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Kashani v. Tsann Kuen China Enterprise Co.

Court of Appeal of California, Second Appellate District, Division Five

May 11, 2004, Filed

B166041

Opinion

 [**176]  MOSK, J.—Plaintiffs Mir Kazem Kashani, Manoutcher G. Nikfarjam, and Shantia Hassanshahi (collectively plaintiffs) allege in their second amended complaint that they and defendant Tsann Kuen China Enterprise Co., Ltd., a Chinese corporation that is the parent corporation or owner of the other named defendants (collectively defendants), executed a written agreement whereby plaintiffs would establish an Iranian corporation in Iran to build a plant in Iran for manufacturing defendants' computer products to be sold in Iran and elsewhere and would provide defendants with 18 percent of the shares of the corporation. Plaintiffs further allege that in reliance on this agreement they expended monies on the project, began setting up the plant, and obtained necessary cooperation from the Government of Iran. According to plaintiffs, defendants ceased doing business [***2]  in the computer industry, in whole or in part, and decided not to proceed with the agreement. Plaintiffs filed an action for breach of contract seeking their expenditures and anticipated lost profits as damages. On appeal, plaintiffs waived their right to seek recovery for their out-of-pocket expenses.

 [*537]  The trial court granted defendants' motion for summary judgment on the ground that the alleged agreement is unenforceable as illegal and against public policy in that it violates United States presidential executive orders and implementing regulations, which prohibit, without a license, any “United States person” from engaging in any transaction, either directly or indirectly, that deals in or relates to the exportation, sale or supply of goods, technology or services to Iran or the Government of Iran or any investment in or financing of such transactions.

In affirming the summary judgment, we hold that plaintiffs legally cannot establish their claim because the agreement upon which plaintiffs' claim is based is illegal [**177]  and against public policy. We also hold that neither the presidential executive orders nor the regulations implementing the orders [***3]  should be interpreted to preclude defendants from prevailing on their affirmative defense of illegality.

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118 Cal. App. 4th 531 *; 13 Cal. Rptr. 3d 174 **; 2004 Cal. App. LEXIS 708 ***; 2004 Cal. Daily Op. Service 4052; 2004 Daily Journal DAR 5620

MIR KAZEM KASHANI et al., Plaintiffs and Appellants, v. TSANN KUEN CHINA ENTERPRISE CO., LTD., et al., Defendants and Respondents.

Prior History:  [***1]  Superior Court of Los Angeles County, No. BC262643, S. James Otero, Judge.

Disposition: Affirmed.

CORE TERMS

license, Regulations, Orders, Contracts, executive order, public policy, illegal contract, unenforceable, parties, technology, exportation, courts, OFAC, transactions, illegality, provisions, manufacture, arbitral, summary judgment, cause of action, sanctions, promise, affirmative defense, national security, state law, authorization, prohibitions, purposes, bargain, words

Civil Procedure, Summary Judgment, Entitlement as Matter of Law, General Overview, Appropriateness, Judgments, Burdens of Proof, Appeals, Summary Judgment Review, Standards of Review, Contracts Law, Defenses, Illegal Bargains, Commercial Law (UCC), Sales (Article 2), Form, Formation & Readjustment, Federal & State Interrelationships, Choice of Law, Significant Relationships, Public Policy Violations, Constitutional Law, Supremacy Clause, Supreme Law of the Land, Business & Corporate Compliance, Types of Commercial Transactions, Sales of Goods, International Trade Law, Forfeitures & Penalties, Transportation Law, Carrier Duties & Liabilities, Embargos, Criminal Law & Procedure, Terrorism, Terroristic Acts, Governments, Federal Government, International Emergency Economic Powers Act, Crimes Against Persons, International Law, Individuals & Sovereign States, Human Rights, Terrorism, Domestic Security, Contract Interpretation, Legislation, Overbreadth, Vagueness, Sentencing, Fines