Opinion ID: 3039142
Heading Depth: 2
Heading Rank: 5

Heading: use of collection agency

Text: In its cross-appeal, OFAC asks us to vacate the district court’s injunction prohibiting OFAC’s use of the Ocwen Fed- 4 Beause we conclude that the IEEPA provisions do not restrict the President’s authority under the UNPA, we do not reach OFAC’s argument that the Travel Ban is not an indirect regulation of humanitarian medical donations. SACKS v. OFFICE OF FOREIGN ASSETS CONTROL 17343 eral Bank to collect Sacks’s unpaid penalty. Because the OFAC regulation in effect when Sacks’s penalty was assessed clearly required referral exclusively to the United States Department of Justice for collection in a federal civil suit, we affirm the district court’s issuance of the injunction. Neither Executive Order 12,724 nor the Iraq Sanctions Act specified the method by which penalties should be imposed or collected, effectively leaving that gap to be filled by OFAC, the agency to which the President delegated his regulatory powers over the Iraqi Sanctions. See Morton v. Ruiz, 415 U.S. 199, 231 (1974) (“The power of an administrative agency to administer a congressionally created . . . program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress.”). OFAC promulgated regulations for the collection of unpaid penalties under the Iraqi Sanctions. In relevant part, they read: In the event that the person named does not pay the penalty imposed pursuant to this subpart or make payment arrangements acceptable to the Director within 30 days of the mailing of the written notice of the imposition of the penalty, the matter shall be referred to the United States Department of Justice for appropriate action to recover the penalty in a civil suit in a Federal district court. 31 C.F.R. § 575.705 (2002). OFAC claims that this provision also allowed it to use administrative collection efforts, including outside collection agencies, to obtain unpaid penalties. Where an agency offers an interpretation of its own regulations in federal court, we must give “substantial deference” to that interpretation “unless an alternative reading is compelled by the regulation’s plain language or by other indications of the [agency’s] intent at the time of the regulation’s promulgation.” Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (internal quotation marks omitted). We will defer to 17344 SACKS v. OFFICE OF FOREIGN ASSETS CONTROL the agency’s interpretation of its own regulation, unless that interpretation is “plainly erroneous or inconsistent with the regulation.” Udall v. Tallman, 380 U.S. 1, 16-17 (1965); Rendleman v. Shalala, 21 F.3d 957, 961 (9th Cir. 1994). [14] Here, the agency’s command is absolute: if the penalty is unpaid after thirty days, “the matter shall be referred to the [Justice Department] for appropriate action to recover the penalty in a civil suit.” Following the guidance of the Supreme Court, see, e.g., Lopez v. Davis, 531 U.S. 230, 241 (2001) (explaining the difference between Congress’s use of the “permissive ‘may’ ” and its “use of a mandatory ‘shall’ ”), we have previously made clear that Congress’s or an agency’s use of the word “shall” indicates a mandatory duty that is not subject to discretion. For example, in Center for Biological Diversity v. United States Forest Service, 349 F.3d 1157, 1167 (9th Cir. 2003), we held that a Council on Environmental Quality regulation stating that an agency “shall” discuss opposing viewpoints and its response to them in a final environmental impact statement could not be satisfied merely by including and analyzing a more environmentally-restrictive alternative to the proposed plan. Similarly, in Webber v. Crabtree, 158 F.3d 460, 461 (9th Cir. 1998) (per curiam), we held that a Bureau of Prisons regulation stating that wardens “shall identify” outdoor smoking areas left the warden no discretion but to do so. Although we will depart from the interpretation of “shall” as mandatory where a “convincing argument to the contrary is made,” Newman v. Chater, 87 F.3d 358, 361 (9th Cir. 1996) (internal quotation marks omitted); see also Sierra Club v. Whitman, 268 F.3d 898, 904 (9th Cir. 2001), such occasions are rare. OFAC offers three reasons to support its contentions that we should disregard the plain language of the regulations. None of these is persuasive. First, OFAC argues that all government agencies are authorized, and even encouraged, to utilize private collection agencies and other administrative collection efforts before referring cases to the Department of Justice. We do not disSACKS