Fulmen Company v. Office of Foreign Assets Control ( 2020 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
FULMEN COMP ANY, et al., )
)
Plaintiffs, )
)
v. ) Civil Case No. 18-2949 (RJL)
)
OFFICE OF FOREIGN ASSETS )
CONTROL, et al., )
)
Defendants. )
MEMORANDUM OPINION
Sor
March ~ I 2020 [## 16, 19]
Fulmen Company and Fulmen Group ("Fulmcn") brings this suit against the Office
of Foreign Assets Control ("OFAC"), the United States Department of the Treasury, and
Steven T. Mnunchin, in his official capacity as Secretary of the United States Department
of the Treasury (collectively, "the Government"), seeking to challenge OFAC's decision
to place Fulmen on its list of Specially Designated Nationals and Blocked Persons ("SDN
List"). Comp 1. ,i 1 [Dkt. # 1]. Fulmen alleges the Government violated the Fifth
Amendment of the United States Constitution and the Administrative Procedure Act
("APA"). Id. at ,i,i 35-69. The Government moves to dismiss, contending this Court lacks
subject-matter jurisdiction to adjudicate Fulmen's constitutional claims and that OFAC's
decision did not violate the AP A. Fulmen cross moves for summary judgment. Upon
consideration of the briefing, the relevant law, the entire record, and for the reasons stated
below, the Government's motion to dismiss is GRANTED and Fulmen's cross-motion for
summary judgment is DENIED.
BACKGROUND
I. Relevant Law
The United States has long relied on economic sanctions to further its foreign policy
and national security interests. See, e.g., Trading with the Enemy Act of 1917, 40 Stat. 411
(codified as amended at 50 U.S.C. app. §§ 1-44); 50 U.S.C. app. § 4305(b)(1) (as amended
in 1933). In 1977, Congress passed the International Emergency Economic Powers Act
(“IEEPA”), 50 U.S.C. §§ 1701 et seq., which grants the President broad discretion to
sanction foreign entities and individuals in the event there is a national emergency.
Specifically, it authorizes the President to:
. . . direct and compel, nullify, void, prevent or prohibit, any . . . transfer . . .
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). Since IEEPA’s passage, the President has imposed sanctions on
countries and foreign individuals engaged in terrorism, narcotics trafficking, and the
proliferation of weapons of mass destruction. See, e.g., Exec. Order No. 12978, 60 Fed.
Reg. 54579 (Oct. 21, 1995) (blocking assets of persons who “play a significant role in
international narcotics trafficking centered in Colombia”); Exec. Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 23, 2001) (blocking assets of persons determined “to have committed,
or to pose a significant risk of committing, acts of terrorism that threaten” national
security); Exec. Order No. 13382, 70 Fed. Reg. 38567 (June 28, 2005) (blocking assets of
persons who have engaged in transactions that have materially contributed to the
proliferation of weapons of mass destruction and their supporters).
2
As relevant here, the President issued Executive Order No. 12938 (“EO 12938”) in
1994, which concluded that the “proliferation of nuclear, biological, and chemical weapons
(‘weapons of mass destruction’) and of the means of delivering such weapons, constitute[d]
an unusual and extraordinary threat to the national security, foreign policy, and economy
of the United States.” 59 Fed. Reg. 58099 (Nov. 14, 1994). EO 12938 further declared a
national emergency to address that threat. Id. In 2005, the President issued Executive
Order No. 13382 (“EO 13382”) to take further action in response to the national emergency
declared in the 1994 order. 70 Fed. Reg. 38567 (June 28, 2005). In addition to the
individuals and entities specifically identified in the order, EO 13382 blocked all property
and interests in property of:
any foreign person determined by the Secretary of State, in consultation with
the Secretary of the Treasury, the Attorney General, and other relevant
agencies, to have engaged, or attempted to engage, in activities or
transactions that have materially contributed to, or pose a risk of materially
contributing to, the proliferation of weapons of mass destruction or their
means of delivery (including missiles capable of delivering such weapons),
including any efforts to manufacture, acquire, possess, develop, transport,
transfer or use such items, by any person or foreign country of proliferation
concern . . . [;]
any person determined by the Secretary of the Treasury, in consultation with
the Secretary of State, the Attorney General, and other relevant agencies, to
have provided, or attempted to provide, financial, material, technological or
other support for, or goods or services in support of, any activity or
transaction described in paragraph (a)(ii) of this section, or any person whose
property and interests in property are blocked pursuant to this order; and . . .
any person determined by the Secretary of the Treasury, in consultation with
the Secretary of State, the Attorney General, and other relevant agencies, to
be owned or controlled by, or acting or purporting to act for or on behalf of,
directly or indirectly, any person whose property and interests in property are
blocked pursuant to this order.
