Asedac v. Panama Canal Com'n

• Decision Date: 28 June 2006
• Docket Number: No. 05-12974.,05-12974.
• Citation: 453 F.3d 1309
• Parties: ASOCIACION DE EMPLEADOS DEL AREA CANALERA (ASEDAC), Mario Lopez, et al., Plaintiffs-Appellants, v. PANAMA CANAL COMMISSION, The Office of Transition Administration Established by the Panama Canal Commission, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

453 F.3d 1309

ASOCIACION DE EMPLEADOS DEL AREA CANALERA (ASEDAC), Mario Lopez, et al., Plaintiffs-Appellants, v. PANAMA CANAL COMMISSION, The Office of Transition Administration Established by the Panama Canal Commission, et al., Defendants-Appellees.

No. 05-12974.

United States Court of Appeals, Eleventh Circuit.

June 28, 2006.

COPYRIGHT MATERIAL OMITTED

Stephen Frederick Rosenthal, Podhurst Orseck, P.A., Miami, FL, for Plaintiffs-Appellants.

Howard S. Scher, William Kanter, U.S. Dept. of Justice, App. Staff, Civ. Div., Washington, DC, for Defendants-Appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before BLACK, BARKETT and COX, Circuit Judges.

BLACK, Circuit Judge:

Panamanian former employees of the United States in the Panama Canal Zone and their labor association, the Asociacion de Empleados del Area Canalera (ASEDAC), appeal the district court's dismissal of their action against the Panama Canal Commission (PCC) and the Office of Transition Administration (OTA) seeking back pay and other employment benefits allegedly owed the employees under the Panama Canal Treaty of 1977 and the Panama Canal Act of 1979. See 22 U.S.C. §§ 3601-3873. The district court dismissed the action because it determined Appellants' claims abated when, while their lawsuit was pending, Congress terminated the PCC and OTA without providing for a successor. Although we do not decide whether Appellants' claims for unpaid employment benefits were extinguished, we affirm based on our conclusions (1) the suit against the PCC and OTA abated when Congress terminated these entities, and (2) sovereign immunity precludes substitution of the General Services Administration (GSA) as a defendant.

I. BACKGROUND

A. Historical Background

Some historical background is necessary to place Appellants' appeal in proper context. Pursuant to the Panama Canal Treaty of 1977 (the Treaty), the United States agreed to restore Panamanian sovereignty over the Panama Canal Zone on October 1, 1979, and the Republic of Panama granted the United States the right to manage and operate the Panama Canal until the Treaty's expiration on December 31, 1999. See Panama Canal Treaty, U.S.-Pan., Sept. 7, 1977, 33 U.S.T. 39. To implement the Treaty, Congress passed the Panama Canal Act of 1979 (the Act), which created the PCC as a wholly-owned United States corporation charged with managing and operating the Panama Canal for the duration of the Treaty. 22 U.S.C. § 3611(a). The Act created the "Panama Canal Revolving Fund" to finance the PCC, and directed the PCC to establish and administer an employment system in the Canal Zone "in accordance with and . . . subject to the provisions of the [Treaty] and related agreements." See id. §§ 3652, 3656, 3712. The Act also contained a limited waiver of the PCC's sovereign immunity. Id. § 3612a(c).

In 1992, Congress amended the Act in preparation for the Treaty's termination and the PCC's dissolution. See id. § 3714a. The 1992 amendment, among other things, directed the PCC to establish the OTA "to close out the affairs of the [PCC] that are still pending after the termination of the [Treaty]." See id. § 3714a(b) & note. The amendment also created the "Panama Canal Commission Dissolution Fund" for the PCC, and later the OTA, to use to pay costs associated with the dissolution, including "costs incurred or identified after the termination" of the Treaty. Id. § 3714a(c). Pursuant to § 3714a(c)(6), the Panama Canal Commission Dissolution Fund terminated on October 1, 2004, and any remaining amounts in the fund were deposited into the general fund of the United States Treasury.

On September 30, 2004, while Appellants' suit was pending, Congress passed a joint resolution that amended the Act and terminated the PCC and OTA as of October 1, 2004. Id. § 3712(e). Section 3712(e) also transferred the Panama Canal Revolving Fund to the GSA and directed the GSA to use this fund to "make payments of any outstanding liabilities" of the PCC.¹

B. Procedural Background

The ASEDAC is an association of Panamanian citizens who were former employees of the PCC in the Panama Canal Zone prior to the Treaty's expiration. The ASEDAC and its individual members filed their complaint against the PCC and OTA on March 22, 2001, claiming the entities failed to pay certain employment benefits required under Panamanian law as made applicable to the PCC by the Treaty and the Act.² Specifically, Appellants allege the PCC and OTA violated the Treaty and the Act by failing to provide in accordance with Panamanian law (1) an extra month's salary for every twelve months worked, (2) severance pay, and (3) seniority pay.³

