After a long period of discovery, marked by numerous disputes among the parties, the defendants have renewed their dispositive motions.
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 foundation exercised control over the day-to-day activities of the New York Foundation." Id. at 257. The parties having completed that discovery and having renewed their motions to this Court, that question remains the pivotal issue for resolution.
Gabay argues initially that Judge Wood's reliance on First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 103 S. Ct. 2591, 77 L. Ed. 2d 46 (1983) ("Bancec "), was misplaced. In Bancec, the U.S. Supreme Court held that agencies and instrumentalities of foreign states are entitled to a presumption of independent status from the foreign state, id. at 627, 633, 103 S. Ct. at 2600, 2603, but that the presumption may be overcome where "internationally recognized equitable principles" require disregarding the corporate form in order to avoid injustice. The Court suggested two situations in which the presumption of separateness might be overcome: (1) where "a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created," and (2) where recognition of the independent status of the agency or instrumentality would "work fraud or injustice." Id. at 629, 103 S. Ct. at 2601.
In interpreting Bancec, Judge Wood noted that the "alter ego" question in that case arose in the context of substantive liability, but that "lower courts have applied Bancec's analysis to issues of FSIA jurisdiction as well." Gabay v. Mostazafan Foundation of Iran, et al., 151 F.R.D. at 253 (citing cases). "Under Bancec and its progeny," she wrote, "plaintiff has the burden of overcoming the presumption of independence on the part of defendant foundations." Id.
Gabay asserts that the presumption of separateness recognized by the Supreme Court in Bancec applies only to the relationship between a foreign state and an instrumentality or agency of that state. He argues that the presumption was recognized in that particular situation out of consideration for the political and economic importance of the government agency as an instrument for development. (Br. at 16.) This case, he asserts, is different in that the relationship between a state and an instrumentality of that state is not at issue; instead this Court must examine the relationship between an instrumentality of a state--the Iran Foundation--and its alleged agent or alter ego--the New York Foundation.
Even if Judge Wood's analysis were not the law of the case, see Zdanok v. Glidden Co., 327 F.2d 944, 953 (2d Cir. 1964); North River Ins. Co. v. Philadelphia Reinsurance Corp., 63 F.3d 160, 164-65 (2d Cir. 1995), cert. denied, 116 S. Ct. 1289, 134 L. Ed. 2d 233 (1996); NLRB v. Coca-Cola Bottling Co., 55 F.3d 74, 77-78 (2d Cir. 1995); Virgin Atlantic Airways, Ltd. v. National Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992), this Court would adhere to it. No cause has been shown to abandon Judge Wood's determination that the pivotal issue is whether the Iranian Foundation exercised control over the day-to-day activities of the New York Foundation, nor has plaintiff pointed to any intervening law that undermines that ruling. The key issue in Bancec was whether an American corporation, sued by an instrumentality of Cuba in the United States, could subject that instrumentality to suit through its counterclaim. The Supreme Court rejected state law as governing the issue, remarking on the importance Congress attached to a "'uniform body of law' concerning the amenability of a foreign sovereign to suit in United States courts." Bancec, 462 U.S. at 622 n.11, 103 S. Ct. at 2598 n.11; see also Barkanic v. General Admin. of Civil Aviation, 923 F.2d 957, 959-60 n.2 (2d Cir. 1991). The same considerations apply in this case and require that the jurisdictional determination facing this Court be made utilizing the standards set forth in Bancec. See Gabay v. Mostazafan Foundation of Iran, et. al., 151 F.R.D. at 254.
The Court now considers whether Gabay has overcome the presumption of independence that rests on the defendant foundations by showing that the Iran Foundation has exercised control over the day-to-day activities of the New York Foundation. Although the parties dispute the time period within which the character of the relationship between the two foundations should be examined for purposes of determining whether the Court has subject matter jurisdiction pursuant to § 1605(a)(3),
the Court finds that the Iran Foundation did not exercise day-to-day control over the New York Foundation during either of the relevant periods. Similarly, the Court will not address the admissibility of the evidence Gabay has amassed in his attempt to prove the Iran Foundation's day-to-day control, since even if all of the evidence were admissible, the Court finds that Gabay has not shown such control.
Simply put, the facts developed by Gabay do not show that the Iran Foundation exercised control over the day-to-day activities of the New York Foundation, and thus the Court does not have subject matter jurisdiction over this action. Gabay alleges the following:
(1) that one of the central purposes of the Iran Foundation, as expressed in its Official Charter, was to control the properties of the Dynasty of the Shah of Iran, which allegedly included the assets of the Pahlavi Foundation of New York. Gabay alleges that the Iran Foundation therefore took over the membership of the New York Foundation's Board of Directors. He asks the Court to draw a negative inference from the change in the Board of Directors in 1979, claiming that by the end of 1979, no director of the Pahlavi Foundation that served prior to the Iranian Revolution remained on the Board. The New York Foundation has shown, however, that there were legitimate reasons for the changes that occurred in the membership of the Board. For example, William Rogers stated, in both a resignation letter and in deposition testimony, that his initial agreement to serve only until the Pahlavi Foundation began to produce income and the Foundation's subsequent achievement of that goal constituted his reason for retiring from the Board. (Loomba Decl., Exh. 6 at 1-2; Winter Reply Aff., Exh. 3 at 13.) Similarly, Dr. Houshang Ahmadi indicated in deposition testimony that he went to his first meeting of the Board at the invitation of Mr. Manoucher Shafie, the president of the New York Foundation at the time, and mentioned nothing to indicate his decision was influenced by a third party. (Winter Reply Aff., Exh. 4 at 17-18.)
(2) that the Iran Foundation was responsible for the change of the New York Foundation's name in 1980 from the "Pahlavi Foundation" to the "Mostazafan Foundation of New York." However, the only evidence in the record regarding the change in name presents legitimate reasons for the change, specifically that the change in name was made at the request of Mr. Shafie, who suggested that as the term meant "helping the needy people," it would fit the purpose of the Foundation. (Winter Reply Aff., Exh. 4 at 42-43.) Mr. Shafie himself testified that he suggested the change because the name "Pahlavi Foundation" had become controversial. (Winter Reply Aff., Exh. 2 at 70-74.)