Matthew A. Goldstein, PLLC v. DOS , 851 F.3d 1 ( 2017 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 21, 2016 Decided March 14, 2017
No. 16-5034
MATTHEW A. GOLDSTEIN, PLLC,
APPELLANT
v.
UNITED STATES DEPARTMENT OF STATE, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:15-cv-00311)
Matthew A. Goldstein argued the cause and filed the briefs
for appellant.
Katherine Twomey Allen, Attorney, U.S. Department of
Justice, argued the cause for appellees. With her on the brief
were Benjamin C. Mizer, Principal Deputy Assistant Attorney
General, and H. Thomas Byron, III, Attorney.
Before: GRIFFITH, SRINIVASAN, and MILLETT, Circuit
Judges.
Opinion for the Court filed by Circuit Judge GRIFFITH.
2
GRIFFITH, Circuit Judge: The plaintiff is a law firm that
advises clients on U.S. law that regulates the international arms
trade. Concerned that the State Department might enforce
arms-control regulations against it in a way that would force
disclosure of confidential client information, the law firm seeks
declaratory and injunctive relief. The district court dismissed
the action for lack of standing and ripeness. We affirm on the
ground that the plaintiff lacks standing to bring a pre-
enforcement challenge because it faces no credible threat of
enforcement.
I
A
The Department of State regulates international arms
brokering under the Arms Export Control Act and the
International Traffic in Arms Regulations (ITAR). In the
interest of national security, the Act authorizes the President to
designate various weapons and technologies as “defense
articles” and to regulate their import and export. 22 U.S.C.
§ 2778(a)(1). All weapons or technologies so designated are
placed on what is known as the United States Munitions List,
see id., which currently includes items such as ballistic
missiles, rockets, bombs, mines, tanks, and military
submarines.
The Act requires those who manufacture, import, or export
these defense articles to register with the U.S. government, see
id. § 2778(b)(1)(A)(i), according to procedures prescribed by
the ITAR, see 22 C.F.R. §§ 120-130. The Act also requires that
those seeking to finance, transport, or assist in the
manufacturing, export, or import of defense articles—i.e.,
brokers—register with the State Department and obtain
3
departmental approval before engaging in brokering activities.
See 22 U.S.C. § 2778(b)(1)(A)(ii)(I)-(III).
Part 129 of the ITAR governs these brokers. Before a
person may be approved to engage in brokering activities, he
must disclose to the State Department certain information,
including the specific activity he intends to undertake; the
name, nationality, address, and place of business of those
involved; a description of the defense article at issue; the
defense article’s destination; and what the defense article will
be used for. See 22 C.F.R. § 129.6(a)-(b). Registered brokers
must also file annual reports with the State Department and
maintain records related to their brokering activities. Id.
§§ 129.10-11.
As relevant here, in 2013 the State Department
promulgated a rule to clarify that “brokering activities” include
“[s]oliciting, promoting, negotiating, contracting for,
arranging, or otherwise assisting in the purchase, sale, transfer,
loan, or lease of a defense article or defense service,” id.
§ 129.2(b)(1)(ii), but exclude “activities by an attorney that do
not extend beyond the provision of legal advice to clients,” id.
§ 129.2(b)(2)(iv). The preamble to the rule elaborates that
“‘legal advice’ includes the provision of export compliance
advice by an attorney to a client.” Amendment to the
International Traffic in Arms Regulations, 78 Fed. Reg.
52,681, 52,681 (Aug. 26, 2013). According to the State
Department’s website, legal advice that is not considered a
brokering activity would also include
[a]dvising on the legality of a transaction, such
as advising whether a transaction is ITAR
compliant, tax rates or other laws may be
preferential, drafting of contract terms where
parties to the transaction have already been
4
identified by the client, representing [a] client to
a client-identified foreign party, conducting
ITAR audits, and/or providing training or
assistance with ITAR compliance procedures.