v. OFFICE OF FOREIGN ASSETS CONTROL 17345 agree. For example, 31 U.S.C. § 3718(a) expressly authorizes federal agency heads to establish contracts with collection services to recover United States assets. Current Treasury Department regulations, codified in 2002, go even further, indicating that every unpaid debt should be referred for debt collection services, 31 C.F.R. § 5.9, that multiple collection remedies should be utilized, id. § 5.2, and even that “aggressive collection activity” should take place before referral to the Department of Justice, id. § 5.16. We may even accept, without deciding, OFAC’s contention that it would not need to adopt an explicit regulation before utilizing administrative collection efforts. As the district court noted, however, what OFAC overlooks in emphasizing these general, permissive provisions is that the one provision that specifically addresses violations of the Iraqi Sanctions, 31 C.F.R. § 575.705, did not take advantage of OFAC’s authority to permit the use of outside collection agencies and, in fact, made referral to the Justice Department mandatory. See Bonneville Power Admin. v. FERC, 422 F.3d 908, 916 (9th Cir. 2005) (discussing the “basic principle of statutory construction . . . that the specific prevails over the general”). We do not know why the Iraqi Sanctions failed to provide for administrative collection efforts or the utilization of collection agencies.5 This omission may have reflected the due process concern that individuals might face harassment by aggressive nongovernmental collec- 5 The sanctions regulations established before the Iraqi Sanctions Regulations similarly mandated referral to the Department of Justice, and did not provide for other collection efforts. At some point in the 1990s, however, without the prompting of a court decision, OFAC began including language in its sanctions regulations that unpaid penalties shall be, or may be, “referred for administrative collection measures . . . or to the United States Department of Justice” for recovery in a civil suit. See, e.g., 58 Fed. Reg. 13,199, 13,212-13 (Mar. 10, 1993) (codified at 31 C.F.R. § 585.705) (Yugoslavian sanctions regulations); 60 Fed. Reg. 47,061, 47,073 (Sept. 11, 1995) (codified at 31 C.F.R. § 560.706) (Iranian sanction regulations); 61 Fed. Reg. 3805, 3812 (Feb. 2, 1996) (codified at 31 C.F.R. § 595.705) (terrorism sanction regulations); 70 Fed. Reg. 48,240, 48,524 (Aug. 16, 2005) (codified at 31 C.F.R. § 537.705) (Burmese sanctions regulations). 17346 SACKS v. OFFICE OF FOREIGN ASSETS CONTROL tion agencies for penalties of up to $250,000, without ever having had an opportunity to challenge their penalties before an Article III court. Regardless of the rationale for the regulation, there is nothing in the regulatory scheme or the President’s Executive Order that would justify the abandonment of the general rules that the plain language of a regulation controls, and that “shall” indeed means “shall.” Second, OFAC points to its recent revision of section 575.705 as evidence of how the previous section 575.705 was understood and should be interpreted. In response to the district court’s ruling in this very case, OFAC issued a rule revising 31 C.F.R. § 575.705 to read that, if the penalized individual does not make arrangements to pay within thirty days, “the matter may be referred for administrative collection measures by the Department of the Treasury or to the United States Department of Justice for appropriate action to recover the penalty in a civil suit in a Federal district court.” 70 Fed. Reg. 15,761, 15,762 (Mar. 29, 2005) (emphasis added). While OFAC does not argue that the revised regulation applies retroactively, it contends that the revision is dispositive proof that OFAC consistently has interpreted the collection regulation to provide for administrative collection in addition to civil suits in federal court. See 70 Fed. Reg. at 15,761 (stating that the rule was revised “to reaffirm that administrative collection of unpaid civil penalties imposed by OFAC is authorized in addition to judicial means of collection”). It is unclear why an interpretive statement added to the Federal Register post-litigation should be entitled to any more deference than the litigation position OFAC already advances. Indeed, although an agency interpretation first articulated in a legal brief is not categorically “unworthy of deference,” OFAC’s position appears to be little more than a “post hoc rationalization advanced . . . to defend past agency action against attack.” Auer v. Robbins, 