The Supreme Court Has Already Agreed that the Mystery Appellant Caused a “Direct Effect” in the United States

I’d like to make a minor — but I think important — point about the DC Circuit opinion in the Mystery Appellant challenge to what is believed to be a Robert Mueller subpoena. Assuming that this is a challenge to a Special Counsel subpoena, then the Supreme Court has already agreed with Mueller — in dissolving a stay of financial penalties for blowing off a subpoena — that some company owned by a foreign country took an action outside the US that had an effect inside the US, in an investigation into what happened during an election.

This post will assume that this is a Mueller subpoena. Some of the evidence backing that assumption includes:

  • DC District Chief Judge Beryl Howell issued the original order; she presides over Mueller’s grand jury
  • A lawyer asked for Mueller’s latest sealed filing on the day a response from the Mystery Appellant was due
  • Greg Katsas recused from consideration of this case; he had said he would recuse on Mueller related issues
  • The secrecy for the hearing before the DC Circuit, and arguably the review process for this challenge, were exceptional
  • Mueller lawyers Michael Dreeben and Zainab Ahmad were seen returning to his office after the DC Circuit hearing

Judges David Tatel, Thomas Griffith, and Stephen Williams issued their order on December 18. The Mystery Appellant appealed to the Supreme Court, and over Christmas John Roberts took briefing on that appeal. Last week the Supreme Court declined to uphold the stay, effectively agreeing with the Circuit’s decision.

And that’s important, because a key part of the now-public (though still partly sealed) DC Circuit opinion explains how the presumed Mueller request overcomes the sovereign immunity of the company in question. The request must involve — among other things — an exception to sovereign immunity.

Taking section 1604 ‘s grant of immunity as a given, the government must check three boxes for the contempt order to stand. First, there must be a valid grant of subject-matter jurisdiction. Second, one of the Act’s exceptions to immunity must apply. And third, the contempt sanctions must be a permissible remedy. According to the district court, the government satisfies all three. We agree.

Mueller claimed that this qualified as an exception because the request involves an “act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere [when] that act causes a direct effect in the United States.”

Moving to those exceptions, in its ex parte filing the government steers us to the third clause of section 1605(a)(2). That provision denies immunity in an “action … based … upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere [when] that act causes a direct effect in the United States.” Ordinarily, the Corporation would bear the burden to establish that the exception does not apply. See EIG Energy FundXIV, L.P. v. Petroleo Brasileiro, S.A., 894 F.3d 339, 344- 45 (D.C. Cir. 2018) (“[T]he foreign-state defendant bears the burden of establishing the affirmative defense of immunity,” including “‘proving that the plaintiff’s allegations do not bring its case within a statutory exception to immunity.”‘ (quoting Phoenix Consulting Inc. v. Republic of Angola, 216 F .3d 36, 40 (D.C. Cir. 2000))).

And because Mueller relied on an ex parte filing to make that case, all the judges involved — Howell, Tatel, Griffith, Williams, Roberts, and whoever else at SCOTUS reviewed this — relied on the argument that Mueller’s lawyers laid out about the request.

Here, however, the government relies primarily on ex parte evidence unavailable to the Corporation. We have repeatedly approved the use of such information when “necessary to ensure the secrecy of ongoing grand jury proceedings,” In re Sealed Case No. 98-3077, 151 F.3d 1059, 1075 (D.C. Cir. 1998), and we do so again here. But where the government uses ex parte evidence, we think the burden falls on the government to establish that the exception applies, and we will conduct a searching inquiry of the government’s evidence and legal theories as a substitute for the adversarial process.

In a sealed discussion of Mueller’s ex parte filing, the DC Circuit finds a “reasonable probability” that that section covers this subpoena. It goes further and states that it doesn’t have to decide what the gravamen of the subpoena is, which suggests that something about this request makes it very clear that the company both possess the records and that they are relevant to Mueller’s investigation.

The “gravamen” of a subpoena may be the mere fact that an entity possesses the documents in question. Alternatively, the “gravamen” may be related to the content of the records and why they may be relevant to the government’s investigation. Indeed, the correct approach may well vary with the facts of a given case. Here, however, we need not resolve that issue [redacted]

There’s some other redacted discussion that dismisses a claim made by the corporation that will be interesting for the history books. But the DC Circuit is clear that the request — as laid out in an ex parte filing presumably written by Mueller’s lawyers — clears the subject matter question.

None of this analysis tells us enough about the company for us to guess what foreign company it is. The WaPo says it is a financial institution. I happen to think that Qatar or the Emirates’ investment authority are the most likely candidates but that’s just an educated guess.