J.A. 103-04. Not all actions taken by attorneys are exempt from
the regulations, however. If attorneys
engage in activities that go beyond providing
consulting or legal advice, including being a
third party to the transaction, or . . . [if they]
engage[] in soliciting, locating a buyer or seller,
introducing or recommending specific parties,
structuring the transaction, marketing,
promoting, and/or negotiating ITAR-controlled
defense articles and services on behalf of their
clients beyond contract terms of already
identified foreign parties by [their] client, then
such activities may constitute brokering
activities under ITAR.
22 C.F.R. § 129.9.
The State Department has established an optional process
under the ITAR for requesting an official determination on
whether a particular activity constitutes brokering. See id.
Submitting such a request requires providing essentially the
same information needed to obtain approval for a brokering
activity, including the specific activities to be undertaken
5
and identities of all the parties involved. Id. § 129.9(a)(1)-(4). 1
B
Matthew A. Goldstein is the principal attorney in a law
firm that bears his name and specializes in providing legal
advice to clients involved in transactions subject to the ITAR.
Goldstein attests that his firm “regularly represents clients in
the preparation of the terms and conditions of sale, user
agreements, vendor certifications, and other legal documents”
for ITAR-related transactions. J.A. 51-52. According to
Goldstein, his firm’s clients often have not identified the
foreign parties that will be involved in prospective transactions
at the time the firm provides its legal advice.
Soon after the State Department promulgated its 2013
regulation explicitly excluding legal services from the ITAR’s
definition of brokering activities, Goldstein sought an advisory
opinion from the Department pursuant to 22 C.F.R. § 126.9(a),
asking whether six categories of services his firm provides
were regulated or exempt. These services include advising
clients on how to structure sales of defense articles, preparing
sales contracts for these items, drafting technical-assistance
agreements, advising on the availability of financing, advising
on and preparing sales proposals, and corresponding and
meeting with U.S. government officials. However, Goldstein
offered the State Department no details about any past or
contemplated transactions.
1
The 2013 rule created this official advisory-opinion process.
Prior to that rule taking effect, individuals could seek informal
advisory opinions, but those opinions were “not binding on the
Department of State.” 22 C.F.R. § 126.9(a) (2012).
6
Goldstein asserts that, nearly a year after he requested an
advisory opinion, the head of compliance at the State
Department called him to say that the services described in his
request would not be subject to Part 129 so long as his clients
did not pay his firm a contingency fee or a commission.
Relying on this advice, Goldstein withdrew his request. The
State Department responded with a letter, advising Goldstein
that his initial request and the phone conversation “lacked
sufficient detail for the Department to make an official
determination as to whether the activities discussed constituted
brokering activities.” J.A. 36 (emphasis added). The letter also
referred him to the Frequently Asked Questions page on the
State Department’s website.
Shortly thereafter, Goldstein’s firm filed suit in district
court alleging that the State Department lacked constitutional
and statutory authority to apply Part 129 to bona fide legal
advice and seeking declaratory and injunctive relief to prevent
the Department from requiring the firm to register as a broker.
After the firm filed suit, the State Department sent Goldstein
another letter. This letter, responding to the particulars of
Goldstein’s initial request for an advisory opinion, informed
him that providing traditional legal advice would not qualify as
a brokering activity—at least in situations where the foreign
party had already been identified. The reason for this
disclaimer, the Department subsequently explained, is that
lawyers qualify as brokers when they work to find foreign
counterparties to transactions for their clients; when the foreign
party is already known, the risk that the lawyer is acting as a
finder is eliminated.
The district court dismissed the firm’s lawsuit for lack of
standing. The court held that the complaint failed to allege with
specificity that the law firm was engaged in “brokering
activities” and what type of information the firm would need to
7
disclose that would run afoul of its duties of confidentiality.
The court also observed that the firm’s allegations of the State
Department’s threat of enforcement were speculative at best.
In addition, the court held, for similar reasons, that the
plaintiff’s claims were not ripe. The plaintiff timely filed its
notice of appeal, and we have jurisdiction pursuant to 28 U.S.C.
§ 1291.
II
“We review a dismissal for lack of standing de novo.”
