RALLS CORPORATION v. COMMITTEE ON FOREIGN INVESTMENT …€¦ · RALLS CORPORATION v. COMMITTEE ON FOREIGN INVESTMENT IN THE UNITED STATES et al, Docket No. 1:12-cv-01513 (D.D.C

RALLS CORPORATION v. COMMITTEE ON FOREIGN INVESTMENT IN THE UNITED STATES etal, Docket No. 1:12-cv-01513 (D.D.C. Sept 12, 2012), Court Docket

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

_____________________________________ ) RALLS CORPORATION, ) 318 Cooper Circle ) Peachtree City, GA 30269 ) ) Plaintiff, ) v. ) ) COMMITTEE ON FOREIGN ) INVESTMENT IN THE UNITED STATES, ) 1500 Pennsylvania Avenue, N.W. ) Washington, D.C. 20220 ) Case No. _______________ ) and ) ) TIMOTHY F. GEITHNER, ) in his official capacity as ) Secretary of the Treasury and ) Chairperson of the Committee on ) Foreign Investment in the United States, ) 1500 Pennsylvania Avenue, N.W. ) Washington, D.C. 20220 ) ) Defendants. ) _____________________________________)

COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF

Plaintiff, Ralls Corporation, by and through its undersigned attorneys, alleges as follows:

INTRODUCTION

1. This is a civil action challenging the issuance of an order by the Committee on

Foreign Investment in the United States (“CFIUS”) as violating the Administrative Procedure

Act and the United States Constitution. CFIUS is an interagency committee established under

Section 721 of the Defense Production Act of 1950, as amended, 50 U.S.C. app. § 2170

(“Section 721”). Its purpose is to review transactions that could result in the control of a U.S.

Case 1:12-cv-01513 Document 1 Filed 09/12/12 Page 1 of 22

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business by a foreign person in order to determine the effect of such transactions on the national

security of the United States.

2. CFIUS’s powers under Section 721 and related executive orders and regulations

are limited. It may only review certain “covered transactions” that could result in foreign control

of a person engaged in interstate commerce in the United States. It may not bar a covered

transaction from taking place. And, like all agencies, it may not arbitrarily or capriciously render

determinations absent any evidence or explanation or by unexpectedly and inexplicably

abandoning a prior position or policy, and it may not engage in the unconstitutional deprivation

of property absent due process.

3. CFIUS violated the foregoing principles and well-established law when it issued

an order subjecting plaintiff Ralls Corporation to draconian obligations in connection with

Ralls’s acquisition of four small Oregon companies whose assets consisted solely of windfarm

development rights, including land rights to construct the windfarms, power purchase

agreements, and necessary government permits. Without identifying any evidence or providing

any explanation, CFIUS concluded that the acquisition was a “covered transaction” subject to its

authority and that “there are national security risks to the United States that arise as a result of”

the acquisition. Moreover, rather than propose measures that would have mitigated the

purported (yet unidentified) national security risks, CFIUS—again without any evidence or

explanation—instead required Ralls immediately to cease all construction and operations and

remove all items from the relevant properties; prohibited Ralls from having any access to the

properties; and forbade Ralls from selling the properties until all items had been removed,

CFIUS was notified of the buyer, and CFIUS did not object to the buyer. CFIUS asserted that

these obligations were enforceable via injunctive relief, civil penalties, and criminal penalties.


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4. Ralls brings this action to obtain a declaration that CFIUS’s conduct was unlawful

and unauthorized and to enjoin enforcement of its order.

JURISDICTION AND VENUE

5. This Court has jurisdiction over this case pursuant to 28 U.S.C. §§ 1331 and 2201.

6. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b) and (e).

PARTIES

7. Plaintiff Ralls Corporation (“Ralls”) is a Delaware corporation that is privately

owned by two Chinese nationals, Messrs. Dawei Duan and Jialiang Wu. Mr. Duan is the CFO of

the Sany Group (“Sany”), a Chinese global manufacturing company. Mr. Wu is a Vice President

of Sany and also the General Manager of Sany Electric Company, Ltd. (“Sany Electric”), a

wholly-owned Chinese subsidiary of Sany.

8. Defendant CFIUS is a “multi agency committee” established pursuant to

Executive Order No. 11858 (May 7, 1975) in order to “carry out” Section 721. 50 U.S.C. app.

§ 2170(k)(1).

9. Defendant Timothy F. Geithner, the Secretary of the Treasury, is the Chairperson

of CFIUS. Section 721 provides that the Secretary of the Treasury “shall serve as the

chairperson” of CFIUS. Id. § 2170(k)(3). Mr. Geithner is sued in his official capacity.

FACTS

I. THE COMMITTEE ON FOREIGN INVESTMENT IN THE UNITED STATES

10. CFIUS is an interagency committee that reviews transactions that could result in

the control of a U.S. business by a foreign person in order to determine the effect of such

transactions on the national security of the United States.

11. CFIUS’s authority derives from Section 721, see 50 U.S.C. app. § 2170(k), and


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Executive Order 11858 (May 7, 1975), as amended by Executive Order 13456 (Jan. 23, 2008).

12. The Secretary of the Treasury serves as Chairperson of CFIUS and is also a

member. The other members of CFIUS are the heads of the following eight departments and

offices: Department of Justice, Department of Homeland Security, Department of Commerce,

Department of Defense, Department of State, Department of Energy, Office of the U.S. Trade

Representative, and Office of Science and Technology Policy.

13. The Director of National Intelligence and the Secretary of Labor are non-voting

members of CFIUS.

