Reply Brief — Milena Ship Management Co. v. Newcomb

Supreme Court brief1994

Ask Donna

What actually matters in this document.

Text

No. 93-620

IN THE

Supreme Court of the United States

OCTOBER TERM, 1993

MILENA SHIP MANAGEMENT COMPANY, LTD.,

SOUTH CRoss SHIPPING, LTD.,

SOUTH ADRIATIC BULK SHIPPING LIMITED, AND

GULF & EASTERN STEAMSHIP AND CHARTERING CORP

Petitioners,

¥.

R. RICHARD NEWCOMB, DIRECTOR,

OFFICE OF FOREIGN ASSETS CONTROL OF THE

DEPARTMENT OF THE TREASURY, AND

JAMES MurRRAY, SENIOR SPECIAL AGENT,

UNITED STATES CUSTOMS SERVICE,

Do: «4X Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Fifth Circuit

PETITIONERS’ REPLY BRIEF

DOUGLAS L. GRUNDMEYER

Counsel of Record

JOHN H. CLEGG

DAPHNE P. MCNUTT

CHAFFE, MCCALL, PHILLIPS,

TOLER & SARPY, L.L.P.

2300 Energy Centre

1100 Poydras Street

New Orleans, LA 70163-2300

(504) 585-7000

January 6, 1994 Attorneys for Petitioners

WILSON - Epes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

Don Saree are

"| BEST AVAILABLE COPY

TABLE OF CONTENTS

TABLE OF AUTHORITIES

PREFACE.

IT.

IT].

OFAC HAD NO PRIOR “KNOWLEDGE” TO

JUSTIFY ITS UNLAWFUL BLOCKING OR-

DERS AND PRESUMPTION OF GOVERN-

MENT OWNERSHIP

FUL BLOCKING ORDERS AFTER THE

FACT ....

PETITIONERS’ CLAIMS ARE NOT MOOT....

CONCLUSION

re ey

TABLE OF AUTHORITIES

CASES Page

Bradley v. School Board of City of Richmond, 416

pS BR cf) RRM Reem emt ene tome Mwr BENE Sr tie. ve 7

Camp v. Pitts, 411 U.S. 1388 (1978) ......................... 5

Citizens to Preserve Overton Park, Inc. v. Volpe,

lids We A BD deseisercicsccas teas 2, 3, 5, 6, 8

Collins v. Youngblood, 497 U.S. 37 (1990) ............. 8

Florida Power & Light Co. v. Lorion, 470 U.S. 729 |

CID cesinbikccocdnsetedacdsadeumecsuicnascideaie nee 4,5, 6

Greene v. United States, 376 U.S. 149 (1964) _... 7

Miller v. Florida, 482 U.S. 423 (1987) ..................... 8

Nixon v. Administrator of General Services, 433

Slate. See CECE cei eee PMO PED tant Ved 8

Panama Refining Co. v. Ryan, 293 U.S. 388

CFP D secccccinecshsnansseccensicdoesadidaboteamamaan nee 7

Pension Benefit Guaranty Corp. v. LTV Corp., 496

oF we ER, |) RON NR lake: Resets pte ey 5

Peters v. Hobby, 349 U.S. 331 (1955) ............-....... 7

Thorpe v. Housing Authority of City of Durham,

Be Wale: Oe CREE vitae cde cee 7

United States v. Brown, 381 U.S. 437 (1965) ........

STATUTES/RULES/PROVISIONS

5 U.S.C. §§ 701-706......... Fee PRONE ENE E BOI ARI ba er 2, 8,6

OF Vian © FP) cada eee 7

SO UA. BE Pe Ee ese nccdateusntcanioda 8

58 Fed. Reg. 13,199, 13,212 (1993) (§ 585.701 of

Federal Republic of Yugoslavia (Serbia and

Montenegro) Sanctions Regulations) _.............. 7

58 Fed. Reg. 25,771 (1993) (Executive Order No.

REED -xstckccniitoniniocisendionsanseni ie 2,6, 7,8

Ua Coe. Ae 2. OO 68. ee ae 7

Rule 10.1(a) and (c), Supreme Court of the

SI TE ooechsectcsnitnisssesncoesaassansadaem tues ene 8

IN THE

Supreme Court of the United States

OCTOBER TERM, 1993

No. 93-620

MILENA SHIP MANAGEMENT COMPANY, LTp..

