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Case 1:15-cv-01641-JEB Document 32 Filed 02/18/16 Page 1 of 33

IN THE UNITED STATES DISTRICT COURT


FOR THE DISTRICT OF COLUMBIA
RAMON CIERCO, et al.,
Plaintiffs,
v.

Civil Action No. 15-1641 (JEB)

JACOB LEW, in his official capacity as


Secretary of the Treasury, et al.,
Defendants,
and
BANCA PRIVADA DANDORRA S.A., in
receivership,
Nominal Defendant.
REPLY IN SUPPORT OF MOTION TO DISMISS BY DEFENDANTS JACOB LEW,
U.S. DEPARTMENT OF THE TREASURY, JENNIFER SHASKY CALVERY,
AND THE FINANCIAL CRIMES ENFORCEMENT NETWORK

Case 1:15-cv-01641-JEB Document 32 Filed 02/18/16 Page 2 of 33

TABLE OF CONTENTS
TABLE OF AUTHORITIES ......................................................................................................... iii
INTRODUCTION ...........................................................................................................................1
DISCUSSION ..................................................................................................................................1
I.

Plaintiffs Lack Standing.......................................................................................................1


A.

Plaintiffs have not established redressability ...........................................................2

B.

Plaintiffs do not have standing to challenge FinCENs proposed


rule on behalf of BPA ..............................................................................................6

C.

Plaintiffs claims should also be dismissed on ripeness grounds ..........................10

II.

The APA Does Not Permit Plaintiffs Challenge to Non-Final


Agency Action ...................................................................................................................11

III.

Plaintiffs Fail to State a Due Process Claim ......................................................................15


A.

Plaintiffs cannot establish a deprivation by the government .................................16

B.

Plaintiffs still lack a sufficiently pled constitutional presence...............................19

C.

Plaintiffs are receiving more than adequate process ..............................................23

CONCLUSION ..............................................................................................................................25

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TABLE OF AUTHORITIES
Cases
Abigail All. for Better Access to Developmental Drugs v. Eschenbach,
469 F.3d 129 (D.C. Cir. 2006)................................................................................................... 5
Action on Smoking and Health v. Dept of Labor,
28 F.3d 162 (D.C. Cir. 1994)................................................................................................... 13
*Am. Mfrs. Mut. Ins. Co. v. Sullivan,
526 U.S. 40 (1999) ............................................................................................................ 16, 17
Ams. for Safe Access v. DEA,
706 F.3d 438 (D.C. Cir. 2013)................................................................................................... 3
Bennett v. Donovan,
703 F.3d 582 (D.C. Cir. 2013)................................................................................................... 3
Bennett v. Spear,
520 U.S. 154 (1997) .................................................................................................... 11, 12, 13
Better Govt Assn v. Dept of State,
780 F.2d 86 (D.C. Cir. 1986)................................................................................................... 11
Block v. Meese,
793 F.2d 1303 (D.C. Cir. 1986)................................................................................................. 3
Blum v. Yaretsky,
457 U.S. 991 (1983) ................................................................................................................ 17
Boumediene v. Bush,
552 U.S. 723 (2008) ................................................................................................................. 21
Briscoe v. Costco Wholesale Corp.,
61 F. Supp. 3d 78 (D.D.C. 2014)............................................................................................. 20
CibaGeigy Corp. v. EPA,
801 F.2d 430 (D.C. Cir. 1986)................................................................................................. 11
City of Harper Woods Emples. Ret. Sys. v. Olver,
589 F.3d 1292 (D.C. Cir. 2009)............................................................................................. 6, 7
32 Cty. Sovereignty Comm. v. Dep't of State,
292 F.3d 797 (D.C. Cir. 2002)........................................................................................... 20, 22

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*Ctr. for Auto Safety v. Natl Highway Traffic Safety Admin.,


452 F.3d 798 (D.C. Cir. 2006)........................................................................................... 11, 12
Doe v. U.S. Dept of Justice,
753 F.2d 1092 (D.C. Cir. 1985)......................................................................................... 18, 19
FBME Bank Ltd. v. Lew,
No. 15-1270, 2015 WL 5081209 (D.D.C. Aug. 27, 2015) ................................................ passim
In re Fed. Nat. Mortgage Assn Sec., Derivative, & ERISA Litig.,
503 F. Supp. 2d 9 (D.D.C. 2007).............................................................................................. 10
Franchise Tax Bd. of Cal. v. Alcan Aluminum Ltd.,
493 U.S. 331 (1990) .................................................................................................................. 6
Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc.,
528 U.S. 167 (2000) .................................................................................................................. 6
FTC v. Standard Oil Co.,
449 U.S. 232 (1980) ................................................................................................................ 14
Gail C. Sweeney Estate Marital Trust v. United States Treasury Dept,
68 F. Supp. 3d 116 (D.D.C. 2014)........................................................................................... 10
General Electric v. Jackson,
610 F.3d 110 (D.C. Cir. 2010)........................................................................................... 18, 19
Heartland Regl Med. Ctr. v. Leavitt,
415 F.3d 24 (D.C. Cir. 2005)..................................................................................................... 5
*In re Murray Energy Corp.,
788 F.3d 330 (D.C. Cir. 2015)..................................................................................... 13, 14, 15
Intl Union, United Auto., Aerospace & Agr. Implement Workers of America v. Brock,
783 F.2d 237 (D.C. Cir. 1986)................................................................................................. 10
Kadi v. Geithner,
42 F. Supp. 3d 1 (D.D.C. 2012)............................................................................................... 21
Kaempe v. Myers,
367 F.3d 958 (D.C. Cir. 2004)................................................................................................. 16
Kamen v. Kemper Fin. Servs.,
500 U.S. 90 (1991) .................................................................................................................... 9

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Lujan v. Defs. of Wildlife,


504 U.S. 555 (1992) .................................................................................................................. 2
McCarthy v. Madigan,
503 U.S. 140 (1992) .................................................................................................................. 9
Mosrie v. Barry,
718 F.2d 1151 (D.C. Cir. 1983)............................................................................................... 18
Natl Assn of Home Builders v. Norton,
415 F.3d 8 (D.C. Cir. 2005)..................................................................................................... 12
*Natl Coal Against the Misuse of Pesticides v. Thomas,
809 F.2d 875 (D.C. Cir. 1987)................................................................................................. 23
Natl Council of Resistance of Iran v. Dept of State,
251 F.3d 192 (D.C. Cir. 2001)........................................................................................... 20, 21
Natl Parks Conservation Assn v. Manson,
414 F.3d 1 (D.C. Cir. 2005)....................................................................................................... 3
Nevada v. Dept of Energy,
457 F.3d 78 (D.C. Cir. 2006)................................................................................................... 11
Old Dominion Dairy Products, Inc. v. Secy of Def.,
631 F.2d 953 (D.C. Cir. 1980).................................................................................................. 18
*Paul v. Davis,
424 U.S. 693 (1976) .......................................................................................................... 18, 19
Perry Capital v. Lew,
70 F. Supp. 3d 208 (D.D.C. 2014)........................................................................................... 10
Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Raines,
534 F.3d 779 (D.C. Cir. 2008)................................................................................................... 9
Pub. Citizen v. Office of U.S. Trade Representatives,
970 F.2d 916 (D.C. Cir. 1992)................................................................................................. 10
Reliable Automatic Sprinkler Co., Inc. v. Consumer Prod. Safety Commn,
324 F.3d 726 (D.C. Cir. 2003)................................................................................................. 12
*Renal Physicians Assn v. HHS,
489 F.3d 1267 (D.C. Cir. 2007)......................................................................................... 2, 3, 4

