American Airways Charters, Inc. v. Regan

• Decision Date: 23 October 1984
• Docket Number: No. 83-1860,83-1860
• Parties: , 53 USLW 2249 AMERICAN AIRWAYS CHARTERS, INC., Appellant v. Donald REGAN, Secretary of the Treasury, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 865

746 F.2d 865

241 U.S.App.D.C. 132, 53 USLW 2249

AMERICAN AIRWAYS CHARTERS, INC., Appellant v. Donald REGAN, Secretary of the Treasury, et al.

No. 83-1860.

United States Court of Appeals District of Columbia Circuit.

Argued March 28, 1984.

Decided Oct. 23, 1984.

Appeal from the United States District Court for the District of Columbia (Civil Action No. 82-03143).

David Rudovsky, Philadelphia, Pa., with whom James E. Drew, Washington, D.C., was on the brief, for appellant.

William H. Briggs, Jr., Asst. U.S. Atty., Washington, D.C., with whom Joseph E. diGenova, U.S. Atty., Royce C. Lamberth and R. Craig Lawrence, Asst. U.S. Attys., Washington, D.C., were on the brief, for appellees.

Before GINSBURG, Circuit Judge, MACKINNON, Senior Circuit Judge, and HAROLD H. GREENE, ^* United States District Judge for the District of Columbia.

Opinion for the Court filed by Circuit Judge GINSBURG.

Concurring opinion filed by District Judge GREENE.

Opinion dissenting in part and concurring in remand filed by Senior Circuit Judge MACKINNON.

GINSBURG, Circuit Judge:

This case concerns the right of a Florida corporation, specially designated a "Cuban national" pursuant to section 5(b) of the Trading with the Enemy Act, 50 U.S.C. app. Sec. 5(b) (1982) (TWEA or Act), to choose and retain counsel without obtaining in advance a government (Treasury Department, Office of Foreign Assets Control) license to do so. We hold that although government permission, in the form of an Office of Foreign Assets Control license, is required prior to the execution of any transaction reaching the assets of a designated Cuban national, the Office of Foreign Assets Control lacks authority to condition the bare formation of an attorney-client relationship on advance government approval.

The administrative authority asserted in this case has never been asserted on any prior occasion; the controlling legislation, were we to read it as contemplating a government license prior to obtaining counsel, would trench on a right of constitutional dimension. We therefore decide this appeal in a manner that both is consistent "with the policy of the legislation as a whole," Shapiro v. United States, 335 U.S. 1, 31, 68 S.Ct. 1375, 1391, 92 L.Ed. 1787 (1948) (quoting United States v. American Trucking Associations, 310 U.S. 534, 543, 60 S.Ct. 1059, 1063, 84 L.Ed. 1345 (1940)), and avoids a constitutional inquiry. See Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 346-48, 56 S.Ct. 466, 482-83, 80 L.Ed. 688 (1936) (Brandeis, J., concurring); Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 441, 5 L.Ed. 257 (1821).

I.

The named plaintiff-appellant, American Airways Charters, Inc. (AAC), is a closely-held corporation, incorporated under the laws of Florida on February 15, 1977. Joint Appendix (J.A.) 15. AAC formerly provided charter service for tourist flights between the United States and Cuba. On April 7, 1982, the Treasury Department's Office of Foreign Assets Control (OFAC), acting pursuant to section 5(b) of the Trading with the Enemy Act, 50 U.S.C. app. Sec. 5(b), ¹ specially designated AAC a Cuban national. This designation, under the Cuban Assets Control Regulations (CACR), 31 C.F.R. pt. 515 (1983), ² effectively froze or blocked all of AAC's assets.

At the time of the designation, and for over five months thereafter, AAC was represented by Allen L. Lear, a member of the bar of the District of Columbia. Lear advised AAC on OFAC's regulations, applied for licenses to carry out various transactions, and generally represented AAC in its dealings with OFAC. Lear held no OFAC license to represent AAC; he never requested OFAC's permission to represent AAC; he was never told by OFAC that his representation of AAC was contingent upon application for and receipt of a license. After April 7, 1982, however, he sought and obtained licenses authorizing payment for services he rendered to AAC. See J.A. 34-35 (Lear affidavit); Brief for Appellees at 7 (hereafter, OFAC Brief).

Lear ceased representing AAC on September 10, 1982, when he left his law firm to commence service as a Department of Justice trial attorney. To provide for continued representation of AAC upon Lear's withdrawal as counsel, AAC's then president, Fernando Fuentes, engaged Harold A. Mayerson of the New York bar, and his law firm, Mayerson & Smith, P.C., to represent the corporation. Fuentes authorized Mayerson, on or about September 8 or 9, 1982, to be AAC's legal advocate before OFAC and for all other purposes relating to AAC's corporate status. J.A. 27 (Mayerson affidavit); id. at 32-33 (Fuentes affidavit); see OFAC Brief at 7-8. Both Fuentes, by letter dated September 13, 1982, and Mayerson, by letter dated September 15, 1982, notified OFAC that Mayerson & Smith, P.C., had been retained as AAC's counsel. J.A. 18-19. In addition, on or about September 9, 1982, Mayerson called OFAC to schedule a meeting to discuss his substitution as counsel and the orderly transfer of AAC's legal work from Lear to Mayerson & Smith, P.C. J.A. 27 (Mayerson affidavit); see OFAC Brief at 8.

