plaintiffs-Appellants,

v.

No. 96-1606

AIR-A-PLANE CORPORATION,

Defendant-Appellee.

UNITED STATES OF AMERICA,

Amicus Curiae.

Appeal from the United States District Court

for the Eastern District of Virginia, at Norfolk.

Raymond A. Jackson, District Judge.

(CA-95-926)

Argued: September 29, 1997

Decided: November 10, 1997

Before RUSSELL, NIEMEYER, and MOTZ, Circuit Judges.

_________________________________________________________________

Reversed and remanded by published opinion. Judge Motz wrote the

opinion, in which Judge Russell and Judge Niemeyer joined.

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COUNSEL

ARGUED: Philip Norton Davey, DAVEY ASSOCIATES, P.C., Norfolk, Virginia, for Appellants. Sushma Soni, Appellate Staff, Civil

Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Amicus Curiae. Robert Eugene Brown, HOWELL,
DAUGHERTY & BROWN, Norfolk, Virginia, for Appellee. ON

BRIEF: Ruth E. Hansell, DAVEY ASSOCIATES, P.C., Norfolk,

Virginia, for Appellants. Frank W. Hunger, Assistant Attorney General, Helen F. Fahey, United States Attorney, Douglas N. Letter,

Appellate Staff, Civil Division, UNITED STATES DEPARTMENT

OF JUSTICE, Washington, D.C.; William B. Hoffman, Chief Counsel, Barbara C. Hammerle, Senior Counsel (Litigation), Office of the

Chief Counsel, Office of Foreign Assets Control, DEPARTMENT OF

THE TREASURY, Washington, D.C., for Amicus Curiae.

_________________________________________________________________

OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

Two related companies -- one incorporated in Great Britain, the

other in Iran -- brought this action to obtain commissions on sales a

Virginia corporation had made to an entity controlled by the Government of Iran. The district court dismissed the action. The court found

it lacked subject matter jurisdiction over the Iranian plaintiff because

its counsel had failed to procure a license necessary to represent Iranian entities. Alternatively, on the basis of an Executive Order that

prohibits certain transactions between entities organized under the

laws of the United States and those controlled by the Government of

Iran, the court concluded that both plaintiffs had failed to state a claim

upon which relief could be granted. Because we conclude that the

licensing requirement does not divest the district court of jurisdiction

and the Executive Order does not necessarily preclude the claims filed

in the complaint, we reverse and remand for further proceedings.

I.

The factual assertions that follow are based on the allegations in

the complaint. On July 19, 1991, Air-A-Plane Corporation and Comet

Enterprises Ltd. ("Comet UK") entered into a contract, in which AirA-Plane made Comet UK its exclusive sales representative for aircraft

equipment (including air conditioners) and spare parts in the Islamic

Republic of Iran. The contract obligated Air-A-Plane to pay sales

commissions to Comet UK on the sale of Air-A-Plane's equipment

ordered by customers within Iran.

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Pursuant to this contract, Comet UK negotiated, on Air-A-Plane's

behalf, with the airline of the Islamic Republic of Iran ("Iran Air") to

purchase a substantial amount of Air-A-Plane equipment. In December 1992 and January 1993, Iran Air paid Air-A-Plane almost $1.5

million for this equipment. Commissions on these sales of more than

$200,000 became due to Comet UK in February 1993. Air-A-Plane

failed to pay Comet UK any of these commissions. On April 11,

1995, Comet UK and Comet Enterprise Ltd. ("Comet Iran"), an Iranian corporation under common management and control, executed a

deed of compromise under which Comet Iran became the beneficiary

of any future payments from any Comet UK principal, including AirA-Plane. (Hereafter, the two related companies are collectively

denominated "Comet.").

In 1995, Comet obtained additional orders from Iran Air for Air-APlane air conditioning units and separate parts. By June 1995, Iran Air

had paid to Air-A-Plane more than $500,000 for this equipment;

Comet's commissions of more than $82,500 became due in July 1995.

