The Ralls Wind Farm Case: Not Quite Dead Yet

0 Comment

I’ve successfully made it through the first work week at my new in-house job, so I’ll reward myself with some blogging.

You may recall the Ralls case, where some Chinese investors (backed by SOE Sany) purchased a U.S. firm that owned several wind farms. However, the siting of one of these was problematic (too close to a military installation) and, long story short, the Committee on Foreign Investment in the US (CFIUS) decided that the deal should be unwound. The case then went up to President Obama, something that usually doesn’t happen with CFIUS matters, and he went along with the decision.

Then Ralls sued, challenging Obama’s decision on several grounds. The last time I wrote about this, I essentially called this whole thing a loser, since the underlying statute that deals with CFIUS says that such a presidential order is not reviewable by the courts. In other words, the law specifically says that the court should throw out the challenge.

And this is what happened. I’m about one week late with this, but a Federal judge handed down a decision in the case on February 22. Of the two parts to the ruling, one was expected and the other part was not, although in my mind it is quite welcome.

The first part was all about this non-reviewable issue. The court summarily dismissed those claims that directly challenged the president’s decision. Nothing exciting here. The law says the decision cannot be reviewed, and that’s the end of that.

But wait, that’s not the end of the story. Part two addressed another claim that I didn’t really take seriously when I read about it before. It still might not go anywhere, but it does intrigue me. Here’s the language:

Count IV of the Amended Complaint will not be dismissed to the extent it alleges that the President’s “Order Regarding the Acquisition of Four U.S. Wind Farm Project Companies by Ralls Corporation” of September 28, 2012 violates the Due Process Clause of the Fifth Amendment to the United States Constitution by depriving Ralls of property without providing adequate opportunity to be heard or an adequate explanation of the reasons for the decision.

The issue here is that these CFIUS decisions are barebones rulings. President Obama’s decision here similarly just said “You can’t do that” without any reason whatsoever, beyond “national security.” That sucks and has always been a hot issue with respect to CFIUS. Goes to transparency and such. Here, we’ve got much more than a simple transparency complaint of course.

The due process challenge is obvious: the government shouldn’t be able to summarily deprive someone of property like this without even an explanation, much less some sort of hearing, etc. Sounds reasonable to me. I realize of course that the big wild card is national security, and I suspect that’s the issue that will decide the matter, probably in favor of the government (if I had to guess).

So . . . cool stuff. We’ll see whether Ralls actually takes the next step and pursues the due process claim further. I kind of hope they do, just to see what happens when these CFIUS complaints get more press.

Have a nice weekend.

4 responses on “The Ralls Wind Farm Case: Not Quite Dead Yet

  1. Marius Van Andel

    Not knowing the details, and not having much knowledge of US law, I wonder what property rights were created if the deal did not go thru in the first place!? Are we talking about “the right to sell”?

  2. Hua Qiao

    Interesting but ultimately, a losing hand i think. Nonetheless, a due process proceeding might shed a little light on the national security thinking here. I continue to wonder why the winfarms were permitted in the first place if their proximity to military bases poses a national security issue.

    I don’t know too much about the windfarms. Are most of them not in a sensitive area? If so, i wonder why there was not a divestiture requirement of the problematic property?

    Why Sany, a construction machinery manufacturer is buying windfarms in the first place is also strange.