United States: Federal Appeals Court Deals Blow To Florida's So-Called Cuba Amendment

The case involves a Florida law, known as the "Cuba Amendment," 2002 Fla. Laws 196, §2,  that broadly prohibits any company that does business in Cuba or Syria – or that is in any way related to a company that does business in Cuba or Syria – from engaging in bidding for local or state public contracts for goods or services within the State of Florida.  See, Fla. Stat. §287.135(2).

Before the law became effective, plaintiff Odebrecht Construction, Inc. ("Odebrecht") filed suit in the District Court for the Southern District of Florida seeking an injunction preventing the Florida Department of Transportation from enforcing the law.  At the time it filed suit, Odebrecht, a Florida construction company since the early 1990s, had a history of public works contracts in Florida worth almost $4 billion (US).  Although Odebrecht has never conducted business in Cuba, its Brazilian parent company, Odebrecht SA, owns foreign subsidiaries that do conduct business in the island nation, including work on the Port of Mariel.  The statute is applicable to any company that does business with Cuba or whose foreign affiliates do business with Cuba. 

In upholding the District Court's decision to issue a preliminary injunction preventing the statute from going into effect, the Eleventh Circuit found that Odebrecht "demonstrated a substantial likelihood of success on its claim that the Cuba Amendment violates the Supremacy Clause of the Constitution."  Judge Stanley Marcus, writing the opinion for the panel, also found that the plaintiff demonstrated other "equitable requirements" that warrant the issuance of a preliminary injunction (e.g., suffering irreparable harm, balancing of the equities, etc.).

The core of the Eleventh Circuit opinion is that Florida's Cuba Amendment conflicts with and "stands as an obstacle to the carefully calibrated federal regime" pertaining to Cuba.  The Court recited at length the statutory and regulatory history of the U.S. embargo with Cuba, including the changes in the federal regulations, known as the Cuba Asset Control Regulations, 31 C.F.R. Part 515 (CACR).  The CACR now allow for limited interaction with Cuba "permitting humanitarian relief to the Cuban people" by loosening restrictions on U.S. exports of agricultural and medical products to Cuba and limited telecommunications transactions. 

Throughout the fifty plus years of the Cuban embargo, both Congress and the Executive Branch have been active and pervasive in the country's dealings with Cuba.  Because the "federal regime contains numerous exceptions [to the embargo], permitting certain kinds of transactions with Cuba through licensing as well as complete exemptions," the Court found that the broad and un-nuanced prohibition of Florida's Cuba Amendment was in direct conflict with federal law.      

Judge Marcus' decision was thorough and amply supported by case law, particularly the unanimous Supreme Court ruling in Crosby v. National Foreign Trade Council, 530 U.S. 363 (2000).  In Crosby, the State of Massachusetts had a law, similar to Florida's Cuba Amendment, that prohibited state agencies from purchasing goods or services from any person or entity doing business in Burma.  In that case, the Supreme Court unanimously held that the Massachusetts law was unconstitutional under the Supremacy Clause.  Indeed, when comparing the Massachusetts law in Crosby to the Cuba Amendment, the Eleventh Circuit in Odebrecht found that the Florida law conflicted with federal law to a greater degree than the Massachusetts law in at least three ways:  "(1) the Cuba Amendment sweeps more broadly than the Federal Regime does, punishing companies like Odebrecht that do run afoul of the federal Cuban sanctions, and penalizing economic conduct that federal law expressly permits; (2) the Cuba Amendment has its own substantial penalties that go beyond the federal sanctions; and (3) the Cuba Amendment undermines the substantial discretion Congress has afforded the President, both to fine-tune economic sanctions, and to pursue multilateral strategies with Cuba."  Odebrecht, p. 23

Accordingly, the Eleventh Circuit panel had "little difficulty" in concluding that Odebrecht had demonstrated a substantial likelihood of success on its claims that the Cuba Amendment was preempted by the extensive federal Cuba sanctions regime.  The short-term impact of this decision, barring a successful appeal to the Supreme Court of the United States ("SCOTUS"), is that U.S. companies whose foreign affiliates do business with Cuba will not lose out on bidding for public works with the State of Florida.  However, Florida's appeal to the Eleventh Circuit was interlocutory and the case may proceed to a decision on permanent relief.  Also, the issues in Odebrecht are limited to the constitutionality of Florida's Cuba Amendment.  It is not an open invitation for U.S. companies to have foreign affiliates engage in business with Cuba without observing the prohibitions in the CACR and the federal statutes embodying the embargo. 

At the time the decision was published it was uncertain whether the Administration of Governor Rick Scott would continue with the litigation or file an appeal with SCOTUS.  According to Bloomberg News, a representative of the Florida Attorney General's Office declined to comment on the Eleventh Circuit opinion.  Nevertheless, the State of Florida may have a steep hill to climb in further litigating this case or seeking further appeal to SCOTUS.  It may be more practical to modify the current version of the Cuba Amendment, taking into consideration and not offending the federal exemptions to the embargo. But that may be a difficult feat to pull off.  Florida may decide to take a different approach such as leaving Cuba alone so that the Castro regime can no longer blame the U.S. for its problems.  

Marco Gonzalez, Jr. is a partner in the Newark office of Duane Morris LLP and co-chair of the Duane Morris Cuba Business Group.  Jose A. Aquino is a special counsel in the New York office of Duane Morris LLP and a member of  the Duane Morris Cuba Business Group.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.