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Al Haramain Islamic Foundation v. United States Department of the Treasury

September 23, 2011

AL HARAMAIN ISLAMIC FOUNDATION, INC., AKA AL-HARAMAIN ISLAMIC FOUNDATION, INC.; AND MULTICULTURAL ASSOCIATION OF SOUTHERN OREGON, PLAINTIFFS-APPELLANTS,
v.
UNITED STATES DEPARTMENT OF THE TREASURY; TIMOTHY GEITHNER; OFFICE OF FOREIGN ASSETS CONTROL; ADAM J. SZUBIN; UNITED STATES DEPARTMENT OF JUSTICE; AND ERIC H. HOLDER JR., ATTORNEY GENERAL, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the District of Oregon Garr M. King, Senior District Judge, Presiding D.C. No. 3:07-cv-01155-KI

The opinion of the court was delivered by: Graber, Circuit Judge:

FOR PUBLICATION

OPINION

Argued and Submitted March 9, 2011-Portland, Oregon

Before: Dorothy W. Nelson, Sidney R. Thomas, and Susan P. Graber, Circuit Judges.

Opinion by Judge Graber

OPINION

Plaintiff Al Haramain Islamic Foundation, Oregon ("AHIF-Oregon"), is a non-profit organization, incorporated in Oregon, whose stated purpose is to promote greater understanding of Islam. The United States government suspected AHIF-Oregon of supporting terrorism. In 2004, the Office of Foreign Assets Control ("OFAC"), a part of the United States Department of the Treasury, froze AHIF-Oregon's assets and designated AHIF-Oregon as a "specially designated global terrorist" pursuant to Executive Order ("EO") No. 13,224. President George W. Bush had issued EO 13,224 pursuant to the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. §§ 1701-1707, in the wake of the events of September 11, 2001.

AHIF-Oregon eventually filed this action, asserting that OFAC has violated a variety of its statutory and constitutional rights. Plaintiff Multicultural Association of Southern Oregon, which the government has not accused of supporting terrorism, challenges certain laws that bar it from providing services to designated entities such as AHIF-Oregon. With the exception of one claim not at issue on appeal, the district court granted summary judgment to OFAC.

On appeal, we affirm in part, reverse in part, and remand. We affirm the district court's ruling that substantial evidence supports OFAC's redesignation of AHIF-Oregon as a specially designated global terrorist, and we affirm the district court's rejection of AHIF-Oregon's due process claims. We reverse the district court's rejection of AHIF-Oregon's Fourth Amendment claim and remand for the district court to determine what judicial relief, if any, is available. Finally, we reverse the district court's dismissal of Plaintiffs' First Amendment claim.

FACTUAL AND PROCEDURAL HISTORY

AHIF-Oregon incorporated as a non-profit public benefit corporation under Oregon law in 1999. AHIF-Oregon describes itself as "an Oregon non-profit charitable organization that seeks to promote greater understanding of the Islamic religion through operating prayer houses, distributing religious publications, and engaging in other charitable activities." It maintains headquarters in Ashland, Oregon, where it formerly owned and operated a prayer house. Its primary activities appear to have taken place in Oregon, though it also was a partial owner of a prayer house in Springfield, Missouri, and conducted some activities there and abroad.

AHIF-Oregon is not the only organization with the name "Al Haramain Islamic Foundation." At the time of its incorporation, organizations with that name existed in dozens of other countries. One of the largest, if not the largest, was AHIF-Saudi Arabia, which had an annual budget of between $30 million and $80 million. Like AHIF-Oregon, AHIF-Saudi Arabia described itself as a charitable organization. AHIF-Saudi Arabia dissolved in June 2004.

