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Merlini v. Canada

United States Court of Appeals, First Circuit

June 10, 2019

CYNTHIA L. MERLINI, Plaintiff, Appellant,
v.
CANADA, Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Nathaniel M. Gorton, U.S. District Judge]

          Theodore J. Folkman, with whom Murphy & King, P.C. was on brief, for appellant.

          John F. Cooney, with whom Benjamin E. Horowitz, Venable LLP, D.E. Wilson, Jr., Andrew E. Bigart, and Liz C. Rinehart were on brief, for appellee.

          Before Lynch, Kayatta, and Barron, Circuit Judges.

          BARRON, CIRCUIT JUDGE.

         Cynthia Merlini ("Merlini") is a United States citizen who was injured in the course of her employment as an administrative assistant at the Canadian consulate in Boston, Massachusetts. The injury occurred in 2009 when she tripped over a cord in the consulate that had not been secured to the floor. In 2017, as a result of that injury, Merlini sued Canada for damages in the United States District Court for the District of Massachusetts pursuant to the Massachusetts Workers' Compensation Act (the "MWCA"), which is codified at Massachusetts General Laws chapter 152.

         The District Court dismissed Merlini's complaint for lack of jurisdiction after concluding that Canada was immune from the suit under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602 et. seq. We now reverse.

         I.

         In 2003, the government of Canada hired Merlini -- who is a resident of Massachusetts, a citizen of the United States, and not a citizen of Canada -- to be an administrative assistant to the Consul General of Canada in Boston. Merlini asserts, and Canada does not contest, that her "duties" in this position "were purely clerical, and comparable to the duties of an assistant or secretary to an executive in any private firm," as "[s]he answered the phones, maintained files, typed letters, and did other secretarial work" in the Canadian consulate in Boston. She further asserts, again without dispute, that "[s]he was not a consular officer," "[s]he had no governmental, consular, diplomatic, or official duties," "[s]he took no competitive examination before hiring," and "she was not entitled to tenure protections, or to the employment benefits Canadian foreign service officers received."

         Merlini alleges that, while setting up coffee and tea service on January 22, 2009 for a meeting at the consulate, she tripped over an unsecured speakerphone cord, fell, struck a credenza, and thereby sustained "a serious injury" that left her unable to work. Canada does not challenge that allegation for the purpose of the present appeal. Additionally, it is undisputed that, per Canada's own national workers' compensation system, Canada paid Merlini what amounted to her full salary from shortly after the accident until October 2009.

         Sometime thereafter, however, Canada determined that Merlini was able to return to work and ceased paying her pursuant to its national workers' compensation system. That determination appears to have set matters on the course that has resulted in the suit that is now before us on appeal.

         The initial step on that course was Merlini's request that Canada reconsider its determination to stop paying her under Canada's workers' compensation system. Following Canada's denial of that request for reconsideration, Merlini shifted course and sought relief under Massachusetts law.

         Merlini did so first, in 2011, by bringing an administrative claim against the Massachusetts Workers' Compensation Trust Fund ("WCTF"). That fund provides, among other things, for the payment of benefits to employees who are unable to work in consequence of workplace injuries that they have suffered while working for an employer who is subject to personal jurisdiction within the Commonwealth and who is "uninsured" for purposes of the MWCA. See Mass. Gen. Laws ch. 152 § 65(2)(e). Chapter 152 provides that, to qualify as "insured," an employer must (1) have insurance with an insurer, (2) hold membership in a workers' compensation self-insurance group certified by the state, or (3) be licensed as self-insured annually by the state, which requires the employer, among other things, to complete a detailed application, provide certain financial information, post a surety bond to or deposit negotiable securities with the state to cover any losses that may occur, and purchase catastrophe reinsurance of at least $500, 000. See id. at §§ 1(6), 25A; 452 Mass. Code Regs. 5.00; see also LaClair v. Silberline Mfg. Co., 393 N.E.2d 867, 871 (Mass. 1979).

         In 2013, the Massachusetts Department of Industrial Accidents ("DIA") held an evidentiary hearing, in which Canada participated as amicus curiae for the WCTF, on Merlini's claim against the fund. An administrative judge found that Merlini was entitled to ongoing incapacity benefits from the fund under chapter 152 § 34 (temporary total incapacity benefits) and chapter 152 § 34A (permanent total incapacity benefits).

