Over the last several months, attorneys who practice before and litigate against the Committee on Foreign Investment in the United States (“CFIUS”) have been paying close attention to United States v. Suirui, a CFIUS enforcement action in the U.S. District Court for the District of Columbia. In Suirui, the government seeks to enforce a presidential order that commanded Suirui Group (a Chinese corporation) to unwind its acquisition of Jupiter Systems (a California corporation). Notably, this case is the first time the government has sought to enforce a presidential divestment order in federal court.

One issue of first impression presented by this case is whether defendants are statutorily barred from raising due process defenses in CFIUS enforcement actions, and must instead litigate due process issues by filing a separate action in the U.S. Court of Appeals for the District of Columbia. The Suirui court recently held that, contrary to the government’s argument, defendants may raise due process defenses in CFIUS enforcement actions, and need not litigate these issues before the D.C. Circuit. The court based this holding on the plain text of the CFIUS statute and the Supreme Court’s recent guidance in McLaughlin Chiropractic Assocs., Inc. v. McKesson Corp. The court also distinguished the Supreme Court decision the government relied on, Yakus v. United States, holding that the statute in Yakus bore little resemblance to the CFIUS statute.

As set forth below, the court’s analysis was sound and well-reasoned. When this issue is inevitably litigated before other courts, they should adopt the Suirui court’s analysis. These courts should also rely on three additional points that the Suirui court did not consider: (1) under the doctrine of constitutional avoidance, the CFIUS statute should be construed such that defendants may raise due process defenses in enforcement actions; (2) the legislative history of the CFIUS statute confirms that, as a general matter, defendants may raise affirmative defenses in CFIUS enforcement actions; and (3) Yakus is distinguishable because of the unique wartime context in which that case was decided.

Relevant Statutory Framework and Due Process Claims

CFIUS, an interagency committee chaired by the Secretary of the Treasury, reviews the potential national security risks of certain foreign investments. At CFIUS’ recommendation, the President may suspend, prohibit, or unwind transactions that threaten to impair national security.

CFIUS derives its authority from section 721 of the Defense Production Act of 1950, as amended, which is codified at 50 U.S.C. § 4565 (“Section 4565”). Under Section 4565(d)(3), “[t]he President may direct the Attorney General of the United States to seek appropriate relief, including divestment relief, in the district courts of the United States.” In addition, under Section 4565(e)(2), “[a] civil action challenging an action or finding under this section may be brought only in the United States Court of Appeals for the District of Columbia Circuit.” But, notably, under Section 4565(e)(1), the President’s decision to suspend, prohibit, or unwind transactions “shall not be subject to judicial review.”

While Section 4565(e)(1) provides that courts cannot directly review the President’s decision to suspend, prohibit, or unwind transactions, the D.C. Circuit has recognized that parties may bring due process claims challenging divestment orders. In particular, in Ralls Corporation v. Committee on Foreign Investment, the D.C. Circuit held that parties affected by divestment orders have legitimate due process claims if they do not receive (1) advanced notice that CFIUS intended to refer the matter to the President, (2) access to the unclassified evidence which led CFIUS to conclude that the transaction posed a threat to national security, or (3) an opportunity to rebut that evidence. If parties prevail on this type of due process claim, the divestment order is effectively invalidated. This victory may be short-lived, however, as the President remains free to order divestment once the affected parties receive the necessary due process. Still, due process claims are a useful tool for parties affected by divestment orders, especially where the presidential administration changes during the course of the litigation. The new administration may take a different view as to whether or to what extent the transaction at issue poses a threat to national security, and thus determine that divestment is unnecessary.

The Suirui Court Holds that Defendants May Raise Due Process Defenses in CFIUS Enforcement Actions

In Suirui, Suirui Group and Jupiter Systems have argued that the presidential divestment order cannot be enforced against them because they did not receive the necessary due process under Ralls. In response, the government countered (among other things) that defendants are statutorily barred from raising due process defenses in CFIUS enforcement actions, and must instead litigate due process issues by filing a separate action in the D.C. Circuit. In making this argument, the government relied on Section 4565(e)(2)’s language that “[a] civil action challenging an action or finding under this section may be brought only in the [D.C. Circuit].” But, as the Suirui court recognized, Suirui Group and Jupiter Systems did not file a civil action challenging an action or finding by CFIUS or the President. Rather, Suirui Group and Jupiter Systems are defendants in a civil enforcement action brought by the government. By its plain terms, Section 4565(e)(2) does not apply to enforcement actions, and thus does not bar defendants in such actions from raising due process defenses.

In rejecting the government’s argument, the court also relied upon the Supreme Court’s recent guidance in McLaughlin. There, the Supreme Court noted that “[w]hen Congress wants to preclude judicial review in enforcement proceedings, it can easily say so,” and that courts “do not presume that Congress silently intended to preclude judicial review in enforcement proceedings.” Because Congress speaks clearly when it wishes to preclude judicial review, and had not done so with respect to CFIUS enforcement actions, the Suirui court held that defendants in such actions may raise due process defenses.

