Consarc Corp. v. US TREASURY DEPT. OFAC, Civ. A. No. 90-2269-55.

• Decision Date: 17 October 1994
• Docket Number: Civ. A. No. 90-2269-55.
• Citation: 871 F. Supp. 1463
• Court: U.S. District Court — District of Columbia
• Parties: CONSARC CORPORATION, Supplemental Plaintiff, v. UNITED STATES TREASURY DEPARTMENT OFFICE OF FOREIGN ASSETS CONTROL, Supplemental Defendant.

871 F. Supp. 1463

CONSARC CORPORATION, Supplemental Plaintiff, v. UNITED STATES TREASURY DEPARTMENT OFFICE OF FOREIGN ASSETS CONTROL, Supplemental Defendant.

Civ. A. No. 90-2269-55.

United States District Court, District of Columbia.

October 17, 1994.

Ramon P. Marks, Neil E. McDonell, Marks & Murase, New York City, Ronald Paul Kananen, Marks & Murase, Washington, DC, for Consarc Corp. and Consarc Engineering, Ltd.

Campbell Killefer, Shaw, Pittman, Potts & Trowbridge, Washington, DC, for Pittsburgh Nat. Bank, and Royal Bank of Scotland PLC.

James Robert Layton, Robert Lawrence Shapiro, U.S. Attorney's Office, Washington, DC, John Charles Cleary, Leboeuf, Lamb, Leiby & Macrae, Pittsburgh, PA, for Dept. of Treasury and Office of Foreign Assets Control.

MEMORANDUM OPINION

SPORKIN, District Judge.

This matter comes before the Court on remand from the United States Court of Appeals for the District of Columbia Circuit. The Office of Foreign Assets Control (OFAC) appealed this Court's orders of April 10, 1991, August 22, 1991, and December 29, 1992. The Court of Appeals held as follows:

We dismiss the appeal in part, thus letting stand the district court's orders that extinguished the standby letter of credit and awarded Consarc the accompanying downpayment. We reverse the district court's orders that awarded the funds to Consarc, that enjoined OFAC to issue an unblocking license, and that enjoined the United States and its agencies from transferring or disposing of the blocked funds. We also remand the case for further proceedings. On 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.

Consarc Corp. v. Iraqi Ministry, 27 F.3d 695, 702 (D.C.Cir.1994).

ANALYSIS AND DECISION

The scope of the appellate court's remand determines what issues the trial court can relitigate. Nelson v. All American Life & Financial Corp., 889 F.2d 141, 152 (8th Cir.1989). Here, the appellate court did not simply order that this Court enter a judgment requiring the $6.4 million payment to be placed in a blocked account. Rather, the appellate court directed this Court to "restore the status quo ante" and conduct "proceedings as to other matters in controversy." It is thus clear that this Court is to consider and decide all remaining issues presented by this litigation. This would include a determination as to the disposition of the furnaces that were sold to the Iraqi government but not delivered at the request of the U.S. Government.¹

The Court's December 29, 1992 Order permitting OFAC to block the furnaces, and any proceeds the furnaces upon sale may produce, was based on the fact that Consarc was permitted to keep Iraq's $6.4 million payment for the furnaces. OFAC now contends that it is entitled to the furnaces and proceeds from the resale of the furnaces as well as the $6.4 million. Fairness dictates that OFAC cannot have both the furnaces (including proceeds from resale) and the $6.4 million payment.

OFAC's own regulations are consistent with this Court's contention that OFAC cannot have both the furnaces and the proceeds from their original sale to the Iraqi Government. Pursuant to 31 C.F.R. § 575.413, certain goods are exempt from OFAC's freeze orders:

The prohibitions contained in § 575.201 do not apply to goods manufactured, consigned, or destined for export to Iraq and not subject to § 575.517, if the Government of Iraq has never held or received title to such goods on or after the effective date, and if any payment received from the Government of Iraq with respect to such goods is placed in a blocked account in a U.S. financial institution pursuant to § 575.503. The prohibitions of § 575.205 apply to goods subject to this section.

This Court finds that Consarc has satisfied all of the requirements of § 575.413. OFAC does not question the applicability of § 575.413 to the situation at hand, but contends that the only way that the furnaces and proceeds from the sale of the furnaces can remain "unblocked" is to block the $1.1 million downpayment previously received from Iraq, which is currently unblocked. The appellate court has affirmed this Court's April 10, 1991 decision that Iraq has no interest in the downpayment.² As such, OFAC has no authority to block the downpayment because the government can only block those payments in which Iraq has an interest. 50 U.S.C. § 1702(a)(1)(A)(ii).³

CONCLUSION

Equity and fairness demand that Consarc not be left empty-handed by the U.S. government which initially approved the contract Consarc entered into with Iraq. U.S. corporations must have at least some certainty when they enter into complex international transactions, particularly when they do so with the specific blessing of the U.S. government. They clearly cannot be deprived of both the proceeds of sale as well as the goods sold but not delivered because of the intercession of the government. OFAC's own regulations underscore the need for fairness.

Given that the Court of Appeals has held...