The two organizations, AHIF-Oregon and AHIF-Saudi Arabia, shared some leaders in common. In particular, Saudi nationals Aqeel Al-Aqil and Soliman Al-Buthe*fn1 both held leadership roles in the two organizations. Al-Aqil founded AHIF-Saudi Arabia and reportedly led that organization during much of its existence. He also founded AHIF-Oregon, along with Al-Buthe and two other persons, and served as president of that organization until he resigned in March 2003. Al-Buthe was a senior official of AHIF-Saudi Arabia, where he was primarily responsible for its internet and charitable works in the United States. Al-Buthe resigned from AHIF-Saudi Arabia in September 2002. Like Al-Aqil, AlButhe was a founding member of the board of directors of AHIF-Oregon. Unlike Al-Aqil, Al-Buthe has not resigned from AHIF-Oregon; Al-Buthe maintains a position on the board to this day.

Shortly after the events of September 11, 2001, President Bush exercised his authority under the IEEPA by issuing EO 13,224. 66 Fed. Reg. 49,079 (Sept. 23, 2001). Under the IEEPA, the President may, in specified ways, "deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat." 50 U.S.C. § 1701(a). Relevant here, the President may

(B) investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States[.]

Id. § 1702(a)(1)(B). A person who violates the IEEPA is subject to civil penalties and, for willful violations, criminal penalties, including a fine up to $1 million and imprisonment for up to 20 years. Id. § 1705.*fn2

In the Executive Order, the President declared that the "September 11, 2001, acts . . . constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States." EO 13,224 pmbl. The Order "blocked" "all property and interests in property" of 27 persons designated by the Order, and it delegated to the specified agency head the authority to designate other persons with substantial connections to terrorist activities and organizations. Id. § 1. Specifically, Section 1 of the Order states that all property and interests in property of the following persons that are in the United States or that hereafter come within the United States, or that hereafter come within the possession or control of United States persons are blocked:

(a) foreign persons listed in the Annex to this order;

(b) foreign persons determined by the Secretary of State, in consultation with the Secretary of the Treasury and the Attorney General, to have committed, or to pose a significant risk of committing, acts of terrorism that threaten the security of U.S. nationals or the national security, foreign policy, or economy of the United States;

(c) persons determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Attorney General, to be owned or controlled by, or to act for or on behalf of those persons listed in the Annex to this order or those persons determined to be subject to subsection 1(b), 1(c), or 1(d)(i) of this order;

(d) except as provided in section 5 of this order and after such consultation, if any, with foreign authorities as the Secretary of State, in consultation with the Secretary of the Treasury and the Attorney General, deems appropriate in the exercise of [her] discretion, persons determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Attorney General;

(i) to assist in, sponsor, or provide financial, material, or technological support for, or financial or other services to or in support of, such acts of terrorism or those persons listed in the Annex to this order or determined to be subject to this order; or

(ii) to be otherwise associated with those persons listed in the Annex to this order or those persons determined to be subject to subsection 1(b), 1(c), or 1(d)(i) of this order.

The 27 persons and entities specifically listed in the Annex did not include Al-Aqil, Al-Buthe, or any AHIF organization.*fn3

Id. at annex.

In the years following the issuance of EO 13,224, OFAC periodically designated new persons and entities.*fn4 Relevant here, by February 1, 2004, OFAC had designated AHIF organizations in six countries: Somalia, Bosnia, Indonesia, Kenya, Tanzania, and Pakistan. But OFAC had not designated AHIF-Oregon, AHIF-Saudi Arabia, or any AHIF organization other than those six in the countries just listed.

On February 18, 2004, federal and state officials executed a search warrant at AHIF-Oregon's Ashland office. The search warrant concerned investigations into possible criminal violations of tax, banking, and money-laundering laws. Agents found, among other things, photographs and other documents related to violence in Chechnya.

The next day, February 19, 2004, OFAC issued a press release stating that it had blocked AHIF-Oregon's assets pending an investigation concerning the potential designation of AHIF-Oregon under EO 13,224.*fn5 The press release did not state reasons for the investigation. OFAC did not provide prior notice to AHIF-Oregon before blocking its assets, and OFAC did not obtain a warrant to block the assets.

