[00:00:00] Speaker 03: Case number 20-5337, Federal Express Corporation at balance versus United States Department of Commerce at out. [00:00:08] Speaker 03: Mr. MacArthur for the appellant, Mr. Aguilar for the appellees. [00:00:12] Speaker 01: Council, before you begin, our timer is not working. [00:00:16] Speaker 01: So I'm afraid I'm gonna have to interrupt you to let you know two minutes left and time is up and so forth, but it may come back on. [00:00:24] Speaker 01: So Mr. MacArthur, if you would begin. [00:00:28] Speaker 03: Thank you, Judge Anderson, and may it please the court. [00:00:32] Speaker 03: This case presents a straightforward question of statutory interpretation. [00:00:36] Speaker 03: Did Congress in the Export Control Reform Act impose strict liability on innocent intermediaries like common carriers who unwittingly facilitate a third person's export violation? [00:00:51] Speaker 03: The answer to that question clearly is no. [00:00:53] Speaker 03: Two interpretive principles in particular are decisive. [00:00:57] Speaker 03: Indeed, I would say that they are independently decisive here. [00:01:01] Speaker 03: The first is that when Congress uses terms of art that have a long settled meaning, those terms are presumed to mean what they've always meant. [00:01:10] Speaker 03: The second is that statutes should not be construed to contradict themselves, or as the Supreme Court put it in Bennett versus Speer, to emasculate an entire section. [00:01:21] Speaker 03: The first principle here, I think, goes to how you would read subsection B if you were considering it standing alone. [00:01:27] Speaker 03: And the second goes to how subsection B should be understood in light of subsection E, which expressly requires knowledge before liability can attach to transporting regulated items. [00:01:40] Speaker 03: Both principles point in the same direction here with the result being that statutory text and structure powerfully combined to confirm that Congress did not impose strict liability on innocent intermediaries. [00:01:54] Speaker 02: So I'll say a few words about... On your first point, that aiding and abetting, I guess, is a term of art that requires knowing violations. [00:02:05] Speaker 02: In fact, I'm not sure that's all that settled. [00:02:08] Speaker 02: First, there's a lot of debate about knowing versus negligence. [00:02:14] Speaker 02: And then in Iran Air, we said, it is not unusual for Congress to permit the imposition of civil sanctions without proof of the violator's knowledge, which seems to be exactly contrary to your position. [00:02:28] Speaker 02: So we have already recognized that it's not such a term of art that it always requires. [00:02:34] Speaker 02: knowing conduct or that it forecloses a strict liability approach. [00:02:41] Speaker 02: And my third point is that when it comes to regulatory offenses, the Supreme Court has recognized, we have recognized that in fact, it's times Congress can impose strict liability even in the criminal area. [00:03:00] Speaker 02: for regulatory offenses and this seems to me like an acutely regulatory area. [00:03:07] Speaker 02: So tell me more, I've given you sort of three reasons why I'm not so sure there's a settled term of art and I'd be interested in your thoughts on that. [00:03:15] Speaker 02: Sorry to do a compound question. [00:03:18] Speaker 03: No problem. [00:03:18] Speaker 03: Thank you, Judge Millett. [00:03:20] Speaker 03: I would start out by saying that we're not disputing that there are significant portions of this export control regime that do impose strict liability, particularly for principals, those who make the decision to export or re-export an item. [00:03:35] Speaker 03: Our argument really is focused on subsection B and the terms of art that are used there. [00:03:40] Speaker 03: With regard to whether aiding and abetting could pick up negligence, I would direct the court's attention to this court's precedent in the securities law context, where the court squarely rejected the argument that civil liability for aiding and abetting could be based on negligence, even where the principal violation under the relevant statutory provision was strict liability. [00:04:06] Speaker 03: but also direct the court's attention to the Federal Circuit's decision in the Hitachi case. [00:04:11] Speaker 03: Think of all of the aiding and abetting precedent that we cited, that may be the most apposite. [00:04:17] Speaker 03: That was also a sort of regulatory statute. [00:04:20] Speaker 03: It was an import statute, and it imposed aiding and abetting liability for aiding and abetting the making of false statements. [00:04:29] Speaker 03: aiding and abetting in that statute was not qualified by any express mens rea requirement statute just said aiding and abetting and the statute made expressly clear that the principal the party who made the false statement could be held liable based on negligence. [00:04:45] Speaker 03: And so the government's submission to the court in that case was, well, then the aider and abettor should likewise be able to be held liable based on negligence. [00:04:54] Speaker 03: And the federal circuit flatly rejected that argument as wholly without support and inconsistent with fundamental legal logic. [00:05:01] Speaker 03: The court surveyed. [00:05:03] Speaker 02: There are courts that have held negligence as an appropriate standard for aiding and abetting liability. [00:05:09] Speaker 02: And so it's not a settled term of art in that regard. [00:05:12] Speaker 03: I have not seen those decisions, Judge Millett, and certainly the government on the other side did not cite any of them. [00:05:18] Speaker 03: I do want to address also your concern about- Let me ask you that directly then. [00:05:22] Speaker 04: You would say that there are not cases where