Court Opinion

ID: 3048388
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:23:59.614654+00
Date Added: 2024-06-11T11:49:17.308480
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

MARTIN VENTRESS,                         
                 Plaintiff-Appellant,
                and
JACK CRAWFORD,
                            Plaintiff,         No. 04-17353
                 v.                             D.C. No.
                                             CV-03-00451-SPK
JAPAN AIRLINES; HAWAII AVIATION
CONTRACT SERVICES, INC.; DOES
1-10 INCLUSIVE; JALWAYS CO., LTD.,
a subsidiary of Japan Airlines,
             Defendants-Appellees.
                                         

MARTIN VENTRESS,                         
                            Plaintiff,
                and
JACK CRAWFORD,
                 Plaintiff-Appellant,          No. 05-15044
                 v.                             D.C. No.
                                             CV-03-00451-SPK
JAPAN AIRLINES; HAWAII AVIATION
CONTRACT SERVICES, INC.; DOES
1-10 INCLUSIVE; JALWAYS CO., LTD.,
a subsidiary of Japan Airlines,
             Defendants-Appellees.
                                         

                              4523
4524              VENTRESS v. JAPAN AIRLINES
         Appeal from the United States District Court
                  for the District of Hawaii
          Samuel P. King, Senior Judge, Presiding

MARTIN VENTRESS,                        
                 Plaintiff-Appellant,         No. 06-15904
                 v.
                                               D.C. No.
                                            CV-03-00451-LEK
HAWAII AVIATION CONTRACT
SERVICES, INC.,                                OPINION
                Defendant-Appellee.
                                        
         Appeal from the United States District Court
                  for the District of Hawaii
       Leslie E. Kobayashi, Magistrate Judge, Presiding

                   Argued and Submitted
             March 9, 2007—Pasadena, California

                     Filed April 24, 2007

       Before: Alfred T. Goodwin, Robert R. Beezer, and
              Richard C. Tallman, Circuit Judges.

                 Opinion by Judge Goodwin
                  VENTRESS v. JAPAN AIRLINES             4527

                         COUNSEL

Martin Ventress, Pro Se, Houston, Texas, for the plaintiff-
appellant; Charles H. Brower, Shawn A. Luiz, Honolulu,
Hawaii, for plaintiff-appellant Crawford.

Andrew L. Pepper, Carlsmith Ball LLP, Honolulu, Hawaii,
for defendants-appellees Japan Airlines & Jalways Co., Ltd.
Carl H. Osaki, Honolulu, Hawaii, for defendant-appellee
Hawaii Aviation Contract Services, Inc.

                         OPINION

GOODWIN, Circuit Judge:

   Martin Ventress, a flight engineer, and Jack Crawford, a
commercial pilot (collectively, “plaintiffs”), sued Japan Air-
lines and other entities, making a number of claims. They
appeal a judgment on the pleadings for Japan Airlines and its
subsidiary Jalways Co., Ltd. (collectively, “JAL”). We have
jurisdiction under 28 U.S.C. § 1291. We reverse.

   Ventress separately challenges the district court’s venue
transfer order and an order compelling arbitration of his
claims against Hawaii Aviation Contract Services, Inc.
(“HACS”). We affirm the venue transfer and dismiss Ven-
tress’ appeal of the arbitration order.

                      BACKGROUND

 JAL is a Japanese commercial air carrier based in Tokyo.
HACS, a Hawaii corporation with its principal place of busi-
4528                 VENTRESS v. JAPAN AIRLINES
ness in Honolulu, provides contract flight crews to JAL. Ven-
tress and Crawford were employed by HACS to perform ser-
vices for JAL flights. Plaintiffs’ employment agreements with
HACS contain mandatory arbitration provisions.

