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Ralls Corp. v. Committee On Foreign Investment In United States

United States District Court, District of Columbia

November 6, 2014


For Ralls Corporation, Plaintiff (1:12cv1513): Brian J. Field, George W. Hicks, Jr., Howard Christopher Bartolomucci, Nathan Alexander Sales, Paul Clement, LEAD ATTORNEYS, BANCROFT PLLC, Washington, DC USA; Viet D. Dinh, LEAD ATTORNEY, BANCROFT PLLC, Washington, DC USA; Tingkang Xia, PRO HAC VICE, MORRIS, MANNING & MARTIN, LLP, Atlanta, GA USA.

For Committee on Foreign Investment in The United States, Timothy F. Geithner, in his official capacity as Secretary of the Treasury and Chairperson of the Committee on Foreign Investment in the United States, Barack Hussein Obama, II, in his official capacity as President of the United States, Defendants (1:12cv1513): Joel L. McElvain, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Washington, DC USA.

For Oregon Windfarms, Llc, Kent Madison, William J. Doherty, Ivar Christensen, Amicus (1:12cv1513): Amber Dale Abbasi, LEAD ATTORNEY, CAUSE OF ACTION, Washington, DC USA; Reed D. Rubinstein, LEAD ATTORNEY, DINSMORE & SHOHL LLP, Washington, DC USA.

For United States of America, Plaintiff (1:13cv2026): Joel L. McElvain, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Washington, DC USA.

For Ralls Corporation, Defendant (1:13cv2026): George W. Hicks, Jr., Paul Clement, Viet D. Dinh, LEAD ATTORNEYS, BANCROFT PLLC, Washington, DC USA.


AMY BERMAN JACKSON, United States District Judge.

The judgment of the United States Court of Appeals for the District of Columbia Circuit was docketed in Ralls Corp. v. Committee on Foreign Investment in the United States, 12-cv-1513-ABJ, on October 2, 2014, when the mandate was returned. See Judgment [Dkt. # 64]. In that case, Ralls challenged both the Amended Order Establishing Interim Mitigation Measures issued by the Committee on Foreign Investment (" CFIUS") on August 2, 2012 (the " CFIUS Order"), and the September 28, 2012 Order issued by the President of the United States (the " Presidential Order"). The matter is now before this Court for further proceedings consistent with the decision on appeal. Also pending before this Court is defendant Ralls's motion to dismiss a related case, United States v. Ralls Corp., 13-cv-2026-ABJ, on mootness grounds. Def. Ralls Corp.'s Mot. to Dismiss for Mootness [Dkt. # 23]. In that case, the government seeks to enforce the Presidential Order that is the subject of the Ralls Corp. v. CFIUS action, and the case has been stayed since July 16, 2014 pending the outcome of the Ralls appeal. Therefore, it is necessary for the Court to address several matters: the remand of its decision concerning the Presidential Order, the remand of its decision concerning the CFIUS Order, and the status of the government's enforcement action.

I. Remand Concerning the Presidential Order

In the portion of its opinion addressing the Presidential Order, the Court of Appeals concluded that " the Presidential Order deprived Ralls of constitutionally protected property interests without due process of law." Ralls Corp. v. CFIUS, 758 F.3d 296, 319 (D.C. Cir. 2014). It therefore remanded the matter to this Court " with instructions that Ralls be provided the requisite process set forth herein, which should include access to the unclassified evidence on which the President relied and an opportunity to respond thereto." Id. at 325. The Court of Appeals then specifically directed this Court to the opinion in National Council of Resistance of Iran v. Department of State, 251 F.3d 192, 346 U.S.App.D.C. 131 (D.C. Cir. 2001) (" NCRI"):

See NCRI, 251 F.3d at 209 ( leaving FTO designation in place and ordering Secretary of State to provide designated entity with access to unclassified evidence supporting designation and opportunity to respond).

Ralls Corp. v. CFIUS, 758 F.3d at 325 (emphasis added).

The Circuit Court further stated:

Our conclusion that the procedure followed in issuing the Presidential Order violates due process does not mean the President must, in the future, disclose his thinking on sensitive questions related to national security in reviewing a covered transaction. We hold only that Ralls must receive the procedural protections we have spelled out before the Presidential Order prohibits the transaction. The DPA expressly provides that CFIUS acts on behalf of the President in reviewing covered transactions . . . and the procedure makes clear that the President acts only after reviewing the record compiled by CFIUS and CFIUS's recommendation . . . . Adequate process at the CFIUS stage, we believe, would also satisfy the President's due process obligation.

Id. at 320.

