Consarc Corp. v. U.S. Treasury Dept., Office of Foreign Assets Control, 94-5390

• Decision Date: 15 December 1995
• Docket Number: No. 94-5390,94-5390
• Citation: 71 F.3d 909
• Parties: CONSARC CORPORATION and Consarc Engineering, Ltd., Appellees, v. UNITED STATES TREASURY DEPARTMENT, OFFICE OF FOREIGN ASSETS CONTROL, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 909

71 F.3d 909

315 U.S.App.D.C. 201

CONSARC CORPORATION and Consarc Engineering, Ltd., Appellees, v. UNITED STATES TREASURY DEPARTMENT, OFFICE OF FOREIGN ASSETS CONTROL, Appellant.

No. 94-5390.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 24, 1995.

Decided Dec. 15, 1995.

Appeal from the United States District Court for the District of Columbia, No. 90cv02269.

Douglas N. Letter, Litigation Counsel, United States Department of Justice, argued the cause, for appellant, with whom Frank W. Hunger, Assistant Attorney General, and Eric H. Holder, Jr., United States Attorney, United States Department of Justice, and William B. Hoffman, Chief Counsel, and Susan K. Hutner, Senior Attorney, United States Department of the Treasury, were on the briefs.

Ramon P. Marks argued the cause, for appellees, with whom Neil E. McDonell, was on the brief.

Stephen A. Weiner was on the brief, for amicus curiae The Bank of New York.

Before: BUCKLEY, SENTELLE and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge:

The United States Department of the Treasury, Office of Foreign Assets Control ("OFAC"), the government agency charged with maintaining assets of Iraq within the United States in order to assure a fair distribution of this property among parties with claims against the Iraqi government, appeals from a District Court order requiring OFAC to release to appellees Consarc Corporation and Consarc Engineering, Ltd. ("Consarc") certain furnaces that these manufacturers had intended to sell to Iraq. OFAC argues that the District Court did not comply with our mandate in our prior review of this case, see Consarc Corp. v. Iraqi Ministry, 27 F.3d 695 (D.C.Cir.1994) ("Consarc I"), in fashioning its most recent order. It also complains that the District Court wrongly found that OFAC could not "freeze" the furnaces according to OFAC's own on-point regulation. We agree on both grounds, and so reverse the order of the District Court.

I. BACKGROUND

Although an extensive history of this matter appears in Consarc I, see 27 F.3d at 697-99, a brief summary of that history clarifies the issues involved in this appeal. In May 1989, Consarc, a New Jersey corporation, agreed to sell to the Iraqi Ministry of Industry and Minerals ("IMIM") two electron beam furnaces that IMIM claimed were to manufacture prosthetics. IMIM made a down payment on the furnaces of $1.1 million to Consarc. An Iraqi bank, Rafidain, pledged an additional $6.4 million of its account in The Bank of New York in order to induce another bank, Pittsburgh National, to pay Consarc once Consarc demonstrated that it had shipped the furnaces. If Pittsburgh National paid Consarc at the appropriate time, and Rafidain then did not reimburse it, Pittsburgh National could claim the $6.4 million set aside in The Bank of New York as its payment. Otherwise, Rafidain would regain full control over The Bank of New York account.

Before Consarc could ship the furnaces, however, the Commerce Department discovered that Iraq did not intend to use these furnaces to make prosthetics, but to aid in its development of nuclear weapons. Consequently, the Commerce Department blocked the shipment of the furnaces. Soon thereafter, Iraq invaded Kuwait.

In response to the invasion, on August 2, 1990, President Bush froze all Iraqi interests in property within the United States under the International Emergency Economic Powers Act ("IEEPA"). See Exec. Order No. 12722, 55 Fed.Reg. 31803 (1990), as authorized by 50 U.S.C. Sec. 1701. OFAC implemented the Executive Order through regulations that provide that "no ... interests in property of the Government of Iraq ... may be transferred ... or otherwise dealt in." Iraqi Sanctions Regulations ("ISR"), 31 C.F.R. Sec. 575.201(a) (1995). According to the ISR, OFAC intends to have all property in which Iraq has an interest placed in "blocked," or frozen, accounts. See 31 C.F.R. Sec. 575.203 (1995). Pursuant to these regulations, OFAC froze the $6.4 million set aside in Rafidain's account in The Bank of New York, and, later, instructed Consarc to freeze all the goods that had been ordered by IMIM. Because Consarc had already re-sold one of the furnaces to Mitsubishi Metals, OFAC also instructed Consarc to freeze the proceeds from that sale.