   In December 2002, Ventress and Crawford jointly filed a
complaint against JAL and HACS in the Central District of
California. The complaint alleged that JAL required a seri-
ously ill pilot to fly in June 2001, in violation of American
and Japanese aviation laws as well as JAL’s own operations
manual. Crawford expressed his concern to a JAL official in
Honolulu in July 2001. Afterward, he experienced harassment
from his superiors, including repeated performance checks,
questions and homework assignments. In December 2001,
HACS informed Crawford that his assignment to JAL was
cancelled because of unsatisfactory performance. That same
month, Ventress submitted reports on the June incidents to
JAL, HACS and aviation regulators. Ventress claimed
repeated harassment from JAL thereafter, including demands
to undergo psychiatric evaluations. Ventress has not been
allowed to fly since September 2001. The complaint sought
recovery for violation of California’s whistle blower statute,1
wrongful termination in violation of the public policy protect-
ing whistle blowers2 and emotional distress. All claims were
brought under California law.
  1
     “An employer may not retaliate against an employee for disclosing
information to a government or law enforcement agency, where the
employee has reasonable cause to believe that the information discloses a
violation of state or federal statute, or a violation or noncompliance with
a state or federal regulation.” Cal. Labor Code § 1102.5(b).
   2
     Among other statutes, the terminations allegedly violated the public
policy expressed in 49 U.S.C. § 42121(a)(1), which prohibits air carriers
from discriminating against any employee because the employee “pro-
vided, caused to be provided, or is about to provide (with any knowledge
of the employer) or cause to be provided to the employer or Federal Gov-
ernment information relating to any violation or alleged violation of any
order, regulation, or standard of the Federal Aviation Administration.”
                  VENTRESS v. JAPAN AIRLINES               4529
   In July 2003, the California district court granted defen-
dants’ motion to transfer the case to the District of Hawaii.
The district court explained that nearly all the events giving
rise to the complaint occurred in international air space or in
Hawaii, and that Hawaii was the more convenient forum for
potential witnesses and for accessing HACS’s personnel
records. After the venue change, plaintiffs moved to amend
the complaint to replace their California law claims with
Hawaii law claims. A magistrate judge denied that motion,
and plaintiffs appealed to the Hawaii district court.

   In October 2004, the Hawaii district court granted judg-
ment on the pleadings for JAL on the ground that all of plain-
tiffs’ claims were preempted by the Friendship, Commerce,
and Navigation Treaty, U.S.-Japan, April 2, 1953, 4 U.S.T.
2063 (“Japan FCN Treaty”). The court further held that the
emotional distress claims failed as a matter of California law,
even if they were not preempted. The court declined to rule
on plaintiffs’ appeal of the denial of leave to amend, saying
that the issue was mooted by its decision on treaty preemp-
tion. The court then severed the claims against HACS and
entered a stipulation and order staying further proceedings
pending arbitration. After Ventress and HACS disputed the
applicable arbitration rules, the court entered an order com-
pelling arbitration under the commercial rules of the Ameri-
can Arbitration Association (“AAA”).

   Ventress and Crawford filed separate appeals from the
judgement for JAL. Although Ventress and Crawford were
represented by the same lawyer when they filed the com-
plaint, Ventress now proceeds pro se. Ventress alone appeals
the change of venue and the order placing arbitration under
AAA commercial rules.

  The consolidated appeals present three questions: (1)
whether the Hawaii district court erred in ruling that the Japan
FCN Treaty preempted plaintiffs’ claims under California’s
4530                  VENTRESS v. JAPAN AIRLINES
whistle blower protection laws,3 (2) whether the California
district court abused its discretion in transferring the case to
Hawaii, and (3) whether the interlocutory order compelling
arbitration is appealable.

                             DISCUSSION

  A.    Treaty Preemption

   Under Federal Rule of Civil Procedure 12(c), judgment on
the pleadings is proper “when, taking all the allegations in the
non-moving party’s pleadings as true, the moving party is
entitled to judgment as a matter of law.” Fajardo v. County
of Los Angeles, 179 F.3d 698, 699 (9th Cir. 1999). We review
de novo a district court’s grant of judgment on the pleadings.
Id.

