Sea Breeze Salt, Inc. v. Mitsubishi Corp.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SEA BREEZE SALT, INC., a California No. 16-56350
corporation; INNOFOOD, S.A. DE
C.V., a Mexican corporation, D.C. No.
Plaintiffs-Appellants, 2:16-cv-02345-
DMG-AGR
v.
MITSUBISHI CORPORATION, a OPINION
Japanese corporation; MITSUBISHI
INTERNATIONAL CORPORATION, a
New York corporation;
EXPORTADORA DE SAL, S.A. DE
C.V., a Mexican corporation; DOES,
1–10,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Dolly M. Gee, District Judge, Presiding
Argued and Submitted November 8, 2017
Pasadena, California
Filed August 15, 2018
2 SEA BREEZE SALT V. MITSUBISHI CORP.
Before: Kim McLane Wardlaw and Andrew D. Hurwitz, *
Circuit Judges, and Wiley Y. Daniel, ** District Judge.
Opinion by Judge Wardlaw
SUMMARY ***
Act of State Doctrine
The panel affirmed the district court’s dismissal of an
antitrust case as barred by the act of state doctrine.
Plaintiffs alleged an antitrust conspiracy between a
Mexican salt production corporation 51-percent owned by
the government of Mexico and a Japanese entity that held
the remaining ownership interest. The panel held that the act
of state doctrine applied because the antitrust action was
fundamentally a challenge to the United Mexican States’
determination about the exploitation of its own natural
resources, made by a corporation owned and controlled by
the Mexican government.
*
This case was submitted to a panel that included Judge Stephen
Reinhardt. Following Judge Reinhardt’s death, Judge Hurwitz was
drawn by lot to replace him. Ninth Circuit General Order 3.2.h. Judge
Hurwitz has read the briefs, reviewed the record, and listened to oral
argument.
**
The Honorable Wiley Y. Daniel, United States District Judge for
the U.S. District Court for Colorado, sitting by designation.
***
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
SEA BREEZE SALT V. MITSUBISHI CORP. 3
COUNSEL
Rory S. Miller (argued), David Zarmi, and G. Jill Basinger,
Glaser Weil Fink Howard Avchen & Shapiro LLP, Los
Angeles, California, for Plaintiffs-Appellants.
Charles E. Davidow (argued) and Daniel A. Crane, Paul
Weiss Rifkind Wharton & Garrison LLP, Washington, D.C.,
for Defendants-Appellees.
OPINION
WARDLAW, Circuit Judge:
The act of state doctrine limits judicial interference in
foreign relations by precluding adjudication of the sovereign
acts of other nations in United States courts. Because this
antitrust action is fundamentally a challenge to the United
Mexican States’ determination about the exploitation of its
own natural resources, made by a corporation owned and
controlled by the Mexican government, it is barred by the act
of state doctrine. We therefore affirm the district court’s
dismissal of the complaint.
I.
Plaintiffs, Innofood, S.A. de C.V. (“Innofood”), a
Mexican corporation with a principal place of business in
Mexico, and Sea Breeze Salt, Inc. (“Sea Breeze”), a
California corporation based in San Diego, brought this suit
in the Central District of California, alleging an antitrust
conspiracy between Exportadora de Sal, S.A. de C.V.
(“ESSA”), a Mexican salt production corporation 51-percent
owned by the government of Mexico, and Mitsubishi
Corporation, a Japanese entity which holds the remaining
4 SEA BREEZE SALT V. MITSUBISHI CORP.
ownership interest in ESSA. 1 Plaintiffs also named
Mitsubishi International Corporation, a New York
corporation and wholly owned subsidiary of Mitsubishi
Corporation.
According to the operative complaint, ESSA is the
world’s largest producer of solar sea salt, and produces
90 percent of Mexico’s salt exports. This amounts to almost
17 percent of the total global output of salt. The complaint
further alleges that “[f]or decades, Mitsubishi has enjoyed a
monopolistic stranglehold on ESSA’s solar sea salt
production, distribution, and sales.” That is, ESSA sold its
salt exclusively to Mitsubishi. That began to change when
Jorge Lopez Portillo Basave (“Portillo”), a reformist, took
over as ESSA’s Director General and began developing
distribution contracts with other companies.
