Zarmach Oil Services, Inc. v. United States Department of the Treasury, Office of Foreign Assets Control ( 2010 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
ZARMACH OIL SERVICES, INC., )
)
Plaintiff, )
)
v. ) Civil Action No. 09-2164 (ESH)
)
UNITED STATES DEPARTMENT )
OF THE TREASURY, OFFICE OF )
FOREIGN ASSETS CONTROL, )
)
Defendant. )
)
MEMORANDUM OPINION
Plaintiff Zarmach Oil Services, Inc. (“Zarmach”) has sued the United States Department
of the Treasury, Office of Foreign Assets Control (“OFAC”), seeking review under the
Administrative Procedures Act (“APA”), 5 U.S.C. §§ 701-706, of OFAC’s denial of a specific
license to release funds blocked pursuant to the sanctions regime against the Government of
Sudan. Zarmach argues that OFAC’s denial violates the APA because it is arbitrary and
capricious and contrary to law. Defendant has moved to dismiss and for summary judgment.
For the reasons stated herein, the Court will grant defendant’s motion.
BACKGROUND
I. STATUTORY FRAMEWORK
In 1977, Congress enacted the International Emergency Economic Powers Act
(“IEEPA”), 50 U.S.C. §§ 1701-1706, amending the Trading With the Enemy Act of 1917
(“TWEA”) and granting the President the authority to regulate various international economic
transactions during declared wars or national emergencies. Upon presidential declaration of a
national emergency “to deal with any unusual and extraordinary threat, which has its source in
whole or substantial part outside the United States, to the national security, foreign policy, or
economy of the United States,” 50 U.S.C. § 1701(a), IEEPA authorizes the President to:
regulate, direct and compel, nullify, void, prevent or prohibit, any
acquisition, holding, withholding, use, transfer, withdrawal,
transportation . . . of, or dealing in, or exercising any right, power,
or privilege with respect to, or transactions involving, any property
in which any foreign country or a national thereof has any interest
. . . with respect to any property, subject to the jurisdiction of the
United States . . . .
Id. §1702(a)(1)(B).
On November 3, 1997, President Clinton issued Executive Order No. 13067, which
authorized a series of economic sanctions against the Government of Sudan pursuant to IEEPA.
Finding that the Government of Sudan’s “continued support for international terrorism; ongoing
efforts to destabilize neighboring governments; and the prevalence of human rights violations,
including slavery and the denial of religious freedom” constituted “an unusual and extraordinary
threat to the national security and foreign policy of the United States,” Exec. Order No. 13067,
62 Fed. Reg. 59989 (Nov. 3, 1997), the President blocked “all property and interests in property
of the Government of Sudan that are in the United States [or] that hereafter come within the
United States.” Id. § 1. The Executive Order further authorized the Secretary of the Treasury,
“in consultation with the Secretary of State and, as appropriate, other agencies . . . to take such
actions, including the promulgation of rules and regulations, and to employ all powers granted to
[the President] by IEEPA, as may be necessary to carry out the purposes of [the] order,”
including redelegation of any of these functions to other officers and agencies of the United
States Government. Id. § 5.
On October 13, 2006, President Bush issued Executive Order No. 13412, which
maintained the blocking of the Government of Sudan and extended the scope of the blocking to
2
Sudanese petroleum and petro-chemical industries. See Exec. Order No. 13412, 71 Fed. Reg.
61369 (Oct. 13, 2006).
Pursuant to IEEPA and a delegation of authority by the Secretary of the Treasury,
31 C.F.R. § 538.802, OFAC has promulgated regulations to implement Executive Order Nos.
13067 and 13412. OFAC’s regulations provide that:
Except as authorized . . . , no property or interests in property of
the Government of Sudan, that hereafter come within the United
States . . . may be transferred, paid, exported, withdrawn or
otherwise dealt in.
31 C.F.R. § 538.201(a). The regulations further provide that:
Any transfer . . . which is in violation of any provision of this part
. . . and involves any property or interest in property blocked
pursuant to § 538.201 is null and void and shall not be the basis for
the assertion or recognition of any interest in or right, remedy,
power or privilege with respect to such property or property
interests.
31 C.F.R. § 538.202(a). Since 2000, OFAC has defined “Government of Sudan” to include the
Sudanese Petroleum Corporation (“Sudapet”), based on evidence that Sudapet was owned by the
Government of Sudan’s Ministry of Energy. (Declaration of Adam J. Szubin [“Szubin Decl.”]
