McKesson Corp. v. Islamic Republic of Iran
753 F.3d 239
D.C. Cir.2014Background
- After Iran’s 1979 revolution, Iran expropriated McKesson’s equity interest and withheld dividends from an Iranian dairy company; McKesson sued in D.C. in 1982.
- This long-running litigation produced a final judgment for McKesson of $29,318,284.47 after appellate remands about interest calculation.
- McKesson filed five separate fee petitions over different time periods; the district court ultimately awarded about $13.4 million in attorneys’ fees using U.S. fee-shifting precedent and a “current-rate” enhancement.
- On appeal the D.C. Circuit held that Iranian law governs entitlement and calculation of fees, with Articles 515, 518, and 519 of Iran’s Civil Procedure Act controlling the analysis.
- Article 518 provides that, when fees are fixed by law or an official tariff, courts should apply that amount; McKesson bore the burden to show the tariff did not apply.
- Iran argued Article 3 of its 2006 attorney-fee regulation (the official tariff) applied, yielding $29,516; McKesson did not dispute the arithmetic but argued the tariff didn’t apply to litigation in foreign courts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Iranian law governs entitlement and calculation of attorneys’ fees | McKesson: Iranian law governs entitlement but court should exercise discretionary reasonableness because tariff does not apply to suits in foreign courts | Iran: Iranian law controls and the official tariff applies, fixing the fee amount | Court: Iranian law governs both entitlement and calculation; Article 518’s default is to apply a tariff when one exists |
| Whether Article 3 tariff applies to this U.S. action | McKesson: Tariff does not apply to cases tried outside Iran by non-Iranian counsel; McKesson bore only an initial burden | Iran: Tariff applies regardless and yields $29,516 for the judgment amount | Court: McKesson failed to meet its burden to show the tariff does not apply; tariff applies |
| Proper measure of review for fee-award legal standard | McKesson: District court should have applied Iranian standards for discretionary fee awards | Iran: District court should apply Iranian law and its tariff | Court: Review de novo whether correct legal standard applied; district court erred by using U.S. precedent instead of Iranian law |
| Proper fee award amount | McKesson: District court’s multi-million-dollar award was reasonable under U.S. fee jurisprudence and delay adjustments | Iran: Award should be tariff amount ($29,516) | Court: Vacated $13.4M award; remanded with instruction to award $29,516 in fees |
Key Cases Cited
- McKesson Corp. v. Islamic Republic of Iran, 672 F.3d 1066 (D.C. Cir. 2012) (held Treaty of Amity claim governed by Iranian law and addressed interest calculation)
- Conservation Force v. Salazar, 699 F.3d 538 (D.C. Cir. 2012) (abuse-of-discretion standard and legal-error exception)
- City of Harper Woods Emps. Ret. Sys. v. Olver, 589 F.3d 1292 (D.C. Cir. 2009) (de novo review of foreign-law interpretation under Fed. R. Civ. P. 44.1)
- Hardt v. Reliance Std. Life Ins. Co., 560 U.S. 242 (2010) (describing the American Rule on attorney’s fees)
- In re Avantel, S.A., 343 F.3d 311 (5th Cir. 2003) (party asserting foreign law bears burden to prove its content)
- Bel-Ray Co. v. Chemrite (Pty) Ltd., 181 F.3d 435 (3d Cir. 1999) (same burden-to-prove-foreign-law principle)
- Roosevelt v. E.I. Du Pont de Nemours & Co., 958 F.2d 416 (D.C. Cir. 1992) (recognition of exceptions to forfeiture in exceptional cases)