3
Id. § 1(a)(i)-(iv). EO 13382 also authorized the Secretary of the Treasury 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 this
order.” Id. § 6. The Secretary in turn delegated that authority to OFAC. See 31 C.F.R.
§§ 539.802 & 544.802.
Pursuant to that delegation, OFAC determines whether individuals and entities
qualify under EO 12938 or EO 13382. See id. Individuals and entities that qualify under
those orders (“Specially Designated Nationals” or “SDNs”) are placed on a list (“SDN
List”) and blocked. See EO 13382, § 1(a); 31 C.F.R. § 501.807. An entity designated by
OFAC as an SDN may “seek administrative reconsideration” or “assert that the
circumstances resulting in the designation no longer apply.” 31 C.F.R. § 501.807. In either
case, OFAC’s regulations permit the designated SDN to “submit arguments or evidence
that [it] believes establishes that [an] insufficient basis exists for the designation” and
“propose remedial steps . . . [to] negate the basis for designation.” Id. § 501.807(a). Under
OFAC’s regulations, an SDN may also request a meeting with OFAC. Id. § 501.807(c).
Any information submitted by an SDN “will be reviewed by [OFAC], which may request
clarifying, corroborating, or other additional information.” Id. § 501.807(b). After
reviewing a request for reconsideration, OFAC “provide[s] a written decision” to the SDN.
Id. § 501.807(d).
II. Factual Background
On November 21, 2011, OFAC designated Fulmen as an SDN under EO 13382,
concluding it had “engaged, or attempted to engage, in activities or transactions that have
4
materially contributed to, or pose a risk of materially contributing to, the proliferation of
weapons of mass destruction or their means of delivery” by Iran. See EO 13382, § 1(a)(ii);
see Admin. R. (“AR”) at 75, 76-77, 79. Specifically, OFAC determined that Fulmen “was
involved in procuring goods for the covert uranium enrichment facility at Qom while the
facility was still an undeclared site from 2006 through 2008.” AR at 76. OFAC further
found that “[f]rom May 2006 until at least September 2008, Fulmen was involved in many
facets of the construction of Qom” and “worked with the U.S.- and UN- designated firm
Kalaye Electric on the construction of elements of the Natanz Uranium Enrichment Plant.”
Id. In OFAC’s view, because Iran had not yet “established full and sustained suspension
of all enrichment-related and reprocessing activities, . . . Fulmen’s activities at both Qom
and Natanz . . . material[ly] contribut[ed] to those facilities’ gas centrifuge plant for
uranium enrichment.” Id. OFAC’s designation decision briefly noted that the European
Council, which administers the European Union’s sanctions program, had also designated
Fulmen on its sanction list. Id. at 77.
Prior to OFAC’s designation on the SDN List, Fulmen requested that the European
Council remove Fulmen from its sanctions list. AR at 476. The Council denied that
request. Id. at 476-77. Fulmen then sought relief in the EU General Court, which, in
November 2013, annulled the sanctions designation because the Council refused to
disclose its evidence to Fulmen. Id. at 471, 477. On December 17, 2013, the Council
ultimately removed Fulmen from its sanction list. Id. at 490.
On October 20, 2014, Fulmen requested OFAC’s reconsideration of its SDN List
designation. Id. at 83. Fulmen asserted that it had “no link to the Iranian government” and
5
was not “involved in any nuclear projects, including, as accused, at the sites of Qom and
Natanz.” Id. On February 6, 2015, OFAC acknowledged receipt of Fulmen’s request. Id.
at 293. On July 19, 2015, Fulmen wrote to OFAC again, reiterating its request for removal
and emphasizing that the European Council had removed Fulmen from its sanctions list.
Id. at 294-95. In Fulmen’s view, “the only reason that OFAC placed Fulmen Co. on its
SDN list was because this company was already on the European Union (EU) sanction
list.” Id.
On October 6, 2015, OFAC requested additional information from Fulmen,
including information regarding its relationship with two Iranian firms, Kalaye Electric and
Arya Niroo Nik; its involvement in the construction of the nuclear site at Qom; and whether
Fulmen had—in the last five years—provided any goods or services to Iran, Iranian entities
identified on the SDN list, or any Iranian nuclear sites. Id. at 320-21. In its May 24, 2016
response, Fulmen stated it had “no interaction” with Kalaye Electric and “no relationship”
with Arya Nirro Nik, and it denied any involvement in the Qom project. Id. at 335, 336.
Fulmen admitted, however, that it had been “involved in the design, construction, and
procurement of high voltage electricity delivery system[s] to municipalities and states
throughout Iran.” Id. at 336. It also represented that an entity named Saba Battery
“recently started manufacturing lithium batteries and Fulmen might use these products” for
certain projects. Id. at 384. Saba Battery, also known as Niru Battery Manufacturing
Company (“Niru Battery”), had been designated by OFAC as an SDN pursuant to EO
13382 since April 7, 2009. Id. at 67 n.5, 70 n.13; see also Additional Designation of
6
Persons and Identification of New Aliases Pursuant to Executive Order 13382, 74 Fed.