In February 2014, Portillo entered a contract with
Innofood for the distribution of solar sea salt. However,
ESSA terminated Portillo in late 2014. ESSA then refused
to honor multiple purchase orders issued by Innofood under
the distribution contract. Plaintiffs allege that this conduct
was part of an orchestrated scheme to breach all the outside
distribution contracts that Portillo had entered, and to return
to dealing exclusively with Mitsubishi.
Innofood alleges that ESSA’s breach precluded
Innofood from fulfilling its contractual obligation to resell
ESSA’s salt to Sea Breeze. Sea Breeze in turn was unable
1
ESSA’s amenability to suit in the United States is also at issue in
Packsys, S.A. de C.V. v. Exportadora de Sal, S.A. de C.V., No. 16-55380,
decided today.
SEA BREEZE SALT V. MITSUBISHI CORP. 5
to fulfill deals it had in place with purchasers in the United
States.
Innofood and Sea Breeze base five claims on ESSA’s
alleged decision to sell its salt exclusively to Mitsubishi:
(1) illegal restraint of trade in violation of the Sherman Act,
15 U.S.C. § 1; (2) unlawful exclusive agreement in violation
of the Clayton Act, 15 U.S.C. § 14; (3) unlawful restraint of
trade in violation of California’s Cartwright Act, Cal. Bus.
& Prof. Code §§ 16720 et seq.; (4) intentional interference
with contractual relations under California law; and
(5) intentional interference with prospective economic
advantage under California law.
The Mitsubishi defendants moved to dismiss based on
the act of state doctrine, forum non conveniens, and failure
to state a claim. The district court dismissed the action as
barred by the act of state doctrine, and therefore did not reach
Mitsubishi’s other arguments. It held that (1) the alleged
conduct constituted the official acts of a foreign sovereign
within its own borders, (2) relief would require the court to
declare invalid the official acts of that foreign sovereign, and
(3) no exception to the act of state doctrine applied.
ESSA was never served with process. A month after the
district court dismissed the claims against Mitsubishi, it also
dismissed the claims as to ESSA, for failure to serve and
because “the grounds on which the case was dismissed as to
the Mitsubishi defendants would in fact apply with equal (if
not greater) force to ESSA if it were to have been served with
process.” Innofood and Sea Breeze timely appealed both
dismissals.
6 SEA BREEZE SALT V. MITSUBISHI CORP.
II.
“[W]e review the district court’s decision concerning the
act of state doctrine de novo.” Liu v. Republic of China,
892 F.2d 1419, 1424 (9th Cir. 1989). When the doctrine is
raised on a motion to dismiss, we take the allegations in the
complaint as true and view them in the light most favorable
to the plaintiffs. Clayco Petroleum Corp. v. Occidental
Petroleum Corp., 712 F.2d 404, 406 (9th Cir. 1983) (per
curiam).
III.
The district court correctly dismissed this case under the
act of state doctrine. Unlike the Foreign Sovereign
Immunities Act (“FSIA”), which is jurisdictional, 2 the act of
state doctrine is a “substantive defense on the merits.”
Republic of Austria v. Altmann, 541 U.S. 677, 700 (2004).
The doctrine is “a consequence of the domestic separation of
powers, reflecting ‘the strong sense of the Judicial Branch
that its engagement in the task of passing on the validity of
foreign acts of state may hinder’ the conduct of foreign
affairs.” W.S. Kirkpatrick & Co. v. Envtl. Tectonics Corp.,
Int’l, 493 U.S. 400, 404 (1990) (quoting Banco Nacional de
2
Because the FSIA is jurisdictional, we must assure ourselves that
it does not bar this suit, even though the issue is not pressed on appeal.
See, e.g., In re Rosson, 545 F.3d 764, 769 n.5 (9th Cir. 2008). We agree
with the district court that the FSIA’s commercial activity exception is
applicable because the suit is based 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); see Packsys, S.A. de C.V. v. Exportadora de Sal,
S.A. de C.V., No. 16-55380, slip op. at 19 n.10 (discussing the “direct
effect” test where a foreign state’s action causes the breach of third-party
contracts with United States companies). The FSIA therefore does not
deprive us of jurisdiction.