we have said negligence is enough, where the statute used that term of art, mating and abetting. [00:05:30] Speaker 04: Is that correct? [00:05:32] Speaker 03: That is correct, Judge Santel. [00:05:33] Speaker 03: I have not seen those cases. [00:05:34] Speaker 03: Your cases, in fact, are platelet to the contrary, the Investors Research case in particular. [00:05:39] Speaker 04: What's the name of that case? [00:05:41] Speaker 03: I believe it's investor's research. [00:05:43] Speaker 03: It's cited in our opening. [00:05:48] Speaker 03: I do want to address your concern, Judge Millett, about Iran Air, because I do think that with respect to the issue that's presented in our case, Iran Air really is a red herring. [00:06:00] Speaker 03: Our case presents a question of first impression [00:06:03] Speaker 03: both because there's a new statute that didn't exist at the time of Iran-Air, and because it's a new issue that wasn't addressed in Iran-Air, namely the liability of an innocent intermediary. [00:06:16] Speaker 02: Mr. Beckett, before you go on that, there's a new statute, but the language that the statute took is drawn directly from and identical to the regulation at issue in Iran-Air, is it not? [00:06:29] Speaker 02: That is correct. [00:06:30] Speaker 02: So it's interpreted in the same language. [00:06:32] Speaker 03: It is the same language of the regulation. [00:06:35] Speaker 03: But critically, Judge Mallette, first point, Grandeir didn't address anything about aiding and abetting. [00:06:42] Speaker 03: Aiding and abetting was a theory that had not been charged in that case. [00:06:45] Speaker 03: So the court says nothing about aiding and abetting, nothing about whether that can be strict liability. [00:06:50] Speaker 02: It did interpret the word cause, which is in the exact same provision that you say that [00:06:55] Speaker 02: provision requires and knowing. [00:06:57] Speaker 02: It did. [00:06:59] Speaker 03: I think the fairest reading that opinion is the court accepted the agency's strict liability reading of cause in the regulation. [00:07:09] Speaker 03: But even if you assume that causing liability is strict, that does not get the government over the finish line here because our fundamental submission about causing liability [00:07:21] Speaker 03: is separate and apart from mens rea our point is that the acts of transporting transferring forwarding. [00:07:29] Speaker 03: The things that a common carrier does are not the sort of acts to begin with that causing liability picks up. [00:07:38] Speaker 03: And that's because number one, causing liability, just like aiding and vetting is a term of art with a long settled historical meaning that has never been understood to pick up intermediaries. [00:07:51] Speaker 03: I think even apart from that sort of term of our understanding, that is the most natural reading of the statutory language here, which talks about causing the doing of a prohibited act. [00:08:05] Speaker 03: It is at best quite unnatural to say that when FedEx transports packages for its customers, it causes its customers to do something. [00:08:16] Speaker 02: So I'm just trying to understand how you read the statute. [00:08:21] Speaker 02: 2A seems to be sort of a principal liability, right? [00:08:29] Speaker 02: And then 2B, do you read that as a mix of some things are principles, some are, I guess, accessories for lack of a better term, [00:08:45] Speaker 02: And so that as we go through B, we have to stop and look at each word and ask whether that word, what mens rea goes with that word. [00:08:55] Speaker 02: So cause could have strict liability, aid would not, a bet would not. [00:09:02] Speaker 02: What about counsel? [00:09:05] Speaker 03: I think that all of the terms that are used in subsection B, and this goes back to what Judge Learned had handset in Peony in 1938, he said all of them, even the most colorless abet, connote a purposive attitude toward the offense. [00:09:22] Speaker 02: But then cause is in there too, and you just said cause could be strict liability. [00:09:27] Speaker 02: Well, that's what we held in Iran Air. [00:09:29] Speaker 02: So either the mens rea turns on and off as we read through B, or it has a single mens rea. [00:09:35] Speaker 03: Well, my point on cause judgment, we do think that it has mens rea. [00:09:39] Speaker 03: My point is that that's not our fundamental submission. [00:09:43] Speaker 03: And we don't know. [00:09:44] Speaker 02: But we held pretty clearly in Iran Air that cause does not. [00:09:47] Speaker 02: And so your position would have to be [00:09:50] Speaker 02: I think, to be consistent with, and that's the exact same language. [00:09:53] Speaker 02: It was a regulation there, but the statute here just picked up the regulation. [00:09:58] Speaker 02: So that exact same language we held in Iran Air allows strict liability. [00:10:04] Speaker 02: And we said, the rationale for that is it's not unusual for Congress to permit the imposition of civil sanctions without proof of the violators knowledge. [00:10:16] Speaker 03: But I don't want to fight you too hard on that point judgment that because I do think we went even if causing is strict. [00:10:21] Speaker 02: But as I read around air, the point that just assume they're sorry, finish your sentence. [00:10:28] Speaker 02: I'm sorry, but I just need to clarify something about what you just said. [00:10:31] Speaker 03: Go ahead. [00:10:32] Speaker 03: I was going to say, as I read the court's decision in Iran air with regard to knowing the point of the court really focused on was that the word knowingly had been removed from the regulation in 1980. [00:10:44] Speaker 03: I think that's an interpretive factor that would go to the meaning of the regulation that really does not go to the meaning of the statute