14. Additionally, the following five offices observe and sometimes participate in

CFIUS’s activities: Office of Management and Budget, Council of Economic Advisors, National

Security Council, National Economic Council, and Homeland Security Council.

15. Section 721 authorizes CFIUS to “review” and “investigat[e]” a “covered

transaction” to determine its effects on national security. 50 U.S.C. app. § 2170(b)(1)(A)(i),

(2)(A).

16. Section 721 defines “covered transaction” as “any merger, acquisition, or

takeover … by or with any foreign person which could result in foreign control of any person

engaged in interstate commerce in the United States.” Id. § 2170(a)(3).

17. The CFIUS process begins when parties to a proposed or pending covered

transaction jointly file a voluntary notice with CFIUS or when CFIUS decides to review a

covered transaction sua sponte.

18. If the parties file a voluntary notice, the voluntary notice must include the

information required by 31 C.F.R. § 800.402, including “a summary setting forth the essentials

of the transaction” and information about the parties involved. The notice must also include


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detailed information about foreign persons and foreign governments involved in the transaction.

19. Upon receiving the voluntary notice, CFIUS “shall review the covered transaction

to determine the effects of the transaction on the national security of the United States.” 50

U.S.C. app. § 2170(b)(1)(A)(i). In so doing, CFIUS “shall consider” eleven factors specified in

subsection (f) of Section 721. Id. § 2170(b)(1)(A)(ii), (f).

20. CFIUS’s review “shall be completed before the end of the 30-day period

beginning on the date of the acceptance of” the voluntary notice. Id. § 2170(b)(1)(E).

21. CFIUS may request additional information from the parties during the 30-day

review period, and the parties must provide the requested information within three business days.

22. In addition to reviewing covered transactions, CFIUS “shall,” under certain

circumstances, also “conduct an investigation of the effects of a covered transaction on the

national security of the United States.” Id. § 2170(b)(2)(A). The circumstances triggering an

investigation are defined in Section 721 and 31 C.F.R. § 800.503. Any such investigation must

be completed within 45 days of its commencement. 50 U.S.C. app. § 2170(b)(2)(C).

23. CFIUS may “negotiate, enter into or impose, and enforce any agreement or

condition with any party to the covered transaction in order to mitigate any threat to the national

security of the United States that arises as a result of the covered transaction.” Id.

§ 2170(l)(1)(A).

24. Section 721 also provides that the President “may take such action for such time

as the President considers appropriate to suspend or prohibit any covered transaction that

threatens to impair the national security of the United States.” Id. § 2170(d)(1). The President

“shall announce the decision on whether or not to take action … not later than 15 days after the

date on which an investigation … is completed.” Id. § 2170(d)(2). The President may take such


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action only if, among other things, he finds that existing provisions of law, other than Section

721 and the International Emergency Economic Powers Act, do not, in his judgment, provide

adequate and appropriate authority for the President to protect the national security.

25. Executive Order 11858 (as amended by Executive Order 13456) also provides

that CFIUS “shall send a report to the President requesting the President’s decision with respect

to a review or investigation of a transaction” in the following three circumstances: (i) CFIUS

“recommends that the President suspend or prohibit the transaction”; (ii) CFIUS “is unable to

reach a decision on whether to recommend that the President suspend or prohibit the

transaction”; or (iii) CFIUS “requests that the President make a determination with regard to the

transaction.”

26. 31 C.F.R. § 800.506 provides that “upon completion or termination of any

investigation,” CFIUS “shall send a report to the President requesting the President’s decision”

under the same three circumstances as Executive Order 11858.

II. THE TERNA-RALLS TRANSACTION

27. Terna Energy USA Holding Corporation (“Terna”) is a Delaware corporation

formed in December 2010 to acquire and act as a holding company for wind energy projects in

the United States. Terna is a subsidiary of Terna Energy SA, a publicly traded renewable energy

company listed on the Athens Stock Exchange.

28. Prior to March 2012, Terna held the membership interests in four Oregon

windfarm projects, all Oregon limited liability companies: Pine City Windfarm, LLC; Mule

Hollow Windfarm, LLC; High Plateau Windfarm, LLC; and Lower Ridge Windfarm, LLC

(collectively, the “Project Companies”). The Project Companies were originally formed in 2009

by Oregon Windfarms, LLC, an Oregon limited liability company owned by U.S. citizens.


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29. The Project Companies’ assets consisted solely of the land rights to construct the

windfarms, power purchase agreements, transmission interconnection agreements and ancillary

agreements with other companies, agreements for the management and use of shared

interconnection facilities with the owners of nearby windfarms, and the government permits

necessary to construct a commercial windfarm.

30. In March 2012, Terna sold its membership interests in the Project Companies to

Intelligent Wind Energy, LLC (“IWE”), a Delaware limited liability company that was owned by

U.S. Innovative Renewable Energy, LLC (“USIRE”), a Delaware limited liability company

owned by a U.S. citizen. USIRE then sold IWE to Ralls.

31. Ralls’s primary business purpose to date has been to try and identify U.S. market

opportunities and help develop wind energy projects for which Sany Electric’s wind turbine

generators can be used.

32. Once constructed, Ralls’s windfarms will consist of four separate 10 megawatt

(“MW”) windfarms with a total of twenty 2.0 MW wind turbine generators (five turbines per

windfarm), plus related systems to allow for power production and interconnection to the

PacifiCorp transmission grid in the western United States under long-term contracts with

PacifiCorp.

33. The Project Companies will not control or have access to PacifiCorp’s

transmission grid.