SOUTH Cross SHIPPING, LTp..

SOUTH ADRIATIC BULK SHIPPING LIMITED, AND

GULF & EASTERN STEAMSHIP AND CHARTERING CorpP.,

- Petitioners,

R. RICHARD NEwcoms, DirEcTOoRr.

OFFICE OF FOREIGN ASSETS CONTROL OF THE

DEPARTMENT OF THE TREASURY. AND

JAMES Murray, SENIOR SPECIAL AGI NT,

UNITED STATES CUSTOMS SERVICE.

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Fifth Circuit

PETITIONERS’ REPLY BRIEF

PREFACE

Respondents advance essentially three main arguments

in Opposition to the petition for a writ of certiorari. First.

OFAC claims that it possessed prior “knowledge” of

Yugoslav history and law and relied on it to adopt a

“Teasonable” presumption that the Yugoslav Government

1 Petitioners’ list of interested persons and Rule 29.1 notation are

set forth at page ii of their petition. Those listings remain current,

and no amendment is necessary.

owned or controlled every entity in its territory (Opposi-

tion Brief, pp. 3, 7). Second, OFAC contends that even

if its administrative record failed to support its initial

blocking orders, the agency’s subsequent decision reject-

ing petitioners’ application for unblocking the vessels

“remedied” any inadequacy in the record (p. 8). Third,

OFAC asserts that Executive Order No. 12,846, 58 Fed.

Reg. 25,771, which President Clinton signed on April 25,

1993 after the final agency actions in this case, blocks the

property of all Yugoslav entities regardless of their affilia-

tion to the Yugoslav Government and effectively moots

the writ petition (p. 11).

Denying certiorari in favor of respondents’ arguments

would directly conflict with the rules governing the con-

duct of administrative agencies review as set forth in the

Administrative Procedure Act, 5 U.S.C. $$ 701-706, and

this Court’s opinion in Citizens to Preserve Overton Park,

Inc. v. Volpe, 401 U.S. 402 (1971). No statutory or

judicial authority permits an administrator to take unlaw-

ful final action and then to justify it after the fact through

the arguments of counsel. None of respondents’ argu-

ments undermines the need to grant the writ application

in this case. To the contrary, the opposition brief under-

scores the reasons why this Court should grant certiorari

to address the important questions concerning due proc-

ess, separation of powers, and proper standards of judi-

cial review that this petition raises.

I. OFAC HAD NO PRIOR “KNOWLEDGE” TO JUS-

TIFY ITS UNLAWFUL BLOCKING ORDERS AND

PRESUMPTION OF GOVERNMENT OWNERSHIP

Throughout its brief in opposition, OFAC asserts that

it based its presumption of government ownership on its

prior “knowledge” of the Yugoslav regime’s involvement

in business enterprises (p. 3) and that its presumption of

government ownership was “reasonable” in view of that

“history” and its “knowledge of prior Yugoslav law”

(p. 7). Unfortunately for OFAC, no evidence in the ad-

ministrative or judicial record supports that assertion.

In the “Stipulation and Order” entered in the district

court on October 2, 1992, OFAC conceded that it had

no “additional evidence to offer beyond that which is al-

ready in the Court’s record of this proceeding” (Petition-

ers’ Appendix, 44a-45a). As petitioners have established,

OFAC’s administrative record begins over two weeks after

it took final agency action by seizing the ZETA on June

19, 1992. OQFAC’s record contains. absolutely no docu-

mentation indicating that OFAC had any “knowledge”

of the Yugoslav economy, JOP’s structure, or Yugoslav

or Montenegrin law before OFAC took action by block-

ing the vessels.

