Court Opinion

ID: 3152884
Source: CourtListenerOpinion
Date Created: 2015-11-06 21:01:11.887754+00
Date Added: 2024-06-11T12:42:36.437675
License: Public Domain

UNITED STATES DISTRICT COURT
                              FOR THE DISTRICT OF COLUMBIA

 FBME BANK LTD., et al.,

                        Plaintiffs,

                        v.                         Case No. 15-cv-01270 (CRC)

 JACOB LEW, in his official capacity as
 Secretary of the Treasury, et al.,

                        Defendants.

                             MEMORANDUM OPINION AND ORDER

       This Court recently issued a preliminary injunction against a rule promulgated by the U.S.

Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). Rather than appeal

the injunction, move for reconsideration, or continue to defend its rulemaking, FinCEN seeks a do-

over: an opportunity to correct any mistakes it might have made the first time around and to

promulgate—following proper procedures—the same rule, a new rule altogether, or perhaps even

no rule at all. A voluntary remand, FinCEN urges, would respect the agency’s desire to correct its

own errors, conserve judicial resources, and would not unduly prejudice parties aggrieved by the

rule. The Court agrees and, accordingly, will grant FinCEN’s motion for voluntary remand and

stay the proceedings while FinCEN complies with the Court’s remand order.

       I.      Background

       On August 27, 2015, this Court preliminarily enjoined a Final Rule—promulgated by

FinCEN—that would have prohibited domestic financial institutions from maintaining

correspondent bank accounts with FBME Bank Ltd. (“FBME”), a Tanzanian-chartered commercial

bank that operates mainly in Cyprus. The Final Rule, which was designed to prevent FBME from

continuing to do business in the United States or in U.S. dollars, was issued following a finding by
FinCEN that FBME was of “primary money laundering concern” and thus a threat to national

security and the U.S. financial system. 31 U.S.C. § 5318A; 79 Fed. Reg. 42639 (July 22, 2014). In

issuing its preliminary injunction, the Court indicated that it was “not inclined to second guess

FinCEN’s exercise of its broad discretion in finding that FBME poses a primary money laundering

concern,” FBME Bank Ltd. v. Lew, No. 1:15–cv–01270, 2015 WL 5081209, at *2 (D.D.C. Aug.

27, 2015), but nevertheless found that FBME was likely to succeed on the merits of two of its

claims against FinCEN: (1) that FinCEN provided insufficient notice of unclassified, non-protected

information on which it relied during the rulemaking proceeding, in violation of the notice-and-

comment requirement of the Administrative Procedure Act, and (2) that FinCEN failed adequately

to consider at least one potentially significant, viable, and obvious alternative to the sanction it

imposed, id. at *5.

       In light of the Court’s ruling, FinCEN requested a “voluntary remand so that it may engage

in further rulemaking relating to FBME Bank to address certain procedural issues raised by the

court in its order.” Defs.’ Status Report, ECF No. 33, at 1–2. FBME opposed FinCEN’s request

and asked for briefing on the issue. Pls.’ Proposed Schedule Mots. Voluntary Remand & Summ. J.,

ECF No. 37. The Court agreed that briefing was warranted and ordered FinCEN to submit a motion

for voluntary remand, which FinCEN filed on September 28, 2015. Defs.’ Mot. Voluntary Remand

& Stay, ECF No. 38 (“Mot. Remand”).

       In its motion, FinCEN proposes that the Court stay litigation pending a redo by the agency:

On remand, “plaintiffs would have the opportunity to respond to unclassified, nonprivileged

information on which FinCEN relied in its earlier decision, and FinCEN would consider plaintiffs’

responses, as well as any additional information submitted by plaintiffs or others, during the new

comment period.” Id. at 2. FBME urges the Court instead to deny FinCEN’s motion, order

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expedited summary-judgment briefing, and proceed to render final judgment “without ado.” Pls.’

Opp’n 2.