Reg. 19635-01, 19636 (Apr. 29, 2009).
On November 10, 2016, OFAC again requested more information from Fulmen.
Specifically, it sought information regarding Fulmen’s connection to Niru Battery and Saba
Battery, including details of business transactions with those entities, use of their
merchandise, and contact with their representatives. AR at 190-91. Fulmen responded on
December 27, 2016, asserting it “does not have any special and / or direct relationship with
Niru-Niroo/Saba Battery.” Id. at 193. It nevertheless acknowledged that “[i]n the past 10
years, Fulmen and its contractors have been purchasing Saba Batteries (Niru Battery) . . . .”
Id. at 195. In Fulmen’s view, however, it was “forced to purchase” batteries from Niru
Battery due to U.S. sanctions and Fulmen’s designation on the SDN List. Id. at 194. It
listed 19 transactions with Niru Battery, including several that occurred after OFAC
designated Niru Battery as an SDN. Id. at 197-98.
On July 20, 2018, OFAC denied Fulmen’s request to be removed from the SDN
List. Id. at 65-73 (evidentiary memorandum), 501-02 (letter to Fulmen). It explained:
After investigation and careful review of all the evidence before OFAC,
including classified and open source information as well as material
[Fulmen] submitted . . . , we find that Fulmen Company has not submitted
credible arguments or evidence establishing that an insufficient basis exists
for the company’s designation or that circumstances resulting in the
designation no longer apply. In particular, information available to OFAC
contradicts statements made in the submissions that Fulmen Company had
never worked with the Iranian firms Kalaye Electric or Arya Niroo Nik.
Id. at 501; see also id. at 503 (describing Fulmen’s relationship with those entities). OFAC
also concluded that in light of Fulmen’s “stated business relationship” with Niru Battery,
7
an entity on the SDN List—itself sanctionable conduct—OFAC was “unable to conclude
that Fulmen Company has engaged in remedial steps that would warrant the removal of
Fulmen Company from the SDN List.” Id. at 501-02. Although OFAC did not reveal to
Fulmen the classified information it considered in reaching its decision, it provided
“unclassified summaries.” Id. at 503. Those summaries reported that: (1) Fulmen “acted
as a procurement agent for the covert uranium enrichment facility at Qom;” (2) Fulmen
“worked with the U.S.- and U.N.-designated firm KALAYE ELECTRIC COMPANY on
construction of elements of the Natanz uranium enrichment plant;” (3) Fulmen “acted
through intermediaries, including Arya Niroo Nik, to procure or supply equipment to the
Qom or Natanz projects;” (4) Fulmen “had a financial relationship with the U.S.- and U.N.-
designated firm KALAYE ELECTRIC COMPAY from 2006 to 2008;” (5) Fulmen had
“dealings” with Arya Niroo Nik from 2007 to 2008; (6) Fulmen was “engaged in dealings”
with Kalaye Electric “in connection with what is likely the Qom site;” and (7) Fulmen’s
statements denying relationships with Kalaye Electric and Arya Niroo Nik, as well as its
“involvement in projects at the uranium enrichment facilities at Qom and Natanz,” were
not credible. Id.
After OFAC’s denial of Fulmen’s request for reconsideration, Fulmen filed this suit,
bringing several causes of action under the Fifth Amendment and the APA. Fulmen alleges
that OFAC violated its procedural and substantive due process rights because it failed to
provide Fulmen notice and opportunity to be heard before designating it as an SDN.
Compl. ¶¶ 38, 41. It further contends that OFAC violated the Takings Clause of the Fifth
Amendment by “completely depriv[ing]” Fulmen of “all economically beneficial use of its
8
name, reputation, property[,] and assets without just compensation.” Id. ¶ 46. Fulmen also
asserts various APA claims, primarily based on its assertion that OFAC was required to
remove Fulmen from the SDN list after The European Council removed Fulmen from the
EU’s sanctions list. See id. ¶¶ 53, 62. On March 25, 2019, the Government moved to
dismiss Fulmen’s complaint, and on April 22, 2019, Fulmen cross moved for summary
judgment. The parties completed briefing on both motions on June 2, 2019.
LEGAL STANDARD
Pursuant to Federal Rule of Civil Procedure 12(b)(1), plaintiff bears the burden of
establishing subject-matter jurisdiction. Grand Lodge of Fraternal Order of Police v.
Ashcroft, 185 F. Supp. 2d 9, 13 (D.D.C. 2001) “Standing is a necessary predicate to any
exercise of federal jurisdiction, and if it is lacking, then the dispute is not a proper case or
controversy under Article III, and federal courts do not have subject matter jurisdiction to
decide the case.” Prisology v. Fed. Bureau of Prisons, 74 F. Supp. 3d 88, 93 (D.D.C.
