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Holy Land Foundation for Relief and Development v. Ashcroft

August 8, 2002

HOLY LAND FOUNDATION FOR RELIEF AND DEVELOPMENT PLAINTIFF,
v.
JOHN ASHCROFT, IN HIS OFFICIAL CAPACITY AS ATTORNEY GENERAL OF THE UNITED STATES, ET AL. DEFENDANTS.



The opinion of the court was delivered by: Gladys Kessler United States District Judge

MEMORANDUM OPINION

Plaintiff, Holy Land Foundation for Relief and Development ("HLF"), the largest Muslim charitable foundation in the country, brings this action challenging its designation as a terrorist organization and the resulting blocking of its assets as arbitrary, capricious and unconstitutional.

On December 4, 2001, the Office of Foreign Asset Control ("OFAC") of the United States Department of Treasury designated HLF as a specially designated terrorist ("SDT"), as a specially designated global terrorist ("SDGT"), and blocked all of its assets pursuant to the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq. ("IEEPA"), and Executive Orders 13224 and 12947.

Defendants are John Ashcroft, Attorney General; the United States Department of Justice; Paul O'Neill, Secretary of the Treasury; the United States Department of the Treasury; Colin Powell, Secretary of State; and the United States Department of State (collectively the "Government").

In this action, HLF seeks to enjoin Defendants from continuing to block or otherwise interfere with access to or disposition of its assets. Plaintiff alleges that the blocking order violates the Administrative Procedure Act ("APA"), 5 U.S.C. § 701 et seq; the First, Fourth and Fifth Amendments of the United States Constitution; and the Religious Freedom Restoration Act, 42 U.S.C. § 2000bb et seq. ("RFRA").

The matters now before the Court are Plaintiff's Motion for a Preliminary Injunction [#3], Defendants' Motion to Dismiss and For Summary Judgment [#17], and Defendants' Motion In Limine and to Strike [#31]. Upon consideration of the motions, oppositions, replies, the arguments presented at the lengthy motions hearing on July 18, 2002, and the entire record herein, for the reasons stated below, the Court denies Plaintiff's Motion for a Preliminary Injunction, grants in part and denies in part Defendants' Motion to Dismiss and for Summary Judgment, and grants Defendants' Motion In Limine and to Strike.

I. STATUTORY FRAMEWORK

A. The International Emergency Economic Powers Act

In 1917, Congress enacted the Trading With the Enemy Act ("TWEA"), which granted the President "broad authority" to "investigate, regulate, . . . prevent or prohibit . . . transactions" in times of war or declared national emergencies. 50 U.S.C. app. § 5(b).

In 1977, Congress amended the TWEA and enacted the IEEPA to delineate the President's exercise of emergency economic powers in response to both wartime and peacetime crises under the TWEA and the IEEPA respectively. The 1977 legislation granted the President broad emergency economic power in wartime under the TWEA, and granted him similar, but not identical, emergency economic power in peacetime national emergencies under the IEEPA.

The IEEPA authorizes the President to declare a national emergency "to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States." 50 U.S.C. § 1701(a). Upon declaration of a national emergency, the IEEPA further authorizes the President to

investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States. Id. § 1702(a)(1)(B).

B. Executive Order 12947

Pursuant to his authority under the IEEPA, President Clinton issued Executive Order 12947 on January 23, 1995. President Clinton found that "grave acts of violence committed by foreign terrorists who threaten to disrupt the Middle East peace process" constitute an "unusual and extraordinary threat to the national security, foreign policy, and economy of the United States." E.O. 12947.

The Executive Order blocks all property and interests in property of the terrorist organizations and persons designated in the Order, known as specially designated terrorists, or SDTs. Id. § 1. The Islamic Resistance movement (commonly known as "Hamas"), a Palestinian military and political organization, is one of the SDTs identified in the Order. The Executive Order also permits the Secretary of the Treasury to designate additional SDTs if they are found, inter alia, to be "owned or controlled by, or to act for or on behalf of" an entity designated in that Order. Id. § 1(a)(iii).

C. Executive Order 13224

After the September 11, 2001 terrorist attacks on the United States, President Bush issued Executive Order 13224, declaring a national emergency with respect to the "grave acts of terrorism . . . and the continuing and immediate threat of further attacks on United States nationals or the United States." E.O. 13224.

As with the Executive Order issued by President Clinton, Executive Order 13224 blocks all property and interests in property of the designated terrorist organizations, known as specially designated global terrorists, or SDGTs. On October 31, 2001, the President designated Hamas as one of the SDGTs subject to the Order.

The Executive Order also authorizes the Secretary of the Treasury to designate additional SDGTs whose property or interests in property should be blocked because they "act for or on behalf of" or are "owned or controlled by" designated terrorists, or they "assist in, sponsor, or provide . . . support for," or are "otherwise associated" with them. Id. § 1(c)-(d).