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Siegert v. Gilley,
500 U.S. 226 (1991) ................................................................................................................ 18
Sloan v. Urban Title Servs., Inc.,
689 F. Supp. 2d 94 (D.D.C. 2010)........................................................................................... 20
Tozzi v. HHS,
271 F.3d 301 (D.C. Cir. 2001)............................................................................................... 2, 3
Trifax Corp. v. District of Columbia,
314 F.3d 641 (D.C. Cir. 2003)................................................................................................. 18
United States v. 8848 S. Commercial St., Chicago, Ill.,
757 F. Supp. 871 (N.D. Ill. 1990) ............................................................................................ 14
United States v. Union Bank For Sav. & Inv. (Jordan),
487 F.3d 8 (1st Cir. 2007) ....................................................................................................... 22
United States v. Verdugo-Urquidez,
494 U.S. 259 (1990) ................................................................................................................ 20
Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council,
435 U.S. 519 (1978) ................................................................................................................ 23
Vill. of Bensenville v. FAA,
457 F.3d 52 (D.C. Cir. 2006)................................................................................................... 17
Statutes
5 U.S.C. 704 ............................................................................................................................... 11
5 U.S.C. 706(2) ............................................................................................................................ 5
21 U.S.C. 881 ............................................................................................................................. 14
31 U.S.C. 5311 ........................................................................................................................... 24
31 U.S.C. 5318A .......................................................................................................... 5, 6, 14, 15
31 U.S.C. 5318A(a)(1) ......................................................................................................... 13, 14
31 U.S.C. 5318A(a)(2) ............................................................................................................... 13
31 U.S.C. 5318A(a)(2)(C) ......................................................................................................... 15
Regulations and Rules
80 Fed. Reg. 13,304 ................................................................................................................ 16, 17
80 Fed. Reg. 13,464 ........................................................................................................................ 5
80 Fed. Reg. 45,057 ...................................................................................................................... 13
Fed. R. Civ. P. 23.1 ......................................................................................................................... 9

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Legislative Materials
H.R. Conf. Rep. 108-381 .............................................................................................................. 22
Miscellaneous
Government Accountability Office, USA PATRIOT Act: Better Interagency
Coordination and Implementing Guidance for Section 311 Could Improve
U.S. Anti-Money Laundering Efforts, GAO-08-1058 ......................................................... 5, 12
Intl Business Publications, Andorra: Business Law Handbook 11 (6th ed. 2008) ....................... 7
Llei 20/2007, del 18 doctubre, de societats annimes i de responsabilitat limitada,
published as amended in 19 Butllet Oficial del Principat dAndorra 1062 (Mar. 5, 2014) ..... 7
Martin Gelter, Why do Shareholder Derivative Suits Remain Rare in Continental Europe?,
37 Brook. J. Intl L. 843 ............................................................................................................. 7
Press Release, LAREB informa que ha finalitzat la primera fase del procs de venda
de Vall Banc, S.A.U. (Nov. 11, 2015) ....................................................................................... 4

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INTRODUCTION
As plaintiffs opposition makes clear, their real quarrel with the challenged notice of
finding and proposed rule is not with the process that the Financial Crimes Enforcement Network
(FinCEN) used, but with the fact that the agency began that process at all. Essentially,
plaintiffs contend that by following the statutory mandate that Congress laid out, and by merely
proposing the imposition of the fifth special measure, FinCEN violated not only the
Administrative Procedure Act (APA) but also the Constitution. The agency has done no such
thing. Plaintiffs challenge non-final action, and they set forth no reason for this Court to
abandon the well-established case law in this Circuit limiting challenges to agency action to
those that are final. Moreover, plaintiffs alleged injuries stem not from the agencys proposed
actions, but from the independent actions of a foreign sovereigninjuries that are neither fairly
traceable to the agency nor redressable by this Court. Finally, plaintiffs fail to state a due
process claim. Even if plaintiffs complaint had identified any specific, substantial connections
with the United States entitling them to due process protections, the public rulemaking process
that Congress prescribed has given them notice and opportunity to be heard on the proposed
action. Due process requires no more, and this case should be dismissed in its entirety.
DISCUSSION
I.

Plaintiffs Lack Standing


Plaintiffs do not seriously contest that, under D.C. Circuit precedent, a federal agency

does not inflict an Article III injury when it proposes a regulation. See Defs. Mem. in Supp. of
Mot. to Dism. at 12-14, ECF No. 29-1 (FinCEN Mem.). Their standing argument instead
hinges on the notion that the publication of the Notice of Finding (NOF) and Notice of
Proposed Rulemaking (NPRM) has inflicted downstream injuries. See Pls. Mem. of Law in

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Oppn to Defs. Mot. to Dism. at 22-27, ECF No. 31 (Opp.). But that contention conflates
proposed agency action with legal compulsion on regulated parties, and fails to respect crucial
distinctions between the U.S. and foreign governments. It is insufficient to create standing.
A.

Plaintiffs have not established redressability

Where redressability depends on the unfettered choices made by independent actors not
before the courts and whose . . . discretion the courts cannot presume either to control or to
predict, . . . standing is not precluded, but it is ordinarily substantially more difficult to
establish. Lujan v. Defs. of Wildlife, 504 U.S. 555, 562 (1992) (emphasis added); see also
Renal Physicians Assn v. HHS, 489 F.3d 1267, 1274 (D.C. Cir. 2007) ([S]tanding to challenge
a government policy cannot be founded merely on speculation as to what third parties will do in
response to a favorable ruling.). So it is here.
Plaintiffs claims depend upon the following chain of inferences: FinCENs publication
of the NOF and NPRM prompted U.S. banks to end their business relationships with Banca
Privada dAndorra (BPA). Compl. 2, 43. This led the Institut Nacional Andorr de
Finances (INAF) to place BPA in administration, id. 22, 24, 27, and the Andorran
parliament to enact a law creating a new agency for the restructuring and resolution of banks, id.
27. Finally, the new agency, the Agncia Estatal de Resoluci dEntitats Bancries (AREB)
approved a resolution plan for BPA, which allegedly injured the plaintiffs as shareholders. Id.
27, 45.
Redressability therefore depends upon the actions of two kinds of third parties
U.S. banks, which ended their business relationships with BPA despite being under no legal
requirement to do so, and AREB, an agency of a sovereign foreign governmentwhose
independent choices the Court cannot presume either to control or to predict. Lujan, 504 U.S.