         The WCTF then appealed this ruling to the DIA's Reviewing Board ("DIA Board"). In 2015, the DIA Board reversed the administrative judge's ruling and denied Merlini the benefits from the fund. The DIA Board determined that (1) Canada was not "subject to the personal jurisdiction of the Commonwealth"; (2) Canada was not "uninsured" for purposes of the statute because it had sovereign immunity; and (3) the WCTF was not liable if an employee was entitled to workers' compensation benefits in any other jurisdiction, Mass. Gen. Laws ch. 152 § 65(2)(e)(i), and Merlini was in fact entitled under Canadian law to such benefits under Canada's national workers' compensation system.

         In 2016, Merlini sought review of the DIA Board's ruling from the Massachusetts Appeals Court ("MAC"). The MAC upheld the Board's ruling. The MAC did so, however, only on the ground that, in consequence of the injury that Merlini suffered at the consulate, she had been entitled to benefits in another jurisdiction -- namely, Canada. Thus, the MAC did not "address whether the Canadian government is subject to the jurisdiction of the Commonwealth or whether the Consulate was an 'uninsured employer' in violation of chapter 152."

         Merlini did not appeal the MAC's ruling. Instead, in 2017, Merlini sued Canada for damages in federal district court in the District of Massachusetts pursuant to chapter 152. It is that suit that is the subject of this appeal.

         Canada moved to dismiss Merlini's suit on jurisdictional grounds under Federal Rule of Civil Procedure 12(b)(1). Canada contended in its motion that it was entitled to foreign sovereign immunity under the FSIA and thus that the District Court lacked jurisdiction. Canada also separately moved to dismiss Merlini's suit under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Canada did so on the ground that the DIA Board's ruling that Canada was not "uninsured" was preclusive of Merlini's claim because the DIA Board had ruled on that basis that Canada "was not required to obtain local workers' compensation insurance or register with the state as a self-insurer and therefore could not be considered an uninsured employer" under the MWCA.

         In opposing Canada's motion to dismiss, Merlini first asserted that two exceptions to the FSIA's presumption of foreign sovereign immunity applied: the "commercial activity" exception, 28 U.S.C. § 1605(a)(2), [1] and the "noncommercial tort" exception, id. at § 1605(a)(5).[2] Merlini thus contended that the District Court had jurisdiction over Canada. Merlini also argued that she had stated a claim against Canada because the DIA Board ruling did not preclude her claim.

         In December 2017, the District Court dismissed Merlini's complaint for lack of jurisdiction on the grounds that, pursuant to the FSIA, Canada is "'presumptively immune' from liability in federal courts of the United States" and that Merlini had failed to demonstrate that either of the two FSIA exceptions on which she relied in contesting Canada's sovereign immunity applied. Merlini v. Canada, 280 F.Supp.3d 254, 256, 258 (D. Mass. 2017) (quoting Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993)). The District Court "decline[d] to address" Canada's separate contention that Merlini had failed to state a claim for which relief could be granted. Id. at 259. Merlini now appeals the District Court's dismissal of her claim for lack of jurisdiction and also contends that the dismissal of her claim may not be affirmed on issue preclusion grounds.

         II.

         We start by describing certain aspects of the Massachusetts workers' compensation scheme, as codified by chapter 152 of the MWCA. Those provisions figure prominently in the parties' dispute over whether Canada is entitled to foreign sovereign immunity in this case.

         As a general matter, the MWCA bars an employee from suing her employer for a work-related injury -- including one resulting from a fellow employee's conduct -- when the employer is "insured" within the meaning of the MWCA. See Mass. Gen. Laws ch. 152 § 24. The MWCA imposes this bar by providing that an employee waives the "right of an action at common law . . . [with] respect to an injury that is compensable under [the MWCA]" if the employer was insured within the meaning of the MWCA at the time of the employee's hiring or became insured prior to the employee's injury, unless the employee preserves such a right by providing proper notice of the employee's intent to preserve it. Id.

