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UNITED STATES v. INTERNATIONAL BHD. OF TEAMSTERS

November 8, 1996

UNITED STATES OF AMERICA, Plaintiff, against INTERNATIONAL BROTHERHOOD OF TEAMSTERS, et al., Defendants.


The opinion of the court was delivered by: EDELSTEIN

 EDELSTEIN, District Judge :

 This opinion emanates from the voluntary settlement of an action commenced by plaintiff United States of America ("the Government") against, inter alia, defendant International Brotherhood of Teamsters ("the IBT" or "the Union") and the IBT's General Executive Board. The settlement is embodied in the voluntary consent order entered March 14, 1989 ("Consent Decree"). The goal of the Consent Decree is to rid the IBT of the hideous influence of organized crime through a two-phased implementation of the Consent Decree's various remedial provisions. In the first phase of the Consent Decree, these provisions provided for three court-appointed officers: the Independent Administrator to oversee the Consent Decree's provisions, the Investigations Officer to bring charges against corrupt IBT members, and the Election Officer to supervise the electoral process that led up to and included the 1991 election for International Union Office. In the second phase of the Consent Decree, the Independent Administrator was replaced by a three-member Independent Review Board ("the IRB"), but the position of Election Officer remained unchanged.

 The Government brings the instant action against non-party Labatt Brewing Company Limited ("Labatt"), a corporation organized under the laws of Canada with its principal place of business in Toronto. (Memorandum of Labatt Brewing Company Limited in Opposition to the Government's Application for an Order Directing It to Permit Union Electioneering on Premises in Canada, United States v. International Bhd. of Teamsters, 88 Civ. 4486 ("Labatt's Memo"), at 1 (Nov. 5, 1996).) This action arises from Labatt's refusal to abide by a decision of the Election Officer issued October 17, 1996, and affirmed by the Election Appeals Master on October 26, 1996, requiring Labatt "to permit campaigning in the parking lot where IBT members park their personal vehicles. . . ." (Decision of the Election Officer, Election Office Case No. P-942-LAB-CAN ("E.O. Decision"), at 3 (Oct. 17, 1996).) Pursuant to the Consent Decree and the Rules for the 1995-1996 IBT International Union Delegate and Officer Election ("the 1996 Election Rules"), the Government moves this Court for an order directing Labatt to comply with the Election Officer's decision, and, if Labatt fails to comply with such order, a subsequent order holding Labatt in civil contempt. (Government's Memorandum of Law in Support of its Motion for an Order of Civil Contempt, United States v. International Bhd. of Teamsters, 88 Civ. 4486 ("Govt.'s Memo"), at 1 (Nov. 1, 1996).) In response, Labatt counters that this Court has no personal jurisdiction over it, that Consent Decree case law is inapplicable to the present dispute, and that ordering Labatt to comply with the Election Officer's decision would violate the international-law principle of comity. (Labatt's Memo at 2-7.) After reviewing papers submitted by the Government and Labatt respectively, and considering the arguments put forth by each at oral argument, this Court finds that it has personal jurisdiction over Labatt for purposes of the instant matter, and that the Government's motion should be granted.

 BACKGROUND

 On Friday, November 1, 1996, the Government applied to this Court for an order directing Labatt to appear before this Court

 
to show cause why the Court should not enter an order, pursuant to, inter alia, its continuing supervisory jurisdiction over implementation of the Consent Decree, the All Writs Act, 28 U.S.C. § 1651, and the Court's inherent equitable powers, (i) directing Labatts to comply fully, within twenty-four hours, with the October 17, 1996 decision of the Election Officer in Election Case No. P-942-LAB-CAN, by allowing Mr. Hoffa, and/or any other nonemployee IBT members to have access for campaign purposes to the parking lot at Labatts' facility in LaSalle, Quebec, Canada where IBT members park their personal vehicles; (ii) in the event of Labatts' failure to take the actions directed in (i) above, adjudging Labatt in civil contempt . . . ; (iii) awarding the Government and the Election Officer such other and further relief as the Court deems just and proper. . . .

 (Order to Show Cause, United States v. International Bhd. of Teamsters, 88 Civ. 4486 (Nov. 1, 1996) ("November 1 Order"), at 2.) In support of its application, the Government submitted a memorandum of law and exhibits explaining the facts underlying the instant motion.