   [1] A treaty preempts inconsistent state law. United States
v. Pink, 315 U.S. 203, 230-31 (1942). Federal law must also
be strictly construed to avoid conflict with treaty obligations.
McCulloch v. Sociedad Nacional de Marineros de Honduras,
372 U.S. 10, 21 (1963). The district court premised its judg-
ment on article VIII(1) of the Japan FCN Treaty, which pro-
vides:

      Nationals and companies of either Party shall be per-
      mitted to engage, within the territories of the other
      Party, accountants and other technical experts, exec-
      utive personnel, attorneys, agents and other special-
      ists of their choice. Moreover, such nationals and
      companies shall be permitted to engage accountants
      and other technical experts regardless of the extent
      to which they may have qualified for the practice of
  3
   The district court held that the emotional distress claims failed as a
matter of California law, and neither of the plaintiffs appeal that decision.
Thus, we need not reach the question whether the Japan FCN Treaty also
preempts the emotional distress claims.
                      VENTRESS v. JAPAN AIRLINES                       4531
      a profession within the territories of such other Party
      ....

(emphasis added). The district court reasoned that plaintiffs’
claims were preempted because holding Japanese employers
liable for violation of California employment law would con-
flict with the employers’ treaty-conferred right to engage spe-
cialists “of their choice.”4

   [2] The extent to which the Japan FCN Treaty preempts
state employment law is a question of first impression in our
circuit. The treaty was one among a series of friendship, com-
merce, and navigation (“FCN”) treaties the United States con-
cluded with trading partners after World War II. Sumitomo
Shoji Am., Inc. v. Avagliano, 457 U.S. 176, 185-86 (1982)
(“Sumitomo II”). These treaties “define the treatment each
country owes the nationals of the other; their rights to engage
in business and other activities within the boundaries of the
former; and the respect due them, their property and their
enterprises.” Herman Walker, Jr., Modern Treaties of Friend-
ship, Commerce and Navigation, 42 Minn. L. Rev. 805, 806
(1958). “The purpose of the Treaties was not to give foreign
corporations greater rights than domestic companies, but
instead to assure them the right to conduct business on an
equal basis without suffering discrimination based on their
alienage.” Sumitomo II, 457 U.S. at 187-88. “The Treaties
accomplished their purpose by granting foreign corporations
‘national treatment’ in most respects.” Id. at 188 (footnote
omitted). National treatment entitles a foreign national to
“carry on his chosen business under conditions of non-
discrimination, and to enjoy the same legal opportunity to
succeed and prosper on his merits as is allowed citizens of the
country.” MacNamara v. Korean Air Lines, 863 F.2d 1135,
  4
    On appeal, Ventress argues for the first time that he was not a “special-
ist” within the meaning of article VIII(1). We do not address that argu-
ment because it was not raised below. See United States v. Alisal Water
Corp., 370 F.3d 915, 923 (9th Cir. 2004).
4532              VENTRESS v. JAPAN AIRLINES
1143 (3d Cir. 1988). Although national treatment was the
“predominant standard,” id., it was not extended to all areas
of commercial activity. “In certain areas treaty parties are
unwilling to grant full national treatment; in those areas the
parties frequently grant ‘most-favored-nation treatment,’
which means treatment no less favorable than that accorded
to nationals or companies of any third country.” Sumitomo II,
457 U.S. at 188 n.18. In addition, the treaties established cer-
tain non-contingent rules of treatment, which “gave foreign
employers a certain specified protection without regard to
whether the same protection was provided to host country
businesses.” McNamara, 863 F.2d at 1143.

   [3] The “of their choice” clause of article VIII(1) is an
example of a non-contingent rule that goes beyond assuring
national treatment. Cf. at 1143-44 (interpreting the same pro-
vision in the Friendship, Commerce, and Navigation Treaty,
U.S.-Korea, Nov. 28, 1956, 8 U.S.T. 2217). Its purpose was
to ensure the foreign company’s ability to control its overseas
investments without interference from local-hiring quotas. As
the Sixth Circuit has explained in the context of the Greece
FCN treaty:

    The post-World War II Friendship, Commerce and
    Navigation treaties were negotiated in a period char-
    acterized by so-called “percentile” restrictions which
    required American companies operating abroad to
    hire a certain percentage of citizens of the host coun-
    try. These restrictions were thought to have the
    effect of inhibiting American companies operating
    abroad from hiring the people in whom they had the
    greatest confidence. Similarly, a number of states
    had laws restricting or banning the employment of
    aliens by foreign companies doing business within
    the state. The legislative history of the post-war trea-
    ties suggests that both parties deemed the right to
    utilize the services of their own nationals in manage-
                   VENTRESS v. JAPAN AIRLINES                   4533
    rial, technical, and confidential capacities to be criti-
    cal.

