Zevallos v. Obama, Civil Action No.: 13-0390 (RC)

CourtUnited States District Courts. United States District Court (Columbia)
Writing for the CourtRUDOLPH CONTRERAS
PartiesFERNANDO ZEVALLOS, Plaintiff, v. BARACK H. OBAMA, In his official capacity as President of the United States, JACOB J. LEW, In his official capacity as Secretary of the Treasury, and UNITED STATES DEPARTMENT OF THE TREASURY OFFICE OF FOREIGN ASSETS CONTROL Defendants.
Decision Date17 January 2014
Docket NumberCivil Action No.: 13-0390 (RC)

BARACK H. OBAMA, In his official capacity as President of the United States,
JACOB J. LEW, In his official capacity as Secretary of the Treasury, and

Civil Action No.: 13-0390 (RC)


Dated: January 17, 2014

Re Document Nos.: 8, 11, 12




In 2004, President George W. Bush designated Fernando Zevallos as a "Significant Foreign Narcotics Trafficker" under the Foreign Narcotics Kingpin Designation Act. Mr. Zevallos brings this action, challenging the government's 2013 decision not to delist him as such, under the Due Process Clause, the Takings Clause, and the Administrative Procedure Act. For

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the reasons that follow, the Court will grant the defendants' motion to dismiss, or in the alternative, for summary judgment.


A. Statutory Background

In 1999, Congress enacted the Foreign Narcotics Kingpin Designation Act ("Kingpin Act"). See Foreign Narcotics Kingpin Designation Act, Pub. L. 106-120 (codified at 21 U.S.C. §§ 1901-08 (1999)). The purpose of the Act is "to provide authority for the identification of, and application of sanctions on a worldwide basis to, significant foreign narcotics traffickers, their organizations, and the foreign persons who provide support to those significant foreign narcotics traffickers and their organizations, whose activities threaten the national security, foreign policy, and economy of the United States." 21 U.S.C. § 1902.

The Kingpin Act authorizes the President to "identify[] publicly the foreign persons that the President determines are appropriate for sanctions . . . and detail[] publicly the President's intent to impose sanctions upon these significant foreign narcotics traffickers pursuant to this chapter." 21 U.S.C. § 1903(b)(1)-(2). A significant foreign narcotics trafficker ("SFNT") is defined as "any foreign person that plays a significant role in international narcotics trafficking, that the President has determined to be appropriate for sanctions pursuant to this chapter . . . ." Id. § 1907(7). Once a person has been designated an SFNT, "there are blocked . . . all such property and interests in property within the United States, or within the possession or control of any United States person, which are owned or controlled by" the SFNT. Id. § 1904(b).

A person designated an SFNT may "seek administrative reconsideration of his, her or its designation . . . or assert that the circumstances resulting in the designation no longer apply, and thus seek to have the designation rescinded . . . ." 31 C.F.R. § 501.807. Administrative

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reconsideration is handled by the Office of Foreign Assets Control ("OFAC"), which is an agency within the Department of the Treasury. Id. § 501.807(b). That same regulation also provides that "[a] blocked person seeking unblocking . . . may request a meeting with the Office of Foreign Assets Control; however, such meetings are not required, and the office may, at its discretion, decline to conduct such meetings prior to completing a review pursuant to this section." Id. § 501.807(c). Additionally, the regulation states that "[a]fter the Office of Foreign Assets Control has conducted a review of the request for reconsideration, it will provide a written decision to the blocked person . . . ." Id. § 501.807(d).

B. Fernando Zevallos's Personal History

The plaintiff, Fernando Zevallos, was born in Peru in 1957. Pl.'s Opp'n Mot. to Dismiss 5, ECF No. 12-1. Mr. Zevallos attended Peruvian Air Force officers' school in the 1970s, and, along with his family, started an air-taxi company called TAUSA in 1978. Id. In the early 1990s, Mr. Zevallos and his family terminated TAUSA and launched Aero Continente, a Peruvian airline. Id. The success of the airline caused Mr. Zevallos to apply for permanent residency status in the United States, which was granted in 1994. Id. at 6.

Since the 1990s, Mr. Zevallos has been charged with drug trafficking related crimes by at least three countries: Peru, Chile, and the United States. In 1995, the Peruvian National Police arrested several individuals on drug trafficking charges, who allegedly had ties to Aero Continente, and, in turn, to Mr. Zevallos as well. Id. Peruvian authorities initially found all the charges against Mr. Zevallos unfounded and absolved him of all criminal charges in 2002. But the Supreme Court of Peru ordered a new trial in 2003. Id. at 7-8. The retrial in Peru eventually led to Mr. Zevallos's conviction in 2005 for drug trafficking offenses, for which he is currently serving a 20-year prison sentence. Id. at 8. See also Def.'s Mot. to Dismiss 9, ECF No. 11-1.