 According to the Government, Labatt "has violated the Rules for the 1995-1996 IBT International Union Delegate and Officer Election by preventing Mr. James P. Hoffa ("Hoffa"), an IBT member and candidate for IBT General President, from gaining campaign access to a parking lot at a Labatt facility in LaSalle, Quebec, Canada." (November 1 Order at 1.) Under the 1996 Election Rules, IBT members and candidates have a limited, rebuttable right of access to distribute literature and seek support for their campaigns in parking lots used by union members to park their cars at their places of employment. (Govt.'s Memo at 2); (Rules for the 1995-1996 IBT International Union Delegate and Officer Election, Art. VIII, § 11(e).) The Government explains that Labatt denied Hoffa and other IBT members campaign access to the parking lot at the Labatt facility in question, and that Labatt removed Hoffa from the Labatt employee parking lot. (Govt.'s Memo at 2.) The Government maintains that "Labatt did not attempt to demonstrate that access to its employee parking lot was neither necessary nor appropriate to meaningful exercise of democratic rights in the course of the 1996 IBT election pursuant to Article VIII, Section 11(e) of the Election Rules." Id. Instead, Labatt asserted only that Rule 11 conflicts with Labatt's safety regulations, and that Labatt is not bound by the Election Rules. Id. at 2 & Ex. F.

 Hoffa filed an election protest regarding this matter with the Election Officer appointed by this Court to oversee the 1995-1996 IBT Election. Id. at 2; (E.O. Decision at 1.) In a decision dated October 17, 1996, the Election Officer granted Hoffa's protest and directed Labatt to comply with the Election Rules and "to permit campaigning in the parking lot where IBT members park their personal vehicles, in conformity with Article VIII, Section 11(e) of the Rules." (E.O. Decision at 3.) The Election Appeals Master affirmed this decision on October 26, 1996. (Decision of the Election Appeals Master, In re: James P. Hoffa and Labatt Breweries, 96-Elec. App. 259 (KC) (Oct. 26, 1996) ("E.A.M. Decision").) This Court's review of these two decisions indicates that Labatt appeared before neither the Election Officer nor the Election Appeals Master. See (E.O. Decision); (E.A.M. Decision at 1).

 The Government asserts that Labatt has failed to seek and obtain a stay of the Election Officer's decision, and that Labatt has refused to comply with the Election Officer's order. (Govt.'s Memo at 3 & Ex. F.) The Government thus seeks an order from this Court directing Labatt to comply with the Election Officer's decision, and, if Labatt fails to comply with such order, a subsequent order holding Labatt in civil contempt. Id. at 1; (November 1 Order at 1.) The Government moved this Court by Order to Show Cause because mailing of the ballots for the 1996 IBT Election was scheduled to begin Thursday, November 7, 1996, and the Government seeks to obtain relief as soon as possible given the short time remaining for campaign activities in connection with the IBT election. (November 1 Order at 1-2.)

 This Court signed the Order to Show Cause on November 1, 1996, and ordered that the Government serve the Order to Show Cause and its supporting papers on Labatt in Quebec, Canada in accordance with the Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters, Nov. 15, 1965 ("the Hague Service Convention"). Id. at 3. This Court further ordered the Government and Labatt to appear for oral argument on this matter on Monday, November 4, 1996. Id.

 In compliance with this Court's November 1 Order, both the Government and Labatt appeared before this Court on November 4, 1996. Although this Court heard argument from each regarding the question whether this Court has subject matter jurisdiction over Labatt, this Court adjourned the hearing to provide Labatt additional time to prepare and submit papers on this issue to this Court. (Hearing, United States v. International Bhd. of Teamsters, 88 Civ. 4486 ("Nov. 4 Tr."), 14 (Nov. 4, 1996).) This Court then ordered Labatt to serve and file its papers by Tuesday, November 5, 1996, the Government to file a response to Labatt's papers by Wednesday, November 6, 1996, at 10:00 a.m., and both Labatt and the Government to appear before this Court for further argument on Wednesday, November 6, 1996, at 10:00 a.m. Id. at 14-15.

 The Government and Labatt properly served and filed their respective papers as ordered by this Court. At oral argument, this Court requested that both participants address the legal bases of their respective positions, the facts upon which they based these positions, and the applicability of Federal Rule of Civil Procedure 4(k)(2) ("Rule 4(K)(2)") to the instant matter.

 Since the Consent Decree's inception, this Court has been inundated with litigation regarding the application and interpretation of the Consent Decree and the role of the officers appointed by this Court to oversee the Consent Decree's provisions. This Court has labored tirelessly to resolve every one of these legal challenges. Moreover, this Court repeatedly has been called upon to reconsider issues of Consent Decree law long since resolved by both this Court and the Second Circuit. As a result of constantly revisiting these well-settled issues, recent decisions emanating from the Consent Decree bear closer resemblance to history lessons on the IBT than they do to innovative legal analyses. The instant matter, however, presents a welcome opportunity for this Court to break this pattern, for it presents not one, but two, novel issues for this Court's consideration: (1) this Court's power to exercise personal jurisdiction over a foreign corporation for purposes of enforcing the Consent Decree; and (2) the applicability of the Consent Decree in a foreign jurisdiction. Because the exercise of personal jurisdiction over Labatt is a prerequisite to this Court's consideration of the substantive legal issues at bar, this Court will address the jurisdictional issue first.

