Late in 2012, President Obama blocked Ralls Corporation’s (“Ralls”) acquisition of four Oregon wind farm companies, based on the recommendations of the Committee on Foreign Investment in the United States (CFIUS). Ralls, whose owners hold senior management positions within the Chinese company, Sany Group, was given 90 days to divest all interest in the wind farm companies at issue and 14 days to remove all structures or physical objects from the project sites.
In an unprecedented move, Ralls challenged the President’s decision as an unconstitutional taking of property without due process. While the U.S. District Court for the District of Columbia dismissed Ralls’ challenge, the U.S. Court of Appeals for the Federal Circuit disagreed. On remand from the D.C. Circuit, the D.C. District Court has now ordered CFIUS to give Ralls access to the unclassified information and factual findings on which CFIUS based its recommendation. For any unclassified documents that CFIUS withholds based on executive privilege, CFIUS must submit a privilege log that identifies all material withheld and the reason for withholding. Ralls will then have an opportunity to oppose the government’s assertion of privilege, as well as to respond to the unclassified information. Ultimately, CFIUS and the President will determine whether to reaffirm, revise, or rescind the original Presidential Order.
Of particular note is the court’s refusal to allow Ralls to sell its interest in the wind farm companies to an American citizen. The Presidential Order, which remains in place pending a final resolution of the appeal, requires CFIUS approval for any potential transfer of the property. In disallowing the transfer, the court noted the unusual circumstances surrounding the potential sale—Ralls was planning to sell assets worth $6 million for only $50,000.
CFIUS may challenge the court order, or it may instead choose to withhold the unclassified information under the claim of executive privilege. CFIUS is very likely to choose the latter course, but it remains to be seen how extensively the government will seek to withhold the material the court has ordered it to disclose. This is almost certain to generate further litigation. Regardless, it is unlikely that access to unclassified information will provide Ralls with sufficient clarity to address the apparently significant national security concerns that undid its acquisition.