34. PacifiCorp itself owns thousands of MWs of wind energy generating facilities,

and nearly 10,600 MW of total generating assets. Once constructed, Ralls’s 40 MW of wind-

generated power will comprise approximately 0.37% of PacifiCorp’s total generating capacity,

and approximately 2.3% of its wind energy generating capacity.


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35. In 2010 and 2011—prior to Ralls’s acquisition of the Project Companies—the

Federal Aviation Administration (“FAA”) issued “Determinations of No Hazard” for each of the

twenty planned turbines at the locations where the Project Companies’ windfarms were to be

sited. An FAA “Determination of No Hazard” is tantamount to FAA approval.

36. The FAA’s review process included review by the Department of Defense. The

purpose of the Department of Defense review is to “prevent, minimize, or mitigate adverse

impacts on military operations, readiness and testing.” Mission Statement of the DOD Siting

Clearinghouse, Office of the Deputy Under Secretary of Defense, Installations and Environment.

37. Shortly after Ralls acquired the Project Companies, the United States Navy

expressed concerns with regard to the location of one of the four windfarm projects, the “Lower

Ridge Windfarm.”

38. The Navy advocated moving the Lower Ridge Windfarm to “reduce airspace

conflicts between the Lower Ridge wind turbines and low-level military aircraft training.”

39. Although the Navy indicated that it had no authority to require such a move, Ralls

agreed, at significant expense and effort, to move the Lower Ridge Windfarm to a new location.

40. Moving the Lower Ridge Windfarm to its new location required Ralls to obtain

additional approvals from the Oregon Public Utility Commission. The Navy wrote to the

Oregon Public Utility Commission on Ralls’s behalf, emphasizing its concern that the placement

of the wind turbines at either location “may have negative security implications” but

recommending that the requested approvals issue. In the same letter, the Navy added that it

“appreciat[ed]” Ralls’s “cooperation and consideration” in agreeing to move the Lower Ridge

Windfarm, particularly given Ralls’s “time constraints” in completing the windfarms.


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III. CFIUS’S PROHIBITION OF THE TERNA-RALLS TRANSACTION

41. On June 28, 2012, Ralls and Terna submitted a voluntary notice to CFIUS

informing CFIUS of Ralls’s recent acquisition of the Project Companies. Ralls included all of

the information required by 31 C.F.R. § 800.402(c), including facts set forth above.

42. In the weeks that followed submission of the voluntary notice, CFIUS asked Ralls

and Terna a number of follow-up questions, as to all of which Ralls and Terna timely provided

responses.

43. On July 25, 2012, CFIUS issued an Order Establishing Interim Mitigation

Measures regarding the Terna-Ralls transaction on July 25, 2012 (“Order”). See Ex. A.

44. The Order stated that CFIUS had determined that the Terna-Ralls transaction was

a “covered transaction” and that “there are national security risks to the United States that arise

as a result of the Transaction.” Id. at 1.

45. The Order stated that, as a result of the CFIUS determination, the “Companies,”

which the Order defined as Ralls and the Project Companies:

“Shall immediately cease all Construction and Operations, and shall not undertake

any further Construction and Operations, at the Properties” (defined as any of the

sites on which the Project Companies proposed to construct windfarms);

“Shall remove all stockpiled or stored items from the Properties no later than July

30, 2012, and shall not deposit, stockpile, or store any new items at the

Properties”; and

“Shall immediately cease all access, and shall not have any access, to the

Properties.” Id.

46. The Order added that “[n]otwithstanding the foregoing, U.S. citizens contracted


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by the Companies and approved by CFIUS may access the site until July 30, 2012, solely for the

purposes of removing any items from the Properties in compliance with” the Order. Id. at 1-2.

47. As authority for its action, CFIUS cited “Section 721, and Executive Order 11858

of May 7, 1975, as amended by Executive Order 13456, 73 Fed. Reg. 4677 (Jan. 23, 2008).” Id.

at 1. CFIUS cited no other authority for its action.

48. The Order provided that it “is enforceable, through injunctive relief, criminal or

civil penalty, or otherwise, pursuant to section 721, the Executive Order, the CFIUS regulations,

18 U.S.C. § 1001, or any other applicable law.” Id. at 2.

49. On July 26, 2012, in a good-faith effort to address CFIUS’s concerns, Ralls

informed CFIUS that it was considering selling the Project Companies, with several American

buyers having expressed interest. Ralls believed that a sale of the Project Companies would

address CFIUS’s concerns in issuing the Order, and it requested CFIUS’s guidance on the

matter.

50. In response to Ralls’s good-faith effort, on August 2, 2012, CFIUS issued an

Amended Order Establishing Interim Mitigation Measures (“Amended Order”). See Ex. B.

51. The Amended Order expanded the definition of “Companies” to include the

Project Companies, Ralls and its subsidiaries, and the Sany Group (including Sany Electric and

Sany Heavy Industries). Id. at 1.

52. The Amended Order also added more prohibitions to the previous Order, stating

that in addition to the prior prohibitions, the Companies:

“[S]hall not deposit, stockpile, or store any new items at the Properties, any lay

down site identified by the Companies in any information or communication

submitted to CFIUS, or at any location that is closer to the R-5701 Restricted


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Airspace than the lay down site that is farthest from the R-5701 Restricted

Airspace”;

“Shall not sell or otherwise transfer or propose, or otherwise facilitate the sale or

transfer to any third party for use or installation at the Properties of any items

made or otherwise produced by the Sany Group”; and

“Shall not complete a sale or transfer of the Project Companies or their assets to

any third party until:

o All items deposited, installed, or affixed (including concrete

foundations) on the Properties subsequent to the acquisition by Ralls

of the Project Companies have been removed from the Properties;

o the Companies notify CFIUS of the intended recipient or buyer;

o the Companies have not received an objection from CFIUS within 10

business days of notification.” Id. at 2.