Appellees moved to dismiss the complaint, and while the motion was pending, Congress enacted the joint resolution terminating the PCC and OTA. Id. § 3712(e). Appellees then notified the court of Congress's action and argued the claims against the PCC and OTA abated under common law principles applicable to wholly-owned United States corporations. Appellants responded by moving pursuant to Rule 25(c) of the Federal Rules of Civil Procedure to substitute the GSA as a defendant, arguing § 3712(e)(2) designated the GSA as PCC's successor-in-interest. The district court dismissed the action, concluding Appellants' claims against the PCC and OTA abated and Congress did not designate the GSA as a successor. The court also denied Appellants' request to substitute the GSA because Congress has not waived its immunity from suit.⁴

II. STANDARD OF REVIEW

We review the district court's determination of its subject matter jurisdiction de novo. ASEDAC, 329 F.3d at 1237-38. We review the denial of a motion for substitution of parties under Rule 25(c) of the Federal Rules of Civil Procedure for abuse of discretion. See Virgo v. Riviera Beach Assocs., Ltd., 30 F.3d 1350, 1357-58 (11th Cir.1994). Because this case presents a question of statutory interpretation, we review the question presented de novo. ASEDAC, 329 F.3d at 1238.

III. DISCUSSION

Our decision to affirm the district court's dismissal is compelled by well-settled common law principles respecting the dissolution of corporations and by equally well-settled principles of sovereign immunity. Succinctly stated, dismissal was appropriate because, under applicable common law principles, Appellants cannot maintain their suit against the PCC and OTA post-dissolution and, under principles of sovereign immunity, they cannot substitute the GSA as a defendant without Congress's express waiver of the GSA's sovereign immunity.

When a corporation dissolves, all pending suits by or against it abate, and no valid judgment may be rendered for it or against it, unless there is statutory authority extending the life of the corporation for litigation purposes. As the Supreme Court explained in Oklahoma Natural Gas Co. v. Oklahoma:

It is well settled that at common law and in the federal jurisdiction a corporation which has been dissolved is as if it did not exist, and the result of the dissolution cannot be distinguished from the death of [a] natural person in its effect. It follows, therefore, that as the death of the natural person abates all pending litigation to which such a person is a party, dissolution of a corporation at common law abates all litigation in which the corporation is appearing either as a plaintiff or defendant. To allow actions to continue would be to continue the existence of the corporation pro hac vice. But corporations exist for specific purposes, and only by legislative act, so that if the life of the corporation is to continue even only for litigating purposes it is necessary that there should be some statutory authority for the prolongation.

273 U.S. 257, 259, 47 S.Ct. 391, 392, 71 L.Ed. 634 (1927) (citations omitted); see also Def. Supplies Corp. v. Lawrence Warehouse Co., 336 U.S. 631, 634-35, 69 S.Ct. 762, 763, 93 L.Ed. 931 (1949) ("[A] time-honored feature of the corporate device is that a corporate entity may be utterly dead for most purposes, yet have enough life remaining to litigate its actions. All that is necessary is a statute so providing."); Pendleton v. Russell, 144 U.S. 640, 644-46, 12 S.Ct. 743, 745, 36 L.Ed. 574 (1892); First Nat'l Bank v. Colby, 88 U.S. (21 Wall.) 609, 615, 22 L.Ed. 687 (1874); Marion Phosphate Co. v. Perry, 74 F. 425, 427 (5th Cir.1896).⁵ Wholly-owned government corporations are no exception to the common law abatement rule. See Def. Supplies Corp., 336 U.S. at 634-36, 69 S.Ct. at 763-64 (applying the common law rule to a government corporation).

There is no dispute Congress dissolved the PCC and OTA on October 1, 2004, while Appellants' suit was pending. 22 U.S.C. § 3712(e)(1). Thus, according to the common law rule, Appellants' suit against these entities abated unless Congress provided otherwise. The district court found "no explicit or implicit expression of Congressional intent to prevent the abatement of any lawsuit filed against the [PCC] or the OTA prior to their dissolution. . . either in the Panama Canal Act or any other congressional enactment." We agree.

Section 3712(e), which terminated the PCC and OTA, says nothing about pending lawsuits against the PCC and OTA. Instead, the statute provides that upon termination of the PCC and OTA, the Panama Canal Revolving Fund transferred to the GSA as the exclusive source available to the GSA "to make payments of any outstanding liabilities of the [PCC]." Id. § 3712(e)(2). Although Appellants concede § 3712(e) does not expressly address pending lawsuits, they contend Congress's command that the GSA pay "any outstanding liabilities" of the PCC is a sufficient statement of Congress's intent not to abate pending litigation against the PCC and OTA. We are not persuaded that when Congress directed the GSA to pay the PCC's outstanding liabilities it meant to prolong the PCC's or the OTA's existence beyond their dissolution date for litigation purposes....