Global Relief v. O'Neill, Paul

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-2536
GLOBAL RELIEF FOUNDATION, INC.,
Plaintiff-Appellant,
v.
PAUL H. O’NEILL, Secretary of the Treasury, et al.,
Defendants-Appellees.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 02 C 674—Wayne R. Andersen, Judge.
____________
ARGUED OCTOBER 29, 2002—DECIDED DECEMBER 31, 2002
____________
Before CUDAHY, COFFEY, and EASTERBROOK, Circuit
Judges.
EASTERBROOK, Circuit Judge. Following the terrorist
attack of September 11, 2001, the President issued an
executive order declaring a national emergency and au-
thorizing the Secretary of the Treasury to freeze the as-
sets of groups that “assist in, sponsor, or provide financial,
material, or technological support for, or financial or oth-
er services to or in support of, such acts of terrorism” to
the extent that statutes permit freezes. Executive Order
13224 §1(d)(i), 66 Fed. Reg. 49079 (Sept. 23, 2001). Author-
ity for this order lies in the International Emergency
2 No. 02-2536
Economic Powers Act (IEEPA), 50 U.S.C. §§ 1701-07, which
after Executive Order 13224 was amended by the USA
PATRIOT Act, Pub. L. 107-56, Title I, §106, 115 Stat. 272(Oct. 26, 2001). On December 14, 2001, the Secretary used
the delegated authority to block all assets of Global Re-
lief Foundation, Inc., an Illinois charitable corporation
that conducts operations in approximately 25 foreign en-
tities, including Afghanistan, Albania, Bosnia, Kosovo,
Iraq, Lebanon, Pakistan, Palestine (West Bank and Gaza),
Russia (Chechnya and Ingushetia), Somalia, and Syria.
The provision underlying this action is §1702(a)(1)(B),
which provides that the President may
investigate, block during the pendency of an inves-
tigation, regulate, direct and compel, nullify, void,
prevent or prohibit, any acquisition, holding,
withholding, use, transfer, withdrawal, transporta-
tion, importation or exportation 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 by any person, or with respect
to any property, subject to the jurisdiction of the
United States[.]
Global Relief Foundation (which goes by the acronym GRF)
denies that any “foreign . . . national” has an “interest” in
its assets, and it asked the district court to enjoin the
blocking order for this reason and several others said to
be rooted in the Constitution. The district court denied
this request, see 207 F. Supp. 2d 779 (N.D. Ill. 2002), and
GRF has appealed.
When the district court acted, the blocking order was an
interim step pending investigation. The freeze on Decem-
ber 14 was accompanied by a search of GRF ’s headquar-
ters, and the Treasury Department planned to use evi-
dence obtained from the search, plus submissions it invited
No. 02-2536 3
from GRF, to decide whether to extend the freeze. One ele-
ment of relief that GRF requested was an injunction against
the extension, which would be accomplished by naming
GRF a “Specially Designated Global Terrorist” under
Executive Order 13224. On October 18, 2002, shortly before
oral argument, the Office of Foreign Assets Control listed
GRF as a Specially Designated Global Terrorist. See
. Designation does not change the
status of GRF ’s assets and records, which remain in Trea-
sury’s control. But it does affect the scope of arguments
available on appeal. Because the designation is a fait
accompli, a court cannot enjoin its making—though a
court might direct the Office of Foreign Assets Control
to lift it. To the extent that GRF was attacking the factual
support for the interim order, time has passed that issue
by; the right question now is whether the designation
of October 18 is supported by adequate information,
and that question cannot be resolved until the district
court has assembled a new record. What is more, some of
GRF ’s principal legal theories drop out of the case. It con-
tended, for example, that Executive Order 13224, which
was issued before enactment of the USA PATRIOT Act, could
not have delegated to the Secretary of the Treasury those
powers added to the IEEPA by the new law. The change
that potentially affected this case was the addition to
§1702(a)(1)(B) of language authorizing asset freezes pend-
ing investigation. Now that the investigative stage is
over, however, the amendment to the IEEPA does not mat-
ter to the freeze, and it is correspondingly inappropri-
ate for us to decide whether Executive Order 13224 dele-
gates powers enacted after September 23, 2001.
