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Ramirez de Arellano, 745 F.2d 1500 (Oct. 5 1984)

United States Court of Appeals for the District of Columbia Circuit

	)
Temistocles Ramirez	)
de Arellano, et al,	)
Plintiffs-Appellants,	)
)
v.	)
)
Caspar W. Weinberger,	)
Secretary of Defense, et al,	)
Defendants-Appellees.	)
	)

Appeal from the United States District Court for the District of Columbia (Civil Action No. 83-02002).

Judges: Spottswood William Robinson III, Chief Judge, and James Skelly Wright, Edward Allen Tamm, Malcolm Richard Wilkey, Abner Joseph Mikva, Harry Thomas Edwards, Ruth Bader Ginsburg, Robert Heron Bork, Antonin Scalia, and Kenneth Winston Starr, Circuit Judges.

Opinion for the court filed by Circuit Judge Wilkey.

Dissenting opinion filed by Circuit Judge Tamm.

Dissenting opinion filed by Circuit Judge Scalia, in which Circuit Judges Bork and Starr concur.

Dissenting opinion filed by Circuit Judge Starr, in which Circuit Judge Scalia concurs. {745 F.2d 1500, 1505}

Opinion

Wilkey, Circuit Judge

This case involves an alleged occupation, amounting to an effective seizure and destruction, of a United States citizen’s privately owned cattle ranch in Honduras by officials of the United States government. Temistocles Ramirez de Arellano (Ramirez), a United States citizen, claims that the Secretaries of State and Defense are operating a large military facility for training Salvadoran soldiers on his private ranch without permission or lawful authority, in violation of the Constitution. Ramirez alleges, in essence, that a United States sponsored and controlled military center is occupying his land, destroying his life’s work, and exposing his family and employees to life threatening conditions. The complaint filed in the United States District Court for the District of Columbia requests declaratory and injunctive relief for the alleged occupation and destruction of private property without constitutional or statutory authority and for a deprivation of the use and enjoyment of property without due process of law. The district court dismissed the complaint prior to any discovery or findings of fact on the ground that the dispute was a nonjusticiable political question. 1  We reverse.

The plaintiffs’ claims present varied and complex issues of core constitutional concern. We emphasize, however, that we are not now being asked to enter judgment on the merits for one of the parties. Because the case is before us on an appeal of the district court’s dismissal of the complaint at the threshold of litigation, we need only determine whether the plaintiffs have stated a justiciable claim for relief which falls within the jurisdiction of the district court. In so doing, we address the assortment of ingenious but spurious arguments which the defendants have conceived and advanced in an effort to wipe out the plaintiffs’ case. We find the dismissal of the complaint was precipitous. {745 F.2d 1500, 1506}

We proceed under the settled rule for assessing the propriety of dismissal under Rule 12(b) of the Federal Rules of Civil Procedure. Many potentially dispositive facts are intensely disputed by the parties, such as the role of the Honduran armed forces and the United States military in operating the Regional Military Training Center (RMTC), and the extent of land occupied and used for the military base. Because there has been neither fact-findings by the district court nor stipulation of undisputed facts by the parties, we must accept as true all of the material allegations in the plaintiffs’ complaint. Dismissal for failure to state a claim for relief is proper only when “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” 2  All factual doubts must be resolved and all inferences made in favor of the plaintiffs. 3  Defendants’ factual allegations, if in agreement with plaintiffs’, only reinforce plaintiffs’ case; if in disagreement, they must be ignored. Thus, at this stage of the proceedings, the only relevant factual allegations are the plaintiffs’.

I.  Background

A.  The Plaintiffs’ Set of Facts

The plaintiffs’ set of facts are detailed in the verified complaint filed by Ramirez and six corporate plaintiffs, in eleven sworn declarations filed with the district court, and in numerous newspaper reports appended to the plaintiffs’ pleadings and memoranda. Assuming, as we must, the truth of the plaintiffs’ material allegations, the facts are as follows.