Finally, with respect to defendants' belated suggestion that some portion of the unclassified material might be covered by the executive privilege - raised apparently for the first time at oral argument, see id . at 319 - the Court stated: " we leave it to the district court on remand to consider whether the executive privilege shields the ordered disclosure." Id. at 320-21.

Based upon these directives, the Court finds that it is bound to issue the following orders to give effect to the July 15, 2014 judgment of the Court of Appeals:

1) The Presidential Order shall remain in place at this time.
2) Defendants are hereby ordered to provide Ralls with access to all unclassified material contained in the record compiled by CFIUS and all unclassified factual findings or evidence underlying CFIUS's recommendation to the President by November 21, 2014.
3) If defendants take the position that any portion of that material is covered by the executive privilege, they must, on the same date, submit a privilege log to plaintiff and the Court identifying the material withheld and reasons for the withholding. Defendants must clearly indicate the nature of the privilege being asserted, including whether they are relying upon the executive communications prong of the executive privilege or the deliberative process prong of the privilege, and they shall submit points and authorities in support of any privilege claims on or before December 8, 2014. Any non-privileged material must be provided to Ralls in the meantime.
4) Ralls must file any pleading opposing the assertion of the privilege by December 31, 2014.
5) Defendants' reply will be due on January 12, 2015.
6) Once any privilege questions have been resolved, the Court will establish the schedule for the next series of events, which will include the following:
7) Ralls shall have the opportunity to respond to and/or rebut the information in writing;
8) CFIUS shall consider the material submitted by Ralls, issue an updated recommendation to the President, and inform Ralls of the substance of that recommendation;
9) CFIUS shall transmit the material submitted to it by Ralls to the President along with its updated recommendation; and
10) After the President has considered the record in its entirety, defendants shall inform Ralls whether the Presidential Order has been reaffirmed, rescinded, or revised in any way.

II. Status of the Enforcement Action

While Ralls has argued in briefing its motion to dismiss the enforcement action, United States v. Ralls Corp., 13-cv-2026-ABJ, that the Presidential Order should be vacated now, see Def. Ralls Corp.'s Reply to Opp. to Mot. to Dismiss for Mootness [Dkt. # 26-1] (" Reply") at 4-7, the Court of Appeals made clear with the citation in its ruling to NCRI that the Order should remain in force while Ralls receives the process that was due. So the Presidential Order will not be vacated. But since the disclosure of information that must now take place has not yet been completed, the Court finds that it would be inappropriate to take up the government's enforcement action at this time, and that case will remain stayed.

And, since the Presidential Order that is currently in place requires that any proposed transfer of the property must be approved by CFIUS, the Court cannot find that Ralls's recent identification of a potential buyer warrants the dismissal of the action as moot. This is particularly true in light of the unusual circumstances - such as the plan to sell a $6, 000, 000 asset for $50, 000 - that raise questions about the arms-length nature of the proposed transaction.

Ralls also argues that CFIUS, which reviews transactions involving acquisitions by foreign persons, see 50 U.S.C. app § 2170(a)(3), has no role to play in reviewing Ralls's plans to divest itself of the project since the proposed buyer is an American citizen. Reply at 7-8. But the predicate for CFIUS's involvement in Ralls's divestiture is not the citizenship of the buyer, but rather, the terms of the Presidential Order directed at Ralls, a company owned by two foreign nationals, and that portion of the Presidential Order remains unaffected by the Circuit Court's ruling.[1] So Ralls's motion to dismiss the enforcement action [Dkt. # 23] will be denied without prejudice at this time.

III. Remand Concerning the CFIUS Order

With respect to the CFIUS Order, while the Court of Appeals observed that both parties seemed to acknowledge that " Ralls's CFIUS Order claims were mooted when the Presidential Order revoked the CFIUS Order and deprived it of any effect, " Ralls Corp. v. CFIUS, 758 F.3d at 321, it determined that the District Court should consider those claims in any event because they were capable of repetition yet evading review. Id. at 325. In order to address the merits of Counts I and II of the amended complaint -- the Administrative Procedure Act challenges to the CFIUS Order -- and those aspects of Counts IV and V that claim constitutional violations in connection with the CFIUS Order, the Court directs the parties to meet and confer and propose a schedule for the filing and briefing of dispositive motions.[2] If it is contemplated that both parties intend to move for summary judgment instead of just one, the schedule should provide for one initial motion for summary judgment, an opposition and cross-motion supported by one combined memorandum, a reply combined with the cross-opposition, and a cross-reply, rather than two motions, two oppositions, and two replies. If the parties cannot agree on an appropriate schedule, the joint submission, which is due on November 14, 2014, should set forth their respective positions on what the schedule should be.


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