         Chapter 152, however, sets forth a corollary to this bar. It provides that, if an employer is not insured within the meaning of the MWCA, then an employee, generally, may bring a suit against the employer to recover for a workplace injury -- even if the conduct is caused by a fellow employee. See Hanover Ins. Co. v. Ramsey, 539 N.E.2d 537, 538 n.3 (Mass. 1989) ("An employer who has failed to obtain workers' compensation insurance can be held liable essentially in all cases in which the employee can prove that he was injured in the course of his work.").

         Moreover, chapter 152 makes clear that, in such a suit by the employee, the employer is deprived of asserting a host of important defenses that would ordinarily be available at common law, which effectively renders the employee's claim against the employer a "strict liability" claim. See Doe v. Access Indus., Inc., 137 F.Supp.3d 14, 16 (D. Mass. 2015); Coppola v. City of Beverly, 576 N.E.2d 686, 687 (Mass. App. Ct. 1991). Section 66 of chapter 152 specifies the limitations on the defenses that are available as follows:

Actions brought against employers to recover damages for personal injuries or consequential damages sustained within or without the commonwealth by an employee in the course of his employment . . . shall be commenced within twenty years from the date the employee first became aware of the causal relationship between the disability and his employment. In such actions brought by said employees . . . it shall not be a defense: 1. That the employee was negligent; 2. That the injury was caused by the negligence of a fellow employee; 3. That the employee had assumed voluntarily or contractually the risk of the injury; 4. That the employee's injury did not result from negligence or other fault of the employer, if such injury arose out of and in the course of employment.

         Merlini contends that, because Canada is not insured (even as a self-insurer) within the meaning of chapter 152, she is entitled under chapter 152 to bring her suit against Canada for the workplace injury that she suffered. And, she further contends, for that same reason, Canada is subject in her suit to the limitations on the defenses that are set forth in § 66. Canada argues in response that, precisely because Merlini relies on § 66, it is entitled to immunity under the FSIA, even assuming that Canada does not qualify as being "insured" within the meaning of chapter 152. Thus, Canada contends, Merlini's claim must be dismissed for lack of jurisdiction.

         We must now decide whether Canada is right. To do so, we must address Merlini's contention that Canada lacks foreign sovereign immunity in consequence of either of two exceptions to such immunity that the FSIA recognizes.

         III.

         The FSIA "provides the sole basis for obtaining jurisdiction over a foreign state in federal court." Universal Trading & Inv. Co. v. Bureau for Representing Ukrainian Interest in Int'l & Foreign Courts, 727 F.3d 10, 16 (1st Cir. 2013) (quoting Argentine Republic v. Amerada Hess Shipping Co., 488 U.S. 428, 439 (1989)). The FSIA establishes "a presumption of foreign sovereign immunity from the jurisdiction of the courts of the United States" that typically controls the jurisdictional question. Id. (citing 28 U.S.C. § 1330; Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 485 n.5 (1983)). Thus, as a general matter, "courts in the Unites States lack both subject matter and personal jurisdiction over a suit against a foreign sovereign." Id.

         The FSIA does, however, set forth a list of express exceptions to the foreign sovereign immunity that it generally recognizes, such that foreign states are not immune from suit in federal court if one of those "enumerated exceptions to immunity applies." Id. (citing 28 U.S.C. §§ 1604, 1605, 1605A; Verlinden, 461 U.S. at 488). Merlini invokes two of those exceptions -- the "commercial activity" exception and the "noncommercial tort" exception -- in contending that Canada is not entitled to sovereign immunity from her suit.

         We focus here on one of them, the "commercial activity" exception, 28 U.S.C. § 1605(a)(2), as we conclude that, contrary to the District Court's ruling, this exception does apply. This conclusion, moreover, precludes the "noncommercial tort" exception from applying. See 28 U.S.C. § 1605(a)(5) (providing that "[a] foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case not otherwise encompassed in paragraph (2) [the "commercial activity" exception]"). Our review of the District Court's ruling on this score is de novo. Universal Trading, 727 F.3d at 15.

         A.