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at 562 (citations omitted). Thus, plaintiffs reliance on the D.C. Circuits decisions in Tozzi v.
HHS, 271 F.3d 301 (D.C. Cir. 2001), and Block v. Meese, 793 F.2d 1303 (D.C. Cir. 1986), is
misplaced.1 Neither case changes the basic rule where redressability depends upon the actions of
third parties: [T]o establish redressability at the pleading stage, we required more than a bald
allegation; we required that the facts alleged be sufficient to demonstrate a substantial likelihood
that the third party directly injuring the plaintiff would cease doing so as a result of the relief the
plaintiff sought. Renal Physicians Assn, 489 F.3d at 1275.2 And neither case demonstrates
that redressability could be satisfied under the circumstances presented here, particularly given
the unknowable future actions of AREB.
Plaintiffs reliance on a March 2015 press release issued by INAF cannot salvage their
redressability argument. Opp. at 22 & n.11 (citing Pls. Mot. Summ. J. Ex. 18). First, that press
release was not issued by AREB, the Andorran agency that is now responsible for the resolution
of BPA; second, it does not establish that, having taken control of BPA and conducted its own
extensive investigation of the banks activities, AREB is even considering abandoning the bridge

In Tozzi, the D.C. Circuit found that a manufacturer had standing to challenge the classification
of dioxin as a carcinogen, because [s]tate and local governments would be less likely to regulate
dioxin, and healthcare companies would in turn be less likely to stop using PVC plastic, if
dioxin were ordered reclassified. 271 F.3d at 310. In Block, the Court of Appeals found that a
film distributor had standing to challenge the classification of certain films as political
propaganda, because the distributor submitted declarations and affidavits detailing specific
instances in which potential customers declined to exhibit a particular film due to the
classification. 793 F.2d at 1308.
2

The other cases cited by plaintiffs are similarly concerned with the behavior of directly
regulated entities or other federal agencies. See Bennett v. Donovan, 703 F.3d 582, 586-88
(D.C. Cir. 2013) (HUD and private entities it heavily regulated); Ams. for Safe Access v.
DEA, 706 F.3d 438, 449 (D.C. Cir. 2013) (VA, as a federal agency, was surely inclined to
subscribe to fellow federal agency DEAs listing of marijuana as a Schedule I substance); Natl
Parks Conservation Assn v. Manson, 414 F.3d 1, 6 (D.C. Cir. 2005) (state authority acted
pursuant to federal agencys impact letter, which was virtually dispositive of the state
permitting decision).
3

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bank it has created and reconstituting BPA in its prior form; and third, it does not establish that
AREB would be likely to take that course of action were the NPRM set aside.
INAFs statement that it wished to conduct its own investigation in order to clarify the
facts motivating FinCENs publication of the NOF and NPRM falls well short of a statement
that AREBs actions are dependent on the actions of FinCEN, or, indeed, a statement that
FinCEN is capable of influencing the course or outcome of the resolution proceedings. AREB is
engaged in its own resolution process of BPA pursuant to Andorran law, has created a bridge
bank for the sale of BPAs good assets, and has eight bidders participating in a process for
acquiring Vall Banc, the new entity created by the resolution process.3 The D.C. Circuit has
recognized that, even assuming arguendo some degree of causation, causation does not
inevitably imply redressability. Renal Physicians Assn, 489 F.3d at 1278. Redressability does
not exist where, as here, the new status quo is held in place by other forces. Id.; see also
Arpaio v. Obama, 797 F.3d 11, 19 (D.C. Cir. 2015) (we may reject as overly speculative those
links which are predictions of future events (especially future actions to be taken by third
parties)). Further, the bare allegation that the Andorran government has adopted a policy to
cooperate with FinCEN, Compl. 27, which pleads no specific facts regarding the scope or
scale of cooperation, does not establish that FinCEN controls the outcome or direction of the
resolution proceedings, or has control over Andorras own criminal investigation of money
laundering at BPA.
Nor can plaintiffs establish that, even if AREB were to decide to abandon its resolution of
BPA and reconstitute the bank in its prior form, U.S. financial institutions would choose to re3

Press Release, AREB, LAREB informa que ha finalitzat la primera fase del procs de venda de
Vall Banc, S.A.U. (Nov. 11, 2015) (AREB wishes to communicate the finalization of the first
phase of the sale process of Vall Banc.), available at http://areb.ad/images/areb/comunicats/
11112015_AREB_ENG.pdf.
4

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open the banks correspondent accounts. In arguing otherwise, plaintiffs cite a supposedly
astonishing statement found on page 11 of FinCENs opening brief. Opp. at 26. But this is
just misplaced indignation. FinCENs brief was simply noting that, while the APA provides the
courts with the authority to set aside agency action found to be arbitrary and capricious, see 5
U.S.C. 706(2), relief obtained in this action will not grant BPA permanent immunity from the
imposition of a special measure. [T]he usual rule is that, with or without vacatur, an agency
that cures a problem identified by a court is free to reinstate the original result on remand.
Heartland Regl Med. Ctr. v. Leavitt, 415 F.3d 24, 29-30 (D.C. Cir. 2005). Thus, plaintiffs can
only speculate that U.S. financial institutions, the other category of third parties upon whom
redressability depends, would re-open their correspondent accounts with BPA if this matter were
remanded to FinCEN, given that U.S. financial institutions were and are under no present legal
obligation to terminate any correspondent accounts with BPA as a result of the NOF and NPRM,
and yet, chose to terminate their relationships with BPA despite the lack of binding legal action.
See FinCEN Mem. at 10-11.
Courts can presume that companies will act in their pecuniary interests, Abigail All. for
Better Access to Developmental Drugs v. Eschenbach, 469 F.3d 129, 135 (D.C. Cir. 2006), and
take advantage of future business opportunities, but the Court need not blind itself to how those
companies have actually behaved in the past, or to the existence of other disincentives to action.
Indeed, one domestic financial institution terminated its relationship with BPA prior to the
publication of the NOF and NPRM based on its own review of alleged money laundering
activity. See Notice of Finding, 80 Fed. Reg. 13,464, 13,465 (Mar. 13, 2015). Further, U.S.
financial institutions have ample incentives to maintain robust anti-money laundering controls
based on their own review of activity in that account, or indeed based on law enforcement

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activity by foreign governments. Indeed, the GAO Report on which plaintiffs place such heavy
reliance noted this same point. See Government Accountability Office, USA PATRIOT Act:
Better Interagency Coordination and Implementing Guidance for Section 311 Could Improve
U.S. Anti-Money Laundering Efforts, GAO-08-1058, at 22 (GAO Report) (Moreover, U.S.
financial institutions must take publicly available information into account when implementing
their anti-money laundering programs and assessing risks). Even if plaintiffs were to obtain
relief from this Court on the merits, that decision would address only one specific proposed
imposition of a special measure under section 5318A. But law enforcement authorities in
Andorra are conducting their own criminal investigation of individuals affiliated with BPA.
FinCEN Mem. at 5. FinCENs NOF and NPRM are thus not the only reason why U.S. financial
institutions would be wary of transacting business with BPA, even assuming that AREB
abandoned the liquidation proceeding. In light of this, plaintiffs simply cannot establish that it is
likely, as opposed to merely speculative, that a favorable order from this Court would redress
the third-party injuries that motivated their complaint. Friends of the Earth, Inc. v. Laidlaw
Envtl. Servs. (TOC), Inc., 528 U.S. 167, 187 (2000).
B.