Plaintiff Ramirez is a citizen of the United States. He is the sole beneficial owner, the general manager, and the chief executive officer of a large agricultural-industrial complex in the northern region of Honduras. Plaintiff Ramirez is a businessman and was a founding member of the Lion’s Club of Trujillo, Honduras, as well as the founder of the Association for the Defense of the Free Enterprise System in San Juan, Puerto Rico. Ramirez has engaged in numerous civic and community services in Puerto Rico and in Central America, including assisting the United States government in a meat distribution program for Puerto Rico. Ramirez conducts his business operations through six corporations which he owns and controls. Two of these corporate plaintiffs are United States nationals and four are incorporated in Honduras. Together they form a chain of title through which plaintiff Ramirez holds his interest in the land and property at issue. 4 

Plaintiff Ramirez acquired his large tract of land in Honduras more than 20 years ago, when it was raw, undeveloped jungle. Since then he has transformed the land into a 14,000-acre cattle ranch, meat-packing operation and shrimp-packing plant. According to Ramirez’s sworn declaration filed with the court, he “supervised the clearing of this land, planting feed grass, constructing fences, farmroads, cattle pens, cattle treatment facilities, warehouses and numerous other buildings, water ponds and reservoirs, and housing for [his] employees and their families.” 5  The business operation employs approximately 500 workers and is the single largest employer in the Department of Colon, Honduras. The plaintiffs’ initial total investment in the property has increased from approximately $700,000 to more than $13,000,000. 6  {745 F.2d 1500, 1507}

Still assuming the truth of the plaintiffs’ factual allegations, the plaintiffs’ property was occupied by the defendants without permission in 1983. In March of that year, the United States Department of Defense decided to establish a Regional Military Training Center for the United States to train soldiers from the army of El Salvador. Because of Congress’s unwillingness to increase the number of military advisers in El Salvador itself, the Defense Department decided not to locate the military training center there. 7  Instead, after reportedly considering several other countries, the Defense Department chose Honduras as the location for the RMTC. Newspaper articles in the United States at the time reported that the Honduran government was resisting the Defense Department’s placement of the military center in Honduras and that a United States Army spokesman said that Honduras did not have anywhere to locate the training center. 8 

Nonetheless, officials of the United States Department of Defense began a survey of land in the vicinity of Ramirez’s property, and in April of 1983 they picked a specific site in Honduras for the Regional Military Training Center. Unknown to Ramirez, the chosen site was his cattle ranch. Officers of the Army Corps of Engineers immediately started planning the construction of a 1,000-man tent camp and training facility on the plaintiffs’ property, and by May 1983, they had drawn up blueprints for the military center. 9 

In this same month, plaintiff Ramirez discovered the United States plans. The First Secretary of the United States Embassy in Honduras was visiting Ramirez’s home and “casually mentioned that a training base for Salvadoran soldiers was going to be built in the area.” 10  When Ramirez asked its location, the official pointed to property across the bay. Ramirez instantly realized that the official was pointing to his privately owned cattle ranch and he immediately informed his guest and other officials of the United States Embassy that the intended site for the RMTC was his land.

Construction of the military camp proceeded apace. Work crews from Litton Industries, under the supervision of the United States Army Corps of Engineers, began bulldozing the ranch in early June 1983. The crews constructed a 1,000-man tent camp for housing Salvadoran soldiers as well as an unspecified number of buildings on the ranch. The Army Corps of Engineers also built an ammunition storage facility and a firing range on the private land. In addition, plans were drawn up for mortar and other long distance firing ranges on the plaintiffs’ property. 11 

Next, according to the plaintiffs’ allegations, United States military training personnel moved in. Over 100 United States Army Special Forces Soldiers began training over 1,000 soldiers on the plaintiffs’ pastures, conducting training exercises all over the ranch using live ammunition.

As a result of the construction and the military operations, plaintiffs allege that they have suffered numerous injuries. Prime grazing land and fences have been bulldozed. The flow of water to the plaintiffs’ meat-packing plant has been interrupted by the soldiers’ diversion of substantial quantities of water for their own use. Cattle have been shot by stray bullets. “Large numbers of armed soldiers and trainees roaming around [the] ranch and the area of [the] meat-packing plant” {745 F.2d 1500, 1508} have frightened Ramirez’s family and his employees. 12  Ranch employees, fearing for their lives, have refused to tend cattle near the military operations, causing the livestock to become undernourished. The foreman of one section of the ranch declared:

Over half of the ranch’s 14,000 acres and nearly 90% of the year-round grazing land has been seized by soldiers of the Regional Military Training Center. 14  The operations are destroying the plaintiffs’ investment and Ramirez’s life’s work.

