This Week at The Ninth: Debarred and Debugged

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This week, the Court knocks down a party’s argument that it was “de facto debarred” from exporting activities under the Arms Export Control Act, and explains what exactly triggers the statute of limitations in Wiretap Act suits.

THORNE v. U.S. DEPARTMENT OF STATE
The Court rejects the contention that parties are “de facto debarred” from exporting activities under the Arms Export Control Act when the government has simply prohibited them from engaging in a discrete set of transactions.

Panel: Judges Siler (CA6), Berzon, and Lee, with Judge Siler writing the opinion.

Key Highlight:  “By essentially only informally requesting further clarification regarding Thorne’s license denials, plaintiffs have not pleaded sufficient facts or provided sufficient evidence of a nefariously imposed complete prohibition on their legal engagement [Arms Export Control Act] activities so as to overcome the presumption of legitimacy that is accorded to Government records and official conduct.”

Background:  Plaintiff Robert Thorne exported firearms, ammunition, and security equipment to South African entities controlled by plaintiff David Sheer.  Under the Arms Export Control Act and its implementing regulations, Thorne was required to obtain a license from the Directorate of Defense Trade Controls (DDTC).  Although the DDTC had approved Thorne’s prior requests, it denied his most recent one, then instructed other third parties not to ship arms to Sheer because he was “an unreliable recipient of U.S. origin defense articles.”  Plaintiffs sued, claiming that the DDTC had “de facto debarred” them without following the requisite procedures.  The district court denied their request for a preliminary injunction.

Result:  The Ninth Circuit affirmed.  The Court first interpreted the governing regulation, 22 C.F.R. § 127.7, which provides that an entity has been “debarred” only when they are “prohibit[ed] . . . from participating directly or indirectly in any [Arms Export Control Act] activities.”  While acknowledging that “it is possible to read ‘any’ in § 127.7 to mean ‘less than all,’”  the Court concluded that “the better reading of ‘any’ is to read it synonymously with ‘total.’”  Thus, consistent with the more general understanding of the term debarment, Plaintiffs needed to show that “DDTC has completely prohibited them from legally engaging in all [Arms Export Control Act] activities.”

The Ninth Circuit held that Plaintiffs had not met that burden.  With respect to Thorne, the Court emphasized that he had been denied licenses only to export to Sheer, and the “denial of a license pertaining to a specific transaction only is not tantamount to a debarment.”  As for Sheer, the Court acknowledged that the DDTC’s effective prohibitions appeared to be more wide-ranging, but the Court noted that the DDTC had not imposed any restrictions on licensees where the “risk” of their shipping arms to Sheer was “determined to be low,” but “not non-existent.”  The Court emphasized that none of the plaintiffs had pursued any of the formal channels available to them to challenge the relevant license denials, undermining any claim that there was some sort of “nefariously imposed complete prohibition.”  The Court also rejected Thorne’s claim that the DDTC had imposed a “presumption of denial” for all his future license requests, explaining that he had simply misread a DDTC email intended to inform him that “a resubmission of license applications unresponsive to the DDTC’s reasons for denial would be pointless.”

KATHLEEN BLISS V. CORECIVIC, INC.
The Court holds that each individual interception of a call is a discrete violation of the Wiretap Act for purposes of triggering its statute of limitations.

Panel: Judges Miller, Hunsaker, and Schlitz (D. Minn.), with Judge Hunsaker writing the opinion.

Key Highlight:  “Each interception of Bliss’s privileged telephone calls is a separate violation of the Act. Therefore, the statute of limitations is triggered anew for each call that CoreCivic recorded, and CoreCivic is entitled to summary judgment only as to calls that Bliss had a reasonable opportunity to discover were recorded more than two years before she filed suit.”

Background:  Bliss is a criminal lawyer in Nevada. CoreCivic runs a detention facility there.  On June 27, 2016, Bliss began receiving discovery documents from the government that showed CoreCivic had been recording her privileged calls with a client detained in CoreCivic’s facility.  Bliss didn’t notice evidence of the recordings until September 2016, when she asked CoreCivic to stop.  It apparently did not, and Bliss filed suit in July 2018 under Title III of the Omnibus Crime Control and Safe Streets Act of 1968, as amended, 18 U.S.C. §§ 2510–2523, and Nevada’s wiretap act, Nev. Rev. Stat. §§ 200.610–200.690 (collectively the “Wiretap Act”).  CoreCivic moved for summary judgment on the theory that Bliss’s claims were time barred:  Wiretap Act suits must be brought no “later than two years after the date upon which the claimant first has a reasonable opportunity to discover the violation.” Because Bliss’s claims arose from a pattern of conduct that began in June 2016, the district court concluded that the statute of limitations had been triggered for all of her claims and granted summary judgment for CoreCivic.

Result:  The Ninth Circuit affirmed in part, reversed in part, and remanded.  The key question, the Court said, was whether “the violation” triggering the Wiretap Act’s limitations period was CoreCivic’s call-recording protocol as a whole or each individual call that it recorded.  Because that term was not defined in the statute, the Court looked to “the public understanding of the words at the time of enactment,” and “the language and design of the statute as a whole.”  Based on dictionary definitions from 1986 (when the statute of limitations provision was enacted) defining “violation” as a singular act, the Court concluded that “each interception is a discrete violation.”   That meaning was confirmed by surrounding statutory context.  “There simply is no textual basis,” the Court said, “for morphing what otherwise would be considered separate violations into a single violation because they flow from a common practice or scheme.”

Turning to the accrual of Bliss’s particular claims, the Court held that the statute of limitations began to run on calls before June 2016 when Bliss first obtained the documents showing those calls had been recorded, and not when she actually discovered the interceptions in September 2016.  On that basis, the Court affirmed “the district court’s holding that Bliss’s claims are untimely to the extent they are based on interceptions that occurred before June 27, 2016.” But CoreCivic hadn’t stopped then. “To the extent [Bliss’s] claims are based on calls that were recorded after [June 27, 2016],” the Court said, “the timeliness of such claims depends on when she first had a reasonable opportunity to discover that such calls were recorded.”  The Court remanded for further proceedings to resolve that issue.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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