Gates v. Victor Fine Foods

• Decision Date: 16 May 1995
• Docket Number: No. 93-16141,93-16141
• Citation: 54 F.3d 1457
• Parties: John GATES; Robert Kinser; Clifford Travis; Dennis Conrad; Richard Doble; Edmund Vincelet; Richard Weyant and Jerome Binder; Jerome Binder, individually and on behalf of all others similarly situated, Plaintiffs-Appellees, v. VICTOR FINE FOODS; Golden Gate Fresh Foods, Inc., Defendant, and Fletcher's Fine Foods; Alberta Pork Producers Development Corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1457

54 F.3d 1457

63 USLW 2730

John GATES; Robert Kinser; Clifford Travis; Dennis

Conrad; Richard Doble; Edmund Vincelet; Richard Weyant and Jerome Binder; Jerome Binder, individually and on behalf of all others similarly situated, Plaintiffs-Appellees, v. VICTOR FINE FOODS; Golden Gate Fresh Foods, Inc., Defendant, and Fletcher's Fine Foods; Alberta Pork Producers Development

Corporation, Defendants-Appellants.

No. 93-16141.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 15, 1995.

Decided May 16, 1995.

Richard W. Nichols, McDonough, Holland & Allen, Sacramento, CA, for defendants-appellants.

James E. Eggleston, Eggleston, Siegel & LeWitter, Oakland, CA, for plaintiffs-appellees.

Appeal from the United States District Court for the Eastern District of California.

Before: TANG and O'SCANNLAIN, Circuit Judges; MERHIGE, ^* District Judge.

O'SCANNLAIN, Circuit Judge:

This case requires us to explore the statutory maze of the Foreign Sovereign Immunities Act as it applies to Canadian entities that market and promote hogs raised in the Province of Alberta and operate a pork processing plant in British Columbia, either one of which might affect employees in a plant in California.

I

Alberta Pork Producers Development Corporation ("Alberta Pork") is a Canadian entity established pursuant to the Alberta Marketing of Agricultural Products Act, R.S.A. 1980, c. M-5, to provide for the effective marketing and promotion of hogs produced in the Province of Alberta. Alberta Pork is the sole marketing agent through which hogs raised in Alberta for slaughter must be sold. Hog producers must sell their hogs to Alberta Pork, which receives a service charge for each hog. Alberta Pork, in turn, sells the hogs to pork processors both within and outside of Canada and remits the proceeds to the producers.

In order to promote and to sell hogs effectively, Alberta Pork is authorized to acquire businesses that process and sell pork. Pursuant to this authority, Alberta Pork purchased Fletcher's Fine Foods ("FFF"), a pork processing plant headquartered in British Columbia, and it currently owns 100% of the shares of FFF. FFF, in turn, is parent to a number of subsidiaries, and through these subsidiaries owned Golden Gate Fresh Foods ("GGFF"), a California pork processing plant.

GGFF was located in Lodi, California and operated under the trade name of Victor Fine Foods. GGFF maintained a welfare benefit plan known as the Victor Fine Foods Group Benefits Plan ("the Plan"). Throughout the time that FFF owned GGFF, GGFF experienced great financial difficulties. Finally, on November 19, 1991, FFF discontinued its financial support of GGFF. The next day, GGFF terminated the Plan. On December 13, the GGFF plant closed, and all the employees were terminated.

The former employees of GGFF ("GGFF employees") brought a class action against GGFF, Alberta Pork, FFF and other defendants, asserting five claims: (1) violation of the Worker Adjustment and Retraining Notification Act ("WARN"), 29 U.S.C. Sec. 2101 et seq., for failure to provide 60-days notice of intent to close the plant; (2) violation of the continuation rules of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), 29 U.S.C. Secs. 1161-68, for failure to give the Plan participants notice of entitlement to, and actual opportunity to convert to, continuation health care coverage upon their terminations from employment; (3) breach of Plan obligations for failure to pay benefits for covered health care services rendered before the Plan was terminated; (4) breach of fiduciary duty for failure to cause the Plan to pay covered pre-Plan-termination benefits and to give notice of, and make available, continuation health care coverage; and (5) violation of section 510 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Sec. 1140, for interfering with the GGFF employees' opportunities to obtain pre-Plan-termination and continuation health care coverage benefits by terminating the Plan.

Alberta Pork and FFF moved to dismiss for lack of subject matter jurisdiction pursuant to the Foreign Sovereign Immunities Act ("the Act"), 28 U.S.C. Secs. 1602-1611. The district court declined to decide whether Alberta Pork and FFF were entities protected by the Act; instead, the court assumed that they were but concluded that the defendants were not immune from the court's jurisdiction in any event because the defendants' actions fell into the commercial activities exception to the Act's grant of immunity. Alberta Pork and FFF appeal.