53. As with the previous Order, the Amended Order cited as authority for its

directives “Section 721, and Executive Order 11858 of May 7, 1975, as amended by Executive

Order 13456, 73 Fed. Reg. 4677 (Jan. 23, 2008).” Id. at 1. As before, the Amended Order cited

no other authority for its directives.

54. Also as with the previous Order, the Amended Order provided that it “is

enforceable, through injunctive relief, criminal or civil penalty, or otherwise, pursuant to section

721, the Executive Order, the CFIUS regulations, 18 U.S.C. § 1001, or any other applicable

law.” Id. at 3.


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COUNT I (Violation of the Administrative Procedure Act—Exceeding Statutory Authority by Prohibiting Transaction and Regulating Foreign Trade)

55. Plaintiff realleges and incorporates by reference the allegations contained in all of

the preceding paragraphs.

56. The Declaratory Judgment Act provides that, in a case of actual controversy

within its jurisdiction, a United States court may declare the rights and other legal relations of

any interested party seeking such declaration. 28 U.S.C. § 2201(a).

57. The Administrative Procedure Act (“APA”) provides that “[a] person suffering

legal wrong because of agency action, or adversely affected or aggrieved by agency action

within the meaning of a relevant statute, is entitled to judicial review thereof.” 5 U.S.C. § 702.

58. The APA also provides that “final agency action for which there is no other

adequate remedy in a court” is “subject to judicial review.” Id. § 704.

59. The APA further provides that a reviewing court shall “hold unlawful and set

aside agency action, findings, and conclusions” found to be, inter alia, “(A) arbitrary and

capricious, an abuse of discretion, or otherwise not in accordance with law; (B) contrary to

constitutional right, power, privilege, or immunity; (C) in excess of statutory jurisdiction,

authority, or limitations, or short of statutory right; [or] (D) without observance of procedure

required by law.” Id. § 706(2).

60. CFIUS constitutes an “agency” whose final actions are reviewable under the

APA.

61. The Amended Order constitutes “final agency action” that is subject to judicial

review. CFIUS has consummated its decisionmaking process by determining that the Terna-

Ralls transaction is a “covered transaction,” that there are national security risks to the United


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States that arise as a result of the transaction, and that severe, prohibitive, and immediate

restrictions are necessary to prevent these purported national security risks. Furthermore, the

Amended Order determines Ralls’s rights and obligations, and legal consequences flow from the

Amended Order: it expressly provides for its enforcement in court, and violating its terms could

expose Ralls to significant penalties. Accordingly, this case is ripe for judicial review.

62. Ralls is suffering legal wrong as a result of the Amended Order because CFIUS

lacks statutory authority to prohibit the Terna-Ralls transaction, versus proposing measures that

mitigate any national security risks.

63. CFIUS’s powers under Section 721 are limited; it may only “negotiate, enter into

or impose, and enforce” an agreement or condition “in order to mitigate any threat to the national

security of the United States that arises as a result of the covered transaction.” Id.

§ 2170(l)(1)(A).

64. By ordering Ralls immediately to cease all construction at the project sites,

remove all equipment from the sites, and cease all access to the sites (including communications

with persons at the sites), CFIUS has not merely mitigated any national security risks associated

with the transaction; its actions are tantamount to prohibiting the transaction entirely, a power

CFIUS does not possess under statute or regulation.

65. Section 721 purports to provide only the President with the extraordinary

authority to suspend or prohibit a transaction, not CFIUS. By issuing the Amended Order,

CFIUS has improperly arrogated this extraordinary power to itself.

66. CFIUS has also exceeded its statutory authority by purporting to restrict

transactions that are not within its purview. Section 1(d) of the Amended Order bars Ralls from

“sell[ing] or otherwise transfer[ring] … to any third party for use or installation at” the


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windfarms “any items made or otherwise produced by the Sany Group.” Ex. B, at 2 (emphases

added). But Section 721 limits CFIUS’s oversight to transactions “by or with any foreign person

which could result in foreign control of any person.” 50 U.S.C. app. § 2170(a)(3) (emphases

added). Because future transactions in which Ralls sells or transfers “items made or otherwise

produced by the Sany Group” would not “result in foreign control of any person,” CFIUS lacks

the authority to impose restrictions on (much less outright bar) such transactions.

67. Similarly, Section 1(e) of the Amended Order bars Ralls from “complet[ing] a

sale or transfer of the Project Companies or their assets to any third party” absent CFIUS

approval. Ex. B, at 2 (emphasis added). But CFIUS lacks the authority to impose restrictions on

Ralls regarding the future sale or transfer of the Project Companies or their assets “to any third

party,” even if it were an American party. CFIUS’s jurisdiction extends only to transactions

“which could result in foreign control.”

68. CFIUS’s limited authority to review transactions resulting in foreign ownership

does not give it the power to regulate foreign trade. Because the obligations in sections 1(d) and

1(f) of the Amended Order do so, CFIUS has exceeded its statutory authority in issuing the

Amended Order, in violation of the APA.

69. To the extent CFIUS may seek further action by the President regarding this

transaction, that action would not prevent judicial review of the Amended Order. Among other

things, any such Presidential action would render CFIUS’s action capable of repetition, yet

evading review, permitting judicial review of the Amended Order.

70. The physical and regulatory takings of Ralls’s property interests constitute

unconstitutional takings in violation of the U.S. Constitution and deprive Ralls of its property

interests absent due process, or at a minimum raise grave doubts about the constitutionality of the


15

government action, though this constitutional question is avoided by a judicial determination that

CFIUS violated the APA in issuing the Amended Order.

