(L to R) Neil MacBride of Davis Polk & Wardwell and Kannon K. Shanmugam, Paul Weiss. (Photo: Courtesy Photo)

Talk about ending the year on a high note.

A team from Paul, Weiss, Rifkind, Wharton & Garrison led by Kannon Shanmugam along with Davis Polk & Wardwell litigators including Neil MacBride (the former U.S. Attorney for the Eastern District of Virginia), prevailed on behalf of ExxonMobil on the last day of 2019.

The oil giant protested being slapped with a $2 million penalty for violating Ukraine-related sanctions regulations.

Here's how U.S. District Judge Jane Boyle in Dallas teed up the question before her: "This is an administrative case prompting the court to determine which party receives the benefit of having its cake and eating it, too—the regulating agency that failed to clarify, or the regulated party that failed to ask."

The cake went to Exxon. I'm visualizing it as chocolate. 

There was a bit of added drama. The lead lawyer for the government was Leslie Vigen—one of Shanmugam's former associates when he headed the appellate practice at Williams & Connolly. Alas, they didn't face off in court—Judge Boyle decided the case based on the written record.

Exxon successfully argued that the Office of Foreign Assets Control violated the Administrative Procedures Act on due process grounds when the government fined Exxon for doing business with Russian oil giant Rosneft.

The case dates back to 2014, when Russia annexed the Crimean peninsula. The Obama administration responded in part by naming "Specially Designated Nationals," whose property would be "blocked" based on their ties to the Russian government. One of them was Igor Sechin, the president and chairman of the management board of Rosneft.

At the time, the White House issued a fact sheet that stated, "Our current focus is to identify these individuals and target their personal assets, but not companies that they may manage on behalf of the Russian state." The defense dug up numerous other examples of the administration making similar statements.

So it's understandable why Exxon figured it could still do business with Rosneft, even though the company never actually asked OFAC for guidance.

(Which reminds of me of how my kids when doing something dubious would respond, 'But you never told me I couldn't.')

Exxon proceeded to execute eight contracts with Rosneft—all signed by Sechin. The feds cried foul, concluding that those contracts violated the sanctions.

But Boyle sided with Exxon in vacating the penalty, ruling that the government didn't give fair notice that the conduct was forbidden. 

"Exxon's alleged violation is based on the receipt of a service, and the service was Sechin's act of signing. When does an entity 'take,' 'come into possession,' or 'get' a service? On this point, the regulations are silent," Boyle wrote.

"Exxon's decision to proceed with the contracts absent guidance from OFAC was risky—and perhaps imprudent," she continued. "But this factor does not overcome others suggesting a lack of fair notice."