In Overton Park, cited above, this Court created a rule

of law to control administrative agencies who possess the

power to take action that may result in the loss of prop-

erty, such as in this case. This Court recognized an

agency's latitude, but held that a reviewing court under

the Administrative Procedure Act must set aside the

agency's action “if it was ‘arbitrary, capricious, an abuse

of discretion, or otherwise not in accordance with law’

or if the action failed to meet statutory, procedural, or

constitutional requirements.” 401 U.S. at 414-15. In

judging whether the administrator acted within the scope

of his authority and if the action was justifiable under

these standards, the reviewing court looks to the evidence

in the administrative record that was before the adminis-

trator at the time of the decisive action, not afterward.

401 U.S. at 419-20. The self-interest of the agency and

its attorneys in justifying prior conduct by arguments

after the fact led this Court in Overton Park to prohibit

any post hoc rationalizations. Petitioners submit that this

Court had cases precisely like this one in mind.

As the rationale for his agency’s action in this case,

R. Richard Newcomb, OFAC’s director, filed a post hoc

affidavit in the district court on August 3, 1992 averring

that he had “knowledge of the Yugoslav economy” and

had based his presumption on a “review of the historical

structure of the Yugoslav economy and the privatization

process begun in SFRY in 1989.” Yet, he admittedly re-

lied on the article by Branko Vukmir, which plaintiffs’

expert on Yugoslav law, Stephen B. Ives, Jr. furnished to

OFAC in late July 1992, over a month after OFAC had

seized the vessels and after petitioners had sought admin-

istrative review. In short, the record plainly shows that

OFAC acquired its so-called “knowledge” long after the

fact. Paradoxically, when confronted with the USS.

Treasury Department’s own opinion that the Yugoslav

State does not own “socially-owned” industry in Yugo-

slavia, OFAC eschews its allegedly prior “knowledge”

and relies on “current Yugoslav law” to argue that the

Government has “a direct financial interest in the ‘social

capital’ of Yugoslav business enterprises” (Opposition

Brief, p. 7 n.1).

OFAC’s administrative record plainly shows that

OFAC had no prior knowledge to justify its unlawiul

blocking orders. Only after judicial proceedings began

did OFAC begin to cover its tracks by creating self-

contradictory conclusions to support its so-called “reason-

able presumption. OFAC blocked the vessels on the

whim, caprice, and prejudice of its director, who felt the

need to act, without an investigation or even a simple

meeting with the State Department to support its final

agency action. This case cries out for this Court’s review

to prohibit such gross abuses of administrative power in

this and future cases.

II. OFAC CANNOT “REMEDY” ITS UNLAWFUL

BLOCKING ORDERS AFTER THE FACT

OFAC erroneously relies on Florida Power & Light

Co. v. Lorion, 470 U.S. 729 (1985), to argue that the

agency’s administrative decision of September 18, 1992

denying petitioners’ application for unblocking of the ves-

sels somehow “remedied” any assumed “inadequacy” in

the administrative record when OFAC initially blocked

the vessels (Opposition Brief, p. 8). OFAC has mis-

construed this Court’s opinion in the Florida Power case

and is advancing an argument that is directly contrary to

this Court’s standards of judicial review under the Ad-

ministrative Procedure Act, 5 U.S.C. $§ 701-706.

