Karpova v. Snow

Decision Date14 August 2007
Docket NumberDocket No. 06-0104-cv.
Citation497 F.3d 262
PartiesJudith KARPOVA, Plaintiff-Appellant, v. John SNOW, Secretary, Department of the Treasury, United States of America, Defendants-Appellees.
CourtU.S. Court of Appeals — Second Circuit

Before: CARDAMONE, SOTOMAYOR, and KATZMANN, Circuit Judges.

CARDAMONE, Circuit Judge:

Plaintiff Judith Karpova (plaintiff or appellant), a resident of New York State and an American citizen, traveled to Iraq in 2003. Purporting to belong to a group known as the Truth, Justice, and Peace Human Shield Action Project (Project), whose aim was to deter the bombing of civilian infrastructure facilities by acting as human shields at such sites in that country, plaintiff claims she went to Iraq in three capacities: as an ordained minister to bear witness to the effect on Iraq's people of economic sanctions, as a professional writer and journalist sending letters or reports to the Jersey Journal, a daily newspaper in Jersey City, New Jersey, and as a human shield to prevent destruction of civilian infrastructure in the event of renewed hostilities. Unfortunately, in doing this and despite her good intentions, plaintiff transgressed several executive orders and United States Treasury Department regulations that governed what interactions United States citizens could have with Iraq while economic sanctions were in place.

Because plaintiff violated those orders and regulations, the Office of Foreign Assets Control within the United States Department of the Treasury (Foreign Assets Control Office or Agency) assessed against her a civil monetary penalty of $6,700. To set aside this fine, plaintiff brought suit against the government in the United States District Court for the Southern District of New York (McMahon, J.). In her complaint plaintiff alleged that her First and Fifth Amendment rights were violated and that the government had engaged in final agency action against her in an unlawful manner. Judge McMahon granted summary judgment in favor of the government, dismissing plaintiff's complaint in a judgment entered October 31, 2005. From that judgment Karpova appeals.

BACKGROUND
A. Statutory and Regulatory Background

In 1990 Congress passed the Iraqi Sanctions Act, which among other things, directed the President to "continue to impose the trade embargo and other economic sanctions with respect to Iraq." Pub.L. No. 101-513, § 586C(a), 104 Stat. 1979, 2048 (1990). President Bush issued executive orders premised on the notion that Iraqi government policies constituted an unusual and extraordinary threat to the national security of the United States, directing that economic sanctions be imposed on Iraq and authorizing the Secretary of the Treasury to promulgate regulations implementing prohibitions on, among other things, the exportation of services to Iraq and transactions related to travel to Iraq. Exec. Order No. 12,722, 55 Fed.Reg. 31,803 (Aug. 2, 1990); Exec. Order No. 12,724, 55 Fed.Reg. 33,089 (Aug. 9, 1990). On January 18, 1991 the Foreign Assets Control Office of the United States Treasury Department issued the Iraqi Sanctions Regulations (regulations) implementing the prohibitions outlined in the President's executive orders and outlining procedures for dealing with violations. See 31 C.F.R. §§ 575.204-211, 575.702-704.

Under these regulations, the Foreign Assets Control Office may demand that people engaging in transactions related to Iraq provide it with complete information relative to those transactions. See 31 C.F.R. § 501.602. When the Agency has a reasonable belief that a violation of the regulations has occurred, it issues a Prepenalty Notice. 31 C.F.R. § 575.702. The Prepenalty Notice informs the alleged violator that a monetary penalty will be imposed unless he or she responds in writing explaining why a penalty is inappropriate. Id. If the recipient replies in such a manner, the Director of the Foreign Assets Control Office then makes a final determination as to whether a violation has occurred and, if so, what financial penalty should be imposed. Such final determination is set forth in a Penalty Notice. 31 C.F.R. § 575.704.