 I. Personal Jurisdiction

 Both at oral argument and in the papers it submitted to this Court, the Government asserts that this Court has personal jurisdiction over Labatt. It provides this Court two bases for this assertion. First, the Government relies on a principle of international law known as the "effects doctrine." (Nov. 4 Tr. 6-9); (Government's Supplemental Memorandum of Law in Support of its motion for an Order of Civil Contempt, United States v. International Bhd. of Teamsters, 88 Civ. 4486 ("Govt.'s Supp. Memo"), at 2 (Nov. 6, 1996).) According to the Government, the Restatement (Third) of Foreign Relations Law ("the Restatement ") expressly provides that a court may exercise jurisdiction over a person "if at the time jurisdiction is asserted . . . the person, whether natural or judicial, had carried on outside the state an activity having a substantial, direct, and foreseeable effect within the state, but only in respect to such activity." Id., at 2 (quoting Restatement (Third) of Foreign Relations Law § 421(2)(j) (1987)). The Government asserts that the Second Circuit repeatedly has endorsed the Restatement principle "that actions outside the state with effects within the state constitute a sufficient basis for personal jurisdiction," id., in order to support a district court's exercise of personal jurisdiction over a foreign defendant. Id. at 3-4.

 The Government contends that the effects doctrine supports this Court's exercise of personal jurisdiction over Labatt in the instant case. Id. It states that "Labatt's refusal to permit limited access to its property, in violation of the Election Rules, interferes with the comprehensive and uniform process governing the IBT election throughout the United States and Canada, and, in so doing, interferes with the effort by the United States to rid the IBT of Corruption and the influence of organized crime." Id. at 5. The Government further asserts that this consequence is a "substantial, direct and foreseeable effect" of Labatt's actions, and that Labatt concedes this fact. Id. at 4.

 Alternatively, the Government suggests that "Labatt is subject to the jurisdiction of this Court for the further reason that it is doing business in the United States and in New York State." Id. at 7. The Government maintains that under New York state law "a foreign parent corporation that does not directly do business in the United States may be amenable to personal jurisdiction if the subsidiary does business here." Id.

 The Government explains that Labatt has a subsidiary in the United States, Labatt U.S.A., located in Darien, Connecticut. (Declaration of Assistant United States Attorney Karen B. Konigsberg, United States v. International Bhd. of Teamsters, 88 Civ. 4486, P 11 (Nov. 1, 1996).) It states that this subsidiary is incorporated in Delaware, and conducts business in both the United States and New York state. Id. ; (Govt.'s Supp. Memo at 8-10 & Ex. E). The Government asserts that statements by Labatt's employees concede that Labatt U.S.A. conducts business in both jurisdictions, and that Labatt owns 70% of Labatt U.S.A. (Govt.'s Supp. Memo at 8); (Affidavit of James West, Director of Legal Services, Canada, and Assistant Secretary of Labatt Brewery Ltd., United States v. International Bhd. of Teamsters, 88 Civ. 4486 ("West Aff."), P 3 (Nov. 1, 1996).) In addition, the Government submits several exhibits which it claims "confirm that Labatt is doing business in the United States through its United States subsidiary," (Govt.'s Supp. Memo at 8), such as: (1) a copy of Labatt's site on the World Wide Web which contains a page devoted to "Labatt in the United States," id. at Ex. A; (2) Labatt's 1994 Annual Report stating that Labatt U.S.A. is a "division" of the company which "competes in the high-quality segment of the United States beer business," id. at Ex. B; and (3) evidence that Labatt U.S.A. is qualified to do business in New York, and maintains an agent for service of process in New York State. Id. at Ex. E.

 Based on this documentation, the Government concludes that "Labatt's purposeful conduct of business in the United States and New York through a United States subsidiary constitutes 'continuous and systematic' contacts with the United States and New York." Id. at 10. Accordingly, the Government argues that "it is entirely consistent with the notions of fair play and justice for this Court to exercise its jurisdiction over Labatt to order compliance with the Election Rules and the Election Officer's order." Id.

 In response to this Court's request, the Government addressed the applicability of Rule 4(k)(2) to the instant dispute. The Government stated that Rule 4(k)(2) is applicable to the instant case, and that it empowers this Court to exercise personal jurisdiction over Labatt. ((Hearing, United States v. International Bhd. of Teamsters, 88 Civ. 4486 (Nov. 6, 1996) ("Nov. 6 Tr."), 5-6.) The Government explained that Rule 4(k)(2) demands that a foreign defendant have sufficient contacts with the United States to satisfy constitutional due process requirements, and that three possible bases exist for satisfying these requirements: (1) transacting business in the United States; (2) doing an act in the United States; and (3) having an effect in the United States by an act done elsewhere. Id. at 5. Referring to its earlier arguments, the Government stated that Labatt both has transacted business in the United States and caused an effect in the United States by an act done elsewhere. Id. at 5-6. Accordingly, the Government concluded that Labatt has sufficient contacts with the United States to support this Court's exercise of personal jurisdiction over Labatt, and that such exercise would comport with traditional notions of fair play and substantial justice, pursuant to the requirements of Rule 4(k)(2). Id. at 6.