71. Likewise, just as federal courts will construe statutes where possible to avoid

serious doubt of their constitutionality, so too CFIUS has an obligation to exercise its powers in a

way that does not raise serious constitutional concerns. CFIUS’s actions in violation of its

statutory authority result in a constitutionally problematic prohibition that is avoided by finding

CFIUS’s conduct in violation of the APA.

COUNT II (Violation of the Administrative Procedure Act—Arbitrary

and Capricious Agency Action)



73. Ralls is suffering legal wrong as a result of the Amended Order because the

Amended Order arbitrarily and capriciously offers literally no evidence or explanation for its

determination that the Terna-Ralls transaction is a “covered transaction,” its determination that

national security risks to the United States arise as a result of the transaction, its determination to

impose prohibitive restrictions on the Terna-Ralls transaction tantamount to barring it outright,

or its determination to impose categorical restrictions when less burdensome alternatives are

available under existing provisions of law that adequately and appropriately protect national

security.

74. The Amended Order instead simply recites, in a conclusory manner, that Ralls’s

acquisition of the Project Companies “constitutes a ‘covered transaction’ for purposes of Section

721,” and that “there are national security risks to the United States that arise as a result of the

Transaction,” and imposes a list of draconian obligations.


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75. This failure to provide any explanation or evidence for CFIUS’s conclusions is a

violation of the APA’s requirement of reasoned decisionmaking, particularly given the lengthy

and detailed list of factors that CFIUS must consider when determining whether a transaction

could harm national security. See 50 U.S.C. app. § 2170(b)(1)(A)(ii), (f).

76. The Amended Order also provides no explanation why CFIUS ignored readily

available, adequate, and appropriate alternative measures short of outright prohibiting the

transaction, including mitigation measures and invocation of 10 U.S.C. § 2663(d), which

provides the Secretary of the Navy with authority to acquire interests in land, such as the

interests in the properties on which the Project would be located, when the need is urgent, the

acquisition is needed in the interest of national defense, and the acquisition is required to

maintain the operational integrity of a military installation.

77. The Amended Order also constitutes arbitrary and capricious action because it

prohibitively restricts Ralls’s acquisition of the Project Companies after the federal government

previously assented to the transaction. Prior to Ralls’s acquisition, the FAA provided

“Determinations of No Hazard” (which included Department of Defense review), and shortly

after Ralls’s acquisition, the Navy objected to the location of one windfarm but assented after

Ralls relocated it at its own cost. The Amended Order rescinds the Navy’s prior assent and

invalidates the FAA’s prior approval, without offering any explanation for this sudden shift in

course.

78. The Amended Order is further arbitrary and capricious in prohibiting Ralls’s

future sales of Sany Group items that would be used at the properties (Section 1(d)) and in

prohibiting Ralls’s future sales of the Project Companies or their assets to any third party absent

CFIUS approval (Section 1(e)). These restrictions and remedies are entirely unrelated to


17

CFIUS’s limited power to review covered transactions and mitigate purported national security

risks.

79. As a result of this and all other legal wrongs wrought by the Amended Order,

Ralls has incurred significant injury. Ralls is immediately prohibited from undertaking any

further construction or operations on its property, it must immediately remove all of its

belongings from the property, it may not use the property for storage, it is prohibited from

accessing the property, it is prohibited from selling or transferring the primary goods to be used

in erecting the windfarms, and it is not permitted to sell or transfer the other assets of the Project

Companies to any third party until all items are removed (including the concrete foundations that

it has expended funds to install), the companies notify CFIUS, and CFIUS does not object.

Accordingly, the Amended Order has, inter alia, eviscerated Ralls’s property rights to construct

the windfarms, its power purchase agreements, its transmission interconnection agreements and

ancillary agreements with PacifiCorp, its agreements for the managements and use of shared

interconnection facilities with the owners of nearby windfarms, and its government permits

necessary to operate the windfarms.

80. The Amended Order also imminently threatens the loss of approximately $25

million in federal renewable energy investment tax incentives to Ralls and its subsidiaries. Ralls

may only obtain these incentives if the windfarms are completed and placed in service by

December 31, 2012. So long as the Amended Order remains in place, Ralls cannot place the

windfarms in service by December 31, 2012.





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82. The physical and regulatory takings of Ralls’s property interests constitute

unconstitutional takings in violation of the U.S. Constitution and deprive Ralls of its property

interests absent due process, or at a minimum raise grave doubts about the constitutionality of the

government action, though this constitutional question is avoided by a judicial determination that

CFIUS violated the APA in issuing the Amended Order.

83. Likewise, just as federal courts will construe statutes where possible to avoid

serious doubt of their constitutionality, so too CFIUS has an obligation to exercise its powers in a

way that does not raise serious constitutional concerns. It is arbitrary and capricious for CFIUS

to fail to consider adequate and available alternatives, including recourse to provisions of

existing law, that would accommodate the government’s security concerns without raising

problems under the Constitution, and for CFIUS to give no explanation or provide any factual

support for its decision to reject these alternatives in favor of a constitutionally problematic

prohibition.

COUNT III (Unconstitutional Deprivation of Property Without Due Process)



85. The Fifth Amendment to the United States Constitution states that “[n]o person

shall be … deprived of life, liberty, or property, without due process of law.” U.S. Const.

amend. V.