SEA BREEZE SALT V. MITSUBISHI CORP. 7
Cuba v. Sabbatino, 376 U.S. 398, 423 (1964)). It recognizes
that “[w]hen the courts engage in piecemeal adjudication of
the legality of the sovereign acts of states, they risk
disruption of our country’s international diplomacy.” Int’l
Ass’n of Machinists v. Org. of Petroleum Exporting
Countries, 649 F.2d 1354, 1358 (9th Cir. 1981) (IAM).
Because it arises from the separation of powers between the
judicial and executive branches, the doctrine is said to have
“constitutional underpinnings.” Sabbatino, 376 U.S. at 423(internal quotation marks omitted).
As a doctrinal matter, the “classic statement” of the act
of state doctrine is that “[e]very sovereign State is bound to
respect the independence of every other sovereign State, and
the courts of one country will not sit in judgment on the acts
of the government of another done within its own territory.”
Credit Suisse v. U.S. Dist. Court, 130 F.3d 1342, 1346 (9th
Cir. 1997) (quoting Underhill v. Hernandez, 168 U.S. 250,
252 (1897)). In its modern formulation, the doctrine bars
suit where “(1) there is an official act of a foreign sovereign
performed within its own territory; and (2) the relief sought
or the defense interposed [in the action would require] a
court in the United States to declare invalid the [foreign
sovereign’s] official act.” Id. (quoting W.S. Kirkpatrick &
Co., 493 U.S. at 405) (alterations in original; internal
quotation marks omitted). In evaluating the act of state
doctrine, we also consider the extent to which “the policies
underlying” the doctrine “justify its application.” W.S.
Kirkpatrick & Co., 493 U.S. at 409.
A. Official Act of a Foreign Sovereign
The district court correctly held that this action
challenges the official act of a foreign sovereign performed
within its own territory.
8 SEA BREEZE SALT V. MITSUBISHI CORP.
As an initial matter, ESSA’s actions, to the extent they
constitute official acts, are the acts of the Mexican
government. The Mexican government owns 51 percent of
ESSA and appoints a majority of its board of directors and
its Director General, a position equivalent to the Chief
Executive Officer of an American company. Given that a
government must always act through agents, it makes no
difference for act of state purposes whether that agent is an
individual, an agency, or a majority-owned and controlled
corporation, so long as the acts in question are official,
sovereign acts. See Samantar v. Yousuf, 560 U.S. 305, 322
(2010) (“We have recognized, in the context of the act of
state doctrine, that an official’s acts can be considered the
acts of the foreign state . . . .”) (citing Underhill, 168 U.S. at
252, 254); cf. 28 U.S.C. § 1603(a), (b) (providing that a
corporation majority-owned by a foreign government is a
“foreign state” for foreign sovereign immunity purposes).
Thus, we have applied the act of state doctrine to the oil-
production decisions of the Organization of the Petroleum
Exporting Countries (“OPEC”) member nations,
notwithstanding the fact that “[t]he OPEC nations produce
and export oil either through government-owned companies
or through government participation in private companies.”
IAM, 649 F.2d at 1355. We make explicit here what was
implicit in that holding: that an official act for purposes of
the act of state doctrine may be performed by an
instrumentality of a foreign sovereign, such as a
government-owned corporation. The critical question is not
the identity of the actor, but rather the nature of the act itself.
Plaintiffs do not appear to argue that ESSA’s corporate
status precludes application of the act of state doctrine;
instead, they contend that the specific conduct alleged here
did not constitute a sovereign, official act. However, a long
line of decisions by this and other courts of appeals holds
SEA BREEZE SALT V. MITSUBISHI CORP. 9
that a nation’s decisions about the exploitation of its own
natural resources are quintessentially sovereign in nature.
