United States District Court, D. Columbia.
MATTHEW A. GOLDSTEIN, PLLC, Plaintiff,
U.S. DEPARTMENT OF STATE, et al., Defendants
MATTHEW A. GOLDSTEIN, PLLC, Plaintiff: Matthew Aaron
Goldstein, MATTHEW A. GOLDSTEIN, PLLC, Washington, DC.
UNITED STATES DEPARTMENT OF STATE, JOHN F. KERRY, in his
official capacity as Secretary of State, DIRECTORATE OF
DEFENSE TRADE CONTROLS, KENNETH B. HANDELMAN, in his official
capacity as Deputy Assistant Secretary, Defense Trade
Controls, DANIEL L. COOK, in his official capacity as Chief
of the Compliance, Registration, and Enforcement Division,
Office of Defense Trade Controls Compliance, Defendants:
Robin Frances Thurston, LEAD ATTORNEY, U.S. DEPARTMENT OF
JUSTICE, Civil Division, Federal Programs Branch, Washington,
Document No.: 25
OPINION GRANTING DEFENDANTS' MOTION TO DISMISS
CONTRERAS, United States District Judge.
Arms Export Control Act (" AECA" or " the
Act" ) authorizes the President " to control the
import and export of defense articles and defense
services." 22 U.S.C. § 2778(a)(1). The Act provides
that " every person (other than an officer or employee
of the United States Government acting in an official
capacity) who engages in the business of brokering activities
with respect to the manufacture, export, import, or
transfer" of a defense article or service must both
register with the government and seek a license before
engaging in such brokering activities. Id. §
2778(b)(1)(A)(ii)(I)--(III). In 2013, the United States
Department of State (" State" ), by regulation,
clarified its definition of " brokering
activities." See generally Amendment to the
International Traffic in Arms Regulations: Registration and
Licensing of Brokers, Brokering Activities, and Related
Provisions, 78 Fed.Reg. 52,680 (Aug. 26, 2013). As pertinent
to this case, State amended the regulation to define "
brokering activities" as excluding " activities by
an attorney that do not extend beyond the provision of legal
advice to clients." 22 C.F.R. § 129.2(b)(2)(iv);
see also Amendment to the International Traffic in
Arms Regulations: Registration and Licensing of Brokers,
Brokering Activities, and Related Provisions, 76 Fed.Reg.
78,578, 78,578 (Dec. 19, 2011) (proposed rule explaining the
case arises out of a dispute over whether and, if so, in what
circumstances an attorney acting on behalf of his client may
nevertheless be engaging in " brokering
activities." After receiving advisory guidance from
State about the provision's scope that he found
insufficient, Matthew A. Goldstein initiated this action on
behalf of his eponymous law firm, Plaintiff Matthew A.
Goldstein PLLC. Plaintiff's complaint seeks a declaration
equitably estopping State from applying the regulations to
its legal services and declaring that State's definition
of " brokering activities" is ultra vires,
unconstitutional, and violates the Administrative Procedure
Act (" APA" ). Plaintiff also seeks an injunction
permanently enjoining State from applying the brokering
regulations to Plaintiff's legal services as described in
Mr. Goldstein's request for guidance.
before the Court is Defendants' motion to dismiss
Plaintiff's claims on the ground that the Court lacks
subject matter jurisdiction or, alternatively, that
Plaintiff's Amended Complaint fails to state a claim. The
Court agrees that Plaintiff lacks standing and that this case
is not yet ripe and therefore will grant Defendants'
motion to dismiss.
FACTUAL & STATUTORY BACKGROUND
The AECA's Regulation of " Brokering
In furtherance of world peace and the security and foreign
policy of the United States," the AECA empowers the
President to control the import and export of defense
articles and services. See 22 U.S.C. §
2778(a)(1). Initially, the AECA only regulated the direct
" manufacturing, exporting, or importing" of
defense articles and services. See 22 U.S.C. §
2778 (1996 ed.); see also International Security
Assistance and Arms Export Control Act of 1976, Pub. L. No.
94-329, § 212(a)(1), 90 Stat. 729, 744-45. In 1996,
however, Congress amended the AECA to require regulation of
international arms brokering. See Act of July 21,
1996, Pub. L. No. 104-164, § 151, 110 Stat. 1421,
1437-38. As the House Report explained, " the extension
of U.S. legal authority . . . to regulate [the] brokering
activities" of " U.S. persons (and foreign persons
located in the U.S.)" would allow the United States to
ensure that the activities of those who broker in
international arms " support the furtherance of U.S.
foreign policy objectives, national security interests and
world peace." H.R. Rep. No. 104-519, at 11-12 (1996),
reprinted in 1996 U.S.C.C.A.N. 1118, 1128-29. "
More specifically," the report noted that " in some
instances U.S. persons are involved in arms deals that are
inconsistent with U.S. policy" and " [c]ertain of
these transactions could fuel regional instability, lend
support to terrorism or run counter to a U.S. policy decision
not to sell arms to a specific country or area."