II. PROCEDURAL BACKGROUND

HLF is a non-profit corporation organized in 1989, with its headquarters in Richardson, Texas. It was originally incorporated under the name Occupied Land Fund ("OLF"), and changed its corporate name to Holy Land Foundation for Relief and Development on September 16, 1991. Shukri Abu Baker is HLF's co-founder and has been Chief Executive Officer from its founding to the present. *fn1

HLF alleges in its Complaint, that it is a § 501(c)(3) charitable organization that provides humanitarian aid throughout the world, although its primary focus has been to provide aid to the Palestinian population in the West Bank and Gaza.

On December 4, 2001, the Secretary of Treasury determined that HLF was subject to Executive Orders 12947 and 13224 because HLF "acts for or on behalf of" Hamas. *fn2 Accordingly, HLF was designated as an SDT under Executive Order 12947 and as an SDGT under Executive Order 13224. Pursuant to the designation, OFAC issued a "Blocking Notice" freezing all of HLF's funds, accounts and real property. At that time, OFAC also removed from HLF headquarters, all documents, computers, and furniture. Pursuant to the Blocking Notice, all transactions involving property in which HLF has any interest are prohibited without specific authorization from OFAC.

Plaintiff filed this action on March 11, 2002, seeking to enjoin Defendants from continuing to block or freeze its assets. Plaintiff alleges that the designation of HLF as an SDT and SDGT and attendant blocking violates (1) the APA; (2) the Due Process Clause of the Fifth Amendment; (3) the Takings Clause of the Fifth Amendment; (4) the Fourth Amendment; (5) First Amendment rights to freedom of speech and association; and (6) the Religious Freedom Restoration Act.

On May 31, 2002, the Government moved for summary judgment on the APA claim and moved to dismiss the remaining constitutional and RFRA claims. On June 24, 2002, the Government filed a Motion In Limine and To Strike, seeking to exclude evidence beyond the administrative record, to preclude the taking of evidence in an evidentiary hearing, and to strike the exhibits attached to Plaintiff's Opposition and Reply brief. *fn3

III. ANALYSIS

A. Motion In Limine and to Strike

HLF contends that the Court should supplement the administrative record with the exhibits attached to its Opposition to Defendants' Motion to Dismiss and for Summary Judgment and Reply in Support of Plaintiff's Motion for a Preliminary Injunction, and that the Court should permit Rule 56(f) discovery and supplement the administrative record accordingly. *fn4 The Government has filed a Motion In Limine and to Strike in response. For the reasons discussed below, the Court grants the Government's Motion.

It is well-established that the scope of review under the APA is narrow and must ordinarily be confined to the administrative record. See Camp v. Pitts, 411 U.S. 138, 142 (1973) ("the focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court"). HLF contends that courts have recognized circumstances under which the reviewing court may consider extra-record evidence, and that such circumstances are present here.

First, the heart of HLF's argument is that the Government must furnish "[t]he 'whole' administrative record," which includes "'all documents and materials directly or indirectly considered by agency decision-makers and includ[ing] evidence contrary to the agency's position.'" Thompson v. Dep't of Labor, 885 F.2d 551, 555 (9th Cir. 1989) (citations omitted). HLF reasons that the administrative record in this case is incomplete because OFAC likely considered evidence that it did not include in the record.

HLF's contention is entirely speculative, and it has failed to identify any documents that OFAC directly or indirectly considered and excluded from the 3130 page administrative record. *fn5 OFAC has certified that the administrative record on file is "complete and accurate." See Certification signed by James W. McCament (May 31, 2002). That certification is entitled to "a presumption of administrative regularity and good faith." Federal Trade Commission v. Invention Submission Corp., 965 F.2d 1086, 1091 (D.C. Cir. 1992). Accordingly, HLF's speculative statements are insufficient to overcome this presumption and the well-settled principle that judicial review is confined to the administrative record.

Second, HLF contends that the Court should consider evidence outside the administrative record because OFAC has demonstrated bias and bad faith, and inadequacy of factfinding procedures, thereby warranting de novo review under 5 U.S.C. § 706(2)( F). Specifically, HLF contends that OFAC's redesignation of HLF as a terrorist *fn6 was a "sham," because that process had a predetermined outcome, and because the agency failed to consider virtually all of the evidence HLF submitted, and continued to rely on evidence that HLF had discredited.

HLF has made only conclusory allegations of bad faith and inadequate procedures. It has failed to provide any factual basis for its charges. The fact that OFAC redesignated HLF based, in part, on evidence that HLF contends is flawed is insufficient to suggest bias or inadequate procedures. OFAC did include in the record a significant portion of HLF's evidence challenging OFAC's factual determinations. *fn7 As addressed infra Part III.B.5.d., it was reasonable for OFAC to determine that the main declaration submitted by HLF was not credible, and that determination does not evidence bias or inadequacy in OFAC's procedures. Moreover, HLF was afforded an opportunity to submit further evidence to the agency, but failed to do so. *fn8

In sum, HLF has not demonstrated that the Court should depart from traditional record review analysis in this case. *fn9 Accordingly, the Court will not permit discovery on the APA claim, *fn10 and the exhibits attached to Plaintiff's Motion to Dismiss and for Summary Judgment and Reply in Support of Plaintiff's Motion for a Preliminary Injunction will not be considered by the Court. The Court's review of the APA claim is therefore limited to the administrative record.

