Capital Cities/ABC, Inc. v. Brady

• Decision Date: 29 June 1990
• Docket Number: No. 89 Civ. 8006 (JES).,89 Civ. 8006 (JES).
• Citation: 740 F. Supp. 1007
• Parties: CAPITAL CITIES/ABC, INC., Plaintiff, v. Nicholas BRADY, Secretary of the Treasury, R. Richard Newcomb, Director, Office of Foreign Assets Control, Defendants.
• Court: U.S. District Court — Southern District of New York

740 F. Supp. 1007

CAPITAL CITIES/ABC, INC., Plaintiff, v. Nicholas BRADY, Secretary of the Treasury, R. Richard Newcomb, Director, Office of Foreign Assets Control, Defendants.

No. 89 Civ. 8006 (JES).

United States District Court, S.D. New York.

June 29, 1990.

Wilmer, Cutler & Pickering (Lloyd N. Cutler, A. Douglas Melamed, W. Dawn Busby, James M. Carr, of counsel), Washington, D.C., Patterson, Belknap, Webb & Tyler (Philip Forlenza, of counsel), New York City, for plaintiff.

Cahill Gordon & Reindel (Floyd Abrams, Amy Glickman, of counsel), New York City, for amici curiae, CBS, Inc. and Nat. Broadcasting Co., Inc., in support of plaintiff.

Department of Justice (Anne L. Weismann, Richard R. Brown, of counsel), Washington, D.C., for defendants.

U.S. Dept. of Treasury (Susan Klavens Hutner, of counsel), Washington, D.C., for defendant Office of Foreign Assets Control.

OPINION AND ORDER

SPRIZZO, District Judge:

PRELIMINARY STATEMENT

The issue presented by these cross-motions for summary judgment is whether the refusal of the United States Department of the Treasury ("Treasury Department") to license an agreement for the exclusive live broadcasting rights of the 1991 Pan American Games is consistent with the Trading With The Enemy Act and the First Amendment.

STATEMENT OF FACTS

Section 5(b) of the Trading With the Enemy Act of 1917, 50 U.S.C.A.App. § 5(b) (West Supp.1990) ("TWEA"), authorizes the President, in times of national emergencies, to impose embargoes on transactions between persons subject to the jurisdiction of the United States and countries designated as hostile by the President.¹ See generally Regan v. Wald, 468 U.S. 222, 226 n. 2, 104 S.Ct. 3026, 3029 n. 2, 82 L.Ed.2d 171 (1984). In 1962, President Kennedy declared a national emergency and placed an embargo on Cuba. See id. at 226, 104 S.Ct. at 3030. Pursuant thereto, the Treasury Department, the agency charged with administering the TWEA, delegated this authority to the Office of Foreign Assets Control ("OFAC") which in turn promulgated the Cuban Assets Control Regulations ("Regulations"). See 31 C.F.R. pt. 515 (1989). The Regulations prohibit transactions with either the Cuban government or Cuban nationals, see 31 C.F.R. § 515.201(a),² unless such transactions fall within the scope of either a general or specific licensing provision.

Parties to a transaction falling within a general licensing provision may proceed without prior OFAC approval. These provisions authorize, inter alia: 1) transactions of common carriers incident to the receipt and transmission of mail, 31 C.F.R. § 515.542(a); 2) transactions incident to the use of satellite channels for the transmission of television news and news programs originating in Cuba by United States news organizations, id. at 515.542(b); and, 3) transactions in connection with travel to Cuba for the purpose of gathering news, making news or documentary films, or professional research and similar activities. Id. at 515.560(a)(1)(ii).

The OFAC may authorize transactions not falling within a general licensing provision by granting a specific license issued on a case by case basis. See, e.g., 31 C.F.R. §§ 515.542(c), 515.560(b), 515.565(b). However, the Regulations explicitly prohibit the issuance of specific licenses for transactions involving the payment to Cuba for television rights, appearance fees, royalties, pre-performance expenses, or other such payments in connection with or resulting from any public exhibition or performance in the United States or in Cuba. Id. at § 515.565(c)(1).

In 1988, Congress amended § 5 to exempt certain transactions from the reach of the TWEA. See Omnibus Trade and Competitiveness Act of 1988, Pub.L. No. 100-418, 102 Stat. 1107 (1988) ("Berman Amendment"). The Berman Amendment provides that the President's authority under § 5 does not:

include the authority to regulate or prohibit, directly or indirectly, the importation ... or the exportation ..., whether commercial or otherwise, of publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, or other informational materials, which are not otherwise controlled for export under section 5 of the Export Administration Act of 1979 or with respect to which no acts are prohibited by chapter 37 of title 18, United States Code.

