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The Ministry of Defense v. Cubic Defense Systems

December 15, 2011

THE MINISTRY OF DEFENSE AND SUPPORT FOR THE ARMED FORCES OF THE ISLAMIC REPUBLIC OF IRAN, AS SUCCESSOR IN INTEREST TO THE MINISTRY OF WAR OF THE GOVERNMENT OF IRAN, PLAINTIFF-APPELLEE,
v.
CUBIC DEFENSE SYSTEMS, INC., AS SUCCESSOR IN INTEREST TO CUBIC INTERNATIONAL SALES CORPORATION, DEFENDANT-APPELLANT. THE MINISTRY OF DEFENSE AND SUPPORT FOR THE ARMED FORCES OF THE ISLAMIC REPUBLIC OF IRAN, AS SUCCESSOR IN INTEREST TO THE MINISTRY OF WAR OF THE GOVERNMENT OF IRAN,
PLAINTIFF-APPELLANT,
v.
CUBIC DEFENSE SYSTEMS, INC., AS SUCCESSOR IN INTEREST TO CUBIC INTERNATIONAL SALES CORPORATION, DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Southern District of California Rudi M. Brewster, District Judge, Presiding D.C. No. CV-98-01165-RMB

The opinion of the court was delivered by: Fisher, Circuit Judge:

FOR PUBLICATION

D.C. No. CV-98-01165-RMB

OPINION

Argued and Submitted

February 8, 2011-Pasadena, California

Before: Alex Kozinski, Chief Judge, Michael Daly Hawkins and Raymond C. Fisher, Circuit Judges.

Opinion by Judge Fisher

OPINION

These appeals require us to decide whether confirmation of an arbitration award in favor of the Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran is "contrary to the public policy" of the United States under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, known as the "New York Convention." We hold, consistent with the position of the United States as amicus curiae, that confirmation of the award does not violate any public policy of the United States. We also hold that the district court's judgment is a "money judgment" subject to postjudgment interest, and that a district court has discretion to award prejudgment interest and attorney's fees in an action to confirm an arbitration award under the Convention. Accordingly, we affirm the judgment in part, vacate it in part and remand to the district court for reconsideration of the Ministry's motions for prejudgment interest and attorney's fees.

Background

In 1977, Cubic International Sales Corporation, predecessor in interest to appellant Cubic Defense Systems, Inc. ("Cubic"), a United States corporation, contracted with the Ministry of War of the government of Iran, predecessor of appellee Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran ("Ministry"), for sale and service of an air combat maneuvering range for use by Iran's military. The Iranian Revolution resulted in nonperformance of the contracts. Consequently, the parties agreed in 1979 that the contracts would be discontinued and that Cubic would try to resell the equipment, with a later settlement of the accounts. In 1981, Cubic sold a modified version of the equipment to Canada.

In 1982, the Ministry filed breach of contract claims against Cubic with the Iran-United States Claims Tribunal at the Hague. In 1987, that tribunal issued an order stating that it lacked jurisdiction to hear the matter. See Ministry of Nat'l Def. of the Islamic Republic of Iran v. Gov't of the United States, 14 Iran-U.S. Cl. Trib. Rep. 276, 1987 WL 503814 (1987).

In 1991, the Ministry filed a request for arbitration before the International Court of Arbitration of the International Chamber of Commerce (ICC). The ICC, sitting in Switzerland, made a final award in those proceedings in May 1997. The final award makes a net award of $2,808,519 plus pre-award interest in favor of the Ministry. The ICC also directed Cubic to reimburse the Ministry $60,000 for arbitration costs.

In June 1998, after Cubic failed to pay, the Ministry filed a petition in federal district court to confirm the ICC's award under the New York Convention. See 9 U.S.C. § 207.*fn1 The district court issued an order granting the Ministry's petition in December 1998.

The Ministry subsequently filed a motion for prejudgment interest covering the period between the ICC's final award and the district court's confirmation. The motion also requested attorney's fees based on Cubic's alleged failure to comply with the ICC's decision. The district court denied the motion, concluding that prejudgment interest and attorney's fees were unavailable in an action to confirm a foreign arbitration award under the Convention.

The district court entered judgment in August 1999. Cubic timely appealed confirmation of the award, and the Ministry timely cross appealed denial of prejudgment interest and attorney's fees. Proceedings were suspended pending litigation over whether certain judgment creditors of Iran could attach the Ministry's judgment. That litigation has now been concluded. See Ministry of Def. & Support for Armed Forces of Islamic Republic of Iran v. Cubic Def. Sys., Inc., 236 F. Supp. 2d 1140 (S.D. Cal. 2002), aff'd, 385 F.3d 1206 (9th Cir. 2004), vacated and remanded, 546 U.S. 450 (2006), remanded to, 495 F.3d 1024 (9th Cir. 2007), rev'd, 556 U.S. 366 (2009), remanded to, 569 F.3d 1004 (9th Cir. 2009).

Following oral argument in February 2011, we invited the United States to express its view on whether confirmation of the ICC's award would be contrary to the public policy of the United States under Article V(2)(b) of the Convention. The United States filed an amicus brief supporting affirmance. We then directed the parties to file supplemental briefs addressing the United States' brief, which they have done. These appeals accordingly are ripe for decision.

DISCUSSION

Cubic argues that the district court erred by confirming the ICC's award because confirmation is contrary to the public policy of the United States and, in the alternative, because the award has not yet become binding on the parties. Cubic also argues that the district court's judgment is not subject to post-judgment interest because the district court did not specify the dollar amount of the confirmed award. On cross appeal, the Ministry argues that the district court abused its discretion by denying its motion for prejudgment interest and attorney's fees. We address these arguments in turn.

I.

[1] Confirmation of foreign arbitration awards is governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, known as the New York Convention, and federal law implementing the Convention, 9 U.S.C. §§ 201-208. Section 207 provides:

Within three years after an arbitral award falling under the Convention is made, any party to the arbi- tration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration. The court shall confirm the award unless it finds one of the grounds for refusal or ...


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