¶ 20.)
OFAC defines the terms “property” and “property interest” to include “any other
property, real, personal, or mixed, tangible or intangible, or interest or interests therein, present,
future or contingent.” 31 C.F.R. § 538.310. The regulations further provide that “the term
interest when used with respect to property (e.g., ‘an interest in property’) means an interest of
any nature whatsoever, direct or indirect.” 31 C.F.R. § 538.307. The regulations define
“transfer” to mean:
any actual or purported act or transaction . . . whether or not done
or performed within the United States, the purpose, intent, or effect
of which is to create, surrender, release, convey, transfer, or alter,
3
directly or indirectly, any right, remedy, power, privilege, or
interest with respect to any property and, without limitation upon
the foregoing, shall include the making, execution, or delivery of
any assignment, power, conveyance . . . agreement, contract, . . .
[or] sale . . . .
31 C.F.R. § 538.313.
Under its sanctions programs, OFAC may, by request, issue a “specific license” to
authorize an otherwise prohibited transaction or service. See 50 U.S.C. app. § 5; 31 C.F.R. §
501.801. OFAC has interpreted its blocking authority under IEEPA and implementing executive
orders as granting it discretionary authority to issue or withhold such licenses based on national
security and foreign policy considerations, and OFAC regulations generally do not compel the
issuance of a specific license once certain criteria are met. (Szubin Decl. ¶ 15.) The Sudanese
Government’s interest in blocked property is extinguished once the property has been transferred
pursuant to an OFAC-licensed transfer. 31 C.F.R. § 538.403.
II. FACTUAL HISTORY
In November 2003, Cliveden Petroleum, Inc. (“Cliveden”), a corporation located in
Geneva, Switzerland, negotiated a lease with Sudapet for oil drilling rights in the Sudan.
(Compl. ¶ 5.) Pursuant to the lease, Cliveden requested that its bank, Banco Atlantico, Gibraltar,
transfer $915,102 via electronic wire to Sudapet’s bank. (Id. ¶ 7.) During the transfer, the funds
were unintentionally routed through the intermediary bank of Bank of New York Mellon in the
United States. (Id. ¶ 9.) Because the assets were destined for Sudapet, an entity defined by
OFAC as part of the Government of Sudan, OFAC blocked the transfer and froze the assets.
A month later, on December 2, 2003, Cliveden entered into an agreement to “irrevocably
and unconditionally assign to Zarmach all of its rights and benefits attached to the pending
4
blocked funds and to the related claim against the US Office of Foreign Asset Control.”1 (Id. ¶
17; Id. Ex. 3.) Despite this purported transfer of rights, on January 13, 2004, Banco Atlantico, on
behalf of Cliveden (which presumably no longer had any interest in the funds), applied to OFAC
for a license to allow the funds to be released. (Id. ¶ 13.) OFAC denied this request, explaining
that “the blocked funds transfer in question involves an interest of a Sanctions Target;
specifically, pursuant to Sudanese Sanctions Regulations, 31 C.F.R. Part 538” and that the
release of the blocked assets “would be inconsistent with U.S. sanctions policy.” (Id. Ex. 2.)
Subsequently, Cliveden wired a separate payment of $915,102 to Sudapet in order to
satisfy its obligations under the lease transaction. (Id. ¶ 16.)
On August 14, 2009, Zarmach submitted an Application for the Release of Blocked
Funds, seeking reconsideration of OFAC’s previous denial of a specific license regarding this
transaction. (Id. ¶ 18; Administrative Record [“AR”] at 000007-19.) On September 2, 2009,
OFAC denied Zarmach’s request. (Compl. Ex. 4.) OFAC explained that it “licenses the release
of blocked funds only under limited and compelling circumstances consistent with the national
security and foreign policy interests of the United States” and stated that while it had reviewed
the information submitted by Zarmach, OFAC had “determined once again that licensing the
release of the blocked funds would be inconsistent with OFAC policy,” as the transfer in
question involved “an interest of a sanctions target, specifically, Sudanese Petroleum
Corporation.” (Id.)