Plaintiffs do not have standing to challenge FinCENs proposed rule on


behalf of BPA

Plaintiffs also fail to establish standing to challenge the proposed rule on BPAs behalf.
They do not dispute that a claim of harm to a corporation belongs to the corporation itself, which
is a distinct legal entity, and thus that a shareholder ordinarily lacks prudential standing to raise
it. See FinCEN Mem. at 16-17 (citing Franchise Tax Bd. of Cal. v. Alcan Aluminum Ltd., 493
U.S. 331, 336 (1990)). Nor do they dispute that whether a shareholder may bring a derivative
suit on behalf of a corporation depends on the law in the place of incorporation (here, Andorra).
Id. at 14-15 (citing, inter alia, City of Harper Woods Emps. Ret. Sys. v. Olver, 589 F.3d 1292,

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1299 (D.C. Cir. 2009)). And they do not dispute that it is plaintiffs [who] bear the burden of
establishing standing to bring a derivative suit. Id. at 14-15 (quoting Harper Woods, 589 F.3d
at 1299). Nevertheless, they point to no Andorran law or case recognizing the existence of a
shareholder derivative action. That failure dooms their derivative claims.
Plaintiffs instead invite the Court to invent a derivative action under Andorran law,
noting that such actions exist in France and Spain. Opp. at 30-31. But in both of those countries,
derivative actions are specifically authorized by statutein Frances 1867 Loi sur les Socits
and in Spains 1989 Ley de Sociedades Annimas. Martin Gelter, Why do Shareholder
Derivative Suits Remain Rare in Continental Europe?, 37 Brook. J. Intl L. 843, 854-55 & nn.46,
50 (2012) (cited in Opp. at 30-31). Yet plaintiffs do not claim that Andorras own corporate
statute, the 2007 Llei de Societats Annimes i de Responsabilitat Limitadawhich was enacted
well after the statutes adopted in France and Spainauthorizes derivative claims.4 Thus, even if
plaintiffs were correct that Andorran courts sometimes look to French and Spanish law to fill
gaps in [their] jurisprudencean utterly unsupported assertion5this sequence suggests a
deliberate choice by the Andorran parliament, not a gap in need of filling. Regardless, even in
European countries where derivative suits are permitted, those actions are limited in scope as
compared to the United States. Gelter, supra, at 875. Indeed, in France and Spain, derivative

See Llei 20/2007, del 18 doctubre, de societats annimes i de responsabilitat limitada,


published in 19 Butllet Oficial del Principat dAndorra 1062 (Mar. 5, 2014), available at
http://www.apttcb.cat/files/documentacion/7201_0_BOPA-DecretSLiSA5-3-14.pdf.
5

This assertion is absent from the declaration that plaintiffs submit, and is not supported by the
business law handbook that plaintiffs cite, which states only: Legal system: based on French
and Spanish civil codes; no judicial review of legislative acts; has not accepted compulsory ICJ
jurisdiction. Intl Business Publications, Andorra: Business Law Handbook 11 (6th ed. 2008)
(cited in Opp. at 30 n.19), available at https://books.google.com/books?id=vDylDllW1L8C&q
=french#v=snippet&q=french&f=false.
7

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suits are only available for claims to damages . . . and are not available for injunctions, id. at
876the only form of relief that plaintiffs seek here.6
Plaintiffs declaration cannot rescue their derivative claims. As relevant here, it states
only that:
There is no law in the Principality of Andorra that forbids a shareholder from filing a
legal action in defense of their interests, against the damages that may be caused to a
company of which they are a shareholder.
Opp. Ex. 1 4. Even if it were clear that the declarant were addressing derivative actionsa
word he does not usethis declaration would fall well short of the mark. First, to say that no
law forbids the filing of a claim is not to say that the law authorizes such a claim, as
plaintiffs must to meet their burden. Cf. Gelter, supra, at 876 (In all of the countries surveyed
here, the legal basis for derivative suits is, in all cases, found in a section of the respective
corporate law governing directors liability.). Second, the declarant speaks of a potential action
only for damages, not for the sort of injunctive relief that plaintiffs seek here. Regardless, that
the declarant is unable to cite any Andorran law or case recognizing a shareholder derivative
actiondespite his 33 years of experience as an attorney in Andorra, Opp. Ex. 1 1is
convincing evidence that such actions do not exist there.
Because plaintiffs fail to show that a shareholder derivative action exists under Andorran
law at all, the Court need not address the separate, threshold questions concerning whether
plaintiffs have satisfied any prerequisites for bringing such a claim, such as (1) whether they
were required to demand that BPAs administrator bring suit against Defendants before doing so
themselves; and (2) whether any such demand requirement should be excused as futile. Should

These are not the only limitations on foreign derivative suits left unexplored in plaintiffs brief.
For example, in France, a shareholder must also demonstrate a management mistake as a
prerequisite to suit. Gelter, supra, at 871.
8

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the Court nevertheless decide to reach these issues, it should find as a matter of equity that
demand was required and cannot be excused here. Indeed, a contrary ruling would permit
plaintiffs to not only create a derivative action under Andorran law, but also to give that action
more generous contours than are generally available even in the United States, let alone
elsewhere in Europe. Cf. Gelter, supra, at 875.
In the United States, courts of equity established demand requirements to prevent abuse
of the shareholder derivative suit and to protect the directors prerogative to take over the
litigation or to oppose it. Kamen v. Kemper Fin. Servs., 500 U.S. 90, 95-96, 101 (1991). In
most jurisdictions, the boards decision to do the . . . latter is subject only to the deferential
business judgment rule standard of review. Id. at 101 (citations omitted). Federal Rule of
Civil Procedure 23.1 facilitates this review, requiring a plaintiff to state with particularity . . .
any effort . . . to obtain the desired action from the directors or other authority and the reasons
for not obtaining the action or not making the effort. Fed. R. Civ. P. 23.1(b). Here, requiring
demand is consistent with these principles, particularly since any decision not to expend
corporate funds challenging a proposed rule with no legal effect would easily satisfy the business
judgment rule. See Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Raines, 534 F.3d
779, 791 (D.C. Cir. 2008) (under Delaware law, the business judgment rule protects decisions
unless no reasonable business person would have made the decision).
Plaintiffs make no attempt to establish that demand may be excused as futile under
Andorran law, which controls the relationship between a corporation and its shareholders. See
Kamen, 500 U.S. at 101-02. And the few futility cases they do citewhich deal with gardenvariety administrative exhaustion, not corporate demandsare inapposite. See Opp. at 32
(citing, inter alia, McCarthy v. Madigan, 503 U.S. 140, 148 (1992)). As Defendants have

Case 1:15-cv-01641-JEB Document 32 Filed 02/18/16 Page 17 of 33

explained, demand futility is not established simply by alleging that the Administrator would be
unlikely to file suit if asked; rather, plaintiffs must point to some personal financial benefit for
the Administrator, or some material detriment experienced by the Administrator but not other
stockholders. FinCEN Mem. at 18 (citing In re Fed. Nat. Mortgage Assn Sec., Derivative &
ERISA Litig., 503 F. Supp. 2d 9, 17 (D.D.C. 2007) (citations omitted)). To that, plaintiffs
have no answer. Their derivative claims should be dismissed for lack of standing.7
C.

Plaintiffs claims should also be dismissed on ripeness grounds

Finally, plaintiffs challenge to a non-final agency action should be dismissed as unripe.


While plaintiffs insist that the issues presented in this case are purely legal, Opp. at 17, and
thus that there is no need to wait for final agency action before commencing review, in the case
that they cite in support of this argument, International Union, United Automobile, Aerospace &
Agricultural Implement Workers of America v. Brock, 783 F.2d 237 (D.C. Cir. 1986), the D.C.
Circuit determined that review was appropriate only after concluding that the challenged
interpretation qualifies as sufficiently final. Id. at 250. Even assuming that the issues in a
case are purely legal, which is generally not true when a plaintiff challenges agency
decisionmaking as arbitrary and capricious, [w]here finality is an independent jurisdictional
requirement (as here), it must be met. Even if only purely legal issues remained . . . that would
not obviate the need for finality itself. Pub. Citizen v. Office of U.S. Trade Representative, 970
F.2d 916, 921 (D.C. Cir. 1992). Accordingly, in cases challenging agency action, the D.C.