In arguing that defendants in CFIUS enforcement actions cannot raise due process defenses, the government also contended that Section 4565(e)(2) resembled the statute at issue in Yakus v. United States. There, in the midst of World War II, Congress had created a mechanism for pre-enforcement review of federal regulations and orders arising under the Emergency Price Control Act of 1942 (“EPCA”), a statute intended to combat wartime inflation. The statute expressly provided that a specifically created federal court—the Emergency Court of Appeals—possessed “exclusive jurisdiction to determine the validity of any regulation or order” covered by the Act. The statute further stated that “[e]xcept as provided in this section, no court . . . shall have jurisdiction or power to consider the validity of any such regulation, order, or price schedule.” Reading these provisions together, the Supreme Court in Yakus held that they precluded district courts from considering the legality of price regulations when the government brought criminal enforcement actions.

Contrary to the government’s position, the Suirui court found that EPCA was distinguishable from Section 4565(d)(3). EPCA clearly and expressly vested the Emergency Court of Appeals with exclusive jurisdiction to determine the validity of regulations and orders arising under that act. And it clearly and expressly barred all other courts from considering the validity of such orders and regulations. As the Suirui court recognized, this is a far cry from Section 4565(d)(3), which merely states that “[a] civil action challenging an action or finding under this section may be brought only in the United States Court of Appeals for the District of Columbia Circuit.” Thus, the court reasoned, the government’s reliance on Yakus was unpersuasive.

The Doctrine of Constitutional Avoidance, the Legislative History of the CFIUS Statute, and the Unique Wartime Context in Which Yakus Was Decided

The Suirui court’s holding that defendants in CFIUS enforcement actions may raise due process defenses was sound and well-reasoned. Going forward, other courts should follow the Suirui court’s analysis. In addition, as set forth below, these courts should rely on three additional points that the Suirui court did not consider.

First, in McLaughlin, the Supreme Court cautioned that “[b]arring defendants in enforcement actions from raising arguments about the legality of agency rules or orders enforced against them raises significant questions under the Due Process Clause.” The Supreme Court cited Justice Powell’s concurrence in Adamo Wrecking Co. v. United States, where Justice Powell warned that a preclusion-of-review provision of the Clean Air Act raised constitutional issues that “merited serious consideration.” The Supreme Court also cited the D.C. Circuit’s decision Chrysler Corp. v. EPA, where the D.C. Circuit likewise cautioned that provisions of that sort raise a “substantial due process question,” and thus should be interpreted narrowly. In line with this guidance and the doctrine of constitutional avoidance, courts should interpret Section 4565(e)(2) narrowly, such that it does not preclude defendants from raising due process defenses in CFIUS enforcement actions.

Second, the legislative history of Section 4565 confirms that parties in enforcement proceedings can raise affirmative defenses. When Congress initially passed Section 4565 back in 1988, the Conference Report emphasized that while the findings of the President are not subject to judicial review, “other matters . . . would be subject to judicial review.” The Conference Report provided just one example of a matter that would be subject to judicial review – namely, “the timeliness of the action taken by the Attorney General.” Thus, the Conference Report expressly confirmed that parties in enforcement proceedings could raise the affirmative defense that the actions taken by the Attorney General were untimely, and thereby implicitly recognized that, as a general matter, parties in enforcement actions may raise affirmative defenses. Nothing in the subsequent legislative history of Section 4565 casts doubt on this point.

Third, Yakus is distinguishable because of the unique wartime context in which this case was decided. As the Supreme Court recognized in McLaughlin, “Congress designed [EPCA] for the wartime context [of World War II], where the need for quick and definitive judicial rulings was at its zenith.” It is true that Section 4565 was likewise designed to address and combat national security threats, particularly those that arise from foreign investment in the United States. But it is simply not reasonable to compare the grave national security threat posed by World War II – which at least arguably justified the due process restrictions imposed by EPCA – with the lesser threats posed by such investments. Accordingly, the government’s reliance on Yakus is unpersuasive.  

In sum, for the reasons set forth in the Suirui court’s decision, and for the additional reasons discussed above, defendants have a right to raise due process defenses in CFIUS enforcement actions. Contrary to the government’s argument, these defendants need not file a separate action in the D.C. Circuit to raise due process issues. 

Katherine Rooney (Columbia Law School 2019) is a senior associate at Debevoise & Plimpton LLP. The views expressed in this essay do not necessarily reflect the views of her employer, if any.

Steven A. Levy (Yale Law School 2016) is an assistant district attorney in the Manhattan District Attorney’s Office. He was previously a senior associate at a global law firm. The views expressed in this essay do not necessarily reflect the views of his employer, if any.