## Facts

- In 2014, the President issued Executive Order 13,661 authorizing Treasury, through OFAC, to block property and interests in property of designated “Specially Designated Nationals” (SDNs) in response to Russia’s actions in Ukraine.
- The Executive Branch publicly stated that the sanctions targeted designated individuals’ personal assets, not the companies they managed, and OFAC clarified that Rosneft was not itself sanctioned.
- OFAC designated Igor Sechin, Rosneft’s president, as an SDN on April 28, 2014.
- Exxon had ongoing joint-venture relationships with Rosneft and, on May 23, 2014, entered into eight contracts with Rosneft that were signed by Sechin in his corporate capacity as Rosneft’s president.
- Exxon did not request interpretive guidance from OFAC before executing the contracts.
- In 2017, OFAC issued a civil penalty notice asserting Exxon violated sanctions by “dealing in the services” of an SDN because the agreements were signed by Sechin; OFAC imposed a $2 million civil penalty.
- Exxon sued under the Administrative Procedure Act (APA) and the Fifth Amendment Due Process Clause, contending OFAC failed to provide fair notice that the conduct was prohibited.
- The case was decided on cross-motions for summary judgment.

## Issues

1. Whether due process required vacatur of OFAC’s penalty because Exxon lacked fair notice that entering contracts with a non-blocked entity, signed by an SDN in a representative corporate capacity, was prohibited.
2. Whether OFAC’s penalty decision was arbitrary, capricious, or otherwise not in accordance with law under the APA because OFAC’s interpretation was not reasonably communicated in advance.

## Decision

- The court granted summary judgment to Exxon on the fair-notice claim.
- The court held Exxon did not have fair notice that the sanctions regime, as of May 2014, prohibited contracts with Rosneft solely because Sechin signed them as an officer.
- The court concluded the penalty violated due process and therefore was unlawful under the APA.
- The court vacated OFAC’s $2 million civil penalty.

## Legal Principles

- Due process bars an agency from imposing civil penalties based on a prohibition that was not communicated with “ascertainable certainty” to regulated parties before the conduct occurred.
- Regulatory text that blocks an SDN’s property and prohibits providing “services” to or for the benefit of an SDN does not, without clear prior notice, necessarily cover agreements with a non-blocked entity merely because an SDN signs in a representative capacity.
- Contemporaneous official statements and the agency’s later “clarifying” guidance may be relevant to whether a regulated party had reasonable notice of the agency’s asserted interpretation at the time of the conduct.
- When a penalty rests on an interpretation not fairly noticed, the action is “not in accordance with law” and must be set aside under the APA.

## Conclusion

The court set aside OFAC’s penalty because the sanctions framework and contemporaneous government communications did not provide Exxon fair notice that contracts with a non-blocked company were prohibited solely because an SDN signed the agreements as the company’s officer.


Exxon Mobil Corp. v. Mnuchin, 430 F. Supp. 3d 220 (N.D. Tex. 2019)