Aug
25
KindHearts and Search Warrants
Posted by Clif Burns at 7:18 pm on August 25, 2009
Category: General
Last week a federal district court in Ohio ruled that OFAC violated the Fourth Amendment rights of KindHearts for Charitable Humanitarian Development, Inc. when it blocked the charity’s assets after a provisional finding that the charity was providing material support to Hamas. Under the court’s ruling, the Fourth Amendment required that OFAC obtain a judicial warrant prior to blocking the charity’s assets. That may have you wondering whether this decision will have an impact on other OFAC designations of blocked entities, including final, and not just provisional, designations. Although the court’s reasoning applies equally to final and provisional designations, the short answer is that this decision may not have much impact on OFAC designations in general.
First, application of a Fourth Amendment rationale is limited to U.S. persons and entities and would not be an argument that could be raised by a foreign person or entity subject to an OFAC blocking order. An overwhelming number of OFAC designations are of foreign persons and entities. On the contrary, as the court noted:
KindHearts is an American corporation based in Toledo, Ohio. Its assets, presumably, came from persons resident in this country. Those assets were in this country when the government seized them.
Second, not all courts looking at OFAC designations have agreed that blocking an entity’s assets constitutes a seizure of those assets, in large part because the government doesn’t take possession of the blocked assets. See Islamic Am. Relief Agency v. Unidentified FBI Agents, 394 F. Supp. 2d 34, 47-48 (D.D.C. 2005); Holy Land Foundation for Relief and Development v. Ashcroft, 219 F. Supp. 2d 57, 79 (D.D.C. 2002). Accordingly, even in cases where OFAC blocks the assets of a U.S. person or entity, other courts may be unwilling to require that OFAC obtain a judicial seizure order prior to blocking assets.
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5 Comments:
Clif: With respect, I think you underestimate the importance of this case. First, as to the seizure issue, the court analysesd this from a Fourth Amendment perspective rather than a Fifth Amendment takings clause as had prior courts, because under IEEPA neither title nor possession pass to the government except in certain limited situations. Second, in addition to the seizure issue, the court found that OFAC’s failure to grant a license for the foundation’s legal fees was arbitrary and capricious under the APA. Just the fact that the court did an APA analysis of an OFAC licensing decision, despite the government’s foreign affairs exclusion argument, would be significant in and of itself. The fact that the court found that an OFAC licensing decision had been arbitrary and capricious, which we all know OFAC often is, is downright momentous. (Given that BIS is still operating under IEEPA also, it raises the prospect that adverse BIS licensing decisions are subject to judicial review as in the old Pacific Nuclear case.)
But perhaps the real significance is in the detailed description by the court of OFAC’s denial of due process, its negligence, its sheer arrogance. No one reading the court’s judgment can dispute that OFAC is a rogue agency that behaves more like an oppressive state agency from a Soviet-era Eastern European dictatorship than an government agency of a free constitutional democracy that adheres to the rule of law.
I’m not aware if the government has filed a notice of appeal yet, however, I have to think its forthcoming and that this decision will be overturned. As you pointed out this issue has been addressed in the past with very different results. I’ll be looking forward to see what happens next.
Hillbilly: The Fourth Amendment claim was raised and denied by the District Court in both Islamic American Relief and in Holy Land. That denial was not raised in either court on appeal. What the KindHearts court said, albeit awkwardly, was that these two courts improperly used a Fifth Amendment taking standard for seizure when a looser standard should apply under the Fourth Amendment. Although I personally agree with the outcome in KindHearts, I was expressing some scepticism that other courts might reach the same results in view of the two other cases that addressed the Fourth Amendment issue.
As to the due process issues, those are unique to each case and were outside the scope of my question as to whether the decision would require judicial orders for seizure prior to blocking designations. I agree that in this case, the record looks very bad for OFAC, but I would stop short of calling them an Eastern European style rogue agency.
Between the Roth case, for which a notice of appeal and request for transcripts was timely filed, and KindHearts, it looks like the usually sensible Sixth Circuit is going to have an opportunity to have a lot to say about trade law and the Constitution.
I think analysis that the ruling is limited to US entities is too strict. There are plenty of precedents which apply US law to foreigners within our borders, such as Yick Wo v. Hopkins and its progeny. And there is an obvious domestic connection to any blocking order, because only US-located assets can be blocked (both by IEEPA and the lack of jurisdiction to attempt otherwise).
I believe that future cases are going to go further in eviscerating the limitations on legal representation. Kindhearts came out before OFAC issued its guidelines limiting the number of paid attorneys and compensation caps. The right to counsel issues, beyond just the Sixth Amendment (if you can argue that blocking is a criminal forfeiture), including overstepping the Tenth Amendment right of states to regulate the bar and separation of powers, are giant. We are also getting into the same territory of American Airways Charters, Inc. v. Regan, where Circuit Judge Ruth B. Ginsburg slammed OFAC for actions not “worthy of our great government”.