In IAM, an American trade union sued the OPEC nations
for alleged violations of United States antitrust laws, arguing
that the countries’ oil-production decisions amounted to an
illegal price-fixing conspiracy. 649 F.2d at 1356. Noting
“the principle of supreme state sovereignty over natural
resources,” we held that the act of state doctrine barred the
suit because “the controlling issue is the legality of a
sovereign act,” namely, the OPEC states’ decisions about the
proper disposition of their natural resources. Id. at 1361.
Drawing on our analysis in IAM, the Fifth Circuit held
that the act of state doctrine barred an antitrust suit against
the OPEC nations’ policies of “controlling the spigot” of oil
production. Spectrum Stores, Inc. v. Citgo Petroleum Corp.,
632 F.3d 938, 944 (5th Cir. 2011). The court recognized that
“[t]he Supreme Court has held, albeit in a different factual
context, that exploitation of natural resources is an
inherently sovereign function,” id. at 954 (citing United
States v. California, 332 U.S. 19, 38–39 (1947)), and
concluded that “the complaints seek a remedy that is barred
by the act of state doctrine, that is, an order and judgment
that would interfere with sovereign nations’ control over
their own natural resources,” id. at 943.
Similarly, we have held that a suit challenging the
validity of a nation’s grant of an off-shore oil concession was
barred by the act of state doctrine because “the underlying
dispute . . . concerns a sovereign decision authorizing
exploitation of important natural resources.” Clayco,
712 F.2d at 407–08. We have noted in the foreign sovereign
immunity context that a license to capture and export
Bangladeshi rhesus monkeys “concerned Bangladesh’s right
to regulate its natural resources, also a uniquely sovereign
10 SEA BREEZE SALT V. MITSUBISHI CORP.
function.” MOL, Inc. v. Peoples Republic of Bangl.,
736 F.2d 1326, 1329 (9th Cir. 1984). And the D.C. Circuit,
also drawing on our IAM decision, was left with “no doubt
that issuance of a license permitting the removal of uranium
from Kazakhstan is a sovereign act” for act of state purposes.
World Wide Minerals, Ltd. v. Republic of Kaz., 296 F.3d
1154, 1165 (D.C. Cir. 2002).
These cases dictate the conclusion that ESSA’s choice to
deal exclusively with Mitsubishi is a sovereign act. Under
Mexico’s Constitution, “the government of Mexico is the
only entity that may own and exploit the country’s natural
resources,” including by “creat[ing] organizations that
manage and distribute these resources.” Corporacion
Mexicana de Servicios Maritimos, S.A. de C.V. v. M/T
Respect, 89 F.3d 650, 653 (9th Cir. 1996). Sea salt is
explicitly included within the list of natural resources that
the Mexican Constitution commits to state ownership:
In the Nation is vested the direct ownership
. . . of all minerals or substances, which in
veins, ledges, masses or ore pockets, form
deposits of a nature distinct from the
components of the earth itself; such as . . .
rock-salt and the deposits of salt formed by
sea water . . . .
Constitución Política de los Estados Unidos Mexicanos, Art.
27 (emphasis added). Mexico’s salt is a sovereign natural
resource; our precedent, and that of other circuits, teaches
that its exploitation is therefore a sovereign act.
Plaintiffs attempt to evade this authority, arguing that
ESSA’s conduct is distinguishable from the granting of
natural resource concessions or the production decisions
involved in the OPEC cases. They contend that their suit
SEA BREEZE SALT V. MITSUBISHI CORP. 11
challenges nothing more than “everyday commercial
decisions” about salt that has already been extracted, and that
these commercial decisions are performed by a government-
owned entity only “by happenstance.”
But plaintiffs’ argument inaccurately characterizes the
conduct alleged in their own complaint. At the core of the
complaint is an allegation that Mexico—through ESSA—
has decided to distribute and export the nation’s sea salt
exclusively through Mitsubishi. That is not a decision about
individual lots of already-produced salt; rather, it is a policy
regarding the disposition of substantially all of the salt
Mexico exports on an ongoing basis. It is not an “everyday
commercial decision” or one that, “by happenstance,” could
have been made by a private company. We see no
meaningful distinction between granting a foreign company
an exclusive concession to extract salt—which plaintiffs
appear to concede would be a sovereign act—and extracting
that salt through a government-owned company under a
policy by which the entire output is sold exclusively to one
buyer.