86. Ralls has numerous valid property interests and property rights tied up in the

windfarm projects that are subject to the Amended Order, including land rights to construct the

windfarms, power purchase agreements, transmission interconnection agreements and ancillary


19

agreements with PacifiCorp, agreements for the managements and use of shared interconnection

facilities with the owners of nearby windfarms, government permits necessary to operate the

windfarms, and some $25 million in federal revenue from renewable energy investment tax

credits.

87. CFIUS’s issuance of the Amended Order, and the intrusiveness and severity of

the Amended Order, effect numerous deprivations of Ralls’s property. Ralls is prohibited from

undertaking any further construction or operations on its property, it must remove all of its

belongings from the property, it may not use the property for storage, it is prohibited from

accessing the property, it is prohibited from selling or transferring the primary goods to be used

in erecting the windfarms, and it is not permitted to sell or transfer the other assets of the Project

Companies to any third party until all items are removed, the companies notify CFIUS, and

CFIUS does not object.

88. The Amended Order effectively extinguishes Ralls’s property rights. Ralls cannot

use its property for the purpose for which it was acquired; in fact, it cannot use its property for

any purpose whatsoever, nor may it benefit from the various rights it has acquired or from the

renewable energy investment tax credits.

89. The economic impact of the Amended Order on Ralls is severe. The Amended

Order has eliminated all or nearly all of Ralls’s value in the Project Companies.

90. Ralls had significant reasonable investment-backed expectations with respect to

the Project Companies. Ralls reasonably relied on the regulatory scheme in place at the time of

its investment decisions because in 2010 and 2011, before Ralls acquired the property in

question, the FAA issued “Determinations of No Hazard,” which approvals included review by

the Department of Defense. For the same reason, Ralls had no reasonable basis for foreseeing


20

that CFIUS would prohibit the transaction, particularly after the Navy facilitated further

approvals for placement of Ralls’s windfarms.

91. The character of CFIUS’s action does not justify its conduct. CFIUS had a

number of less invasive measures it could have implemented to mitigate whatever national

security risks it thought to exist (which the Amended Order does not articulate), not least that the

Navy could have purchased Ralls’s interest in the land rights owned by the Project Companies

under 10 U.S.C. § 2663(d).

92. Prior to issuance of the Order and Amended Order, CFIUS did not disclose to

Ralls any of the evidence it had obtained during its review, nor did it offer Ralls any opportunity

to respond to that evidence. At no point did Ralls have any occasion to view or rebut any record

or portion thereof that CFIUS compiled in reaching its determination, nor was it given

meaningful notice or hearing prior to CFIUS’s determination.

93. The Order and Amended Order themselves do not identify any of the evidence

upon which CFIUS relied in reaching its determination, nor do they provide any explanation for

CFIUS’s determination.

94. As a result, CFIUS’s issuance of the Order and Amended Order deprived Ralls of

its property absent due process of law, in violation of the Fifth Amendment to the U.S.

Constitution.

95. CFIUS’s rote invocation of “national security risks” does not alleviate the absence

of due process. Well-established law provides that even where national security concerns are at

play, a party subject to administrative action is still entitled to due process. See, e.g., People’s

Mojahedin Org. of Iran v. U.S. Dep’t of State, 613 F.3d 220 (D.C. Cir. 2010); Nat’s Council of

Resistance of Iran v. Dep’t of State, 251 F.3d 192 (D.C. Cir. 2001).


21





PRAYER FOR RELIEF

Wherefore, Plaintiff respectfully prays for the following relief:

1. an order and judgment declaring that CFIUS violated the APA in issuing the

Amended Order, and enjoining enforcement of the Amended Order;

2. an order and judgment declaring that CFIUS lacks the authority to issue an order

prohibiting the Terna-Ralls transaction or regulating future transactions not resulting in foreign

control of a person, and enjoining CFIUS from attempting to do so;

3. an order and judgment declaring arbitrary and capricious CFIUS’s determinations

that the Terna-Ralls transaction is a “covered transaction,” that it presents “national security risks

to the United States,” that the Terna-Ralls transaction should be subject to numerous draconian

obligations set forth in the Amended Order, and that no less burdensome measure should be

considered or imposed; and enjoining enforcement of the Amended Order;

4. an order and judgment declaring that the Amended Order deprives Ralls of its

property without due process, and enjoining enforcement of the Amended Order;

5. an order and judgment enjoining CFIUS from taking any action that would

frustrate or eliminate the jurisdiction of this Court;

6. costs and attorneys’ fees pursuant to any applicable statute or authority; and

7. any other relief that this Court deems just and appropriate.


22

Respectfully submitted, /s/ Paul D. Clement . Paul D. Clement (D.C. Bar No. 433215) Viet D. Dinh (D.C. Bar No. 456608) H. Christopher Bartolomucci (D.C. Bar No. 453423) George W. Hicks, Jr. (D.C. Bar No. 499223) Brian J. Field (D.C. Bar No. 985577) BANCROFT PLLC 1919 M Street, N.W., Suite 470 Washington, D.C. 20036 (202) 234-0090 Steven S. Honigman (D.C. Bar No. 201020) 500 East 77th Street New York, New York 10162 (202) 549-4917

Counsel for Plaintiff Ralls Corporation

Dated: September 12, 2012


Case 1:12-cv-01513 Document 1-1 Filed 09/12/12 Page 1 of 4








AO 440 (Rev. 06/12) Summons in a Civil Action

UNITED STATES DISTRICT COURTfor the

__________ District of __________

))))))))))))

Plaintiff(s)

v. Civil Action No.

Defendant(s)

SUMMONS IN A CIVIL ACTION

To: (Defendant’s name and address)

A lawsuit has been filed against you.

Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if youare the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ.P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 ofthe Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney,whose name and address are:

If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.