Wickes v. Olympic Airways, 745 F.2d 363, 367 n.1 (6th Cir.
1984). The Fifth Circuit, examining the Japan FCN Treaty,
has reached the same conclusion about the objective of article
VIII. “The article VIII(1) right to free choice of technical and
managerial personnel sought to ensure that the American
businessman’s investment in the host country would remain
within his control.” Spiess v. C. Itoh & Co. (Am.), Inc., 643
F.2d 353, 361 (5th Cir. 1981), rev’d on other grounds, 457
U.S. 1128 (1982). “[T]he Senate, in consenting to ratification
of the Treaty, was concerned about the right of American
companies to use American personnel to control their invest-
ments in Japan.” Id.

   [4] Given the purpose and history of the FCN treaties, our
sister circuits have consistently held that foreign employers do
not enjoy immunity from domestic employment laws that do
not interfere with the employers’ ability to hire their fellow
citizens. In McNamara, 863 F.2d 1135, the Third Circuit con-
sidered a provision in the Korea FCN treaty that is identical
in language to article VIII(1). The plaintiff, having been ter-
minated by his Korean employer and replaced by a Korean
citizen, sought recovery for race, national origin and age dis-
crimination. The employer argued that it enjoyed treaty con-
ferred immunity from federal anti-discrimination statutes. The
court disagreed. The court explained that the treaty’s negotiat-
ing history “[wa]s barren of any suggestion that Article
VIII(1) was intended to achieve anything other than the right
to utilize one’s own citizens in the capacities specified.” Id.
at 1145. Rather, the provision “was intended to confer no
greater right than an employer’s freedom to choose the
nationality of its executive labor pool.” Id. at 1146. If the pro-
vision conferred broad immunity from domestic employment
laws, the drafters would not have specifically guaranteed the
right to hire technical experts regardless of professional quali-
fication requirements under local law. Such language would
4534                 VENTRESS v. JAPAN AIRLINES
have been superfluous. Id. at 1145. Although the Korean
employer had a treaty right to discriminate in favor of Korean
citizens, the treaty afforded no immunity from liability for
race, age and national origin discrimination.5

   In Wickes, the Sixth Circuit had to decide whether the
Greece FCN treaty preempted Michigan’s employment dis-
crimination laws. The court held that the “of their choice”
clause in the treaty afforded only “a narrow privilege to dis-
criminate in favor of Greek citizens.” 745 F.2d at 368. Thus,
the plaintiff’s discrimination claims were viable because there
was no conflict between the treaty right to hire Greek citizens
and Michigan law’s prohibition of discrimination on the basis
of race, sex and national origin. Id.; see also Fortino v. Qua-
sar Co., 950 F.2d 389, 392-95 (7th Cir. 1991) (assuming that
national origin discrimination claim could proceed against
Japanese employer, and permitting age discrimination claim
to proceed also); Avigliano v. Sumitomo Shoji Am., Inc., 638
F.2d 552, 559 (2d Cir. 1981) (“Sumitomo I”) (holding that
Japan FCN Treaty did not bar national origin and sex discrim-
ination claims brought under Title VII), rev’d on other
grounds, 457 U.S. 176.

   [5] We hold that the district court erred by construing arti-
cle VIII(1) to confer on Japanese employers blanket immunity
from state employment law. In the district court’s view, JAL’s
immunity was sufficiently broad that judgment was appropri-
ate even though the pleadings were silent on whether the
plaintiffs were replaced by Japanese citizens. In other words,
the district court believed that JAL has a treaty right to ignore
domestic employment law even for personnel decisions that
involved only non-Japanese citizens. Taken to its logical con-
clusion, such an expansive construction of article VIII(1)
  5
   For purposes of Title VII, citizenship and national origin are distinct
concepts. Title VII prohibits only national origin discrimination, not dis-
crimination on the basis of citizenship. Espinoza v. Farah Mfg. Co., 414
U.S. 86, 88 (1973).
                  VENTRESS v. JAPAN AIRLINES               4535
would lead to absurd results, such as exempting foreign
employers from collective bargaining laws. Sumitomo I, 638
F.2d at 559. As the circuits that have addressed the question
have uniformly found, the main purpose of article VIII(1) is
to guarantee the ability of each signatory’s companies the
ability to staff critical managerial and technical positions
overseas with their fellow citizens. California’s whistle-
blower protection laws merely prevent JAL from retaliating
against employees for reporting and resisting the employer’s
domestic law violations; the laws in no way conflict with
JAL’s limited treaty right to discriminate in favor of Japanese
citizens. In the absence of conflict, there can be no preemp-
tion.

