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Kadi v. Geithner

United States District Court, D. Columbia.

March 19, 2012

YASSIN ABDULLAH KADI, Plaintiff,
v.
TIMOTHY GEITHNER, et al., [1] Defendants

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For YASSIN ABDULLAH KADI, Plaintiff: David F. Geneson, LEAD ATTORNEY, SHEPPARD, MULLIN, RICHTER & HAMPTON LLP, Washington, DC; Daniel L. Brown, Elizabeth M. Rotenberg-Schwartz, PRO HAC VICE, SHEPPARD MULLIN RICHTER & HAMPTON LLP, New York, NY.

For HENRY M. PAULSON, In his official capacity, Secretary of the Treasury, ADAM J. SZUBIN, In his official capacity, U.S. Department of the Treasury, Director, UNITED STATES DEPARTMENT OF TREASURY, OFFICE OF FOREIGN ASSETS CONTROL, Defendants: Jonathan Eli Zimmerman, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Federal Programs Branch, Washington, DC.

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MEMORANDUM OPINION

JOHN D. BATES, United States District Judge.

This case, brought by Yassin Abdullah Kadi, [2] a citizen and permanent resident of Saudi Arabia, involves a challenge to the decision of the Office of Foreign Assets Control (" OFAC" ) to designate him as a " specially designated global terrorist (" SDGT" ). Presently pending are (1) defendants' [3] motion to dismiss or, in the alternative, for summary judgment; (2) Kadi's motion for discovery under Fed.R.Civ.P. 56(f); and (3) Kadi's motion to amend his complaint. For the reasons that follow, the Court will grant defendants' motion for summary judgment, deny Kadi's motion for discovery under Rule 56(f), and deny Kadi's motion to amend the complaint.

BACKGROUND

I. Statutory and Regulatory Background

The listing of SDGTs is governed by the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq. (" IEEPA" ), and Executive Order 13,224 (66 Fed. Reg. 49,079 (Sept. 23, 2001)) (" EO 13,224" ). IEEPA " authorizes the President to declare a national emergency when an extraordinary

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threat to the United States arises that originates in substantial part in a foreign state." Holy Land Found. v. Ashcroft, 333 F.3d 156, 159, 357 U.S. App.D.C. 35 (D.C. Cir. 2003). Such a declaration provides the President with extensive authority set forth in 50 U.S.C. § 1702, which permits the President to block property subject to the jurisdiction of the United States. Specifically, the President is authorized 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 . . . .

50 U.S.C. § 1702(a)(1)(B). IEEPA further provides that, in the event of " judicial review of a determination made under this section, if the determination was based on classified information . . . such information may be submitted to the reviewing court ex parte and in camera." Id. § 1702(c).

After September 11, 2001, the President issued EO 13,224 invoking his authority under IEEPA and the United Nations Participation Act, 22 U.S.C. § 287c. The Executive Order declared a " national emergency" with respect to " grave acts of terrorism and threats of terrorism committed by foreign terrorists, including the terrorist attacks . . . committed on September 11, 2001, . . . and the continuing and immediate threat of further attacks on United States nationals or the United States." Id. EO 13,224 ordered the blocking of property of twenty-seven specific terrorists and terrorist organizations identified in an Annex. Id. § 3. The Secretary of the Treasury is authorized to designate additional persons whose property or interests in property should be blocked, where the Secretary finds that such persons " act for or on behalf of" or are " owned or controlled by" designated terrorists, or they " assist in, sponsor, or provide . . . support for" (including " financial . . . support" or " financial . . . services" ) or are " otherwise associated with" them. Id. § § 1(c)-(d). The Secretary has delegated his authorities under the Executive Order to the Director of OFAC. 31 C.F.R. § 594.802. Persons designated pursuant to the Executive Order are referred to as " specially designated global terrorists" (SDGT). See 31 C.F.R. § 594.310.