50 U.S.C.A. App. § 5(b)(4) (emphasis added).

On February 2, 1989, the Regulations were amended in an attempt to comply with the Berman Amendment. See 54 Fed. Reg. 5229, 5231 (1989); Declaration of R. Richard Newcomb ("Newcomb Decl.") at ¶ 10. According to the new Regulations, all transactions relating to "informational materials" are currently authorized by a general license. See 31 C.F.R. §§ 515.206(a), 515.545(b).³ The definition of "informational materials," however, excludes "intangible items such as telecommunications transmissions," see id. at § 515.332(b)(2), and the Regulations prohibit "transactions related to informational materials not fully created and in existence at the date of the transaction." Id. at § 515.206(c). Moreover, the "remittance of royalties or other payments relating to works not yet in being" is precluded. Id. at § 515.545(b).

Plaintiff, Capital Cities/ABC, Inc. ("ABC"), owns and operates the ABC Television Network which televises, inter alia, various sporting events. See Declaration of Dennis Lewin ("Lewin Decl.") at ¶ 2. The Pan American Games ("Games") are a multidiscipline sports competition among 39 member nations which, like the Olympics, are held in a different member nation every four years. See Affidavit of Robert H. Helmick ("Helmick Aff.") at ¶ 3-4. The Games, first held in 1951, are organized and run by the Pan American Sports Organization ("PASO"), an international organization headquartered in Mexico. The PASO is composed of sports organizations from the member nations, including organizations from the United States and Cuba. Id.

In 1986, PASO determined that the 1991 Games would be held in Havana, Cuba. See Helmick Aff. at ¶ 5. Thereafter, in October 1988, ABC decided to place a bid with PASO for the rights to televise the 1991 Games, which was eventually accepted. In consideration for the exclusive rights to broadcast the Games live, ABC agreed to pay PASO $8.7 million with the express understanding that PASO would remit seventy-five percent of this sum, $6.5 million, to Cimesports, S.A., a Cuban entity and the host organizer of the Games. See Declaration of Joel E. Lulla ("Lulla Decl.") at ¶ 2; Declaration of Stephen J. Solomon ("Solomon Decl.") at ¶ 11.

In early June 1989, ABC notified the OFAC of this agreement, and after the OFAC informed ABC that a specific license was necessary, ABC applied for "a license covering all necessary transactions involving Cuba in connection with the television coverage and transmission of the 1991 Pan American Games." See Letter dated June 12, 1989 (annexed to Plaintiff's Notice of Motion as Ex. 1); Lulla Decl. at ¶ 3. In its application, ABC stated that it would pay a fee to a Cuban national and "incur additional production expenses in Cuba." See Notice of Motion at Ex. 1.

Negotiations between ABC and the OFAC with respect to the license were commenced, and on June 23, 1989, ABC notified the OFAC that it did not believe that the transaction required a specific license and that the OFAC's position was contrary to the intent of the Berman Amendment. See id. at Ex. 2. Thereafter, on September 18, 1989, ABC withdrew its application, stating that it was engaged in negotiations to obtain the broadcast rights in a different transaction with different parties. See id. at Ex. 3. No further description of that transaction was proffered.

However, by letter to the OFAC dated November 16, 1989, ABC expressed its intention to proceed as originally planned and once again asserted that the transaction did not require a license. ABC further contended that live broadcast coverage of the Games was, in any event, authorized by the general licenses provided for "travel and importation in connection with news gathering and similar activities." See id. at Ex. 4. In response, the OFAC stated that it would grant ABC a license if royalty payments were made into a blocked account pursuant to 31 C.F.R. § 515.508(a)⁴ and if travel expenses were kept to a minimum.

In addition, the OFAC informed ABC that although sports broadcasts were entertainment and not news, ABC could avail itself of the news gathering general license if no royalty payment was made and provided that ABC followed several guidelines.⁵ See Notice of Motion at Ex. 5. Alternatively, the OFAC noted that ABC could import videotapes of the Games so long as ABC did not "fund, or provide or contract for services in connection with, the production of the tapes." In sum, the OFAC denied the renewed application for a specific license on the basis suggested by ABC "because this transaction would result in a very substantial payment to Cuba, and was therefore contrary to the current foreign policy of the United States." Id.

ABC concluded that the options offered by OFAC were unacceptable because ABC's agreement with PASO required that funds be remitted to Cuba. See Lulla Decl. at ¶ 5; Rana Decl. at ¶ 7. Therefore, ABC brought this action seeking a declaratory judgment that the Berman Amendment and/or the Constitution authorizes the transaction proposed by ABC, see Complaint, Prayer for Relief, at ¶ 1; that the Regulations are null and void to the extent that they regulate the importation of television signals and related informational materials, see id. at ¶ 2; and that the Berman Amendment, the Administrative Procedures Act and/or the United States Constitution bar the Government from initiating any proceeding against ABC to prohibit ABC from televising the 1991 Games. Id. at ¶ 3. ABC also seeks a permanent injunction "barring Defendants from ... regulating ABC's televising of the 1991 Games." Id. at ¶ 4.

DISCUSSION

The principle issues...