Fares v. Smith

• Decision Date: 10 August 2018
• Docket Number: No. 17-5075,17-5075
• Citation: 901 F.3d 315
• Parties: Abdul Mohamed Waked FARES, et al., Appellants v. John E. SMITH, in his official capacity as Acting Director, Office of Foreign Assets Control of the Department of the Treasury and Office of Foreign Assets Control of the United States Department of the Treasury, Appellees
• Court: U.S. Court of Appeals — District of Columbia Circuit

901 F.3d 315

Abdul Mohamed Waked FARES, et al., Appellants

v.John E. SMITH, in his official capacity as Acting Director, Office of Foreign Assets Control of the Department of the Treasury and Office of Foreign Assets Control of the United States Department of the Treasury, Appellees

No. 17-5075

United States Court of Appeals, District of Columbia Circuit.

Argued January 9, 2018

Decided August 10, 2018

James E. Gillenwater, Washington, DC, argued the cause for appellants. With him on the briefs was Peter J. Kahn, Washington, DC. David D. Aufhauser, Washington, DC, entered an appearance.

Nicolas Riley, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief were Jessie K. Liu, U.S. Attorney, Douglas N. Letter, Attorney, and Lauren Sun, Counsel, U.S. Department of Justice. Benjamin M. Schultz and H. Thomas Byron, Attorneys, U.S. Department of Justice, entered appearances.

Before: Pillard and Wilkins, Circuit Judges, and Sentelle, Senior Circuit Judge.

Pillard, Circuit Judge:

The Office of Foreign Assets Control (OFAC) unilaterally named two Panamanian men and a business they control as Specially Designated Narcotics Traffickers. Under the Foreign Narcotics Kingpin Designation Act, that agency decision froze the designees’ assets in the United States and forbade anyone here from transacting or dealing in the frozen property. See 21 U.S.C. § 1904(b), (c). When the designees asked the agency to turn over the evidence against them—the administrative record setting out the bases of the designation—so that they could challenge the determination, the agency returned a file almost entirely blacked out with redactions. What lay behind those redactions, the government represented, could not be disclosed without compromising ongoing criminal investigations or risking the lives of key sources.

These designees sued, claiming that, because the government had failed to produce or describe the underlying evidence as such, it gave them insufficient post-deprivation notice of the bases of their designation in violation of the Due Process Clause of the Fifth Amendment. Plaintiffs immediately sought summary judgment, arguing that they had an absolute right to the evidence against them: The government must choose, plaintiffs urged, between disclosing the evidence and delisting (un-designating) them. The agency insisted it faced no such choice. Rather than disclose evidence that the agency deemed to contain law enforcement sensitive information, it presented plaintiffs two unclassified summaries describing the factual bases of the designation decision. The agency then filed its own summary judgment motion, arguing that the unclassified summaries satisfied due process because they described the facts supporting plaintiffs’ designations and thus enabled plaintiffs to challenge them. The district court granted the government’s motion.

On appeal, plaintiffs maintain that due process requires more. They insist that the government must choose between (a) dropping the designation and (b) disclosing the evidence against them by producing the unredacted underlying evidentiary record, or, at a minimum, identifying facts about informants or other evidentiary sources, regardless of the practical costs. See Appellants’ Br. 22 ("[D]ue process prohibits OFAC from relying on undisclosed material to uphold the merits of a sanctions designation."); Oral Arg. Tr. 7:24-9:7 (plaintiffs’ counsel requesting "a non-privileged description of sources or where those sources come[ ] from, dates, places," or at least confirmation that the government used "a confidential source").

The Foreign Narcotics Kingpin Designation Act’s asset-freezing provision unquestionably raises many due process concerns. But plaintiffs have chosen to frame their challenge in a manner that, by artificially limiting it, presents no tenable claim. Plaintiffs do not factually challenge the accuracy of the summaries’ descriptions of their involvement in money laundering. Nor do they ask the government to make the allegations against them more specific. They do not challenge the scope of the government’s sweeping redactions to the administrative record. Nor do they press the agency with control over the sensitive evidence to support its assertion of privilege. Plaintiffs do not ask for in camera examination of the administrative record for any purpose. Nor do they request cleared counsel who could review the redacted information on plaintiffs’ behalf. Instead—without questioning the government’s assertion that disclosing any more of the underlying evidence or the sources of that evidence would have calamitous consequences—plaintiffs ask the court to direct the agency to turn over the evidence itself, or to identify its sources, compromising the very sensitivity they leave unchallenged. Otherwise, plaintiffs suggest, OFAC must drop the designation entirely.