2014). “In deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(1), the Court must accept as true all well-pleaded factual allegations and draw all
reasonable inferences in favor of the plaintiffs.” Logan v. Dep’t of Veterans Affairs, 357
F. Supp. 2d 149, 153 (D.D.C. 2004). “[W]hen the inquiry focuses on the Court’s power to
hear the claim, [however,] the Court may give the plaintiff’s factual allegations closer
scrutiny and may consider materials outside the pleadings.” Id.
When evaluating a motion under Federal Rule of Civil Procedure 56, summary
judgment is appropriate when the pleadings and the evidence demonstrate that “there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
9
of law.” Fed. R. Civ. P. 56(a). In APA challenges, however, “the standard set forth in
Rule 56(a) does not apply because of the limited role of a court in reviewing the
administrative record.” Kadi v. Geithner, 42 F. Supp. 3d 1, 8 (D.D.C. 2012). In that
context, summary judgment “serves as the mechanism for deciding, as a matter of law,
whether the agency action is supported by the administrative record and otherwise
consistent with the APA standard of review.” Id. at 9.
ANALYSIS
I. Fulmen’s Constitutional Claims
Fulmen brings three claims under the Fifth Amendment of the United States
Constitution: (1) a procedural due process claim based on OFAC’s failure to provide notice
and an opportunity to be heard prior to its designation as an SDN; (2) a substantive due
process claim based on the Government’s “arbitrary decision to include [Fulmen] on the
SDN list without meaningful procedural protections;” and (3) a takings claim based on
OFAC’s failure to remove Fulmen from the SDN list, which Fulmen alleges “deprives [it]
of all economically beneficial use of its name, reputation, property[,] and assets without
just compensation.” Compl. ¶¶ 35-48. Unfortunately for Fulmen, each of those
constitutional claims fail for a simple reason: Fulmen lacks standing to assert them.
The Supreme Court has long held that non-resident aliens without substantial
connections to the United States are not entitled to Fifth Amendment protections. Jifry v.
F.A.A., 370 F.3d 1174, 1182 (D.C. Cir. 2004) (citing Johnson v. Eisentrager, 339 U.S. 763,
771 (1950)). As a foreign national, that long-standing rule applies to Fulmen, and it bars
Fulmen’s constitutional claims. Although the Supreme Court has recognized that “aliens
10
[that] have come within the territory of the United States and established ‘substantial
connections’ with this country” may be entitled to some constitutional protections, Fulmen
has not established any connection to the United States, let alone a substantial one. Id. at
1182-83 (quoting United States v. Verdugo-Urquidez, 494 U.S. 259, 271 (1990)). In fact,
Fulmen’s complaint alleges just the opposite, stating Fulmen “ha[s] no connections to any
U.S. person or U.S. entity.” Compl. ¶ 9 (emphasis added). And Fulmen only doubles
down on that admission in its briefing. See Pls.’ Reply in Supp. of Mot. for Partial Summ.
J. (“Pls.’ Reply”) at 7 [Dkt. # 22] (noting that Fulmen “has no significant nexus to the
United States” (emphasis added)).
Fulmen’s arguments to the contrary are not persuasive. It first attempts to leapfrog
the standing inquiry entirely, arguing instead that its claims must proceed because OFAC’s
administrative procedures were constitutionally inadequate. Pls.’ Opp. to Gov’t’s Mot. to
Dismiss (“Pls.’ Opp’n”) at 10-11 [Dkt. # 18]. But because Fulmen is not entitled to raise
Fifth Amendment challenges to OFAC’s decision-making, I need not—and indeed, should
not—assess whether that decision-making passes constitutional muster. See Prisology, 74
F. Supp. 3d at 93.
One point of clarification on this issue: In a suit challenging the Government’s
revocation of non-resident alien pilots’ airman certificates, our Circuit Court suggested that
I need not decide whether plaintiffs are entitled to Fifth Amendment protections when,
“even assuming that they are, they have received all the process that they are due.” Jifry,
370 F.3d at 1183. Relying on that reasoning, other district courts have recently declined
to reach the “antecedent” question of whether foreign plaintiffs are entitled to the
11
protections of the Due Process Clause, instead concluding their constitutional claims fail
on the merits and disposing of the suit on those grounds. See Fares v. Smith, 249 F. Supp.
3d 115, 122 (D.D.C. 2017); Joumma v. Mnuchin, Civ. A. No. 17-2780, 2019 WL 1559453,
at *10 n.13 (D.D.C. April 10, 2019). I am skeptical that our Circuit Court intended to
require us to skip the standing inquiry in all cases. And, in cases like this one, where
plaintiffs’ allegations foreclose their ability to assert constitutional claims, it seems
especially inappropriate to consider the merits. See People’s Mojahedin Org. of Iran v.