1
This transfer appears to have occurred pursuant to a corporate restructuring by Cliveden, which
currently no longer exists as a corporate entity and whose former Chairman is now the Chairman
of Zarmach. (Plaintiff’s Response to Defendant’s Motion to Dismiss and Motion for Summary
Judgment [“Pl.’s Opp.”] Ex. A.)
5
Zarmach initiated the present action on November 17, 2009, claiming that OFAC’s denial
of a license violates the APA and the Takings Clause of the Fifth Amendment to the
Constitution.
ANALYSIS
I. STANDARD OF REVIEW
When a district court reviews agency action under the APA, as is the case here, the court
may “reverse the agency action only if it is ‘arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.’” United Techs. Corp. v. U.S. Dep’t of Defense, 601 F.3d
557, 562 (D.C. Cir. 2010) (quoting 5 U.S.C. § 706(2)(A)). “This ‘standard is narrow and a court
is not to substitute its judgment for that of the agency. Nevertheless, the agency must examine
the relevant data and articulate a satisfactory explanation for its action[,] including a rational
connection between the facts found and the choice made.’” Id. (quoting Motor Vehicle Mfrs.
Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). In applying this
standard, the Court does not undertake its own fact-finding, Holy Land Found. For Relief and
Dev. v. Ashcroft (“Holy Land I”), 219 F. Supp. 2d 57, 67 (D.D.C. 2002), aff’d, 333 F.3d 156(D.C. Cir. 2003), but rather must base its review on the “administrative record that was before
the [agency] that the time [it] made [its] decision.”2 Citizens to Preserve Overton Park, Inc. v.
Volpe, 401 U.S. 402, 415 (1971). Summary judgment is an appropriate procedure for resolving a
challenge to a federal agency’s administrative decision when review is based upon the
administrative record, even though the Court does not employ the standard of review set forth in
Rule 56 of the Federal Rules of Civil Procedure. Richards v. I.N.S., F.2d 1173, 1177 & n.28
(D.C. Cir. 1977); Fund for Animals v. Babbitt, 903 F. Supp. 96, 105 (D.D.C. 1995).
2
Zarmach therefore cannot create a material issue of fact at this stage of the proceedings by
offering new “factual” information (i.e., the affidavit by the Chairman of both Cliveden and
Zarmach) that had not been previously submitted to OFAC. See also infra note 6.
6
An agency’s decision need not be “a model of analytic precision to survive a challenge,”
and “[a] reviewing court will ‘uphold a decision of less than ideal clarity if the agency’s path
may reasonably be discerned.’” Dickson v. Sec’y of Def., 68 F.3d 1396, 1404 (D.C. Cir. 1995)
(quoting Bowman Transp., Inc. v. Arkansas-Best Motor Freight Sys., 419 U.S. 281, 286 (1974)).
“The court, therefore, must be able to conclude that the agency ‘examine[d] the relevant data and
articulate[d] a satisfactory explanation for its action including a rational connection between the
facts found and the choice made.’” Kreis v. Sec’y of the Air Force, 406 F.3d 684, 686 (D.C. Cir.
2005) (quoting Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43). Accordingly, courts “‘do not defer to
the agency's conclusory or unsupported suppositions,’” United Techs., 601 F.3d at 562 (quoting
McDonnell Douglas Corp. v. U.S. Dep’t of the Air Force, 375 F.3d 1182, 1187 (D.C. Cir.
2004)), and counsel’s “post hoc rationalizations” cannot substitute for an agency's failure to
articulate a valid rationale in the first instance. El Rio Santa Cruz Neighborhood Health Ctr.,
Inc. v. U.S. Dep’t of Health & Human Servs., 396 F.3d 1265, 1276 (D.C. Cir. 2005); see
Burlington Truck Lines v. United States, 371 U.S. 156, 169 (1962). Such agency litigating
positions “are not entitled to deference because they do not necessarily reflect the views of the
agency, but rather may have been developed hastily, without adequate consideration of opposing
positions pursuant to the agency's normal deliberative process.” Public Citizen, Inc. v. Lew, 127
F. Supp. 2d 1, 10 (D.D.C. 2000).
Furthermore, courts owe a substantial measure of “deference to the political branches in
matters of foreign policy,” including cases involving blocking orders. Regan v. Wald, 468 U.S.
