Rahmani v. Yellen

1

MIR RAHMAN RAHMANI, et al., Plaintiffs, v. JANET YELLEN, Secretary of the Treasury, et al., Defendants.

Civil Action No. 24-0285 (RC)

No. 11, 17, 24

United States District Court, District of Columbia

April 19, 2024

MEMORANDUM OPINION

RUDOLPH CONTRERAS, UNITED STATES DISTRICT JUDGE

Granting Defendants' Partial Motion to Dismiss; Denying Plaintiffs' Motion for Preliminary Injunction; Denying Plaintiffs' Motion to Strike

I. INTRODUCTION

Mir Rahman Rahmani (“M. Rahmani”), Hafi Ajmal Rahmani (“A. Rahmani,” and together with M. Rahmani, the “Rahmanis”), along with over two dozen business entities (the “Related Entities” and collectively with the Rahmanis, “Plaintiffs”) filed the instant action on January 31, 2024, against Secretary of the Treasury Janet Yellen, the United States Department of the Treasury's Office of Foreign Assets Control (“OFAC”) and its Director, Bradley Smith (collectively, the “Treasury Defendants”), and against Secretary of State Antony J. Blinken (“State,” and collectively with the Treasury Defendants, “Defendants”).^[1] They brought suit because, on December 11, 2023, OFAC designated both Rahmanis as Specially Designated Nationals (“SDN”) on the Specially Designated Nationals and Blocked Persons List (“SDN List”), claiming that the Rahmanis are responsible for a multi-part corruption scheme that misappropriated millions of dollars from U.S. government-funded contracts in Afghanistan. State concurrently designated the Rahmanis as being ineligible for entry into the United States.

Plaintiffs now seek a preliminary injunction against these designations, while Defendants move to dismiss in part. Plaintiffs argue that they have a high likelihood of success on their claims that Defendants' actions are ultra vires and arbitrary and capricious in violation of the Administrative Procedure Act (“APA”), and that they will be irreparably harmed without an injunction. Defendants disagree, arguing that the Treasury Defendants acted well within their statutory authority and that State's designations are non-reviewable, and also within statutory authority, and that Plaintiffs' claims should be dismissed. And although Defendants do not move to dismiss Plaintiffs' claim that OFAC's designations are not sufficiently supported by a factual basis, they sharply contest this point when arguing against Plaintiffs' motion for a preliminary injunction.

Ultimately, the Court agrees with Defendants that the Treasury Defendants have acted within their authority, and dismisses the two counts asserting otherwise. It also determines that Plaintiffs lack standing for two of their counts against State's designations and that the Court cannot review the other count against State, and dismisses these claims. Moreover, the Court concludes that Plaintiffs have not shown a likelihood of success on the merits on the remaining count against the Treasury Defendants. Thus, as set forth below, the Court will GRANT Defendants' partial motion to dismiss and DENY Plaintiffs' motion for a preliminary injunction.

II. BACKGROUND

A. Statutory Background

1. International Emergency Economic Power Act

In 1917, Congress enacted the Trading with the Enemy Act (“TWEA”), 50 U.S.C.A. § 1 et seq., which gave the President authority to impose economic sanctions in response to both peacetime emergencies and times of war. See Regan v. Wald, 468 U.S. 222, 225-26 (1984). While for decades TWEA provided the legal framework for economic sanctions, in 1977 Congress passed the International Emergency Economic Power Act (“IEEPA”), 50 U.S.C. § 1701 et seq. IEEPA “limit[ed] the President's power to act pursuant to [TWEA] solely to times of war.” Wald, 468 U.S. at 227. However, it also gave the President “broad discretion” to impose economic sanctions on foreign entities and individuals in the event of a national emergency. See Fulmen Co. v. OFAC, 547 F.Supp.3d 13, 17 (D.D.C. 2020) (citing 50 U.S.C. § 1702(a)(1)(B)). “The President may declare such a national emergency ‘when an extraordinary threat to the United States arises that originates in substantial part in a foreign state.'” Basengezi v. Smith, No. 23-cv-1249 (JEB), 2024 WL 1050340, at *1 (D.D.C. Mar. 11, 2024) (quoting Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156, 159 (D.C. Cir. 2003)); see also 50 U.S.C. § 1701(a). Once the President has declared a national emergency, IEEPA authorizes the President to:

[R]egulate, direct and compel, nullify, void, prevent or prohibit, any . . . transfer . . . 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 . . . with respect to any property, subject to the jurisdiction of the United States[.]

