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Media Alerts - Ralls Corp. v. Committee on Foreign Investment in the United States
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July 21, 2014
  Ralls Corp. v. Committee on Foreign Investment in the United States
Headline: The Defense of Production Act's ban on judicial review of Presidential Orders does not preclude courts from hearing due process challenges.

Area of Law:
Defense of Production Act; Federal Courts; Due Process

Issue Presented
: Whether a foreign-owned company ordered by the President to divest itself of American holdings under Section 721 of the Defense of Production Act may make a procedural due process challenge to that order despite a statutory provision stating that the actions and findings of the President "shall not be subject to judicial review."

Brief Summary: In March 2012, Defendant Ralls Corporation, an American company owned by Chinese nationals, purchased four American companies formed to develop windfarms in Oregon. The Committee on Foreign Investments in the United States (CFIUS) reviewed the purchase under Section 721 of the Defense Production Act of 1950 (DPA), which gives it authority to review transactions "which could result in foreign control of any person engaged in interstate commerce in the United States." CFIUS decided that the proximity of the planned windfarms to restricted airspace and a military bombing zone threatened national security and issued an order in July 2012 directing Ralls to cease construction and operations at the site. In September, the President completed his review of the transaction and, agreeing with CFIUS, issued a Presidential Order prohibiting the transaction and ordering Ralls to divest itself of the windfarm assets. Although Section 721 of the DPA states that the Presidential Order "shall not be subject to judicial review," Ralls filed suit in the United States District Court for the District of Columbia challenging the order on numerous grounds, including that the company was not offered the opportunity to review and rebut the evidence on which the decision was based, in violation of the Due Process Clause. The District Court found that Section 721 barred judicial review of many of the claims but rejected Ralls' due process charge for failure to state a claim. Ralls appealed.

The United States Court of Appeals for the District of Columbia Circuit reversed. First the Court held that it had jurisdiction to review the due process claim. The court reasoned that a statutory bar on judicial review precludes consideration of constitutional claims only where there is "clear and convincing evidence" that Congress so intended. Examining the text and legislative history of the statute, the court found no evidence that Congress had intended to exclude constitutional challenges to the process. The court distinguished McBryde v. Committee to Review Circuit Council Conduct & Disability Orders of Judicial Conference of the United States, 264 F.3d 52 (D.C. Cir. 2001), on the basis that Congress had provided an alternative mechanism for review of process-based challenges in that statute that would have rendered review by an Article III court superfluous.

The court then rejected the government's claim that review of the Order presented a non-justiciable political question. Applying the six disjunctive prongs of Baker v. Carr, the court found that the due process claim did not call for review of either the President's decision that the acquisition of the project companies threatened national security or the President's prohibition of the transaction in order to mitigate the national security threat.

Turning to the merits of the due process claim, the court rejected the district court's conclusion that Ralls's fully-vested state law property interests were "too contingent for constitutional protection" given the likelihood of CFIUS review. The court then concluded that the Constitution required permitting Ralls access to the unclassified evidence on which CFIUS relied and an opportunity to rebut that evidence. Because the process afforded Ralls fell short of this constitutional minimum, the court reversed the dismissal.

For the full text of the opinion, please visit http://www.cadc.uscourts.gov/i...le/13-5315-1502552.pdf.

Panel: Henderson, Brown, and Wilkins

Argument Date: May 5, 2014

Date of Issued Opinion: July 15, 2014

Docket Number: No. 13-5315

Decided: Reversed and remanded.

Case Alert Author: Albertine Guez

Counsel (if known): Paul D. Clement, Viet D. Dinh, H. Christopher Bartolomucci, and George W. Hicks, Jr. for the appellant. Douglas N. Letter, Stuart F. Delery, Ronald C. Machen, Jr., and Sonia K. McNeil for the appellees.

Author of Opinion: Henderson

Case Alert Circuit Supervisor: Elizabeth Earle Beske, Ripple Weistling

    Posted By: Ripple Weistling @ 07/21/2014 10:55 AM     DC Circuit  

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