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October 16, 1980


The opinion of the court was delivered by: GREENE

On August 13, 1980, a Suggestion of Interest was filed on behalf of the United States requesting that the Court stay all proceedings in the instant action for an indefinite period. *fn1" Accompanying the pleading was an affidavit by the Secretary of the Treasury G. William Miller which describes certain foreign policy concerns which allegedly support the government's request for a stay. Subsequently, in response to the government's offer, the Court also examined in camera classified declarations of Secretary Miller and Deputy Secretary of State Warren M. Christopher elaborating on those concerns. *fn2" Having examined these documents, as well as all the pleadings submitted by the parties, *fn3" the Court has concluded that a stay of the proceedings for an indefinite duration, as requested by the United States, cannot be justified.

 The government presents two basic arguments in favor of a stay. First, it is said that certain Treasury regulations prohibit the Court from proceeding further with the case; second, they appeal to the Court's equitable powers which, it is claimed, should be exercised because of what the government regards as the foreign policy implications of further proceedings herein.


 The Iranian Assets Control Regulations (31 C.F.R. Part 535) *fn4" provide in section 201(a) that

No property subject to the jurisdiction of the United States or which is in the possession of or control of persons subject to the jurisdiction of the United States in which ... Iran has any interest of any nature whatsoever may be transferred, paid, exported, withdrawn or otherwise dealt in except as authorized.
The entry of any judgment or of any decree or order of similar or analogous effect upon any judgment book, minute book, journal or otherwise, or the docketing of any judgment in any docket book or the filing of any judgment roll or the taking of any other similar or analogous action.

 The government argues that these regulations should be construed to halt all further proceedings herein, apparently on the theory that the prohibition on the entry of judgments encompasses all steps preliminary to such entry, and more particularly, that, as long as the regulations remain in effect, any determination of substantive legal rights is prohibited. *fn5" This argument flies directly in the face of the legislative history of the regulations and the judicial construction of similar regulatory pronouncements.

 The summary of the November 23, 1979 amendments to the regulations, prepared by Treasury Department's Office of Foreign Assets Control, explains that "the need for (this) amendment is to authorize judicial proceedings to deal with a large volume of cases which are anticipated" (emphasis added). 44 Fed.Reg. 67617 (Nov. 26, 1979). In view of that unequivocal statement, it is not surprising that it has been held that section 504, far from being a device for blocking court action, appears to reflect a Treasury Department effort "to permit the full range of judicial proceedings involving Iran and its entities ...." E-Systems, Inc. v. Islamic Republic of Iran, 491 F. Supp. 1294 (N.D.Tex.1980).

 This interpretation finds support in cases construing identically worded regulations, promulgated pursuant section 5(b) of the Trading with the Enemy Act, 50 App.U.S.C. ยง 1 et seq. *fn6" Notwithstanding 31 C.F.R. 500.504 and 515.504 which contain the same language as section 504 of Part 535, courts have proceeded with litigation pertaining to blocked assets of Vietnam and Cuba, even to the point of judgment, where the judicial processes did not involve the transfer of blocked funds. See Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S. Ct. 923, 11 L. Ed. 2d 804 (1964); *fn7" Vishipco Line v. Chase Manhattan Bank, 77 Civ. 1251 (S.D.N.Y., Nov. 3, 1978). The Vishipco case describes the extent to which section 500.504 (identical to 535.504) limits the freedom of action of the courts:

The objective of the regulation is to prevent circumvention of the Trading with the Enemy Act by parties who would seek a court order effectuating a transfer that would otherwise be prohibited .... That purpose is not frustrated by issuance of a judgment that does not transfer title or require immediate payment out of blocked funds.

 See also Zittman v. McGrath, 341 U.S. 446, 71 S. Ct. 832, 95 L. Ed. 1096 (1951). Thus, prior constructions of regulations identical to those at issue in the present case not only have established that the regulations do not require litigation concerning frozen assets to be stayed; they go so far as to suggest that judgment may be entered, at least as long as a transfer of blocked assets is not entailed. *fn8"

 The conclusion that the regulations do not create a barrier to further proceedings is further supported by the familiar canon that a construction involving unconstitutionality is to be avoided if at all possible, United States v. Vuitch, 402 U.S. 62, 91 S. Ct. 1294, 28 L. Ed. 2d 601 (1971); Flemming v. Nestor, 363 U.S. 603, 80 S. Ct. 1367, 4 L. Ed. 2d 1435 (1960); International Union v. National Right ...

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