50 U.S.C. § 1702(a)(1)(B). This authority is “essentially the same” as the wartime powers granted by TWEA. Wald, 468 U.S. at 228.

2. Global Magnitsky Act

In 2016, Congress passed the Global Magnitsky Human Rights Accountability Act (“Global Magnitsky Act”), which authorizes the President to deny entry into the United States, revoke any already-issued visa, block interests in property under U.S. jurisdiction, and prohibit U.S. persons from entering into transactions with, any foreign person identified as engaging in human rights violations or corruption. 22 U.S.C. § 10101, et seq. Regarding corruption, the Act authorizes the President to impose sanctions on any foreign “government official, or a senior associate of such an official,” that the President determines is “responsible for, or complicit in, ordering, controlling, or otherwise directing, acts of significant corruption, including the expropriation of private or public assets for personal gain, corruption related to government contracts or the extraction of natural resources, bribery, or the facilitation or transfer of the proceeds of corruption to foreign jurisdictions.” 22 U.S.C. § 10102(a)(3). The Act also authorizes the President to designate any foreign person who has “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of” such corruption-supporting acts. Id. § 10102(a)(4). For each category of covered individuals, the Act permits economic “blocking” sanctions “in accordance with” IEEPA, but it specifies that the “national emergency requirement” for such sanctions under IEEPA does “not apply.” Id. § 10102(b)(2).

3. Executive Order 13818

On December 20, 2017, the President issued Executive Order 13818 “[b]y the authority vested in [the] President by the Constitution and the laws of the United States of America, including the . . . IEEPA, . . . the Global Magnitsky Human Rights Accountability Act,” and three other federal laws. Exec. Order. No. 13,818, 82 Fed.Reg. 60839 (Dec. 26, 2017). The order declared that “the prevalence and severity of human rights abuse and corruption that have their source, in whole or in substantial part, outside the United States . . . have reached such scope and gravity that they threaten the stability of international political and economic systems.” Id. It further “determine[d] that serious human rights abuse and corruption around the world constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.” Id. Consequently, “[t]he United States seeks to impose tangible and significant consequences on those who commit serious human rights abuse or engage in corruption, as well as to protect the financial system of the United States from abuse by these same persons.” Id.

Thus, the President declared a national emergency to counter these human rights abuse and corruption threats, blocking the property and interests in property of:

(ii) any foreign person determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Attorney General: . . .

(B) to be a current or former government official, or a person acting for or on behalf of such an official, who is responsible for or complicit in, or has directly or indirectly engaged in:

(1) corruption, including the misappropriation of state assets, the expropriation of private assets for personal gain, corruption related to government contracts or the extraction of natural resources, or bribery.

Id. § 1(a)(ii)(B)(1) (emphasis added). Executive Order 13818 also authorized the Secretary of the Treasury, in consultation with the Secretary of State, “to take such actions, including adopting rules and regulations, and to employ all powers granted to [the President] by IEEPA and the [Global Magnitsky] Act as may be necessary to implement this order,” and to re-delegate such functions as needed. Id. § 8. Subsequently, the Secretary of the Treasury delegated to the Director of OFAC the authority to block persons under the Executive Order. See 31 C.F.R. § 583.802.

Persons designated by OFAC pursuant to Executive Order 13818 (as well as other blocking authorities) are referred to as “Specially Designated Nationals or Blocked Persons”, or SDNs. OFAC maintains an “SDN List” of such individuals or entities whose assets are blocked. Once designated, an SDN may at any time “seek administrative reconsideration” of the designation or may “assert that the circumstances resulting in the designation no longer apply.” Id. § 501.807. In doing so, the SDN “may submit arguments or evidence that the person believes establishes that insufficient basis exists for the designation,” and may also “propose remedial steps on the person's part . . which the person believes would negate the basis for designation.” Id. § 501.807(a). Additionally, the SDN may request a meeting with OFAC. Id. § 501.807(c). After conducting a review, OFAC will “provide a...