Iran Air v. Kugelman
| Citation | 996 F.2d 1253 |
| Decision Date | 02 July 1993 |
| Docket Number | Nos. 91-1596,92-1304 and 92-1389,s. 91-1596 |
| Parties | IRAN AIR, Petitioner, v. Robert F. KUGELMAN, Acting Under Secretary for Bureau of Export Administration, U.S. Department of Commerce, Respondent. |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Thomas J. Whalen, argued for petitioner. Kevin Michael Sherlock also entered an appearance for petitioner.
John S. Koppel, Atty., Dept. of Justice, argued for respondent. With him on the brief were Stuart M. Gerson, Asst. Atty. Gen., Jay B. Stephens, U.S. Atty. at the time the brief was filed, Douglas N. Letter, Atty., Dept. of Justice, and Thomas C. Barbour, Sr. Trial Atty., Dept. of Commerce. Michael Jay Singer, Atty., Dept. of Justice, also entered an appearance for respondent.
Before EDWARDS, RUTH BADER GINSBURG, and SILBERMAN, Circuit Judges.
Opinion for the Court filed by Circuit Judge RUTH BADER GINSBURG.
In 1985, Iran Air unwittingly violated the Export Administration Act of 1979, 50 U.S.C.App. §§ 2401-2420, in connection with the shipment of three U.S.-made "signal generators" 1 from Germany to Iran. In 1990, the Commerce Department's Office of Export Enforcement sought to impose civil sanctions against Iran Air, but the Administrative Law Judge (ALJ) assigned to hear the case ruled that the Export Act authorized sanctions only for knowing violations. Because the Office of Export Enforcement had neither alleged nor proved that Iran Air knowingly violated the law, the ALJ dismissed the charge. On final agency review, the Acting Under Secretary of Commerce for Export Administration emphasized that the ALJ's interpretation of the Act clashed with the Department's firm position that "knowledge" is not a requirement in a civil penalty case. The Under Secretary imposed a $100,000 civil penalty (the statutory maximum) and a suspension of export privileges for twenty-four months, twenty-one of them to be waived if Iran Air paid the penalty in full within thirty days of the Under Secretary's order.
On petition for review to this court, Iran Air asserts that, as the ALJ ruled, only knowing violations of export administration regulations are sanctionable. In any event, Iran Air insists, this court's decision in Dart v. United States, 848 F.2d 217 (D.C.Cir.1988), precludes a ruling by the Under Secretary overturning that of the ALJ. We hold that both sides have misperceived our ruling in Dart. That decision does not permit the agency head to reject the ALJ's fact findings, but neither does it allow the ALJ to supplant the head of the agency in construing the applicable law and regulations. Accordingly, we affirm the Under Secretary's construction of the governing statute and regulation; we remand, however, for a reasoned determination of the appropriate penalty.
In August 1985, Iran Air placed an order for three top-of-the-line signal generators with a German-based company, Fluke Germany, for export to Iran. The purchase order stated: "Please ship to Iran Air Frankfurt Airport for reforwarding to Tehran Iran." Fluke Germany did not have the generators in stock, and therefore referred the order to its affiliate, Fluke Holland. Fluke Holland, which was also out of the signal generators, obtained them from the United States manufacturer, Fluke USA. The invoices associated with the transactions between Fluke USA and Fluke Holland and between Fluke Holland and Fluke Germany bore the destination control statement:
On October 17, 1985, Fluke Germany delivered the Fluke USA generators to Iran Air Regulations pursuant to the Export Administration Act of 1979 (Export Act), 50 U.S.C.App. §§ 2401-2420, instruct that "reexport" of certain U.S.-made equipment, such as the signal generators in this case, from Germany to Iran requires a Commerce Department license:
[302 U.S.App.D.C. 177] in Frankfurt, Germany. In contrast to the previous invoices, the invoice for this transaction contained no destination control statement. A few days later, Iran Air shipped the generators to Iran
Unless the reexport of a commodity previously exported from the United States has been specifically authorized in writing by the Office of Export Licensing prior to its reexport ..., no person in a foreign country (including Canada) or in the United States may:
(a) Reexport such commodity ... from the authorized country(ies) of ultimate destination; or
(b) Export such commodity from the United States with the knowledge that it is to be reexported ... from the authorized country(ies) of ultimate destination.