here. [00:10:53] Speaker 03: Absent any evidence in 2018 that Congress was aware that back in 1980, that change to the regulations texts had been made. [00:11:02] Speaker 03: I was just going to say, Judge Santel, that if, for example, there had been a prior version of this statute that said knowingly and [00:11:13] Speaker 03: Congress amended that to believe the word, then there would be a conversation about what inference to draw from that. [00:11:19] Speaker 03: I think you would still have to ask, is that, was it dropped to create strict liability or was it dropped because Congress determined that express mens rea requirement wasn't necessary? [00:11:30] Speaker 04: In any event, do you see any necessary problem with the prospect that a different mens rea would apply to cause and dating and abetting? [00:11:37] Speaker 03: I do not. [00:11:38] Speaker 04: I think that if you turn on and off, as Judge Millett suggested, is that any problem you think? [00:11:44] Speaker 03: I don't think it's any problem. [00:11:45] Speaker 03: I think it's perfectly appropriate to analyze each of these terms and determine whether they come with a prepackaged mens rea requirement, like courts have, as far as I am aware, uniformly held is the case with aiding and abetting. [00:12:02] Speaker 03: but I also don't want to lose. [00:12:03] Speaker 02: Can I follow up on that though? [00:12:04] Speaker 02: Is it your position that everything in B except cause? [00:12:08] Speaker 02: I thought you said this and I could very well have misheard. [00:12:12] Speaker 02: Everything else in B requires knowledge except for cause. [00:12:18] Speaker 03: I think that is right. [00:12:19] Speaker 03: I think that is right, Judge Millett. [00:12:22] Speaker 03: And I don't want to lose sight here of the point about subsection E, which I think is equally important to the term of art canon that we've been discussing. [00:12:33] Speaker 03: So in subsection E, Congress expressly addressed the liability of those who, among other things, transport, transfer, forward regulated items. [00:12:44] Speaker 03: And it made those acts [00:12:46] Speaker 03: civilly sanctionable only when done with knowledge. [00:12:49] Speaker 03: Now, at no point in this litigation has the government been able to explain why Congress would have imposed a knowledge requirement for those acts in subsection E while at the same time making those very same acts the basis of strict liability under subsection B. That really would create the very sort of statutory contradiction [00:13:14] Speaker 03: that both the Supreme Court and this Court have consistently refused to read neighboring provisions to create. [00:13:21] Speaker 03: It would in effect nullify the knowing requirement that Congress included in subsection E. So Commerce utterly fails to offer up a holistic- Well, if Congress knew that all these terms already included knowledge, why would they have had to put that in E? [00:13:38] Speaker 02: And if your reading of B is adopted, we don't even need E to be in the statute, do we? [00:13:43] Speaker 03: No, I don't think that's right. [00:13:44] Speaker 03: And that was where I think the district court aired the district court said, well, I understand that the government's reading appears to make a hash of the statute, but so does FedEx's. [00:13:54] Speaker 03: But that's just wrong. [00:13:56] Speaker 03: Our interpretation does not deprive subsection B of heft because subsection B [00:14:02] Speaker 03: covers culpable actors who do not commit any of the acts that are listed in subsection E, but who caused those acts to be done by an intermediary or who substantially assist those acts. [00:14:20] Speaker 03: And that is precisely the historic office of aiding and abetting and causing liability as it appears, for example, in 18 USC 2. [00:14:30] Speaker 03: So we have a situation where our reading alone harmonizes the statute. [00:14:35] Speaker 03: What I find really remarkable about this case is that the government doesn't really engage at all on the level of text and structure of the statute. [00:14:44] Speaker 03: They put all of their eggs in the basket of the ratification canon, but [00:14:50] Speaker 03: The ratification canon doesn't allow you to skip over text and structure in the way that the government has done here. [00:14:56] Speaker 03: The Supreme Court has been quite clear about that in the Brown versus Gardner case. [00:15:02] Speaker 03: And last term in the BP case, the court has consistently held that even when the government is making a ratification argument, as in any other statutory interpretation case, you begin with text and structure. [00:15:15] Speaker 03: And if they supply a clear answer, that is the end of the matter. [00:15:18] Speaker 02: But even if you get sort of passed- There's still another issue here because it's not just ratification, right? [00:15:26] Speaker 02: Congress in, sorry, 4826A sort of adopted expressly, this isn't an implied ratification, expressly adopted not just the rules and regulations, but also orders [00:15:46] Speaker 02: determinations and all other forms of administrative action that have been taken beforehand and carried that forward. [00:15:56] Speaker 02: So it's not just even the regulation. [00:15:59] Speaker 02: But determinations, which would include the decision in Iran Air, other administrative action, which again would include the decision in Iran Air, would include the prior decisions against Federal Express that didn't require any knowledge. [00:16:14] Speaker 02: All of that. [00:16:15] Speaker 02: This is sort of quite striking. [00:16:17] Speaker 02: All of that. [00:16:18] Speaker 02: is carried forward. [00:16:19] Speaker 02: So Congress not only lifted the regulatory language verbatim and put it into a statute, but then said, we are bringing