The plaintiffs claim that the land on which their operations are based is irreplaceable. Land in other areas of Honduras is either too arid, too mountainous or too inaccessible for the integrated agro-industrial enterprise. The only other land in Honduras suitable for cattle ranching is neighboring property, which is privately owned. 15 

The plaintiffs allege that in May 1983, the Washington Post reported an announcement by officials of the Departments of State and Defense pertaining to the establishment of the RMTC. One month later, the National Congress of Honduras entered a decree which authorized “the admission of military instructors and students, coming from friendly countries” to the Military Training Center. 16  According to Ramirez, however, “the site for the RMTC was neither presented to, nor decided by the Honduran legislature.” 17  In the summer of 1983, Honduran military officials discussed expropriation of a small portion of the ranch with Ramirez, but this discussion, Ramirez alleges, only pertained to a 1,500-2,000 acre section of the ranch called the “Designated Area.” These discussions did not result in any expropriation of the Designated Area 18  and the training activities spilled over onto the majority of the ranch’s acreage.

Meanwhile, according to the complaint, plaintiff Ramirez made numerous efforts to resolve his dispute with officials of the United States Embassy in Honduras and the Departments of State and Defense in Washington, D.C., but these efforts were unproductive or rebuffed. 19  The plaintiffs have not received any compensation for the seizure nor has any hearing on the dispute been held. The plaintiffs do not know from day to day what is going to happen on their ranch.

B.  Procedural History

In July 1983 plaintiff Ramirez and the six corporate plaintiffs which he wholly owns and controls sued Caspar W. Weinberger, Secretary of Defense, George P. Shultz, Secretary of State, and Lt. Gen. Joseph K. Bratton, Chief of Engineers for the United States Army Corps of Engineers, in the United States District Court for the District of Columbia. The plaintiffs’ complaint charges the named officials of the United States with causing the construction and operation of a large military training camp on the plaintiffs’ private property in Honduras. It alleges that the defendants’ occupation and destruction of the plaintiffs’ property is unconstitutional {745 F.2d 1500, 1509} because it is not authorized by any federal statute or provision of the Constitution. It further charges that the defendants deprived the plaintiffs of the use and enjoyment of their property without due process of law. The complaint seeks declaratory and injunctive relief and such other relief as the court deems just and proper. 20 

Shortly after the complaint was filed, the parties met in an effort to stipulate material facts. When they failed to reach an agreement, plaintiffs sought the permission of the district court to begin discovery of the facts. The district court denied their request. 21 

On 20 July 1983, the United States defendants moved to dismiss the complaint on the grounds that the action presented a nonjusticiable political question and that the plaintiffs had failed to state a claim for relief. No answer to the complaint was filed, but the defendants’ motion to dismiss was supported by five declarations disputing the plaintiffs’ factual claims and contending that the RMTC was actually a project of the Honduran government. The plaintiffs opposed the motion to dismiss and submitted additional declarations of fact and other exhibits. On 24 August 1983, the district court dismissed the complaint, holding that the case presented a nonjusticiable political question. The district court indicated that summary judgment was not appropriate at that time, because crucial material facts were in dispute. Accordingly it dismissed the complaint under Rule 12(b) of the Federal Rules of Civil Procedure. 22  This appeal ensued.

C.  Subsequent Developments

On appeal before a panel of this court, the defendants informed the court that the President of the Republic of Honduras had issued an “expropriation decree” in November 1983 pertaining to the plaintiffs’ land. 23  The decree identifies certain land in the Department of Colon, Honduras on which the Regional Military Training Center is located, and states that the described property “shall be expropriated.” It provides that “established legal procedures shall apply to the appraisal of the property and to the payment of compensation.” The decree is signed by the Secretary of State for National Defense and Public Security of Honduras and is dated 4 November 1983. 24 

In response to this submission to the court by the defendants, the plaintiffs submitted a letter to the court stating that the signing of such an expropriation decree merely begins the process of expropriation in Honduras and is not itself an act of expropriation or a claim of title. The plaintiffs directed the court’s attention to the uncontroverted legal opinions they had already submitted to the district court, which advise that a Presidential decree of expropriation in Honduras is only the first step in a process which may or may not result in expropriation. 25 

The plaintiffs also submitted to the court a copy of a letter dated 18 November 1983 from Ramirez to the United States Ambassador to Honduras. This letter describes alleged, subsequent developments on the ranch which are similar to those outlined in the verified complaint. The letter reads:

II.  The Plaintiffs’ Claims

The plaintiffs’ set of facts gives rise to cognizable causes of action against the named defendants. Count I of the plaintiffs’ complaint charges that the defendants’ establishment of the Regional Military Training Camp on plaintiffs’ land, the occupation and destruction of the plaintiffs’ property, and the deprivation of the plaintiffs’ use and enjoyment of the property “are beyond defendants’ express or implied authority under the laws and treaties of the United States and the United States Constitution.” 27 

This count states a claim. It is settled law that the Executive’s power to take the private property of United States citizens must stem from an act of Congress or from the Constitution itself. 28  When there is no authorization by an act of Congress or the Constitution for the Executive to take private property, an effective taking by the Executive is unlawful because it usurps Congress’s constitutionally granted powers of lawmaking and appropriation. Youngstown Sheet & Tube Co. v. Sawyer 29  is a leading authority for the cause of action stated in plaintiffs’ first count. There the Supreme Court adjudicated a challenge to the Executive’s power to seize privately owned steel mills during the Korean conflict. The Court held that the President’s seizure of the steel mills was unconstitutional because no statute authorized the taking and authority to take the mills was not implicit in the powers granted to the Executive by the Constitution, {745 F.2d 1500, 1511} despite the exigent circumstances. It upheld a federal district court’s injunction prohibiting Executive officials from seizing the mills. 30 

In the instant case, plaintiffs claim that no statute or constitutional provision authorizes the United States defendants to take the plaintiffs’ private property for a military training center. While we express no view on the merits of the plaintiffs’ first count, the plaintiffs have succeeded in stating a claim against the defendants for an unauthorized and unconstitutional deprivation of the use and enjoyment of their property. This claim is adjudicable in the federal district court.

Count II contends that the defendants’ deprivation of the plaintiffs’ use and enjoyment of their property without notice or a hearing violates the due process clause of the fifth amendment. Plaintiffs rely on Mullane v. Central Hanover Bank & Trust Co. 31  as support for the proposition that the deprivation of a property interest must be preceded by notice and must be accompanied by an appropriate hearing, except in extraordinary circumstances. Plaintiffs claim that the defendants have given the plaintiffs no notice of their intentions with respect to the plaintiffs’ property and that no hearing has been held on the property dispute. This count also states a claim within the jurisdiction of the federal district court sufficient to withstand dismissal for failure to state a claim. 32 

III.  Justiciability

Having found that the plaintiffs’ set of facts gives rise to the causes of action stated in the complaint, we examine the applicability of the political question doctrine to this case. The district court dismissed the complaint on the ground that the case presented a nonjusticiable political question. It determined that the case was a direct challenge to the propriety of the United States military presence in Central America, and having so characterized the complaint, it held that the dispute was nonjusticiable. The district court found that the case presented all of the three criteria identified by the Supreme Court in Baker v. Carr 33  for nonjusticiable political questions. The panel opinion by Judge Scalia (later vacated for en banc) found unanimously that the trial court was in error in relying on this ground. On this point our en banc disposition is in accord with the panel opinion.

The factors for identifying political questions were recently summarized by Justice Powell in his concurrence in Goldwater v. Carter. The doctrine incorporates three inquiries:

(i) Does the issue involve resolution of questions committed by the text of the Constitution to a coordinate branch of Government? (ii) Would resolution of the question demand that a court move beyond areas of judicial expertise? (iii) Do prudential considerations counsel against judicial intervention? 34 

The first of these formulations requires the court to determine whether the text of the Constitution implicitly or explicitly commits the stated claim to the political branches. According to the Supreme Court, this necessitates a close textual analysis of specific provisions of the Constitution. The Supreme Court determined, for example, that certain suits brought pursuant to the Constitution’s guarantee of a republican form {745 F.2d 1500, 1512} of government in article IV are nonjusticiable political questions textually committed for resolution to Congress, not the Judiciary, because the Constitution gives Congress the exclusive power to determine whether a particular state government should be recognized. 35  In addition, certain disputes over internal procedures in Congress may be textually committed for resolution to Congress by article I, section 5, clause 2, which provides that “[e]ach House may determine the Rules of its Proceedings.” 36 

In the area of foreign affairs, some broad challenges to the Executive’s conducting of foreign relations have been found nonjusticiable because formulation of foreign policy is constitutionally committed to the political branches. In Johnson v. Eisentrager, for example, the Supreme Court refused to adjudicate claims by enemy aliens who were convicted of violating laws of war in China after Germany had surrendered. The aliens’ claims were found to be committed to resolution by the political branches because they fundamentally challenged the propriety of United States military activities in China. There, the Court stated: “[I]t is not the function of the Judiciary to entertain private litigation ... which challenges the legality, the wisdom, or the propriety of the Commander-in-Chief in sending our armed forces abroad or to any particular region.” 37 