Against this regulatory backdrop, Consarc, with the conditional consent of OFAC, sued IMIM for fraud. In a series of orders, the District Court awarded Consarc the $6.4 million set aside by Rafidain in The Bank of New York as part of a default judgment. The District Court further invalidated the agreement that would have allowed IMIM to recoup its down payment and extinguished all Iraqi interest in the down payment itself, thus giving Consarc an additional $1.1 million free and clear. However, the District Court was willing to find that IMIM had a property interest in the furnaces, which permitted OFAC to continue to hold the remaining goods and the proceeds from the sale of one furnace to Mitsubishi, as long as Consarc received the $6.4 million that had been set aside in The Bank of New York. The District Court consequently ordered OFAC to release the $6.4 million in The Bank of New York to Consarc, but ordered Consarc to freeze the remaining furnace as well as the proceeds that Consarc had received from the sale of the second furnace. See Consarc I, 27 F.3d at 699.

On appeal, we dismissed OFAC's attempts to reestablish an Iraqi interest in the down payment as time-barred. See id. at 700. Otherwise, we ordered that "[o]n remand the district court will restore the status quo ante with respect to the $6.4 million, and conduct such proceedings as to the other matters in controversy as may be appropriate." Id. at 702.

On remand, the District Court reconsidered its opinion in light of Consarc I. See Consarc Corp. v. United States Treasury Dep't Office of Foreign Assets Control ("Consarc II"), 871 F.Supp. 1463, 1464 (D.D.C.1994). It justified this reconsideration as pursuant to our order to conduct other appropriate proceedings, see id., and concluded that "[e]quity and fairness demand" that Consarc regain control over either the $6.4 million or the furnaces. Id. at 1465. To that end, the District Court extinguished any Iraqi interest in the furnaces that IMIM had arranged to purchase, and ordered OFAC to release to Consarc both the $1.7 million received from the prior sale of one furnace and the remaining furnace. In exchange, Consarc was to restore the $6.4 million, plus interest, into "a blocked account." Id. at 1466. The District Court also indicated that Consarc was to have a "$6.4 [million] claim against the blocked account." Id. at 1465. Consarc has since placed the $6.4 million into a blocked account, but one under a different name and in a different bank than Rafidain's original Bank of New York account.

OFAC has again appealed, protesting that the District Court wrongly interpreted the relevant IEEPA provisions and OFAC's own regulations. OFAC also contends that this court should compel Consarc to restore the $6.4 million to Rafidain's original account in The Bank of New York, not some other blocked account, as per this court's order in Consarc I.

II. DISCUSSION

At issue in this appeal are the District Court's interpretations of our mandate in Consarc I, the scope of OFAC's authority under the IEEPA, and one of OFAC's own regulations. We need look no further than the plain meaning of each to reverse the conclusions of the District Court. ¹

A. Consarc I

OFAC first challenges the District Court's interpretation of Consarc I. In particular, OFAC disputes the meaning of the phrase "status quo ante" as used in that decision.

Prior to the start of this litigation, OFAC had "blocked" Rafidain's pledge of $6.4 million in Rafidain's account in The Bank of New York. The District Court subsequently ordered The Bank of New York to transfer that amount to Consarc in 1993. We then reversed the District Court and directed it to "restore the status quo ante with respect to the $6.4 million." Consarc I, 27 F.3d at 702. In its subsequent order, the District Court instructed Consarc to "place into a blocked account ... the amount of $6,422,418.10, plus interest, which constitute[s] the funds set aside in 1989 to pay Consarc under the letter of credit issued by Rafidain Bank and turned over by The Bank of New York to Consarc in 1993." Consarc II, 871 F.Supp. at 1466. Ostensibly responding to this order, Consarc placed the proper amount into a blocked account in a bank other than The Bank of New York and into an account not in Rafidain's name.

This result does not restore the status quo ante. Webster's Third New International Dictionary defines status quo as "the existing state of affairs ... at the time in question." Id. at 2230 (1961). As ante means "prior," see id. at 90, the plain meaning of status quo ante denotes the state of affairs prior to the District Court's order at issue in the appeal. As that order had compelled The Bank of New York to transfer the $6.4 million from Rafidain's account to Consarc, a return to the status quo ante, as commonly understood, must include a restoration of that sum (plus interest) to the same account in the same bank.

The legal definition of status quo ante has a similarly clear meaning and reaches the same result. Black's Law Dictionary defines status quo to mean "the existing state of things at any given date" and offers the example "[§ ]tatus quo ante bellum" to mean "the state of things before the war." Black's Law Dictionary 1264 (5th ed. 1979). Judicial precedent confirms that "[t]he status quo is the last uncontested status which preceded the pending controversy." Westinghouse Electric Corp. v. Free Sewing Machine Co., 256 F.2d 806, 808 (7th Cir.1958); see also Litton Systems, Inc. v. Sundstrand Corp., 750 F.2d 952, 961 (Fed.Cir.1984). As the last uncontested status in this matter saw the...