222, 242 (1984) (“Matters relating ‘to the conduct of foreign relations . . . are so exclusively
entrusted to the political branches of government as to be largely immune from judicial inquiry
or interference.’” (quoting Harisiades v. Shaughnessy, 342 U.S. 580, 589 (1952))); accord Holy
7
Land I, 219 F. Supp. 2d at 84 (“Blocking orders are an important component of U.S. foreign
policy, and the President’s choice of this tool to combat terrorism is entitled to particular
deference.”).
II. LEGAL ANALYSIS
Plaintiff’s principal claim is that OFAC’s refusal to grant it a specific license amounts to
a violation of 5 U.S.C. § 706(2)(A)-(C) of the APA. (Compl. ¶¶ 52-54; Pl.’s Opp. at 5.) Under
these provisions, this Court may vacate a decision by an agency if the decision is:
(A) arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law;
(B) contrary to constitutional right, power, privilege, or immunity;3
[or]
(C) in excess of statutory jurisdiction, authority, or limitations, or
short of statutory right . . . .
5 U.S.C. § 706(2)(A)-(C). The plaintiff claims that OFAC’s actions should be vacated under
each of the above provisions. (Pl.’s Opp. at 15-22.) The Court will address each seriatim.
A. Statutory Authority4
Zarmach claims that OFAC’s decisions to maintain the blocking were in excess of
OFAC’s statutory authority, arguing in its license application to OFAC that the Government of
3
In addition to claiming that the OFAC’s actions violate various constitutional provisions, and
thus should be vacated pursuant to the APA, the plaintiff’s complaint and its opposition
independently allege various constitutional violations. (Compl. ¶¶ 55-61; Pl.’s Opp. at 19-22.)
However, the claims are identical. Because the Court finds that the OFAC’s actions do not
violate the Constitution, and thus should not be vacated under the APA, the constitutional claims
necessarily must fail as well.
4
The “standing” arguments raised by defendant do not require extended analysis, as they are
almost entirely premised on the validity of OFAC’s blocking order, thereby implicating the
precise merits-based question associated with plaintiff’s claims. “[T]hough the trial court may
rule on disputed jurisdictional facts at any time, if they are inextricably intertwined with the
merits of the case it should usually defer its jurisdictional decision until the merits are heard.”
Herbert v. Nat’l Acad. of Sciences, 974 F.2d 192, 198 (D.C. Cir. 1992).
8
Sudan has “no ownership interest” in the blocked funds because the funds never actually reached
Sudapet’s possession, and because Cliveden subsequently satisfied its obligation to Sudapet
through a separate transaction. (AR-000007.)
IEEPA provides the President with broad authority to block “property in which any
foreign country or a national thereof has any interest.” 50 U.S.C. § 1702(a)(1)(B) (emphasis
added). A sanctions target need not have a “legally enforceable ownership interest” in assets in
order to subject them to blocking.5 Holy Land Found. for Relief & Dev. v. Ashcroft (“Holy Land
II”), 333 F.3d 156, 162-63 (D.C. Cir. 2003) (upholding OFAC’s broad definition of “property
interest”).
Congress has authorized the Executive Branch to define the statutory terms of IEEPA,
including the scope of the term “any interest,” 50 U.S.C. § 1704, and because OFAC is charged
with administering the provisions of Executive Order No. 13067 and has the authority to
promulgate regulations to effectuate its provisions, the agency’s broad definitions carry the force
of law. See 31 C.F.R. § 538.802; Consarc Corp. v. U.S. Treasury Dep’t, Office of Foreign
Assets Control, 71 F.3d 909, 914-15 (D.C. Cir. 1995) (OFAC is entitled to Chevron deference in
its interpretations of IEEPA, and its interpretation of its own regulations “receives an even
greater degree of deference than the Chevron standard, and must prevail unless plainly
inconsistent with the regulation”) (citation omitted); Consarc Corp. v. Iraqi Ministry, 27 F.3d
5Zarmach’s repeated reliance on the Rux litigation, a judgment action pursuant to the Terrorism
Risk Insurance Act of 2002, Pub. L. 107-297 (“TRIA”), is therefore inapposite. See Rux v. ABN-
Amro Bank N.V., No. 08-cv-6588, 2009 U.S. Dist. LEXIS 42847 (S.D.N.Y. April 14, 2009)).
While TRIA authorizes the attachment of certain blocked assets in which a terrorist party has an
actual ownership interest (“blocked assets of that terrorist party,” TRIA § 201(a)), the Sudanese
sanctions regime under IEEPA authorizes blocking assets in which the Government of Sudan has
any interest, even if it falls short of a legally enforceable ownership interest.