Still, if this is indeed a Mueller subpoena, given the topic of Mueller’s inquiry and his fairly clear discipline at staying within the scope of it, that nevertheless is a signifiant revelation. That’s because Mueller is investigating events relating to an election. And most acts by a company owned by a foreign country that cause an effect in this country — if they have some relationship with that election — would be illegal. It could be the payoff for a bribe. It could be a more direct expenditure associated with the campaign. It could be a payment associated with activities that occurred during the campaign.

Maybe it’s something far more obscure. But any of the obvious applications here would all implicate a foreign country influencing — directly or indirectly — the election. And SCOTUS has already reviewed that Mueller argument, and found it reasonable.

That doesn’t mean SCOTUS has reviewed the evidence the company has, it doesn’t mean the company will turn over the evidence (though it would already incurred something like $300,000 to avoid compliance), it doesn’t mean the evidence proves whatever crime Mueller has cited in demanding it.

But SCOTUS has, at a minimum, found Mueller’s argument that such evidence would be relevant to his criminal investigation reasonable.

Update: Added language to make what happened — SCOTUS dissolved the stay — technically correct.

Update: And SCOTUS is now debating whether to allow the Mystery Appellant to file cert under seal or not.

As I disclosed last July, I provided information to the FBI on issues related to the Mueller investigation, so I’m going to include disclosure statements on Mueller investigation posts from here on out. I will include the disclosure whether or not the stuff I shared with the FBI pertains to the subject of the post. 

45 replies
    • GusGus says:

      I was thinking the same thing at first.  But then again, the cost of not complying will add up.  The penalty is $50,000 per day. If the firm stalls for 100 days, not even 4 months, that’s $5,000,000.  I think $5 million matters, even to an oligarch.

      • P J Evans says:

        Even at my level of peon management (exempt but with no one under me, and no chance of promotion), the company I worked at drummed into us that fines that could run $20-30K per day per incident were something they didn’t want to deal with, so do it correctly the first time and don’t f*ck up.

  1. Bay State Librul says:

    I am an accountant/auditor. How will we ever know if they pay up? They will probably litigate. Anyone know the procedure to ensure that funds ($300,000) are deposited with the Treasury?

    • earlofhuntingdon says:

      The most common exception for foreign state immunity is “commercial activity.”  If so, that would imply a business presence or activity in the US, which would allow putting a freeze on any US-based assets of the foreign state-owned firm.  That often puts more leverage on the firm than the fine itself.

  2. Vern says:

    I happen to think that Qatar or the Emirates’ investment authority are the most likely candidates but that’s just an educated guess.

    That would be a BFD!  Suggests a far wider scope of Mueller’s efforts.  Can you share your reasoning?

    • earlofhuntingdon says:

      Banks usually transfer funds on behalf of a client.  It’s identity would be a bigger deal.

      • Alan says:

        > There’s been a lot of commotion over at Deutsch Bank.   I would say they are a likely candidate.

        That would mean that you did not read the opinion from the appellate court that provides a limited description of the company.

  3. Alan says:

    @ Bay State Librul

    not sure, but I would think the Special Counsel could levy or attach the company’s (and possibly the country’s) accounts and assets here in USA if they didn’t pay. Not sure we’ll ever know tho, cause that might identify the company & country, which is currently sealed info.

  4. Semanticleo says:

    I keep hearing floaters like ‘incompetent to stand trial ‘ and ‘knowingly, willingly’ as though an escape clause for Trump’s indictment as a legal/social liability.

    Surely, Pence would break a leg to pardon, but those dangerous days leading up…

  5. Dunyazad says:

    I like your thought that the Qatar Investment Authority might be the subpoenaed company. That would be the same entity that, together with Glencore, purchased the 19.5% share of Gazprom for which Carter Page allegedly was offered the brokerage fee in return for lifting of sanctions.

  6. punaise says:

    Nominally OT, regarding the whole NYTimes FBI counter-intel “reveal” and why it’s not really news:
    is there a layperson’s guide or synopsis for those of us who lack a detailed grasp of the import this?
    Water-cooler credibility hangs in the balance, merci!