Id. at 12.
the AECA now requires " every person" who "
engages in the business of brokering activities with respect
to the manufacture, export, import, or transfer" of a
defense article or service to both register with the
government and procure a license to engage in such brokering
activities. 22 U.S.C. § 2778(b)(1)(A)(ii)(I)--(III). The
statute further provides that entities must abide by
requirements " [a]s prescribed in regulations issued
under this section." Id. §
2778(b)(1)(A)(ii)(I). As part of its International Traffic in
Arms Regulations (" ITAR" ), State has promulgated
regulations specific to brokering activities at Title 22,
Part 129 of the Federal Code of Regulations (" Part
129" ), see generally 22 C.F.R. § §
129 requires any person engaged in brokering activities to
register with the Directorate of Defense Trade Controls
(" the Directorate" ) as a " precondition for
the issuance of approval for brokering activities" or
for " the use of exemptions." 22 C.F.R. §
129.3(a); see also id. § 129.3(e). Once
registered, a person may not " engage in the business of
brokering activities . . . without first obtaining the
approval of the Directorate of Defense Trade Controls for the
brokering of" a number of regulatory-prescribed defense
articles and services. Id. § 129.4(a); see
also id. § 129.5 (listing exemptions from the
approval requirement, not relevant here). To obtain approval,
a broker must supply the Directorate with certain information
and fully describe " the brokering activities that will
be undertaken" including: " [t]he action to be
taken by the applicant to facilitate the manufacture, export,
import, or transfer" of the defense article; "
[t]he name, nationality, address, and place of business of
all persons who may participate in the brokering
activities" ; a description of the defense articles
involved; the estimated quantity and dollar value; and the
" [e]nd-user and end-use." Id. §
129.6(a)--(b). Part 129 also requires registrants to provide
a report to the Directorate " on an annual basis"
detailing the registrant's " brokering activities in
the previous twelve months." Id. §
129.10(a). That report must include a description of the
" brokering activities that received or were exempt from
approval" or otherwise certify that " there were no
such activities." Id. § 129.10(b)--(c). In
addition, a " person who is required to register"
as a broker " must maintain records concerning brokering
activities," which " shall be available at all
times for inspection and copying by the Directorate."
Id. § § 129.11, 122.5(b).
2013, Part 129's definition of " broker" and
" brokering activities" was quite general. A broker
was defined as " any person who acts as an agent for
others in negotiating or arranging contracts, purchases,
sales or transfers of defense articles or defense services in
return for a fee, commission, or other consideration."
22 C.F.R. 129.2(a) (2006 ed.); see also Bureau of
Political-Military Affairs; Amendments to the International
Traffic in Arms Regulations, 62 Fed.Reg. 67,274, 67,276-77
(Dec. 24, 1997) (first adding Part 129 in light of the AECA
amendment regulating brokering activities). And "
brokering activities" were defined as " acting as a
broker as defined in § 129.2(a)," including "
the financing, transportation, freight forwarding, or taking
of any other action that facilitates the manufacture, export,
or import of a defense article or defense service,
irrespective of its origin." 22 C.F.R. § 129.2(b)
2011, in light of a 2003 report to Congress in which State
had " noted that it was beginning a review of the
brokering regulations" and " assess[ing] the need
to modify the regulations in light of the experience gained
in administering them," State issued a Notice of
Proposed Rulemaking that substantially altered the regulatory
definition of " broker" and " brokering
activities." Amendment to the International Traffic in
Arms Regulations: Registration and Licensing of Brokers,
Brokering Activities, and Related Provisions, 76 Fed.Reg.
78,578, 78,578 (Dec. 19, 2011). As pertinent to this case,
State proposed to amend the definition of brokering
activities to clarify that " [b]rokering activities do
not include . . . activities by an attorney that do not
extend beyond providing legal advice to a broker."
Id. at 78,587 (proposed language for §
129.2(a)(3)); see also id. at 78,578
promulgated an Interim Final Rule in 2013, amending Part 129.
See generally Amendment to the International Traffic
in Arms Regulations: Registration and Licensing of Brokers,
Brokering Activities, and Related Provisions, 78 Fed.Reg.
