Can States Prevent Release of Iran Sanctions through Federal Litigation?

by Jerry Gordon (October 2015)

IAEA Director General Yukia Amano and Iranian President Hassan Rouhani
Tehran, September 20, 2015
Source: AP

President Obama achieved what ultimately could become a Pyrrhic victory when Senate minority Democrats blocked two resolutions offered by the Senate Republican Majority. They rejected the Iran nuclear pact under the deadline set by the Corker–Cardin Iran Nuclear Agreement Review Act, (“Corker-Cardin”) September 17, 2015. It is a Pyrrhic victory as Iranian President Rouhani has refused to hold discussions with President Obama at the UN General Assembly meetings that began on September 28^th in New York City. Supreme Leader Ayatollah Khamenei declared that the Iran nuclear pact achievement would not foster the hoped for development of further relations between the US and the Islamic Republic. On September 20^th, UN Nuclear watchdog agency chief, Yukia Amano met with Iranian President Hassan Rouhani in Tehran to receive soil and environmental samples taken by Iranian inspectors at the disputed Parchin military test site under IAEA remote monitoring. These arrangements were protested during Congressional hearings with requests for delivery of side agreements between the IAEA and Iran. The delivery of those self inspections samples starts the clock on ultimate release of sequestered funds held by largely Asian banks under international and US sanctions legislation. Iran has already received a total of $72 billion in released funds under terms of the interim JPOA agreement of November 24, 2013 ($12.9 Billion) and Swiss Banks which lifted $60+ billion in sequestered Iranian Central Bank hard currency reserves within a few days of UN Security Council unanimous approval of the JCPOA on July 22, 2015.

The Senate Republican majority failed in a last move to upend the Iran Nuclear deal. As reported by the AP, a Senate vote on a resolution requiring Iran to recognize Israel as a quid pro quo to lifting sanctions failed once again to reach the 60-vote threshold. The vote was 53 to 45 before the deadline of September 17^th under Corker-Cardin. Senate Majority Leader Mitch McConnell (R-KY) said, in an AP report on the Administration’s start to implement the JCPOA, the deal “likely will be revisited by the next commander-in-chief.” The AP reported House Speaker John Boehner suggesting that possible litigation might be an option. Other Senators and Members of Congress have suggested renewal of the Iran Sanctions Act of 2006 before it sunsets in 2016. Yet, given the turmoil in Congress following the announced resignation of House Speaker Boehner and other roiling budgetary and debt limit issues, there is little political will to engage in further actions. Possible Congressional litigation over the President’s handling of the Iran nuclear deal is unrealistic given no Republican Super Majority in the Senate. However, as we shall see there is the distinct possibility of State Federal litigation barring further release of sequestered funds.

We have published similar proposals by Sklaroff and Bender for Senate litigation over the President’s handling of the Iran nuclear pact. The Sklaroff-Bender proposal required the Senate to change Rule 22 to achieve cloture to cut off filibusters by minority Democrats, before Majority leader Mitch McConnell (R-KY) might offer up a resolution for the Iran nuclear agreement to be dealt with as a treaty under Article II, Section 2 of the Constitution. That requires a two thirds vote under the advice and consent of the Senate. However, to initiate that would have required McConnell to make changes in Rule 22 at the start of the 114^th Congress in January 2015. Currently, to cut off debate requires 60 votes. Congressional Research Service reports on this issue indicated previous proposals reducing the threshold down in steps to a simple majority vote. A number of prominent conservative activists and organizations advocated such a change at the start of the new Congress but McConnell pushed back, arguing that Democrats would use the new rules once they returned to the Majority to quash Republican concerns in the future.

David B. Rivkin, Esq.

The Proposal for State Litigation over the Iran Deal

On the September 20, 2015 Lisa Benson Show we interviewed, David B. Rivkin, Jr. a noted Constitutional litigator and a partner in the Washington, DC office of the Baker Hostetler law firm. The topic was “Can the Senate Sue the President over his handling of the Iran Nuclear Deal?” Rivkin is also a Senior Fellow of the Foundation for Defense of Democracies (FDD). He served in a variety of legal and policy positions in the Reagan and George H. W. Bush Administrations, including stints at the White House Counsel’s office, Office of the Vice President and the Departments of Justice and Energy. While in the government, he handled a variety of national security and domestic issues, including environmental and energy policy, tax, trade and constitutional issues. He is a much sought after commentator on matters of constitutional and international law, as well as foreign and defense policy.