    • Rayne says:

      This is the quickie overview I gave an elderly friend:
      1) Understand there are two different kinds of investigations: criminal and counterintelligence;
      2) After Trump fired Comey, a counterintelligence investigation into Trump’s actions was opened by the FBI because he literally admitted firing Comey because of Russia on top of other sketchy behavior;
      3) This counterintelligence investigation of a seated president was folded into Special Counsel’s Office along with its criminal investigation work, providing some protection from then-Attorney General Jeff Sessions who had recused himself.
      4) It’s not news in the respect that all of Team Trump’s interactions with Russians/pro-Russians and about Russian interests should have warranted counterintelligence investigations alongside criminal investigations.

      It’s overly simplistic but it’s the easiest way I could explain to this elder that the president is a suspected spy for Russia without being that scary blunt and triggering a mental shutdown.

      • Frank Probst says:

        There wasn’t very much time (about a week, I think) between, the firing of Comey and the appointment of Mueller.  And that’s also the time window during which Rosenstein and McCabe supposedly had their “controversial conversation” that we learned about last year, which puts that whole story in a slightly different light.  It’s less likely (if it ever was “likely”) that they were conspiring to get rid of the President for “deep state” reasons and much more likely that they were trying to figure out what the hell to do, given how awful the whole thing looked.

        • Rayne says:

          Yup, that really makes the scenario look very different. It reeks of greater urgency. The subsequent mounting belligerence and pressure to remove McCabe, Page, Strzok, and Ohr also look very different now — as if someone outside the counterintelligence investigation(s) had pressed Trump or Trump minions like Nunes about their remaining presence at DOJ/FBI.

        • Trip says:

          Which makes it all the more stunning that Trump hasn’t fired Rosenstein. What did he say to Trump to maintain his position at their meeting?

  7. fftfft says:

    Speculating on the purpose, if the corporation is QIA the subpoena could be to understand the legal entity structure of its 19% investment in Rosneft. There would be no ambiguity that QIA possesses the information to satisfy the subpoena.

  8. scribe says:

    I think you’re reading too much into the S.Ct. declining to grant a stay.  Without having the exact language of their standard before me, the gist of the standard they apply when deciding whether to grant a stay is “does the person seeking a stay have a strong chance of success on the merits”?

    This is to be distinguished from the standard they employ when deciding whether to grant the temporary, administrative stay – such as was granted here on the initial filing.  Recall, the initial application went to the Chief Justice in his function as the circuit justice responsible for the DC Circuit.  He granted a temporary, administrative stay to hold the status quo in place until all the papers could be filed and either he, or the Court as a whole, could decide whether to grant the full-up “strong chance of success on the merits” stay.  Since they declined to grant the full-up stay, it is reasonable to conclude only that the Court decided mystery appellant (now, more precisely, mystery “petitioner”) did not have a strong chance of success on the merits.

    But keep in mind, the Supreme Court does not sit as a court for the mere correction of errors.  There are innumerable cases throughout our legal history where the lower courts “got it wrong” in any of the manifold ways courts can get things wrong and where the Supreme Court decided there were not 4 justices interested in taking the case.  (I am sure people have died in death chambers even the lower court “got it wrong” and the SCt didn’t sit to correct errors.)  Maybe there wasn’t a conflict in the circuits about the interpretation of the law, maybe there were procedural defects in the way the case had been handled, maybe only 3 justices liked the petitioner’s lawyers, maybe 4 justices liked the case but knew the other 4, if they convince #9 to join them, would turn the law in a direction they didn’t like.  No one knows.  But a denial of certiorari means, and ONLY means, there were not 4 justices interested in taking the case.

    So, if the Court denied a stay because petitioner lacked a strong chance of success on the merits, either the Court felt the decision below was arguably correct – which means by definition there was not a “strong chance of success on the merits” – or they felt the underlying law had not developed enough.  Or there were not enough justices willing to short-circuit normal procedure to benefit petitioner with a stay.

    Recall, this is a challenge to a grand jury subpoena – judges ordinarily support the police, even at the S.Ct. level – and GJ subpoenas are usually given wide latitude.  Also, reading the DC Cir opinion shows the “I’d be breaking foreign law” argument was both made late and made poorly, with the DC Cir expressing a LOT of skepticism of the argument’s merit, if any.  The opinion smelled of the DC Cir saying the opinion on breaking foreign law by complying with the US GJ subpoena  was bullshit made up for the occasion.  But they were too nice to come out and say it directly.

    Similarly, filing a petition (and/or appendix) under seal can mean a lot of things beyond a less-than-benevolent activity behind the scenes.  Sealed appendices are routine in cases involving trade secrets, family-law disputes, some patent matters and grand jury matters.  Preserving grand jury secrecy is one of the paramount values all courts enforce.  There are orders on the SCt orders list almost every week allowing the filing of briefs, appendices, or other documents under seal.  Follow the orders list and you’ll see them.