That unyielding argument runs counter to precedent. We therefore affirm the district court’s grant of summary judgment for the government. Plaintiffs have not made out a viable claim under the relevant due process framework. We note that other avenues remain for plaintiffs should they elect to use them to challenge their designation in the future.

I.

The Foreign Narcotics Kingpin Designation Act (Kingpin Act), 21 U.S.C. §§ 1901 - 1908, authorizes the Secretary of the Treasury—and by delegation the Office of Foreign Assets Control and its Director, John Smith, (collectively, OFAC, agency, or government)—to deem foreign persons who "materially assist[ ] in ... international narcotics trafficking activities" as "specially designated narcotics traffickers" (Traffickers). Id. § 1904(b)(2)-(4); 31 C.F.R. §§ 598.314, 598.803. Trafficker designations under the Kingpin Act are analogous to other Executive Branch asset-freezing designations, such as those authorized by the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. § 1702, and the Anti-Terrorism and Effective Death Penalty Act (AEDPA), 8 U.S.C. § 1189. See Zevallos v. Obama , 793 F.3d 106, 110 (D.C. Cir. 2015). Under each scheme, the designated person ("a specially designated national, specially designated terrorist, or specially designated narcotics trafficker") is added to the "Specially Designated Nationals and Blocked Persons List." 31 C.F.R. § 501.807(a) ; see Zevallos , 793 F.3d at 110. All persons on OFAC’s combined list have their "property and interests in property within the United States" frozen, and no one may deal in those assets. 21 U.S.C. § 1904(b), (c) ; see Zevallos , 793 F.3d at 110.

Individuals designated as traffickers by OFAC may "seek administrative reconsideration" before the agency.

31 C.F.R. § 501.807. Practically, that entails challenging the sufficiency of the bases of the designation and/or rebutting those bases, such as by submitting exculpatory materials to the agency. Id. As part of the agency’s reconsideration process, designated individuals may request disclosure of the administrative record supporting the designation decision. The statute provides that, to support its determinations, OFAC may submit classified information ex parte and in camera to any court considering a challenge to a designation. 21 U.S.C. § 1903(i).

This court, in the context of a "foreign terrorist organization" designation under AEDPA, has "already decided ... that due process require[s] the disclosure of only the unclassified portions of the administrative record." People’s Mojahedin Org. of Iran v. Dep’t of State , 327 F.3d 1238, 1242 (D.C. Cir. 2003) ( People’s Mojahedin II ) (citing Nat’l Council of Resistance of Iran v. Dep’t of State , 251 F.3d 192, 207-09 (D.C. Cir. 2001) ( NCORI ) ); see Holy Land Found. for Relief & Dev. v. Ashcroft , 333 F.3d 156, 164 (D.C. Cir. 2003) ( Holy Land ). We have countenanced that approach in very limited, statutorily recognized circumstances when the government has both exigent reasons for freezing assets and pressing interests in the nondisclosure of the highly sensitive classified information. In that narrow category of cases, other procedural safeguards sufficed to provide meaningful protections of due process interests in adequate notice and accurate decision making, and prevent government overreach.

II.

On May 5, 2016, OFAC designated as traffickers several dozen Panamanian individuals and entities, including plaintiffs here: Abdul Mohamed Waked Fares, a Panamanian businessman who owned and operated several companies also designated; his son, Mohamed Abdo Waked Darwich, who held an executive position in those businesses; and Grupo Wisa, S.A., one of Fares’s businesses, which sells duty-free goods internationally; together with approximately two dozen other businesses (not parties to this litigation) owned and operated by Fares or Darwich. Joint App’x (J.A.) 8-9, 111-12; see Additional Designations, Foreign Narcotics Kingpin Designation Act, 81 Fed. Reg. 28,937 (May 10, 2016).¹

A few weeks after the designation, plaintiffs requested that OFAC reconsider its decision. J.A. 104-06. The reconsideration request did not present exculpatory evidence; instead, it focused on the "permanent adverse consequences of the designations," and proposed an alternative, interim means of immobilizing plaintiffs’ control of their property: placing "all affected assets into trusts managed by independent persons approved by the U.S. government." J.A. 106; see generally 31 C.F.R. § 501.807(a) (identifying "corporate reorganization" as a potential alternative to asset blocking). Plaintiffs also asked for "immediate access to the administrative record upon which the challenged designations were based." J.A. 106.

In June, OFAC denied the request for reconsideration, noting that plaintiffs had not presented any "evidence or argument to support a finding that there was an insufficient basis for the designations." J.A. 111-13. OFAC rejected the proposed trust terms because they explicitly provided "for continuing control by the [...