United States Dep’t of State, 182 F.3d 17, 22 (D.C. Cir. 1999) (noting, in a case where
plaintiffs’ foreign status was uncontested, that “a foreign entity without property or
presence in this country has no constitutional rights, under the due process clause or
otherwise”); see also 32 Cty. Sovereignty Comm. v. Dep’t of State, 292 F.3d 797, 799 (D.C.
Cir. 2002) (dismissing plaintiffs’ constitutional claims because they failed to demonstrate
either a property interest or presence in the United States). Because Fulmen’s own
pleadings demonstrate no property or presence in the United States, it cannot establish the
“substantial connections” necessary to potentially entitle it to constitutional protections as
a non-resident alien. 1
Fulmen also argues that it is “entitled to a constitutional claim for due process”
because OFAC “froze [its] assets and would not permit [it] to acquire any property in the
1
Fulmen points to Cardenas v. Smith, see Pls.’ Opp’n at 11 n.11, which at most recognized that
whether a non-resident alien can assert constitutional claims is a case-specific inquiry, 733 F.2d
909, 916-17 (D.C. Cir. 1984). That case does not control the result here. As noted supra,
subsequent D.C. Circuit and Supreme Court cases have clarified that a foreign national is not
entitled to constitutional protection absent substantial connections to the United States. Here,
Fulmen’s allegations confirm it has no connection to the United States.
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United States.” Pls.’ Opp’n at 11. I take Fulmen’s contention to mean that it either has
assets in the United States or hopes to acquire such assets. Neither framing saves Fulmen’s
claims. First, Fulmen’s complaint does not allege that it has assets in the United States that
were frozen by OFAC, or that it sought and was unable to acquire property in the United
States. See Compl. ¶¶ 9, 37-39, 46. It cannot now expand on its claims in a late-breaking
bid to establish “substantial connections” with the United States. See District of Columbia
v. Barrie, 741 F. Supp. 2d 250, 263-64 (D.D.C. 2010). Second, Fulmen’s statements are
conclusory, vague, and find no support in the administrative record. As such, they are
utterly insufficient to establish the kind of “substantial connection” necessary for a foreign
national to assert constitutional claims. See Conant v. Wells Fargo Bank, N.A., 60 F. Supp.
3d 99, 107 (D.D.C. 2014).
II. Fulmen’s APA Claims
Fulmen asserts that OFAC’s denial of its request to be removed from the SDN List
violated the APA because (1) it was arbitrary or capricious; (2) exceeded OFAC’s statutory
authority; and (3) was unwarranted by the facts. Compl. ¶¶ 51, 62, 69. Each of those
claims fails.
A. Whether OFAC’s Decision Was Arbitrary and Capricious
Under the APA, courts may “set aside OFAC’s action only if it is ‘arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with the law.’” Islamic
Am. Relief Agency v. Gonzalez, 477 F.3d 728, 732 (D.C. Cir. 2007) (quoting 5 U.S.C. §
706(2)(A)). This deferential standard of review does not permit a court to “substitute its
judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm
13
Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). Rather, a court must assess whether the
agency’s actions were “based on a consideration of the relevant factors and whether there
has been a clear error of judgment.” Id. A court must affirm if the agency’s findings are
supported by “substantial evidence” and there is a “rational connection between the facts
found and the choice made.” Burlington Truck Lines, Inc. v. United States, 371 U.S. 156,
168 (1962). “‘Substantial evidence’ is simply such relevant evidence as a reasonable person
might accept as proof of a conclusion.” Jifry, 370 F.3d at 1181. OFAC, in particular, is
entitled to even greater deference—indeed, “extreme[] deferen[ce]”—because its decisions
implicate national security and foreign policy. Islamic Am. Relief Agency, 477 F.3d at 734.