Renal Physicians Ass’n v. U.S. Dep’t of Health & Human
Servs., 489 F.3d 1267, 1273 (D.C. Cir. 2007). In reviewing a
district court’s grant of “a motion to dismiss for want of
standing,” we “must accept as true all material allegations of
the complaint, and must construe the complaint in favor of the
complaining party.” Warth v. Seldin, 422 U.S. 490, 501 (1975).
The question before us is whether the law firm has
standing to seek to enjoin the State Department from enforcing
its regulations governing arms brokering. The firm has failed,
however, to demonstrate its standing to seek pre-enforcement
relief: it has not “suffered an ‘injury in fact[]’ that is (a)
concrete and particularized and (b) actual or imminent . . . .”
Sabre, Inc. v. U.S. Dep’t of Transp., 429 F.3d 1113, 1117 (D.C.
Cir. 2005) (quoting Friends of the Earth, Inc. v. Laidlaw Envtl.
Servs., Inc., 528 U.S. 167, 180-81 (2000)). It is true that a
plaintiff is not required “to expose himself to liability before
bringing suit to challenge the basis” for an enforcement action
by the government. MedImmune, Inc. v. Genentech, Inc., 549
U.S. 118, 128-29 (2007). After all, a plaintiff can seek pre-
enforcement review when the threat of enforcement is
“sufficiently imminent.” Susan B. Anthony List v. Driehaus,
134 S. Ct. 2334, 2342 (2014). But there is something
fundamental to a pre-enforcement challenge that is missing
8
here. There must be some desired conduct by the plaintiff that
might trigger an enforcement action in the first place. Cf.
Abbott Labs. v. Gardner, 387 U.S. 136, 154 (1967)
(“[P]etitioners have sufficient standing as plaintiffs [because]
the regulation is directed at them in particular; it requires them
to make significant changes in their everyday business
practices; if they fail to observe the [agency]’s rule[,] they are
quite clearly exposed to the imposition of strong sanctions.”);
Susan B. Anthony List, 134 S. Ct. at 2342 (explaining that pre-
enforcement constitutional challenges to criminal statutes
require plaintiffs to allege “an intention to engage in a course
of conduct . . . proscribed by [the] statute,” under which “there
exists a credible threat of prosecution” (quoting Babbitt v.
United Farm Workers Nat’l Union, 442 U.S. 289, 298 (1979))).
But here, we have no facts from which to conclude that the law
firm risks incurring any liability by failing to register with the
State Department. Indeed, Goldstein offers only vague and
general descriptions of legal activities that the firm intends to
undertake, none of which the State Department views as
brokering, as the Department has made abundantly clear on its
website and, more particularly, at oral argument before this
court. Unsurprisingly, then, the State Department has shown no
intention of enforcing the brokering regulations against
Goldstein’s law firm.
The 2013 regulation is straightforward: “[A]ctivities by an
attorney that do not extend beyond the provision of legal advice
to clients” are not brokering activities. 22 C.F.R.
§ 129.2(b)(2)(iv). The State Department understands all of the
activities Goldstein has described to fit under that umbrella. As
government counsel explained at oral argument, Goldstein has
“given no indication that” his firm does anything “extend[ing]
beyond” legal advice. Oral Arg. Tr. 30:3-10. In the State
Department’s view, then, there is no reason to believe that
Goldstein’s firm engages in brokering activities within the
9
meaning of Part 129. As long as the firm merely provides the
legal services Goldstein describes, it faces no material risk of
enforcement from the State Department. His firm therefore
need not fear that it will have to disclose confidential client
information or otherwise take steps to register.
True, an attorney like Goldstein could provide legal advice
in a manner that constituted brokering, but the State
Department has explained that the only such situation it has
identified is when an attorney acts as a “finder” by, for
example, helping clients to identify or locate foreign
counterparties for proposed transactions. See Oral Arg. Tr.
