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CAPITAL CITIES/ABC, INC. v. BRADY

June 29, 1990

CAPITAL CITIES/ABC, INC., PLAINTIFF,
v.
NICHOLAS BRADY, SECRETARY OF THE TREASURY, R. RICHARD NEWCOMB, DIRECTOR, OFFICE OF FOREIGN ASSETS CONTROL, DEFENDANTS.



The opinion of the court was delivered by: Sprizzo, District Judge:

OPINION AND ORDER

PRELIMINARY STATEMENT

The issue presented by these cross-motions for summary judgment is whether the refusal of the United States Department of the Treasury ("Treasury Department") to license an agreement for the exclusive live broadcasting rights of the 1991 Pan American Games is consistent with the Trading With The Enemy Act and the First Amendment.

STATEMENT OF FACTS

Section 5(b) of the Trading With the Enemy Act of 1917, 50 U.S.C.A.App. § 5(b) (West Supp. 1990) ("TWEA"), authorizes the President, in times of national emergencies, to impose embargoes on transactions between persons subject to the jurisdiction of the United States and countries designated as hostile by the President.*fn1 See generally Regan v. Wald, 468 U.S. 222, 226 n. 2, 104 S.Ct. 3026, 3029 n. 2, 82 L.Ed.2d 171 (1984). In 1962, President Kennedy declared a national emergency and placed an embargo on Cuba. See id. at 226, 104 S.Ct. at 3030. Pursuant thereto, the Treasury Department, the agency charged with administering the TWEA, delegated this authority to the Office of Foreign Assets Control ("OFAC") which in turn promulgated the Cuban Assets Control Regulations ("Regulations"). See 31 C.F.R. pt. 515 (1989). The Regulations prohibit transactions with either the Cuban government or Cuban nationals, see 31 C.F.R. § 515.201(a),*fn2 unless such transactions fall within the scope of either a general or specific licensing provision.

The OFAC may authorize transactions not falling within a general licensing provision by granting a specific license issued on a case by case basis. See, e.g., 31 C.F.R. § 515.542(c), 515.560(b), 515.565(b). However, the Regulations explicitly prohibit the issuance of specific licenses for transactions involving the payment to Cuba for television rights, appearance fees, royalties, pre-performance expenses, or other such payments in connection with or resulting from any public exhibition or performance in the United States or in Cuba. Id. at § 515.565(c)(1).

In 1988, Congress amended § 5 to exempt certain transactions from the reach of the TWEA. See Omnibus Trade and Competitiveness Act of 1988, Pub.L. No. 100-418, 102 Stat. 1107 (1988) ("Berman Amendment"). The Berman Amendment provides that the President's authority under § 5 does not:

  include the authority to regulate or prohibit,
  directly or indirectly, the importation . . . or the
  exportation . . ., whether commercial or otherwise,
  of publications, films, posters, phonograph records,
  photographs, microfilms, microfiche, tapes, or other
  informational materials, which are not otherwise
  controlled for export under section 5 of the Export
  Administration Act of 1979 or with respect to which
  no acts are prohibited by chapter 37 of title 18,
  United States Code.

50 U.S.C.A. App. § 5(b)(4) (emphasis added).

On February 2, 1989, the Regulations were amended in an attempt to comply with the Berman Amendment. See 54 Fed. Reg. 5229, 5231 (1989); Declaration of R. Richard Newcomb ("Newcomb Decl.") at ¶ 10. According to the new Regulations, all transactions relating to "informational materials" are currently authorized by a general license. See 31 C.F.R. § 515.206(a), 515.545(b).*fn3 The definition of "informational materials," however, excludes "intangible items such as telecommunications transmissions," see id. at § 515.332(b)(2), and the Regulations prohibit "transactions related to informational materials not fully created and in existence at the date of the transaction." Id. at § 515.206(c). Moreover, the "remittance of royalties or other payments relating to works not yet in being" is precluded. Id. at § 515.545(b).

Plaintiff, Capital Cities/ABC, Inc. ("ABC"), owns and operates the ABC Television Network which televises, inter alia, various sporting events. See Declaration of Dennis Lewin ("Lewin Decl.") at ¶ 2. The Pan American Games ("Games") are a multidiscipline sports competition among 39 member nations which, like the Olympics, are held in a different member nation every four years. See Affidavit of Robert H. Helmick ("Helmick Aff.") at ¶ 3-4. The Games, first held in 1951, are organized and run by the Pan American Sports Organization ("PASO"), an international organization headquartered in Mexico. The PASO is composed of sports organizations from the member nations, including organizations from the United States and Cuba. Id.

In 1986, PASO determined that the 1991 Games would be held in Havana, Cuba. See Helmick Aff. at ¶ 5. Thereafter, in October 1988, ABC decided to place a bid with PASO for the rights to televise the 1991 Games, which was eventually accepted. In consideration for the exclusive rights to broadcast the Games live, ABC agreed to pay PASO $8.7 million with the express understanding that PASO would remit seventy-five percent of this sum, $6.5 million, to Cimesports, S.A., a Cuban entity and the host organizer of the Games. See Declaration of Joel E. Lulla ("Lulla Decl.") at ¶ 2; Declaration of Stephen J. Solomon ("Solomon Decl.") at ¶ 11.

In early June 1989, ABC notified the OFAC of this agreement, and after the OFAC informed ABC that a specific license was necessary, ABC applied for "a license covering all necessary transactions involving Cuba in connection with the television coverage and transmission of the 1991 Pan American Games." See Letter dated June 12, 1989 (annexed to Plaintiff's Notice of Motion as Ex. 1); Lulla Decl. at ΒΆ 3. In its application, ABC stated that it ...


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