Itek Corp. v. First National Bank of Boston

In 1977, Itek Corporation (plaintiff) sold equipment to Iran’s Ministry of War (ministry). The contract provided that the ministry would release Itek from the contract if the United States government canceled Itek’s Iran export license and that any dispute would be litigated in Iran under Iranian law. The contract further required Itek to obtain bank guarantees allowing the ministry to (1) obtain a refund of some of the down payment that the ministry paid until Itek earned it and (2) protect itself against Itek’s possible poor performance. Bank Melli Iran (Melli) (defendant) provided the guarantees. Melli required Itek to secure standby letters of credit from The First National Bank of Boston (FNBB) (defendant), which would be payable to Melli upon Melli’s certification that the ministry demanded payment from it on the guarantees. By February 1979, the ministry released most of the down-payment guarantee. However, a new government took power in Iran, leading the United States government to cancel Itek’s Iran export license in April 1979. In January 1980, Itek sued FNBB to limit Melli’s ability to collect on the letters of credit. The district court promptly granted the requested order. On March 11, Itek cancelled the contract and requested an order barring FNBB from paying Melli due to alleged fraud in the transaction. In April 1981, after Itek joined Melli as a defendant, the district court preliminarily enjoined FNBB from paying Melli, ruling that Melli did not have a colorable basis to demand payment. The court subsequently entered a permanent injunction, which was vacated on appeal due to new Treasury Department regulations. The district court then reentered the preliminary injunction. Melli appealed, arguing that Itek failed to show the requisite irreparable harm for a preliminary injunction because Itek had an adequate remedy at law: (1) suing the ministry in Iran for damages or (2) pursuing a claim with the Iran-United States Claims Tribunal (tribunal). Itek responded that (1) suing the ministry in Iran would be futile and (2) as of the January 1982 deadline for filing a tribunal claim, the tribunal’s jurisdiction appeared not to cover claims like Itek’s. Melli retorted that a later tribunal ruling showed that the tribunal would have had jurisdiction. Additionally, Melli contended that Itek failed to show fraud in the transaction because Melli had a colorable claim for payment.