II

The Foreign Sovereign Immunities Act provides the exclusive source of subject matter jurisdiction over suits involving foreign states and their instrumentalities. Joseph v. Office of Consulate General of Nigeria, 830 F.2d 1018, 1021 (9th Cir.1987), cert. denied, 485 U.S. 905, 108 S.Ct. 1077, 99 L.Ed.2d 236 (1988). Under the Act, foreign states are presumed to be immune from the jurisdiction of United States courts unless one of the Act's exceptions to immunity applies. 28 U.S.C. Sec. 1604. For instance, a foreign state is not immune if the plaintiff's cause of action is based upon a commercial activity carried on by the foreign state. 28 U.S.C. Sec. 1605(a).

The parties first dispute whether the Act is even implicated. The GGFF employees contend that Alberta Pork and FFF are not "foreign states" within the meaning of the Act, and thus can gain no protection from it. Assuming that the defendants are foreign states, the parties next dispute whether the defendants are nonetheless subject to jurisdiction because they fall into the Act's commercial activities exception. We examine these contentions in turn.

III

The Foreign Sovereign Immunities Act provides immunity only for "foreign states." 28 U.S.C. Sec. 1604. The Act defines a foreign state to include any "agency or instrumentality of a foreign state." 28 U.S.C. Sec. 1603. In order for an entity to be considered an "agency or instrumentality," three requirements must be met. First, the entity must be a separate legal person. Second, the entity must not be a citizen of the United States nor be created under the laws of any third country. Finally, the entity must be either "an organ" of the foreign state or political subdivision thereof, or a majority of its shares must be owned by the foreign state or political subdivision thereof. 28 U.S.C. Sec. 1603(b). The parties agree that the defendants satisfy the first and second requirements. Therefore, the issue before us is whether or not they are "organs" of a foreign state or political subdivision thereof, or majority-owned by a foreign state or political subdivision.

The Act's legislative history suggests that Congress intended the terms "organ" and "agency or instrumentality" to be read broadly. The House Report states that:

entities which meet the definition of an "agency or instrumentality of a foreign state" could assume a variety of forms, including a state trading corporation, a mining enterprise, a transport organization such as a shipping line or airline, a steel company, a central bank, an export association, a governmental procurement agency or a department or ministry which acts and is suable in its own name.

H.R.Rep. No. 94-1487, 94th Cong. 2nd Sess. (1976), reprinted at 1976 U.S.C.C.A.N. 6604, 6614.

The case law provides us with little guidance because most of the cases discussing this issue involve entities owned by socialist governments. ¹ See, e.g., Yessenin-Volpin v. Novosti Press Agency, 443 F.Supp. 849, 852 (S.D.N.Y.1978). Thus, in determining whether Alberta Pork and FFF are "foreign states" for purposes of the Act, we focus on the statutory text and legislative history. We examine each defendant in turn.

A

Under Alberta law, the Marketing of Agricultural Products Act, R.S.A.1980, c. M-5, provides that producers of a particular agricultural product can apply to a governmental body called the Alberta Agricultural Products Marketing Council ("Council") for approval to establish a marketing board. Id. Sec. 15. Pursuant to this procedure, hog producers submitted a plan which the Council approved, and Alberta Pork was formed as the marketing board for hog producers in 1968. Alberta Hog Producers' Marketing Plan, 1968, Alta.Reg. 195/68.

Although the Council does not appear to exercise day-to-day control over marketing boards, it does play an active supervisory role. For example, a board cannot be created until a group of producers submits to the Council a proposed plan to be administered by a board. c. M-5, Sec. 15. Once the plan is approved and the board is established, the Council may authorize the board to issue regulations requiring producers, among other things, to produce according to quotas, id. Sec. 27(1)(a), to furnish information relating to the production and marketing of specified products, id. Sec. 26(b), and to pay service charges, id. Sec. 26(f). These provisions suggest that a board can act only in a manner and on the subjects that the Council has previously authorized. Indeed, when Alberta Pork wanted to buy FFF, the Council had to issue a regulation authorizing the acquisition. See Alberta Pork Producers' Marketing Plan, 1968 Amendment Regulation, Alta.Reg. 99/81.

The Council also has the authority to require a board to furnish it with any information and records that the Council desires. c. M-5, Sec. 11. A board cannot issue any regulations without the approval of the Council, id. Sec. 29(1), and if there is a conflict between regulations issued by the Council and regulations issued by a board, the Council's regulations prevail, id. Sec. 28. Further, the Council may ask a board to amend or to repeal its regulations, and if the board does not do so within 45 days, the Council may do so itself. Id. Sec. 30.

The Marketing of Agricultural Products Act also establishes a mechanism whereby a producer who is dissatisfied with a board decision can appeal to an appellate...