CLERK OF COURT

Date:Signature of Clerk or Deputy Clerk


AO 440 (Rev. 06/12) Summons in a Civil Action (Page 2)

Civil Action No.

PROOF OF SERVICE

(This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l))

This summons for (name of individual and title, if any)

was received by me on (date) .

’ I personally served the summons on the individual at (place)

on (date) ; or

’ I left the summons at the individual’s residence or usual place of abode with (name)

, a person of suitable age and discretion who resides there,

on (date) , and mailed a copy to the individual’s last known address; or

’ I served the summons on (name of individual) , who is

designated by law to accept service of process on behalf of (name of organization)

on (date) ; or

’ I returned the summons unexecuted because ; or

’ Other (specify):

.

My fees are $ for travel and $ for services, for a total of $ .

I declare under penalty of perjury that this information is true.

Date:Server’s signature

Printed name and title

Server’s address

Additional information regarding attempted service, etc:


AO 440 (Rev. 06/12) Summons in a Civil Action

UNITED STATES DISTRICT COURTfor the

__________ District of __________

))))))))))))

Plaintiff(s)

v. Civil Action No.

Defendant(s)

SUMMONS IN A CIVIL ACTION

To: (Defendant’s name and address)

A lawsuit has been filed against you.

Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if youare the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ.P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 ofthe Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney,whose name and address are:

If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.

CLERK OF COURT

Date:Signature of Clerk or Deputy Clerk


AO 440 (Rev. 06/12) Summons in a Civil Action (Page 2)

Civil Action No.

PROOF OF SERVICE

(This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l))

This summons for (name of individual and title, if any)

was received by me on (date) .

’ I personally served the summons on the individual at (place)

on (date) ; or

’ I left the summons at the individual’s residence or usual place of abode with (name)

, a person of suitable age and discretion who resides there,

on (date) , and mailed a copy to the individual’s last known address; or

’ I served the summons on (name of individual) , who is

designated by law to accept service of process on behalf of (name of organization)

on (date) ; or

’ I returned the summons unexecuted because ; or

’ Other (specify):

.

My fees are $ for travel and $ for services, for a total of $ .

I declare under penalty of perjury that this information is true.

Date:Server’s signature

Printed name and title

Server’s address

Additional information regarding attempted service, etc:


CIVIL COVER SHEET JS-44 (Rev. 5/12 DC)

I. (a) PLAINTIFFS (b) COUNTY OF RESIDENCE OF FIRST LISTED PLAINTIFF _____________________

(EXCEPT IN U.S. PLAINTIFF CASES)

DEFENDANTS

COUNTY OF RESIDENCE OF FIRST LISTED DEFENDANT _____________________ (IN U.S. PLAINTIFF CASES ONLY)

NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE TRACT OF LAND INVOLVED

(c) ATTORNEYS (FIRM NAME, ADDRESS, AND TELEPHONE NUMBER)

ATTORNEYS (IF KNOWN)

II. BASIS OF JURISDICTION (PLACE AN x IN ONE BOX ONLY)

III. CITIZENSHIP OF PRINCIPAL PARTIES (PLACE AN x IN ONE BOX FOR PLAINTIFF AND ONE BOX FOR DEFENDANT) FOR DIVERSITY CASES ONLY!

o 1 U.S. Government Plaintiff

o 2 U.S. Government Defendant

o 3 Federal Question (U.S. Government Not a Party)

o 4 Diversity (Indicate Citizenship of Parties in item III)

Citizen of this State

Citizen of Another State

Citizen or Subject of a Foreign Country

PTF

o 1

o 2

o 3

DFT

o 1

o 2

o 3

Incorporated or Principal Place of Business in This State Incorporated and Principal Place of Business in Another State Foreign Nation

PTF

o 4

o 5

o 6

DFT

o 4

o 5

o 6

IV. CASE ASSIGNMENT AND NATURE OF SUIT (Place an X in one category, A-N, that best represents your Cause of Action and one in a corresponding Nature of Suit)

o A. Antitrust 410 Antirust

o B. Personal Injury/ Malpractice 310 Airplane 315 Airplane Product Liability 320 Assault, Libel & Slander 330 Federal Employers Liability 340 Marine 345 Marine Product Liability 350 Motor Vehicle 355 Motor Vehicle Product Liability 360 Other Personal Injury 362 Medical Malpractice 365 Product Liability 367 Health Care/Pharmaceutical Personal Injury Product Liability 368 Asbestos Product Liability

o C. Administrative Agency Review 151 Medicare Act

Social Security

861 HIA (1395ff) 862 Black Lung (923) 863 DIWC/DIWW (405(g)) 864 SSID Title XVI 865 RSI (405(g))

Other Statutes 891 Agricultural Acts 893 Environmental Matters 890 Other Statutory Actions (If Administrative Agency is Involved)

o D. Temporary Restraining Order/Preliminary Injunction

Any nature of suit from any category may be selected for this category of case assignment. *(If Antitrust, then A governs)*

o E. General Civil (Other) OR o F. Pro Se General Civil Real Property

210 Land Condemnation 220 Foreclosure 230 Rent, Lease & Ejectment 240 Torts to Land 245 Tort Product Liability 290 All Other Real Property

Personal Property

370 Other Fraud 371 Truth in Lending 380 Other Personal Property Damage 385 Property Damage Product Liability

Bankruptcy 422 Appeal 27 USC 158 423 Withdrawal 28 USC 157

Prisoner Petitions 535 Death Penalty 540 Mandamus & Other 550 Civil Rights 555 Prison Conditions 560 Civil Detainee – Conditions of Confinement

