EMPLOYMENT LAW - FIRST CIRCUIT USES FOREIGN SOVEREIGN IMMUNITY EXCEPTION TO KEEP TEN-YEAR WORKERS' COMPENSATION CASE ALIVE.

• Author: Renzoni, Katherine

EMPLOYMENT LAW--FIRST CIRCUIT USES FOREIGN SOVEREIGN IMMUNITY EXCEPTION TO KEEP TEN-YEAR WORKERS' COMPENSATION CASE ALIVE--Merllni v. Canada, 926 F.3d 21 (1st Cir. 2019).

The Foreign Sovereign Immunities Act (FSIA) provides protection to foreign sovereigns against suits filed in United States Federal Courts. (1) Like most statutes, FSIA has a limited number of exceptions which allow cases against sovereigns, such as the commercial activities exception and the tortious actions exception. (2) In Merlini v. Canada, (3) a United States clerical worker filed suit against her employer, Canada, for her workers' compensation injury. (4) As a result, the First Circuit Court of Appeals analyzed whether the suit was jurisdictionally appropriate under the commercial activities exception of the FSIA. (5)

Cynthia Merlini (Merlini), began working for the Consulate General of Canada in Massachusetts in 2003 as an administrative assistant. (6) While preparing for a meeting in early 2009, Merlini tripped over a loose phone cord, fell into a credenza and sustained injuries to her head and neck. (7) Merlini initially received workers' compensation benefits through the Canadian Employees Compensation Act (GECA) until it was determined that she was able to return to work and her benefits were terminated. (8) Merlini then filed a suit with the Massachusetts Departmerit of Industrial Accidents (DIA) requesting benefits through the Workers' Compensation Trust Fund (WCTF), where an Administrative Judge found that Merlini was entitled to benefits. (9) The WCTF appealed the Administrative Judge's decision to the DIA review board, who reversed the case. (10) The Massachusetts Appeals Court (MAC) then affirmed the review board's reversal." Rather than appeal the MAC decision, Merlini brought an action against Canada in the District Court of Massachusetts, claiming that Canada failed to comply with Massachusetts Workers' Compensation law, which the court dismissed. (12) Merlini appealed that dismissal to the First Circuit Court of Appeals. (13) Ultimately, the First Circuit Court of Appeals reversed the lower court's dismissal, finding that the FSIA commercial activities exception was applicable and granted the United States jurisdiction over the case. (14)

Prior to enactment of the FSIA, United States courts deferred to the concept that foreign sovereigns enjoyed the privilege of absolute immunity. (15) This overarching theory of immunity shifted as international commerce became dominant and the concept of royalty faded. (16) When the FSIA was eventually codified, it included nine exceptions, making it easier for United States courts to establish jurisdiction and enforce judgments. (17)

The language of the commercial activities exception is vague and difficult for courts to interpret. (18) The Supreme Court's decision in Republic of Argentina v. Weltover, (]9) guides courts to focus on the "nature" of the conduct at issue, "rather than its 'purpose,'" when the commercial activities exception is raised. (20) Even with Weltover's instruction, conduct that constitutes commercial activity is extremely fungible, but a three-step analysis purports to clarify the commercial activities exception. (21)

First, courts determine the conduct that the plaintiffs claim is based on, then whether that conduct is considered a commercial activity. (22) If these two factors are met, the final step is to ensure that the conduct was connected to the United States. (23)

Within the employment context, the commercial activities exception is frequently asserted against foreign employers. (24)

The starting point for deciding whether the commercial activities exception applies is examining the nexus between the alleged conduct and the employees employment, then if inseverable, whether the conduct is that which any private party may participate in. (25) Although there are cases that examine the commercial activities exception in employment related claims, courts also take cues from the application of the exception in other areas. (26)

In Merlini v. Canada, the First Circuit Court of Appeals began their analysis by introducing the Massachusetts workers' compensation statutes under which Merlini attempted to bring her claim. (27) Canada rebutted Merlini's claims under the Massachusetts workers' compensation statutes by raising the FSIA, to which Merlini presented the commercial activities and tort exceptions. (28) Rejecting the tort exception, the court addressed the commercial activities exception by examining what conduct Merlini's claim was based on and whether that conduct was commercial. (29) The court determined that Merlini's claim was based on Canada's employment of her and was therefore commercial. (30) After this determination the court dissected and rejected Canada's argument that Merlini's claim was based on Canada's choice to compensate her through the GECA and thereby was non-commercial activity. (11)