Because plaintiffs do not attempt to invoke a conflict of interest exception to the demand
requirement, the Court need not address it. In any event, plaintiffs misunderstand the relevance
of Perry Capital v. Lew, 70 F. Supp. 3d 208 (D.D.C. 2014). Perry illustrates the principle that,
when the control of a corporation is vested in a receiver, a shareholder cannot circumvent a
demand requirement simply by claiming that the receiver has a conflict of interest. Id. at 23133; see also Gail C. Sweeney Estate Marital Trust v. U.S. Treasury Dept, 68 F. Supp. 3d 116,
125 & n.11 (D.D.C. 2014).
10

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Circuit has consistently held that final agency action pursuant to the Administrative Procedure
Act is a crucial prerequisite to ripeness. Nevada v. Dept of Energy, 457 F.3d 78, 85 (D.C. Cir.
2006) (alterations and citations omitted); see also Better Govt Assn v. Dept of State, 780 F.2d
86, 88 (D.C. Cir. 1986) (same). The Court should not chart a different course here.
II.

The APA Does Not Permit Plaintiffs Challenge to Non-Final Agency Action
The APA limits judicial review to [a]gency action made reviewable by statute and final

agency action for which there is no other adequate remedy in a court. 5 U.S.C. 704. No
statute provides for review of FinCENs publication of an NOF and NPRM, and neither qualifies
as final agency action. See FinCEN Mem. at 20-26. Final agency action must mark the
consummation of the agencys decisionmaking process, and must be one by which rights or
obligations have been determined, or from which legal consequences will flow. Bennett v.
Spear, 520 U.S. 154, 1770-78 (1997) (citation omitted). A proposed rule is, by definition,
tentative and has no legal effect, and a notice of finding is not the consummation of any
agency decisionmaking process, and it creates no rights, fixes no obligations, and has no legal
force.
Plaintiffs appear to suggest that the Court discard the finality requirements announced in
Bennett and adopt a flexible approach based on the consequences of the challenged agency
action. Opp. at 15-21.8 The flaw in this argument, as the Court of Appeals has squarely held,
is that the consequences to which they allude are practical, not legal. Ctr. for Auto Safety v.
Natl Highway Traffic Safety Admin., 452 F.3d 798, 811 (D.C. Cir. 2006). Plaintiffs construct

To the extent that plaintiffs believe an end-run around Bennett can be justified by relying on the
flexible and pragmatic approach to finality, as endorsed in decisions such as Ciba-Geigy Corp.
v. EPA, 801 F.2d 430 (D.C. Cir. 1986), Ctr. for Auto Safety, 452 F.3d at 811, it bears noting
that the D.C. Circuit has held that circuit decisions such as Ciba-Geigy cannot obviate the
holding of Bennett. Id.
11

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their argument upon financial institutions voluntary compliance with proposed rules announced
by FinCEN, repeatedly citing a Government Accountability Office report published eight years
ago, which noted that domestic financial institutions often take action on their own with respect
to suspected money laundering institutions after FinCEN announces proposed special measures.
See Opp. at 4, 5, 6, 20 (citing GAO Report). But that report noted that when an NPRM is
published, banks implement it voluntarily, GAO Report at 21 (emphasis added), and never
claimed that an NPRM was binding.
Voluntary compliance with a proposed rule does not convert it to final agency action.
Final agency action must determine rights or obligations, or fix legal consequences.
Bennett, 520 U.S. at 177-78 (emphasis added). D.C. Circuit precedent interpreting Bennett has
rejected the argument that voluntary compliance with a non-binding proposal can constitute de
facto final agency action. See Ctr. for Auto Safety, 452 F.3d at 811 (It may be that, to the
extent that they actually prescribe anything, the agencys guidelines have been voluntarily
followed by automakers and have become a de facto industry standard for how to conduct
regional recalls. But this does not demonstrate that the guidelines have had legal
consequences.); Natl Assn of Home Builders v. Norton, 415 F.3d 8, 15 (D.C. Cir. 2005) ([I]f
the practical effect of the agency action is not a certain change in the legal obligations of a party,
the action is non-final for the purpose of judicial review.); Reliable Automatic Sprinkler Co. v.
Consumer Prod. Safety Commn, 324 F.3d 726, 732 (D.C. Cir. 2003) (No legal consequences
flow from the agencys conduct to date, for there has been no order compelling Reliable to do
anything. . . . [T]he request for voluntary compliance clearly has no legally binding effect.).
Neither the NPRM nor the NOF imposes legal consequences or fixes rights and
obligations. As the D.C. Circuit held just last year, [p]roposed rules meet neither of the two

12

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requirements for final agency action: (i) They are not the consummation of the agencys
decisionmaking process, and (ii) they do not determine rights or obligations, or impose legal
consequences. In re Murray Energy Corp., 788 F.3d 330, 334 (D.C. Cir. 2015) (quoting
Bennett, 520 U.S. at 177-78); see also Action on Smoking and Health v. Dept of Labor, 28 F.3d
162, 165 (D.C. Cir. 1994) (Agency action is final when it imposes an obligation, denies a right,
or fixes some legal relationship, and an agencys proposed rulemaking generates no such
consequences.) (citation omitted). The NOF, similarly, imposes no legal consequences and
fixes no rights or obligations. See FinCEN Mem. at 22. Under section 5318A, the sole
consequence of the publication of a NOF is that FinCEN may require domestic financial
institutions and domestic financial agencies to take 1 or more of the special measures. 31
U.S.C. 5318A(a)(1) (emphasis added). Special measures, however, cannot be imposed without
further procedural requirements, and the fifth special measurewhich was proposed in the
NPRM at issue heremay be imposed only by following the informal rulemaking process. Id.
5318A(a)(2).
Plaintiffs brush past the test for finality by claiming that the NOF marks the
consummation of FinCENs decisionmaking process and announced a finding which would not
be revisited. Opp. at 17. That assertion is incorrect. An NOF may be updated or amended
during a rulemaking proceeding based on comments from interested parties. See, e.g.,
Imposition of Special Measure Against FBME Bank Ltd., 80 Fed. Reg. 45,057, 45,059 (July 29,
2015) (FinCEN believes that it is appropriate . . . to amend the NOF based on these
comments.). Additionally, an NOF is not the consummation of a decisionmaking process
because it merely begins the process of determining whether a special measure should be
imposed. See 31 U.S.C. 5318A(a)(1). Even setting aside that fault, plaintiffs address only half

13

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of the relevant test. Statements or findings made in support of a proposed special measure are
not themselves final agency action because they lack legal effect, even if the agency will not
reconsider the statement itself. Cf. In re Murray Energy Corp., 788 F.3d at 336 (Moreover,
even if EPAs position on its legal authority is set in stone, the agencys statements about its
legal authorityunconnected to any final rule or other final agency actiondo not impose any
legal obligations or prohibitions on petitioners. Any such legal obligations or prohibitions will
be established, and any legal consequences for violating those obligations or prohibitions will be
imposed, only after EPA finalizes a rule.).
Further, plaintiffs argument that an NOF is final agency action confuses the legal
standard for issuing such a notice. Section 5318A calls for the publication of an NOF if
reasonable grounds exist for concluding that . . . 1 or more financial institutions operating
outside of the United States . . . is of primary money laundering concern. 31 U.S.C.
5318A(a)(1). A notice of findingissued based on reasonable groundsdoes not require or
imply that a final rule imposing a special measure will follow.9 It is thus analogous to the filing
of a complaint or the commencement of an enforcement proceedinga classically non-final
agency action. See FTC v. Standard Oil Co., 449 U.S. 232, 242 (1980) (burden imposed on
plaintiff by the initiation of enforcement proceedings not sufficient to establish final agency
action, despite being substantial, because it is different in kind and legal effect from the
burdens . . . considered to be final agency action).
Finally, plaintiffs characterization of FinCEN as a savvy dodger of review, Opp. at 21,
is no substitute for a valid legal basis for seeking review of the NOF and NPRM. FinCEN is
9