       II.     Legal Standard

       Courts “prefer[] to allow agencies to cure their own mistakes rather than wast[e] the courts’

and the parties’ resources reviewing a record that both sides acknowledge to be incorrect or

incomplete.” Ethyl Corp. v. Browner, 989 F.2d 522, 524 (D.C. Cir. 1993). As a result, “courts

have long recognized the propriety of voluntarily remanding a challenged agency action without

judicial consideration of the merits upon an admission of agency error.” Carpenters Indus. Council

v. Salazar, 734 F. Supp. 2d 126, 132 (D.D.C. 2010). Voluntary remand is typically appropriate “(i)

when new evidence becomes available after an agency’s original decision was rendered,” id. (citing

Ethyl Corp., 989 F.2d at 523), “or (ii) where ‘intervening events outside of the agency’s control’

may affect the validity of an agency’s actions,” id. (quoting SKF USA Inc. v. United States, 254
F.3d 1022, 1028 (Fed. Cir. 2001)). “Even in the absence of new evidence or an intervening event,

however, courts retain the discretion to remand an agency decision when an agency has raised

‘substantial and legitimate’ concerns in support of remand.” Id. (citing Sierra Club v. Antwerp, 560
F. Supp. 2d 21, 23 (D.D.C. 2008) (citing cases)). In exercising this discretion, courts should take

into account whether the party opposing voluntary remand will be “unduly prejudiced.” Am. Forest

Res. Council v. Ashe, 946 F. Supp. 2d 1, 47 (D.D.C. 2013). In general, however,

       When an agency seeks a remand to take further action consistent with correct legal
       standards, courts should permit such a remand in the absence of apparent or clearly
       articulated countervailing reasons. Otherwise judicial review is turned into a game in
       which an agency is “punished” for procedural omissions by being forced to defend
       them well after the agency has decided to reconsider.

Citizens Against Pellissippi Parkway Extension, Inc. v. Mineta, 375 F.3d 412, 416 (6th Cir. 2004).

If an agency decides to seek voluntary remand in order to reconsider its action, “it should move the

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court to remand or to hold the case in abeyance pending reconsideration by the agency.” Anchor

Line Ltd. v. Fed. Mar. Comm’n, 299 F.2d 124, 125 (D.C. Cir. 1962).

       III.    Analysis

       FinCEN has properly moved this Court for a voluntary remand to reconsider its Final Rule

and for a stay of proceedings while it undertakes a new notice-and-comment process and

reevaluates potential alternatives. The question for the Court is whether FinCEN has identified

substantial and legitimate concerns in support of a voluntary remand, Carpenters Indus. Council,
734 F. Supp. 2d at 132, and whether a voluntary remand would conserve the Court’s and the

parties’ time and resources, Ethyl Corp., 989 F.2d at 524, without causing undue prejudice to

FBME, Am. Forest Res. Council, 946 F. Supp. 2d at 47. The Court concludes that FinCEN has

identified concerns that may be alleviated by a voluntary remand, that such a remand will serve the

interests of judicial economy, and that FBME will not be prejudiced as a result. It will therefore

grant FinCEN’s motion and allow the agency to correct its own mistakes.

       Although FinCEN does not directly confess error, it recognizes that the Court has identified

serious “procedural concerns” with the Final Rule, Mot. Remand 1, and it agrees that the

“record . . . needs to be supplemented,” Defs.’ Reply 2. These concerns include both potential

inadequacies in the notice-and-comment process as well as FinCEN’s seeming failure to consider

significant, obvious, and viable alternatives to the sanction it imposed. Id. at 4. Moreover, FinCEN

does not challenge the preliminary injunction, nor does it wish to continue to defend its previous

rulemaking. FinCEN has thus acknowledged substantial and legitimate concerns with the

promulgation of its Final Rule. Nonetheless, the Court, in its discretion, must decide whether

voluntary remand is appropriate under the circumstances presented here.

