Zevallos v. Obama Ex Rel. United States
417 App. D.C. 106
| D.C. Cir. | 2015Background
- Fernando Zevallos, a Peruvian national and founder of Aero Continente, was designated in 2004 under the Foreign Narcotics Kingpin Designation Act as a "significant foreign narcotics trafficker," and his U.S.-controlled assets were blocked.
- Zevallos submitted a delisting request in 2004 with supporting exhibits; Treasury disclosed unclassified materials in 2005, but the submitted exhibits were lost by Treasury and never recovered.
- Zevallos dismissed a 2005 D.C. lawsuit after his conviction in Peru; Treasury construed that dismissal as abandonment of his delisting request (without notifying him) and did not act on the request for years.
- Zevallos renewed contact in 2009, answered a Treasury questionnaire, and in 2013 sued to compel Treasury to decide his pending delisting request; Treasury denied delisting in 2013 relying on open-source news reports and other evidence.
- District court granted summary judgment to Treasury; Zevallos appealed, raising APA arbitrary-and-capricious and procedural claims, plus due process claims. The D.C. Circuit reviewed under the APA’s deferential standard.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review | Zevallos: agency decision should be reviewed de novo | Treasury: APA arbitrary-and-capricious review applies | Court: APA deferential review applies; de novo inappropriate absent severe procedural defects |
| Reliance on open-source evidence | Zevallos: Treasury may not rely on unverified news reports to deny delisting | Treasury: may rely on open-source, hearsay, and third-party materials as part of the administrative record | Court: Treasury permissibly relied on such materials; record supports denial |
| Procedural error (lost exhibits; failure to notify withdrawal) | Zevallos: loss of his 2004 exhibits and Treasury’s uncommunicated view that his dismissal withdrew the request denied required procedure | Treasury: any procedural lapses were harmless and do not require vacatur | Court: Errors were harmless; Treasury assumed missing evidence in Zevallos’s favor and outcome would not differ; remand is not required for relief beyond refiling option |
| Due process (pre- and post-deprivation) | Zevallos: blocking assets without prior notice and inadequate postdeprivation process violated procedural and substantive due process | Treasury: exigent risks of asset flight justify no predeprivation hearing; postdeprivation administrative review satisfied due process | Court: Blocking without pre-notice was justified; postdeprivation process was adequate; no substantive due process violation shown |
Key Cases Cited
- Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156 (3d Cir. 2003) (approving use of unclassified, hearsay, and open-source materials in designation contexts)
- Islamic Am. Relief Agency v. Gonzales, 477 F.3d 728 (D.C. Cir. 2007) (describing APA deference and standards for reviewing agency designation decisions)
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (agency action set aside if arbitrary and capricious; must connect facts to decision)
- Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663 (1974) (permitting postdeprivation process where predeprivation notice would enable asset flight)
- Al Haramain Islamic Found., Inc. v. U.S. Dep't of Treasury, 686 F.3d 965 (9th Cir. 2012) (holding extreme delays and inadequate disclosure can violate due process)