II. Procedural History and Designation[4]

Kadi is a citizen and permanent resident of Saudi Arabia and a self-described " prominent Saudi Arabian businessman and philanthropist." Compl. ¶ 1; AR 94. On October 12, 2001, OFAC designated Kadi a SDGT pursuant to the IIEPA and EO 13,224, Compl. ¶ 20, which, by operation of law, resulted in the blocking of all of his property and interests in property subject to the jurisdiction of the United States. It is undisputed that OFAC did not give notice to Kadi before blocking his assets. The designation was made known to Kadi and to the public through a press release instructing financial institutions to freeze Kadi's assets. Compl. ¶ 20; AR 123-26. A press release was also issued by authorities in the United Kingdom. Compl. ¶ 20. By letter dated October 15, 2001, OFAC also mailed Kadi a " Notice of

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Blocking" providing direct notice of the designation and blocking and advising him of the administrative procedures available to challenge OFAC's action. AR 2784-85. Notice of the designation was also published on October 26, 2001 in the Federal Register. See 66 Fed. Reg. 54404 (Oct. 26, 2001).

Kadi thereafter sought judicial review in the High Court in London. Compl. ¶ ¶ 22-23. In response to a request for information by the United Kingdom, the United States Treasury Department faxed a two-page document to United Kingdom officials in October 2001 (" two-page fax" ), which Kadi learned about during his court proceedings in London. Compl. ¶ 24. Kadi places much emphasis on this two-page fax, which summarized unclassified information relating to Kadi's financial support of terrorist activities through a charitable organization known as the Muwafaq Foundation and his other ties to terrorists and terrorism financing. AR 39-40. Kadi claims that around May 23, 2002, he met with OFAC staff at the U.S. Embassy in Saudi Arabia, where OFAC denied knowledge of the two-page fax. Compl. ¶ 25. However, there is no dispute that Kadi received a copy of the two-page fax, reviewed it, and proceeded to refute various contentions as part of his petition for reconsideration. See Compl. ¶ 29.

Kadi petitioned OFAC for reconsideration on December 21, 2001. AR 23. In the months and years thereafter, he has submitted several witness statements and other materials in support of his petition and has engaged in a series of exchanges with OFAC. On March 12, 2004, OFAC issued a twenty-page unclassified memorandum denying Kadi's request for reconsideration (" OFAC Memorandum" ). Compl. ¶ 30. AR 3-40. Kadi maintains that this is the only formal written statement he has received from the United States government. Compl. ¶ 31. Based on these events, Kadi filed this action on January 16, 2009, challenging the evidentiary basis for his designation and the freezing of his assets, and raising an array of constitutional claims. Specifically, he claims violations under the Administrative Procedure Act, 5 U.S.C. § 701 et seq., the IEEPA, and the First, Fourth, and Fifth Amendments. On May 22, 2009, defendants filed a motion to dismiss or, in the alternative, for summary judgment. Kadi opposes the motion and seeks discovery under Rule 56(f). Kadi also seeks leave to file an amended complaint. The Court heard argument with respect to the pending motions on April 9, 2010, and thereafter requested supplemental briefing, which has now been completed. [5]

STANDARD OF REVIEW

All that the Federal Rules of Civil Procedure require of a complaint is that it contain " 'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)); accord Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam). Although " detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion to dismiss, to provide the " grounds" of " entitle[ment] to relief," a

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plaintiff must furnish " more than labels and conclusions" or " a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555-56; see also Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986). " To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570); accord Atherton v. District of Columbia Office of the Mayor, 567 F.3d 672, 681, 386 U.S. App.D.C. 144 (D.C. Cir. 2009). A complaint is plausible on its face " when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. This amounts to a " two-pronged approach" under which a court first identifies the factual allegations entitled to an assumption of truth and then determines " whether they plausibly give rise to an entitlement to relief." Id. at 1950-51.

The notice pleading rules are not meant to impose a great burden on a plaintiff. Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 347, 125 S.Ct. 1627, 161 L.Ed.2d 577 (2005); see also Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512-13, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002). When the sufficiency of a complaint is challenged by a motion to dismiss under Rule 12(b)(6), the plaintiff's factual allegations must be presumed true and should be liberally construed in his or her favor. Leatherman v. Tarrant Cnty. Narcotics & Coordination Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993); Phillips v. Bureau of Prisons, 591 F.2d 966, 968, 192 U.S. App.D.C. 357 (D.C. Cir. 1979); see also Erickson, 551 U.S. at 94 (citing Twombly, 550 U.S. at 555-56). The plaintiff must be given every favorable inference that may be drawn from the allegations of fact. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113, 342 U.S. App.D.C. 268 (D.C. Cir. 2000). However, " the court need not accept inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in the complaint." Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276, 305 U.S. App.D.C. 60 (D.C. Cir. 1994). Nor does the court accept " a legal conclusion couched as a factual allegation," or " naked assertions [of unlawful misconduct] devoid of further factual enhancement." Iqbal, 129 S.Ct. at 1949-50 (internal quotation marks omitted); see also Aktieselskabet AF 21. November 21 v. Fame Jeans Inc., 525 F.3d 8, 17 n.4, 381 U.S. App.D.C. 76 (D.C. Cir. 2008) (explaining that the court has " never accepted legal conclusions cast in the form of factual allegations" ).

