Matthew A. Goldstein, PLLC v. United States Department of State

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 21, 2016 Decided March 14, 2017

No. 16-5034

MATTHEW A. GOLDSTEIN, PLLC,

APPELLANT

v.

UNITED STATES DEPARTMENT OF STATE, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:15-cv-00311)

Matthew A. Goldstein argued the cause and filed the briefs

for appellant.

Katherine Twomey Allen, Attorney, U.S. Department of

Justice, argued the cause for appellees. With her on the brief

were Benjamin C. Mizer, Principal Deputy Assistant Attorney

General, and H. Thomas Byron, III, Attorney.

Before: GRIFFITH, SRINIVASAN, and MILLETT, Circuit

Judges.

Opinion for the Court filed by Circuit Judge GRIFFITH.

2

GRIFFITH, Circuit Judge: The plaintiff is a law firm that

advises clients on U.S. law that regulates the international arms

trade. Concerned that the State Department might enforce

arms-control regulations against it in a way that would force

disclosure of confidential client information, the law firm seeks

declaratory and injunctive relief. The district court dismissed

the action for lack of standing and ripeness. We affirm on the

ground that the plaintiff lacks standing to bring a pre-

enforcement challenge because it faces no credible threat of

enforcement.

I

A

The Department of State regulates international arms

brokering under the Arms Export Control Act and the

International Traffic in Arms Regulations (ITAR). In the

interest of national security, the Act authorizes the President to

designate various weapons and technologies as “defense

articles” and to regulate their import and export. 22 U.S.C.

§ 2778(a)(1). All weapons or technologies so designated are

placed on what is known as the United States Munitions List,

see id., which currently includes items such as ballistic

missiles, rockets, bombs, mines, tanks, and military

submarines.

The Act requires those who manufacture, import, or export

these defense articles to register with the U.S. government, see

id. § 2778(b)(1)(A)(i), according to procedures prescribed by

the ITAR, see 22 C.F.R. §§ 120-130. The Act also requires that

those seeking to finance, transport, or assist in the

manufacturing, export, or import of defense articles—i.e.,

brokers—register with the State Department and obtain

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departmental approval before engaging in brokering activities.

See 22 U.S.C. § 2778(b)(1)(A)(ii)(I)-(III).

Part 129 of the ITAR governs these brokers. Before a

person may be approved to engage in brokering activities, he

must disclose to the State Department certain information,

including the specific activity he intends to undertake; the

name, nationality, address, and place of business of those

involved; a description of the defense article at issue; the

defense article’s destination; and what the defense article will

be used for. See 22 C.F.R. § 129.6(a)-(b). Registered brokers

must also file annual reports with the State Department and

maintain records related to their brokering activities. Id.

§§ 129.10-11.

As relevant here, in 2013 the State Department

promulgated a rule to clarify that “brokering activities” include

“[s]oliciting, promoting, negotiating, contracting for,

arranging, or otherwise assisting in the purchase, sale, transfer,

loan, or lease of a defense article or defense service,” id.

§ 129.2(b)(1)(ii), but exclude “activities by an attorney that do

not extend beyond the provision of legal advice to clients,” id.

§ 129.2(b)(2)(iv). The preamble to the rule elaborates that

“‘legal advice’ includes the provision of export compliance

advice by an attorney to a client.” Amendment to the

International Traffic in Arms Regulations, 78 Fed. Reg.

52,681, 52,681 (Aug. 26, 2013). According to the State

Department’s website, legal advice that is not considered a

brokering activity would also include

[a]dvising 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

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identified by the client, representing [a] client to

a client-identified foreign party, conducting

ITAR audits, and/or providing training or

assistance with ITAR compliance procedures.

J.A. 103-04. Not all actions taken by attorneys are exempt from

the regulations, however. If attorneys

engage in activities that go beyond providing

consulting or legal advice, including being a

third party to the transaction, or . . . [if they]

engage[] 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 [their] client, then

such activities may constitute brokering

activities under ITAR.