In the months following that press release, OFAC and AHIF-Oregon exchanged voluminous documents on a range of topics. At the request of OFAC, AHIF-Oregon submitted a copy of a Koran that AHIF-Oregon previously had distributed to prisoners and others. The Koran was the only item specifically requested by OFAC.

The bulk of the exchange concerned AHIF-Oregon's possible connections to Chechen terrorism in Russia. The dispute centers on a donation in 2000 by AHIF-Oregon to AHIF-Saudi Arabia of more than $150,000. AHIF-Oregon concedes that it made the donation but strenuously argues that it was intended to be used, and in fact was used, for humanitarian relief in Chechnya. The donation originated from an Egyptian national who apparently wished to funnel the money through AHIF-Oregon. AHIF-Oregon received the funds and then transferred them to AHIF-Saudi Arabia.

In June 2004, while OFAC's investigation of AHIF-Oregon continued, two important events occurred. First, AHIF-Saudi Arabia dissolved. OFAC had not designated AHIF-Saudi Arabia under EO 13,224 or otherwise as a terrorist organization. Second, OFAC designated Al-Aqil as a specially designated global terrorist. At the time, though, Al-Aqil no longer had an official connection to AHIF-Oregon; he had resigned from AHIF-Oregon's board in March 2003.

On September 9, 2004, OFAC issued a press release declaring that it had designated AHIF-Oregon. The press release also stated that OFAC had designated Al-Buthe, even though OFAC had not advised Al-Buthe of any investigation of him. The press release read, in part:

The investigation shows direct links between the U.S. branch and Usama bin Laden. In addition, the affidavit alleges the U.S. branch of [AHIF] criminally violated tax laws and engaged in other money laundering offenses. Information shows that individuals associated with the branch tried to conceal the movement of funds intended for Chechnya by omitting them from tax returns and mischaracterizing their use, which they claimed was for the purchase of a prayer house in Springfield, Missouri.

Other information available to the U.S. shows that funds that were donated to [AHIF-Oregon] with the intention of supporting Chechen refugees were diverted to support mujahideen, as well as Chechen leaders affiliated with the al Qaida network.

One week later, on September 16, 2004, OFAC sent a letter to AHIF-Oregon entitled "BLOCKING NOTICE." The letter provided: "You are hereby notified that pursuant to [Executive Order No. 13,224] and under the authorities granted by IEEPA, OFAC has determined that [AHIF-Oregon] is an entity that falls within the criteria for designation set forth in the Order at § 1(c), (d). Accordingly, [AHIF-Oregon] is hereby designated as a Specially Designated Global Terrorist pursuant to the Order." The letter described the legal consequences of the designation, including the blocking of all assets, and warned the organization of the civil and criminal penalties for violations of the IEEPA. The letter concluded that AHIF-Oregon could request administrative reconsideration pursuant to 31 C.F.R. § 501.807.

In early 2005, AHIF-Oregon submitted additional documents for the administrative record and requested administrative reconsideration. In the letter, AHIF-Oregon asserted that it had no connection to terrorism and provided a detailed explanation concerning certain subjects, including the Chechen donation. In the many months following its request for administrative reconsideration, AHIF-Oregon repeatedly sought both an explanation for the designation and a final determination of its request for administrative reconsideration. Like AHIF-Oregon, Al-Buthe requested administrative reconsideration of OFAC's designation of him.

Having received no response to its 2005 request for administrative reconsideration, AHIF-Oregon filed this action in August 2007. AHIF-Oregon brought a substantive challenge to the designation and several procedural challenges. As to the latter, AHIF-Oregon argued that OFAC's use of classified information violated its due process rights, that OFAC's refusal to provide reasons for the investigation and designation violated its due process rights, and that OFAC's failure to obtain a warrant before seizing its assets violated the Fourth Amendment.

Three months after AHIF-Oregon filed its complaint, in November 2007, OFAC sent a letter to AHIF-Oregon and AlButhe notifying them of OFAC's provisional intent to "redesignate" them and offering a final chance to submit documentation. The parties again exchanged many documents, including nearly 1,000 pages of material submitted by AHIF-Oregon.

