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Critical Brief: Dames & Moore v. Regan (S.Ct. 1981)

Facts: In 1979, the U.S. Embassy in Tehran was forcefully seized by rebels in Iran, and fifty-two

Americans were taken hostage. Invoking the power of the International Emergency Economic

Powers Act (IEEPA), President Carter took steps to free the hostages by issuing Executive Order

12170, which froze Iranian assets in the U.S. to put pressure on the Government of Iran. Executive Order

12170 allowed the U.S. to stop the transfer of “all property and interests in property of the Government of

Iran, its instrumentalities and controlled entities and the Central Bank of Iran, which are or become

subject to jurisdiction of the United States” (216). In addition, this Executive Order gave U.S. courts

jurisdictional authority to hear private cases of Americans harmed by the Iranian Revolution, and this

allowed the courts to allocate payment for damages in the United States by using Iranian owned assets.

Taking advantage of Executive Order 12170, Dames & Moore filed suit in the U.S. District Court of

California on December 19, 1979 against the Iranian Government, the Atomic Energy Organization of

Iran, and a number of Iranian banks. Dames & Moore claimed that its subsidiary, Dames & Moore

International, S.R.L. had entered into a contract with the Atomic Energy Organization. “As provided in

the terms of the contract, the Atomic Energy Organization terminated the agreement for its own

convenience on July 30, 1979” (217). Dames & Moore argued that the Iranian Government owed it

$3,436,694.30 plus interest “…for services performed …prior to the date of termination” (217). Dames &

Moore won the case since Iran, the defendant, did not show up to defend itself against the claim.

Therefore, the “…District Court issued orders of attachment directed against the property of the

defendants, and the property of certain Iranian banks was then attached to secure any judgment that might

be entered against them” (217). However, before Dames & Moore could receive the payments, the

American hostages were released following the signing of the Algiers Accords, which “…stated that ‘[it]

is the purpose of [the United States and Iran]…to terminate all litigation between the Government of each

party and the nationals of the other, and to bring about the settlement and termination of all such claims”
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(217). Under Executive Order 12294 (Feb. 24, 1981), the Reagan Administration agreed to the conditions

and nullified all right to Iranian assets, ordered the transfer of these assets to Iran, and suspended all

claims which could have been presented in the International Court of Justice. Treasury Secretary Regan

affirmed these agreements made by the Carter Administration. As a result, Dames & Moore filed an

action against Regan seeking injunctive relief in order to prevent the enforcement of the executive orders

and the loss of its payments.

Legal Issue: The legal issue was whether the executive order was valid and constitutional when it

overturned a court case that had already made a ruling. Can the President suspend and nullify American

citizens’ pending court claims against non-Americans without the approval of Congress and in the name

of foreign policy?

Holding and Reasoning: The Supreme Court found that the executive orders dissolving

judgments and suspending pending civil claims against Iran were constitutional. Even though Dames &

Moore argued that the executive order was unconstitutional because it overturned a judicial holding, The

Court, citing two main reasons, concluded that the President had not overstepped his authority. The first

basis was the Supreme Court’s finding and arguments in Youngstown Sheet & Tube Co. v. Sawyer

(1952). The Youngstown case only limited the power of the President to seize private property in

the absence of either specifically enumerated authority under Article II of the Constitution or

statutory approval given to him by Congress. During the Youngstown case, Justice Black reasoned

that “[t]he President’s power, if any, to issue the order must stem either from an act of Congress or from

the Constitution itself” (219). Justice Jackson also reasoned that“[w]hen the President acts pursuant to

an express or implied authorization for Congress, he exercises not only his own powers but also those

delegated by Congress” (219). Therefore, when the President and Congress are in agreement, there is a

strong presumption that the President’s actions are constitutional. If Congress stays neutral and silent, the
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Court may have to look at past practices and court rulings. When Congress is working against the

President, there is a possibility that he overstepped his authority. “Because the President’s action [in

1981]…was taken pursuant to specific congressional authorization, it is ‘supported by the strongest of

presumptions…of judicial interpretation, and the burden of persuasion would rest heavy upon any who

might attack it” (220). Because Congress stayed neutral, Justice Rehnquist used the findings of

Youngstown Sheet & Tube Co. v. Sawyer and Jackson’s arguments to conclude that the “…the

provisions of the IEEPA explicitly authorized the President to nullify the attachments and transfer the

assets” (220). However, the provisions of the IEEPA did not give the President authorization to suspend

claims in the courts because “[t]he claims…are not in themselves transactions involving Iranian property

or efforts to exercise any rights with respect to such property” (220). While the President claimed

authorization under the Hostage Act, it is clear that this act did not give him such ability. Instead, he

derives the power to suspend the claims in courts from “…a longstanding practice of settling such claims

by executive agreement without the advice and consent of the Senate” (221). Rehnquist proved this

argument using many examples. First, the President had entered into 10 different settlements with foreign

nations since 1952, and one of these was an $80 million settlement with the People’s Republic of China.

Second, the International Claims Settlement Act of 1949 “…implicitly approved the practice of claim

settlement by executive agreement “… [b]y creating a procedure to implement future settlement

agreements” (221). Third, past Supreme Court cases, such as United States v. Pink (1942), have

acknowledged that the President has some degree of power to enter into executive agreements without the

formal approval of the Senate. While a few examples drawn from the past do not grant the President

power and authority, the longstanding custom of executive orders, which have been known and allowed

by Congress, raises a strong presumption that this practice is constitutional.

Legal &Political Implications: The ruling of the Court in Dames & Moore v. Regan upheld the

President’s authority in foreign policy. President Carter was using the courts as a tool for foreign policy in
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an attempt to pressure Iran to free the American hostages, and this action ultimately worked. Since he

instituted the first executive order, it was within his constitutional authority to nullify it with the second.

Also, Congress did not interfere, so it therefore gave its implicit approval of the President’s actions. It

would have been dangerous for the Court to rule against the U.S. Government because it would have

restricted the President’s foreign policy power and potentially endangered the security of the U.S. by

publicizing what the Government would be unable to do in foreign affairs. As a result, enemies could use

such weaknesses against the U.S. in the future. Conclusively, the Court upheld the long continued

practice and custom of not restricting the President’s power in foreign affairs when Congress does not

object to his actions.