California Court Refuses to Apply Iranian Law, in Part Because It Reflects Religious Ideology Rather Than Economic Interest

Plaintiff had been an Iranian citizen exposed to asbestos in Iran, from 1959 to 1979; he then moved to California (after defendants' negligent conduct took place), and developed mesothelioma and died.

In Sabetian v. Fluor Enterprises, Inc., decided a week ago by the California Court of Appeal (Justices Feuer, Perluss & Segal), Houshang Sabetian worked in Iran from 1959 to 1979, as an Iranian citizen, for the National Iranian Oil Company. He claimed that asbestos exposure at the facility caused testicular mesothelioma, and because of that the loss of his right testicle; the jury agreed, and found that the defendants, who were involved in constructing the facility, were negligent.

One question was what law applied—the law of Iran, or the law of California, the state to which Sabetian eventually moved after the asbestos exposure took place. In McCann v. Foster Wheeler LLC (Cal. 2010), the California Supreme Court dealt with a similar situation but involving Oklahoma law, and concluded Oklahoma law applied:

In light of the relevant facts of this case, we conclude that a failure to apply Oklahoma law would significantly impair Oklahoma's interest. The conduct for which plaintiff contends Foster Wheeler should be held liable—plaintiff's alleged exposure to asbestos during the application of insulation to a boiler designed and manufactured by Foster Wheeler—occurred in Oklahoma in 1957, at a time when plaintiff was present in Oklahoma and was an Oklahoma resident. As already discussed, the circumstance that Foster Wheeler is not an Oklahoma company—the circumstance relied upon by the Court of Appeal—is not a persuasive basis for finding that the failure to apply Oklahoma law would not significantly impair Oklahoma's interest. Oklahoma's interest in the application of its statute of repose applies equally to out-of-state businesses that design improvements to real property located in Oklahoma and to Oklahoma businesses that design such improvements situated within that state.

But here the Court of Appeal refused to apply Iranian law, in this case the Iranian law of damages:

[D]efendants filed a declaration from Mahmoud Katirai, an Iranian lawyer and scholar of Iranian law. On the issue of compensatory damages for personal injury, Katirai opined, "Under Iranian law, [p]laintiffs' remedies are limited to a statutory compensation ('diyeh') pre-determined by the legislature, plus financial damages such as medical expenses and loss of income…. This statutory compensation, which is based on Islamic law, has been codified in the Islamic [Penal Code of Iran], but are of [a] civil nature….

"Statutory compensation … calls for payment in certain commodities[;] … since payment in such commodities is no longer practical, however, the price of such commodities is determined each year by virtue of a decree of the Department of Justice[,] and Iranian courts are required to award [a] remedy based on such decision. Presently, the amount of the statutory compensation in cases of death is 2,310,000,000 Rials. During certain lunar months (i.e., Zel-ghadeh, Zel-hajeh, Rajab, and Moharam) which are called 'haram' (celebratory months), the amount of the statutory compensation in cases of death is 3,080,000,000 Rials." … Sabetian's recovery for his physical injury was … limited to a maximum of two times the amount allowed for a single injury, 5.4 billion Rials (approximately $128,000)….

[Under the California choice of law rule,] we must "examine 'each jurisdiction's interest in the application of its own law under the circumstances of the particular case to determine whether a true conflict exists.'" The Fluor defendants do not dispute California has a legitimate governmental interest in having its law applied. The principal purpose of a damages award under California tort law is "to compensate a wrongfully injured party for injury to person or property." As the McCann court observed, application of California law "to a current California resident who suffers an … illness as a result of his … prior exposure to asbestos in another jurisdiction would assist such residents in obtaining compensation for their injuries and in not becoming dependent on the resources of California for necessary medical, disability, and unemployment benefits." Thus, California's interest is substantial.

We disagree, however, with the Fluor defendants' characterization of Iran's interest as the promotion and protection of foreign investment in Iran. We must evaluate Iran's interest in the context of the particular Iranian law the Fluor defendants seek to apply.

The Fluor defendants assert the salient Iranian interest at issue is embodied in its Foreign Investment Act, which protects foreign companies doing business in Iran by applying Iranian law to claims arising from conduct in Iran. But the Fluor defendants seek to impose the limitation on compensation for personal injury actions as codified in the Islamic Penal Code of Iran "based on Islamic law," which provides statutory compensation as "provided in the [holy] religion" to compensate for unintentional conduct resulting in the "loss of a member."

The evidence submitted by the Fluor defendants highlights this interest served by Iranian law. They submitted an Iranian news article characterizing statutory compensation as the amount due to "a Muslim male" in a particular calendar year, as well as evidence showing the amount of statutory compensation depended on whether the victim's loss occurred in one of the "sacred" months of the year. In the case of the loss of a testicle, the Islamic Penal Code of Iran specifies payment of one-third the amount of full statutory compensation for removal of the right testicle, and two-thirds of the amount for the left, plus an additional proportion of the statutory compensation for impairment to general health. There can be no dispute these rules are "based on Islamic standards."

{Evidence submitted in support of the supplemental declaration indicates, without qualification, "during the sacred [haram] months, the [statutory compensation] amount would be increased by one third." Regardless of whether the rule would apply to Sabetian in this case, the variation in prescribed recovery by reference to the sacred months of the Iranian calendar illustrates the essential religious nature of Iran's law of statutory compensation.} …

[O]ur task is not to determine … [which] rule is the better or worthier rule, but rather to decide—in light of the legal question at issue and the relevant state interests at stake—which jurisdiction should be allocated the predominating lawmaking power under the circumstances of the present case."

The Fluor defendants are correct that "a jurisdiction ordinarily has the 'predominant interest' in regulating conduct that occurs within its borders, and in being able to assure individuals and commercial entities operating within its territory that applicable limitations on liability set forth in the jurisdiction's law will be available to those individuals and businesses in the event they are faced with litigation in the future."  McCann. That argument has some force here, where Sabetian's injury was caused by conduct that occurred in Iran while he was a resident of that country.

But the concern in McCann—that applying California's law would prevent Oklahoma from providing "any reasonable assurance … that the time limitation embodied in its statute would operate to protect … businesses in the future"—does not apply with the same force to the present circumstances where the Iranian law at issue does not seek to promote and protect foreign businesses with domestic business dealings, but rather, to ensure damages awards are consonant with state-endorsed religious teachings.

California's interest in protecting recovery of damages for injuries suffered by its residents would be severely impaired if Iranian law applied in light of the significant reduction in recovery under Iran's statutory compensation scheme. Sabetian suffered his injury while a resident of California [presumably because the initial exposure when he was an Iranian citizen led to disease after he moved to California -EV], and California has an interest in ensuring that Sabetian is fully compensated so he does not become dependent on California's resources for necessary medical, disability, and unemployment benefits. By contrast, Iran's interest in limiting damages paid by a foreign company to a California resident in accordance with the tenets of Islamic law (the same as Iranian companies) is relatively weak. Thus, California law applies to the Sabetians' recovery of compensatory damages.

I'm pretty skeptical about this analysis, but in any event I thought some of our readers might find it interesting.