the whole history of administration, administrative actions and determinations into this statute. [00:16:37] Speaker 03: So I don't read section 4826, Judge Millett, to adopt any of the prior administrative action. [00:16:46] Speaker 03: What I read that to do is to continue them in effect. [00:16:49] Speaker 03: Congress is in effect saying we're putting this export control regime on a new statutory footing, but we're not starting over from scratch. [00:16:57] Speaker 03: Commerce has all these regulations and we're not going to make commerce re-promulgate them. [00:17:03] Speaker 03: under this new statute, they will remain in effect. [00:17:06] Speaker 03: But it doesn't, it doesn't. [00:17:07] Speaker 02: That's not all it says. [00:17:08] Speaker 02: I understand that point. [00:17:09] Speaker 02: That's not all it says. [00:17:11] Speaker 02: It also says we're keeping, we're bringing forward, we're keeping status quo, including determinations [00:17:21] Speaker 02: and administrative actions, all other, or other, doesn't have the word all, I'm adding that, or other forms of administrative action. [00:17:29] Speaker 02: And if those were flatly inconsistent with the statutory text, Congress couldn't have brought them forward. [00:17:36] Speaker 02: We have to read the statutory text to be consistent with what Congress said, we are continuing under this statute. [00:17:44] Speaker 02: This will continue under this statute. [00:17:47] Speaker 02: So doesn't that have to inform the reading of the statutory text? [00:17:51] Speaker 03: I don't think so, Judge Millett, because I don't think there's anything in section 4826 that deems any prior administrative action to be lawful. [00:18:01] Speaker 03: It deems it to be in effect. [00:18:02] Speaker 03: And those are different things. [00:18:04] Speaker 03: The court has recognized that they are different things. [00:18:06] Speaker 03: Congress has sometimes deemed action to be lawful. [00:18:10] Speaker 02: They'll continue in effect. [00:18:11] Speaker 02: So they're going to continue with this statute. [00:18:15] Speaker 02: That's correct. [00:18:16] Speaker 02: Less changed by commerce. [00:18:18] Speaker 03: And the statute also says continue unless and until set aside under the authority of the subject. [00:18:24] Speaker 03: And so if there is administrative action that is inconsistent with the statute, it can be set aside as inconsistent with the statute. [00:18:34] Speaker 02: I just thought it was rather unusual that Congress went that in depth into [00:18:41] Speaker 02: the regulatory process and carried it forward and said, this will continue in effect side by side with our statutory language. [00:18:51] Speaker 03: Right. [00:18:51] Speaker 03: As I say, I think that was done because Congress did not want to start over from scratch here. [00:18:56] Speaker 03: But let me try it this way, Judge Mallett. [00:18:58] Speaker 03: I think that the government is really asking for quite a radical expansion of the [00:19:05] Speaker 03: ratification here, because again, this case isn't just about, well, this case about subsection B, but section 4819 has much more than just subsection B and even more than E. It's actually subsections A through J. It's a very long and detailed list of 10 different categories of prohibited acts. [00:19:26] Speaker 03: And the logic of the government's position here [00:19:29] Speaker 03: is because that long and detailed list was transplanted from the agency's pre-existing regulation that Congress should be deemed to have baked into the statute every administrative interpretation of those provisions that commerce has applied and countless enforcement actions over the decades, regardless of whether there's any evidence that Congress was [00:19:53] Speaker 03: aware of those administrative interpretations, and even if those administrative interpretations conflict with the text and structure of the statute. [00:20:03] Speaker 02: It's not deeming. [00:20:04] Speaker 02: Just to be just to be crystal clear, we're not deeming. [00:20:06] Speaker 02: This isn't one of congressional silence about what should happen. [00:20:10] Speaker 02: That's normally where we talk about deeming. [00:20:13] Speaker 02: Congress said it in terms in 4826A. [00:20:16] Speaker 02: And it went so far, like I said, it's not just rules or regulations, but it said determinations and administrative actions, which have got to include interpretations. [00:20:27] Speaker 02: I mean, it's unusual and it's, you know, Congress was biting off a lot, but we've got to give effect to the full breadth of that, can we not? [00:20:36] Speaker 03: I think you do have to give full effect to 4826. [00:20:39] Speaker 03: And I think you do that by recognizing that all of those provisions and administrative actions remain in effect. [00:20:46] Speaker 03: But I do not think that takes off the table to question whether they are lawful. [00:20:53] Speaker 03: I see that my time has expired. [00:20:55] Speaker 01: If there are no more questions, we'll give you some time, Mr. MacArthur, in reply. [00:20:59] Speaker 01: Mr. Aguilar. [00:21:08] Speaker 01: You need to turn on your... I apologize. [00:21:11] Speaker 00: I apologize, Your Honor. [00:21:12] Speaker 00: Sorry about that. [00:21:14] Speaker 00: Okay. [00:21:14] Speaker 00: May it please the court, Daniel Aguilar, for the federal defendants? [00:21:17] Speaker 00: The FedEx has brought this case not to challenge a particular enforcement action or to challenge the promulgation of a particular rule, but to seek non-statutory review of the Department of Commerce's long-standing export controls as ultra-viris. [00:21:33] Speaker 00: district court correctly rejected that claim on the merits and this court should affirm. [00:21:39] Speaker 04: What do you say to the proposition that aiding and abetting is a term of art which has traditionally involved the center or amends ray of that sort? [00:21:50] Speaker 00: That may be the case in other contexts, Your Honor, but I think that this court's unanimous opinion in Iran Air, which at page 1256, quoted the version of this regulation as it stood at the time, materially identical to how it stands today, materially identical to the version of the statute that Congress passed, said this could be read either way. [00:22:11] Speaker 00: It could be read to have annoying interpretation, or it could be read to impose strict liability. [00:22:17] Speaker 04: Did that case actually construe the language of aiding and abetting [00:22:20] Speaker 00: Yes, Your Honor. [00:22:22] Speaker 00: It quoted that entire regulation in its entirety at page 1256. [00:22:27] Speaker 00: The court considered it again in considering whether or not strict liability should be imposed. [00:22:32] Speaker 00: And it said the statute itself, because at the time the statutory prohibition just said you cannot commit violations. [00:22:38] Speaker 00: If you do, there's a civil penalty. [00:22:39] Speaker 00: The court says, well, that doesn't have an explicit mandatory requirement. [00:22:43] Speaker 00: And then it said neither does the charging regulation, which at that time was 78.7. [00:22:50] Speaker 04: Did not specifically discuss the aiding and abetting question that we have here. [00:22:55] Speaker 00: I don't think the court went at length at it, but the court certainly was aware of the length. [00:22:59] Speaker 04: I don't think he used the term even in its analysis, did it? [00:23:03] Speaker 04: The term aiding and abetting? [00:23:05] Speaker 00: Well, certainly the court was aware of that regulatory text. [00:23:08] Speaker 00: And in his concurrent opinion, Judge Silberman contrasted her on air with other cases where he believed strict liability was not appropriate. [00:23:15] Speaker 00: But he said that that was the correct course in her on air because there were, quote, regulations authorizing penalties for nonknowing and nonwillful violations. [00:23:24] Speaker 00: So I think obviously the court did consider the language of the regulation [00:23:28] Speaker 00: and concluded that the Department of Commerce's application and interpretation of that as imposing strict liability was appropriate. [00:23:37] Speaker 04: Is there any case you know of that does specifically say that aiding and abetting does not import the knowledge requirement that it has in criminal law? [00:23:47] Speaker 00: I think that's what Iran Air does. [00:23:49] Speaker 04: And I think that that's what... I thought you just told me that Iran Air did not mention, did not analyze that term, aiding and abetting, and did not specifically state that. [00:23:59] Speaker 04: Now, is there any case that does? [00:24:01] Speaker 00: Your Honor, I think Iran Air clearly considered that language. [00:24:03] Speaker 04: Leave Iran out for a moment. [00:24:05] Speaker 04: Forget Iran Air is there. [00:24:06] Speaker 04: Is there any other case you could give me that does specifically take those terms aiding and abetting and analyze them in a way that does not require knowledge or [00:24:17] Speaker 00: I have not researched that area thoroughly, Your Honor, because I believe that this court's binding precedent on the regulation at issue here is sufficient. [00:24:25] Speaker 04: I will take that to be a no to my question then, that you know of no such case. [00:24:29] Speaker 00: I have not done the research on that, Your Honor, no. [00:24:31] Speaker 00: But again, what I think is important here is that we're here on non-statutory ultraviaries review, right? [00:24:38] Speaker 00: Congress prohibited APA review of the Department of Commerce's actions in this area, except for cases of enforcement actions. [00:24:48] Speaker 00: And there it said when you receive an adverse order under a particular enforcement action, you can have APA review. [00:24:55] Speaker 00: And there were enforcement actions against FedEx that settled those cases, and then it brought this on non statutory review, essentially under the lead of versus kind standard. [00:25:05] Speaker 00: Yeah, what this court has repeatedly held is that under that kind of action. [00:25:11] Speaker 00: merely merely having a disagreement about laws insufficient to prevail on the merits, what there has to be is a patent misconstruction of the act, or where the agency has disregarded a specific and unambiguous statutory directive. [00:25:24] Speaker 00: And I think that given the history here both of this court's decision and are on air. [00:25:28] Speaker 00: the Commerce Department's decisions across executive administrations, applying that to hold repeatedly that strict liability is appropriate in this regulation. [00:25:38] Speaker 00: And then Congress's enactment of the 2018 Act, both as Judge Millett was recognizing, keeping in place all regulations, orders, and administrative actions as they were, [00:25:49] Speaker 00: and then separately restructuring the civil penalties provisions to exactly map the existing regulatory structure that the Commerce Department had and that this court had already construed in Iran Air. [00:26:02] Speaker 00: It's hard against that backdrop to argue that the application of strict liability in that context is so far beyond the pale as to satisfy ultra-virus review. [00:26:16] Speaker 02: Now this this court, in fact, has recognized at least partial response to Judge Lintel's question. [00:26:22] Speaker 02: This court said, recognizing Halberstam, that it's an open question, whether aiding and abetting requires knowledge or some lesser scant. [00:26:33] Speaker 02: I did not talk about strict liability, but certainly knowledge is not settled