Air-A-Plane again failed to pay Comet any of the commissions due

on these subsequent sales.

On May 6, 1995, pursuant to the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq . (1977), President Clinton

issued Executive Order No. 12959 prohibiting certain transactions

with the Government of Iran. The Executive Order states in pertinent

part:

Section 1. The following are prohibited, except to the

extent provided in regulations, orders, directives, or licenses

that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit

granted prior to the effective date of this order:

. . . .

(d) . . . any transaction, including the purchase, sale, transportation, swap, financing, or brokering transactions, by a

United States person, relating to goods or services of Iranian

origin or owned or controlled by the Government of Iran . . .

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. . . .

Section 8(a).This order is effective at 12:01 a.m., eastern

daylight time, on May 7, 1995, except that . . . (ii) letters of

credit and other financing agreements with respect to existing trade contracts may be performed pursuant to their terms

with respect to underlying trade transactions occurring prior

to 12:01 a.m., eastern daylight time, on June 6, 1995.

Exec. Order No. 12959 (1995). The Office of Foreign Assets Control

("OFAC") promulgated implementing regulations that define Government of Iran to include any "entity controlled by" it. 31 C.F.R.

§ 560.304(a) and (b) (1996). The regulations also require legal counsel to procure a license in order to represent "a person in Iran," including Iranian corporations, in certain transactions. Id. § 560.525(b) and

§ 560.305.

Seeking to collect the commissions, Comet UK and Comet Iran

filed this action in federal court against Air-A-Plane on September 14,

1995. Air-A-Plane moved to dismiss the action pursuant to Rules

12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Air-APlane contended that the court did not have jurisdiction over Comet

Iran because Comet Iran's counsel had not obtained a license to provide legal services to an Iranian entity as required by 31 C.F.R.

§ 560.525(b). Additionally, Air-A-Plane asserted that Executive

Order 12959 barred performance of its contract with Comet and so

the complaint failed to state a claim.

The district court granted both motions. Initially, the court held that

because the regulations promulgated pursuant to the Executive Order

required counsel to obtain a license in order to provide certain legal

services to an Iranian corporation, and because counsel for Comet

Iran, an Iranian corporation, lacked such a license, the court did not

have jurisdiction over Comet Iran's claim. The court then determined

that even if it had jurisdiction over Comet Iran, it would "dismiss the

action in its entirety" because "obtaining orders from Iran Air constitutes . . . a transaction relating to goods owned or controlled by the

Government of Iran" and payment for such transactions "is barred by

the [Executive] Order."

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We review de novo dismissals for lack of subject matter jurisdiction or for failure to state a claim upon which relief can be granted.

See Cavallo v. Star Enter., 100 F.3d 1150, 1153 (4th Cir. 1996);

Tillman v. Resolution Trust Corp., 37 F.3d 1032, 1034 (4th Cir.

1994).

II.

Comet challenges the district court's finding that it lacked subject

matter jurisdiction on several grounds.

Noting that the relevant regulations were amended in August 1997,

Comet asserts that the 1997 amendments to 31 C.F.R.§ 560.525,

which relax the licensing requirement for the provision of legal services to a "person in Iran," apply here. Thus, Comet, and the United

States as amicus curiae, argue that under the current regulations, as

amended August 4, 1997, the provision of legal services to Comet

Iran in connection with this litigation would be permitted.

Comet is correct that, after the district court's ruling, OFAC

amended 31 C.F.R. § 560.525(a)(3) and § 560.525(a)(5)(I) to authorize the provision of legal services "to the Government of Iran or to

a person in Iran" for the "[i]nitiation and conduct of domestic United

States legal, arbitration, or administrative proceedings on behalf of

the Government of Iran or a person in Iran . . .[t]o resolve disputes

between the Government of Iran or an Iranian national and the United

States or a United States national." 62 Fed. Reg. 41851, 41852 (Aug.

4, 1997). Accordingly, the amended regulations would permit the

legal representation of Comet Iran in this suit, without the issuance

of any license.