On February 6, 2008, OFAC sent AHIF-Oregon and AlButhe a letter stating that, "after a thorough investigation and review of the evidence in the record regarding AHIF-Oregon and Mr. Al-Buthe, OFAC has determined that AHIF-Oregon and Mr. Al-Buthe continue to meet the criteria for designation." The letter specified three reasons for redesignating AHIF-Oregon: "(1) being owned or controlled by [designated persons] Aqeel Al-Aqil and Al-Buthe, (2) acting for or on behalf of [designated persons] Al-Aqil and Al-Buthe, and (3) supporting and operating as a branch office of AHIF, an international charity that employed its branch offices to provide financial, material, and other services and support to al Qaida and other [designated persons]."

In a memorandum dated the same day, OFAC explained, in more detail, its reasons for redesignating AHIF-Oregon. Much of the document is redacted, but its unredacted conclusions are the same as the ones stated in the letter:

AH[I]F-Oregon should be determined to be subject to Executive Order 13,224 for the following reasons: [1] AH[I]F-Oregon has been owned or controlled by, or has acted for or on behalf of AlAqil; [2] AH[I]F-Oregon has been owned or controlled by, or has acted for or on behalf of Al-Buthe; [3] As a branch of the Saudi charity Al-Haramain Islamic Foundation, AH[I]F-Oregon has acted for or on behalf of, or has assisted in, sponsored, or provided financial, material, or technological support for, or financial or other services to or in support of Al Qaida and other [designated persons].

(Emphasis omitted.) Four months later, on June 19, 2008, OFAC designated "the world-wide organization of AHIF."

In this action, the district court granted summary judgment to OFAC on all of AHIF-Oregon's claims. The court held that substantial evidence did not support OFAC's determination that Al-Aqil owned or controlled AHIF-Oregon at the time of redesignation. But the court found that substantial evidence did support OFAC's other two reasons: that Al-Buthe owned or controlled AHIF-Oregon and that AHIF-Oregon supported designated persons as a branch office of AHIF-Saudi Arabia.

With respect to the procedural challenges, the district court rejected AHIF-Oregon's argument that OFAC cannot rely on classified information in making its designation determinations. The district court next held that OFAC violated AHIFOregon's procedural due process rights by failing to provide notice and a meaningful opportunity to respond. But the district court held that the violation was harmless because, even if AHIF-Oregon properly had been informed of OFAC's reasons for suspicion, AHIF-Oregon could not have avoided the redesignation. Finally, the district court held that the blocking of assets is a "seizure" for purposes of the Fourth Amendment. But the court held that OFAC's actions fell within the "special needs" exception to the warrant requirement.

The second named plaintiff in this action is Multicultural Association of Southern Oregon ("MCASO"). MCASO describes itself as "an Oregon public benefit corporation with members, incorporated in 1995 and operating in Medford, [Oregon, as] a non-profit 501(c)(3) organization." "MCASO's objectives include serving as a catalyst in the southern Oregon community to promote understanding and appreciation between cultures in order to reduce racism, promote and support multicultural education, and provide forums for problem solving related to intercultural differences." Before the designation of AHIF-Oregon, MCASO had co-sponsored events with AHIF-Oregon. MCASO alleged that it would continue to co-sponsor events and conduct other activities in coordination with AHIF-Oregon, were it not for AHIF-Oregon's designation. MCASO asserts that EO 13,224 and its implementing regulations are unconstitutionally vague and overbroad and that they violate MCASO's First and Fifth Amendment rights by prohibiting it from working with AHIF-Oregon.*fn6 With one exception concerning a claim not before us on appeal,*fn7 the district court rejected MCASO's claims and granted summary judgment to OFAC.

AHIF-Oregon and MCASO timely appeal.