Justice Lynch dissented from the majority opinion, first rejecting their determination that Merlini's claim was based on her employment with Canada. (32) Justice Lynch suggests that the majority's opinion creates a circuit split with the D.C., Second, and Ninth Circuits. (33) Finally, the dissent suggests that this decision will cause resounding foreign affairs issues, potentially making it more difficult for the United States to enforce workers' compensation provisions in their own foreign consulate locations. (34)

Workers' compensation balances the interest between employees and employers - employees receive benefits for their workplace injuries, while employers compliant with Massachusetts law receive curbed liability. (35) On this premise, the First Circuit Court of Appeals, correctly finds that Merlini's claim is based on her employment, not Canada's choice to forego Massachusetts insurance in favor of the GECA. (36) Whether dealing with a foreign sovereign or an average employer, an employer's reason for failing to maintain requisite workers' compensation insurance is wholly irrelevant to an employee's claim. (37) If Merlini's job and duties involved sovereign functions then the commercial actitivities exception would be immaterial, but since Merlini maintained a clerical position, it is instead, highly material. (38)

As with any case dealing with foreign sovereigns, foreign policy implications are a concern. (39) The dissent proposes that Canada's choice to utilize the GECA is a sovereign act, but their analysis fails to follow the nature over purpose test. (40) The majority also undercuts this point by noting that the Quebec Government Office in Boston maintains Massachusetts workers' compensation insurance. (41) The dissent also cites concern for this case creating a circuit split, however all of the cases listed are distinguishable from the current case. (42) The dissent raises a relevant point in its concern for possible repercussions that may stem from this decision, a factor that courts should always be aware of when dealing with the FSIA. (43)

Merlini may not have intended to reveal the loophole at the intersection of Canada and Massachusetts workers' compensation systems, but her case disrupts the gentle balance of the workers' compensation scheme. (44) The decision in Merlini, though correctly determined, forces foreign sovereigns to purchase state workers' compensation insurance to protect themselves from further employee claims. (45) Although Congress intended for the courts to shape the boundaries of the commercial activities exception, Congress may now need to step in and clarify topics that frequently arise in the gray areas of the exception. (46)

The Merlini court analyzed the commercial activities exception of the FSIA within the scope of an employee's workers' compensation claim against Canada. The court correctly held that the commercial activities exception applies, and therefore Merlini's claim against Canada for not purchasing Massachusetts workers' compensation insurance was permissible. The case before the First Circuit was handled appropriately but concerns regarding this decision should not be overlooked. Instead, the broad nature of the commercial activities exception should be carefully reviewed for areas requiring further clarification, to provide guidance for future cases and reduce adverse foreign policy impacts.

(1.) See 28 U.S.C. [section][section] 1602, 1604 (1976) (stating relevant statute). The Foreign Sovereign Immunities Act (FSIA) grants immunity to foreign states from the jurisdiction of the United States. Id. Under the FSIA. foreign sovereign is defined to encompass "a political subdivision of a foreign state or an agency or instrumentality of a foreign state." Id. [section] 1603. Further, "instrumentality of a foreign state" includes those that are "an organ of a foreign state or subdivision." Id. Regarding the commercial activities exception, the term "commercial activities" is meant to include those activities that occur in the "regular course of commercial conduct or a particular commercial transaction or act." Id. Commercial activity by a foreign state is that activity "by such state and having substantial contact with the United States." Id. See also David A. Brittenham, Note, Foreign Sovereign Immunity and Commercial Activity: A Conflicts Approach, 83 COLUM. L. REV. 1440, 1440 (1983) (explaining history of FSIA). The FSIA was codified in 1976 and replaced the widely held concept that foreign sovereign's received absolute immunity. Id. at 1441. Instead, the FSIA provided a systematic analysis for the courts to follow when determining whether a case fell outside of the court's jurisdiction. Id. The concern with the FSIA and its subsequent exceptions was for the political implications that could arise from foreign sovereigns being pulled into United States courts. Id. The commercial activities exception initially emerged as one of the most popular of the exceptions, which particularly...