 Labatt contests the Government's assertion that this Court has personal jurisdiction over it, and raises three claims in opposition to the Government's arguments. First, Labatt states that "there is absolutely no basis for the Court's exercise of personal jurisdiction over Labatt." (Labatt's Memo at 1.) Labatt explains that it is a corporation organized under the laws of Canada with its principal place of business in Toronto, engaged in the business of brewing and selling beer. Id. Labatt operates several breweries in Canada, including the facility in LaSalle, Quebec that is the focus of the instant dispute. Id. It further states that it "conducts no business in the United States and has no property or employees here," but that "Labatt's beer is sold in the United States by a partially owned subsidiary, which takes title to the beer at the breweries in Canada." Id. at 1-2. In addition, Labatt affirms to this Court that it does not advertise, solicit business, sell goods or otherwise conduct business, own property, hold bank accounts, or have employees in the United States. (West Aff. PP 2-5.) Based on these facts, Labatt contends that it lacks sufficient "'minimum contacts' with the forum state so that the assertion of personal jurisdiction . . . is consistent with 'traditional notions of fair play and substantial justice.'" (Labatt's Memo at 2.)

 Second, Labatt contends that case law cited by the Government in support of its case fails to support this Court's exercise of personal jurisdiction over Labatt. Id. Labatt explains that two of the Government's cited cases-- United States v. International Bhd. of Teamsters [Yellow Freight], 948 F.2d 98 (2d Cir. 1992), vacated with directions to dismiss as moot, 506 U.S. 802, 121 L. Ed. 2d 4, 113 S. Ct. 31 (1992), and United States v. International Bhd. of Teamsters [Star Market], 954 F.2d 801, cert. denied, 505 U.S. 1205, 120 L. Ed. 2d 870, 112 S. Ct. 2993 (1992)--address Consent Decree jurisdictional issues entirely unrelated to that at bar. Id. at 3; (Nov. 6 Tr. 8.) Labatt declares that Yellow Freight "held only that the All Writs Act gives this Court power to enforce the 1989 Consent Decree against non-parties if the Court has personal jurisdiction over the non-party." (Labatt's Memo at 3.) It further professes that "the only issue in Star Market was whether the Court had nationwide jurisdiction to enforce the 1989 Consent Decree" on a non-party that "indisputably has substantial United States contacts." Id. at 3-4.

 Third, Labatt argues that the Government's reliance on the "effects doctrine" is misplaced. It contends that the cases cited by the Government in support of this doctrine arose from criminal proceedings, that "there is no allegation of any criminal conduct nor that any law of the United States had been violated" in the instant case, and that, therefore, the effects doctrine is inapplicable. Id. at 4-6; (Nov. 6 Tr. 9.)

 As for Rule 4(k)(2), counsel for Labatt was entirely unfamiliar with both the provision and its interpretive case law. (Nov. 6 Tr. 12-13.) After listening to the Court read Rule 4(k)(2), however, he attempted to fashion a response by boldly asserting that "Rule 4(k)(2) does not add anything" to the instant inquiry, and that "there is nothing in Rule 4(k)(2) that diminishes the minimum-contacts test." Id.

 It is a basic principle of first-year civil procedure that questions of personal jurisdiction go to "whether the controversy or defendant has sufficient contact with the forum to give the court the right to exercise judicial power over defendant. . . ." Santos v. State Farm Fire and Cas. Co., 902 F.2d 1092, 1095 (2d Cir. 1990). Plaintiff bears the burden of establishing a district court's personal jurisdiction over defendant, but his burden varies depending on the procedural posture of the litigation. Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 196-97 (2d Cir. 1990). "Prior to discovery, a plaintiff challenged by a jurisdictional testing motion may defeat the motion by pleading in good faith . . . legally sufficient allegations of jurisdiction." Id. at 197. At such preliminary stage, plaintiff's prima facie showing may be met solely by allegations, the truth of which must be assumed by the district court. Id.

 In light of this standard, the positions advanced by both the Government and Labatt, and relevant case law, this Court finds that it is proper to exercise personal jurisdiction over Labatt in the instant case, pursuant to Rule 4(k)(2). For the benefit of Labatt's counsel, this Court will explain the Rule itself and review the ...


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