July 15, 2014 / 3:20 PM / 3 years ago

U.S. court sides with Chinese firm in dispute with Obama

WASHINGTON (Reuters) - A federal appeals court on Tuesday issued a surprising rebuke to U.S. President Barack Obama and said he deprived a small Chinese-owned firm of its right to due process when he squashed its bid to build wind farms close to a U.S. naval training site.

The U.S. Court of Appeals for the District of Columbia Circuit reversed a lower court ruling and ordered that the firm, Ralls Corp, be provided the evidence on which Obama had rejected the bid.

Obama had issued an order in 2012 instructing Ralls to sell off its four planned wind farms due to national security risks, the first time since 1990 that a U.S. president has formally blocked a business transaction or required a sale on such grounds.

Ralls, which was installing wind turbines close to an Oregon site used to test unmanned drones, immediately sued.

The firm argued that Obama's order violated the due process clause of the Fifth Amendment to the U.S. Constitution, and said the government had not provided it with the opportunity to review and respond to the evidence used against it.

Experts had predicted the lawsuit had little chance to succeed because of the president's broad powers to protect national security.

But in a 47-page ruling, a panel of one Obama appointee and two Republican-appointed judges concluded that Obama's order deprived the company of its property without due process of law.

"Due process requires, at the least, that an affected party be informed of the official action, be given access to the unclassified evidence on which the official actor relied and be afforded an opportunity to rebut that evidence," the panel wrote.

"Although the Presidential Order deprived Ralls of significant property interests ... Ralls was not given any of these procedural protections at any point," it said.

The lower court, which had earlier dismissed Ralls' claims, valued the wind farm assets at $6 million.

Neither former solicitor general Paul Clement, who argued the case on behalf of Ralls, nor a spokesman for the U.S. Justice Department, immediately responded to a request for comment.

Obama's order followed a recommendation from the Committee on Foreign Investment in the United States, an interagency group headed by the Treasury secretary that evaluates the national security risks of foreign investments in U.S. companies or operations.

Reporting by Aruna Viswanatha; Editing by Doina Chiacu and Andrew Hay

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