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Meanwhile, in 2001, Chile filed a money laundering case against him and Aero Continente, see Pl.'s Opp'n Mot. to Dismiss 6-7, and in 2007, Mr. Zevallos was indicted in the Southern District of Florida for alleged conspiracy, money laundering, and substantive violations of the Kingpin Act. Id. at 8. Finally, new charges were brought against him in Peru in 2011 and 2012, on allegations that Mr. Zevallos engaged in a criminal conspiracy, narcotics trafficking, and money laundering. Id. at 9. See also AR000343-346, AR000470, ECF No. 7-3.

C. The Designation and Correspondence between Mr. Zevallos and OFAC

On June 1, 2004, pursuant to the Kingpin Act, President George W. Bush designated Mr. Zevallos an SFNT. See Compl., Ex. 3, ECF No. 1-3. In response, on December 23, 2004, Mr. Zevallos submitted a letter to OFAC challenging that designation.1 AR000015, ECF No. 6-1. On June 24, 2005, and September 15, 2005, the Department of Justice provided Mr. Zevallos with redacted, unclassified information relied upon by OFAC in reaching its designation decision. See AR000469, AR000480, ECF No. 6-3. On October 17, 2005, Mr. Zevallos submitted supplemental arguments in support of his reconsideration request. AR001004, ECF No. 7-5. He did not receive a response from OFAC, and on November 9, 2005, he filed a complaint in the U.S. District Court for the District of Columbia challenging his designation. See Zevallos v. Bush, Civ. No. 05-2196 (D.D.C. Nov. 9, 2005), ECF No. 1. On December 21, 2005 (two days after his conviction in Peru of all charges for narcotics trafficking and money laundering), he voluntarily dismissed that complaint. See AR001235, ECF No. 7-7; Zevallos v. Bush, Civ. No. 05-2196 (D.D.C. Dec. 21, 2005), ECF No. 7. At that point, OFAC assumed that

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the voluntary dismissal of Mr. Zevallos's lawsuit also constituted a withdrawal of his request for reconsideration. See Def.'s Mot. to Dismiss 21, ECF No. 11-1, Def.'s Reply 8, ECF No. 14.

On July 8, 2009, Mr. Zevallos submitted a letter to OFAC renewing his request for reconsideration of his designation as an SFNT. See AR001236, AR001203-1207. In response to that, on October 2, 2009, OFAC sent Mr. Zevallos a questionnaire, to which he replied on November 2, 2009. AR001236. On May 15, 2010, Mr. Zevallos submitted a letter to OFAC requesting a response to his November 2009 letter. Id. On February 25, 2011, and also on October 17, 2012, Mr. Zevallos submitted letters to OFAC requesting a decision on his delisting petition. AR001237. On November 20, 2012, OFAC replied to Mr. Zevallos's October 17, 2012 letter, acknowledging its receipt. Id. Finally, on March 13, 2013, OFAC submitted another letter to Mr. Zevallos providing him with a status update, informing Mr. Zevallos that it "hope[d] to reach a final decision in the near future." Id. See also AR000894.

Mr. Zevallos then filed this lawsuit on March 25, 2013, initially asking this Court to enter an order compelling OFAC to issue a written decision as to Mr. Zevallos's continued SFNT designation. See Compl. 14, ECF No. 1. On June 14, 2013, OFAC issued a 44-page Evidentiary Memorandum denying Mr. Zevallos's reconsideration request. See AR001229-1281, ECF No. 7-7. Mr. Zevallos then amended his complaint, seeking instead an order from this Court compelling OFAC to remove his name from the Specially Designated Nationals list. See Am. Compl. 20, ECF No. 10. The defendants moved to dismiss each claim. They also moved for summary judgment in the alternative, as to Counts I (Procedural Due Process), II (Substantive Due Process), and V (Arbitrary and Capricious under the APA). They also argue that Counts III (Takings) and IV (Undue Delay) should be dismissed for lack of subject matter jurisdiction. See Def.'s Mot. to Dismiss 3-4, ECF No. 11-1. The Court now turns to the relevant legal standards.

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A. Legal Standards

1. Motion to Dismiss for Lack of Subject Matter Jurisdiction (12(b)(1))

Federal courts are courts of limited jurisdiction, and the law presumes that "a cause lies outside this limited jurisdiction . . . ." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377...

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