Rivkin recently won a landmark decision in the DC Federal District Court in the matter of House v. Burwell over the supremacy of Congressional appropriations authorities with regard to implementation of the Affordable Care Act. That decision affirmed Congressional standing to bring such an action. He co-authored a September 6, 2015 Washington Post opinion article with Rep. Mike Pompeo (R-KS) suggesting a possible suit  by the Senate against the President for non–compliance with the language of Corker-Cardin requiring delivery of all requisite documents including the privileged IAEA side agreements. A September 10, 2015 Wall Street Journal (WSJ) op ed by Rivkin and Elizabeth Price Foley discussed how the successful House v. Burwell suit gave standing to Congress to bring possible litigation against the President. Moreover, the suit in the ACA matter had survived a motion to dismiss by the Administration.

Watch this mid-April 2015 WSJ interview with David B. Rivkin. He presciently predicted the problems confronting Congress under Corker-Cardin to pass resolutions rejecting the JCPOA:

Rivkin and colleague Lee Casey wrote about that possibility in a July 26, 2015, WSJ opinion article, “The Lawless Underpinnings in the Iran Nuclear Deal.” They argued:

The Obama end-run around the Constitution could yet be blocked if states exercise their own sanctions regimes … The administration faces another serious problem because the deal requires the removal of state and local Iran-related sanctions. That would have been all right if Mr. Obama had pursued a treaty with Iran, which would have bound the states, but his executive-agreement approach cannot pre-empt the authority of the states.

That leaves the states free to impose their own Iran-related sanctions, as they have done in the past against South Africa and Burma. The Constitution’s Commerce Clause prevents states from imposing sanctions as broadly as Congress can. Yet states can establish sanctions regimes—like banning state-controlled pension funds from investing in companies doing business with Iran—powerful enough to set off a legal clash over American domestic law and the country’s international obligations. The fallout could prompt the deal to unravel.

An explanation of the JCPOA State Sanctions impasse was outlined in a Steptoe International Compliance blog on August 15, 2015, “The JCPOA and State Sanctions” by Bibek Pandy:

The Iran nuclear deal (JCPOA) does not say much about Iran sanctions imposed by US state governments. Almost two dozen states (including New York, California and Florida) have passed laws that in some form (i) ban the awarding of government contracts to companies tied to Iran, and/or (ii) prohibit public funds from investing in companies doing certain types of business in Iran. These state restrictions can be more extensive in scope than US federal sanctions. For example, some state restrictions (e.g. in Florida) attach automatically to the parent entity of the company who engages in certain Iran activities. Laws in many states provide for the lifting of Iran sanctions when the President removes Iran from the list of countries that support terrorism; but the JCPOA does not do that, and, as a result, Iran sanction laws in most states will remain intact.

[…]

Companies considering engaging in activity authorized under the JCPOA need to be still mindful of non-federal Iran sanctions. In particular, state government contractors with Iran links should review state procurement laws before engaging in activities permitted by the JCPOA. Furthermore, contractors can face civil penalties in many states for providing false certifications related to their Iran activities. The bar for Iran-related disqualification in some states is relatively low, and the JCPOA does not change that.

During the Lisa Benson Show interview, Rivkin suggested that the President had violated Coker-Cardin by not delivering all of the requisite information, including the IAEA side agreements with Iran. As a result of this violation, the congressional review period has never started and, consistent with the statutory language of Corker-Cardin, the President’s authority to lift any sanctions against Iran or unblock any frozen Iranian funds has been vitiated. Rivkin expressed the view that, if the President were to indicate that he intends to lift sanctions, or unblock frozen assets, this decision can be challenged in court, either by the House or the Senate, or the States. Listen to the Rivkin interview on the Lisa Benson Show sound cloud, here.

The following are excerpts from the Lisa Benson Show interview with Rivkin presenting his rationale for state litigation.

Why has Corker-Cardin failed?

Corker-Cardin was a fundamentally wrong effort by congress to deal with a lawless behavior by the President. This was a major international undertaking by the United States; dealing with Iran’s nuclear program, and sanctions for well over a decade, even before this administration came into office.

All major international undertakings by the United States should be dealt with as a treaty. The framers were very clear on that. One of the reasons it was done is to make sure that all such international undertakings enjoy broad acceptance, which is kind of ironic given the unpopularity of this particular deal. My view was that this Corker-Cardin approach was exactly wrong, because it let the arrangement between the two political branches requiring both the House and the Senate to reject a deal by veto proof super majority, versus the President coming to the Senate and submitting as a treaty.

My view at the time was it was not going to turn out well. Well, it didn’t turn out well. What I didn’t expect was that the President, having gotten this incredible bi-partisan concession with Corker-Cardin, would not even bother complying with it.

The quid pro quo would be that the President gets every aspect of the Iranian deal, every side agreement, every arrangement, put it before congress, then the vote can take place. Of course, the key side agreement dealing with the IAEA –Iran self inspections weren’t submitted.

Could Congress have sued the President?