       Given the procedural posture of this case, interests of judicial economy counsel in favor of a

voluntary remand. FinCEN now recognizes the need to provide “plaintiffs notice and opportunity

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to comment on the unclassified, non-privileged evidence that was not available to them prior to the

issuance of the rule” and to “more explicit[ly] consider[] . . . alternative measures if it finds FBME

to be of primary money laundering concern.” Mot. Remand 4–5. Continuing to litigate those issues

while FinCEN proposes to go back and address potential errors would be inefficient. The Court—

and the parties—also have no way of knowing whether FinCEN will ultimately reach the same

result on remand. As FinCEN notes, FBME (and the public) “would have another opportunity to

present new evidence and possibly change the outcome of the rulemaking, as FinCEN’s decision

would be a new evaluation of the totality of the evidence before it.” Id. at 5. Should FinCEN

decide again to promulgate a rule adverse to FBME, then FBME will have the opportunity to

challenge the amended rule before this Court.

       FBME nevertheless contends that it would suffer prejudice from a voluntary remand. It first

argues that it is entitled to receive final judgment on the merits of its claims and that a voluntary

remand would interfere with its right to judicial review. Pls.’ Opp’n 6. Citing cases dealing with

the doctrine of mootness, it argues that FinCEN should not be allowed to “destroy [this] court’s

jurisdiction by voluntarily ceasing to engage in offending behavior” and thus “evade this Court’s

forthcoming final judgment.” Id. at 7. FBME ignores, however, that FinCEN “agree[s] the Court

would retain jurisdiction over this suit,” Mot. Remand 2, and that the agency does “not request that

the Court decline to issue a final judgment,” Pls.’ Reply 3. All that FinCEN seeks is a temporary

stay to allow it to pursue further administrative action to remedy the likely procedural defects that

this Court identified in FinCEN’s prior rulemaking. Id. FBME therefore need not fear that the

Court, by granting FinCEN’s present motion, will lose jurisdiction over the case or that it will be

unable to render a final judgment.

       Relatedly, FBME advances a policy-based argument that granting FinCEN’s motion would

thwart the development of precedent in administrative law. In FBME’s view, “FinCEN’s instant

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approach to voluntary remand is especially novel and dangerous,” because allowing for voluntary

remand under these circumstances “would . . . prevent judicial precedent from establishing

principled limits” on agency behavior. Defs.’ Opp’n 9. This argument is flawed for three reasons.

First, while the findings and conclusions in the Court’s preliminary-injunction order may not have

precedential value as to the ultimate merits of FBME’s claims, see Fund for Animals v. Mainella,

335 F. Supp. 2d 19, 27 (D.D.C. 2004), the Court made several holdings—essential to its

determination on FBME’s motion for a preliminary injunction—that may guide future courts in

similar cases and FinCEN’s own behavior in future rulemakings. See FBME Bank Ltd., 2015 WL
5081209, at *8 (“Given FinCEN’s reliance on [certain] non-classified, non-protected documents, its

failure to publicly disclose them during the notice-and-comment period appears to constitute a

procedural error under the [Administrative Procedure Act].”); id. at *10 (“FinCEN’s authority to

impose conditions was an obvious potential alternative to a full prohibition on opening or

maintaining correspondent accounts on behalf of FBME.”). Although “[c]ase law in this area is

limited,” id. at *8, the reasoning the Court articulated in its prior opinion has begun to fill that void.

       Second, despite FMBE’s suggestion to the contrary, Pls.’ Opp’n 9, courts have granted

voluntary-remand motions following issuance of preliminary injunctions, see Defs.’ Reply 4. In

Citizens Against Pellissippi Parkway Extension, for example, the Sixth Circuit held that the district

court abused its discretion in denying an agency’s motion for voluntary remand, which would have

allowed the agency to “cure the very legal defects asserted by plaintiffs,” in the wake of a

preliminary injunction. 375 F.3d at 416. And in Sierra Club v. Kempthorne, No. 07-0216, 2009
WL 323072 (S.D. Ala. Feb. 9, 2009), a district court granted federal defendants’ motions for

voluntary remand following the court’s entry of a preliminary injunction against them and retained

jurisdiction during the pendency of remand proceedings. Id. at *1. So, while not necessarily

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common, there is nothing extraordinary about granting a motion for voluntary remand after

preliminarily enjoining an agency rule.

