Obama denied Chinese developers due process by blocking project — appeals court

Source: Nick Juliano, E&E reporter • Posted: Wednesday, July 16, 2014

Chinese owners seeking to build wind farms near a naval facility in Oregon were denied their due process rights when President Obama blocked the project on national security grounds without providing adequate evidence for his decision, a federal appeals court ruled today.

The unanimous decision by the U.S. Court of Appeals for the District of Columbia Circuit remands the case, Ralls Corp. v. Committee on Foreign Investment in the United States, to the district court and directs the administration to give Ralls an opportunity to respond to unclassified evidence Obama used to justify his decision. Although the court acknowledges it cannot question the national security grounds under which the president justified his decision, it said the question of whether Ralls was afforded adequate due process was reviewable.

“Ralls asks us to decide whether the Due Process Clause entitles it to have notice of, and access to, the evidence on which the President relied and an opportunity to rebut that evidence before he reaches his non-justiciable (and statutorily unreviewable) determinations,” wrote Judge Karen Henderson, agreeing that the process leading to the final decision falls under the court’s authority.

The long-running dispute stems from Obama’s 2012 decision to block Ralls from constructing wind farms near a naval weapons training facility in Oregon. Though it is Delaware-based, Ralls is owned by two Chinese businessmen who were aiming to install turbines from the Chinese manufacturing firm Sany Group, where they also are executives.

When Ralls purchased U.S. companies that had been developing the Oregon wind farms, it attracted the attention of the Committee on Foreign Investment in the United States, which reviews transactions that could result in foreign ownership of companies in the United States that could threaten national security. CFIUS first rejected Ralls’ ownership, and Obama got involved after Ralls challenged the interagency committee’s first decision.

During oral arguments, the administration said it would not share even the unclassified evidence against Ralls because such materials could be shielded under executive privilege. It also argued that Ralls’ due process rights were not violated because the Chinese businessmen knew it was possible CFIUS could block the transaction and did not obtain any preclearance before completing the purchase. Ralls argued that the decision to block the project could be based on mistaken information or factors that could be mitigated, but that the company was unable to properly make its case without seeing any evidence (Greenwire, May 5).

The appellate judges sided with the company, agreeing that its purchase of the Oregon companies applied property rights under state law that triggered due process collections and that the company had a right to see unclassified evidence against it. It disputed the administration’s argument that the mere existence of potential CFIUS proceedings placed the burden on Ralls to get permission for the purchases in advance.

“Ralls’s state-law property rights fully vested upon the completion of the transaction, meaning due process protections necessarily attached,” Henderson wrote. “There is nothing ‘contingent’ about the interests Ralls obtained under state law, and the Appellees offer no legal support — other than the district court order — for the proposition that the nature of a property interest recognized under state law is affected by potential federal deprivation.”

In remanding the case to the U.S. District Court for the District of Columbia, which previously sided with the administration, the appellate panel says Ralls should be given access to unclassified evidence against it and an opportunity to respond. If the administration wants to raise an executive privilege claim at that point, the district court is “well positioned” to resolve that claim, Henderson wrote.

Ralls also challenged the initial CFIUS decision in its first district court lawsuit, but that claim was dismissed on jurisdictional grounds, and its merits have received little attention. The appellate panel found the CFIUS decision could be reviewed and directed the district court to address the merits of that claim as well.

Joining Henderson, who was appointed by President George H.W. Bush, in the unanimous opinion were Judges Janice Rogers Brown, one of President George W. Bush’s appointees, and Robert Wilkins, whom Obama added to the court earlier this year.

Representatives of the Obama administration were not immediately available for comment this morning.