Not every issue related to foreign relations, however, is constitutionally committed for resolution by the Executive. Baker v. Carr states that “it is error to suppose that every case or controversy which touches foreign relations lies beyond judicial cognizance.” 38  Issues which are not at base sweeping challenges to the Executive’s foreign policy typically are adjudicated by the courts because they do not involve judicial usurpation of the Executive’s constitutional powers to manage foreign affairs.

A careful analysis of the plaintiffs’ case shows that their claims are not exclusively committed for resolution to the political branches. Unlike the claim addressed by the Court in Johnson v. Eisentrager, the plaintiffs do not seek to adjudicate the lawfulness of the United States military presence abroad. Instead, they seek adjudication of the narrow issue whether the United States defendants may run military exercises throughout the plaintiff’s private pastures when their land has not been lawfully expropriated. They do not challenge the United States military presence in Honduras or in Central America, nor do they object to United States sponsorship of a Regional Military Training Center in Honduras. Plaintiffs’ claim, properly understood, is narrowly focused on the lawfulness of the United States defendants’ occupation and use of the plaintiffs’ cattle ranch.

This is a paradigmatic issue for resolution by the Judiciary. The federal courts historically have resolved disputes over land, even when the United States military is occupying the property at issue. 39  Furthermore, certain disputes over property rights to land located abroad are appropriately resolved by the federal courts, 40  as are property disputes involving the Executive Branch and foreign affairs. In Youngstown, for example, the Supreme Court adjudicated the claim that the President had unlawfully seized most of the nation’s steel mills, even though the case arose in the context of the nation’s military involvement in Korea. 41  The issues in the {745 F.2d 1500, 1513} instant case are well within the traditional bounds of justiciability by the federal Judiciary.

Secondly, it cannot be said on review of this dismissal that resolution of the case will require the court to move outside of its areas of expertise. On the basis of the complaint and affidavits, it appears that adjudication of the defendants’ constitutional authority to occupy and use the plaintiffs’ property will necessitate interpretations of the Constitution and of federal statutes — which are quintessential tasks of the federal Judiciary. 42  The complaint does not reveal that expertise beyond the capacity of the Judiciary is essential to a resolution of the claims.

The district court found, however, that adjudication of the plaintiffs’ claims would be unmanageable because reaching “the heart of this matter would necessarily involve sensitive and confidential communications between the highest members of the Executive branch and officials of a foreign power that are not judicially discoverable.” 43  We disagree. It is premature to conclude that essential evidence is undiscoverable merely on the basis of the complaint and related declarations in this case. Evidentiary privileges turn on facts, such as the harm that might flow from disclosure of particular communications, 44  which are not yet part of the record in the instant case. In Attorney General v. The Irish People, Inc., this court held that dismissal of a complaint is not proper “when information which ‘might’ be relevant to a ... claim is unavailable for discovery.” 45  That case applies squarely to the instant appeal. If it turns out that essential evidence is undiscoverable due to Executive privilege, the district court can take appropriate action at that time. Speculation about Executive privilege in this case cannot justify squelching the plaintiffs’ complaint prior to any fact-finding.

Finally, the district court erred by holding that prudential considerations compel dismissal of the complaint. Baker v. Carr identifies four circumstances in which prudential considerations may bar adjudication of a claim. These are:

None of these circumstances is necessarily presented by the plaintiffs’ complaint and related declarations.

The plaintiffs do not seek judicial monitoring of foreign policy in Central America nor do they challenge United States relations with any foreign country. The case does not raise the specter of judicial control and management of United States foreign policy. As such, the issues in the instant case are qualitatively different from those posed in several recent cases which were dismissed as nonjusticiable political questions. In Dickson v. Ford the Fifth Circuit upheld the dismissal of a taxpayer’s challenge to military and economic assistance to Israel. 47  Likewise, in Crockett v. Reagan a panel of this circuit upheld the dismissal {745 F.2d 1500, 1514} of a suit brought by members of Congress challenging the legality of United States military aid to El Salvador. 48  If adjudicated, those broadside attacks on fundamental foreign policy decisions might have resulted in conflicting pronouncements from the Judiciary and the political branches over the basic tenets of United States relations with foreign states.

