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GABAY v. MOSTAZAFAN FOUND. OF IRAN

June 4, 1997

NORMAN GABAY, Plaintiff, against MOSTAZAFAN FOUNDATION OF IRAN a/k/a The Foundation for the Oppressed, an agency or instrumentality of the Government of the Islamic Republic of Iran, and MOSTAZAFAN FOUNDATION OF NEW YORK, as alter ego of Mostazafan Foundation of Iran, Defendants.


The opinion of the court was delivered by: STEIN

 SIDNEY H. STEIN, U.S. District Judge.

 Defendants move separately to dismiss the complaint in this action, arguing that (1) the court lacks subject matter jurisdiction over plaintiff's claims; (2) the court lacks personal jurisdiction over the Mostazafan Foundation of Iran; (3) plaintiff's claims are time-barred; (4) the complaint fails to state a cause of action on which relief may be granted; and (5) summary judgment should be granted because there is no genuine issue as to any material fact. *fn1" Because the Court finds that there is no subject matter jurisdiction over plaintiff's claims, defendants' motions are granted and the action is dismissed.

 I. Factual Background

 Plaintiff Norman Gabay initiated this action on September 22, 1992, to recover damages for the expropriation by the Government of the Islamic Republic of Iran of several business establishments in Iran. (Compl. P 1.) Defendants are the Mostazafan Foundation of Iran (the "Iran Foundation")--an entity established and existing under the laws of Iran--and the Mostazafan Foundation of New York, a not-for-profit foundation established in 1973 pursuant to the laws of New York as the Pahlavi Foundation, and currently known as the Alavi Foundation (the "New York Foundation"). (Id. ; Mirza Aff. P 10.)

 Gabay is a native of Iran who, prior to 1979, established a carpet and textile business there. (Compl. PP 11, 12.) He emigrated to the United States in 1971 and became a naturalized American citizen in 1980. (Id. PP 13, 14.) In the United States, Gabay founded the Charles Company, an enterprise that manufactured plastics, imported Persian rugs, and exported raw material and machinery to one of his Iranian companies. (Id. P 13.) Until 1979, Gabay traveled to Iran regularly to supervise the operations of his Iranian businesses. Following the Islamic revolution in 1979, Gabay stopped traveling to Iran, but continued to supervise his businesses there through local managers and from the offices of the Charles Company in this country. (Id. PP 15, 16.)

 Gabay claims that sometime during the period of 1981-1983 the Iran Foundation expropriated all his properties in Iran. (Id. P 19.) He further claims that the taking violated international law because (1) he was not compensated, and (2) the property was seized because he is Jewish. (Id.)

 Gabay contends that this Court has subject matter jurisdiction over this dispute pursuant to the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1330, 1602-11. He claims that the Iran Foundation is an agency or instrumentality of Iran within the meaning of § 1603(a) of the FSIA (Compl. P 5); that the Iran Foundation acted as the expropriating agency in Iran (id. P 10); that the New York Foundation is a mere "alter ego" of the Iran Foundation (id. PP 6, 23) and engages in "commercial activity" in this district (id. PP 28, 30); and that because of the alter ego relationship, the Iran Foundation itself must be regarded as engaging in commercial activity in New York. (Id. P 5.) Thus, Gabay contends that because the Iran Foundation owns the expropriated properties in Iran and engages in business in New York, it is subject to suit for the wrongful taking of his properties in Iran pursuant to the "expropriation" exception to foreign sovereign immunity, 28 U.S.C. § 1605(a)(3). (Compl. PP 2, 10.)

 II. Procedural History

 On December 29, 1981, Gabay filed suit against the Government of Iran in the U.S. District Court for the Central District of California, seeking compensation for the expropriation of his property in Iran. (Loomba Decl. P9.) See Bernard G. Martin, a pseudonym v. Government of Iran, et al., No. 81 Civ. 6501 (C.D. Cal. Dec. 22, 1981). That action was dismissed by the court without prejudice in February 1982, following the issuance by President Reagan of Executive Order No. 12294, 46 Fed. Reg. 14,111 (Feb. 24, 1981), 31 C.F.R. § 535.222 (1997), which implemented the Algiers Accords between Iran and the United States. (Loomba Decl., Exh. 10.) The Accords, which came into force on January 19, 1981, required, inter alia, that all then-existing claims by U.S. nationals against Iran (or its organs or agencies) be asserted before a specialized international tribunal established under the Accords--the Iran-U.S. Claims Tribunal at The Hague, The Netherlands--and that all suits against Iran in U.S. domestic courts be terminated. The Tribunal was competent to hear, among other controversies, claims by U.S. nationals against Iran and its agencies and organs for the taking of property, if such taking occurred prior to January 19, 1981.

 In January 1982, Gabay filed a claim before the Tribunal against Iran for compensation for the taking of his property. (Compl. P 7.) The Tribunal ruled--almost a decade later--that Gabay had failed to establish that the claimed expropriation occurred at a time within the Tribunal's jurisdiction. On July 10, 1991, the Tribunal therefore issued a "final award" dismissing Gabay's claim for lack of jurisdiction. (See Rovine Aff., Exh. 6.) One month later, Gabay filed an application with the Tribunal requesting an "interpretation" of the award, which the Tribunal denied, writing that it could not "identify any ambiguous language in the Award." (See id., Exh. 7.) This suit followed.

 On October 15, 1993, Judge Kimba M. Wood of this court denied motions by the Iran Foundation and the New York Foundation to dismiss the complaint without prejudice to their renewal, and allowed Gabay to engage in limited discovery regarding the relationship between the two foundations. The court held that if Gabay could establish an alter ego relationship between the Alavi Foundation and the Iran Foundation, he would meet the requirements for invoking the FSIA's "international taking" exception to foreign sovereign immunity, § 1605(a)(3). *fn2" After a long period of discovery, marked by numerous disputes among the parties, the defendants have renewed their dispositive motions.

 III. Discussion

 In her October 15, 1993 opinion, Judge Wood presented a lengthy and thorough analysis of the FSIA, which, in her words, "sets forth 'the sole basis' for obtaining subject matter jurisdiction over foreign states and their agencies and instrumentalities in the federal courts." Gabay v. Mostazafan Foundation of Iran, et. al, 151 F.R.D. at 252 (quoting Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434, 109 S. Ct. 683, 688, 102 L. Ed. 2d 818 (1989); Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 493, 103 S. Ct. 1962, 1971, 76 L. Ed. 2d 81 (1983)). Judge Wood outlined the purpose of the statute and the exception to foreign sovereign immunity that plaintiff seeks to apply in this case, § 1605(a)(3), which is known as the "expropriation exception." As noted above, she dismissed the defendants' dispositive motions without prejudice and ordered the parties to conduct limited discovery on the issue of "whether the Iranian ...


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