The meeting took place on September 16, 1982, at OFAC's offices. At the meeting, OFAC's director, Dennis M. O'Connell, told Mayerson that legal representation of a "designated national" required a specific license, and that the letter Mayerson had written to OFAC was inadequate to be deemed a license request. In the absence of a proper application for and grant of a specific license, O'Connell stated, Mayerson could not represent AAC. J.A. 28-29 (Mayerson affidavit); id. at 71 (O'Connell affidavit); see OFAC Brief at 8. OFAC did not supply to, or identify for, Mayerson the application form to which its director referred. Nor, in response to Mayerson's inquiries, did OFAC officers cite any prior instance in which OFAC had in fact conditioned counsel's mere representation of a "designated national" on an advance application for and grant of a government license. J.A. 28-29 (Mayerson affidavit). ³

On September 17, 1982, the day following Mayerson's meeting with OFAC officials, OFAC's director notified Fuentes, by letter, that he was henceforth "prohibited from engaging in any transactions for, on behalf of, or with [AAC], without a specific license from this Office." J.A. 20. The letter stated that the prohibitions would "prevent [Fuentes] from functioning as the president and chief executive officer of AAC." Id. It further stated that the director ordered the prohibitions "in the interests of conserving and liquidating AAC's assets and the proper settlement of its accounts," and in view of the "a) control of AAC by Cuba or Cuban nationals while [Fuentes was] its president and chief executive officer, b) the transfer out of the U.S. of AAC assets on the day AAC was designated as a Cuban national, and c) [Fuentes'] indictment for violations of the Trading With the Enemy Act." Id.

Thereafter, OFAC chose to recognize and deal with Frank Masdeu, one of AAC's two then vice-presidents, as the sole individual authorized to act on behalf of AAC. See J.A. 31 (Fuentes affidavit); id. at 76 (O'Connell affidavit). OFAC has advised Masdeu that he has the right to select counsel for AAC and to apply for a license for the retention of such counsel. J.A. 68 (Masdeu affidavit); id. at 76 (O'Connell affidavit). There is no indication in the record that OFAC ever consulted Florida law when it determined that Masdeu, and no other person, may properly speak for AAC. Nor is there any indication that Masdeu, on OFAC's recommendation or on his own initiative, ever attempted to secure a Florida court determination that he is currently the proper spokesman for AAC.

The instant action, seeking injunctive and declaratory relief allowing Mayerson to represent AAC, was commenced on November 3, 1982. Both sides filed dispositive motions. On July 11, 1983, the district court dismissed the complaint for want of subject matter jurisdiction. American Airways Charters, Inc. v. Regan, Civ. No. 82-3143 (D.D.C. July 11, 1983), reprinted in J.A. 4-8. The district judge reasoned that on April 7, 1982, the day AAC was designated a foreign national, the corporation lost capacity to act; since that day, the court declared, AAC has "lack[ed] the capacity to retain counsel to bring this action in its own name." J.A. 5. ⁴ OFAC, according to the district court, "has plenary authority to control [AAC's] operation." J.A. 7 n. 4. Thus, the district court apparently concluded, without OFAC's license, no attorney may prosecute this suit as AAC's agent. ⁵ But cf. Dean Witter Reynolds, Inc. v. Fernandez, 741 F.2d 355 (11th Cir.1984) (Cuban national need not obtain a license prior to initiating an in personam lawsuit in a United States court).

We think the district court stumbled in attributing to OFAC more power than Congress conferred upon the Executive. AAC's assets are blocked, and may not be touched without OFAC's permission. But Congress has not authorized the Executive to seize the corporation, control all its internal operations, decide--with no regard to state law--who shall act as its president in lieu of the board-elected officer, ⁶ and impose a prior license requirement before the corporation can designate an attorney to represent it.

Facts not in dispute reveal that in early September 1982, when Fuentes authorized Mayerson to represent AAC, Fuentes was AAC's president and chief executive officer. Nor is it seriously disputed that, absent a valid prior license requirement, AAC's president would have authority to obtain counsel for the corporation. Because we conclude that Congress did not commit to the Executive power to condition a designated Cuban national's bare representation by counsel upon advance government approval, we reverse the district court's judgment and remand the case with directions to enter appropriate relief for AAC. ⁷

II.

Section 5(b) of TWEA confers upon the President authority to control, through any agency he designates, ...