Property Rights 820 Copyrights 830 Patent 840 Trademark

Federal Tax Suits 870 Taxes (US plaintiff or defendant) 871 IRS-Third Party 26 USC 7609

Forfeiture/Penalty 625 Drug Related Seizure of Property 21 USC 881 690 Other

Other Statutes 375 False Claims Act 400 State Reapportionment 430 Banks & Banking 450 Commerce/ICC Rates/etc. 460 Deportation

462 Naturalization Application 465 Other Immigration Actions 470 Racketeer Influenced & Corrupt Organization

480 Consumer Credit 490 Cable/Satellite TV 850 Securities/Commodities/ Exchange 896 Arbitration 899 Administrative Procedure Act/Review or Appeal of Agency Decision 950 Constitutionality of State Statutes 890 Other Statutory Actions (if not administrative agency review or Privacy Act)


o G. Habeas Corpus/ 2255 530 Habeas Corpus – General 510 Motion/Vacate Sentence 463 Habeas Corpus – Alien Detainee

o H. Employment Discrimination 442 Civil Rights – Employment (criteria: race, gender/sex, national origin, discrimination, disability, age, religion, retaliation)

*(If pro se, select this deck)*

o I. FOIA/Privacy Act 895 Freedom of Information Act 890 Other Statutory Actions (if Privacy Act)

*(If pro se, select this deck)*

o J. Student Loan

152 Recovery of Defaulted Student Loan (excluding veterans)

o K. Labor/ERISA (non-employment) 710 Fair Labor Standards Act 720 Labor/Mgmt. Relations 740 Labor Railway Act 751 Family and Medical Leave Act 790 Other Labor Litigation 791 Empl. Ret. Inc. Security Act

o L. Other Civil Rights (non-employment) 441 Voting (if not Voting Rights Act) 443 Housing/Accommodations 440 Other Civil Rights 445 Americans w/Disabilities – Employment 446 Americans w/Disabilities – Other 448 Education

o M. Contract 110 Insurance 120 Marine 130 Miller Act 140 Negotiable Instrument 150 Recovery of Overpayment & Enforcement of Judgment 153 Recovery of Overpayment of Veteran’s Benefits 160 Stockholder’s Suits 190 Other Contracts 195 Contract Product Liability 196 Franchise

o N. Three-Judge Court 441 Civil Rights – Voting (if Voting Rights Act)

V. ORIGIN

o 1 Original Proceeding

o 2 Remand from State Court

o 3 Remanded from Appellate Court

o 4 Reinstated or Reopened

o 5 Transferred from another district (specify)

o 6 Multi-district Litigation

o 7 Appeal to District Judge from Mag. Judge

VI. CAUSE OF ACTION (CITE THE U.S. CIVIL STATUTE UNDER WHICH YOU ARE FILING AND WRITE A BRIEF STATEMENT OF CAUSE.)

VII. REQUESTED IN COMPLAINT

CHECK IF THIS IS A CLASS ACTION UNDER F.R.C.P. 23

DEMAND $ JURY DEMAND:

Check YES only if demanded in complaint YES NO

VIII. RELATED CASE(S) IF ANY

(See instruction)

YES

NO

If yes, please complete related case form

DATE: _________________________

SIGNATURE OF ATTORNEY OF RECORD _________________________________________________________

INSTRUCTIONS FOR COMPLETING CIVIL COVER SHEET JS-44

Authority for Civil Cover Sheet

The JS-44 civil cover sheet and the information contained herein neither replaces nor supplements the filings and services of pleadings or other papers as required by law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiating the civil docket sheet. Consequently, a civil cover sheet is submitted to the Clerk of Court for each civil complaint filed. Listed below are tips for completing the civil cover sheet. These tips coincide with the Roman Numerals on the cover sheet.

I. COUNTY OF RESIDENCE OF FIRST LISTED PLAINTIFF/DEFENDANT (b) County of residence: Use 11001 to indicate plaintiff if resident

of Washington, DC, 88888 if plaintiff is resident of United States but not Washington, DC, and 99999 if plaintiff is outside the United States.

III. CITIZENSHIP OF PRINCIPAL PARTIES: This section is completed only if diversity of citizenship was selected as the Basis of Jurisdiction under Section II.

IV. CASE ASSIGNMENT AND NATURE OF SUIT: The assignment of a judge to your case will depend on the category you select that best represents the primary cause of action found in your complaint. You may select only one category. You must also select one corresponding nature of suit found under the category of the case.

VI. CAUSE OF ACTION: Cite the U.S. Civil Statute under which you are filing and write a brief statement of the primary cause.

VIII. RELATED CASE(S), IF ANY: If you indicated that there is a related case, you must complete a related case form, which may be obtained from

the Clerk’s Office. Because of the need for accurate and complete information, you should endure the accuracy of the information provided prior to signing the form.


eklimp

Stamp

RALLS CORPORATION v. COMMITTEE ON FOREIGN INVESTMENT IN THEUNITED STATES et al, Docket No. 1:12-cv-01513 (D.D.C. Sept 12, 2012), Court Docket

© 2012 Bloomberg Finance L.P. All rights reserved. For terms of service see bloomberglaw.com // PAGE 1

Document Link: http://www.bloomberglaw.com/ms/document/X1Q6MCRLKN82?documentName=1.xml

General Information

Case Name RALLS CORPORATION v. COMMITTEE ON FOREIGNINVESTMENT IN THE UNITED STATES et al

Docket Number 1:12-cv-01513

Court United States District Court for the District of Columbia

Nature of Suit Statutes: Other Statutory Actions

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