15 C.F.R. § 774.1 (footnote omitted). Despite this regulation, Iran Air did not obtain a reexport license for the transfer of the U.S.-made signal generators from Germany to Iran. Nor does it appear that any Fluke company did so.
Five years later, in October 1990, the Commerce Department's Office of Export Enforcement (OEE) instituted administrative proceedings against Iran Air--though apparently not against any of the Fluke companies 2--for the imposition of civil sanctions. OEE charged Iran Air, pursuant to 15 C.F.R. § 787.2, 3 with causing the reexport of "U.S.-origin Fluke signal generators ... from ... Germany to Iran without obtaining ... the reexport authorization required by [15 C.F.R. § ] 774.1."
After an evidentiary hearing, the ALJ dismissed the charge. The ALJ ruled, centrally, that the governing statutory prescription, 50 U.S.C.App. § 2410(c), authorized the imposition of civil sanctions only for knowing violations of the Export Act or regulations thereunder. The OEE, according to the ALJ, neither alleged nor proved that Iran Air had knowingly violated the law. 4
The Acting Under Secretary of Commerce for Export Administration (Under Secretary) disagreed with the ALJ's reading of the Export Act. In accord with OEE's position, the Under Secretary ruled that the exporter's knowledge need not be shown as a prerequisite to the imposition of civil penalties. Declaring that the ALJ had incorrectly construed the civil sanction prescriptions to include a state of mind requirement, the Under Secretary remanded the case for reconsideration consistent with the agency's view of the controlling law.
On remand, the ALJ refused to follow the Under Secretary's reading of the law and, again, dismissed the charge. The ALJ emphasized that the Export Act allowed the Under Secretary only to "affirm, modify, or vacate" an ALJ decision, 50 U.S.C.App. § 2412(c)(1); that language, as construed in Dart v. United States, 848 F.2d 217 (D.C.Cir.1988), the ALJ said, precluded reversal of his determination "summarily," i.e., without "meaningful explanation." Even under the agency's construction of the law, the ALJ concluded, the errors in ordering and shipping the Fluke USA-made generators "would have warranted no more than a warning" to the American manufacturer, its subsidiaries, and Iran Air. Once more the Under Secretary asserted the agency head's prerogative to interpret the governing law: " 'Knowledge,' " the Under Secretary repeated, "is not an essential element of proof for the imposition of civil penalties...." (Emphasis in original.) That construction of the Export Act and the regulations thereunder, the Under Secretary said, "became the law of this case," i.e., law "binding on the ALJ and the parties." For a second time, the Under Secretary vacated the ALJ's decision and remanded for a determination of the charge against Iran Air consistent with the rule that Export Act civil penalties entail no scienter requirement.
Unmoved, the ALJ said in a terse order that he had completely fulfilled his responsibilities when he set out "alternative dispositions"--dismissal of the charge or, if the Under Secretary read the law correctly, a warning to Iran Air. This order, the ALJ's third, expressly acknowledged that he and the Under Secretary parted ways, not on "the factual dispositive issues," but on an "essentially legal" ruling.
At last, the Under Secretary issued a final order restating, more elaboratively, the agency's view that Export Act civil penalties entail no state of mind requirement. Concluding that "to remand, yet again" would be "futile," the Under Secretary imposed a $100,000 civil penalty, the statutory maximum, and suspended Iran Air's export privileges for three months, if Iran Air paid the monetary penalty within thirty days, or for twenty-four months, if Iran Air did not promptly pay the $100,000 penalty.
Invoking this court's review, Iran Air urges that the ALJ correctly construed the Export Act penalty provisions to require, even for civil sanctions, allegation and proof of the exporter's "knowledge." In any event, Iran Air maintains, the Under Secretary may not tamper with an ALJ decision in favor of the exporter.
(a) Threshold Issues. Iran Air challenges the timeliness of the charge and the substantiality of the evidence that no export license was issued for the signal generators. We hold that the charge was timely made because it was filed within the five-year period prescribed in 28 U.S.C. § 2462, although not served until some days thereafter. Cf. FED.R.CIV.P. 3 (); West v. Conrail, 481 U.S. 35, 38-40, 107 S.Ct. 1538, 1541-42, 95 L.Ed.2d 32 (1987) ().
We furthermore agree that the record adequately supports the determination that no export license was issued for the shipment of the signal generators to Iran. As the...
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