The acts alleged in the complaint also occurred in
Mexico; that is, they were “official act[s] of a foreign
sovereign performed within its own territory.” Credit
Suisse, 130 F.3d at 1346 (quoting W.S. Kirkpatrick & Co.,
493 U.S. at 405). As alleged in the complaint, ESSA has its
principal place of business in Mexico, and extracts and
processes its salt in Mexico. There is nothing to suggest that
this state-owned Mexican corporation made its decisions
about the distribution of Mexico’s salt anywhere other than
within Mexico. See Spectrum Stores, 632 F.3d at 955 n.18
(“[A] country’s decisions about how much of its [resources]
to extract take place exclusively within that country.”).
Moreover, ESSA’s alleged breach of the Innofood contract
12 SEA BREEZE SALT V. MITSUBISHI CORP.
also occurred in Mexico, where the salt was to be delivered.
The first requirement for the application of the act of state
doctrine is therefore met.
B. Invalidation of an Official Act
The district court also correctly determined that the relief
sought by plaintiffs would require a United States court to
invalidate Mexico’s sovereign decisions about the
exploitation of its natural resources. See Credit Suisse,
130 F.3d at 1346.
Again, the OPEC cases are instructive. In IAM, we held
that the plaintiff’s suit, which asked the court to find the
OPEC nations’ sovereign oil-production decisions in
violation of the antitrust laws, would require the court to
invalidate those sovereign acts:
While the case is formulated as an anti-trust
action, the granting of any relief would in
effect amount to an order from a domestic
court instructing a foreign sovereign to alter
its chosen means of allocating and profiting
from its own valuable natural resources.
649 F.2d at 1361. Thus, “the only remedy sought [was]
barred by act of state considerations.” Id. The Fifth Circuit
followed suit in Spectrum Stores, recognizing that “the
granting of any relief . . . would effectively order foreign
governments to dismantle their chosen means of exploiting
the valuable natural resources within their sovereign
territories,” and therefore “declin[ing] to sit in judgment of
the acts of the foreign states.” 632 F.3d at 955–56; see also
World Wide Minerals, 296 F.3d at 1165 (“Because the relief
sought here would require us to question the ‘legality’ of
Kazakhstan’s denial of the export license by ruling that
SEA BREEZE SALT V. MITSUBISHI CORP. 13
denial a breach of contract, the act of state doctrine applies.”
(quoting W.S. Kirkpatrick & Co., 493 U.S. at 405)).
Just so here: Each of the five causes of action brought by
plaintiffs has at its core ESSA’s alleged decision to repudiate
all of its distribution contracts with other entities and return
to distributing salt exclusively through Mitsubishi. In order
for the claims to succeed, a court must pass judgment on the
lawfulness of that decision, thereby “instructing a foreign
sovereign to alter its chosen means of allocating and
profiting from its own valuable natural resources.” IAM,
649 F.2d at 1361. Although the complaint alleges five
alternative legal theories, that each seeks the same relief—
invalidation of ESSA’s exclusivity arrangement with
Mitsubishi—is readily illustrated:
• Count one alleges a Sherman Act violation on the
basis of ESSA and Mitsubishi’s “unlawful exclusive
contracts, combinations, or conspiracies to prevent
their competitors from entering the Mexican solar
sea salt market.” Relief under this count would
require a ruling on the legality of the exclusive
distribution scheme for ESSA’s salt.
• Count two alleges a Clayton Act violation. Although
it is brought solely against the Mitsubishi entities, it
alleges that “Mitsubishi has forced ESSA to cease
sales to non-Mitsubishi entities, and to sell only to
Mitsubishi International.” Again, what is challenged
is ESSA’s decision to distribute exclusively through
Mitsubishi.
• Count three is the California antitrust claim, the heart
of which is again that “the Defendants agree[d] that
ESSA should not sell salt to any other distributors.”
14 SEA BREEZE SALT V. MITSUBISHI CORP.
• Count four alleges intentional interference with
contract against all defendants. The underlying
theory is that ESSA and Mitsubishi interfered with
Innofood’s contract to sell ESSA-produced salt to
Sea Breeze by cutting off supply to Innofood. Again,
the claim is premised on the allegation that the
“[d]efendants conspired to have ESSA stop selling
product to non-Mitsubishi distributors, and actually
did stop selling salt to Innofood.”