Indeed, in other contexts, a showing based on reasonable grounds must be grounded in more
than mere suspicion, but need not rise to the level of prima facie proof. United States v. 8848 S.
Commercial St., Chi., Ill., 757 F. Supp. 871, 879 (N.D. Ill. 1990) (construing a civil forfeiture
statute, 21 U.S.C. 881).
14

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following the process set forth in section 5318A, which requires the agency to use rulemaking
procedures when imposing the fifth special measure. See 31 U.S.C. 5318A(a)(2)(C). And the
APA has never entitled a plaintiff to review of every alleged injury from administrative action,
particularly where the alleged injury is a downstream consequence imposed by third parties
rather than the agency. Plaintiffs relegate their discussion of Murray Energy to a footnote,
shrugging off the D.C. Circuits most recent precedent on this issue by stating that they are not
seeking to recover or avoid their costs in preparing for a final rule. Opp. at 21 & n.8.
Obviously, plaintiffs are not complaining of precisely the same injury as the petitioners in
Murray Energy, but that hardly suffices to distinguish the case. In Murray Energy, as here, the
petitioners complained that the Court will not be able to fully remedy [their] injury if we do not
hear the case at this time. In re Murray Energy Corp., 788 F.3d at 335. But even if proposed
rules have immediate practical consequences, that reality has never been a justification for
allowing courts to review proposed agency rules. Id. As in Murray Energy, the plaintiffs APA
claims seeking review of non-final agency action should be dismissed. Further, plaintiffs are
incorrect in claiming that special measures imposed under section 5318A are otherwise
unreviewable; last summers decision in FBME Bank Ltd. v. Lew, No. 15-1270, 2015 U.S. Dist.
LEXIS 113687 (D.D.C. Aug. 27, 2015), demonstrates that judicial review can take place in the
context of a final rule, as the APA requires.
III.

Plaintiffs Fail to State a Due Process Claim


Plaintiffs opposition brief does not salvage their due process claim. Plaintiffs have not

suffered a cognizable deprivation as the result of government action. Even if they had, their
tenuous connections to the United States do not entitle them to due process protections. And, in
any event, plaintiffs have been afforded ample process through FinCENs statutorily prescribed

15

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rulemaking proceedings. For each of these independent reasons, plaintiffs fail to state a due
process claim.
A. Plaintiffs cannot establish a deprivation by the government
Plaintiffs are unable to overcome the core defect of their due process claimthat there
has been no government action causing a deprivation. Even if BPAs alleged deprivations could
be imputed to plaintiffs, there is no sufficiently close nexus between the State and the
challenged action. Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 52 (1999) (citation
omitted). Despite attempting to conflate the independent actions of U.S. banks and the Andorran
government with those of FinCEN, plaintiffs cannot establish that such actions were the result of
coercive power or . . . such significant encouragement, either overt or covert by the U.S.
government, that the choice must in law be deemed to be that of the State. Id. (citation
omitted).
Plaintiffs assertion that the NPRM and the NOF alone coerced domestic banks and the
Andorran government to act is implausible on its face. Neither the NOF nor the NPRM required
or provided an incentive for any specific action by a third party. Indeed, the only action
suggested by the NPRM as to domestic actors was an invitation to submit comments on the
proposed rule, making clear that imposition of the fifth special measure was a proposal for the
future, not a current requirement.10 See Imposition of Special Measure Against Banca Privada
dAndorra as a Financial Institution of Primary Money Laundering Concern, 80 Fed. Reg.
13,304, 13,307 (Mar. 13, 2015). The NOF itself does not suggest that third parties take any
10

Contrary to plaintiffs assertions, the NPRM did not advise[] U.S. banks to take any action
with regard to plaintiffs correspondent accounts. Opp. at 38 (citing Compl. 1). Rather, the
cited encourage[ment] was directed only to other countries. 80 Fed. Reg. at 13,305. The
Court need not credit plaintiffs mischaracterization of the NPRM in its allegations at the motion
to dismiss stage. See Kaempe v. Myers, 367 F.3d 958, 965 (D.C. Cir. 2004) (public records are
subject to judicial notice on a motion to dismiss).
16

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particular action. Decisions made by domestic banks, while perhaps consistent with the findings
in the NOF and recommendation in the NPRM, cannot therefore be treated as the result of
coercion or instigation. See Vill. of Bensenville v. FAA, 457 F.3d 52, 64 (D.C. Cir. 2006)
(Mere approval of or acquiescence in the initiatives of a private party is not sufficient to justify
holding the State responsible for those initiatives.) (quoting Blum v. Yaretsky, 457 U.S. 991,
1004 (1982)).11
That FinCEN encourage[d] other countries to take similar action in the NPRM, 80 Fed.
Reg. at 13,305, is insufficient to establish that the agency coerced the Andorran government to
initiate the resolution of BPA. This invitation, standing alone, is not the type of significant
encouragement necessary to treat a typical third-party actor as an arm of the United States. Am.
Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. at 52. Yet even if it were, a sovereign country is no
typical third-party actor, a distinction plaintiffs ignore. To inquire into whether the Andorran
government was essentially acting as a puppet of the United States would be contrary to the act
of state doctrine, as defendants pointed out in their opening brief. Nor have plaintiffs identified
any case where a foreign countrys actions were imputed to the United States for the purpose of
state-actor analysis. If it were even possible to make such an attribution, the level of coercion
must rise far above the limited encourage[ment] alleged here.12
Plaintiffs also argue that the NOF directly caused a reputational harm and thereby injured
their liberty interest in engaging in business. This argument fails because plaintiffs cannot meet

11

Even if the domestic banks actions could be imputed to the U.S. government, plaintiffs have
not articulated why they have a protectable property interest in having access to the U.S.
financial system. See Opp. at 31.
12

As set forth in more detail above, both U.S. banks and the Andorran government have their
own independent reasons for acting to deter and detect money-laundering activity. See supra at
5.
17

