Sperry Corp. v. United States

12 Cl. Ct. 736, 1987 U.S. Claims LEXIS 140
CourtUnited States Court of Claims
DecidedAugust 5, 1987
DocketNo. 660-82C
StatusPublished
Cited by7 cases

This text of 12 Cl. Ct. 736 (Sperry Corp. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sperry Corp. v. United States, 12 Cl. Ct. 736, 1987 U.S. Claims LEXIS 140 (cc 1987).

Opinion

OPINION

SMITH, Chief Judge.

This matter is before the court on Defendant’s Suggestion of Mootness. This opinion elaborates upon an oral ruling given by the court at the close of argument on that motion. That ruling was based upon consideration of the parties submissions and oral argument.

Facts

The plaintiffs, Sperry Corporation and Sperry World Trade, Inc. (collectively “Sperry”) are challenging the validity of the Iran Claims Act which was signed into law on August 16, 1985. It allowed the United States to deduct one and a half percent from any award of the Iran Claims Tribunal (Tribunal) of less than $5 million. One percent would be deducted from any amount recovered over $5 million. The deduction from the award was made retroactive to June 7, 1982. Thus, Sperry’s award of $2.8 million, which was entered in September of 1982, was reduced by one and a half percent.

To understand the Iran Claims Act we must first look at the events leading up to its passage. In the late 1970’s growing hostilities between the United States and the Islamic Republic of Iran resulted in a complete breakdown in relations between the two countries following the illegal detention of United States citizens by Iran. During this time, plaintiffs had various contracts with the Iranian government and many quasi-governmental bodies. These contracts dealt with leasing computer systems and performing data processing services. At the time of the hostage crisis, plaintiffs withdrew their personnel from Iran. They subsequently sued Iran and its instrumentalities in the United States District Court to recover a purported $18 million in damages. Sperry Corp. v. Islamic Republic of Iran, No. 80-1614 (D.D.C.). They obtained a prejudgment attachment on Iranian property located in the United States worth approximately $7 million.

On January 19, 1981, the United States entered into the Algiers Accords with Iran. The treaty was designed to end the 444 day hostage crisis and to alleviate the international crisis the Iranian revolution had caused. See Belk v. United States, 12 Cl.Ct. 732 (1987). In return for the release of American hostages, the United States agreed to suspend all pending litigation against Iran in United States courts, to terminate all attachments on Iranian property located in the United States and to transfer those assets back to Iran, in addition to other provisions not at issue here. The Tribunal was established in the Hague to adjudicate or otherwise dispose of outstanding claims and a security account was set up at the N.V. Settlement Bank in the Netherlands to hold Iranian funds that would be used to pay Tribunal awards. A fiscal reserve account was likewise set up by the United States at the Federal Reserve Bank of New York (FRBNY) to process awards to United States claimants.

United States claimants whose suits in federal courts were suspended by the Accords sued the government to prevent the implementation of the Accords. They charged that the terms of the compromise were beyond the President’s statutory and constitutional authority and constituted a taking in violation of the Fifth Amendment. The Supreme Court, however, upheld the Accords in Dames & Moore v. Regan, 453 U.S. 654, 101 S.Ct. 2972, 69 L.Ed.2d 918 (1981). Thus, any United States claimant wishing to pursue a claim against Iran was required to proceed through the Tribunal in the Hague.

Plaintiffs filed a claim with the Tribunal, entered into settlement negotiations with representatives of the Iranian government and settled their claims for $2.8 million on July 8, 1982. The settlement agreement was then submitted to the Tribunal and a [739]*739final judgement on that amount was entered in September of 1982. Funds in the amount of plaintiffs’ award were transferred from the N.V. Settlement Bank to the FRBNY on October 29,1982. Before plaintiffs were paid, however, the FRBNY deducted two percent from the award pursuant to a directive license issued by the Secretary of the Treasury on June 7, 1982. The government’s justification for the fee was to cover costs expended by the departments of Treasury, State, and Justice in the Tribunal process. The fee was authorized by the Independent Offices Appropriations Act, 31 U.S.C. § 9701 (1982) (IOAA).

The plaintiffs brought suit in this court alleging that the directive license was improper. The court through former Chief Judge Kozinski found in a ruling from the bench, on May 1, 1985, that the fee schedule was not founded upon proper consideration of the problem but was, rather, a quickly devised attempt to charge a fee for use of the Tribunal. Judge Kozinski also found that the IOAA authorized only appropriation of funds for services provided by the appropriating agency. Thus, the fee schedule which sought to deduct fees for the use of the departments of Treasury, State and Justice was invalid.

Congress, apparently in response to this ruling, enacted the Iran Claims Act, which eventually became part of the Foreign Relations Authorization Act. See generally Act of August 16,1985. Pub.L. No. 99-93, Title Y, 1985 U.S.Code Cong. & Admin. News (99 Stat.) 437-39. It authorized the deduction of one and a half percent from the first $5 million of a Tribunal award and one percent from any amount greater than $5 million. It was made retroactive to June 7, 1982. Id. at § 502(d).

Since the court’s holding of May 1, 1985 is now moot if the Iran Claims Act is upheld, the plaintiffs contend as follows: that the Act works a taking of private property for public use without just compensation in violation of the Fifth Amendment to the Constitution, that the Act denies them due process of law, that it violates the Origination Clause of the Constitution, and that its retroactivity is unconstitutional. These contentions will each be addressed in turn.

Taking

The plaintiffs argue that to the extent the deduction is not a tax it is a taking under the Fifth Amendment. The takings clause provides that private property shall not be taken for public use without just compensation. The defendant, however, contends that the deduction is not a taking under the Fifth Amendment. This court’s decisions in Belk v. United States, 12 Cl.Ct. 732 (1987) and in Shanghai Power Co. v. United States, 4 Cl.Ct. 237 (1983), affd., 765 F.2d 159 (Fed.Cir.1985), cert. denied, 474 U.S. 909, 106 S.Ct. 279, 88 L.Ed.2d 243 (1985) deal with the standards for determining whether a taking has occurred in the context of the exercise of the President’s foreign policy powers. Belk concerned events at the core of the crisis involved in this case. The plaintiffs, thirteen American hostages and two of their spouses, alleged that when the United States executed the Accords it extinguished their causes of action against Iran for false imprisonment, assault and battery, etc., and therefore constituted a taking. Shanghai Power concerned President Carter’s settlement of the plaintiff’s $144 million claim against the Peoples Republic of China for about $20 million. In determining that there was not a taking in both cases we have laid out several factors. Of these factors, three are relevant and will each be discussed in determining the taking issue.

The first factor involves the degree to which a property holders rights can be impaired without working a taking.

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493 U.S. 52 (Supreme Court, 1989)
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863 F.2d 654 (Ninth Circuit, 1988)
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Bluebook (online)
12 Cl. Ct. 736, 1987 U.S. Claims LEXIS 140, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sperry-corp-v-united-states-cc-1987.