9
695, 701 (D.C. Cir. 1994) (The Treasury Department “may choose and apply its own definition
of property interests, subject to deferential judicial review.”).
Pursuant to this authority, OFAC defines the term “property interest” broadly to include
“any . . . property, real, personal, or mixed, tangible or intangible, or interest or interests therein,
present, future or contingent.” 31 C.F.R. § 538.310. See also id. § 538.307 (defining “interest,”
used with respect to property, as “an interest of any nature whatsoever, direct or indirect”).
Consequently, OFAC’s blocking of Cliveden’s transfer was within the scope of its statutory
authority, even if Sudapet’s interest in the assets took the form of an “indirect future or
contingent interest.” (Defendant’s Motion to Dismiss and Motion for Summary Judgment
[“Def.’s Mot.”] at 16.).
Zarmach argues, however, that the second payment from Cliveden to Sudapet
consummating their lease deal extinguished whatever property interest Sudapet may have once
had in the blocked assets, depriving OFAC of the statutory authority to continue blocking them.
OFAC regulations, however, provide only one method by which the Sudanese Government’s
interest in the funds may be extinguished: a valid license from OFAC, see 31 C.F.R. §
538.403(a), and contain no provision by which the efforts of a sanctions target and a company it
wishes to do business with can, on their own, “un-block” assets frozen by OFAC.
Furthermore, the exercise of OFAC blocking authority over the assets is not, as Zarmach
claims, an exercise in “extraterritorial jurisdiction.” (Pl.’s Opp. at 13.) The regulations
explicitly prohibit the transfer of any “property or interests in property of the Government of
Sudan, that are in the United States, that hereafter come within the United States, or that are or
hereafter come within the possession or control of U.S. persons, including their overseas
branches.” 31 C.F.R. § 538.201(a) (emphasis added). It is undisputed both that the blocked
10
funds came within U.S. jurisdiction during the course of the original transfer (Compl. ¶ 9), and
are currently held by the Bank of New York Mellon, (id. ¶ 32). Once blocked, the assets cannot
be transferred except pursuant to an OFAC license. See 31 C.F.R. §§ 501.801, 538.201,
538.202, 538.403. This result is not altered by the fact that a foreign entity has an interest in the
blocked funds, or that one such foreign entity purports to transfer the funds to another foreign
entity, as “to have enforceable rights in the United States, [the assignee] must find authority for
the assignment somewhere in United States law.” Havana Club Holding, S.A. v. Galleon S.A.,
203 F.3d 116, 122 (2d Cir. 2000) (Under the Cuban Assets Control Regulations, blocked assets
cannot be transferred without authorization from OFAC.).
The Court also notes the consistent refrain by Zarmach that OFAC’s continued refusal to
issue it a license fails to advance the policies and goals of the United States’ sanctions program
against Sudan. (See, e.g., AR-000007 (“The funds no longer serve any U.S. policy purpose, as
neither Sudan nor [Sudapet] assert any ownership interest in the funds.”); Compl. ¶ 48 (“The
present circumstances offer no incentive or impetus for Sudan, or any of its decision makers to
change its behavior, because it has absolutely no interest in the frozen funds belonging to
Zarmach.”); id. ¶ 49 (“Punishing and withholding the funds . . . fulfills none of the purposes of
the Sudanese Sanctions.”); Pl.’s Opp. at 5 (“Nothing in [the designation of Sudapet as a blocked
entity] was intended to punish foreign business operating outside of the United States from doing
business with Sudan.”).) This policy argument, however, has no legal merit.
Zarmach may indeed believe that OFAC’s policy of refusing to unblock transfers made
through U.S. banks between foreign companies and sanctions targets is an ineffective strategy
for exerting pressure on foreign governments. But as OFAC has asserted, such a policy
discourages companies worldwide from doing business with the sanctions target and places
11
companies at risk for having their assets frozen should they inadvertently be routed through the
United States, increasing transaction costs on such businesses and forcing sanctions targets to
pay higher prices for goods and services. (See Def.’s Mot. Ex. A, Declaration of Adam J. Szubin
(Mar. 10, 2010) ¶ 11.) If companies knew they could recover blocked assets simply by re-paying
the sanctions target by other means, OFAC’s blocking authority would be severely diminished,
thereby reducing the President’s leverage in dealing with sanctions targets. (Id. ¶¶ 11-12.) In
any event, this Court declines to adjudicate such matters of strategy and tactics relating to the
conduct of foreign policy, which “are so exclusively entrusted to the political branches of
government as to be largely immune from judicial inquiry or interference.” Regan, 468 U.S. at
242.
