Judge Awards $40.5 Million in 30-Year-Old Iranian Dairy Dispute

, The National Law Journal

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Zoe Tillman reports for American Lawyer affiliates The National Law Journal and Legal Times.

Just as the mythological Greek king Sisyphus was doomed to forever roll a boulder up a hill, only to watch it fall as he reached the summit, a 30-year dispute over interests in an Iranian dairy seemed destined to make endless trips to the U.S. Court of Appeals for the D.C. Circuit without resolution.

But in an opinion issued Wednesday, U.S. District Judge Richard Leon wrote that he hoped he was near the end of litigation that the D.C. Circuit once described as "Sisyphean labor." Following a D.C. Circuit opinion last February finding that U.S. courts did have jurisdiction over the case, Leon on Wednesday ordered Iran to pay $40.5 million in damages, interest and attorney fees to plaintiff McKesson Corp.

Leon may not get his wish just yet, however. A lead attorney for Iran, Christopher Wright of Wiltshire & Grannis, said in an email that "Iran is reviewing the court’s decision and considering whether to appeal." Mark Bravin of Winston & Strawn, lead counsel for McKesson, declined to comment.

McKesson sued the Iranian government in 1982 in the U.S. District Court for the District of Columbia. McKesson partnered with Iranian investors to create a dairy in Iran in the 1960s, but the company and its personnel fled during the Iranian Revolution in 1979. McKesson accused Iran of expropriating its interests in the dairy and sued for damages.

The case made at least half a dozen trips to the D.C. Circuit, with Iran challenging the jurisdiction of U.S. courts to hear the case. In the ruling last February, the appeals court found that McKesson did have a right of action under a Treaty of Amity between Iran and the United States, as construed under Iranian law. The court upheld Leon's judgment against Iran but struck about $20 million in compound interest from the $43 million award. The appeals court kicked the case back to Leon to recalculate the amount, ordering Iran to pay simple interest at a rate of 9 percent.

Iran appealed to the U.S. Supreme Court, but the high court denied Iran's petition to hear the case on March 18.

Using the D.C. Circuit's guidance, Leon ordered Iran Wednesday to pay $29 million in damages and interest--$7.6 million in damages and $21.6 million in interest--along with about $10 million in attorney fees and $1.1 million for other costs.

The bulk of the opinion dealt with McKesson's request for attorney fees. Iran challenged the fees on multiple fronts, from the court's jurisdiction to award them at all to the reasonableness of rates charged by the law firms involved, Winston & Strawn and Morgan, Lewis & Bockius. The firms sought fees for work done in the case from 2000 to 2012; pre-2000 attorney fees were the subject of a separate order.

According to McKesson, lawyers in the case billed more than 18,500 hours since 2000.

Leon cited expert testimony that Iranian law did allow for recovery of attorney fees and costs. Under the Treaty of Amity – the treaty between Iran and the United States that McKesson brought its claim under – the losing party can be on the hook for attorney fees, Leon wrote.

McKesson argued that the court should use Morgan Lewis and Winston's standard rates to calculate fees, while Iran argued that the standards used in the Laffey Matrix should apply. Based on independent law firm billing surveys, Leon found that both firms charged "reasonable" rates.

Leon granted McKesson's request to use the firms' 2012 billing rates to calculate fees for work done between 2000 and 2012 as an "enhancement" to make up for delays in being paid over the past decade. However, Leon found that Iran raised legitimate concerns about how efficiently McKesson's lawyers managed the case and also about the use of vague descriptions for certain time entries in billing records. To account for those issues, Leon reduced McKesson's fee request of $11 million by 10 percent, awarding around $10 million. Finally, Leon awarded McKesson $1.1 million for other costs.

Although Leon said he welcomed "the opportunity to conclude this protracted litigation," Iran could appeal Wednesday's decision and reopen an appeal of a 2000 order awarding pre-2000 attorney fees. The D.C. Circuit put the appeal of pre-2000 attorney fees on hold for the past decade as the rest of the case proceeded. The court administratively dismissed that appeal earlier this month, citing the need to clear older cases from the docket, but left the door open for Iran to revive it.

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