52,680 (Aug. 26, 2013). In response to the comments of three
parties, State altered the proposed language of § 129.3
slightly to clarify that the definition of brokering
activities does not extend beyond the provision of legal
advice to a client (rather than to a broker
). Id. at 52,681. Thus, the current definition,
effective October 24, 2013, provides that " brokering
activities" do not include " activities by an
attorney that do not extend beyond the provision of legal
advice to clients." 22 C.F.R. §
" Frequently Asked Questions" section of its
website, the Directorate provides further guidance regarding
the regulatory definition's scope. The FAQs state that:
Activities conducted by an attorney, consultant, or any other
professional that do not extend beyond the provision of legal
or consulting advice to clients on ITAR compliance is not
within the definition of brokering activities. For example,
advising on the legality of a transaction, such as advising
whether a transaction is ITAR compliant, tax rates or other
laws may be preferential, drafting of contract terms where
parties to the transaction have already been identified by
the client, representing your client to a client-identified
foreign party, conducting ITAR audits, and/or providing
training or assistance with ITAR compliance procedures, are
outside the scope of brokering activities. However, this does
not mean that there are no circumstances where an attorney,
consultant, or any other professional would be a broker. If
these persons engage in activities that go beyond providing
consulting or legal advice, including being a third party to
the transaction, or are engaged in soliciting, locating a
buyer or seller, introducing or recommending specific
parties, structuring the transaction, marketing, promoting,
and/or negotiating ITAR-controlled defense articles and
services on behalf of their clients beyond contract terms of
already identified foreign parties by your client, then such
activities may constitute brokering activities under ITAR
Frequently Asked Questions (FAQs) -- Registration,
U.S. Dep't of State, Directorate of Defense Trade
Controls (July 2, 2015),
Guidance Available From the Department of State
this dispute was caught in the cross-hairs of the 2013 change
in legal regime, the Court also briefly describes the
available methods for seeking guidance from State about the
the 2013 amendments, 22 C.F.R. § 129.10, entitled "
Guidance," provided that " [a]ny person desiring
guidance on issues related to" Part 129, " such as
whether an activity is a brokering activity within the scope
of this Part . . . may seek guidance in writing from the
Directorate of Defense Trade Controls." 22 C.F.R. §
129.10 (2006 ed.). The provision cross-referenced to "
[t]he procedures and conditions stated in § 126.9."
Id. Section 126.9, in turn, provides a mechanism to
request advisory opinions that " are issued on a
case-by-case basis and apply only to the particular matters
presented to the Directorate of Defense Trade Controls."
22 C.F.R. § 126.9(a). Any request for an advisory
opinion " must be made in writing" and " must
outline in detail the equipment, its usage, the security
classification (if any) of the articles or related technical
data, and the country or countries involved."
Id. The section further cautions that advisory
opinions " are not binding on the Department of State,
and may not be used in future matters before the
2013 Interim Final Rule revised, renumbered, and
substantially altered the guidance available to regulated
entities under Part 129. Previous § 129.10 was
renumbered as § 129.9. Section 129.9 now provides a
stand-alone method by which a party can seek guidance. The
section still provides that a person " desiring guidance
on whether an activity constitutes a brokering activity
within the scope of this part 129 may request in writing
guidance from the Directorate of Defense Trade
Controls." 22 C.F.R. § 129.9. But the new section
goes on to require that the requester " identify the
applicant and registrant code (if applicable) and describe
fully the activities that will be undertaken," listing
specific information that a requester must provide--including
the " name, nationality, and geographic location of all
U.S. and foreign persons who may participate in the
activities," the " [e]nd-user and end-use,"
and " [a] copy of any agreement or documentation, if
available, between or among the requester and other persons
who will be involved in the activity or related transactions
that describes the activity to be taken by such persons"
--that go far beyond the more limited information required by
§ 126.9. Id. ; compare 22 C.F.R.
§ 126.9. There appears to be a benefit to that
specificity, however: § 129.9(b) states that any
guidance received as a result of a request " will
constitute an official determination by the Department of
State." Id. 
law practice focuses on international trade. See Am.
Compl. ¶ 63. As alleged in its complaint,
Plaintiff's clients " include exporters of military,
homeland security, dual-use, and purely commercial items and
technologies," and Plaintiff advises its clients "
on all aspects of U.S. export control laws and related
international trade laws." Id. Plaintiff
contends that " [m]ost of these legal services involve
advisements on transactions subject to the ITAR."
about the scope of the 2013 Final Interim Rule,
Plaintiff's principal, Matthew A. Goldstein, sought an
advisory opinion from Daniel Cook, the Directorate's
Chief of the Compliance, Registration, and Enforcement
Division. Am. Compl. ¶ 37. While Plaintiff's
complaint alleges that the request was sent pursuant to 22
C.F.R. § 129.9(a), see Am. Compl. ¶ 37,
Plaintiff has since clarified that Mr. Goldstein's
request was submitted under the prior guidance provision, 22
C.F.R. § 129.10, see Pl.'s Mem. Opp'n
Defs.' Mot. to Dismiss at 7 n.2 (" Pl.'s Mem.
Opp'n" ), ECF No. 26-1. Mr. Goldstein sent Mr. Cook
a letter on August 29, 2013, three days after the Final
Interim Rule was promulgated, but before its October 24, 2013
effective date, expressing concern that some lawyers'
activities might fall within the regulatory definition of
" brokering activities" because " export
compliance advice frequently includes advice on how to
structure transactions involving sales of defense articles
and assistance in the preparation of contracts and other
documents for such transactions." ...