Facts
- After September 11, 2001, the President declared a national emergency under the International Emergency Economic Powers Act (IEEPA) and issued Executive Order 13,224 (EO 13224) authorizing the blocking of property connected to terrorism.
- EO 13224 authorized the Secretary of the Treasury to designate persons whose property should be blocked if they acted for or on behalf of, assisted, sponsored, or were otherwise associated with a specially designated global terrorist (SDGT).
- The Secretary delegated designation authority to the Office of Foreign Assets Control (OFAC).
- OFAC designated Yassin Abdullah Kadi, a Saudi citizen, as an SDGT and blocked his property and interests in property subject to U.S. jurisdiction.
- Kadi did not receive pre-designation notice. OFAC later sent a letter notifying him of the designation and the administrative procedures available to seek reconsideration.
- Kadi petitioned OFAC for reconsideration and submitted extensive materials disputing the basis for his designation.
- OFAC evaluated Kadi’s submissions along with classified and unclassified information and concluded the designation was reasonable, finding that Kadi acted on behalf of, assisted, and provided financial support to al Qaeda and associated with known terrorists, including Osama bin Laden.
- OFAC issued a lengthy unclassified memorandum denying reconsideration.
- Kadi sued Treasury/OFAC officials, asserting statutory and constitutional challenges to the designation and blocking action. Defendants moved to dismiss or, alternatively, for summary judgment. Kadi also moved for discovery under Rule 56(f) and for leave to amend.
Issues
- Whether OFAC’s SDGT designation and blocking of Kadi’s property should be set aside under the Administrative Procedure Act (APA) as arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.
- Whether OFAC’s use of classified information, reviewed by the court ex parte and in camera, was permitted under IEEPA and consistent with judicial review of the designation.
- Whether the procedures afforded to Kadi (including the lack of pre-deprivation notice and limited disclosure of the basis for designation) satisfied Fifth Amendment due process.
- Whether blocking Kadi’s assets constituted an uncompensated taking in violation of the Fifth Amendment.
- Whether the asset blocking amounted to an unreasonable search or seizure under the Fourth Amendment.
- Whether the designation and blocking unlawfully burdened Kadi’s First Amendment rights.
- Whether Kadi was entitled to discovery beyond the administrative record under Rule 56(f) and whether he should be granted leave to amend his complaint.
Decision
- The court treated defendants’ filing as a motion for summary judgment on the administrative record and granted summary judgment for the government.
- The court held OFAC’s SDGT designation and continued blocking of Kadi’s assets were supported by the administrative record (including classified submissions) and were not arbitrary or capricious under the APA.
- The court held IEEPA permits the government to submit classified information to the reviewing court ex parte and in camera, and the court could rely on that information in evaluating the designation.
- The court rejected Kadi’s due process challenge, finding that post-designation notice, an unclassified statement of reasons, an opportunity to submit written rebuttal materials in the administrative process, and judicial review were adequate in this national-security sanctions context.
- The court rejected Kadi’s Takings Clause claim, concluding that the blocking action did not amount to a compensable taking.
- The court rejected Kadi’s Fourth Amendment claim, concluding that the blocking action was a reasonable exercise of sanctions authority rather than an unreasonable search or seizure.
- The court rejected Kadi’s First Amendment claim, concluding the sanctions targeted financial/property interests tied to terrorism, not protected speech, and any incidental burden was justified.
- The court denied Kadi’s Rule 56(f) motion for discovery because APA review is generally limited to the administrative record and Kadi did not show a sufficient basis for extra-record discovery.
- The court denied Kadi’s motion to amend as futile in light of the court’s merits rulings.
Legal Principles
- OFAC designations under IEEPA and EO 13224 are reviewed under the APA’s deferential arbitrary-and-capricious standard, with substantial deference to executive judgments in foreign affairs and national security.
- IEEPA authorizes courts, in reviewing sanctions determinations based on classified information, to receive and consider that information ex parte and in camera.
- In targeted-sanctions cases, due process may be satisfied by prompt post-deprivation notice, an unclassified explanation of reasons to the extent feasible, an opportunity to submit written materials to contest the designation, and judicial review on the administrative record; due process does not require disclosure of classified evidence to the designee.
- Blocking of assets under IEEPA is generally treated as a regulatory restriction serving national-security objectives and does not, without more, constitute a compensable taking.
- Asset blocking under this sanctions framework is analyzed as a reasonable regulatory action rather than a traditional criminal-law search or seizure for Fourth Amendment purposes.
- First Amendment challenges typically fail where sanctions address provision of funds or other material/financial support associated with terrorism and any incidental effect on expression or association is justified by compelling governmental interests.
- Discovery in APA cases is ordinarily confined to the administrative record; extra-record discovery requires a specific showing (such as bad faith or an incomplete record), and courts are especially reluctant to expand discovery where classified material is involved.
Conclusion
In Kadi v. Geithner, the District Court for the District of Columbia upheld OFAC’s designation of Yassin Kadi as an SDGT and the resulting asset freeze, concluding the designation was reasonable on the administrative record (including classified material reviewed ex parte and in camera) and rejecting Kadi’s APA, IEEPA, and First, Fourth, and Fifth Amendment challenges, while also denying his requests for discovery and leave to amend.