law under this circuit's precedent. [00:26:42] Speaker 00: I believe that's a fair reading, Your Honor. [00:26:44] Speaker 00: And again, Iran Air made it clear [00:26:46] Speaker 00: at page 1258 that the court was satisfied that the agency's reading of the regulation as imposing a strict liability standard is a permissible one. [00:26:55] Speaker 00: And it again noted back in 1993, it noted contemporary commentators, both in law review articles and I think practical guides about how to comply with the export regulations noted that unknowing violations are not overlooked and that the regulations and statutory structure allow for the imposition of strict liability. [00:27:13] Speaker 00: And I think it's fair to note that in the district court FedEx also brought a substantive due process challenge, arguing that there wasn't allowed fair notice of this, and they aren't pressing that again on appeal, particularly because Ron Air said everybody has fair notice of this strict liability standard and that's been a long standing occurrence. [00:27:32] Speaker 00: But again, in the district court FedEx was pressing this argument on the facial construction of the regulations that they were just incompatible with the statutory. [00:27:40] Speaker 02: They also challenged the interpretation, I think that's the fairest reading of the district court record. [00:27:45] Speaker 00: I think the district court acknowledged that that could be one of the constructions of the claims. [00:27:50] Speaker 00: We don't think that that was fairly presented. [00:27:52] Speaker 00: But if this court wants to go ahead and reach Commerce Department's construction of that, we think that we went on the merits there. [00:27:58] Speaker 00: So we're not trying to hide the ball on that one. [00:28:00] Speaker 00: But we are noting that this is a fairly different claim than that which they brought in district court. [00:28:05] Speaker 02: What do you do? [00:28:06] Speaker 02: It does seem the statute specifically talks in section, sorry, subsection E. [00:28:16] Speaker 02: about what FedEx does, right, about transferring, transporting. [00:28:21] Speaker 02: And for that, it requires a knowing requirement, a knowing mens rea. [00:28:28] Speaker 02: And yet under B, [00:28:35] Speaker 02: You would never have to show that for someone who transfers or transports, because I think anyone who transfers or transports, you could always say either cause or aided and abetted. [00:28:45] Speaker 02: So tell me how, in particular, as to people who transfer and transport, like FedEx does, it makes any sense [00:28:58] Speaker 02: to allow that exact activity, transfer-transport, to be stripped of the knowing. [00:29:05] Speaker 00: Mansbray, if you just charge it under B. Well, I think in this aspect, the statute and the regulations as they existed are intended to just cover the waterfront. [00:29:13] Speaker 00: It's a belt and suspenders approach that is, again, largely overlapping. [00:29:17] Speaker 00: Under subsection B, nobody can procure anything that would violate that. [00:29:22] Speaker 02: It's not that there's some coverage in action. [00:29:25] Speaker 02: As to these activities, Congress wanted knowledge. [00:29:29] Speaker 02: Those specific activities, and I know it's a longer list, but for our purposes we'll talk about transfer, transport, maybe just transport is really all we need to look at. [00:29:39] Speaker 02: It's not built in suspenders to say, [00:29:42] Speaker 02: It requires knowledge if you transport under E, but it doesn't require knowledge if you transfer it under B. And it's the exact same activity and it's the exact same theory of liability. [00:29:51] Speaker 02: That's not, that's contradiction. [00:29:53] Speaker 02: That's not built in. [00:29:55] Speaker 00: I disagree that it would be contradiction, Your Honor. [00:29:57] Speaker 00: I think it allows for multiple theories of a charging violation. [00:30:01] Speaker 00: And again, this is the regulatory scheme. [00:30:03] Speaker 00: that the Commerce Department had set up itself before Congress codified it. [00:30:08] Speaker 00: I think it is just saying across the waterfront, we don't want people violating the export laws. [00:30:12] Speaker 00: And I think that you can make a charging decision under E, where there's knowing violations. [00:30:17] Speaker 00: And here, again, the violations that FedEx was charged with at the outset in the other underlying settlement agreements were shipping items to Syria, which was under a general embargo that required a license to ship anything to Syria. [00:30:32] Speaker 00: It was shipping $10,000 worth of manufacturing equipment for an electronic microscope to a Pakistani nuclear facility, which was on the entity's list. [00:30:41] Speaker 00: It was shipping 53 items to aerotechnic fronts, which was on the entity's list for helping. [00:30:46] Speaker 02: Is shipping a form of transporting? [00:30:49] Speaker 00: Yes, Your Honor, I believe. [00:30:50] Speaker 00: Yes, that's what we've done in causing the export violation as well under B. [00:30:55] Speaker 00: And so in these instances, knowledge as the Commerce Department's regulations, and I think as Congress itself recognizes, are appropriately considered at the back end about what the particular kind of remedy should be or sanction. [00:31:08] Speaker 02: It wouldn't be under the back end if you charged them under E. You would actually have to prove it for liability. [00:31:14] Speaker 00: That's true. [00:31:15] Speaker 00: And if they've also done something that is permitted under B, you could have it on the back end as well there. [00:31:21] Speaker 00: I'm just saying that even under B, [00:31:23] Speaker 00: Knowledge is an insignificant it's still going to be considered by the agency if, for example, I think they