# Foreign Ownership and Due Process: What Ralls v. CFIUS Established
*A presidential order can force a foreign-owned company to unwind a U.S. acquisition on national-security grounds — and the courts will not second-guess the security judgment. But Ralls held that the government still has to tell you what evidence it used and let you respond.*
The Committee on Foreign Investment in the United States (CFIUS) reviews foreign acquisitions of U.S. businesses for national-security risk, and the President can block or unwind a deal. Ralls Corp. v. CFIUS is the landmark case on what process is owed when the government does that — a question that matters to every contractor with foreign investors or foreign ownership.
What the Case Was About
Ralls Corporation — owned by Chinese nationals — acquired four wind-farm projects in Oregon, some near restricted Navy airspace used for drone testing. CFIUS reviewed the transaction, and President Obama issued an order requiring Ralls to divest the projects and remove all installed equipment, citing national security. Ralls sued, challenging both the order and the process behind it.
What the Court Held
The D.C. Circuit drew a sharp line between substance and process. On substance, the court held the President's national-security determination is not reviewable: the statute (the Defense Production Act § 721) expressly bars judicial review of the President's findings and the merits of the determination. Courts will not weigh whether the security risk was real. On process, the court held that Ralls had a constitutionally protected property interest, and due process required that it receive notice of the unclassified evidence CFIUS relied on and an opportunity to rebut it. The government had not provided that, so the deprivation of process was unconstitutional. The case was later settled, but the procedural holding endures.
Why It Matters for Contractors
- Foreign investment carries CFIUS risk. If a foreign person acquires control — or certain non-controlling rights — in a U.S. business, especially one touching critical technology, critical infrastructure, or sensitive data ("TID" businesses under FIRRMA), the deal may be reviewable, and an adverse outcome can force divestment.
- Process exists, but the security call is the government's. Ralls guarantees notice of unclassified evidence and a chance to respond — but not a court re-examination of the security judgment itself.
- Plan ownership structures early. Contractors raising foreign capital should screen for CFIUS exposure before closing, not after. This connects directly to Foreign Ownership, Control or Influence (FOCI) review under the National Industrial Security Program.
Key Takeaways
- Ralls (D.C. Cir. 2014): the President's CFIUS divestment order is not reviewable on the merits, but the affected company is entitled to due process — notice of the unclassified evidence and a chance to respond.
- CFIUS, modernized by FIRRMA (2018), reaches foreign investments in critical technology, critical infrastructure, and sensitive personal data businesses.
- Contractors with foreign investors or ownership should assess CFIUS and FOCI exposure before a transaction closes.
Go deeper in our primer on Foreign Access & Supply-Chain Controls and the Defense Production Act § 721 / FIRRMA statute page.
*Source: Ralls Corp. v. Committee on Foreign Investment in the United States, 758 F.3d 296 (D.C. Cir. 2014).*