Under Fed.R.Civ.P. 56(a), summary judgment is appropriate when the pleadings and the evidence demonstrate that " there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Id. In a case involving review of a final agency action under the Administrative Procedure Act, 5 U.S.C. § 706, however, the standard set forth in Rule 56(a) does not apply because of the limited role of a court in reviewing the administrative record. See Nat'l Wilderness Inst. v. United States Army Corps of Eng'Rs, 2005 WL 691775, *7 (D.D.C. 2005); Fund for Animals v. Babbitt, 903 F.Supp. 96, 105 (D.D.C. 1995), amended on other grounds, 967 F.Supp. 6 (D.D.C. 1997). Under the APA, it is the role of the agency to resolve factual issues to arrive at a decision that is supported by the administrative record, whereas " the function of the district court is to determine whether or not as a matter of law the evidence in the administrative record permitted

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the agency to make the decision it did." See Occidental Engineering Co. v. Immigration & Naturalization Service, 753 F.2d 766, 769-70 (9th Cir. 1985); see also Northwest Motorcycle Ass'n v. United States Dep't of Agriculture, 18 F.3d 1468, 1472 (9th Cir. 1994) (" [T]his case involves review of a final agency determination under the [APA]; therefore, resolution of th[e] matter does not require fact finding on behalf of this court. Rather, the court's review is limited to the administrative record." ). Summary judgment thus serves as the mechanism for deciding, as a matter of law, whether the agency action is supported by the administrative record and otherwise consistent with the APA standard of review. See Richard v. INS, 554 F.2d 1173, 1177, 180 U.S. App.D.C. 314 & n.28 (D.C. Cir. 1977), cited in Bloch v. Powell, 227 F.Supp.2d 25, 31 (D.D.C. 2002), aff'd, 348 F.3d 1060, 358 U.S. App.D.C. 322 (D.C. Cir. 2003).

Plaintiffs challenge Kadi's designation as a SDGT as violating the requirements of the APA, IIEPA, and EO 13,224. The APA requires that the Court " hold unlawful and set aside agency action, findings, and conclusions" that are " arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). The " scope of review under the 'arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). The court must be satisfied that the agency has " 'examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a rational connection between the facts found and the choice made.'" Alpharma, Inc. v. Leavitt, 460 F.3d 1, 6, 373 U.S. App.D.C. 65 (D.C. Cir. 2006). The agency's decisions are entitled to a " presumption of regularity," Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), and although " inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one." Id. at 416. The Court's review is confined to the administrative record, subject to limited exceptions not applicable here. See Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973) (" [T]he focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court." ).

DISCUSSION

I. APA Claim

A.Standard for Motion for Summary Judgment and Discovery

Before addressing the merits of Kadi's APA claim, the Court first considers Kadi's preliminary argument that summary judgment is inappropriate because there are disputed issues of material fact. Alternatively, he claims that the motion for summary judgment is premature because he has not been provided an opportunity to obtain discovery on his claims. See Opp'n at 64-69.

In general, summary judgment " is proper only after the plaintiff has been given adequate time for discovery." First Chicago Int'l v. United Exch. Co., 836 F.2d 1375, 1380, 267 U.S. App.D.C. 27 (D.C. Cir. 1988). However, a party opposing summary judgment and seeking to obtain discovery under Rule 56(f) has the burden of stating " concretely why additional discovery is needed to oppose a motion for summary judgment." Messina v. Krakower, 439 F.3d 755, 762, 370 U.S. App.D.C. 128 (D.C. Cir. 2006); see also Byrd v. EPA, 174 F.3d 239, 248 n.8, 335 U.S. App.D.C. 403 (D.C. Cir. 1999) (party seeking discovery has the burden of identifying which facts to be discovered would create triable issue, as well as the reasons

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why discovery is necessary to challenge the summary judgment motion).