OFAC’s decision not to remove Fulmen from the SDN List was neither arbitrary
nor capricious. The record reflects that OFAC’s initial decision to include Fulmen on the
SDN List was based on Fulmen’s involvement “in procuring goods for Iran’s covert
uranium enrichment facility at Qom;” its involvement “in many facets of the construction
at Qom;” and its “work with U.S.- and U.N.- designated firm [Kalaye Electric Company]
on the construction elements of the Natanz Uranium Enrichment Plant.” AR at 66. In
denying Fulmen’s request for removal, OFAC requested and reviewed information
provided by Fulmen, and it responded to Fulmen’s arguments for reconsideration. Id. at
67-71. OFAC also considered classified evidence of Fulmen’s involvement with these
entities, and it provided unclassified summaries to Fulmen. 2 Id. at 501, 503. Based on its
2
On June 14, 2019, the Government submitted ex parte the classified information on which OFAC
relied, which the Court has since reviewed. See Notice of Classified Lodging [Dkt. # 24]; see also
50 U.S.C. § 1702(c); Olivares v. Transp. Sec. Admin., 819 F.3d 454, 462 (D.C. Cir. 2016)
(recognizing the court’s inherent authority to review classified material ex parte, in camera). That
14
review, OFAC concluded that Fulmen had failed to “submit[] credible arguments or
evidence establishing that an insufficient basis exists for the company’s designation”
because “information available to OFAC contradicts [Fulmen’s] statements” that it had
never worked with Kalaye Electric or Arya Niroo Nik. Id. at 501; see also id. at 503
(describing Fulmen’s involvement with these entities). And even if that evidence were not
enough, Fulmen admitted during OFAC’s reconsideration review that it had transacted on
numerous occasions with Niru Battery, an entity designated by OFAC as an SDN, which
independently warrants Fulmen’s SDN designation. See id. at 195, 197-98, 501-02; EO
13382, § 1(a)(iii). 3 Given that record, both classified and unclassified, as well as the
deference owed OFAC, I simply cannot conclude its denial of Fulmen’s request for
removal from the SDN List was arbitrary or capricious. Holy Land Found. for Relief &
Dev. v. Ashcroft, 219 F. Supp. 2d 57, 75 (D.D.C. 2002), aff’d, 333 F.3d 156 (D.C. Cir.
information provides additional detail about Fulmen’s conduct during the relevant period. To the
extent Fulmen seeks to challenge OFAC’s reliance on classified materials, that argument fails
under our Circuit Court’s precedent. See People’s Mojahedin Org. of Iran v. Dept’ of State, 327
F.3d 1238, 1242 (D.C. Cir. 2003) (approving nondisclosure of classified evidence under similar
circumstances).
3
Fulmen’s attempts to downplay this affiliation are not persuasive. Pls.’ Reply at 4-5. Fulmen
contends that in its response to OFAC’s request for additional information, it denied having a
“special and / or direct relationship” with Niru Battery. Id. at 5. That may be so. But Fulmen
admitted to numerous transactions with Niru Battery, and its characterization of the relationship is
irrelevant. See AR at 195, 197-98. Fulmen also argues that it was improper for OFAC to rely on
its transactions with a designated SDN because OFAC considers voluntary disclosure of past
violations as a mitigating factor. Pls.’ Reply at 4 & n.3. The fact that OFAC can consider
voluntary disclosure at the penalty stage does not mean that this Court can or should overturn
OFAC’s decision to decline to remove an entity from the SDN List that disclosed violations. And
here, Fulmen only disclosed the transactions during the reconsideration stage, after OFAC twice
asked for additional information. See AR at 190-91, 195, 197-98, 320-21, 384.
15
2003) (concluding the record “demonstrate[d] a reasonable basis” for OFAC’s
determination).
The European Council’s decision to remove Fulmen from its sanctions list does not,
of course, warrant a contrary result. Fulmen contends that OFAC violated its own
procedural requirements by failing to consider the EU’s ruling. Pls.’ Opp’n at 19-20. As
an initial matter, the record demonstrates that OFAC did consider the EU courts’ decisions,
and it explained why those decisions were not determinative. AR at 67 n.6. But more
importantly, nothing in IEEPA or OFAC’s regulations requires OFAC to consider a foreign
court’s decision to remove Fulmen from its sanction list. See 31 C.F.R. § 501.807. Fulmen
makes much of its claim that OFAC’s 2011 designation of Fulmen was “based on the
reciprocity system established with the EU.” Pls.’ Opp’n at 1; see also id. at 2, 4, 9, 19,
22. In Fulmen’s view, OFAC only imposed sanctions because the EU did, and it was
therefore required to remove sanctions if and when the EU did. The record, however, does
not support Fulmen’s assumption. OFAC included Fulmen on the SDN List after
concluding it met the criteria set forth in EO 13382. AR at 75, 76-77, 79. And OFAC is
certainly not bound by other countries’ decisions to sanction or not sanction particular
individuals and entities. It is tasked with protecting the national security, foreign policy,
and economic interests of the United States, see 59 Fed. Reg. 58099, 31 C.F.R. § 501.101,
and it is entitled to make its decisions based on the record before it, see 70 Fed. Reg. 38567,
§ 6.
In any event, I am “reluctant to rely on the decisions of other countries based on
information that likely differed from the administrative record compiled by and available
16
to OFAC.” Kadi, 42 F. Supp. 3d at 13. As another district court has pointed out, a foreign
country’s “decision[] may have been reached under different standards of proof or review,”
further “undermin[ing] any persuasiveness [it] would have.” Id.; see also Joumma, 2019
WL 1559453, at *3. Indeed, as Fulmen admits, EU courts impose a higher standard of
proof than OFAC. Pls. Opp’n at 2 n.4. And, moreover, the EU General Court’s decision
to annul the European Council’s sanctions designation of Fulmen was based on a
procedural flaw: The Council had refused to submit any evidence at all justifying its
designation of Fulmen. AR at 67 n.6. Here, OFAC made its decision based on developed
record evidence. 4
To the extent Fulmen challenges the facts underlying OFAC’s decision, see Compl.