The recent amendments, however, do not apply to this case. The

regulations expressly specify that amendments do not apply to a "suit

or proceeding commenced or pending prior to such amendment." 31

C.F.R. § 560.402 (1996). Thus, we must determine whether the

licensing requirement contained in the regulations, applicable at the

time Comet Iran filed this suit, deprives this court of jurisdiction.

The district court concluded that the licensing requirement for the

provision of legal services was jurisdictional. For this reason, the

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court held that the failure of Comet Iran's counsel to obtain a license

to provide legal services deprived the court of subject matter jurisdiction over Comet Iran. On appeal, Comet, and the United States as

amicus curiae, challenge the district court's determination that the

licensing requirement is jurisdictional. Alternatively, Comet asserts

that if the requirement is jurisdictional it is unconstitutional.

Neither the district court nor Air-A-Plane cite any administrative or

judicial precedent to support the conclusion that the licensing requirement is jurisdictional. In fact, although the specific licensing requirement at issue here has never before been interpreted, federal courts

have been reluctant to find similar requirements jurisdictional.

For example, when Cuban nationals brought an in personam action

against United States nationals for fraud, the Eleventh Circuit held

that the relevant OFAC regulation, which imposed a licensing

requirement for any person engaged in a "transaction" with Cuba, was

not jurisdictional. Dean Witter Reynolds, Inc. v. Fernandez, 741 F.2d

355 (11th Cir. 1984). The court reasoned that the decision by Congress to "empower[ ] the Executive to forbid" certain activities "does

not imply that the jurisdiction of the federal courts is dependent upon

the issuance of a license by the Treasury Department." Id. at 360 n.16.

See also American Airways Charters, Inc. v. Regan , 746 F.2d 865,

868-74 (D.C. Cir. 1984) (failure to obtain license as required by

Cuban Assets Control Regulations held not jurisdictional); National

Oil Corp. v. Libyan Sun Oil Corp., 733 F.Supp. 800 (D. Del. 1990)

(agency regulations requiring a license to enter judgment held not

jurisdictional); National Airmotive v. Government and State of Iran,

499 F.Supp. 401, 405 (D. D.C. 1980) (agency prohibition on the entry

of judgments held not jurisdictional).

Moreover, a license requirement, promulgated by an executive

agency, that limits federal court jurisdiction would raise serious constitutional concerns. A court is always well advised to construe regulations in a manner that avoids such "serious constitutional

questions." NLRB v. Catholic Bishop of Chicago, 440 U.S. 490, 500-

01 (1979); see also American Airways Charters , 746 F.2d at 874

(construing licensing requirement "in a manner that not only upholds

their constitutionality but also steers clear of uncertainty on that

score").

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Finally, the Government's interpretation of its own regulations also

supports our conclusion that the licensing requirement at issue here

is not jurisdictional. OFAC, the agency charged with enforcing the

regulation containing the licensing requirement, does not assert that

the requirement deprives the federal courts of jurisdiction over Comet

Iran's claim. Indeed, the United States, in its amicus brief, has specifically informed us that OFAC has "never interpreted its regulation to

strip federal courts to hear civil suits brought by private foreign corporations." The Supreme Court has frequently reiterated that an agency's interpretation of its own regulations is entitled to substantial

deference. See e.g., Thomas Jefferson University v. Shalala, 512 U.S.

504, 512 (1994); Stinson v. United States, 508 U.S. 36, 45 (1993).

For all of these reasons, we decline to construe the licensing

requirement, which has now been repealed, as jurisdictional and hold

that the district court erred in doing so. Because we have concluded

that the requirement is not jurisdictional, we need not reach the question of its constitutionality.

III.

Alternatively, the district court held that even if it had jurisdiction

over Comet Iran it would dismiss the action "in its entirety" for failure

to state a claim upon which relief can be granted. The court based this

holding on its interpretation of Executive Order No. 12959, and the

Order's implementing regulations, 31 C.F.R. § 560. The proper interpretation of these provisions presents an issue of first impression in

the federal courts.

