Community Elec. Service of Los Angeles, Inc. v. National Elec. Contractors Ass'n, Inc.
| Decision Date | 10 May 1989 |
| Docket Number | 88-5616 and 88-5663,Nos. 87-6280,s. 87-6280 |
| Citation | 869 F.2d 1235 |
| Parties | 130 L.R.R.M. (BNA) 2950, 131 L.R.R.M. (BNA) 2408, 57 USLW 2706, 111 Lab.Cas. P 11,110, 1989-1 Trade Cases 68,475, 13 Fed.R.Serv.3d 743 COMMUNITY ELECTRIC SERVICE OF LOS ANGELES, INC., Plaintiff-Appellant-Cross-Appellee, v. NATIONAL ELECTRICAL CONTRACTORS ASSOCIATION, INC., et al., Defendants-Appellees-Cross-Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Pamela Victorine (argued) and Alan G. Martin, Greimes, Martin, Stein & Richland, Beverly Hills, Cal., and John P. McNicholas, Morgan, Wenzel & McNicholas, Los Angeles, Cal., for appellant-cross-appellee Community Elec. Service of Los Angeles, Inc., and for cross-appellee Morgan, Wenzel & McNicholas, John P. McNicholas, Thomas H. Cadden and David T. McCann.
Gary L. Lieber (argued), John A. McGuinn, Karen A. Broe, Porter, Wright, Morris & Arthur, Washington, D.C., for appellee-cross-appellant, Nat. Elec. Contractors Ass'n, Inc.
Jack R. White (argued), Hill, Farrer & Burrill, Los Angeles, Cal., for appellee-cross-appellant Southern California, IBEW-NECA Pension Trust Fund, Southern Sierras Chapter, NECA, John Gomes, individually and Industrial Elec., Inc., and Dennis Thorson, individually and Thorson Elec., Inc.
D. William Heine and Robert M. Dohrmann, Schwartz, Steinsapir, Dohrmann & Sommers, Los Angeles, Cal., and Richard M. Resnick, Sherman, Dunn, Cohen, Leifer & Counts, P.C., Washington, D.C., for appellee-cross-appellant Intern. Broth. of Elec. Workers, AFL-CIO.
Elizabeth R. Lishner, Pappy & Davis, Los Angeles, Cal., for appellee-cross-appellant, IBEW Local Union 11.
Ray Van Der Nat, Los Angeles, Cal., for appellee-cross-appellant, IBEW Local Union 440.
Dennis A. O'Mahoney, Los Angeles, Cal., for appellee-cross-appellant Los Angeles County Chapter, NECA.
Appeal from the United States District Court for the Central District of California.
Before WRIGHT, NORRIS and WIGGINS, Circuit Judges.
This case involves the consolidation of three appeals from an antitrust suit with nine defendants. We must determine whether Community Electric Service, Inc. had the capacity to sue in federal court and whether its pleadings warrant Rule 11 sanctions.
Community Electric, an electrical contracting company operating in Los Angeles County, bid successfully on a Palm Springs contract in an effort to expand its business geographically. It signed a letter of assent binding it to a collective bargaining agreement between the International Brotherhood of Electrical Workers (IBEW) Local 440 and Southern Sierras National Electrical Contractor's Association, Inc. (NECA).
The IBEW Local 440--Southern Sierras NECA agreement (termed "the Inside Wireman's Agreement") has a provision effectively imposing a $35 per day travel/subsistence payment on non-local contractors for each employee on a job. It applies to jobs begun before the contractor has maintained a permanent place of business within the jurisdiction for 90 days.
Community Electric contends vigorously that this provision has the purpose and effect of excluding non-local contractors. It claims that the provision sets prices and makes it impossible for non-local contractors to compete on equal footing with local contractors.
Community Electric attempted dispute resolution under the terms of the agreement. A labor management committee ruled against it unanimously.
These provisions were also the subject of proceedings before the National Labor Relations Board. It held the subsistence payments a mandatory subject of bargaining and enforceable, but declined to address the antitrust implications.
Community Electric asserts that its challenges resulted in retaliatory action. Besides claiming harassment from Southern Sierras NECA and Local 440, Community Electric alleges additional harassment from their Los Angeles counterparts. It contends that Los Angeles NECA and Local 11, as well as the IBEW-NECA pension trust fund, enforced several rules discriminatorily.
On January 13, 1986, Community Electric filed a complaint alleging violations of the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act (RICO), and related California state law claims. It named as defendants the Southern Sierras and Los Angeles County Chapters of the NECA, their parent body, National NECA, Locals 11 and 440 of the IBEW, their parent body, International IBEW, two owners of electrical contracting firms from Palm Springs, John Gomes and Dennis Thorsen, and the Southern California IBEW-NECA Pension Trust Fund.
On July 1, 1983, before the filing, the California Franchise Tax Board had suspended Community Electric's corporate powers, rights, and privileges. The defendants in their answer alleged Community Electric's lack of capacity to sue.
On May 28, 1987, the California Secretary of State's Office informed the defendants that Community Electric's corporate powers, rights, and privileges were suspended. The defendants notified Community Electric and on June 8 filed a request for a status conference. That day, the California Tax Franchise Board issued a certificate of revivor reinstating Community Electric's corporate powers for the purpose of pursuing this litigation.
On August 6, 1987, the court dismissed the case, holding that Community Electric lacked the capacity to file a complaint in January 1986 due to the July 1983 suspension. It also determined that the reinstatement was ineffective to validate the January filing. The antitrust statute of limitation expired May 6, 1987, four years after After the dismissal, the defendants moved for Rule 11 sanctions. The court denied them, concluding that neither the complaint nor Community Electric's subsequent documents violated Rule 11's "Frivolousness Clause."
Community Electric ceased doing business. The June 8 reinstatement occurred too late.
Community Electric appeals the grant of summary judgment and defendants appeal the denial of their Rule 11 motion.
Federal Rule of Civil Procedure 17(b) provides that "[t]he capacity of a corporation to sue or be sued shall be determined by the law under which it was organized." Community Electric filed before the antitrust statute of limitation (15 U.S.C. Sec. 15b (1982)) expired. The court held it had no capacity to sue under California law, the law of the state where it incorporated. Community Electric argues that federal antitrust law should prevail because of the federal interest involved.
We hold that Rule 17(b) prevails over antitrust law and requires us to apply California law. In Levin Metals Corp. v. Parr-Richmond Terminal Co., 817 F.2d 1448, 1451 (9th Cir.1987), we rejected the argument that the Comprehensive Environmental Response Compensation Liability Act of 1980 (CERCLA) prevails over 17(b). The plaintiffs sued a corporation for claims arising after its dissolution. Id. at 1449. As the plaintiffs in that case, Community Electric cites no authority in support of its position and other courts have held to the contrary. See id. at 1451.
We follow the other circuits that apply state law even when it requires dismissing an antitrust suit. See Moore v. Matthew's Book Co., 597 F.2d 645, 646-47 (8th Cir.1979); R.V. McGinnis Theatres v. Video Indep. Theatres, Inc., 386 F.2d 592, 593-95 (10th Cir.1967), cert. denied, 390 U.S. 1014, 88 S.Ct. 1265, 20 L.Ed.2d 163 (1968). This follows since corporations are creatures of state law. Cf. Cort v. Ash, 422 U.S. 66, 84, 95 S.Ct. 2080, 2091, 45 L.Ed.2d 26 (1975) ().
The facts of R.V. McGinnis Theatres parallel this case. 386 F.2d at 593-94. McGinnis sued for alleged antitrust violations. Oklahoma had revoked McGinnis' charter for failing to pay its corporate franchise tax. McGinnis relied on a later reinstatement.
The Tenth Circuit affirmed the lower court decision to dismiss. Id. at 594-95. The relevant statute permitted reinstatement only where payment of the tax occurs within a year of suspension and McGinnis had paid after the year expired. Id.
Applying California law, Community Electric had no capacity to sue in January 1986. Section 23301 of the California Revenue and Tax Code provides that the Franchise Tax Board may suspend the rights, powers and privileges of a corporation for nonpayment of taxes.
A delinquent California corporation may neither bring suit nor defend a legal action. E.g., Reed v. Norman, 48 Cal.2d 338, 309 P.2d 809, 812 (1957). We have repeatedly acknowledged this as the law of California. See United States v. 2.61 Acres of Land, More or Less, 791 F.2d 666, 668 (9th Cir.1985) (); cf. In re Christian & Porter Aluminum Co., 584 F.2d 326, 331-32 (9th Cir.1978) (). Because the Franchise Tax Board suspended Community Electric, it had no capacity to sue.
The antitrust statute of limitation expired May 6, 1987. The Board reinstated Community Electric on June 8, 1987. Community Electric argues that this reinstatement gave it the capacity retroactively for the January filing.
We apply California law to determine whether Community Electric may obtain retroactively the capacity to sue. The California statutory scheme provides for suspension under Sec. 23301 and revival under No California Supreme Court decision has addressed the situation where the revivor issues after the statute of limitation has expired. Every California court facing this question has held that corporate reinstatement will not validate retroactively the earlier filing. These decisions conclude that the expiration of a statute of limitation...
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