    So, the SCt making the mystery petitioner here go through the normal procedure is nothing out of the normal.  At MOST – and this is tea leaves reading at an extreme – it might imply an inclination on the part of the SCt to compel the mystery petitioner to comply with the GJ.  After all, the orders list from last week took a bunch of cases so the Court could fill out its April argument calendar, meaning for decision in May-June.  A petition filed now would, in the normal course, not be granted (or denied) until later this year, probably during the Long Conference in September, and not be heard and decided until Christmas or slightly before.

      • Alan says:

        It was staying pending appeal.  If all stays have been lifted, then they’ll have to either comply with the subpoena, seek further relief (from the trial court or an appellate court), start paying, or face further sanctions.

  9. Hops says:

    If a DC circuit judge recuses from a Mueller case due to having been appointed by Trump, would a Supreme Court justice do the same?

  10. Alan says:

    @ Hops

    That’s up to the individual SCOTUS justice. There are very few checks on a SCOTUS justice–they are subject to impeachment and removal by Congress, and presumably, if a majority of the justices think a justice should be recused, they have the inherent power to issue an order forcing recusal, but that is a power that has never before been exercised and probably never will.

    • earlofhuntingdon says:

      Supreme Court Justices determine for themselves whether to recuse.  Lower court judges are subject to rules that dictate when they should or must recuse.

  11. RR says:

    @ punaise, 1:26p

    Martin Longman has a summary at Washington Monthly dated January 12 that at least one other reader here has found useful. (I would embed or include the link if I were certain that would not run afoul of site practices.)

    [Please go ahead and share the link – I’ll watch for it in moderation in case it stalls backend. Thanks. /~Rayne]

  12. pseudonymous in nc says:

    Are contempt fines levied on a rolling basis or are they added up and invoiced when the party complies?

    • Alan says:

      It’s up to the judge.  The court has broad discretion to craft an order that will compel compliance or fairly sanction a party for failing to comply.

    • William Bennett says:

      Yes, thanks. Helpful context for a couple of things, including the Wittes piece, which I got my fingers singed for posting a link to on another EW thread.

  13. Wotadog says:

    Thank you RR for pointing out the article by Martin Longman. I know I’m not the sharpest knife in the draw but how can Trump still be president? It means while the arguing is going on he can continue his sell out of America.

  14. Michael says:

    Mueller’s response to Manafort was due today. The DC courthouse was closed due to the snow, right? So how does that affect Mueller’s filing?

  15. stryx says:

    Why can’t the mystery Corp be Deutsche Bank? Would their participation in his kind of action have to be disclosed to shareholders/regulators? TrumpCo is an expensive non-performing asset for them. Why wouldn’t they aggressively fight a supoena seeking testimony about what they took in trade?

  16. e.a.f. says:

    $50K a day isn’t much to pay if you’re worth several billion dollars, especially if you’re government owned. If its a government, the sky is the limit and it could go on for years. Its important and its worth more than money.
    If its a government owned entity, I don’t think Deutsche bank is government owned, but I’ve been known to be wrong.
    so we can guess, some have educated guesses, some of us will have wild guesses, me, it could be an Israeli government owned entity.

  17. Mitch Neher says:

    What if Trump, Kushner and Mnuchin are acting as “brokers” for business transactions between Russian individuals or Russian organizations listed in one of the US sanctions regimes and foreign banks that are neither under sanctions nor under investigation by FinCen? Steering oligarch rubles away from places where FinCen might discover it towards places where FinCen is not even looking for it? A sort of sanctions relief by means of tip-offs from the bad cop on how to avoid getting caught by the good cop?

  18. harpie says:

    I would just like to add: 6:00 AM – 12 Jan 2019
    Trump sold an estimated $35,000,000 worth of real estate while serving in the White House last year, according to a Forbes analysis of property docs and filings. // Some purchases were made through LLCs,  a move that allows buyers to shield their identities

  19. Willis Warren says:

    This seems appropriate here…

    The breakfast event, which was first reported by The Daily Sabah, a pro-government Turkish paper, took place at the Trump International Hotel in Washington, D.C. at 8.30 a.m. on Jan. 18, 2017—two days before President Donald Trump’s inauguration. About 60 people were invited, including diplomats from governments around the world, according to those same sources.

  20. bmaz says:

    I think there is near certainty it is a Mueller issue. Also agree that it is extremely telling that the admin stay was dissolved. That does not bode well for Mystery Guest Corp.

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