International Association of Machinists and Aerospace Workers V.Organization of Petroleum Exporting Countries

Journal article by Monroe Leigh; American Journal of International Law, Vol. 76, 1982

Journal Article Excerpt

INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS v.ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES

MONROE LEIGH

Act of state doctrine -- Foreign Sovereign Immunities Act -- judicial restraint in
foreign policy arena
649 F.2d 1354.
U.S. Court of Appeals, 9th Cir., July 6, 1981.

The International Association of Machinists and Aerospace Workers (IAM),
an American labor union, brought an antitrust action in the U.S. District Court
for the Central District of California against the Organization of Petroleum
Exporting Countries (OPEC) and its 13 member nations. ¹ The suit was pre-
cipitated by dramatic increases in oil prices during the 1970's, which IAM
attributed to price fixing by OPEC in violation of section 1 of the Sherman
Act (15 U.S.C. §1). IAM sought treble damages and injunctive relief under
the Clayton Act (15 U.S.C. §§15, 16). The district court dismissed defendant
OPEC on the ground that it had been improperly served, and determined that
monetary damages were foreclosed as to all defendants by application of the
indirect purchaser rule of Illinois Brick Co. v. Illinois (431 U.S. 720 ( 1977 )).
As for the remaining claim for injunctive relief, the court held that it lacked
jurisdiction under the Foreign Sovereign Immunities Act of 1976 (28 U.S.C.
§§ 1330 and 1602-1611) (FSIA). ² IAM appealed the dismissal of the claim for
injunctive relief.

The U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal, but
on alternative grounds. The appeals court reasoned that the doctrine of sovereign
immunity was technically inapposite to the summary dismissal of the plaintiff's
claims. However, it held that many of the political considerations on which the
district court had focused in fashioning its sovereign immunity decision justified
judicial avoidance of the controversy through application of the act of state
doctrine.

Central to the district court's decision had been its finding that OPEC's
alleged price fixing was a sovereign rather than a commercial act. In reaching
this conclusion the district court had reasoned that OPEC's purpose in setting
uniform oil prices was to guarantee control of the member nations' natural
resources, which control, the court concluded, was an essentially sovereign
function.

On appeal, IAM argued that the district court's application of a "purpose"
test rather than an "activity" standard ignored clear congressional mandate.

____________________

¹	The defendants did not appear in the district court proceedings. Their position was argued to the court by amici and additional information was supplied by court-appointed experts.
²	477 F.Supp. 553 (C.D. Cal. 1979). The district court also held that had there been jurisdiction, two alternative grounds for dismissal were present: first, that the OPEC nations were not "persons" within the meaning of the Sherman Act; second, that there was no proximate cause linking the oil price increases and OPEC activities.

-160-

The court of appeals agreed with IAM's argument, noting that IAM's position
was supported both by the FSIA's legislative history and by the language of
the statute itself. Thus, the court observed, Congress, in enacting the FSIA,
had declared that the courts should determine whether an activity was sovereign
or commercial by applying an objective nature-of-the-act test, that is, by focusing
on "the course of conduct or particular transaction or act, rather than by
refer[ring] to its purpose" (28 U.S.C. § 1603(d)).

However, the appeals court agreed with the thrust of the district court's
opinion: that an American trial court was an inappropriate forum to attempt
to decide an international political dispute with such serious ramifications.
Accordingly, although the appeals court concluded that the district court tech
nically had the power to adjudicate OPEC's potential liability under American
antitrust law, it determined that the district court could properly and pruden
tially refrain from hearing the case by invoking the act of state doctrine.

As the court explained, the act of state doctrine "declares that a United States
court will not adjudicate a politically sensitive dispute which would require the
court to judge the legality of the sovereign act of a foreign state." Judicial
deference, under this doctrine, is grounded both in the

institutional limitations of the courts and the peculiar requirements of
successful foreign relations. . . . When the courts engage in piecemeal
adjudication of the legality of the sovereign acts of states, they risk dis
ruption of our country's international diplomacy. The executive may utilize
protocol, economic sanction, compromise, delay, and persuasion to achieve
international objectives. Ill-timed judicial decisions challenging the acts of
foreign states could nullify these tools and embarrass the United States in
the eyes of the world.^...

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International Association of Machinists and Aerospace Workers V.Organization of Petroleum Exporting Countries

Journal article by Monroe Leigh; American Journal of International Law, Vol. 76, 1982

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