22 C.F.R. § 129.9.

The State Department has established an optional process

under the ITAR for requesting an official determination on

whether a particular activity constitutes brokering. See id.

Submitting such a request requires providing essentially the

same information needed to obtain approval for a brokering

activity, including the specific activities to be undertaken

5

and identities of all the parties involved. Id. § 129.9(a)(1)-(4). 1

B

Matthew A. Goldstein is the principal attorney in a law

firm that bears his name and specializes in providing legal

advice to clients involved in transactions subject to the ITAR.

Goldstein attests that his firm “regularly represents clients in

the preparation of the terms and conditions of sale, user

agreements, vendor certifications, and other legal documents”

for ITAR-related transactions. J.A. 51-52. According to

Goldstein, his firm’s clients often have not identified the

foreign parties that will be involved in prospective transactions

at the time the firm provides its legal advice.

Soon after the State Department promulgated its 2013

regulation explicitly excluding legal services from the ITAR’s

definition of brokering activities, Goldstein sought an advisory

opinion from the Department pursuant to 22 C.F.R. § 126.9(a),

asking whether six categories of services his firm provides

were regulated or exempt. These services include advising

clients on how to structure sales of defense articles, preparing

sales contracts for these items, drafting technical-assistance

agreements, advising on the availability of financing, advising

on and preparing sales proposals, and corresponding and

meeting with U.S. government officials. However, Goldstein

offered the State Department no details about any past or

contemplated transactions.

1

The 2013 rule created this official advisory-opinion process.

Prior to that rule taking effect, individuals could seek informal

advisory opinions, but those opinions were “not binding on the

Department of State.” 22 C.F.R. § 126.9(a) (2012).

6

Goldstein asserts that, nearly a year after he requested an

advisory opinion, the head of compliance at the State

Department called him to say that the services described in his

request would not be subject to Part 129 so long as his clients

did not pay his firm a contingency fee or a commission.

Relying on this advice, Goldstein withdrew his request. The

State Department responded with a letter, advising Goldstein

that his initial request and the phone conversation “lacked

sufficient detail for the Department to make an official

determination as to whether the activities discussed constituted

brokering activities.” J.A. 36 (emphasis added). The letter also

referred him to the Frequently Asked Questions page on the

State Department’s website.

Shortly thereafter, Goldstein’s firm filed suit in district

court alleging that the State Department lacked constitutional

and statutory authority to apply Part 129 to bona fide legal

advice and seeking declaratory and injunctive relief to prevent

the Department from requiring the firm to register as a broker.

After the firm filed suit, the State Department sent Goldstein

another letter. This letter, responding to the particulars of

Goldstein’s initial request for an advisory opinion, informed

him that providing traditional legal advice would not qualify as

a brokering activity—at least in situations where the foreign

party had already been identified. The reason for this

disclaimer, the Department subsequently explained, is that

lawyers qualify as brokers when they work to find foreign

counterparties to transactions for their clients; when the foreign

party is already known, the risk that the lawyer is acting as a

finder is eliminated.

The district court dismissed the firm’s lawsuit for lack of

standing. The court held that the complaint failed to allege with

specificity that the law firm was engaged in “brokering

activities” and what type of information the firm would need to

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disclose that would run afoul of its duties of confidentiality.

The court also observed that the firm’s allegations of the State

Department’s threat of enforcement were speculative at best.

In addition, the court held, for similar reasons, that the

plaintiff’s claims were not ripe. The plaintiff timely filed its

notice of appeal, and we have jurisdiction pursuant to 28 U.S.C.

§ 1291.

II

“We review a dismissal for lack of standing de novo.”

Renal Physicians Ass’n v. U.S. Dep’t of Health & Human

Servs., 489 F.3d 1267, 1273 (D.C. Cir. 2007). In reviewing a

district court’s grant of “a motion to dismiss for want of

standing,” we “must accept as true all material allegations of

the complaint, and must construe the complaint in favor of the

complaining party.” Warth v. Seldin, 422 U.S. 490, 501 (1975).