         The "commercial activity" exception provides in relevant part that "a foreign state is subject to jurisdiction in any case 'in which the action is based upon a commercial activity carried on in the United States by the foreign state.'" Fagot Rodriguez v. Republic of Costa Rica, 297 F.3d 1, 5 (1st Cir. 2002) (emphasis added) (quoting 28 U.S.C. § 1605(a)(2)). The inquiry into whether the exception applies -- at least in a case like this, in which the parties agree that the foreign state "carried on" the relevant action "in the United States" -- involves two steps.

         The first step "requires a court to 'identify[] the particular conduct on which the [plaintiff's] action is based.'" OBB Personenverkehr AG v. Sachs, 136 S.Ct. 390, 395 (2015) (alteration in original) (quoting Saudi Arabia v. Nelson, 507 U.S. 349, 356 (1993)). In performing that threshold inquiry, "a court should identify that 'particular conduct' by looking to the 'basis' or 'foundation' for a claim," which the court has variously described as "'those elements . . . that, if proven, would entitle a plaintiff to relief'" and as "the gravamen of the complaint." Id. (omission in original) (internal citations omitted) (quoting Nelson, 507 U.S. at 357).

         This inquiry requires more than a myopic focus on whether "one element" of the claim is based upon a "commercial activity" of the foreign state. See id. at 394-96. The right approach looks beyond the fact that a single element of the claim might be "based on" such conduct and instead "zeroe[s] in on the core of" the plaintiff's claim. Id. at 396.

         After a court identifies the particular conduct by the foreign state on which the plaintiff's claim is "based," the next step in the inquiry requires a court to determine whether that conduct qualifies as "commercial activity." Fagot Rodriguez, 297 F.3d at 5. If the conduct does so qualify, then the "commercial activity" exception to foreign state sovereign immunity applies, at least when, as in this case, the parties do not dispute that the conduct was "carried on" by the foreign state "in the United States."

         "The term 'commercial activity' encompasses both 'a regular course of commercial conduct' and 'a particular commercial transaction or act.'" Id. (quoting 28 U.S.C. § 1603(d)). As we have explained, however, "the question is not whether the foreign government [was] acting with a profit motive or instead with the aim of fulfilling uniquely sovereign objectives," but "[r]ather, the issue is whether the particular actions that the foreign state perform[ed] (whatever the motive behind them) [were] the type of actions by which a private party engages in 'trade and traffic or commerce.'" Id. at 6 (alterations in original) (quoting Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 614 (1992)). Thus, "[i]n assessing whether a certain transaction or course of conduct is commercial in character, courts must look to the 'nature' of the activity rather than its 'purpose.'" Id. at 5-6; see also 28 U.S.C. § 1603(d) ("The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose.").

         Against this legal background, the key questions concerning the "commercial activity" exception that we must address in this appeal are the following: what conduct is Merlini's claim against Canada "based on," and is that conduct "commercial activity"? We turn, then, to those two questions, starting with the first.

         B.

         In taking up the first question, we begin by observing that Canada does not dispute that it employed Merlini at its consulate in Boston, that she is an American citizen and not a Canadian citizen, that her employment involved only duties that "were purely clerical," and that her employment lacked indicia of diplomatic or civil service.[3] Nor does Canada contest, for purposes of this appeal, that Merlini was injured while performing her ordinary clerical duties as Canada's employee in the consulate in Boston.

         Thus, if Merlini's complaint is "based on" Canada's employment of her as a clerical worker doing routine clerical work at the consulate in Boston, then the "commercial activity" exception would appear to apply. See H. Rep. No. 94-1487, at 16 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6615 (describing "[a]ctivities such as a government's . . . employment or engagement of laborers, clerical staff or public relations or marketing agents . . . [as] those included within the definition [of commercial activity]" (emphasis added)). In fact, Canada does not appear to argue otherwise.

         The State Department, in its amicus brief, however, contends that Merlini's complaint is solely "based on" the negligent conduct by her fellow employee that caused the injury that she suffered during the course of her employment -- namely, what she alleges in her complaint to have been the negligent laying of the cord by that employee. The Department then contends that this conduct does not qualify as "commercial activity" and thus that the "commercial activity" exception does not apply. Rather, the Department contends, the "noncommercial tort" exception is the only exception that might apply in Merlini's case, insofar as her action under § 66 can be characterized -- notwithstanding the fact that it strips the employer of asserting an absence of negligence as a defense -- as one that seeks recovery "against a foreign state for personal injury . . . caused by [a] tortious act or omission." 28 U.S.C. § 1605(a)(5) (emphasis added). The Department thus argues that we should vacate and remand to permit Merlini to develop her claim of negligence under the "noncommercial tort" exception.

