This week the U.S. Court of Appeals for the Ninth Circuit released its opinion in Sacks v. OFAC, upholding the right of OFAC to adopt rules prohibiting travel to Iraq. Additionally, the court dismissed, in unusually harsh language, OFAC’s argument that it could use collection agencies to collect penalties imposed by OFAC for violation of the travel rules.

Bertram Sacks, the plaintiff in the case, travelled to Iraq nine times between 1990 and 2003 to provide medicine and toys to Iraqi civilians and children. Following a 1997 trip, OFAC fined Sacks $10,000. When Sacks did not pay the penalty, OFAC assigned the debt to a collection agency. The collection agency then sent a letter to Sacks demanding the payment of $10,000 plus $3,767.08 in interest and late fees. Sacks challenged the right of OFAC to use a collection agency to collect the penalty. Both the district court and the appeals court agreed with Sacks.

In agreeing with Sacks, the Ninth Circuit quoted OFAC’s own regulations which provided, in 31 C.F.R. §575.705 that

In the event that the person named does not pay the penalty imposed . . . the matter shall be referred to the United States Department of Justice for appropriate action to recover the penalty in a civil suit in a Federal district court.

The Court rather sensibly informed OFAC that “shall” means “shall” not “might” or “may” or “can.”

OFAC’s efforts to slither around the word “shall” were not convincing to the court. First, OFAC tried to rely on its amendment of the rule in 2005 to add language permitting the use of collection agencies. The opinion dismissed this argument, noting that the amendment had been adopted in response to the earlier decision of the district court in this case holding that collection agencies weren’t authorized by the rule. The court termed efforts to cite the amended rule as nothing more than a “post hoc rationalization.”

But the harshest language from the Court was reserved for a bizarre argument from OFAC which it called the “Rule of the Silent Disjunctive.” Under this argument, according to OFAC, all remedies are permitted unless explicitly forbidden by a rule. To which the court retorted:

In other words, a regulation or statute mandating that an agency “shall” do x in fact means that it “shall” do x or y, unless the statute or regulation explicitly states that it “shall not” do y. This proposed “rule of the silent disjunctive” is patently absurd.

To drive the point home, the Court, with more than a hint of sarcasm, gives these examples:

By OFAC’s rationale, the Endangered Species Act’s requirement that the final determination of whether a species is threatened “shall be published in the Federal Register” could also be satisfied by publishing that information in USA Today. Though the Mandatory Victims Restitution Act requires that the sentencing court shall order the defendant to pay restitution, applying OFAC’s proposed interpretive rule, the sentencing court could also comply with the statute by ordering the defendant to make a public apology.

Ouch.

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