38:10-14 (government counsel explaining that “the only
example . . . that the Agency has been able to identify” of an
attorney providing legal advice in a manner that implicates the
brokering regulation involves the use of that “legal advice to
steer a client towards a particular buyer or a particular seller”). 2
The law firm simply has alleged no facts suggesting that it
intends to act as a finder in any capacity. Moreover, Goldstein
has expressly denied that his firm has any plan or desire to do
so. See Appellant’s Br. 24; see also Oral Arg. Tr. 38:14-16
2
The State Department has explained how this might work in
practice: “[F]or example, if someone comes to an attorney and they
want to sell controlled explosives, and they ask the attorney to draft
a general sales contract, that would be legal advice, [and] it would
not constitute brokering. But if the same person came to the attorney,
asked them to draft a general sales contract and the attorney happens
to also represent a buyer in Pakistan and knows the buyer would want
to buy these controlled explosives, and so the attorney recommends
that the contract be translated into Urdu knowing that this is going to
be the only likely buyer in the area, then the attorney might have used
non-legal knowledge and tried to steer the seller towards the
particular buyer even though he was engaging in legal advice.” Oral
Arg. Tr. 28:14-29:3.
10
(government counsel agreeing that “here the Plaintiff has
explicitly disclaimed” acting as a finder).
The law firm’s fear that it may be the target of Department
enforcement seems to be based on a misunderstanding of the
letter that Goldstein received from the State Department after
his firm filed suit, in which the Department advised that
Goldstein’s proposed activities would be exempt “as long as”
the foreign parties had already been identified. J.A. 40.
Focusing on the “as long as” language, the firm argues that it
must be subject to the requirements of Part 129 because it
“often” provides these services before its clients have identified
the foreign parties to proposed transactions. Appellant’s Reply
Br. 5 (“Defendants argue ‘Plaintiff has not adequately alleged
that he has engaged in or will engage in any conduct regulated
as brokering activity[] under part 129.’ . . . But Plaintiff has
repeatedly stated that it regularly provides legal advice to
clients on transactions where the clients have not identified all
parties to the transactions.”).
The letter, however, did not state that all legal advice on
international arms transactions in which foreign parties are
unidentified necessarily constitutes brokering. On the contrary,
the “as long as” language in the State Department’s letter
simply creates a limited safe harbor: when an attorney provides
ordinary legal services to a client in a situation where the
foreign party has been identified, it is especially clear that the
attorney is not helping to “find” the foreign party to the
transaction—and thus not engaging in brokering activities. If
the foreign party has not been identified, that merely leaves
open the possibility that the attorney may be acting as a finder.
But the State Department does not take the position that
attorneys engage in brokering every time they provide legal
advice relating to transactions with foreign parties not yet
identified. See Appellees’ Br. 27 (“[P]laintiff mistakenly
11
assumes that all advice on transactions in which the foreign
parties are not identified constitutes brokering.”). Rather, its
view is that attorneys must go outside the bounds of providing
proper legal counsel, and instead must actually undertake
brokering measures. Contrary to Goldstein’s argument, then,
the plaintiff’s stated intention to provide legal advice to clients
on transactions where foreign parties are unidentified does not
imply that it would face an enforcement action for failing to
register under Part 129.
Goldstein may not have provided the State Department
with enough information to make an official and binding
determination that any particular transaction of his would fall
outside the definition of brokering. See 22 C.F.R. § 129.9. But
taken as a whole, the State Department’s 2013 regulation
explicitly removing the provision of legal advice from the
definition of brokering activities, the Department’s letters to
Goldstein, and its representations at oral argument demonstrate
that, in the Department’s view, the firm is not subject to
regulation as a broker based on the firm’s proposed activities.
Therefore, because the firm alleges that it intends only to
provide legal advice and denies that it will act as a finder (or
collect a contingency fee) in the process, it has not shown that
it faces a meaningful risk that the State Department will seek
to enforce Part 129 against it, either by forcing it to register or
by penalizing it for failure to register. Without any credible
threat of enforcement, the firm has no injury to speak of that
would afford it standing to seek to enjoin enforcement of that
regulation in court.
III
The order of the district court dismissing the action for
lack of subject-matter jurisdiction is affirmed on the ground
that the plaintiff faces no credible threat of enforcement and
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therefore lacks the injury-in-fact necessary for Article III
standing.
So ordered.