Appellees make a broader argument: that the appeal
is moot and should be dismissed. Obviously the suit is
live. Treasury has blocked GRF ’s accounts and thus effec-
tively shut down its operations across the globe. A federal
4 No. 02-2536
court could order Treasury to end the freeze. When relief
is possible, a lawsuit is not moot. See Spencer v. Kemna,
523 U.S. 1 (1998); Hall v. Beals, 396 U.S. 45 (1969). One
application of this principle is that suits seeking money
damages, as GRF does, cannot become moot unless the de-
fendant satisfies the plaintiff’s demand. See Powell v.
McCormack, 395 U.S. 486, 498-500 (1969). Injunctive re-
lief directing Treasury to lift all restrictions on GRF ’s as-
sets and operations also remains an option. Even volun-
tary cessation by the defendants would not moot the
case, while any possibility remained that they would
again freeze GRF ’s assets. See Buckhannon Board & Care
Home, Inc. v. West Virginia Department of Health & Human
Services, 532 U.S. 598, 608 (2001); Friends of the Earth, Inc.
v. Laidlaw Environmental Services, Inc., 528 U.S. 167, 189
(2000). Still, appellees contend, the appeal is moot in the
sense that word often takes when an appeal from the grant
of preliminary injunctive relief is overtaken by the grant
of permanent injunctive relief. Whether the record ade-
quately supported relief pending trial is of no moment
once the trial has been held and permanent relief entered.
All that then matters is whether the record supports per-
manent relief. See, e.g., Continental Training Services,
Inc. v. Cavazos, 893 F.2d 877, 880 (7th Cir. 1990). Just so,
appellees insist, now that the freeze pending investiga-
tion has been replaced by a final order naming GRF as a
Specially Designated Global Terrorist.
This would be a good analogy if all that GRF wanted
was review of the freeze in light of the information that
Treasury possessed on December 14, 2001, or if the only
point of the appeal had been to obtain an order prevent-
ing the Treasury Department from blocking the assets
until it had reached a final decision. Those issues are be-
hind us, and no resolution one way or the other could
do GRF any good today. The premise of appellees’ sugges-
tion of mootness is that GRF ’s current requests are limited
No. 02-2536 5
to its status pending final administrative resolution; ap-
pellees concede that the appeal would not be moot if
GRF sought relief against any permanent blocking order.
Suggestion of Mootness at 6-8. Yet GRF ’s ambition is not
so limited. It contends, among other things, that the
IEEPA never applies to the assets of any corporation that
holds its charter from one of the United States. This
argument, if successful, would knock out any freeze,
preliminary or permanent, without regard to the strength
of the evidence. If GRF is right on this score, then it is
entitled to relief immediately. Dismissing this appeal, and
directing GRF to start from scratch in the district court
with a challenge to the designation of October 18, then
would compound the injury by extending the length of
an illegal administrative action. It is because of possibil-
ities such as this that courts say that entry of a perma-
nent injunction (or, here, a permanent administrative
order) “usually” calls for dismissal of the appeal from
preliminary relief. See Burgess v. Ryan, 996 F.2d 180, 184
(7th Cir. 1993). “Usually” is not always; one appropriate
exception is for a legal argument that would annul any
adverse decision, temporary or permanent.
Now the scope of its ambition would not be enough if
GRF had not advanced and preserved these arguments, but
it has done what is required. Soon after receiving formal
notice from Treasury that proceedings were under way
that could end in its being named a Specially Designated
Global Terrorist, GRF asked the district court to stave off
that action. This request, in a document filed on June 5,
2002, and styled “Rejoinder to Defendants’ Notice,” asks
the court to block the designation and advances argu-
ments that have been reiterated in the appellate briefs.