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the requirements for such a deprivation under D.C. Circuit case law and, even if they could, the
argument is premature. A procedural due process claim cannot hinge on a reputational injury
whose only practical consequences are inflicted by third parties. In General Electric v. Jackson,
610 F.3d 110 (D.C. Cir. 2010), the Court of Appeals held that a plaintiffs claim that a particular
government action harms the [plaintiffs] reputation, and the market, in turn, devalues its stock,
brand, and credit rating, and thus constituted a due process violation, was foreclosed by
Supreme Court precedent. Id. at 121 (citing Paul v. Davis, 424 U.S. 693 (1976)); see also
Siegert v. Gilley, 500 U.S. 226, 234 (1991) ([S]o long as . . . damage flows from injury caused
by the defendant to a plaintiffs reputation, plaintiff has not stated a constitutional injury). To
state a reputational due process claim under Paul, the plaintiff must establish two things: First,
the government must be the source of the defamatory allegations. Second, the resulting stigma
must involve some tangible change of status vis-a-vis the government. Doe v. U.S. Dept of
Justice, 753 F.2d 1092, 1108-09 (D.C. Cir. 1985). While the D.C. Circuit has recognized that a
procedural due process claim may lie where a government action broadly precludes plaintiffs
from pursuing a chosen trade or business, General Electric, 610 F.3d at 121 (citation omitted),
that line of authority is limited to cases involving lost government employment or government
contracting opportunities, see Mosrie v. Barry, 718 F.2d 1151, 1161 (D.C. Cir. 1983) (The
harms suffered by appellant in this case do not meet the Paul v. Davis requirement of loss of a
government position or change in legal status.) (emphasis added); Trifax Corp. v. District of
Columbia, 314 F.3d 641, 643 (D.C. Cir. 2003) (Trifax claims to have suffered broad
preclusion from government contracting); Old Dominion Dairy Products, Inc. v. Secy of Def.,
631 F.2d 953, 963 (D.C. Cir. 1980) (plaintiff lost two substantial contracts which it otherwise
would have received. This sudden loss of Government work effectively put Old Dominion out

18

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of business.). The D.C. Circuit has never held that a plaintiff can proceed under the broad
preclusion portion of its stigma-plus test based entirely on the consequential effects of thirdparty actioni.e., without showing a tangible change of status vis-a-vis the government. Doe,
753 F.2d at 1109. Such a holding would be in direct conflict with both General Electric and Paul
v. Davis. See Paul, 424 U.S. at 706 (But the Court has never held that the mere defamation of
an individual . . . was sufficient to invoke the guarantees of procedural due process absent an
accompanying loss of government employment.).
Moreover, as with plaintiffs claims generally, their reputational harm argument is
premature. Plaintiffs have sued while the government is in the midst of an ongoing process, the
result of which may end in a final rule or otherwise, and the reputational harms are alleged to
result from a notice of finding that is subject to being withdrawn or revised during the
rulemaking process. Even if the argument were not premature, at most the NOF affected BPAs
reputation, and thereby its relationships, with the four U.S. banks with whom it had
correspondent banking relationships. See Compl. 39.13 The actions by the U.S. banks do not
cut off BPAs international business. Indeed, plaintiffs claim that portions of BPAs business
operations are still viable. Id. 46. Plaintiffs therefore cannot establish that the NOF had the
effect of largely precluding BPA from pursuing banking as a business. General Electric, 610
F.3d at 121.
B. Plaintiffs still lack a sufficiently pled constitutional presence
Plaintiffs attempt to establish the substantial connections to the United States
necessary to invoke constitutional due process protections via (1) their own alleged real property

13

The complaint does not allege whether BPA was also unable to establish new correspondent
banking relationships with other U.S. banks. U.S. banks remain free to establish correspondent
accounts with BPA. Nothing in the proposed rule precludes them from doing so.
19

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interests; and (2) BPAs correspondent banking relationship and compliance with U.S. regulatory
requirements in maintaining its correspondent accounts. United States v. Verdugo-Urquidez,
494 U.S. 259, 270 (1990). Neither is sufficient.
As to plaintiffs own real property interests, as defendants pointed out in their opening
brief, the complaint does not plead sufficient details regarding plaintiffs significant real
property assets to permit them to claim the protection of the Due Process Clause. Compl. 41.
While plaintiffs need not catalogue every domestic property interest, their allegations should
make clear whether the identified property is related to the complained of deprivation, because as
discussed below, it is unlikely that owning unrelated property would entitle the owner to due
process protections in all respects. Plaintiffs have identified no case where such a vague
allegation was sufficient to establish substantial connections with the United States for the
purpose of due process analysis.14 Although plaintiffs now identify beneficial real property
holdings in Florida, see Opp. at 34 n.20, this information is not properly before the Court. [I]t
is axiomatic that a plaintiff may not amend the complaint through facts first alleged in an
opposition brief. Briscoe v. Costco Wholesale Corp., 61 F. Supp. 3d 78, 90 (D.D.C. 2014)
(citing Sloan v. Urban Title Servs., Inc., 689 F. Supp. 2d 94, 114 (D.D.C. 2010)).
14

Plaintiffs overstate the holding from 32 County Sovereignty Committee, in which the court
declined to find any entitlement to due process because those plaintiffs had failed to demonstrate
that they possessed any controlling interest in property in the United States. 32 Cty. Sovereignty
Comm. v. Dep't of State, 292 F.3d 797, 799 (D.C. Cir. 2002). The court did not opine on what
type of property would be sufficient to confer due process rights nor did it discuss what would
comprise sufficient allegations as to that property. Similarly, the alleged property at issue in
National Council of Resistance of Iran, an unidentified United States bank account, itself would
have been blocked had the plaintiffs been designed as foreign terrorist organizations and
thereby was sufficient to support the plaintiffs due process claim. Natl Council of Resistance
of Iran, 251 F.3d at 204. The case does not stand for the proposition that any colorable
allegation of United States property would be sufficient to support a due process claim as to
unrelated property. See also id. at 202 (we are not undertaking to determine, as a general
matter, how substantial an aliens connections with this country must be to merit the
protections of the Due Process Clause).
20

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Even if the Court were to credit these additional facts, the Florida real estate is not a
sufficient substantial connection to give them due process rights with regard to the completely
unrelated alleged deprivations to BPAs U.S. operations. Plaintiffs do not attempt to explain
why this unrelated property interest would meet the functional approach required. See
Boumediene v. Bush, 552 U.S. 723, 764 (2008). And plaintiffs view would lead to absurd
results, as foreign nationals could obtain expansive constitutional protections simply by
procuring an unrelated asset in the United States. Even the cases on which they rely make clear
that the Florida real estate does not entitle plaintiffs to due process rights writ large. See Natl
Council of Resistance of Iran v. Dept of State, 251 F.3d 192, 204 (D.C. Cir. 2001) (a foreign
organization that acquires or holds property in this country may invoke the protections of the
Constitution when that property is placed in jeopardy by government intervention) (emphasis
added). They have identified no case reaching the expansive conclusion they seek.15
Plaintiffs also claim the right to seek constitutional protections via the nominal party,
BPA. As set forth above, however, plaintiffs lack standing to raise claims on BPAs behalf.
Even if BPAs operations could be imputed to plaintiffs, they do not establish the substantial
connection necessary to entitle plaintiffs to constitutional protections. There are no allegations
that BPA has a physical presence in the United States, such as a branch or office. With respect
to BPAs correspondent accounts, ownership of the funds in those accounts cannot automatically
be attributed to BPA, given that the funds in such accounts are generally presumed to belong to

15

Plaintiffs reliance on Kadi v. Geithner is misplaced. The court in Kadi stated that [t]he D.C.
Circuit has not explicitly addressed what criteria this Court should apply in considering whether
a foreign national residing outside the United States can satisfy the substantial connection test
to raise rights under the U.S. Constitution related to the blocking or freezing of his assets and
ultimately declined to determine whether the plaintiff had met the substantial connection test
because the matter could be resolved on other grounds. Kadi v. Geithner, 42 F. Supp. 3d 1, 2528 (D.D.C. 2012).
21