The question before us is whether the law firm has

standing to seek to enjoin the State Department from enforcing

its regulations governing arms brokering. The firm has failed,

however, to demonstrate its standing to seek pre-enforcement

relief: it has not “suffered an ‘injury in fact[]’ that is (a)

concrete and particularized and (b) actual or imminent . . . .”

Sabre, Inc. v. U.S. Dep’t of Transp., 429 F.3d 1113, 1117 (D.C.

Cir. 2005) (quoting Friends of the Earth, Inc. v. Laidlaw Envtl.

Servs., Inc., 528 U.S. 167, 180-81 (2000)). It is true that a

plaintiff is not required “to expose himself to liability before

bringing suit to challenge the basis” for an enforcement action

by the government. MedImmune, Inc. v. Genentech, Inc., 549

U.S. 118, 128-29 (2007). After all, a plaintiff can seek pre-

enforcement review when the threat of enforcement is

“sufficiently imminent.” Susan B. Anthony List v. Driehaus,

134 S. Ct. 2334, 2342 (2014). But there is something

fundamental to a pre-enforcement challenge that is missing

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here. There must be some desired conduct by the plaintiff that

might trigger an enforcement action in the first place. Cf.

Abbott Labs. v. Gardner, 387 U.S. 136, 154 (1967)

(“[P]etitioners have sufficient standing as plaintiffs [because]

the regulation is directed at them in particular; it requires them

to make significant changes in their everyday business

practices; if they fail to observe the [agency]’s rule[,] they are

quite clearly exposed to the imposition of strong sanctions.”);

Susan B. Anthony List, 134 S. Ct. at 2342 (explaining that pre-

enforcement constitutional challenges to criminal statutes

require plaintiffs to allege “an intention to engage in a course

of conduct . . . proscribed by [the] statute,” under which “there

exists a credible threat of prosecution” (quoting Babbitt v.

United Farm Workers Nat’l Union, 442 U.S. 289, 298 (1979))).

But here, we have no facts from which to conclude that the law

firm risks incurring any liability by failing to register with the

State Department. Indeed, Goldstein offers only vague and

general descriptions of legal activities that the firm intends to

undertake, none of which the State Department views as

brokering, as the Department has made abundantly clear on its

website and, more particularly, at oral argument before this

court. Unsurprisingly, then, the State Department has shown no

intention of enforcing the brokering regulations against

Goldstein’s law firm.

The 2013 regulation is straightforward: “[A]ctivities by an

attorney that do not extend beyond the provision of legal advice

to clients” are not brokering activities. 22 C.F.R.

§ 129.2(b)(2)(iv). The State Department understands all of the

activities Goldstein has described to fit under that umbrella. As

government counsel explained at oral argument, Goldstein has

“given no indication that” his firm does anything “extend[ing]

beyond” legal advice. Oral Arg. Tr. 30:3-10. In the State

Department’s view, then, there is no reason to believe that

Goldstein’s firm engages in brokering activities within the

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meaning of Part 129. As long as the firm merely provides the

legal services Goldstein describes, it faces no material risk of

enforcement from the State Department. His firm therefore

need not fear that it will have to disclose confidential client

information or otherwise take steps to register.

True, an attorney like Goldstein could provide legal advice

in a manner that constituted brokering, but the State

Department has explained that the only such situation it has

identified is when an attorney acts as a “finder” by, for

example, helping clients to identify or locate foreign

counterparties for proposed transactions. See Oral Arg. Tr.