• Count five alleges intentional interference with
prospective economic advantage, asserting that
ESSA and Mitsubishi interfered with plaintiffs’
future downstream sales of salt by moving to an
exclusive distribution arrangement. And once again,
the claim is founded on “[d]efendants’ exclusive
agreements” and “unlawful actions in restraint of
trade”—that is, ESSA’s decision to distribute
exclusively through Mitsubishi.
Because each count is premised on ESSA’s alleged decision
to repudiate all other contracts and distribute salt exclusively
through Mitsubishi, each count would require a court to pass
on the validity of Mexico’s sovereign decisions about how
to exploit and profit from its natural resources. 3 What’s
more, plaintiffs seek injunctive relief, which would amount
to a quite literal instruction to Mexico to alter the way it
3
This observation also disposes of plaintiffs’ argument that the
Mitsubishi entities, as private parties, cannot invoke the act of state
doctrine. As we have previously made clear, “a private litigant may raise
the act of state doctrine, even when no sovereign state is a party to the
action.” IAM, 649 F.2d at 1359 (emphasis added). That is, “[t]he act of
state doctrine is apposite whenever the federal courts must question the
legality of the sovereign acts of foreign states,” even if the entity
invoking the doctrine is not itself sovereign. Id.SEA BREEZE SALT V. MITSUBISHI CORP. 15
profits from its salt. See Liu, 892 F.2d at 1432 (“[A]ny
injunctive relief ‘instructing a foreign sovereign to alter its
chosen means of allocating and profiting from its own
valuable natural resources’ would affront the sovereignty of
a state.” (quoting IAM, 649 F.2d at 1361)).
C. The Sabbatino Factors
The Supreme Court has indicated that even when the two
mandatory elements are satisfied, courts may appropriately
look to additional factors to determine whether application
of the act of state doctrine is justified. W.S. Kirkpatrick &
Co., 493 U.S. at 409 (“[I]n Sabbatino, . . . we observed that
sometimes, even though the validity of the act of a foreign
sovereign within its own territory is called into question, the
policies underlying the act of state doctrine may not justify
its application.”). Here, the additional factors identified by
the Court weigh in favor of applying the doctrine.
Sabbatino sets out three factors that courts should
consider when evaluating whether the act of state doctrine
bars an action against a foreign sovereign. First, “the greater
the degree of codification or consensus concerning a
particular area of international law, the more appropriate it
is for the judiciary to render decisions regarding it.”
Sabbatino, 376 U.S. at 428. Second, “the less important the
implications of an issue are for our foreign relations, the
weaker the justification for exclusivity in the political
branches.” Id. And finally, “[t]he balance of relevant
considerations may also be shifted if the government which
perpetuated the challenged act of state is no longer in
existence.” Id.With respect to the first factor, we noted in IAM that
“[w]hile conspiracies in restraint of trade are clearly illegal
under domestic law, the record reveals no international
16 SEA BREEZE SALT V. MITSUBISHI CORP.
consensus condemning cartels, royalties, and production
agreements.” 649 F.2d at 1361. Like IAM, this case is based
on the allegedly anticompetitive acts of a sovereign in the
exploitation of its own natural resources; if there is no
international consensus condemning such actions, this factor
weighs in favor of applying the act of state doctrine. Just as
in IAM, the record here reveals no international norms
against exclusive arrangements in the extraction and export
of a country’s resources.
Second, this case also has potentially important
implications for our foreign relations. See Sabbatino,
376 U.S. at 428. As we explained in IAM, “the very nature”
of an action that, if successful, will result in a United States
court telling a foreign sovereign what to do with its own
natural resources raises the “possibility of insult to the
[foreign] state[] and of interference with the efforts of the
political branches to seek favorable relations with” that state.
