The opinion of the court was delivered by: GREENE
This is an action to recover a debt allegedly due and owing to plaintiff, an American corporation, by defendants, the government and state of Iran and agencies and instrumentalities thereof, pursuant to certain contractual agreements. Contemporaneously with the filing of its complaint, plaintiff filed an application for writ of attachment before judgment as to certain property of defendants frozen in this country and now in possession of agencies or instrumentalities of the United States pursuant to Executive Order No. 12170. The Court signed an order approving the issuance of such writ on March 21, 1980. Presently pending before the Court in this action are a motion to quash this attachment by garnishees Department of Defense, Department of Treasury, and Defense Security Assistance Agency; and a motion to dismiss by defendants on grounds of lack of subject matter and personal jurisdiction, improper venue, and insufficiency of service of process, both filed in the month of July.
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.
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.
Having examined these documents, as well as all the pleadings submitted by the parties,
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)
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.
Under section 203(e) of the same Part, "any attachment judgment, decree, lien, execution, garnishment, or other judicial process is null and void with respect to any property" in which Iran has an interest, "unless licensed or authorized pursuant to this part." Section 504 which was added to the regulations on November 23, 1979, purports to license judicial proceedings with regard to the Iranian assets, but subsection (b) excludes from such license
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.
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. § 1 et seq.
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);
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:
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.
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 ...