The district court concluded that Executive Order No. 12959 prohibited the payment of sales commissions from Air-A-Plane to Comet

because that payment would constitute a transaction proscribed by the

Order. The Order prohibits "any transaction, including purchase, sale,

transportation, swap, financing, or brokering transactions, by a United

States person relating to goods or services of Iranian origin or owned

or controlled by the Government of Iran." Exec. Order No. 12959

§ 1(d). The implementing regulations define"Government of Iran" to

include "[a]ny entity owned or controlled directly or indirectly" by the

Government of Iran or "any political subdivision, agency, or instrumentality thereof." 31 C.F.R. §§ 560.304(a) and (b). Thus, the district

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court reasoned that because the contract between Air-A-Plane and

Comet relates to goods bought by Iran Air, an entity substantially

owned or controlled by the Government of Iran, it falls within the

Order's prohibition.

From the face of the complaint, however, it is far from clear that

the Executive Order prohibits suit on the claims at issue here. The

Order provides an express exception to its general ban "to the extent

provided in regulations, orders, directives, or licenses that may be

issued pursuant to this order . . ." Id.§ 1. The appellate briefs indicate

that Air-A-Plane, itself, sought and obtained a license authorizing the

export of parts to Iran Air "and all transactions in connection with

performance of the trade contract" after the effective date of the Executive Order. This license may well authorize Comet's suit on the commissions earned on these transactions.*

Air-A-Plane contends that Comet's failure to allege in its complaint, or in its response to Air-A-Plane's motion to dismiss, that its

claims are authorized by license precludes Comet from now so asserting. The contention is meritless. The federal rules simply require that

a complaint include "`a short and plain statement of the claim' that

will give the defendant fair notice of what the plaintiff's claim is and

the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47

(1957). Even after a defendant files a motion to dismiss pursuant to

Rule 12(b)(6) of the Federal Rules of Civil Procedure, a plaintiff need

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*Even if no license permits Comet's suit, OFAC suggests that the

Executive Order may not bar Comet's suit as to the commissions due to

Comet in February 1993 on underlying sales completed prior to that date

because such sales took place "prior to the effective date of the Executive

Order," and the commissions contract constitutes a "financing agreement." The Executive Order prohibits certain transactions with the Iranian government "notwithstanding any contract entered into prior to" the

1995 effective date of the Order. Exec. Order No. 12959 § 1 (emphasis

added). However, the Order specifically states that"letters of credit and

other financing agreements with respect to existing trade contracts may

be performed pursuant to their terms with respect to underlying trade

transactions occurring prior to 12:01 a.m., eastern daylight time, on June

6, 1995." Id. § 8(a)(ii). If necessary, on remand, the district court can

consider the relationship of these two portions of the Order and their possible applicability to the facts of this case.

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not come forward with all of the facts supporting its claim for relief.

See Fayetteville Investors v. Commercial Builders, Inc., 936 F.2d

1462, 1471 (4th Cir. 1991). Rather, "unless it appears beyond a reasonable doubt that the plaintiff can prove no set of facts in support of

his claim which would entitle him to relief" a court should not dismiss

a complaint for failure to state a claim. Conley , 355 U.S. at 46.

We cannot conclude "beyond a reasonable doubt" that Comet "can

prove no state of facts" in support of its claims that would entitle it

to relief. Conley, 355 U.S. at 46. Accordingly, we hold that the district

court also erred, as a matter of law, in dismissing Comet's complaint

for failure to state a claim upon which relief can be granted. We

reverse and remand this case to the district court for further proceedings consistent with this opinion. We note that the district judge did

not have the benefit of OFAC's position in originally ruling on this

matter. On remand, the court may wish to request the United States

to provide a full explanation of OFAC's views as to the difficult

issues presented by Executive Order 12959 and the accompanying

regulations.

REVERSED AND REMANDED

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