United States v. Fla. W. Int'l Airways, Inc.

• Decision Date: 10 February 2012
• Docket Number: Case No. 10–20864–Cr.
• Citation: 853 F.Supp.2d 1209
• Parties: UNITED STATES of America, Plaintiff, v. FLORIDA WEST INTERNATIONAL AIRWAYS, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

853 F.Supp.2d 1209

UNITED STATES of America, Plaintiff,

v.FLORIDA WEST INTERNATIONAL AIRWAYS, INC., et al., Defendants.

Case No. 10–20864–Cr.

United States District Court, S.D. Florida.

Feb. 10, 2012.

Frank J. Vondrak, United Department of Justice, Chicago, IL, Carsten M. Reichel, Katherine A. Schlech, Mark Krotoski, Meagan D. Johnson, Nancy H. McMillen, Paul T. Gallagher, Philip A. Giordano, US Department of Justice, Washington, DC, for Plaintiff.

Jeremy Evans, Kirby D. Behre, Paul, Hastings, Janofsky & Walker, LLP, Wasington, DC, Maria Emelina Mejer–Kondla, Kondla & Associates, North Miami Beach, FL, Robin Ellen Kaplan, David Oscar Markus, Markus & Markus, PLLC, Miami, FL, for Defendants.

ORDER ADOPTING MAGISTRATE'S REPORT AND RECOMMENDATION

ROBERT N. SCOLA, JR., District Judge.

THIS MATTER is before the Court on the Report and Recommendation from the Honorable Edwin G. Torres, United States Magistrate Judge, regarding the Defendants' Motions to Dismiss the Indictment. Judge Torres's Report recommends that Defendant Hidalgo's Motion to Dismiss (ECF No. 67) be granted, and that Defendant Florida West International Airways, Inc.'s Motion to Dismiss (ECF No. 94) be denied. (Report of Magistrate, ECF No. 191.) The Government and Hidalgo have filed objections to the Report. (Obj's, ECF Nos. 198 & 200.). On February 10, 2012, the Court held a hearing on the parties' objections.

Judge Torres's Report and Recommendation contains detailed factual findings which are thoroughly explained and supported by the evidence. Additionally, the Report cogently addresses the legal issues and accurately resolves each of them. Finally, the Report provides a well-reasoned and complete response to all of the issues raised by the Government and Hidalgo in their objections. Having considered Judge Torres's Report, and the parties' objections, and having made a complete de novo review of the record, this Court finds Judge Torres's Report and Recommendation cogent and compelling.

It is ORDERED and ADJUDGED that Judge Torres's Report and Recommendation (ECF No. 191) is AFFIRMED and ADOPTED. Hidalgo's Motion to Dismiss (ECF No. 67) is GRANTED. Florida West's Motion to Dismiss (ECF No. 94) is DENIED.

REPORT AND RECOMMENDATION¹

EDWIN G. TORRES, United States Magistrate Judge.

This matter is before the Court on Defendants' Motions to Dismiss Indictment and Request for Evidentiary Hearing (the “Motions”) [D.E. 67, 94]. This Court has thoroughly reviewed the Motions, responses, replies, the Parties' supplemental filings, the exhibits filed with the Court and is otherwise appraised of the entire record in this case. The Court also held a lengthy two-day evidentiary hearing on August 22 and 23, 2011, at which the Parties presented arguments on the pending Motions. For the following reasons, Defendant Rodrigo Hidalgo's Motion should be GRANTED and Defendant Florida West International Airways, Inc.'s Motion should be DENIED.

In light of our findings discussed herein and ultimate recommendation, the related motions [D.E. 109, 139, 143, 144, 158, 170, 175] are also DENIED.

I. BACKGROUND

These Motions present a familiar third-party breach of contract issue arising in a relatively novel plea agreement context. At bottom, Rodrigo Hidalgo (“Hidalgo”) and Florida West International Airways, Inc. (“Florida West”) (collectively the “Defendants”) move to dismiss the pending indictment arguing that, by seeking this indictment, the Government has breached a 2009 plea agreement that immunized them.

Several years ago, the Government investigated a large price-fixing conspiracy affecting the air cargo industry. As a result of that investigation, the Government indicted, among other air cargo providers, LAN Cargo, S.A. (“LAN Cargo”) for participating in this alleged price-fixing conspiracy. On January 21, 2009, the Government and LAN Cargo executed a plea agreement whereby LAN Cargo plead guilty to violating the Sherman Antitrust Act, 15 U.S.C. § 1, and paid a fine in exchange for immunity to certain employees and related corporations. [D.E. 67–1, hereafter (“Plea Agreement”) ]. These immunity provisions state:

Paragraph 14: Upon acceptance of the guilty plea called for by this Plea Agreement and the imposition of the recommended sentence, and subject to the cooperation requirements of paragraph 12 of this Plea Agreement, the United States agrees that it will not bring further criminal charges against [LAN Cargo] or any of [its] subsidiaries for any act or offense committed before the date of this Plea Agreement that was undertaken in furtherance of an antitrust conspiracy involving the sale of air cargo services.... [LAN Cargo] understand [s] that this Plea Agreement does not limit the ability of the United States to prosecute any company in which LAN Cargo had an ownership interest that ended prior to the date of this Agreement, for any involvement such company may have had in an antitrust conspiracy involving the sale of air transportation services or for any other offense.