Although the district judge did not expressly deal with
this aspect of GRF ’s position, he did address many of the
underlying legal arguments (such as the contention that
the IEEPA does not apply to U.S. corporations). It is unnec-
6 No. 02-2536
essary to recite the details of GRF ’s arguments in the dis-
trict court and this court. Defendants’ argument that GRF
has forfeited contentions that would carry over to the
current circumstances is unsound. So on the defendants’
own approach to mootness, at least some of the issues
presented on appeal are live, and GRF is entitled to a
prompt decision on them.
Let us turn, then, to GRF ’s contention that the IEEPA
does not apply to corporations that hold charters issued
within the United States. The argument is straightfor-
ward: a U.S. corporation is a U.S. citizen; the corporation
owns all of its property (including its bank accounts);
this property therefore cannot be “property in which any
foreign country or a national thereof has any interest” for
the purpose of §1702(a)(1)(B). The district court ob-
served that two of the three members of GRF ’s board are
foreign nationals, but this does not alter the fact that GRF
is itself a citizen of the United States. Neither member-
ship on the board nor ownership of stock affects the citi-
zenship of the firm, which as a matter of corporate law
has an existence separate from that of the directors
and investors. Cases such as Sumitomo Shoji America, Inc.
v. Avagliano, 457 U.S. 176 (1982), illustrate the applica-
tion of this principle to federal statutes. Treaties that the
United States has negotiated with many foreign nations
allow citizens (including corporations) of those nations
certain privileges within the United States. Avagliano
holds that a U.S. subsidiary of a foreign corporation is a
U.S. citizen, not a foreign citizen, for the purpose of these
treaties, which meant that the subsidiary must comply
fully with U.S. law even though 100% of its stock may
be held by foreign nationals. Some statutes prescribe a
different rule. The Foreign Sovereign Immunities Act,
for example, treats a corporation as having the sovereign
attributes of a government that owns the majority of its
stock. 28 U.S.C. §1603(b)(2). Cf. Patrickson v. Dole Food
No. 02-2536 7
Co., 251 F.3d 795 (9th Cir. 2001), cert. granted, 122 S. Ct.
2657 (2002) (posing the question whether indirect owner-
ship, through a holding company structure, receives the
same treatment). But under the Foreign Sovereign Im-
munities Act a corporation chartered within the United
States always is treated as a private U.S. citizen, even if
a foreign nation owns all of its stock. 28 U.S.C. §1603(b)(3).
Given the holding of Avagliano and the norm reflected
in §1603(b)(3), does it not follow that the property of any
corporation chartered within the United States is domes-
tic U.S. property?
No, it does not follow, and for a simple reason. GRF reads
the word “interest” in §1702(a)(1)(B) as referring to a le-
gal interest, in the way that a trustee is legal owner of
the corpus even if someone else enjoys the beneficial
interest. See Navarro Savings Association v. Lee, 446 U.S.
458 (1980). The legal interest in GRF ’s property lies in
the United States, but we need to know whether
§1702(a)(1)(B) refers to legal as opposed to beneficial
interests. The function of the IEEPA strongly suggests
that beneficial rather than legal interests matter. The
statute is designed to give the President means to con-
trol assets that could be used by enemy aliens. When an
enemy holds the beneficial interest in property, that is
a real risk even if a U.S. citizen is the legal owner. Con-
sider for a moment what would happen if Osama bin
Laden put all of his assets into a trust, under Illinois
law, administered by a national bank. If the trust instru-
ment directed the trustee to make the funds available
for purchases of weapons to be used by al Qaeda, then
foreign enemies of the United States would have an “inter-
est” in these funds even though legal ownership would
be vested in the bank. The situation is the same if al Qaeda
incorporated a subsidiary in Delaware and transferred
all of its funds to that corporation—something it could
do without any al Qaeda operative setting foot in the
8 No. 02-2536
United States. What sense could it make to treat al Qaeda’s
funds as open to seizure if administered by a German bank
but not if administered by a Delaware corporation under
terrorist control? Nothing in the text of the IEEPA sug-
gests that the United States’ ability to respond to an
external threat can be defeated so easily. Thus the focus
must be on how assets could be controlled and used, not
on bare legal ownership. GRF conducts its operations out-
side the United States; the funds are applied for the bene-
fit of non-citizens and thus are covered by §1702(a)(1)(B).