give the example of a taxi driver who is helping there's a passenger in the backseat with a prohibited item and they're helping them get to the airport or something. [00:31:36] Speaker 00: In that circumstances, yes, there may be a violation, but both one. [00:31:39] Speaker 00: civil penalty in that case may very well not be appropriate. [00:31:44] Speaker 00: And two, the decision about whether even to bring in enforcement action against that, right? [00:31:49] Speaker 00: Are you actually going to be deterring anybody from future violations of the export laws? [00:31:53] Speaker 04: It's still rather hard to see why if the statutes don't have any difference. [00:31:59] Speaker 04: You have both sections of the statute. [00:32:03] Speaker 04: And if you use the same standard with respect to knowing or innocent [00:32:11] Speaker 04: action. [00:32:14] Speaker 04: Why do you have the separate statutes? [00:32:16] Speaker 04: I'm lost on that. [00:32:19] Speaker 00: I think it's just the, again, these came from the Commerce Department's initial promulgation and I think it's the Commerce Department. [00:32:25] Speaker 04: Why did the Commerce Department initially promulgate the two if there was no difference in that respect? [00:32:31] Speaker 00: Right. [00:32:31] Speaker 00: And I think that the legislative, I mean, sorry, the regulatory history here goes back some decades. [00:32:36] Speaker 00: I don't have a comprehensive analysis of it here. [00:32:39] Speaker 00: But I think it is to ensure that there are not violations of the export laws in any conceivable way. [00:32:46] Speaker 00: And to the extent that the canon against surplusage gives the court policy. [00:32:50] Speaker 04: That's what I'm asking you about, essentially, is the canon against surplusage. [00:32:54] Speaker 00: So at point to this court's decision in Great Lakes common versus FCC, which we saw it in our brief. [00:33:00] Speaker 00: And there the claim was that the particular regulatory definition for who's a competitive local exchange carrier under the phone next we just apply to everybody, every exchange carrier and it would just be surplus edge. [00:33:12] Speaker 00: And this court rejected the invocation of the canon there because it explained where the text and the history of the regulation makes its meaning clear, the canon against surplusage cannot dictate a different interpretation. [00:33:25] Speaker 00: So I think both looking to the text, which this court recognized doesn't require knowledge, nor does it compel strict liability. [00:33:31] Speaker 00: But then to the history of that regulation, you know, in or on error, the court went at lengths. [00:33:35] Speaker 00: to describe the interaction between the ALJ and the Under Secretary about whether strict liability was permitted under the regulation or whether knowledge was required. [00:33:44] Speaker 00: The Commerce Department's repeated invocations of the regulation here to provide for strict liability and Congress's actions, approving all of the existing regulations, codifying the regulations since the statute and no indication [00:33:57] Speaker 00: that Congress was at all dissatisfied with the Commerce Department's invocations of strict liability or this Court's decisions. [00:34:05] Speaker 00: I think all of that demonstrates that at a minimum, the Commerce Department's interpretation and application of the strict liability regime here is colorable and not a patent violation of the Congressional Authorization and the Export Control Reform Act. [00:34:22] Speaker 00: And that's the standard that they have to meet for non-statutory ultraviaries review. [00:34:31] Speaker 00: And for those reasons, we'd ask this court to affirm. [00:34:34] Speaker 01: All right. [00:34:34] Speaker 01: Thank you. [00:34:35] Speaker 01: Mr. MacArthur, why don't you take two minutes and also answer any questions? [00:34:41] Speaker 03: Thank you, Judge Henderson. [00:34:42] Speaker 03: I'd just like to start out by emphasizing what we did not just hear. [00:34:46] Speaker 03: And that's what we've not heard from the government throughout this case. [00:34:50] Speaker 03: And that's any explanation of how these terms, these statutory terms, these terms of art could be read on their own to impose strict liability on common carriers. [00:35:01] Speaker 03: And any real effort to reconcile subsections E and B in a way that doesn't have subsection B swallowing subsection E. They really are putting all their eggs in this idea of ratification with the idea of being that because Congress borrowed the text, [00:35:18] Speaker 03: of the pre existing regulation that should pull in with it, the prior administrative construction of the text, even in the absence of any congressional awareness and I do want to. [00:35:29] Speaker 03: focused the court's attention on the AFL-CIO versus Brock decision, which squarely rejected that exact same argument in the exact same scenario where there was a pre-existing regulation that had a long-standing administrative interpretation. [00:35:44] Speaker 03: Congress codified the text of the regulation. [00:35:47] Speaker 03: The argument was presented to the court by codifying the text. [00:35:50] Speaker 03: It brought with it the administrative interpretation, and the court said no. [00:35:54] Speaker 03: Absent, [00:35:56] Speaker 03: absolute evidence of congressional awareness of the interpretation, that's a misapplication of the ratification canon. [00:36:03] Speaker 03: Judge Millett going back to Section 4826A, even if you were to accept that that [00:36:09] Speaker 03: carries forward the prior regulation and makes the regulation untouchable, there still is the question of whether the regulation itself imposes strict liability on common carriers. [00:36:23] Speaker 03: And for all of the same reasons