By contrast, those factors which have permitted adjudication in other cases implicating foreign affairs are present here. Private United States litigants seek a determination of the lawfulness of the Executive’s deprivation of their private property. 49  The prudential, separation-of-powers concerns presented by the instant case are certainly not greater than those underlying the wartime seizure of an entire industry by the Executive in Youngstown. Ramirez’s dispute with the United States military over land in Honduras does not require unquestioning adherence to a political decision by the Executive. The complaint does not present any of the criteria used by the Supreme Court to identify nonjusticiable political questions.

The political question doctrine is a tempting refuge from the adjudication of difficult constitutional claims. Its shifting contours and uncertain underpinnings make it susceptible to indiscriminate and overbroad application to claims properly before the federal courts. Recent cases raise doubts about the contours and vitality of the political question doctrine, which continues to be the subject of scathing scholarly attack. 50  We need not, however, announce the demise of the political question doctrine by our holding in this case. Despite confusion over whether a retreat to the political question doctrine is proper in particular cases, 51  it is clear that the doctrine is, at best, a narrow one. Baker v. Carr admonishes that “[t]he doctrine ... is one of ‘political question,’ not one of ‘political cases.’” 52  For similar reasons we fundamentally disagree with Judge Tamm’s dissenting suggestion that granting these plaintiffs their day in court will “intolerably” impinge and intrude upon the Executive’s conducting of foreign affairs. This dissent relies heavily on United States v. Curtiss-Wright Export Corp., 53  to establish the existence of a “realm” of Executive power in the foreign relations area which courts should not curtail. But this same decision reviewed, on the merits, a constitutional challenge to certain laws granting foreign affairs power to the President. 54  The possibility that the laws would not withstand constitutional scrutiny, with the concomitant embarrassment {745 F.2d 1500, 1515} to the President who had relied on those laws in prohibiting arms sales to specific foreign countries, did not deter the Court from finding the controversy to be justiciable.

The Executive’s power to conduct foreign relations free from the unwarranted supervision of the Judiciary cannot give the Executive carte blanche to trample the most fundamental liberty and property rights of this country’s citizenry. The Executive’s foreign relations prerogatives are subject to constitutional limitation; 55  no agreement with a foreign country can confer upon the Executive Branch any power greater than those bounded by the Constitution. 56  We recognize that review by the Judiciary may not always be appropriate. But unlike Curtiss-Wright, 57  the government has not relied on a specific legislative grant of authority to conduct the challenged activities. Moreover, this is not a case like Chicago & Southern Airlines, Inc. v. Waterman Steamship Corp., 58  in which the plaintiffs, who were denied review of an Executive order, were at least granted some process through which their contention could be heard prior to the Executive decision. Indeed, if the dissent’s approach were adopted by all judicial forums, then no ordinary process at all could be offered. 59  We must be most reluctant to withhold judicial scrutiny in these circumstances.

Every act taken by the Executive having an effect beyond this country’s borders may be described as political with a potential or actual impact on our foreign relations. Affirmance of this dismissal on the ground that plaintiffs’ claims are political questions or an improper challenge to foreign affairs powers would mean that virtually anything done by United States officials to United States citizens on foreign soil is nonjusticiable. This is not the law. A proper application of the political question doctrine to the plaintiffs’ case shows that dismissal on this ground was erroneous.

IV.  Standing

After prompting by the vacated panel opinion in this case, the defendants for the first time pressed the argument that Ramirez, a United States citizen, and his two wholly owned United States corporations lack standing to sue the defendants for the constitutional violations alleged here. The theory is that because plaintiff Ramirez and his two wholly owned United States corporations own and control the land in question by means of legal title held by their wholly owned Honduran corporations, the three United States plaintiffs do not have a constitutionally protected property interest in the land and property for the purposes of the asserted claims.

This proposition embodies a most extreme form of fanciful thinking. It is bizarre to posit that the claimed seizure and destruction of the United States plaintiffs’ multi-million dollar investment, business, property, assets, and land is not an injury to a protected property interest. The suggestion that a United States citizen who is {745 F.2d 1500, 1516} the sole beneficial owner of viable business operations does not have constitutional rights against United States government officials’ threatened complete destruction of corporate assets is preposterous. If adopted by this court, the proposition would obliterate the constitutional property rights of many United States citizens abroad and would make a mockery of decades of United States policy on transnational investments.