519 U.S. 452, 462 (1997) (internal quotation marks omitted) (alteration in original). Even if OFAC’s interpretive statement represents the agency’s reasoned interpretation as of 2005, it tells us nothing of SACKS v. OFFICE OF FOREIGN ASSETS CONTROL 17347 the agency’s interpretation during the life of the Iraqi Sanctions. As such, the statement in the Federal Register is neither controlling nor particularly helpful. Third, OFAC makes the novel claim that section 575.705’s “silence concerning administrative collection remedies” permits the use of those remedies in satisfaction of the regulatory requirement. In other words, a regulation or statute mandating that an agency “shall” do x in fact means that it “shall” do x or y, unless the statute or regulation explicitly states that it “shall not” do y. This proposed “rule of the silent disjunctive” is patently absurd. By OFAC’s rationale, the Endangered Species Act’s requirement that the final determination of whether a species is threatened “shall be published in the Federal Register” could also be satisfied by publishing that information in USA Today. Though the Mandatory Victims Restitution Act requires that the sentencing court shall order the defendant to pay restitution, applying OFAC’s proposed interpretive rule, the sentencing court could also comply with the statute by ordering the defendant to make a public apology. Or, to bring the examples closer to home, the requirement of former 31 C.F.R. § 575.521 that an application for a license to send medicine to Iraq “shall be made in advance” of the exportation could have been satisfied by Sacks if he submitted an application in advance or within ten years following the exportation. We rejected a similar argument in Webber, where the warden asserted that a regulation stating that he “shall” identify outdoor smoking areas at federal prison facilities, to prevent employee exposure to second-hand smoke, also would allow him to achieve that goal by banning all smoking at the facility, 158 F.3d at 461. Our view has not changed. We will not require that Congress or an agency articulate all of the acts the agency may not engage in simply to guarantee that mandatory prescriptions are followed. Our decision in Lawrence v. Commodity Futures Trading Comm’n, 759 F.2d 767 (9th Cir. 1985), is not to the contrary. 17348 SACKS v. OFFICE OF FOREIGN ASSETS CONTROL In Lawrence, a commodities broker consented to findings that he had violated the Commodities Exchange Act and agreed to pay a $3,500 civil penalty. Id. at 769. When he refused to pay the penalty, the Commodity Futures Trading Commission suspended his registration pursuant to a statutory provision allowing it to do so if an individual violated one of its rules or orders. Id. at 770 & n.5 (citing 7 U.S.C. §§ 12a(3)-(4)). Lawrence argued that the Commission was powerless to suspend him because a separate statutory provision stated that “collection of overdue money penalties imposed by the [Commission] shall be referred to the Attorney General for recovery in a federal district court action.” Id. at 771 (citing 7 U.S.C. § 9a). We rejected Lawrence’s claim, holding that referral to the Justice Department was not intended to be the Commission’s “exclusive remedy for violation of its orders to pay fines.” Id. at 772. Despite OFAC’s multiple citations to it, Lawrence is inapposite. The alternative remedy taken by the Commission, suspension of Lawrence’s registration, was explicitly articulated in the same statute, whereas nothing in the Iraqi Sanctions regulations mentions administrative collection. Furthermore, as we recognized in Lawrence, suspension of the license and referral to the Justice Department were not mutually exclusive remedies. See id. at 771-72. The Lawrence court was not required to reach the question of whether the agency could collect the penalty using means other than Justice Department referral because suspension of his registration was a different punishment altogether. [15] Rather than adopt OFAC’s troublesome “rule of the silent disjunctive,” we hold that the plain language of the regulation authorizes no other methods for the collection of unpaid penalties. Because the regulation is clear, no deference is owed to OFAC’s questionable interpretation. See Thomas Jefferson Univ., 512 U.S. at 512. If OFAC wishes to collect the $10,000 penalty from Sacks, it may do so by referring the matter to the Department of Justice for the filing of a civil suit in federal district court as its own regulation mandates. SACKS v. OFFICE OF FOREIGN ASSETS CONTROL 17349