Handing a win to Bancroft’s Paul Clement, the U.S. Court of Appeals for the D.C. Circuit ruled Tuesday that the Obama Administration ignored due process when it barred a Chinese-owned company from acquiring a planned wind farm project near a U.S. Navy facility. The decision reverses an earlier ruling that allowed the administration to block the project on national security grounds.
In March 2012 Ralls Corporation, an American holding company owned by two executives of the Chinese heavy equipment giant Sany Group, acquired four U.S. companies with land and development rights in north-central Oregon, planning to build wind farms there using Sany equipment. The project sites are partly within military airspace and just miles from a restricted training site that the Navy uses to test unmanned aircraft.
President Obama issued an order prohibiting the acquisition deals six months later. The order stated that there was “credible evidence that leads [the President] to believe that Ralls . . . might take action that threatens to impair the national security of the United States.”
Obama’s decision to derail Ralls’ development plans came after a ruling from an interagency committee headed by the U.S. Treasury Secretary called the Committee on Foreign Investment in the U.S., or CFIUS. CFIUS reviews the national security implications of deals that would lead to foreign control of U.S. companies, but does not disclose its proceedings or rulings publicly.
Ralls challenged both the CFIUS and White House orders in U.S. district court in Washington, D.C., arguing that CFIUS had overstepped its authority under the Administrative Procedures Act and that the president violated the company’s Fifth Amendment right to due process. Judge Amy Berman Jackson rejected those arguments last year in a pair of rulings available here and here. Among other things, Jackson found that Ralls relinquished its constitutionally protected property interests by making its acquisitions despite the looming threat of a presidential veto.
The D.C. Circuit disagreed Tuesday, finding that the company hadn’t waived its due process claims by opting to move ahead with the purchases prior to a determination from CFIUS. “As Ralls aptly notes, the Federal Government cannot evade the due process protections afforded to state property by simply ‘announcing that future deprivations of property may be forthcoming,’” wrote D.C. Circuit Judge Karen LeCraft Henderson.
Tuesday’ ruling doesn’t guarantee that Ralls will be allowed to move ahead with the wind farm project, but it gives the company access to unclassified information that the president relied on to make his decision. The ruling also allows Ralls to rebut the evidence upon which CFIUS and the president relied.
As The Wall Street Journal points out, Chinese government officials asked just last week for more transparency from CFIUS in meetings with Treasury Secretary Jacob Lew and Secretary of State John Kerry.
Bancroft’s Clement, who argued the case for Ralls at the D.C. Circuit, didn’t immediately respond to requests for comment. Tim Tingkang Xia, a senior partner at Morris, Manning & Martin who has been handling the case alongside Bancroft, said in a statement that Ralls was “heartened” by the decision. “We look forward to further vindicating Ralls’ right to be treated fairly and equally under the law,” Xia said.
A spokesperson for the Justice Department’s Civil Division said the government is reviewing the decision.