¶¶ 64, 68, Pls.’ Reply at 8-9, those arguments are equally unavailing. Fulmen first asserts
that OFAC’s decision was not rational because it relied on “unreliable blogs, redacted
information[,] and more than 60 pages of undisclosed/secret information.” Pls.’ Reply at
8. Our Circuit Court, however, has permitted the Government to rely on a “on a broad
range of evidence, including intelligence data and hearsay declarations.” Holy Land
Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156, 162 (D.C. Cir. 2003). Nothing in this
record warrants a departure from that well-established precedent. Fulmen next appears to
4
Fulmen’s reliance on OFAC’s 2014 delisting of Ante Gotovina is similarly misplaced. Pls.’
Opp’n at 20-21. As the Government points out, Gotovina was designated pursuant to a different
Executive Order, which expressly permits designation of individuals “under open indictment by
the International Criminal Tribunal for the former Yugoslavia.” See Gov’t Reply in Supp. of Mot.
to Dismiss (“Govt’ Reply”) at 18-19 [Dkt. # 20] (citing 79 Fed. Reg. 7,280 (Feb. 6, 2014)). Thus,
when the International Criminal Tribunal acquitted Gotovina, the underlying rationale for that
particular designation no longer existed. Such considerations do not apply here, however, because
EO 13382 does not include foreign proceedings as a basis for designation on the SDN list.
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contend that OFAC erred in considering classified information because that information is
now available to international bodies and no longer secret. Pls.’ Reply at 8-9. That
argument makes little practical sense, and Fulmen offers no legal support for it. Id.
B. Whether OFAC Exceeded Its Statutory Authority
Pursuant to the APA, a court must “hold unlawful and set aside agency action,
findings, and conclusions” that are “in excess of statutory jurisdiction, authority, or
limitations, or short of statutory right.” 5 U.S.C. § 706(2)(C). Fulmen contends that
“OFAC’s decision to deny [its] delisting request exceeds the agency’s statutory authority
because [Fulmen] ha[s] already been cleared by the Court of Justice of the European Union
and removed from the European blocked list.” Compl. ¶ 62. OFAC has broad discretion
to block individuals pursuant to IEEPA and EO 13382, and this claim fails for the same
reasons Fulmen’s arbitrary-and-capricious claim fails. See supra at 16-17. Moreover, as
the Government points out, the primary statutory restriction contained in IEEPA—namely
that Executive’s power to block entities may only be exercised “to deal with an unusual
and extraordinary threat with respect to which a national emergency has been declared”—
contains no indication that OFAC’s designation decisions are determined by European
courts. 50 U.S.C. § 1701(b); Gov’t Mot. to Dismiss at 29 [Dkt. # 16]. And if that were not
enough, Fulmen fails to even press this claim in its opposition or cross-motion, thereby
conceding it. See Pls.’ Opp’n 18-22; see generally Pls.’ Reply.
C. Whether OFAC’s Decision Was Unwarranted by the Facts
A court must set aside an agency action that is “unwarranted by the facts to the
extent that the facts are subject to trial de novo by the reviewing court.” 5 U.S.C.
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§ 706(2)(F). Fulmen argues that de novo review of OFAC’s decision is appropriate here
because “there is no guidance as to the standard of review, or any standard for that matter,
by which OFAC must operate in rendering or removing its SDN designations.” Pls.’ Opp’n
at 21-22. That is plainly wrong.
De novo review of agency decisions is appropriate only in rare circumstances
“where there are inadequate factfinding procedures in an adjudicatory proceeding, or where
judicial proceedings are brought to enforce certain administrative actions.” Camp v. Pitts,
411 U.S. 138, 142 (1973). Indeed, our Circuit Court has never applied de novo review in
an APA case, and it has indicated that agency procedures “must be severely defective
before a court proceeding under the APA can substitute de novo review for review of the
agency’s record.” Zevallos v. Obama, 793 F.3d 106, 112 (D.C. Cir. 2015) (quoting Nat’l
Org. for Women v. SSA, 736 F.2d 727, 745-46 (D.C. Cir. 1984)) (emphasis added). Fulmen
fails to identify any particular procedure it deems defective, instead taking issue with the
substance of OFAC’s decision in light of Fulmen’s “adamant[] den[ials]” of involvement
with uranium enrichment programs in Iran. See Compl. ¶¶ 66-69; see also Pls.’ Opp’n at
21-22; Pls.’ Reply at 14-15. That does not warrant de novo review. Nor is this a case
where OFAC did not engage in any fact-finding procedures such that de novo review might
be appropriate. See Zevallos v. Obama, 10 F. Supp. 3d 111, 118 n.2 (D.D.C. 2014)(noting
OFAC’s submission of a lengthy administrative record); see also OKKO Bus. PE, 133 F.
