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McKesson HBOC, Inc. v. Islamic Republic of Iran

Summary judgment against Iran for expropriating plaintiff's equity in an Iranian dairy affirmed in most respects; jurisdiction over Iran existed pursuant to an exception in the Foreign Sovereign Immunities Act for commercial acts of a foreign sovereign that have direct effects in the United States.

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As amended January 15, 2002.

Argued October 1, 2001

McKesson HBOC, Inc., an American corporation, owns a minority interest in an Iranian dairy. Following Iran’s 1979 Islamic Revolution, the dairy cut off the flow of capital and other material to McKesson, froze out McKesson’s board members, and stopped paying McKesson’s dividends. After years of litigation, including two appeals to this court, the district court granted summary judgment for McKesson, holding the Islamic Republic of Iran liable for expropriating McKesson’s equity in the dairy. Following a bench trial on the value of McKesson’s holdings, the district court ordered Iran to pay over $20 million in compensation for, among other things, expropriated equity and withheld dividends. In this appeal, Iran argues that federal courts lack jurisdiction over it, that material issues exist as to its liability for expropriation, and that the district court erred in valuing McKesson’s assets. McKesson cross-appeals, challenging the district court’s assessment of simple rather than compound interest. We affirm in most respects. Jurisdiction exists pursuant to the Foreign Sovereign Immunities Act’s exception for commercial acts of a foreign sovereign that cause direct effects in the United States. The district court’s careful consideration of the valuation evidence easily survives clear-error review. And although the district court may have erred in finding that international law precludes awards of compound interest, it acted well within its broad discretion to grant simple interest. But because we find that genuine issues of material fact exist as to whether Iranian corporate law excused the dairy’s withholding of dividends, we reverse the district court’s grant of summary judgment on the issue of Iran’s liability for expropriating McKesson’s equity and remand that portion of the case for trial.

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