649 F.2d at 1361. Such an order would be inherently
offensive to the principle of co-equality among international
sovereigns, see, e.g., Sarei v. Rio Tinto, PLC, 550 F.3d 822,
829 (9th Cir. 2008) (en banc), and would therefore be likely
to impinge the executive’s ability to conduct foreign
relations in a coordinated manner.
Moreover, the scale and importance of the resources at
issue here are by no means minor. The complaint alleges
that ESSA produces nine million tons of sea salt each year—
90 percent of Mexico’s salt exports and a full 17 percent of
the total global salt output. And because the gravamen of
the complaint is that it is unlawful for ESSA to distribute its
salt solely through Mitsubishi, the action—and the
injunction that a successful suit would bring—implicates all
of that production, not just the sales contemplated by the
Innofood contract.
SEA BREEZE SALT V. MITSUBISHI CORP. 17
Finally, to the extent that the complaint alleges
improprieties in Mitsubishi’s relationship with ESSA,
judicial restraint is even more warranted. If it is true that a
Japanese corporation has essentially co-opted an
instrumentality of the Mexican government through a
“combination of legitimate and illegitimate power,” a
judicial declaration to that effect from a United States court
could be fairly regarded as a demeaning affront to Mexico’s
sovereign control over its own institutions. American
intervention in such a delicate matter, if undertaken at all,
should proceed through coordinated executive branch
action, rather than “piecemeal adjudication” in the courts.
IAM, 649 F.2d at 1358. The possibility of interference with
foreign relations therefore militates against allowing this suit
to proceed.
As to the third Sabbatino factor, it is undisputed that the
government of Mexico continues to exist. Thus, the
mandatory elements are satisfied and the prudential concerns
counsel in favor of applying the act of state doctrine.
D. The Purported Commercial Exception
In a variation on their argument about the sovereign
nature of ESSA’s acts, plaintiffs call upon this court to
recognize a commercial exception to the act of state doctrine.
Such an exception was endorsed by four Justices of the
Supreme Court in a 1976 case, but was not adopted as law.
See Alfred Dunhill of London, Inc. v. Republic of Cuba,
425 U.S. 682, 695–706 (1976) (opinion of White, J.). The
Dunhill plurality’s exception would “[d]istinguish[] between
the public and governmental acts of sovereign states on the
one hand and their private and commercial acts on the
other.” Id. at 695. Thus, “purely commercial acts” would
be excluded from act of state protection; the doctrine would
pose no bar to suit when “foreign governments do not
18 SEA BREEZE SALT V. MITSUBISHI CORP.
exercise powers peculiar to sovereigns,” but instead
“exercise only those powers that can also be exercised by
private citizens.” Id. at 704–05.
We appeared to reject a commercial exception several
years after Dunhill, when we stated that “[t]he act of state
doctrine is not diluted by the commercial activity exception
which limits the doctrine of sovereign immunity.” IAM,
649 F.2d at 1360; see also id. (“Because the act of state
doctrine and the doctrine of sovereign immunity address
different concerns and apply in different circumstances, we
find that the act of state doctrine remains available when
such caution [about affronting foreign sovereigns] is
appropriate, regardless of any commercial component of the
activity involved.”). More recently, however, we have
stressed that the existence of a commercial exception is an
undecided question. Von Saher v. Norton Simon Museum of
Art at Pasadena, 754 F.3d 712, 727 (9th Cir. 2014) (“We
have not yet decided whether to adopt a commercial
exception in our Circuit.”); see also Clayco, 712 F.2d at 408(same).
The Fifth and Eleventh Circuits have held that no
commercial exception to the act of state doctrine exists,
while the D.C. Circuit has arguably adopted the exception.
Compare Spectrum Stores, 632 F.3d at 955 n.16 (“[W]e
agree with the Ninth Circuit that . . . ‘[t]he act of state
doctrine is not diluted by the commercial activity exception
which limits the doctrine of sovereign immunity.’” (quoting
IAM, 649 F.2d at 1360)), and Honduras Aircraft Registry,
Ltd. v. Honduras, 129 F.3d 543, 550 (11th Cir. 1997)
(“[T]here is no commercial exception to the act of state
doctrine as there is under the FSIA.”), with de Csepel v.