that we've advanced as to why subsection B of the statute does not impose strict liability on common carriers, I don't think commerce's regulation does either. [00:36:35] Speaker 03: And so section 4826A would not change the equation. [00:36:38] Speaker 02: Can I tell you just one other thing that has been very helpful? [00:36:42] Speaker 02: I'm sorry, did you have a question, Joseph? [00:36:44] Speaker 04: No, go ahead. [00:36:46] Speaker 02: Here's one other thing that gives me some concern about this case, and that is we're dealing with a statute that is grounded in the protection of national security. [00:36:59] Speaker 02: This statute is rooted in the War Powers Act. [00:37:02] Speaker 02: This is meant to protect the United States against serious and profound threats to the nation, to its troops, to its people. [00:37:19] Speaker 02: And that's an area when we started dealing with national security where courts are very hesitant, very hesitant to upset the vote because that is not our area of expertise. [00:37:32] Speaker 02: And so what I'm really struggling with here is because you have some very strong arguments on your side, but the government has her on air. [00:37:40] Speaker 02: It has an express statutory embrace of their hug for determinations and administrative actions, all of them that preceded the statute. [00:37:56] Speaker 02: And we have a recognition in this country that in fact, when it comes to regulatory actions, Congress can impose even criminal liability, let alone civil liability on a strict liability basis. [00:38:14] Speaker 02: And Iran Air told us that imposing strict liability [00:38:20] Speaker 02: people who act without knowledge is not uncommon. [00:38:24] Speaker 02: And I'm worried about the decision to lower the mens rea from where it has been for 40 years under statutes and regulations and administrative practice is a real policy judgment about national security. [00:38:42] Speaker 02: a real policy judgment about how much we want people who are engaged in something that's an completely regulatory activity. [00:38:50] Speaker 02: There's no right to export things to foreign countries, put aside a First Amendment claim which you don't have. [00:38:57] Speaker 02: There's no right to engage in that business if it has any risk of imperiling the United States national security. [00:39:04] Speaker 02: So why shouldn't I be worried about loosening [00:39:10] Speaker 02: protections that have been in place for 40 years for our national security and that Congress in a lot of ways here and our own circuit precedent seem to have locked in. [00:39:22] Speaker 03: I appreciate the concern Judge Millett and I think there are a few things to say about that. [00:39:27] Speaker 03: One is that nothing in the position that we've taken here or if this court were to rule in our favor [00:39:33] Speaker 03: would undermine commerce's ability to enforce the statute against the principles, the exporters and the re-exporters. [00:39:41] Speaker 03: And that's what was at issue in Iran Air, was a principle. [00:39:44] Speaker 03: Nothing in our position would prevent commerce from going after them and even going after them on a strict liability basis. [00:39:51] Speaker 03: And even as to common carriers, I don't think you'd see after a ruling in our favor here, [00:39:56] Speaker 03: that these companies would simply scrap their compliance programs. [00:40:01] Speaker 03: There would still be liability for knowing facilitation of unlawful exports and companies will want to stay as far away as possible from having any debate about whether they had knowledge of the facts that made the export unlawful. [00:40:17] Speaker 03: But at the end of the day, it's a question of statutory interpretation. [00:40:20] Speaker 03: And if you rule in our favor and commerce decides that's a problem, commerce can go back to Congress and ask Congress to address the question of innocent intermediaries, address the question of common carriers, and then Congress would be in a position. [00:40:34] Speaker 02: It's not just common carriers. [00:40:36] Speaker 02: My concern is [00:40:39] Speaker 02: Not that FedEx has any interest in imperiling the national security of the United States. [00:40:43] Speaker 02: I'm sure it doesn't. [00:40:47] Speaker 02: But it's not common carriers. [00:40:48] Speaker 02: It's any person who transports. [00:40:52] Speaker 02: Any person. [00:40:53] Speaker 02: And there are all kinds of individuals and smaller organizations, fly-by-night organizations, [00:41:01] Speaker 02: that engage in all kinds of unfortunate activities. [00:41:06] Speaker 02: And we would be loosening our statutory protections as to everybody who transports. [00:41:15] Speaker 02: Everybody who pauses, aids, and bets, induces, procures, all of them, it would be loosened under your theory. [00:41:24] Speaker 03: That is correct insofar as they could not be held strictly liable, but there still would be liability for knowing violations and commerce could always there will always be a principle and commerce can. [00:41:34] Speaker 02: They may not always they may not always be able to be found and regulated by the government. [00:41:39] Speaker 02: National security that's where you really do want belt and suspenders. [00:41:43] Speaker 03: And this is where we would like to see Congress truly grapple with this problem and weigh the competing interests, because there is a significant interest on the other side. [00:41:52] Speaker 03: And that's the interest in not imposing harsh administrative civil penalties on companies that are entirely innocent and that are doing their level best to avoid facilitating unlawful exports. [00:42:09] Speaker 01: All right. [00:42:09] Speaker 01: Thank you, gentlemen. [00:42:11] Speaker 01: Madam Clerk, if you'd call the next case.