   JAL relies heavily on the Fifth Circuit’s statement in Spiess
that “article VIII(1) means exactly what it says: Companies
have a right to decide which executives and technicians will
manage their investment in the host country, without regard
to host country laws.” 643 F.2d at 361. Although that dictum
appears to endorse a broad view of the scope of article
VIII(1), a careful reading of the Spiess opinion shows that the
Fifth Circuit intended otherwise. Spiess’ holding was merely
that article VIII(1) “exempts [Japanese employers] from
domestic employment discrimination laws to the extent of
permitting discrimination in favor of Japanese citizens in
employment for executive and technical positions.” Id. at 359;
see also id. at 355 (“We hold that the treaty affords American
subsidiaries of Japanese corporations the limited right to dis-
criminate in favor of Japanese nationals . . . .”). The court
expressly declined to decide whether article VIII(1) has any
preemptive effect outside of the context of citizenship dis-
crimination. Id. at 362 n.8; see also Bennett v. Total Mina-
tome Corp., 138 F.3d 1053, 1059-60 (5th Cir. 1998)
(assuming, without deciding, that age, race and national origin
discrimination claims could proceed against French employer
asserting treaty right to discriminate on basis of citizenship);
Papaila v. Uniden Am. Corp., 51 F.3d 54, 55 (5th Cir. 1995)
(holding that “Article VIII to a limited extent permits Japa-
4536                   VENTRESS v. JAPAN AIRLINES
nese companies to discriminate in favor of their fellow citi-
zens because of their citizenship”).

   JAL further argues that Fortino, MacNamara and Sumi-
tomo I are distinguishable because they involved federal
employment discrimination statutes rather than state whistle-
blower laws. JAL does not explain how whistle-blower pro-
tection statutes conflict with article VIII(1)’s citizenship dis-
crimination rights any more than Title VII does. JAL also
points to a minor difference in wording between the Greece
FCN Treaty at issue in Wickes and the Japan FCN Treaty. We
do not agree that Wickes can be so easily distiguished.6 In any
event, that difference does nothing to change the fact that arti-
cle VIII(1) was primarily aimed at permitting foreign compa-
nies to hire their fellow citizens. Nor does the argument
undermine the persuasiveness of Fortino, MacNamara and
Sumitomo I, each of which involved the Japan FCN Treaty
itself or language that is identical to article VIII(1). Thus we
conclude that article VIII(1), which confers on Japanese
employers only the limited right to discriminate in favor of
  6
   Article XII(4) of the Greece FCN treaty provides:
      Nationals and companies of either Party shall be permitted to
      engage . . . agents and other employees of their choice among
      those legally in the country and eligible to work. Moreover, such
      nationals and companies shall be permitted to engage, on a tem-
      porary basis, accountants and other technical experts, regardless
      of nationality and regardless of the extent to which they may pos-
      sess the qualifications required by applicable laws for the exer-
      cise of their duties . . . .
Treaty of Friendship, Commerce and Navigation, U.S.-Greece, Aug. 3,
1951, 5 U.S.T. 1829 (emphasis added). JAL argues that the absence of the
“regardless of nationality” language in the Japan FCN Treaty indicates an
intent to grant foreign employers rights beyond citizenship discrimination.
JAL has read too much into a slight difference in terminology. The Greece
FCN Treaty also states that employers may engage personnel “of their
choice among those legally in the country,” while the Japan FCN Treaty
lacks the “those legally in the country” qualification. Following JAL’s
logic, this would mean that Japanese employers are free to hire illegal
workers. We doubt that Congress intended such a result.
                   VENTRESS v. JAPAN AIRLINES                 4537
their fellow citizens for certain managerial and technical posi-
tions, does not preempt California’s whistle blower protection
laws. We reverse the district court’s judgment on this issue
and remand for further proceedings.