This understanding is consistent with the portion of
Dames & Moore v. Regan, 453 U.S. 654, 675 (1981), on
which GRF relies. The Court observed that “claims of
American citizens against Iran are not in themselves
transactions involving Iranian property or efforts to
exercise any rights with respect to such property.” GRF
reads this as excluding any claims or other property
owned by citizens of the United States. We read it, to the
contrary, as focusing on the nature of the property rather
than the identity of its owner. Claims against Iran not
only were owned by U.S. citizens but also were designed
to generate funds that would be used beneficially within
the United States. Claims owned nominally by U.S. citi-
zens but effectively controlled by Iran, or designed to raise
funds for the operation of the Iranian government, would
have been treated differently, we are confident. See also
Centrifugal Casting Machine Co. v. American Bank &
Trust Co., 966 F.2d 1348, 1353-54 (10th Cir. 1992) (looking
to the nature of the interest, rather than the citizenship
of its legal owner, to determine whether it is within scope
of IEEPA). So the fact that GRF as a U.S. corporation owns
all of its assets does not mean that the assets are free of
any foreign national’s interest. Cf. Regan v. Wald, 468
U.S. 222 (1984).
A foreign beneficial interest does not automatically make
the funds subject to freeze. We have nothing to say here
No. 02-2536 9
about whether GRF supports terrorism (as Treasury has
concluded) or instead provides humanitarian relief (as it
describes itself). That question is open to review in the
district court, on the record compiled by the agency be-
fore it named GRF as a Specially Designated Global Ter-
rorist. What we hold is that the phrase “property in
which any foreign country or a national thereof has
any interest” in §1702(a)(1)(B) does not offer GRF a silver
bullet that will terminate the freeze without regard to the
nature of its activities.
None of GRF ’s constitutional arguments has that effect
either. There is no separation-of-powers problem, as Dames
& Moore shows. The Steel Seizure Case, Youngstown
Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952), dealt
with a seizure of private assets under a President’s inher-
ent powers, which the Court deemed insufficient; Execu-
tive Order 13224, by contrast, delegates to the Secretary
only those powers provided by statute.
Administration of the IEEPA is not rendered unconstitu-
tional because that statute authorizes the use of classified
evidence that may be considered ex parte by the district
court. 50 U.S.C. §1702(c). Ex parte consideration is com-
mon in criminal cases where, say, the identity of infor-
mants otherwise might be revealed, see Roviaro v. United
States, 353 U.S. 53 (1957), and in litigation under the
Freedom of Information Act—where public disclosure
would divulge the very information that the case is about
and thus make it impossible for the government to main-
tain confidentiality even when the FOIA does not create
a right of public access. See EPA v. Mink, 410 U.S. 73(1973). A part of the Antiterrorism and Effective Death
Penalty Act of 1996 parallel to §1702(c) has been sus-
tained against constitutional challenge in two decisions
with which we agree. See Iran Council of Resistance v.
Department of State, 251 F.3d 192, 196 (D.C. Cir. 2001);
People’s Mojahedin Organization v. Department of State,
10 No. 02-2536
182 F.3d 17, 19 (D.C. Cir. 1999). See also, e.g., United
States v. Ott, 827 F.2d 473, 476 (9th Cir. 1987), and United
States v. Belfield, 692 F.2d 141, 147 (D.C. Cir. 1982), which
hold that use and ex parte judicial review of classified
information under the Foreign Sovereign Immunities
Act are constitutionally proper. The Constitution would
indeed be a suicide pact, Kennedy v. Mendoza-Martinez, 372
U.S. 144, 160 (1963), if the only way to curtail enemies’
access to assets were to reveal information that might
cost lives.