       Third, rather than set a dangerous precedent, FinCEN’s proposed course of action

demonstrates proper agency conduct when an agency is confronted with its own procedural

mistakes: offering, in good faith, to take further action to remedy those mistakes consistent with the

correct legal standards. FBME complains that FinCEN has taken “the most begrudging and tactical

[approach] imaginable,” Pls.’ Opp’n 9, making its proposal not in good faith, but out of desperation

to avoid having to litigate to final judgment. It correctly notes that FinCEN did not raise the

possibility of a voluntary remand until the Court issued a preliminary injunction against it. Yet

FinCEN, recognizing the Court’s “procedural concerns,” Mot. Remand 1, is now willing not just to

revisit the rule, but to accept in the interim the Court’s injunction preventing the rule from going

into effect. FinCEN has not made the sort of “novel, last second motion to remand,” Lutheran

Church-Missouri Synod v. FCC, 141 F.3d 344, 349 (D.C. Cir. 1998), that could indicate bad faith.

       In a similar vein, FBME claims that it is “entitled to vacatur of the Final Rule whereas

FinCEN proposes now to leave the Final Rule intact,” and that therefore “voluntary remand . . . [is]

a non-starter.” Pls.’ Opp’n 10. FBME cites, for instance, Chlorine Chemistry Council v. EPA, 206
F.3d 1286 (D.C. Cir. 2000), for the proposition that denial of voluntary remand is appropriate when

an agency makes “no offer to vacate the rule” and the agency’s “proposal would have left

[plaintiffs] subject to a rule they claimed was invalid.” Id. at 1288. Here, however, FinCEN’s

proposal would not leave FBME subject to a rule it claims is invalid. Indeed, FinCEN

acknowledges that “the rule is currently enjoined,” Mot. Remand 2, and will continue to be

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enjoined until the Court reaches final judgment, Order Granting Mot. Prelim. Inj., ECF No. 32.

FBME is thus unlikely to be prejudiced by a voluntary remand under these circumstances.

        FBME also contends that there are “specific disputes that are certain to vex remand

proceedings unless they are resolved first.” Pls.’ Opp’n 15. In addition to rehashing the issue of

whether FinCEN can properly rely on Suspicious Activity Reports (“SARs”), id. at 22–25, FBME

complains that FinCEN may “rely on unspecified categories (not just SARs) of unclassified

information without giving FBME any notice of what it is, any opportunity to respond, and any

opportunity to contest FinCEN’s claimed basis for the withholding,” id. at 15. But FinCEN has

assured the Court that this unclassified information “will likely be made available in redacted form

during the proceedings on remand” and that any “redactions [made to documents containing that

information] will be limited and will not remove any substantive information related to the

Plaintiffs.” Defs.’ Notice, ECF No. 47. The Court is satisfied that on remand FinCEN will fulfill

its obligations under the Administrative Procedure Act to disclose unclassified information not

protected by the Bank Secrecy Act on which it intends to rely.

        For the foregoing reasons, the Court concludes that a voluntary remand and stay of

proceedings are appropriate. Therefore, it is hereby

        ORDERED that [38] FinCEN’s Motion to Remand is GRANTED. It is further

        ORDERED that, no later than November 30, 2015, FinCEN will publish notice of its intent

to reopen the Final Rule and provide relevant unclassified materials to plaintiffs and the public. It

is further

        ORDERED that the deadline for comments on the reopened Final Rule shall be set for no

later than two months following FinCEN’s notice of intent to reopen the Final Rule. It is further

        ORDERED that, no later than two months following the deadline for comments, FinCEN

will render a decision on the reopened Final Rule. It is further

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          ORDERED that, no later than two weeks after FinCEN renders a decision on the reopened

Final Rule, the parties shall meet and confer and submit to the Court a joint status report. It is

further

          ORDERED that this action be STAYED pending completion of the remand proceedings.

          SO ORDERED.

                                                              CHRISTOPHER R. COOPER
                                                              United States District Judge

Date:      November 6, 2015

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