  B.   Venue

   [6] “For the convenience of parties and witnesses, in the
interest of justice, a district court may transfer any civil action
to any other district or division where it might have been
brought.” 28 U.S.C. § 1404(a). In transferring the case to
Hawaii, the district court’s decision to change venue is
reviewed for abuse of discretion. Posnanski v. Gibney, 421
F.3d 977, 978 (9th Cir. 2005). “Weighing of the factors for
and against transfer involves subtle considerations and is best
left to the discretion of the trial judge.” Commodity Futures
Trading Comm’n v. Savage, 611 F.2d 270, 279 (9th Cir.
1979).

   [7] The California district court explained its reasoning in
detail in the transfer order. The court found no significant
connection between California and the facts alleged in the
complaint. The flights in which JAL allegedly flew a sick
pilot operated in Thailand, Hawaii and Japan. Crawford and
Ventress both resided in Hawaii while employed by HACS,
all communication between plaintiffs and JAL during their
employment took place in Hawaii, and the termination deci-
sion was made in Hawaii. The court also concluded that most
potential witnesses resided in Hawaii and Japan; indeed,
HACS requires all contract crew members to reside in
Hawaii. Moreover, most of the documentary evidence, includ-
ing HACS’ personnel files, are located in Hawaii. Other fac-
tors deemed to favor venue in Hawaii include Hawaii’s
interest in adjudicating a dispute involving a Hawaii
employer, the Hawaiin choice-of-law clause in the HACS
employment agreement, and the lower degree of docket con-
gestion in the District of Hawaii.
4538              VENTRESS v. JAPAN AIRLINES
   [8] Ventress argues that developments subsequent to the
transfer order made Hawaii an inconvenient forum for his
claims against JAL. However, the district court could not
have abused its discretion by not considering events that had
not taken place at the time of decision. Ventress also disputes
that most potential witnesses reside in Hawaii. He claims that
HACS tax records would establish that most potential wit-
nesses live in the western United States. Nothing in the record
indicates that such evidence was ever presented to the district
court. Likewise, Ventress’ assertion of bias on the part of
Hawaii’s jury pool is not supported by any evidence in the
record. The district court did not abuse its discretion in trans-
ferring the case to Hawaii.

  C.   Arbitration

   [9] Ventress seeks review of the district court’s interlocu-
tory order compelling arbitration of his claims against HACS
under the AAA’s commercial rules. That order is not appeal-
able because the district court has stayed the case pending
arbitration. Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S.
79, 87 n.2 (2000) (“Had the District Court entered a stay
instead of a dismissal in this case, that order would not be
appealable.”); Dees v. Billy, 394 F.3d 1290, 1294 (9th Cir.
2005) (“We therefore hold that a district court order staying
judicial proceedings and compelling arbitration is not appeal-
able . . . .”); Bushley v. Credit Suisse First Boston, 360 F.3d
1149, 1153 (9th Cir. 2004) (order compelling arbitration not
appealable where plaintiff’s action was “effectively stayed
pending the conclusion of . . . arbitration”).

   [10] We dismiss Ventress’ interlocutory appeal challenging
the arbitration order. Because Ventress refused to dismiss this
aspect of his appeal when timely requested by counsel for
HACS, we hold that HACS is entitled to recover its costs
from Ventress. See Fed. R. App. P. 39(a)(1).
                  VENTRESS v. JAPAN AIRLINES             4539
                       CONCLUSION

   We hold that the Japan FCN Treaty does not preempt Cali-
fornia’s whistle blower protection laws. We REVERSE the
district court’s judgment for JAL. We AFFIRM the order
transferring the case to Hawaii and DISMISS Ventress’
appeal of the interlocutory arbitration order.

   The case against JAL is REMANDED for further proceed-
ings. On remand, the district court shall consider plaintiffs’
motion to amend the complaint to state claims under Hawaii
state law.

  Plaintiffs to recover costs on the appeal against JAL;
HACS to recover from Ventress its costs on the appeal of the
arbitration order.

 REVERSED    AND    REMANDED     IN                   PART;
AFFIRMED IN PART; DISMISSED IN PART.