In Overton Park, this Court held that judicial review

of an administrative action must be based “on the full

administrative record that was before the [administrative

Officer] .. . at the time he made his decision.” 401 U.S.

at 420 (emphasis added). This Court rejected affidavits,

legal arguments, and other post hoc rationalizations to

justify prior administrative action that lacks support in

the administrative record. 401 U.S. at 419. The Florida

Power decision does not give OFAC license to “paper

over” its mistakes, concoct post hoc rationalizations for

its earlier, final blocking orders, or engage in a “ping

pong” game of remand until the agency “cures” its arbi-

trary action and prevails. Overton Park and Florida

Power simply establish that a remand to the agency may

be proper “for a fuller explanation of the agency’s reason-

ing at the time of the agency action” and that the agency

must give the reviewing court a full record “to provide

an explanation that will enable the court to evaluate the

agency's rationale at the time of decision.” Pension Bene-

fit Guaranty Corp. v. LTV Corp., 496 U.S. 633, 654

(1990) (emphasis added). As this Court stated in

Florida Power, “(T]he focal point for judicial review

should be the administrative record already in existence,

not some new record made initially in the reviewing

court.” 470 U.S. at 743, quoting Camp v. Pitts, 411 U:S.

138, 142 (1973). As noted earlier, OFAC has stipulated

in this case that it has “no additional evidence to offer”

(Petitioners’ Appendix, 44a-45a).

OFAC does not dispute the lower courts’ findings that

it took “final agency action” in blocking the vessels be-

ginning in mid-June 1992. The local point of that final

agency action is the administrative record, such as it

existed, when OFAC blocked the vessels. Overton Park

and Florida Power do not permit OFAC to invent a new

administrative record or to justify the prior blocking

orders through a subsequent administrative decision re-

fusing to unblock the vessels months later. The initial

blocking orders must stand or fall on their own merits as

of the time OFAC imposed them. The administrative

and judicial records in this case plainly show that OFAC

adopted its unreasonable and arbitrary presumption on

an empty record without any prior investigation or con-

Sultation with the State Department or any experts in

Yugoslav and Montenegrin law. No decision of this

Court permits an administrative agency to act first and

justify it later with post hoc rationalizations when chal-

lenged. The error that this case presents will undoubtedly

recur whenever OFAC purports to implement future eco-

nomic sanctions against foreign governments and harms

the rights of innocent parties in the process. Injustices

will result and evade review unless this Court gives guid-

“ance to OFAC and the federal courts.

lil. PETITIONERS’ CLAIMS ARE NOT MOOT

On April 25, 1993, while the appeal of this case was

pending in the Fifth Circuit, President Clinton signed

- Executive Order No. 12,846, 58 Fed. Reg. 25,771, block-

ing the property of “all commercial, industrial, or public

utility undertakings or entities organized or located in the

Federal Republic of Yugoslavia (Serbia and Monte-

negro) ....” This executive order further provides that

all expenses incident to the blocking and maintenance of

property blocked under it and earlier executive orders are

chargeable to the owners or operators of the property.

Respondents now argue that this new executive order

moots petitioners’ claims and makes further review of

this case “unwarranted.” (Opposition Brief, p. 11.) That

argument is meritless, because OFAC cannot rely on a

later executive order to excuse its earlier final agency

action beyond the scope of previous executive orders,

especially where “substantial rights affecting the lives

and property of citizens are at stake.” See Peters v.

Hobby, 349 U.S. 331, 347 (1955).

The general rule that a court applies the law in effect

at the time of its decision is subject to a very important

exception. A court cannot apply new law retroactively

to a pending case if a “manifest injustice” would result.

See Bradley v. School Board of City of Richmond, 416

U.S. 696, 716-17 (1974), citing Thorpe v. Housing Au-

thority of City of Durham, 393 U.S. 268, 282 (1969);

Greene v. United States, 376 U.S. 149, 160 (1964). “If

the citizen is to be punished for the crime of violating a

legislative order of an executive officer, or of a board or

commission, due process of law requires that it shall

appear that the order is within the authority of the officer,

board or commission, and, if that authority depends on

determinations of fact, those determinations must be

shown.” Panama Refining Co. v. Ryan, 293 U.S. 388.

432 (1935).

Respondents cannot rely on Executive Order No.