B. Arbitrary and Capricious
Zarmach argues that OFAC’s decision to deny a license was arbitrary and capricious
because (1) the basis for this decision cannot reasonably be discerned and (2) OFAC has treated
it differently than a similarly situated party—namely, the Government of Ethiopia. (Id. at 16-
19.)
1. Basis for OFAC’s Decision
The basis in the administrative record for OFAC’s decision to deny a specific license is
clear. Both Cliveden’s original application for a license and Zarmach’s request for
reconsideration of OFAC’s initial denial stated that Sudapet was the intended beneficiary of the
original transfer. (AR-000004, AR-000005, AR-000010.) Sudapet had previously been
designated by OFAC as part of the Government of Sudan. The administrative record is clear that
because the transfer involved “an interest of a sanctions target,” the funds were subject to
blocking and a specific license would be inconsistent “with the national security and foreign
policy interests of the United States.” (AR-000001; AR-000006.) The fact that OFAC reached
12
this decision despite Zarmach’s argument that neither Sudan nor Sudapet had any “ownership
interest in the funds” (AR-000007 (emphasis added)) does not mean that OFAC’s path cannot
“reasonably be discerned.’” Dickson, 68 F.3d at 1404.6
2. OFAC Action Involving Government of Ethiopia
Zarmach challenges OFAC’s decision as inconsistent with its treatment of blocked funds
destined for Sudan from the Government of Ethiopia, arguing that because OFAC “consider[ed]
a release” of Ethiopia’s blocked assets, “it would be absurd not to draw the same conclusion in a
scenario which mirrors the same facts.” (Pl.’s Opp. at 17-18.)
While an agency “must treat similar cases in a similar manner unless it can provide a
legitimate reason for failing to do so,” Indep. Petroleum Ass’n of Am. v. Babbitt, 92 F.3d 1248,
1258 (D.C. Cir. 1996), this Court is mindful that “[a] review of a decision made by OFAC is
‘extremely deferential’ because OFAC operates ‘in an area at the intersection of national
security, foreign policy, and administrative law,’” Empresa Cubana Exportadora de Alimentos y
Productos Varios v. United States Dep’t of Treasury, 606 F. Supp. 2d 59, 68 (D.D.C. 2009)
(quoting Islamic Am. Relief Agency v. Gonzales, 477 F.3d 728, 734 (D.C. Cir. 2007)).
Here, OFAC has proffered sufficient legitimate reasons for treating these cases
differently. As an initial matter, it bears noting that while OFAC “considered” issuing a license
for the release of Ethiopia’s blocked assets, it never actually did so. (Pl.’s Opp. at 18;
Defendant’s Reply [“Def.’s Reply”] at 10.) Furthermore, OFAC was faced with a specific
request from a foreign country (as opposed to a private business), and “based on strong foreign
6
Zarmach’s assertions in both its Complaint and in a sworn declaration by its own chairman that
“Sudan has no interest in the blocked funds” does not alter this analysis. Even if the Court were
required to credit such allegations—which it is not, as they represent legal conclusions—the
issue before the Court is based on the record before OFAC at the time of its decision, Citizens to
Preserve Overton Park, Inc., 401 U.S. at 415, and whether the agency can demonstrate a
“rational connection between the facts found and the choice made,” Kreis, 406 F.3d at 686.
13
policy guidance from the State Department and its own consideration of the national security and
foreign policy interests involved,” OFAC considered the possibility of issuing a license. (AR-
000153–54) Such foreign policy considerations are owed substantial deference by this Court,
Regan, 468 U.S. at 242, and certainly constitute “legitimate reasons” for reaching a different
outcome. Zarmach has therefore not met its burden of establishing that OFAC’s differing
treatment of its assets and those of the Government of Ethiopia was arbitrary and capricious.
C. Constitutional Claims
1. Takings Clause of the Fifth Amendment
Zarmach alleges that OFAC’s refusal to grant it a license violates the Takings Clause of
the Fifth Amendment. (Compl. ¶ 53, 55-61.) Under the Fifth Amendment, no “private property
[shall] be taken for public use, without just compensation.” U.S. Const. amend. V. This claim
must be dismissed.