Supp. 3d 17, 28-29 (D.D.C. 2015) (“At most, Plaintiff raises a question as to whether
OFAC adequately explained its decision, but such an inadequacy would not constitute ‘a
deficiency in fact-finding procedures such as to warrant the de novo review of OFAC’s
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fact-finding procedures.’” (quoting Pitts, 411 U.S. at 142)). Thus, Fulmen is not entitled
to de novo review, and its final APA claim accordingly fails.
III. Fulmen’s Other Arguments
None of Fulmen’s remaining arguments has merit. Fulmen first requests a writ of
mandamus requiring OFAC to remove Fulmen from the SDN List. To obtain such a writ,
Fulmen must establish “(1) a clear and indisputable right to relief, (2) that the government
agency or official is violating a clear duty to act, and (3) that no adequate alternative
remedy exists.” Am. Hosp. Ass’n v. Burwell, 812 F.3d 183, 189 (D.C. Cir. 2016). Fulmen
fails to satisfy those criteria. Most obviously, an adequate remedy exists for Fulmen’s
claims under the APA. See Citizens for Responsibility & Ethics in Wash. v. SEC, 916 F.
Supp. 2d 141, 151-52 (D.D.C. 2013). Fulmen also fails to establish a “clear and
indisputable right to relief” or violation of a “clear duty to act” because IEEPA and EO
13382 grant OFAC broad discretion to make designation determinations. See id. at 151;
see also Sulemane v. Mnuchin, Civ. A. No. 16-1822, 2019 WL 77428, at *8 (D.D.C. Jan.
2, 2019) (rejecting request for writ of mandamus and observing did not show “clear and
indisputable right to relief” in part because OFAC’s denial of reconsideration was not
arbitrary or capricious). In light of those failings, Fulmen’s request for mandamus is
denied.
Second, Fulmen seeks discovery prior to any ruling on summary judgment. Pls.’
Opp’n at 24. But Fulmen already agreed to a briefing schedule for summary judgment
without discovery. See Joint Meet & Confer Statement at 2 [Dkt. # 17]. And, absent
“evidence that the agency has given a false reason[,] . . . discovery is inappropriate in cases
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under the APA.” Kadi, 42 F. Supp. 3d at 10 (quoting Nat’l Treasury Employees Union v.
Seidman, 786 F. Supp. 1041, 1046 (D.D.C. 1992)); see also Motor Vehicle Mfrs., 463 U.S.
at 43 (“[A] court is not to substitute its judgment for that of the agency”). Nothing in the
record suggests OFAC acted in bad faith or engaged in improper behavior, nor is the record
“so bare . . . it prevents effective judicial review.” See OFAC v. Voices in Wilderness, 382
F. Supp. 2d 54, 62-63 (D.D.C. 2005).
Finally, in a Hail-Mary attempt to save its beleaguered claim that the EU’s decision
to delist Fulmen requires that OFAC do the same, Fulmen argues that the doctrine of
collateral estoppel applies and bars OFAC’s designation of Fulmen on the SDN List. Pls.’
Opp’n at 25-27. Please! Collateral estoppel requires, among other things, that the same
issue being raised was previously contested by the same parties and submitted for judicial
determination in the prior case. Martin v. Dep’t of Justice, 488 F.3d 446, 454 (D.C. Cir.
2007). That doctrine does not apply here because the United States was not a party to the
EU proceedings. AFL-CIO v. Fed. Labor Relations Auth., 835 F.2d 1458, 1462 (D.C. Cir.
1987) (requiring mutuality of the parties for collateral estoppel to apply against the
Government). Fulmen’s related argument that this Court is required to recognize and
enforce the EU’s delisting decision is equally meritless. See Pls.’ Opp’n at 27-28. “A
judgment of a foreign country ordinarily has no greater effect in the United States than in
the country where the judgment was rendered.” Restatement (Fourth) of Foreign Relations
Law § 487, Comment: d (2018). Thus, as the Government points out, “Fulmen can at most
ask this Court to recognize the EU courts’ decisions requiring the removal of Fulmen from
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the EU sanctions lists." Gov't Reply at 25. It cannot, however, require OFAC to remove
Fulmen from the SDN List.
CONCLUSION
For afl of the foregoing reasons, the Government's motion to dismiss is
GRANTED, and Fulmen's cross-motion for summary judgment is DENIED. A separate
order consistent with this decision accompanies this Memorandum Opinion.
United States District Judge
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