The President violated the Constitution in my opinion. First, by not submitting the Iranian nuclear deal as a treaty, and second, he violated the Constitution by not complying with Corker-Cardin and not giving the Congress all elements of the agreement, including the IAEA-Iran side agreements.

Either the House or the Senate could sue the President if they so choose, because what the President has done violates separation of powers and infringes on the institutional prerogatives. The Senate, indeed, would be a perfect plaintiff. 

Frankly the Senate is not going to do that, in part because a motion – in order to have standing to challenge this  – would have to be an institutional authorization as a resolution passed by the Senate, similar to the House resolution to bring about a challenge to Obama Care. That resolution in the Senate would be subject to filibuster; therefore, it would not happen.

Why do the states have standing to sue the President?

The states that are interested in pursuing this can certainly go forward in part, because of the viability of state-level sanctions and a number of states have put forward sanctions of their own.

At least 30 states have sanctions in place today, including blue and red states. Now that, of course, happened in the context of the 2010 robust federal sanction law. You have states including New York, Florida and California doing that. Now given how partisan the Iran nuclear deal has become something tells me that New York and California are not going to lead on this.

A number of Attorney Generals and Governors can. They should and will be interested in this and you don’t need many states. You can have a couple of states doing that. However, they have to have a very carefully thought out sanctions package in place and they have to put it forward under state law. Then they can take the position that the legality of a sanctions package depends upon what is the federal government’s policy toward Iran.

By the way you don’t even need state legislatures. A number of states have Constitutions that allow governors to pass sanctions by executive order. They don’t even need to pass it as legislation. It is a question of individual state Constitutions. It could be done in a matter of weeks if you had governors who were interested in it.

My sense, by the way, is that some governors, including Governor Scott, of Florida, have spoken on this issue. The fact that things are not happening in Washington does not mean that it’s not happening elsewhere in the country. .. I have very high respect for Florida Attorney General Pam Bondi and Governor Scott.

Florida Governor Rick Scott Attorney General Pam Bondi

Is there evidence of gubernatorial support for possible sanctions litigation?

In the run up to the Congressional standoff with the President on the Iran nuclear pact, 14 Republican governors led by Florida Governor Rick Scott sent a letter to  the President opposing the Iran nuclear deal. As noted in the Miami Herald “Naked Politics” blog, “The letter focuses concern about how it would affect pension divestment policies and contracting restrictions.” The governors’ letter supported the position articulated by David Rivkin:

Paragraph 25 of the Iran nuclear agreement provides that the federal government will “actively encourage” states to lift state-level sanctions such as the divestment and contracting restriction laws,” the letter states. “While Secretary Kerry confirmed in testimony before the House Foreign Affairs Committee that the agreement will not preempt state law because it is not a treaty, we are concerned about what steps your Administration may take to attempt to implement paragraph 25. Therefore, we wish to make it clear to you in advance of any efforts to implement paragraph 25 that we intend to ensure that the various state-level sanctions that are now in effect remain in effect. These state-level sanctions are critically important and must be maintained.’

The letter was signed by Govs. Scott, Doug Ducey of Arizona, Asa Hutchinson of Arkansas, Mike Pence of Indiana, Bobby Jindal of Louisiana, Phil Bryant of Mississippi, Chris Christie of New Jersey, Jack Dalrymple of North Dakota, John Kasich of Ohio, Mary Fallin of Oklahoma, Nikki Haley of South Carolina, Dennis Daugaard of South Dakota, Greg Abbott of Texas, Gary Herbert of Utah, and Scott Walker of Wisconsin.

Conclusion

Following the Lisa Benson Show, David Rivkin and this writer held a conversation to explore the possibilities of state level initiatives. Florida Attorney General (AG) Pam Bondi led a filing made in the U.S. District Court for the Northern District of Florida in Pensacola on behalf of Florida and more than two dozen other State AGs endeavoring to overturn the Affordable Care Act. Senior U.S. District Judge Roger Vinson heard oral arguments and ruled on the matter sending it ultimately to the 11th Circuit in Atlanta. Rivkin thinks that a similar action could be mounted by Florida and a number of the 14 states’ Attorney Generals, whose Governors signed a letter penned by Governor Scott opposing the Iran nuclear pact. The filing might be based on existing Florida and other state sanction laws passed under the federal 2010 Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) supplemented by an Executive Order. The States’ cause of action, according to Rivkin, could be filed in a matter of weeks, potentially forestalling the release of sanctions before the implementation date under the JCPOA, December 15, 2015. Thus the Rivkin state litigation proposal, if implemented promptly, might possibly stop the release of US Iran nuclear sanctions. Further, Florida is well positioned to take the lead on this important litigation.

 

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Also see Jerry Gordon’s collection of interviews, The West Speaks.

 

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