Kadi argues that because the classified record was not made available to him, he is unable to respond to the motion for summary judgment. Moreover, he claims that because subsequent decisions by other countries " vindicated him," the administrative record is therefore incomplete, and he contends that he should be given an opportunity to supplement it. The Court rejects these arguments. Subsequent to the 2004 decision, Kadi has had several years and opportunities to petition OFAC to supplement the administrative record, but he has not done so. Moreover, absent " evidence that the agency has given a false reason . . . discovery is inappropriate in cases under the APA." See Nat'l Treasury Employees Union v. Seidman, 786 F.Supp. 1041, 1046 (D.D.C. 1992). Although Kadi attempts to argue that OFAC has acted in bad faith, nothing in the record supports Kadi's contention. Even if the Court permitted discovery, it is doubtful that it would garner additional facts that would help to decide whether the agency action was arbitrary and capricious, given the deferential review of such actions. See Camp, 411 U.S. at 142 (" [T]he focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court." ); Seidman, 786 F.Supp. at 1046 n. 11 (" The Court may not substitute its judgment for that of the decision-making agency." ) (citing Motor Vehicle Mfrs., 463 U.S. at 43). Accordingly, the Court will deny Kadi's motion for discovery under Rule 56(f) with respect to the APA claim and will proceed to resolve it.

B.Merits of the APA Claim

Kadi's APA claim primarily challenges OFAC's decision to continue his SDGT designation as arbitrary and capricious, as based on a lack of sufficient procedural safeguards, for insufficiency of the evidence in the administrative record, and for OFAC's misplaced reliance on the facts that were in the record. See Compl. ¶ ¶ 51-54. In considering the merits of the claim, the Court has reviewed the parties' submissions, the arguments made by the parties at the hearing before the Court, and the entire administrative record, which consists of both the classified and unclassified record.

In reviewing a challenge to the agency's decision as arbitrary and capricious, the Court bears several considerations in mind. The D.C. Circuit has stated that " a highly deferential review applies" to examination of a SDGT designation. Islamic Am. Relief Agency v. Gonzales, 477 F.3d 728, 732, 375 U.S. App.D.C. 93 (D.D.C. 2007); Holy Land Found., 333 F.3d at 162. As previously stated, the " scope of review under the 'arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency." Motor Vehicle Mfrs., 463 U.S. at 43. The agency's decisions are entitled to a " presumption of regularity," Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), and although " inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one." Id. at 416. The Court, then, " must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Id. Courts are particularly mindful that their review is highly deferential when matters of foreign policy and national security are concerned. See Islamic Am. Relief Agency, 477 F.3d at 734 (" [O]ur review -- in an area at the intersection of national security, foreign policy, and administrative law -- is extremely

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deferential." ); Zarmach Oil Servs v. U.S. Dep't of the Treasury, 750 F.Supp.2d 150, 155 (D.D.C. 2010) (" [C]ourts owe a substantial measure of 'deference to the political branches in matters of foreign policy,' including cases involving blocking orders." ) (citing Regan v. Wald, 468 U.S. 222, 242, 104 S.Ct. 3026, 82 L.Ed.2d 171 (1984)); Holy Land Found., 219 F.Supp.2d at 84 (" Blocking orders are an important component of U.S. foreign policy, and the President's choice of this tool to combat terrorism is entitled to particular deference." )

1. Overview of the OFAC Decision and Kadi's Arguments[6]

After petitioning OFAC for reconsideration in December 2001, Kadi and the agency engaged in several meetings and Kadi provided numerous statements and submissions. On March 12, 2004, OFAC notified Kadi that his petition for reconsideration was denied and that his name would remain on the list of SDGTs. AR 1. OFAC emphasized that its determination rested on the " totality of the record" (both classified and unclassified), which showed that Kadi had financial relationships -- primarily through the Muwafaq Foundation, but also through other Kadi companies -- with many persons and organizations that were designated SDGTs by OFAC:

No one element, no one contact, no one accusation of funding is taken as being determinative of the assessment that AL-QADI has been providing support to terrorists through his actions. Rather, when considering the number of sources, the numbers of activities and length of time, the totality of the evidence, both classified and unclassified, this provides a ...

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