Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Arbitration Between Tehran-Berkeley Civil and Environmental Engineers

decided: April 20, 1987.


Appeal by petitioner from orders entered in favor of respondent in the United States District Court for the Southern District of New York (Owen, J.), dismissing the petition to compel arbitration, preliminarily and permanently staying any arbitration proceeding, and declaring that respondent is not a party to and is not liable for damages under the relevant contract. Vacated and Remanded.

Author: Altimari

KEARSE and ALTIMARI, Circuit Judges, and STEWART, District Judge.*fn1

ALTIMARI, Circuit Judge:

The political cataclysm which occurred during the late 1970s in the governmental structure of Iran and the repercussions felt by the international business community provide the backdrop for the instant appeal. Appellant Tehran-Berkeley Civil and Environmental Engineers ("Tehran-Berkeley") appeals from orders of the United States District Court for the Southern District of Ne York, dismissing its petition to compel arbitration, granting appellee Tippetts-Abbett-McCarthy-Stratton's ("TAMS") cross-petition for an order preliminarily and permanently staying and enjoining any arbitration proceeding before the American Arbitration Association, and declaring pursuant to Federal Rule of Civil Procedure 57 and the Declaratory Judgment Act, 28 U.S.C. § 2201 et seq., that appellee is not a party to and is not liable for damages under the contract at issue. Appellant contends that the district court erred in failing to conduct a hearing, in holding the agreement between the parties to be unambiguous, in concluding that appellee is neither a party nor primary obligor under the contract, and in finding that appellant's cause of action lay properly against the Islamic Republic of Iran rather than against appellee.

For the reasons stated below, we vacate and remand.


Appellee TAMS is a New York engineering and architectural consulting partnership. Abdul Aziz Farmanfarmaian & Associates ("AFFA") is an Iranian engineering firm. TAMS and AFFA created and equally owned TAMS-AFFA Consulting Engineers and Architects ("TAMS-AFFA"), an Iranian entity created for the sole purpose of performing services on the Tehran International Airport ("TIA") project. This performance was based on a contract ("CAO contract") dated March 19, 1975 between the Civil Aviation Organization of the Imperial Government of Iran on the one hand and TAMS and AFFA on the other. Under the CAO contract, TAMS and AFFA were to act as "Consultants" and were liable jointly and severally for all obligations under the contract.

The contract at issue on this appeal was entered into on August 12, 1975. Although TAMS and AFFA had entered into their partnership agreement as of that date, it was not until October 19, 1975 that the Iranian government certified that TAMS-AFFA was listed in the Register for Non-Commercial firms of Iran. Accordingly, the contract had to be negotiated and individually executed by principals. of TAMS and AFFA and principals of appellant Tehran-Berkeley in Iran. Under this contract, Tehran-Berkeley agreed to perform soil exploration for the TIA project. Tehran-Berkeley was designated the "Contractor" in the contract, while TAMS and AFFA were designated "Consultant." The contract provides that the Consultant was to submit invoices for work performed by Tehran-Berkeley to CAO for payment, and required "the Consultant [to] pay the Contractor immediately upon receipt of payment" from CAO. The contract contains an arbitration clause which provides that

all the disputes that may arise between the Contractor and the Consultant whether relating to execution of the works under the Contract or relating to interpretation of any of the Paragraphs of the General Conditions or Technical Provisions or other documents attached to the Contract, shall according to the prevailing laws be settled through arbitration....

The political events which occurred in Iran beginning in 1978 are widely known. On June 19, 1979, the Islamic Revolutionary Council of the newly established Iranian Government passed the Bill Concerning Appointment of Provisional Directors to Supervise Productive, Industrial, Commercial, Agricultural and Services Units. This Bill authorized the Government to appoint "provisional directors" as managers for enterprises abandoned by their directors. Pursuant to this Bill, the Plan and Budget Organization of the Government of Iran appointed a "provisional director" for AFFA on July 24, 1979. This appointment was announced in the August 11th edition of the Official Gazette. By December of 1979, the "provisional director" expanded its powers, assuming control of the non-commercial partnership TAMS-AFFA. In particular, the "provisional director" assumed sole signature power of TAMS-AFFA's Articles of Partnership that all checks be signed by representatives of both TAMS and AFFA. During the months of August through November 1979, TAMS representatives in Iran managed to rectify at least partially these violations of TAMS-AFFA's partnership agreement. however, the crisis in relations between the United States and Iran that developed in November of 1979, as a result of the seizure of American citizens in Iran, reversed this trend. The last remaining TAMS representative with signature authority left Iran in December, 1979. TAMS's letters and telexes to TAMS-AFFA concerning further work on the TIA project went unanswered.

Following the freeing of the American hostages in January, 1981 and the signing of the Algerian Accords, which inter alia established the Iran-United States Claims Tribunal, TAMS filed a claim against the Government of Iran seeking amounts allegedly due under the CAO contract and the value of its fifty percent interest in TAMS-AFFA. On June 29, 1984, the Claims Tribunal filed its decision, awarding TAMS the sum of $5,594,405 plus interest in the "dissolution value" of TAMS-AFFA. The Tribunal defined "dissolution value" as "the value of TAMS-AFFA after the collection of all assets and the discharge of all obligations," noting that this value was "only a very rough evaluation." Tippets, Abbett, McCarthy, Stratton v. The Government of Iran, Iranian Assets Litigation Rep., 8820, 8826, 8828 (July 13, 1984). The Tribunal explicitly indicated "that [its] Award involves no adjudication of the rights and obligations of the parties to the [CAO] contract or of any obligations owed by TAMS-AFFA to the tax and social security authorities of Iran or other third parties." Id. at 8827. (footnote omitted) (emphasis added).

On October 31, 1985, appellant Tehran-Berkeley filed its Demand for Arbitration with the American Arbitration Association, seeking $999,922 plus interest from TAMS for soil and foundation investigations performed on the TIA project under the August 12, 1975 contract. By letter dated November 4, 1985 to the American Arbitration Association of its intention to seek a stay of arbitration and of its refusal to arbitrate the dispute.

Tehran-Berkeley filed and served a Petition to Compel Arbitration dated November 6, 1985 pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the "Act"). Appellee TAMS filed an Answer to the Petition and a Cross-Petition to Stay Arbitration dated November 15, 1985.

Treating appellant's Petition and appellee's Cross-Petition as cross-motions for summary judgment, the district court in an Endorsed Memorandum dated April 24, 1986 dismissed the petition, holding that appellee was not a party to and was not liable under the August 12, 1975 contract. The court found the contract to be between appellant and a "single counter-contracting 'party'," ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.