Court Opinion

ID: 2676836
Source: CourtListenerOpinion
Date Created: 2014-06-03 15:00:53.311962+00
Date Added: 2024-06-11T13:11:02.337253
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 6, 2014                     Decided June 3, 2014

                        No. 01-7041

             MCKESSON CORPORATION, ET AL.,
                     APPELLEES

                             v.

                ISLAMIC REPUBLIC OF IRAN,
                       APPELLANT

     FINANCIAL ORGANIZATION FOR THE EXPANSION OF
        OWNERSHIP OF PRODUCTIVE UNITS, ET AL.,
                     APPELLEES

            Consolidated with 13-7070, 13-7121

        Appeals from the United States District Court
                for the District of Columbia
                    (No. 1:82-cv-00220)

    Patrick P. O’Donnell argued the cause for the appellant.
Christopher J. Wright, Anne K. Langer and Charles T.
Kimmett were on brief. Thomas G. Corcoran, Jr., Henry M.
Lloyd, Laina Lopez and Mary-Ellen Noone entered
appearances.
                                 2
     Mark N. Bravin argued the cause for the appellees. Gene
C. Schaerr, Eric M. Goldstein and Mark R. Joelson were on
brief. Peter Buscemi entered an appearance.

     Stuart F. Delery, Assistant Attorney General, United
States Department of Justice, Ronald C. Machen Jr., United
States Attorney, and Douglas N. Letter and H. Thomas Byron,
III, Attorneys, were on brief for amicus curiae United States of
America in support of neither party.

    Before: HENDERSON, ROGERS and TATEL, Circuit Judges.

    Opinion for the Court filed by Circuit Judge HENDERSON.

      KAREN LECRAFT HENDERSON, Circuit Judge: After the
1979 revolution in Iran, the Iranian government expropriated
the interest held by McKesson Corporation (McKesson), an
American business, in an Iranian dairy company. McKesson
first filed suit in the District of Columbia district court in 1982.
After more than three decades of litigation, including six trips
to this Court, McKesson finally secured a judgment of $29.3
million. We now review the $13.4 million in attorney’s fees
the district court awarded McKesson. Because the district
court improperly calculated attorney’s fees under Iranian law,
we vacate the fee award and remand with instructions to award
McKesson $29,516 in attorney’s fees.

                                 I.

    The baroque procedural history that got us here is
contained in many volumes of West’s Federal Reporter. For a
detailed summary, see McKesson Corp. v. Islamic Republic of
Iran (McKesson VI), 672 F.3d 1066, 1070–72 (D.C. Cir. 2012).
For our limited purpose, the relevant background is as follows.
In McKesson VI, we held that the 1955 Treaty of Amity,
                               3
Economic Relations, and Consular Rights, U.S.-Iran, Aug. 15,
1955, 8 U.S.T. 899 (Treaty of Amity)—construed under
Iranian law—provides McKesson with a private right of action
against the government of Iran. 672 F.3d at 1078. We
affirmed the district court’s finding that Iran is liable to
McKesson under the Treaty of Amity for the expropriation of
McKesson’s equity interest in the dairy company and the
withholding of McKesson’s dividends. Id. at 1080–83. We
concluded that the district court erred, however, in adding
compound interest to McKesson’s damages award and
therefore remanded with instructions to recalculate the award
using simple interest. Id. at 1083–84. On March 27, 2013,
the district court did so, entering final judgment for McKesson
in the amount of $29,318,284.47. McKesson Corp. v. Islamic
Republic of Iran, 935 F. Supp. 2d 34, 38 (D.D.C. 2013). That
amount is not at issue here.

     Over the course of the litigation, McKesson filed five
petitions for attorney’s fees accrued during five distinct time
periods. On November 30, 2000, the district court ruled on
the first petition. See McKesson Corp. v. Islamic Republic of
Iran, No. 82-00220 (D.D.C. Nov. 30, 2000), reprinted at Joint
Appendix (JA) 211–34. It reasoned that “in determining
whether a prevailing party is entitled to fees and expenses, a
court looks . . . to the substantive law on which the successful
claim is based.” JA 217. At the time, however, we had not
yet decided what (if any) substantive law provided McKesson
with a cause of action. The district court held that it had
authority to award reasonable fees under international law or,
in the alternative, under Iranian law, see JA 219–27, and
granted McKesson $2.95 million in fees and expenses for legal
work performed through July 2000, see JA 234.

