Cuba Embargo in Florida Goes Too Far, Court Says

     (CN) – Florida cannot stop companies with remote business ties to Cuba from bidding on state or local public contracts, the 11th Circuit ruled.
     Florida passed the Cuba Amendment in May 2012 to ostensibly prevent companies that did business in Cuba or Syria, or were related to such companies, from bidding on state or local public contracts worth at least $1 million. Slated to take effect on July 1, 2012, the law would have applied to any company whose subsidiaries, parent companies or affiliates had business ties to Cuba or Syria, including distant foreign affiliates.
     It also would have required companies to certify that they did not have business operations in any of the two countries when submitting a bid or renewing a contract with a government agency. Any agency or local government entity participating in the contract could impose a civil penalty of $2 million or twice the amount of the contract against companies that filed false certifications.
     Coral Gables-based company Odebrecht Construction sued the Florida Department of Transportation (FDOT) in June 2012 to prevent it from enforcing the amendment against the company. Odebrecht, whose Brazilian parent company had unrelated foreign subsidiaries that did business in Cuba, was one of more than 200 Florida businesses potentially affected by the amendment.
     Claiming that most of its income comes from infrastructure and transportation projects, Odebrecht said the law would prevent it from bidding on high-value public contracts in Florida, including several FDOT contracts worth up to $1.8 billion for which it qualified.
     Odebrecht argued that the law violated the supremacy clause of the U.S. Constitution because it conflicted directly with the federal regime of sanctions against Cuba, and weakened the president’s ability to formulate uniform policies concerning Cuba. A federal judge agreed last year and blocked the amendment before it took effect.
     A three-judge panel of the 11th Circuit refused to lift the injunction last week, finding that the state law conflicted with the comprehensive economic sanctions the federal government had imposed for decades to limit American companies from doing business in Cuba.
     “Federal policy towards Cuba is long-standing, it is nuanced, it is highly calibrated, and it is constantly being fine-tuned,” Judge Stanley Marcus wrote for the panel. “It is designed to sanction strongly the Castro regime while simultaneously permitting humanitarian relief and economic transactions that will benefit the Cuban people. When the State of Florida promulgated the Cuba Amendment, it plainly was not operating in an area where the federal government has been asleep at the switch.”
     Florida’s law would have penalized economic conduct allowed by federal laws and impose broader sanctions than the federal ones, according to the ruling. While the federal sanctions include exceptions for published materials, telecommunications services, and agricultural and medical products, the Cuba Amendment has no such exceptions, the 44-page ruling states.
     “The Cuba Amendment plainly sweeps further than the federal regime because it imposes a penalty on a U.S. corporation like Odebrecht that does not itself do business with Cuba, but has a foreign parent company that does business with Cuba through an unrelated foreign subsidiary,” Marcus wrote. “Or, in simpler terms, the Cuba Amendment penalizes U.S. companies for the business activities of their foreign parents or their foreign affiliates, no matter how remote the connection. This squarely conflicts with the federal regime, which only sanctions U.S. companies for their own actions or the actions of their own subsidiaries.”
     Florida’s law furthermore would have imposed penalties exceeding that which the federal regime provides: 20 years’ imprisonment, $1 million in criminal penalties, and up to $50,000 per violation in civil penalties, according to the ruling.
     Since a company’s business ties to Cuba trigger the penalties under the Cuba Amendment, the FDOT failed to show that it merely penalized companies for submitting a false certification, an action not covered by federal law, the judges found.
     They also agreed that the Cuba Amendment undermines the president’s power to fine-tune economic sanctions and to direct diplomatic relations with Cuba.
     Odebrecht is likely to succeed on its claim that federal law pre-empts the amendment, and that it would suffer irreparable harm if the law took effect, the ruling states.
     Since 80 percent of the company’s revenues over the years have come from public contracts in Florida, it faces actual and imminent injury in the loss of its right to bid on such contracts, and the loss of revenue and profits. What’s more, 11th Amendment immunity would block Odebrecht from suing Florida’s agencies for monetary damages, the ruling adds.
     Florida would additionally not be harmed by the injunction, which would actually increase competition in bidding and decrease the state’s costs, the court found.

%d bloggers like this: