Cruz v. U.S.

Decision Date16 June 2005
Docket NumberNo. C 01-0892 CRB.,C 01-0892 CRB.
Citation387 F.Supp.2d 1057
CourtU.S. District Court — Northern District of California
PartiesSenorino R. CRUZ, et al., Plaintiffs, v. UNITED STATES of America, et al., Defendants.

Valeriano Saucedo, Miner Barnhill & Galland, Visalia, CA, Paul A. Strauss, Miner Barnhill & Galland, Matthew J. Piers, Jonathan A. Rothstein, Frederick S. Rhine, Gessler, Hughes & Socol, Ltd., Chicago, IL, Morris J. Baller, Laura L. Ho, Debra A. Smith, Saperstein Goldstein Demchak & Baller, Oakland, CA, for Plaintiffs.

Jean Lin, U.S. Department of Justice Civil Division, Washington, DC, Raymond C. Marshall, Bingham McCutchen LLP, San Francisco, CA, Jonathan I. Blackman, Cristina M. Posa, Cleary Gottlieb Steen & Hamilton, New York, NY, for Defendants.

AMENDED MEMORANDUM AND ORDER RE: MEXICAN DEFENDANTS' MOTION TO DISMISS

BREYER, District Judge.

The Court, in order to correct the legal error contained therein, hereby amends its March 30, 2005 Memorandum and Order Granting Mexican Defendants' Motion to Dismiss read as follows:

Now before the Court is the Mexican Defendants' motion to dismiss the Second Amended Complaint (SAC) on several bases, including: (1) sovereign immunity; (2) personal jurisdiction; (3) lack of a private right of action; (4) the act of state doctrine; (5) international comity; and (6) statute of limitations. After carefully considering the papers submitted by the parties and having had the benefit of oral argument and several post-hearing briefs, the Court hereby DENIES the motion to dismiss.

BACKGROUND

The facts underlying plaintiffs claims in this action have been described in great detail by earlier orders of this Court and will not be repeated here. However, some explanation regarding the procedural history that brought the case to its present posture is necessary to frame the issues now before the Court.

On August 23, 2002, the Court issued an order dismissing all claims in both the Cruz and De la Torre actions. Cruz v. United States, 219 F.Supp.2d 1027 (N.D.Cal.2002). Inter alia, the Court ruled that the Mexican Defendants were entitled to absolute immunity because the Foreign Sovereign Immunity Act ("FSIA") did not apply retroactively. Plaintiffs in the Cruz matter later requested that the Court reconsider that ruling in light of the Ninth Circuit's holding in Altmann v. Republic of Austria, 317 F.3d 954 (9th Cir.2002) ("Altmann I"). By way of a June 24, 2003 order, the motion for reconsideration was denied on the grounds that the holding regarding retroactivity in Altmann I was limited to the facts presented there. Cruz v. United States, No. 01-0892, 2003 WL 21518119 (N.D.Cal. Jun.24, 2003).

The Supreme Court then affirmed the Altmann decision, though on the grounds that the FSIA is retroactive generally. Republic of Austria v. Altmann, 541 U.S. 677, 124 S.Ct. 2240 2253-54, 159 L.Ed.2d 1 (2004) ("Altmann II"). Accordingly, this Court's basis for dismissing the claims against the Mexican Defendants is no longer valid, and it now may review defendants' motion to dismiss on sovereign immunity grounds pursuant to the understanding that the statute applies retroactively.

DISCUSSION
I. Plaintiffs' Remaining Claims

The question of what viable claims remain in the complaint following the Court's prior orders has been the subject of some dispute between the parties and therefore merits some clarification. The Court previously ruled in the De la Torre action that the international agreements creating the bracero program did not create a private right of action.1 See De la Torre v. United States, No. C 02-1942 CRB, ¶ . 12-15 (N.D. Cal. April 14, 2004). That ruling applies with equal force here, and therefore plaintiffs may not assert causes of action based exclusively on the international agreements. This finding also precludes plaintiffs from making claims in contract law asserting third-party beneficiary rights under the international agreements. See Kwan v. United States, 272 F.3d 1360, 1363 (Fed.Cir.2001) (stating that "the appellants cite no authority, and we know of none, whereby an individual has been found entitled to judicial enforcement of a government-to-government agreement on the legal theory that they are third party beneficiaries of the agreement."). Similarly, plaintiffs' claims for breach of fiduciary duty, which are premised only upon duties found within the international agreements, see, e.g., SAC at ¶¶ 93-94, must also be dismissed.

However, plaintiffs have also made claims against the Mexican Defendants based on theories of resulting trust, accounting, unjust enrichment, conversion and California's Unfair Competition Law. Unlike plaintiffs' contract claims, these claims which are inherently equitable in nature do not require the existence of a contract for relief to be granted. See, e.g., In re Markair Inc., 172 B.R. 638, 641-42 (9th Cir. BAP 1994) (stating that a resulting trust is established by intentions of the parties); Lectrodryer v. SeoulBank, 77 Cal.App.4th 723, 726, 91 Cal.Rptr.2d 881 (2000) (stating that elements of unjust enrichment are "receipt of a benefit and unjust retention"); In re Emery, 317 F.3d 1064, 1069 (9th Cir.2003) (per curiam) (conversion claim established by showing plaintiff's ownership or property).2 Therefore, because it is possible for plaintiffs to establish an ownership interest in the savings funds based upon cause of action that are independent of the international agreements, these claims survive the Court's earlier ruling.

II. FSIA

The Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602 et seq., "established a comprehensive framework for determining whether a court in this country ... may exercise jurisdiction over a foreign state." Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 610, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992). The act provides that foreign states shall be immune from suit unless one of its exceptions applies. 28 U.S.C. §§ 1604, 1605. Plaintiffs contend that this Court has jurisdiction and that Mexico lacks sovereign immunity from this case pursuant to the FSIA's commercial activity exception which provides for no immunity in any case:

in which the action is based [1] upon a commercial activity carried on in the United States by the foreign state; or [2] upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or [3] upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States;

28 U.S.C. § 1605(a)(2) (numeration added). The section requires not only that the suit be related to some commercial activity of the foreign state, but also that one of the three forms of nexus with the United States are present.

The parties respective burdens with respect to the application of the FSIA are allocated according to a complex procedure:

Where ... the plaintiff alleges in his complaint that his claim is based on a foreign state's strictly commercial acts, the defendant must establish a prima facie case that it is a sovereign state3.... This proof establishes a presumption that the foreign state is protected by immunity. The plaintiff then has the burden of going forward with the evidence by offering proof that one of the FSIA exemptions applies. Once the plaintiff has presented this evidence, the defendant must prove its entitlement to immunity by a preponderance of the evidence.

Siderman de Blake v. Republic of Argentina, 965 F.2d 699, 708 n. 9 (9th Cir.1992) (citation omitted). Here, it is undisputed that the Mexican Defendants all fall within the FSIA's definition of a sovereign state.

Plaintiffs have relied on the undisputed structure of the bracero program to establish that their claims are directed against commercial conduct. Defendants reply that the commercial activity exception does not apply for two reasons: (1) plaintiffs' claims are not "commercial activity;" and (2) there is not a sufficient nexus between plaintiffs' claims and the United States for the exception to apply.

A. Commercial Activity

The FSIA defines "commercial activity" as:

Either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose.

28 U.S.C. § 1603(d). The Supreme Court has clarified that:

when a foreign government acts, not as regulator of a market, but in the manner of a private player within it, the foreign sovereign's actions are `commercial' within the meaning of the FSIA. Moreover, because the Act provides that the commercial character of an act is to be determined by reference to its `nature' rather than its `purpose,' 28 U.S.C. § 1603(d), the question is not whether the foreign government is acting with a profit motive or instead with the aim of fulfilling uniquely sovereign objectives. Rather, the issue is whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in `trade and traffic or commerce.'

Weltover, 504 U.S. at 614, 112 S.Ct. 2160 (citation omitted, emphasis in original).

Clearly an important stage in making this determination is classifying the relevant conduct. At the outset it should be noted that the heart of plaintiffs' remaining claims against the Mexican Defendants is that they failed to properly safeguard the savings funds after they were received, and then failed to disgorge the funds to the braceros. Viewed in this light, the alleged activities of the Mexican Defendants are indistinguishable from the actions of a private bank or trustee. Indeed, the agreements could have specified that a private bank play the role of the ultimate holder of the savings funds,...

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