The debate over standing is easily obfuscated by couching the issue in terms of whether this court should permit Ramirez to bring a suit “derivatively” or whether we should “lift the corporate veil.” 60  As Justice (then Judge) Cardozo admonished, “Metaphors in law are to be narrowly watched, for starting as devices to liberate thought, they end often by enslaving it.” 61  The ability of the United States plaintiffs to sue does not turn on whether certain rights which may belong only to the Honduran corporation may be asserted “ derivatively” by the sole United States shareholders or on whether we should “lift the corporate veil.” The “standing” inquiry may be conducted along two different branches: first, whether there is a cognizable property interest under the United States Constitution directly assertable by a United States citizen-shareholder; and second, whether (a) there is a cognizable property interest directly belonging to the corporation, and (b) if so, the scope of a shareholder’s right to assert that interest derivatively. The crucial issue here is whether the United States plaintiffs have constitutional rights of their own, which exist by virtue of their exclusive beneficial ownership, control, and possession of the properties and businesses allegedly seized. 62  Properly understood, the question is whether the United States plaintiffs — Ramirez and his two wholly owned United States corporations — have a judicially cognizable interest in the affected property sufficient to enable them to sue for an unconstitutional deprivation of the use and enjoyment of that private property. Because we hold that the United States plaintiffs have a protected property interest for the purposes of the claims asserted here and that they have standing to sue, we do not reach the question whether the alien Honduran corporations also have constitutional rights to judicial relief for the violations alleged here. 63  {745 F.2d 1500, 1517}

We analyze this issue, as we must, on the basis of the facts alleged by the plaintiffs. According to the plaintiffs’ complaint, the operation is the enterprise of one man — a United States citizen. Title to the property is held by three companies incorporated in Honduras, which are wholly owned jointly by plaintiff Ramirez and by two United States corporations which plaintiff Ramirez wholly owns and controls. The sole and ultimate individual investor, beneficial owner and shareholder in the chain of companies is plaintiff Ramirez. 64 

The essence of standing is whether the asserted claims — here, of an unconstitutional, unauthorized occupation and use of private property and of a deprivation of property without due process of law — entitle persons in the position of the plaintiffs to judicial relief. 65  The question may be phrased either in terms of whether the plaintiffs have standing to sue or in terms of whether the plaintiffs have properly stated a cause of action for the allegedly unconstitutional acts. 66  Either way, the inquiry must focus on whether the plaintiffs have a cognizable property interest in the assets in Honduras for the purposes of the constitutional violations claimed here.

We turn first to an assessment of the nature of the United States citizens’ interests {745 F.2d 1500, 1518} in the property. The fact that the United States plaintiffs do not directly hold legal title to the real property does not deprive them of a property interest in the assets nor does it defeat their constitutional claims. Ramirez has a protected property interest in the allegedly occupied property both by virtue of his status as sole shareholder of the corporations and by virtue of his possession of the land for more than twenty years.

First, as shareholders, the United States plaintiffs have a concrete and protected interest in the property allegedly occupied and used by the United States defendants. The United States plaintiffs’ status as sole and ultimate shareholders of the corporations which have title to the land and property gives rise to interests which are protected from unconstitutional activity of the type alleged here. It is settled law that ownership of stock constitutes a specific interest in the corporation’s property.

Shares of stock do ... represent an interest in the corporate property. Thus, it has been said that stockholders are the equitable owners of the property and assets of the corporation, and that they have a proprietary interest in the corporation, and a qualified beneficial interest which is an indirect or collateral interest in the corporate property. It has been held that the stockholder’s interest is an “ownership interest” within the meaning of an insurance policy on the corporate property, and that his interest is an insurable one. 67 

Likewise, this circuit acknowledged in Nielsen v. Secretary of the Treasury that shareholders have a property interest in assets of a corporation. There the court agreed with the apparent shareholders that the blocking of a corporation’s assets in the United States could constitute a deprivation of the shareholders’ property. 68 