Paragraph 15(a): Upon the Court's acceptance of the guilty plea ... the United States will not bring criminal charges against any current or former director, officer, or employee of [LAN Cargo] or [its] subsidiaries (or against any current or former employee of LAN Cargo's parent corporation [LAN], or any of [LAN's] subsidiaries, whose primary responsibilities related to the sale of air cargo services for [LAN Cargo] ), for any act or offense committed before the date of the Plea Agreement and while that person was acting as a director, officer, or employee of [LAN Cargo] or [its] subsidiaries that was undertaken in furtherance of an antitrust conspiracy involving the sale of air cargo services ..., except that the protections granted in this paragraph shall not apply to Armando Valdivieso, Roberto Bianchi, Alvaro Carril, Claudio Silva, and Tomas Silva.

Id. at 14–15 (emphasis added).

As additional background, LAN Cargo's parent company is LAN Airlines, S.A. (“LAN”), a Chilean-based airline engaged in the business of air passenger travel. LAN Cargo, its wholly owned subsidiary, handles the air cargo division of LAN and provides cargo related services to South and North America through a network of companies. Because certain countries regulate whether a foreign owned company may operate an airline within its borders, LAN Cargo maintains a close relationship with companies domesticated in those countries to provide service to all of the Americas. This web of airlines includes Aerolinhas Brasileiras, S.A. (“ABSA”), a Brazilian company, MAS Air (“MAS Air”), a Mexican company, and Florida West, an United States company. As further discussed below, Hidalgo and Florida West present ample evidence that this web of companies is referred to informally as the “LAN Cargo Group”—a unit acting with a cohesive purpose—which is controlled by LAN Cargo.

On December 2, 2010, the Government indicted the Defendants and others with one count of participating in an antitrust conspiracy involving “international air transportation services for cargo between Miami, Florida and Colombia and elsewhere.” [D.E. 1]. The Indictment alleges that from January 2002 until February 14, 2006 Hidalgo participated in a conspiracy to suppress and eliminate competition by fixing and coordinating certain components of cargo rates, including peak season, security and fuel surcharges for international air cargo shipments in violation of the Sherman Antitrust Act, 15 U.S.C. § 1. It is further alleged that Florida West joined and participated in this conspiracy from August 2002 until February 14, 2006. Id.

A. The Parties' Positions

Specifically, Hidalgo asserts that paragraph 15 of the Plea Agreement provides immunity to him under all three categories:

1) “any current or former director, officer, or employee of [LAN Cargo]”

2) “any current or former director, officer, or employee of [LAN Cargo's] subsidiaries” or

3) “any current or former employee of [LAN], or any of [LAN's] subsidiaries, whose primary responsibilities related to the sale of air cargo services for [LAN Cargo].” ² [D.E. 157 at 1].

Hidalgo contends that he is immunized under the first two categories of the Plea Agreement because during the indictment period he was simultaneously an executive of LAN Cargo and LAN Cargo's subsidiaries South Florida Air Cargo (“SFAC”) and Florida West.³ Notably, as discussed further below, Hidalgo contends that his employment status with LAN Cargo was kept confidential to the public to maintain the appearance of separation between LAN Cargo and Florida West. See n. 11, infra. Alternatively, if Florida West is deemed a subsidiary of LAN (rather than LAN Cargo), then Hidalgo is still immunized by the third category because his primary responsibilities related to the sale of air cargo services for LAN Cargo.

Taking Hidalgo's dual employment argument in parts, he first contends very simply that, if the evidence demonstrates that he worked as a LAN Cargo executive, then he is immunized from prosecution. Next, Hidalgo asserts the equally straightforward premise that, as a Florida West executive (which he undisputedly was), he is immunized as a subsidiary of LAN Cargo. However, because the Plea Agreement leaves the term “subsidiary” undefined, whether Florida West is a “subsidiary” of LAN Cargo is a disputed issue. Hidalgo argues that Florida West is a “subsidiary” of LAN Cargo as a matter of law based on two purportedly dispositivefacts: 1) LAN Cargo held a 25% minority interest in Florida West; and, 2) LAN Cargo exercised actual control over Florida West's affairs. As for his alternative argument, Hidalgo maintains that all of his responsibilities, not just his “primary responsibilities,” were for the sale of air cargo services for LAN Cargo and, thus, he is covered under the third category.

Similarly, Florida West contends that paragraph 14 of the Plea Agreement affords it immunity as a “subsidiary” of LAN Cargo. [D.E. 94 at 2]...