Nor does the Constitution entitle GRF to notice and a pre-
seizure hearing, an opportunity that would allow any
enemy to spirit assets out of the United States. Although
pre-seizure hearing is the constitutional norm, postpone-
ment is acceptable in emergencies. See, e.g., Gilbert v.
Homar, 520 U.S. 924, 930 (1997); FDIC v. Mallen, 486 U.S.
230, 240 (1988). Risks of error rise when hearings are
deferred, but these risks must be balanced against the
potential for loss of life if assets should be put to violent
use. Opportunity to obtain recompense under the Tucker
Act, 28 U.S.C. §1491(a), if the blocking turns out to be
invalid, provides the private party with the very remedy
that the Constitution names: just compensation. If the
freeze is sustained on the merits, however, GRF does not
have any grievance, any more than a cocaine ring has
a right to recover the value of the illegal drugs or a thief
a right to be paid the value of confiscated burglar’s tools.
See Paradissiotis v. United States, 304 F.3d 1271 (Fed.
Cir. 2002). GRF ’s takings claim not only is premature—it
must await decision on the validity of the Global Terrorist
designation—but also is in the wrong court. It belongs
to the Court of Federal Claims under the Tucker Act.
Other constitutional theories—such as GRF ’s contention
that application of the IEEPA is an ex post facto law—are
defective for too many reasons to count. For example, only
criminal statutes are deemed ex post facto laws, and the
No. 02-2536 11
IEEPA does not define a crime. Moreover, the IEEPA pre-
dates GRF ’s activities, and at all events aid to the enemies
of the United States has been unlawful since the Nation’s
founding. Application of the IEEPA is not a bill of attainder;
implementation of the statute is in the hands of the Ex-
ecutive and Judicial Branches, while a bill of attainder is
a decision of guilt made by the Legislative Branch. See
United States v. Lovett, 328 U.S. 303, 315 (1946). It is
unnecessary to recite and reject the rest of this lot indi-
vidually.
Because we have dealt exclusively with legal contentions,
our resolution of them is conclusive and not subject to
reexamination in the district court when deciding wheth-
er GRF is entitled to a permanent injunction. But we have
avoided any inquiry into the facts and do not attempt
to anticipate the ultimate resolution of GRF ’s claim. The
central question now becomes whether the evidence sup-
ports the agency’s belief that GRF uses its assets to sup-
port terrorism. That question should be addressed and
resolved expeditiously in the district court. The judgment
denying GRF ’s request for an injunction that would com-
pel the release of its assets while that issue remains open
is affirmed.
CUDAHY, Circuit Judge, concurring: I am in agreement
with the majority both with respect to mootness and to
the merits, but I write separately primarily to suggest
the significance of the present determinations for future
phases of the case.
On the issue of mootness, a detailed study of the argu-
ments offered by GRF would lend support to the conclu-
sion reached by the majority. GRF did seek at various
12 No. 02-2536
points to litigate the question of enjoining the government
from blocking GRF’s assets through a designation of GRF
as a Specially Designated Global Terrorist.
On the merits, the concept of “interest” as it relates to
property useful to aliens for terrorist purposes may in
some cases be tenuous and require careful attention in
application, but is nonetheless valid in light of crucial
national security concerns. GRF’s constitutional objections
are of varying degrees of merit, but its procedural com-
plaints seem of greatest weight, even though not weighty
enough to support preliminary relief. These procedural
objections may not have been fully formulated in the
context of GRF’s designation as an SDGT.
On the question of what is yet to be done, we have left
factual matters entirely open, as they pertain both to
permanent relief and to any preliminary relief that GRF
might seek in the future. See Adams v. City of Chicago, 135
F.3d 1150, 1153 (7th Cir. 1998) (noting that denial of a
preliminary injunction does not doom subsequent motions
for temporary relief based on facts unavailable at the
time of the first motion). The issues decided at this pre-
liminary level appear entirely legal in nature and not
subject to reexamination in any subsequent attempts
at preliminary relief based on future factual develop-
ments. It is conceivable, of course, that GRF might be able
to challenge this conclusion.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—12-31-02