   On March 27, 2013, the district court ruled on
McKesson’s next three fee petitions, covering legal work done
                                4
from August 2000 to June 2012. It noted that we had
determined in 2012 that Iranian law recognizes McKesson’s
cause of action and therefore “the issue of whether attorneys’
fees may be awarded to McKesson is . . . governed by Iranian
law.” McKesson Corp., 935 F. Supp. 2d at 39 (citing
McKesson VI, 672 F.3d at 1072). It then concluded that it had
discretion to award reasonable attorney’s fees under Iranian
law, brushing aside Iran’s contrary argument in a footnote. Id.
at 39–40 & n.4. Despite having acknowledged that Iranian
law governed, however, the district court proceeded to assess
the reasonableness of McKesson’s requested award by
referring solely to American case law applying federal
fee-shifting statutes. Id. at 40–45. It held that a fee award of
just over $10 million was reasonable under this precedent. Id.
at 45. The award included a “current-rate” enhancement that
compensated McKesson for the delay in payment by
calculating fees using 2012 billing rates instead of the rates that
prevailed when the work was performed. Id. at 43. The
district court subsequently granted McKesson’s fifth fee
request—$434,385 for fees incurred for work done between
July 2012 and April 2013—for the same reasons given for the
second through fourth requests. Id. at 47–48.

    Iran timely appealed each of the district court orders
awarding fees. 1 The appeal from the district court’s 2000
decision, which we had held in abeyance until now, was
consolidated with the two more recent cases for appeal. See
Order, Nos. 01-7041, 13-7070, 13-7121 (D.C. Cir. Aug. 16,
2013).

        1
          The three awards total $13,407,424.43 in fees:
$2,945,803.73 from the November 2000 award; $10,027,235.70
from the March 2013 award; and $434,385 from the August 2013
award.
                                5
                               II.

     Although we generally review an attorney’s fees award for
abuse of discretion, “a district court abuses its discretion if it
did not apply the correct legal standard or if it misapprehended
the underlying substantive law.” Conservation Force v.
Salazar, 699 F.3d 538, 542 (D.C. Cir. 2012) (quotation marks
and ellipsis omitted). We therefore review de novo whether
the district court applied the correct legal standard, id.,
including de novo review of the district court’s interpretation
of foreign law, City of Harper Woods Emps. Ret. Sys. v. Olver,
589 F.3d 1292, 1298 (D.C. Cir. 2009); see FED. R. CIV. P. 44.1.

     We held in McKesson VI that this suit is governed by
Iranian law, 672 F.3d at 1075, and the parties agree that Iranian
law controls the question of attorney’s fees. The parties
further agree that, under Articles 515 and 519 of the Iranian
Civil Procedure Act of 2000 (Act), McKesson is entitled to
receive some measure of attorney’s fees. Article 515
authorizes the prevailing party to “demand compensation for
damages resulting from the court proceeding.” Article 519
defines damages to include “legal fees[] and other costs which
are directly or indirectly related to the court proceeding and
have been necessary to prove or defend the case.”

     The parties disagree on the calculation of fees. The
dispute therefore turns on the applicability vel non of Article
518 of the Act, which provides: “In the instances where the
amount of expenses and damages are [sic] not fixed in the law
or official tariff, the amount of such expenses and damages
shall be decided by the court.” Iran contends that an “official
tariff” applies here—Article 3 of Iran’s 2006 regulation on
                                  6
attorney’s fees.2 By Iran’s calculation, that tariff yields a fee
award of $29,516.            McKesson does not dispute that
calculation nor does it dispute that the tariff would apply if this
action had been brought by Iranian counsel in an Iranian court.
It was brought in an American court, however. McKesson
contends this makes all the difference because Iran “presented
absolutely no evidence below that the tariff applies in this type
of case, i.e., a case tried in courts outside of Iran by non-Iranian
counsel.” Br. of McKesson 27. Because this case is
therefore not one in which damages are “fixed in the law or
official tariff,” McKesson contends, the amount of attorney’s
fees is to be decided “by the court”—i.e., in the court’s
discretion.

