Zarmach Oil Services, Inc. v. United States Department of the Treasury
750 F. Supp. 2d 150
D.D.C.2010Background
- Zarmach Oil Services, Inc. challenges OFAC's denial of a specific license to release blocked funds tied to a Sudanese deal.
- The blocked funds originated from a 2003 Cliveden Petroleum, Inc. lease deal with Sudapet, with $915,102 wired via a U.S. intermediary and blocked as proceeds to a government entity.
- Cliveden assigned its rights to Zarmach in December 2003; OFAC denied a license in January 2004 and again in September 2009 after Zarmach sought reconsideration.
- OFAC defines Government of Sudan to include Sudapet and treats any transfer involving such interests as blocked; license decisions are discretionary.
- Cliveden later paid a second $915,102 to Sudapet to satisfy its lease obligations; Zarmach seeks release of the blocked funds via APA review.
- The court grants summary judgment for OFAC, finding no APA violation, and discusses deference to foreign policy decisions and the proper role of courts in these matters.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether OFAC acted within statutory authority | Zarmach contends OFAC exceeded authority by blocking assets with no Sudanese Government ownership interest. | OFAC has broad statutory authority to block property interests of any government or national thereof under IEEPA and related regulations. | OFAC acted within statutory authority. |
| Whether OFAC's denial was arbitrary or capricious | OFAC's rationale is unclear and its treatment of comparable Ethiopian cases was inconsistent. | OFAC provided rational, policy-based reasons grounded in national security and foreign policy; differential treatment is permissible given foreign policy considerations. | Not arbitrary or capricious; rational basis supported by record. |
| Takings Clause claim | OFAC's blocking constitutes a taking requiring compensation. | Blocking assets under IEEPA is not a taking; court should dismiss or lack jurisdiction for takings claim. | Lacks subject matter jurisdiction; takings claim dismissed. |
| Fourth Amendment claim | Continued blocking amounts to an unreasonable seizure. | Blocking of assets is not a seizure under Fourth Amendment doctrine; such claims are not properly before the court. | Claim rejected; not cognizable under Fourth Amendment. |
Key Cases Cited
- Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156 (D.C. Cir. 2003) (broad deference to national security foreign policy determinations in blocking)
- Regan v. Wald, 468 U.S. 222 (1984) (foreign policy is largely immune from judicial interference)
- Consarc Corp. v. U.S. Treasury Dep't, Office of Foreign Assets Control, 71 F.3d 909 (D.C. Cir. 1995) (OFAC's interpretations of IEEPA receive Chevron-like deference; deference heightened when interpreting own regulations)
- Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971) (court reviews agency actions with rational connection between facts found and choice made)
- Dickson v. Sec'y of Def., 68 F.3d 1396 (D.C. Cir. 1995) (court may sustain agency action if its path is reasonably discernible)