B. Karpova Travels to Iraq

In early 2003 the Project hoped to bring attention to the fact that the United States allegedly had bombed civilian infrastructure in Iraq during the 1990 Gulf War. The method the Project chose to get public attention was to send non-Iraqis to these sites to act as human shields. The presence of civilians at the sites, it was hoped, would publicize the threat to them were the United States to begin a bombing campaign, and perhaps deter the United States from acting. Plaintiff Karpova joined this group and sent a letter to supporters indicating her plans to travel to Iraq in February 2003 as a member of the Project. She requested supporters to send small donations to help finance her travel expenses. On February 19, 2003 she arrived in Iraq and remained there until March 9. Karpova did not obtain a license that might have authorized her, despite the economic sanctions, to engage in travel-related transactions involving Iraq. While there, plaintiff acted as a preemptive human shield. Although Karpova left the country before the United States' bombing campaign actually began, appellant was near an oil refinery while in Iraq. Karpova also went on guided tours in Basra and Baghdad, visited hospitals and schools, and spent time "looking, listening, talking, and writing." Her writing took the form of four letters sent back to America that were printed in installments by the Jersey Journal. The Foreign Assets Control Office learned of Karpova's unauthorized trip from press accounts.

C. Agency's Response

On March 20, 2003 the Foreign Assets Control Office sent a letter to plaintiff requiring that she provide the Department of the Treasury with a detailed written report concerning her trip to Iraq, so that it could ascertain whether she had violated the Iraqi Sanctions Regulations. This "Requirement to Furnish Information" specifically required Karpova to provide the dates of her travel to Iraq, reason for her trip, and a detailed itemization of all travel-related transactions in which she engaged in connection with her trip. Plaintiff responded on April 21, 2003 with a lengthy letter, which included the dates and various reasons for her trip, but failed to provide a detailed itemization of all travel-related transactions. Instead, she simply asserted that all of her travel-related transactions were taken care of by an organization called the Peace, Friendship, and Solidarity Organization, and thus that she was not required to spend any money during her 19 days in Iraq.

Plaintiff did not provide any proof to support her statements despite the Agency's request that she provide a copy of any travel-related receipts or records associated with her expenditures in Iraq. The Agency replied on June 23, 2004 by sending Karpova a Prepenalty Notice stating she had violated the Iraqi Sanctions Regulations by exporting her services to Iraq and engaging in unauthorized travel-related transactions while there. The Prepenalty Notice cited the following specific violations (1) attempting to collect funds for travel expenses to/from/ within Iraq, (2) departing Jordan for Iraq and arriving in Iraq, (3) providing ministerial services, (4) serving as a freelance journalist, (5) providing services to the government of Iraq by shielding Iraqi government infrastructure from possible United States military action, and (6) engaging in travel-related transactions, including the purchase of food. The Prepenalty Notice proposed a penalty of $10,000, and it gave Karpova an opportunity to submit a written response. The Prepenalty Notice requested that Karpova explain why the penalty should not be issued or why, if issued, it should be reduced.

Karpova answered this request on August 5, 2004 with a letter from her lawyer arguing that she had not provided services to any agency of the Iraqi government. The letter contended that the regulatory scheme under the Iraqi Sanctions Regulations violated Karpova's due process rights and exceeded the authority of the Executive branch, and that the penalty violated Karpova's First and Fifth Amendment rights. She did not dispute that she had engaged in transactions related to travel in Iraq, but she incorporated by reference her previous letter as something for the Foreign Assets Control Office to consider in determining the appropriate penalty.

On March 14, 2005 the Agency sent Karpova a Penalty Notice. The Penalty Notice ruled that she had violated the Iraqi Sanctions Regulations by engaging in prohibited transactions relating to Iraq, as detailed in the Prepenalty Notice. It explained that Karpova's response had not presented any new facts or explanations to refute the Foreign Assets Control Office's charges that Karpova violated the regulations. The fine was reduced from $10,000 to $6,700 in light of the fact that plaintiff had provided a written response to the Prepenalty Notice and because it was her first offense.

D. The Instant Suit

On June 9, 2005 plaintiff brought the instant suit alleging that the fine imposed against her for her travel to Iraq was arbitrary and capricious in violation of the Administrative Procedure Act and unconstitutional under the First and Fifth Amendments. She also claimed the Iraqi Sanctions Regulations were themselves unlawful. Karpova requested the district court declare the Penalty Notice and 31 C.F.R. § 575.207 (prohibited transactions relating to Iraq) null and void and sought a permanent...

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