     We read Article 518’s plain language to provide that
“decided by the court” applies only “[i]n the instances where
the amount of [attorney’s fees is] not fixed in the law or official
tariff.” That is, Article 518 provides a general rule that courts
must use an official tariff or other amount fixed by law in
awarding attorney’s fees. The court has discretion only when
the tariff (or other fixed amount) does not apply. As the party
seeking attorney’s fees under foreign law, McKesson bears the

        2
          McKesson contends that Iran forfeited this argument with
respect to the first and second fee petitions by not raising it below.
When those two petitions were filed and briefed in 2000 and 2007,
however, it was far from certain what substantive law (if any)
supplied McKesson’s cause of action. Indeed, we issued four
decisions between 2001 and 2012 on the subject. See McKesson
HBOC, Inc. v. Islamic Republic of Iran, 271 F.3d 1101 (D.C. Cir.
2001), vacated in relevant part, 320 F.3d 280 (D.C. Cir. 2003);
McKesson Corp. v. Islamic Republic of Iran, 539 F.3d 485 (D.C. Cir.
2008); McKesson VI, 672 F.3d at 1078–80. That unusual degree of
uncertainty makes this is an “exceptional” case in which Iran’s
forfeiture may be excused. See Roosevelt v. E.I. Du Pont de
Nemours & Co., 958 F.2d 416, 419 n.5 (D.C. Cir. 1992).
                                7
burden of establishing the substance of foreign law. See In re
Avantel, S.A., 343 F.3d 311, 321–22 (5th Cir. 2003) (party
seeking to apply Mexican privilege law “had the burden of
proving its substance to a reasonable certainty such that the
district court could apply it to the documents at issue”);
Bel-Ray Co. v. Chemrite (Pty) Ltd., 181 F.3d 435, 440–41 (3d
Cir. 1999) (similar); Restatement (Second) of Conflict of Laws
§ 136 cmt. f (1971) (“[T]he party who claims that the foreign
law is different from the local law of the forum has the burden
of establishing the content of the foreign law.”); see also Baker
v. Booz Allen Hamilton, Inc., 358 F. App’x 476, 481 (4th Cir.
2009) (similar); cf. Br. of McKesson 25 (acknowledging it
bears “initial burden”). It is therefore up to McKesson to
show that the general rule (that an official tariff controls) does
not apply here. We reject McKesson’s attempt to shift the
burden by requiring Iran to show that the general rule does
apply and the exception does not. Although McKesson
criticizes Iran’s expert on Iranian law for not supplying
authority for the proposition that the tariff applies in actions
pursued outside Iranian courts, neither does McKesson’s
expert offer any authority supporting the notion that it does not
apply in such cases.

     Moreover, McKesson’s argument seeks to have it both
ways. It invokes Iranian law to argue that the court has
discretion to award attorney’s fees but, when it comes to
addressing how the court should exercise that discretion,
McKesson cites not a single Iranian precedent. Instead,
McKesson relies (as did the district court) solely on U.S.
precedent awarding attorney’s fees under federal fee-shifting
statutes. But that precedent tells us nothing about how an
Iranian court exercises its alleged discretion. Put differently,
McKesson is content to use Iranian law insofar as it allows for
fees and thus is more generous than the default American Rule.
See Hardt v. Reliance Std. Life Ins. Co., 560 U.S. 242, 252–53
                               8
(2010) (under “American Rule” each litigant pays its own
attorney’s fees unless statute or contract provides otherwise).
But McKesson runs from Iranian law where it is less generous
than U.S. law—i.e., where the applicable tariff yields a smaller
award than might have been granted if McKesson had brought
its action under a U.S. fee-shifting statute. We think the
internal inconsistency of McKesson’s argument is telling.

     We conclude that the official tariff applies. Iran contends
that, applied to McKesson’s $29.3 million judgment, the tariff
yields a fee award of $29,516. McKesson does not dispute the
calculation. Accordingly, we vacate the district court’s fee
award and instruct the district court on remand to grant
McKesson $29,516 in attorney’s fees.

                                                    So ordered.