38:10-14 (government counsel explaining that “the only

example . . . that the Agency has been able to identify” of an

attorney providing legal advice in a manner that implicates the

brokering regulation involves the use of that “legal advice to

steer a client towards a particular buyer or a particular seller”). 2

The law firm simply has alleged no facts suggesting that it

intends to act as a finder in any capacity. Moreover, Goldstein

has expressly denied that his firm has any plan or desire to do

so. See Appellant’s Br. 24; see also Oral Arg. Tr. 38:14-16

2

The State Department has explained how this might work in

practice: “[F]or example, if someone comes to an attorney and they

want to sell controlled explosives, and they ask the attorney to draft

a general sales contract, that would be legal advice, [and] it would

not constitute brokering. But if the same person came to the attorney,

asked them to draft a general sales contract and the attorney happens

to also represent a buyer in Pakistan and knows the buyer would want

to buy these controlled explosives, and so the attorney recommends

that the contract be translated into Urdu knowing that this is going to

be the only likely buyer in the area, then the attorney might have used

non-legal knowledge and tried to steer the seller towards the

particular buyer even though he was engaging in legal advice.” Oral

Arg. Tr. 28:14-29:3.

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(government counsel agreeing that “here the Plaintiff has

explicitly disclaimed” acting as a finder).

The law firm’s fear that it may be the target of Department

enforcement seems to be based on a misunderstanding of the

letter that Goldstein received from the State Department after

his firm filed suit, in which the Department advised that

Goldstein’s proposed activities would be exempt “as long as”

the foreign parties had already been identified. J.A. 40.

Focusing on the “as long as” language, the firm argues that it

must be subject to the requirements of Part 129 because it

“often” provides these services before its clients have identified

the foreign parties to proposed transactions. Appellant’s Reply

Br. 5 (“Defendants argue ‘Plaintiff has not adequately alleged

that he has engaged in or will engage in any conduct regulated

as brokering activity[] under part 129.’ . . . But Plaintiff has

repeatedly stated that it regularly provides legal advice to

clients on transactions where the clients have not identified all

parties to the transactions.”).

The letter, however, did not state that all legal advice on

international arms transactions in which foreign parties are

unidentified necessarily constitutes brokering. On the contrary,

the “as long as” language in the State Department’s letter

simply creates a limited safe harbor: when an attorney provides

ordinary legal services to a client in a situation where the

foreign party has been identified, it is especially clear that the

attorney is not helping to “find” the foreign party to the

transaction—and thus not engaging in brokering activities. If

the foreign party has not been identified, that merely leaves

open the possibility that the attorney may be acting as a finder.

But the State Department does not take the position that

attorneys engage in brokering every time they provide legal

advice relating to transactions with foreign parties not yet

identified. See Appellees’ Br. 27 (“[P]laintiff mistakenly

11

assumes that all advice on transactions in which the foreign

parties are not identified constitutes brokering.”). Rather, its

view is that attorneys must go outside the bounds of providing

proper legal counsel, and instead must actually undertake

brokering measures. Contrary to Goldstein’s argument, then,

the plaintiff’s stated intention to provide legal advice to clients

on transactions where foreign parties are unidentified does not

imply that it would face an enforcement action for failing to

register under Part 129.

Goldstein may not have provided the State Department

with enough information to make an official and binding

determination that any particular transaction of his would fall

outside the definition of brokering. See 22 C.F.R. § 129.9. But

taken as a whole, the State Department’s 2013 regulation

explicitly removing the provision of legal advice from the

definition of brokering activities, the Department’s letters to

Goldstein, and its representations at oral argument demonstrate

that, in the Department’s view, the firm is not subject to

regulation as a broker based on the firm’s proposed activities.

Therefore, because the firm alleges that it intends only to

provide legal advice and denies that it will act as a finder (or

collect a contingency fee) in the process, it has not shown that

it faces a meaningful risk that the State Department will seek

to enforce Part 129 against it, either by forcing it to register or

by penalizing it for failure to register. Without any credible

threat of enforcement, the firm has no injury to speak of that

would afford it standing to seek to enjoin enforcement of that

regulation in court.

III

The order of the district court dismissing the action for

lack of subject-matter jurisdiction is affirmed on the ground

that the plaintiff faces no credible threat of enforcement and

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therefore lacks the injury-in-fact necessary for Article III

standing.

So ordered.