Republic of Hung., 714 F.3d 591, 604 (D.C. Cir. 2013)
(“[C]laims [that] challenge not sovereign acts, but rather
SEA BREEZE SALT V. MITSUBISHI CORP. 19
commercial acts [are] entitled to no deference under the act
of state doctrine.”). The Second, Third, and Sixth Circuits
have noted the views expressed by the Dunhill plurality, but
have found no need to pass upon the existence of a
commercial exception. See Fed. Treasury Enter.
Sojuzplodoimport v. Spirits Int’l B.V., 809 F.3d 737, 744 (2d
Cir. 2016); Envtl. Tectonics v. W.S. Kirkpatrick, Inc.,
847 F.2d 1052, 1059 & n.8 (3d Cir. 1988); Kalamazoo Spice
Extraction Co. v. Provisional Military Gov’t of Socialist
Eth., 729 F.2d 422, 425 n.3 (6th Cir. 1984).
We likewise need not decide whether the act of state
doctrine includes a commercial exception, because any such
exception would be inapplicable here. As laid out by the
Dunhill plurality, a commercial exception would apply when
“foreign governments do not exercise powers peculiar to
sovereigns.” Dunhill, 425 U.S. at 704. But as explained
above, the acts alleged here—decisions about the
exploitation and distribution en masse of Mexico’s
sovereign natural resources—are exactly the kind of powers
that are “peculiar to sovereigns.” 4 No private citizen could
make the policy decision that substantially all of Mexico’s
salt production should be distributed through a particular
4
Indeed, it appears possible that any commercial exception is in fact
subsumed within the prima facie requirement that the challenged conduct
constitute an “official act of a foreign sovereign.” Credit Suisse,
130 F.3d at 1346 (quoting W.S. Kirkpatrick & Co., 493 U.S. at 405). As
we put it in IAM, “[w]hile purely commercial activity may not rise to the
level of an act of state, certain seemingly commercial activity will trigger
act of state considerations.” 649 F.2d at 1360 (emphases added); see
also Honduras Aircraft Registry, 129 F.3d at 550 (“The factors to be
considered, as recited in Kirkpatrick, may sometimes overlap with the
FSIA commercial exception, but a commercial exception alone is not
enough.”).
20 SEA BREEZE SALT V. MITSUBISHI CORP.
channel. As in Clayco, “[b]ecause the rule espoused by the
Dunhill plurality would not apply in any event, we need not
reach the question whether to adopt an exception to the act
of state doctrine for purely commercial activity.” 712 F.2d
at 408. 5
IV.
As a final matter, Mitsubishi argues that Sea Breeze’s
appeal should be dismissed because its corporate status had
been suspended by the California Franchise Tax Board for
failure to pay taxes. However, we have taken judicial notice
of the fact that Sea Breeze’s status has since been
normalized. Dismissal is not required when a delinquent
corporation pays its back taxes and the state restores its
corporate powers while its appeal is pending.
Intercontinental Travel Mktg., Inc. v. FDIC, 45 F.3d 1278,
1282 n.4 (9th Cir. 1994). Thus, the temporary suspension of
Sea Breeze’s status does not require dismissal of its appeal.
V.
In closing, we emphasize the narrow nature of our
holding. This decision is not a license for courts to dismiss
cases on act of state grounds whenever a foreign state-owned
enterprise is involved. Nor even is it an invitation to apply
the doctrine in every case challenging the actions of a
government-owned company that operates in an industry
related to natural resources. We hold merely that on the facts
5
Plaintiffs also make passing reference to the act of state doctrine’s
so-called extraterritorial exception. But that exception is implicated
when a foreign sovereign attempts to confiscate property that is located
within the United States at the time of the confiscation. See Tchacosh
Co., Ltd. v. Rockwell Int’l Corp., 766 F.2d 1333, 1336–37 (9th Cir.
1985). Nothing comparable is alleged here.
SEA BREEZE SALT V. MITSUBISHI CORP. 21
of this case—which amount to a challenge to the Mexican
government’s policy decision about how to dispose of
essentially its entire salt output—application of the act of
state doctrine is appropriate to preclude our courts’
consideration of the action.
AFFIRMED.