The Supreme Court has accepted this proposition that a shareholder may have a property interest in the assets of a corporation which can support the shareholder’s standing to sue over an injury to the corporation’s assets. In Regional Rail Reorganization Act Cases, the Court implicitly held that the sole shareholder of a corporation has a constitutionally protected property interest in corporate assets. 69  Not a single Justice dissented from the Court’s finding that the sole shareholder of Penn Central Transportation Co. had a sufficient interest in Penn Central’s assets to be a proper party in a challenge to an alleged taking of the railroad company’s property without just compensation. The facts of ownership in the instant case are functionally equivalent: a sole ultimate shareholder is suing for unlawful destruction of the corporate assets. Likewise, in Kaufman v. Societe Internationale Pour Participations Industrielles et Commerciales, the Supreme Court permitted United States shareholders to intervene in a suit seeking recovery of corporate property confiscated by the United States under the Trading with the Enemy Act. Rejecting the dissent’s contention that the United States shareholders had no present interest in the physical property of the corporation, the Court held that “when the Government seizes assets of a corporation organized under the laws of a neutral country, the rights of innocent stockholders to an interest in the assets proportionate to their stock holdings must be fully protected.” 70  The corporate ownership of the land and property in the instant case does not deprive the sole beneficial owners — United States citizens — of a property interest for the purposes of the claims asserted here. {745 F.2d 1500, 1519}

The Supreme Court has consistently refused to allow mere corporate formalities to dictate whether the suing party in fact has a valid claim and a personal stake in the outcome of the case. In Bangor Punta Operations, Inc. v. Bangor & Aroostook Railroad, the Supreme Court squarely rejected the argument that the Court may not “look behind the corporate entity to the true substance of the claims and the actual beneficiaries” when it evaluates a party’s standing to sue. 71  In that case, the Court determined that a corporation should not be treated as a distinct and separate entity for standing purposes when 99% of the corporation’s stock was owned by a single shareholder. Because the facts of that case showed that the shareholder both owned and controlled the corporation, the Court found that the shareholder would be the actual beneficiary of any recovery by the corporation. Thus, the Court disregarded the corporate form of ownership in determining whether the suit could proceed. Similarly, in the recent case of First National City Bank v. Banco Para El Comercio Exterior de Cuba, the Court refused to give conclusive status to the act of incorporation in determining the status of the corporate party before the Court. 72  There the Court stated that “an incorporated entity ... is not to be regarded as legally separate from its owners in all circumstances.” 73  Applying that approach to the instant case, it is clear that Ramirez, the sole individual owner and controller of the corporations, has a property interest in the corporate assets that is real and protected for the purposes of the claims alleged in the instant case. 74 

Secondly, in addition to his beneficial property interest as a shareholder, Ramirez has a cognizable possessory interest in the property allegedly seized, by virtue of his continuous possession of his ranch for more than twenty years. The Supreme Court stated in Board of Regents v. Roth that the Court “has ... made clear that the property interests protected by procedural due process extend well beyond actual ownership of real estate, chattels, or money.” 75  In Fuentes v. Shevin the Court applied that principle and held that a purchaser of household goods under a conditional sales contract had a possessory interest in the goods sufficient to give rise to a constitutional claim for a violation of due process when a note holder attempted repossession. 76  Despite the purchaser’s lack of legal title, the Court held that the purchaser had a cognizable property interest in the continued use and possession of the goods.

The facts alleged by Ramirez in his complaint give rise to an analogous possessory {745 F.2d 1500, 1520} interest. According to the complaint, Ramirez has personally controlled and managed his Honduran property for over 20 years, during which time he developed the land from raw jungle into viable business operations. He has spent much of his life on the land allegedly seized. Prior to the defendants’ alleged invasion of this cattle ranch, Ramirez had full control and possession of the ranch’s pastures and business operations. Now he claims to have been ejected from portions of the land he once possessed. Ramirez’s possessory interest is constitutionally protected for the purposes of the claims stated here. 77 

For decades United States investors abroad have utilized the privilege of incorporation in the host country in order to put themselves on a parity with indigenous corporations and other foreign investors in regard to taxation, labor law, and other matters. It has hitherto never been suggested that the constitutional rights of United States citizen-investors, in this case against unconstitutional seizures by United States officials, were in any way lessened by the mere utilization of such corporate vehicles. Furthermore, the defendants’ contention is contrary to the policy which the United States maintains world-wide with respect to the confiscation abroad of assets owned directly or indirectly by United States citizens; the United States insists upon full compensation by the confiscating nation as a condition of United States foreign assistance. 78  It is astonishing for the United States defendants to argue that confiscation of corporate assets is a deprivation of United States investors’ property when executed by a foreign government but that it is an unrecognizable injury to United States shareholders when it is carried out by the United States itself. It is hard to imagine a more disingenuous contention. 79  {745 F.2d 1500, 1521}