B. Administrative Procedure Act

As noted above, Plaintiff contends that OFAC's designation of HLF as an SDT and SDGT, resulting in the blocking of its assets, violates the APA. HLF makes three major arguments: (1) OFAC exceeded its statutory authority under the IEEPA because Hamas does not have a legally enforceable interest in HLF's property; (2) the blocking order violates the statute's humanitarian aid exception; and (3) the OFAC action was arbitrary, capricious, and without substantial evidence in the record. The Government has moved for summary judgment on the entire APA claim.

1. Summary Judgment Standard of Review

Under Fed. R. Civ. P. 56, a motion for summary judgment shall be granted if the pleadings, depositions, answers to interrogatories, admissions, and affidavits show that there is no genuine issue of material fact, and that the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 2. APA Standard of Review

An agency's action may be set aside only if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). In making this determination, the Court "must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971). If the "agency's reasons and policy choices . . . conform to 'certain minimal standards of rationality' . . . the rule is reasonable and must be upheld," Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 521 (D.C.Cir. 1983) (citation omitted), even though the Court itself might have made different choices.

As noted above, under arbitrary and capricious review, the Court does not undertake its own fact-finding. Instead, the Court must review the administrative record assembled by the agency to determine whether its decision was supported by a rational basis. See Camp v. Pitts, 411 U.S. 138, 142 (1973).

3. The IEEPA Does Not Require a Legally Enforceable Interest

The IEEPA provides, in relevant part, that the President may block "property in which any foreign country or a national thereof has any interest." IEEPA, 50 U.S.C. § 1702(a)(1)(B). HLF contends that this "interest" must constitute a "legally enforceable interest." Accordingly, HLF reasons that OFAC exceeded its statutory authority because it cannot establish that Hamas had any such interest in HLF's property. The Government argues that the IEEPA does not impose any such requirement of a legally enforceable interest on the President's authority. It reasons that OFAC need only determine that Hamas has "any interest" in HLF's property, which it reasonably did in this case. It is clear that both the text of the statute and the cases interpreting it support the Government's position.

First, the plain text of the IEEPA authorizes the blocking of property in which the designated foreign national or country has "any interest." IEEPA, 50 U.S.C. § 1702(a)(1)(B) (emphasis added). The language imposes no constraints on that term. Moreover, Congress explicitly authorized the Executive to define the statutory terms of the IEEPA. See id. § 1704. *fn11 OFAC carried out that mandate and defined "interest" to mean "an interest of any nature whatsoever, direct or indirect." 31 C.F.R. 500.311-.312 (emphasis added). It is clear, then, that the plain text of the statute, as well as its implementing regulations, broadly define the term "interest," and do not impose the limitation advanced by Plaintiff.

Second, courts have repeatedly upheld OFAC's authority to interpret broadly the term "any interest" in the identical provisions of the IEEPA, and its predecessor statute, the TWEA. See Regan v. Wald, 468 U.S. 222, 224, 225-26, 233-34 (1984) (repeatedly stating that the phrase "any interest" must be construed in the broadest possible sense); Consarc Corp. v. Iraqi Ministry, 27 F.3d 695, 701-02 (D.C. Cir. 1994) ("Consarc I") (finding that OFAC may choose and apply its own definition of property interests, subject to deferential judicial review, and that OFAC's application of its own regulations, "receives an even greater degree of deference than the Chevron standard, and must prevail unless plainly inconsistent with that regulation"); Consarc v. OFAC, 71 F.3d 909 (D.C. Cir. 1995) ("Consarc II") (referring to the expansive statutory grant of power under the IEEPA, and finding that a challenge to OFAC's interpretation of its own regulation must either demonstrate that the statute clearly forbids the agency's interpretation or that the interpretation is unreasonable).

Third, in those cases where courts have found that a foreign nation or national had an interest in property under the IEEPA, they have not based that ruling on any statutory requirement that the interest be "legally enforceable." See, e.g., Consarc II, 71 F.3d at 909; Consarc I, 27 F.3d at 695; Milena Ship Management Co. v. Newcomb, 995 F.2d 620 (5th Cir. 1993). *fn12

In sum, in light of the plain text of the IEEPA and OFAC's regulations broadly defining the term "interest," the deference that must be afforded to OFAC's interpretation of its own regulations, and the relevant case law, the Court concludes that the IEEPA does not limit the President's blocking authority to the existence of a legally enforceable interest.

4. The Humanitarian Aid Exception Authorizes Donations of "Articles," But Not of Money

The humanitarian aid exception under the IEEPA provides, in relevant part, that "[t]he authority granted to the President by [the IEEPA] does not include the authority to regulate or prohibit, directly or indirectly . . . donations, by persons subject to the jurisdiction of the United States, of articles, such as food, clothing, and medicine, intended to be used to relieve human suffering." IEEPA, 50 U.S.C. ยง 1702(b)(2). HLF contends that OFAC's blocking order violates this exception ...


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