899 F.3d 1064
9th Cir.2018Background
- Plaintiffs Innofood (Mexican) and Sea Breeze (California) sued Mitsubishi entities and ESSA (a salt producer 51% owned and controlled by the Mexican government) alleging an antitrust conspiracy and tortious interference after ESSA ceased honoring distribution contracts and sold Mexican sea salt exclusively through Mitsubishi.
- ESSA allegedly produces ~90% of Mexico’s salt exports (about 17% of global output); plaintiffs claim ESSA repudiated outside distribution agreements entered under a reformist director, harming downstream U.S. commerce.
- Causes of action: Sherman Act §1, Clayton Act §14, California Cartwright Act, intentional interference with contract, and interference with prospective economic advantage.
- Mitsubishi moved to dismiss invoking the act of state doctrine (and other defenses); district court dismissed under the act of state doctrine and later dismissed claims as to ESSA for lack of service and on the same grounds; plaintiffs appealed.
- The Ninth Circuit considered whether ESSA’s conduct constituted an official sovereign act performed within Mexico and whether judicial relief would require invalidating Mexico’s sovereign decisions about exploitation/distribution of its natural resources.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ESSA’s conduct is an "official act of a foreign sovereign" for act of state purposes | ESSA’s conduct was ordinary commercial decisions about already-extracted salt, not sovereign policy | ESSA is majority-government owned and its distribution policy reflects Mexican sovereign control over natural resources | Held: ESSA’s exclusivity decision is a sovereign act—resource exploitation decisions are quintessentially sovereign |
| Whether granting relief would require invalidating a foreign sovereign act | Plaintiffs seek only antitrust/tort relief against private actors, not to invalidate Mexico’s policies | Relief would effectively force Mexico to change how it allocates and profits from national salt resources | Held: Granting relief would require U.S. courts to invalidate Mexico’s sovereign distribution policy, so act of state bars suit |
| Applicability of Sabbatino prudential factors | Plaintiffs downplay foreign-relations impact and international consensus | Defendants emphasize lack of international consensus condemning such sovereign resource policies and the high foreign-relations stakes | Held: Sabbatino factors favor applying act of state (no international consensus; strong foreign-relations implications; Mexican government continues to exist) |
| Whether a commercial exception to the act of state doctrine applies | Plaintiffs urge a commercial exception for "purely commercial acts" | Defendants and court: even if a commercial exception exists, it does not cover sovereign resource-allocation decisions; the challenged acts are sovereign in nature | Held: Court need not decide adoption of commercial exception; even under Dunhill test, this case falls outside any commercial exception |
Key Cases Cited
- Liu v. Republic of China, 892 F.2d 1419 (9th Cir. 1989) (act of state doctrine review standard)
- W.S. Kirkpatrick & Co. v. Envtl. Tectonics Corp., Int’l, 493 U.S. 400 (1990) (modern formulation of act of state doctrine)
- Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964) (prudential factors for applying act of state)
- Int’l Ass’n of Machinists v. Org. of Petroleum Exporting Countries, 649 F.2d 1354 (9th Cir. 1981) (resource-exploitation decisions are sovereign acts barred from antitrust adjudication)
- Spectrum Stores, Inc. v. Citgo Petroleum Corp., 632 F.3d 938 (5th Cir. 2011) (OPEC-related antitrust claims barred by act of state)
- Credit Suisse v. U.S. Dist. Court, 130 F.3d 1342 (9th Cir. 1997) (elements of act of state: official act within territory and relief would invalidate that act)
- Samantar v. Yousuf, 560 U.S. 305 (2010) (official’s acts can be treated as acts of the foreign state)
- Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682 (1976) (plurality discussing a possible commercial exception to act of state)