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the depositor. United States v. Union Bank For Sav. & Inv. (Jordan), 487 F.3d 8, 17 (1st Cir.
2007) ([A]bsent an exception, section 981(k)(4)(B)(i)(I) places ownership in the hands of the
owner . . . of the funds that were deposited into [the foreign bank] at the time such funds were
deposited.). Plaintiffs assert that business transactions and compliance with U.S. regulatory
requirements establish BPAs presence, but that argument is contrary to the law of this Circuit,
which requires actual presence or property. See 32 County Sovereignty Comm. v. Dept of
State, 292 F.3d 797, 799 (D.C. Cir. 2002) ([a] foreign entity without property or presence in this
country has no constitutional rights).16 Notably, the FBME court recently declined to determine
whether a plaintiff bank in a similar position as BPA was entitled to due process because the
record was unclear whether it had sufficient presence or property in the United States to
establish that foreign banks entitlement to constitutional protections. FBME Bank Ltd., 2015
U.S. Dist. LEXIS 113687, at *16.
Finally, plaintiffs citation to legislative history borders on the absurd. The quoted
section describes Congresss view of how a court should treat a moving party where classified
information has been submitted as part of this regulatory scheme. H.R. Conf. Rep. 108-381, at
55. It refers only to potential due process issues related to any classified information should
FinCEN issue a final rule which is then challenged, and the report is not relevant in this matter,
where plaintiffs are challenging a proposed rule (and also lack standing to do so). The cited
report cannot reasonably be read to afford any new due process protections to parties who would
not otherwise be entitled to them. Indeed, to the extent that plaintiffs are relying on this passage
to assert that Congress considered the due process implications of this statutory scheme, in that
16

Indeed, its actions in complying with regulatory requirements were minimalthe submission
of names and addresses of BPAs owners to its correspondent banks and the identity of an agent
in the United States designated to receive process. Compl. 40. There was no significant
engagement with U.S. regulatory requirements.
22

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case their argument must be interpreted to mean that Congress concluded that the NOF, NPRM,
and subsequent rulemaking process afforded interested parties sufficient process, and their claim
should fail.
C.

Plaintiffs are receiving more than adequate process

Even if plaintiffs are entitled to due process protections, and even if they could identify a
cognizable government deprivation, the rulemaking proceeding authorized by Congress provides
more than adequate process. Rather than permit this proceeding to run its course, plaintiffs now
prematurely seek additional protections. Their argument rests largely on the misapprehension
that they have already been subject to a deprivation without a prior opportunity to be heard. On
the contrary, as defendants have set forth, the NOF and the NPRM are initial steps in a process
designed to provide notice and an opportunity to be heard prior to the promulgation of a final
rule. Neither, in and of themselves, create a deprivation by the government.
Plaintiffs insist that they are constitutionally entitled to notice, or even a rulemaking, in
advance of an NPRM. See Opp. at 42 (stating that the NPRM was not subject to a rulemaking
procedure). Yet in making this argument they do not attempt to distinguish the long-standing
rule that due process imposes no constraints on informal rulemaking beyond those imposed by
statute. Natl Coal Against the Misuse of Pesticides v. Thomas, 809 F.2d 875, 881 n.4 (D.C.
Cir. 1987); see also Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense
Council, 435 U.S. 519 (1978); FinCEN Mem. at 33 (collecting cases). Nor have they identified a
case where individual notice in advance of an NPRM was constitutionally required.
In their opening brief, defendants explained that the process afforded plaintiffs, including
the amount of notice provided by the NOF and opportunity to comment, exceeds that found
sufficient in similar contexts, including Treasury Department designations of individuals and

23

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organizations deemed to present threats to national security under IEEPA and AEDPA. As
noted, plaintiffs response mistakenly treats the issuance of the NOF and NPRM as causing the
deprivation, but when properly viewed as the initial events in a notice and comment process,
plaintiffs cannot seriously argue that the process available to them compares unfavorably to
either IEEPA or FTO designations. Cf. FBME Bank Ltd., 2015 U.S. Dist. LEXIS 113687, at
*28 (it is almost certainly true that FBME received substantially more process than any
organization that is designated an FTO under AEDPA).17 Plaintiffs claims that the current
process is insufficient are thus unavailing.
To the extent that plaintiffs argument concerns their lack of access to the non-classified
record on which the NOF and NPRM were based, it is premature. There has been no final
agency action, and thus the administrative record is not yet required. See FinCEN Mem. at 33
n.16. Plaintiffs rely on the recent decision in FBME to assert that they were entitled to the
unclassified administrative record before the NPRM comment period expired. Yet a careful
reading of the FBME decision makes clear that such a conclusion would be premature in this
matter. First, in FBME, the court was reviewing a final rule, with its accompanying
deprivations, which is not the case here. Moreover, the FBME court carefully reviewed the
unclassified documents upon which FinCEN relied and identified particular relevant factual
information omitted from the NOF. Id. at *22-24. This analysis informed its decision that the

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Plaintiffs argue that the national security concerns that underlie SDGT designations under
IEEPA are not present here. Yet the statutory scheme that sets forth the process that plaintiffs
have been afforded addresses extremely serious concerns. Specifically, in enacting Section 311,
Congress noted that money laundering provides the financial fuel that permits transnational
criminal enterprises to conduct and expand their operations and that it is critical to the
financing of global terrorism and the provision of funds for terrorist attacks. 31 U.S.C. 5311
(note). Although plaintiffs assert that BPAs actions are unrelated to such serious concerns, such
an argument is appropriate for a substantive review of any final rule that is issued; it does not
affect the adequacy of the process available under Section 311.
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Case 1:15-cv-01641-JEB Document 32 Filed 02/18/16 Page 32 of 33

plaintiffs there had not had a meaningful opportunity to comment. Id. at 28. It would be
premature and unsubstantiated to reach such a conclusion here because the unclassified record is
not before the Court, and there is no basis to determine whether it contains additional factual
details that were not made available to plaintiffs in the NOF.
Further, although plaintiffs complain that the comment period has closed without an
opportunity to comment based on the unclassified record, whether this constitutes a procedural
violation is premature in advance of a final rule. In FBME, for example, the court noted that
FinCEN considered comments submitted by FBME after the deadline. Id. at 28. Should
FinCEN issue the unclassified record and subsequently consider any comments provided by
plaintiffs in advance of a final rule, plaintiffs would no longer be able to mount this procedural
claim. Even if such a procedural claim could exist in the future, it is premature and not ripe for
resolution. Plaintiffs due process claim should therefore be dismissed.
CONCLUSION
For the foregoing reasons, the Court should dismiss the complaint and deny plaintiffs
motion for partial summary judgment as moot.
Dated: February 18, 2016

Respectfully submitted,
BENJAMIN C. MIZER
Principal Deputy Assistant Attorney General
CHANNING D. PHILLIPS
United States Attorney
DIANE KELLEHER
Assistant Director
/s/ Eric Beckenhauer
ERIC B. BECKENHAUER
THOMAS D. ZIMPLEMAN
ROBIN THURSTON

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Case 1:15-cv-01641-JEB Document 32 Filed 02/18/16 Page 33 of 33

Trial Attorneys
U.S. Department of Justice
Civil Division, Federal Programs Branch
20 Massachusetts Ave. NW
Washington, DC 20530
Tel: (202) 514-8095
Fax: (202) 616-8470
E-mail: Eric.Beckenhauer@usdoj.gov
Counsel for Defendants

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