         To establish the premise on which this contention rests -- namely, that the suit is based solely on the conduct of Merlini's fellow employee with respect to the speakerphone cord -- the Department invokes the Supreme Court's opinion in Saudi Arabia v. Nelson. There, the plaintiff argued that his claims of torture and false imprisonment at the hands of the Saudi Arabian government were "commercial" in nature because it was his employment with the Saudi Arabian government that "led to" those injuries. Nelson, 507 U.S. at 358. The Supreme Court, however, disagreed. In so deciding, the Court held that it was wrong to characterize the plaintiff's claims as being "based on" "commercial activity" simply because "commercial activity" "preceded" the conduct from which those claims arose. Id. Instead, the Court stressed that while the plaintiff's employment may have "led to" his injuries at the hands of the Saudi Arabian government in a temporal sense, the actions that effectuated those injuries were in no way tied to that employment and were, therefore, not "commercial" in nature. Id. The Department argues that the same conclusion is required here.

         We disagree. The MWCA requires that Merlini prove only that she was injured in the workplace in the course of her employment with Canada. Consequently, Merlini is not required to prove -- as the plaintiff in Nelson was required to prove as to his claims for battery, unlawful detainment, wrongful arrest and imprisonment, false imprisonment, inhuman torture, disruption of normal family life, and infliction of mental anguish -- any action by any person that caused the underlying injury. She has to prove, instead, that she suffered a workplace injury in the course of her employment and that the defendant, Canada, was her employer. Given that courts have held that an employer's maintenance of a hostile or discriminatory work environment constitutes "commercial activity" for the purposes of a Title VII suit against an employer, 42 U.S.C. § 2000e-2(a), -- see, e.g., Holden v. Canadian Consulate, 92 F.3d 918, 922 (9th Cir. 1996); Ashraf-Hassan v. Embassy of France in United States, 40 F.Supp.3d 94, 102-03 (D.D.C. 2014) -- we fail to see why that same logic does not apply to Merlini's § 66 claim against her employer for workplace injuries suffered by employees during the course of their employment. Hers is no more an ordinary slip and fall case than those cases are ordinary harassment cases. Each rests on a claim that makes the employer directly liable for what happens in the workplace to the employee who brings the suit.

         To be sure, the Supreme Court has stressed that to find the gravamen of any personal injury suit, one must look to "the point of contact -- the place where the boy got his fingers pinched." Sachs, 136 S.Ct. at 397 (internal quotations omitted). However, nothing in that precedent requires that we assess that conduct independent of the plaintiff's actual claim, which, in this case, is a claim against the employer -- not a fellow employee -- and requires no proof that any fellow employee engaged in any particular conduct.

         We find the D.C. Circuit's analysis in El-Hadad v. United Arab Emirates instructive in this regard. 496 F.3d 658 (D.C. Cir. 2007). There, the Court held that that the gravamen of the plaintiff's complaint, which alleged breach of contract for wrongful termination, involved "commercial activity," in part, because it occurred in the "employment context." Id. at 663. In choosing to focus on the "employment relationship . . . as a whole," the Court noted that a "narrow[er]" framing of the gravamen of the complaint -- focusing myopically on the plaintiff's defamation or breach of contract claims divorced from the employment context -- would "defy analysis" under the "commercial activity" inquiry. Id. at 663 n.1 (highlighting the difficulty of characterizing a "breach of contract," without more, as "commercial" or "non-commercial").

         Simply put, Merlini's employment did not simply "le[ad] to" the injury that she received; it provides the legal basis for the only cause of action that she has against her employer for the injury for which she seeks to recover. See In re Opinion of the Justices, 34 N.E.2d 527, 544 (Mass. 1941) (establishing that chapter 152 ยง66 "must be interpreted as creating a cause of action in an employee sustaining an injury 'in the course of his employment' that is a 'direct ...


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