As an initial matter, the Court lacks subject matter jurisdiction over this claim, which is
properly brought before the United States Court of Federal Claims pursuant to the Tucker Act,
28 U.S.C. § 1491(a)(1). Dames & Moore v. Regan, 453 U.S. 654, 688-89 (1981) (noting that
Court of Federal Claims is the proper forum for claims alleging an unconstitutional taking).
Moreover, it is no answer for plaintiff to argue that it seeks not compensation but a judgment
setting aside OFAC’s decision. Ry. Labor Executives’ Ass’n v. United States, 987 F.2d 806, 816
(D.C. Cir. 1993) (“The Taking Clause does not prohibit the government from taking private
property. The Clause requires only that the government accomplish the taking in a particular
way, namely, by paying for the property.”); Islamic American Relief Agency v. Unidentified FBI
Agents, 394 F. Supp. 2d 34, 51 (D.D.C. 2005) (finding Court of Federal Claims is proper forum
for takings claim in suit challenging IEEPA blocking under APA), aff’d in part sub nom. Islamic
Am. Relief Agency v. Gonzales, 477 F.3d 728 (D.C. Cir. 2007).
14
But even if this Court had jurisdiction over plaintiff’s Takings Clause claim, which it
does not, the claim fails as a matter of law. It is well-established that the blocking of assets
pursuant to an executive order is not a taking within the meaning of the Fifth Amendment.
Islamic American Relief Agency v. Unidentified FBI Agents, 394 F. Supp. 2d at 51; Holy Land I,
219 F. Supp. 2d at 78 (citing multiple cases for the proposition that the blocking of assets does
not “as a matter of law, constitute takings within the meaning of the Fifth Amendment”).
Accordingly, plaintiff’s Fifth Amendment claim will be dismissed.
2. Fourth Amendment
Zarmach further claims that OFAC’s “continued blocking” of the funds constitutes an
unreasonable seizure contrary to the Fourth Amendment. This claim, too, must fail. As an initial
matter, such a claim, having been raised for the first time in plaintiff’s opposition, is not properly
before the Court. See Sharp v. Rosa Mexicano, 496 F. Supp. 2d 93, 97 n.3 (D.D.C. 2000)
(“[P]laintiff may not, through summary judgment briefs, raise the new claims . . . because
plaintiff did not raise them in his complaint, and did not file an amended complaint.”); DSMC,
Inc. v. Convera Corp., 479 F. Supp. 2d 68, 84 (D.D.C. 2007) (rejecting plaintiff’s attempts to
broaden claims and thereby amend its complaint in opposition to defendant's motion for
summary judgment).
Even if the Court were to read Zarmach’s vague assertion that “OFAC’s refusal to grant a
license . . . is contrary to constitutional rights afforded to Zarmach” (Compl. ¶ 53), as somehow
containing the requisite specificity necessary to assert a Fourth Amendment violation, this claim
would fail. As the Court in Holy Land I noted, “the Government plainly had the authority to
issue the blocking order pursuant to the IEEPA and the executive orders and the Court has
determined that its actions were not arbitrary and capricious. Further, the case law is clear that a
blocking of this nature does not constitute a seizure.” Holy Land I, 219 F. Supp. 2d at 78-79
15
(citing Tran Qui Than v. Regan, 658 F.2d 1296, 1301 (9th Cir. 1981); D.C. Precision Inc. v.
United States, 73 F. Supp. 2d 338, 343 n.1. (S.D.N.Y. 1999); Can v. United States, 820 F. Supp.
106, 109 (S.D.N.Y. 1993)); Islamic American Relief Agency v. Unidentified FBI Agents, 394 F.
Supp. 2d 34 at 48 (“[T]his Court agrees that the OFAC’s blocking of the [plaintiff’s] assets does
not create a cognizable claim under the Fourth Amendment.”). The Court therefore rejects
plaintiff’s belated attempt to assert a Fourth Amendment claim.
CONCLUSION
For the foregoing reasons, the Court grants defendant’s motion for summary judgment.
A separate order accompanies this Memorandum Opinion.
/s/
ELLEN SEGAL HUVELLE
United States District Judge
Date: November 16, 2010
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