STANDARDS OF REVIEW

We review de novo the district court's decision on cross-motions for summary judgment. Trunk v. City of San Diego, 629 F.3d 1099, 1105 (9th Cir. 2011). "We review de novo questions of law, including constitutional rulings, resolved on summary judgment." Nader v. Cronin, 620 F.3d 1214, 1216 (9th Cir. 2010) (per curiam), cert. denied, 131 S. Ct. 1844 (2011). We review for clear error the district court's factual findings. Sapp v. Kimbrell, 623 F.3d 813, 821 (9th Cir. 2010).

The judicial review provisions of the Administrative Procedure Act ("APA"), 5 U.S.C. § 706(2)(A), govern challenges to OFAC's designation decisions. See Alaska Dep't of Envtl. Conservation v. EPA, 540 U.S. 461, 496-97 & n.18 (2004) (holding that, when considering an agency action as to which the statute does not specify the standard of review, the courts of appeals must proceed pursuant to the APA's general standard of review for agency actions in 5 U.S.C. § 706(2)(A)); see also Vigil v. Leavitt, 381 F.3d 826, 833 (9th Cir. 2004) (describing Alaska Dep't of Envtl. Conservation's application); accord Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156, 162 (D.C. Cir. 2003). Accordingly, we may set aside OFAC's designation only if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). Under that standard, we review for substantial evidence the agency's factual findings. Alaska Dep't of Health & Soc. Servs. v. Ctrs. for Medicare & Medicaid Servs., 424 F.3d 931, 937 (9th Cir. 2005).

DISCUSSION

A. Substantive Challenge to the Redesignation

OFAC supported its 2008 redesignation of AHIF-Oregon on three grounds: (1) that AHIF-Oregon is owned or controlled by Al-Aqil; (2) that AHIF-Oregon is owned or controlled by Al-Buthe; and (3) that AHIF-Oregon provided support to al Qaida and other designated persons as a branch office of AHIF-Saudi Arabia. AHIF-Oregon argues under the APA that substantial evidence does not support those reasons. Like the district court, we conclude that substantial evidence supports the last two reasons, but not the first. We address them in turn, below.

Before doing so, however, we note that AHIF-Oregon also describes its APA challenge in two other ways. First, AHIF-Oregon argues that OFAC reached its decision without affording AHIF-Oregon a meaningful opportunity to respond and thus violated the APA. We occasionally have held that an agency's prejudicial procedural failure violates the APA and, accordingly, have remanded to the agency for reconsideration. See, e.g., Asarco, Inc. v. EPA, 616 F.2d 1153, 1162 (9th Cir. 1980) (citing Bowman Transp., Inc. v. Ark.-Best Freight Sys., Inc., 419 U.S. 281, 288 n.4 (1974)). But the genesis of that rule appears to be the Due Process Clause, rather than a separate statutory grant of procedural rights. See Bowman Transp., 419 U.S. at 288 n.4 ("Indeed, the Due Process Clause forbids an agency to use evidence in a way that forecloses an opportunity to offer a contrary presentation."). In any event, AHIF-Oregon does not argue with any specificity that its procedural objections under the APA are any different from its identical objections under the Due Process Clause. We address its due process claim concerning inadequate notice in Part B-2, below.

Second, AHIF-Oregon argues that OFAC lacked "authorization" to redesignate AHIF-Oregon. We disagree. The regulations clearly contemplate administrative reconsideration, 31 C.F.R. § 501.807; indeed, OFAC issued its redesignation decision at AHIF-Oregon's specific request under the regulations. Just as OFAC has authority to designate an entity, it likewise has the authority to respond to that entity's request for reconsideration, including with updated reasons.

It appears that AHIF-Oregon's primary point is that OFAC's 2008 reasons actually are a post-hoc rationalization for its original 2004 designation and that AHIF-Oregon had no earlier notice of the reasons OFAC eventually gave in 2008. As with the previous argument, we see no difference between this argument and AHIF-Oregon's procedural due process claim concerning inadequate notice, which we analyze below, in Part B-2. We turn, then, to our review of OFAC's three stated reasons ...


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