Dames & Moore v. Regan
Did the President of the United States have the constitutional and statutory authority to nullify attachments on Iranian assets, order the transfer of frozen Iranian assets out of the country, and suspend private American legal claims against Iran in United States courts, all pursuant to the executive agreement that ended the Iran hostage crisis?
The Decision
9-0 decision · Opinion by William H. Rehnquist · 1981
Majority Opinion— William H. Rehnquistconcurring ↓dissent ↓
The Supreme Court upheld the executive orders in a decision written by Justice William H. Rehnquist, with all nine justices agreeing on the core judgment, though two justices wrote separately to express some reservations (making the effective vote 9–0 on the main question). The Court found that the President had the authority both to nullify the attachments and transfer Iranian assets, and to suspend American claims pending in domestic courts, though it rested its reasoning on different legal foundations for each action.
On the question of nullifying attachments and transferring frozen Iranian assets, the Court found that IEEPA directly and explicitly authorized the President's actions. The statute's language was broad, granting the President power during a national emergency to 'nullify, void, prevent or prohibit' any transfer of property in which a foreign country has any interest. Because the President was acting with express congressional authorization, his power was at its highest level under the framework laid out by Justice Jackson's famous concurrence in the 1952 Youngstown steel seizure case — the so-called 'three-zone' analysis of presidential power.
The suspension of claims in American courts presented a harder question, because IEEPA did not specifically mention the power to suspend lawsuits. Here, the Court concluded that although Congress had not expressly authorized the suspension of claims, it had implicitly approved the practice. The Court pointed to a long and unbroken history — stretching back nearly to the founding of the Republic — in which Presidents had settled the claims of American citizens against foreign governments through executive agreements. Congress had never objected to this practice and had, in fact, created legislation like the International Claims Settlement Act that acknowledged and facilitated it. This pattern of congressional acquiescence, the Court reasoned, constituted an implicit invitation for the President to act, placing the President's authority in the favorable first zone of the Youngstown framework.
Crucially, the Court went out of its way to stress the extreme narrowness of its decision. Justice Rehnquist wrote that the ruling was 'limited to the necessity of the moment' and that the Court was not attempting to lay down any broad rules about presidential power. The opinion acknowledged that claims suspension raises serious constitutional questions, including possible Fifth Amendment takings concerns, but suggested that if the Claims Tribunal failed to provide Dames & Moore with a meaningful remedy, the company might still have a claim for compensation against the United States government in the Court of Claims. The opinion stands as a landmark example of the Court resolving a high-stakes separation-of-powers dispute while deliberately avoiding sweeping pronouncements about executive authority.
Concurring Opinions
Justice John Paul Stevens joined most of the Court's opinion but wrote separately to express reservations about Part III of the opinion, noting concerns about the breadth of the analysis regarding IEEPA's statutory authorization and emphasizing that the case should be decided on the narrowest possible grounds.
Dissenting Opinions
Lewis F. Powell Jr.
Justice Powell concurred with most of the Court's opinion but dissented from its treatment of the claims suspension issue. He agreed the President had authority to suspend the claims, but he believed the Court did not adequately address the serious Fifth Amendment concern: that suspending and effectively extinguishing Dames & Moore's legal claims amounted to a government taking of private property that required just compensation.
- The right to pursue a legal claim in court is a form of property protected by the Fifth Amendment, and the government's suspension and redirection of that claim to an international tribunal could constitute a taking requiring compensation.
- The Court should not have left the takings question for another day; the majority's suggestion that the Claims Tribunal might provide an adequate remedy was speculative and insufficiently protective of the company's constitutional rights.
Background & Facts
On November 4, 1979, Iranian militants stormed the United States Embassy in Tehran and took dozens of American diplomats and citizens hostage. In response, President Jimmy Carter declared a national emergency and, using the authority granted by the International Emergency Economic Powers Act (IEEPA), froze approximately $12 billion in Iranian government assets held in the United States. This meant no one could transfer, withdraw, or otherwise deal with those assets without government permission.
Dames & Moore was an American engineering and construction firm that had performed work under a contract with the Atomic Energy Organization of Iran. When Iran failed to pay, Dames & Moore filed a lawsuit in federal court in California, seeking over $3.4 million. The company also obtained a court order attaching (essentially, legally freezing) certain Iranian property in the United States to help guarantee any future judgment it might win. Many other American companies and individuals filed similar lawsuits against Iran during this period.
After more than a year of negotiations, the United States and Iran reached a deal known as the Algiers Accords on January 19, 1981 — the day before President Reagan's inauguration. Under this agreement, the hostages would be released, frozen Iranian assets would be transferred back to Iran (with some placed in a special fund), all American lawsuits against Iran in U.S. courts would be terminated, and the claims would instead be heard by a newly created international body called the Iran-United States Claims Tribunal, based in The Hague. On the day of his inauguration and in the weeks that followed, President Reagan issued executive orders implementing these terms.
Dames & Moore challenged these executive orders in federal court, arguing that the President had no legal authority to nullify the court-ordered attachment on Iranian property, transfer those assets out of the country, or suspend the company's lawsuit. The federal district court ruled against Dames & Moore, upholding the President's actions. Given the extraordinary national importance and urgency of the matter — the hostage agreement was being implemented in real time — the Supreme Court took the case on an expedited basis, bypassing the usual appeals court process. The case was argued on June 24, 1981, and decided just eight days later on July 2, 1981.
The Arguments
Dames & Moore argued that the President exceeded his constitutional and statutory authority by nullifying court-ordered attachments on Iranian property, ordering the transfer of Iranian assets out of the United States, and suspending lawful claims that American citizens had pending in federal courts. The company contended that no statute gave the President the power to take away an American company's right to pursue its day in court.
- IEEPA authorized the President to freeze assets during an emergency, but did not explicitly grant the power to permanently dispose of those assets by transferring them out of the country or to suspend private lawsuits in American courts.
- The executive orders effectively destroyed Dames & Moore's legal rights — including the court-ordered attachment — without any act of Congress and without providing adequate compensation, potentially violating the Fifth Amendment's prohibition on taking private property without just compensation.
- The President cannot unilaterally extinguish the legal claims of private American citizens against a foreign government through an executive agreement that was never approved by Congress or ratified as a treaty by the Senate.
The government argued that the President had ample authority to implement the Algiers Accords, drawing power both from specific congressional statutes like IEEPA and the Hostage Act, and from the President's inherent constitutional authority over foreign affairs, especially when reinforced by a long history of congressional acquiescence in executive claim settlements.
- IEEPA grants the President sweeping authority to deal with any property in which a foreign country has an interest during a declared national emergency, including the power to 'nullify, void, prevent or prohibit' any transfer or exercise of rights with respect to such property.
- Presidents have settled the claims of American citizens against foreign governments through executive agreements for nearly two centuries, and Congress has repeatedly acknowledged and even created mechanisms to implement such settlements, showing implicit approval of the practice.
- The resolution of the hostage crisis was a matter of the highest national security and foreign policy importance, and the President's power is at its maximum when acting in the realm of foreign affairs with at least the implicit backing of Congress.