12,846 of April 25, 1993 retroactively to moot this writ

application and sanction the unwarranted seizure of peti-

tioners’ vessels almost a year earlier under different execu-

‘tive orders. Petitioners had Fifth Amendment rights to

the full economic use of their vessels until OFAC arbi-

trarily, capriciously, and unlawfully deprived them of

those rights by blocking the vessels in mid-June 1992.

Since the blocking, petitioners have incurred the substan-

tial costs of maintaining these vessels without any benefit.

Applying the latest executive order to moot this writ

application would condone OFAC’s unlawful actions and

deprive petitioners of meaningful judicial review to vin-

dicate their constitutional rights.

Retroactively applying Executive Order No. 12,846

would further offend the prohibitions against ex post facto

laws and bills of attainder in U.S. Const. Art. I, § 9,

cl. 3. Under 50 U.S.C. § 1705(b) and under § 585.701

of OFAC’s Federal Republic of Yugoslavia (Serbia and

cia iii ei.

Montenegro) Sanctions Regulations published at 58 Fed.

Reg. 13,199, 13,212 (1993), petitioners are subject to

criminal penalties (including fines, imprisonment, or

both) if they willfully violate any order or regulation

issued under the International Emergency Economic

Powers Act, 50 U.S.C. §§ 1701-1706. Applying the

latest executive order to moot this writ petition and to

justify the prior unlawful blockings would constitute an

ex post facto violation by specifically targeting and pun-

ishing petitioners and their vessels for past lawful conduct.

If applied to petitioners, the latest executive order would

retrospectively criminalize a status and events occurring

before its enactment, would disadvantage petitioners by

punishing them now for earlier lawful acts beyond the

scope of the earlier executive orders, and would change

the legal consequences of their prior status. See Collins v.

Younghlood, 497 U.S. 37 (1990); Miller v. Florida, 482

U.S. 423 (1987). A retroactive application of Executive

Order No. 12.846 would also be a prohibited bill of

attainder by inflicting punishment upon petitioners as an

identifiable group and confiscating their property without

a judicial trial because of their prior status. See Nixon v.

Administrator of General Services, 433 U.S. 425 (1977);

United States v. Brown, 381 U.S. 437 (1965). This writ

petition is by no means moot.

CONCLUSION

As discussed above and in the petition, this case pre-

sents questions of extreme importance. The decisions be-

low upholding OFAC’s arbitrary, capricious, and unlawful

blocking orders have violated petitioners’ constitutional

rights, the doctrine of separation of powers, and _ this

Court’s standards of judicial review of administrative de-

cisions—particularly as set forth in Overton Park. This

writ application presents substantial and important rea-

sons for granting certiorari within the meaning of Rule

10.1(a) and (c) of this Court’s Rules. This Court should

exercise its power of supervision to correct the lower

courts’ departure “from the accepted and usual course of

judicial proceedings” and to correct the lower courts’

prejudicial errors of constitutional and federal statutory

law. Unless corrected, OFAC now has license to adopt

arbitrary presumptions and deprive citizens of their prop-

erty at the whim of its administrator. Unless this Court

intercedes, this fundamental error will be repeated and

evade review in the many future cases when economic

sanctions are imposed against foreign governments and

the rights of innocent non-governmental entities and per-

sons are jeopardized.

This Court has never hesitated to stop governmental

overreaching that infringes on the rights of individuals.

This case is the perfect vehicle for this Court to address

broad concerns of judicial review and separation of pow-

ers with a worldwide impact. More particularly, this

Court should grant certiorari to reverse OFAC’s unlawful

actions that have irreparably injured these petitioners and

will continue to do so by unjustly stigmatizing them as

entities of a foreign government that in due course may

face substantial claims from other citizens and govern-

ments. Unless reversed, the administrative and judicial

rulings at issue will forever deprive petitioners of their

property and may ultimately destroy them. This case

warrants this Court’s review.

Respectfully submitted,