We have followed the saga of Epsilon Electronics extensively, beginning with the The Auto Sound and the OFAC Fury Part I and Part II and ending most recently with Epsilon, Epsilon. Well, it seems that the story may be drawing to a close. On Monday, a federal district court granted OFAC summary judgment on its motion to dismiss Epsilon Electronics complaint challenging the $4.073 million dollar fine imposed on Epsilon by OFAC. The opinion can be viewed and downloaded here.
The court considered each of Epsilon’s arguments and easily dispatched all of them, only barely concealing its opinion that Epsilon’s arguments were largely frivolous. We discussed our own view of Epsilon’s arguments, particularly its bizarre claim that the fine violated the U.S. Constitution’s Excessive Fines clause, in The Auto Sound and the OFAC Fury Part II. The court, not surprisingly, held that the Excessive Fines clause did not preclude the $4 million fine given that Epsilon sold $3.4 million in goods to Iran and given that this fine was only one-third of the statutory maximum.
Epsilon’s due process claim fared no better with the court. The court paid particular attention to what was, perhaps, Epsilon’s gravest error in its dealing with OFAC, one we noted in Epsilon, Epsilon, our third post on this case. Two separate subpoenas, the court noted, provided Epsilon with adequate notice of OFAC’s investigation. The court went on:
Almost two years later, on May 6, 2014, OFAC issued its pre-penalty notice, which informed the plaintiff that it had 30 days to provide a written response to the pre-penalty notice. … The plaintiff provided a two-page response to the pre-penalty
notice on June 6, 2014 … . This series of events shows that the plaintiff had ample opportunity to respond to OFAC’s inquiries into its dealings with Asra International and to OFAC’s detailed pre-penalty notice. Procedural due process demands nothing more.
The court’s reference to the “detailed” pre-penalty notice and the plaintiff’s “two-page” response make clear that the court had little patience for a due process claim once Epsilon had squandered its opportunity to provide an adequate response to the pre-penalty notice.
Finally, the court dismissed Epsilon’s arguments that its sales to Iran were permissible under the “inventory exception” embodied in OFAC’s “Guidance on Transshipments to Iran.” According to the court, the guidance does not permit sales into non-U.S inventory outside Iran where the U.S. exporter has “reason to know” that the goods were ultimately destined to Iran. The court cited, as we have, the distributor’s website as ample evidence that Epsilon had reason to know that its distributor was dealing principally, if not exclusively, with Iran.