GOETHE HOUSE NEW YORK, GERMAN CULTURAL CENTER V. NATIONAL LABOR RELATIONS BOARD, ET AL. No. 88-1797 In the Supreme Court of the United States October Term, 1989 On Petition for a Writ of Certiorari to the United States Court of Appeals for the Second Circuit Brief for the National Labor Relations Board in Opposition TABLE OF CONTENTS Question Presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW The opinion of the court of appeals (Pet. App. A1-A15) is reported at 869 F.2d 75. The opinion of the district court (Pet. App. A16-A21) is reported at 685 F. Supp. 427. The underlying decision and direction of election by the Board (App., infra, 1a-15a) is reported at 288 N.L.R.B. No. 29. JURISDICTION The judgment of the court of appeals was entered on February 16, 1989. The petition for a writ of certiorari was filed on May 5, 1989. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTION PRESENTED Whether the district court lacked jurisdiction to review the National Labor Relations Board's direction of a representation election in a bargaining unit of petitioner's employees, where petitioner had an adequate means of obtaining review in the court of appeals under Section 10(e) and (f) of the National Labor Relations Act, 29 U.S.C. 160(e) and (f). STATEMENT 1. Petitioner, Goethe House, is one of the six American branches of the Goethe Institute, a German nonprofit organization with 114 branches worldwide, which, under a contract with the Foreign Office of the Federal Republic of Germany (the Foreign Office), performs various functions in the area of German cultural foreign policy such as presenting and organizing cultural events, providing information on life in the Federal Republic of Germany, and promoting the German language. Petitioner's activities are controlled by the Foreign Office, and funding for the Goethe Institute is provided by the Federal Republic of Germany (App., infra, 3a-5a). On March 5, 1982, District 65, International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), AFL-CIO (District 65, or the Union) filed a representation petition seeking an election in a bargaining unit consisting of all employees of petitioner other than those represented by a German union, /1/ excluding managerial, professional, and confidential employees, guards, and supervisors (App., infra, 3a, 14a). This unit includes a bookkeeper, assistant librarian, administrative assistant, and secretary (all in the Program Department), a messenger, a custodian, and a maintenance worker. All of these employees are either American citizens or third country nationals (App., infra, 5a & n.8). In its Decision and Direction of Election issued on March 29, 1988, the Board found that petitioner's budget and operations indicated that it was engaged in commerce as defined in Sections 2(6) and 2(7) of the National Labor Relations Act, 29 U.S.C. 152(6) and (7) /2/ (App., infra, 6a). The Board noted that it was not precluded from asserting jurisdiction over nonprofit educational institutions such as petitioner merely because they "do not engage in purely commercial activities" (App., infra, 6a n.9). The Board dismissed petitioner's contention that its status as a foreign instrumentality excluded it from coverage under the Act (App., infra, 7a-13a). The Board found "'no basis for believing that the Act was intended to exclude any employees in our country whose employer in this country is an 'employer' engaged in 'commerce' within the meaning of the Act'" (App., infra, 8a (citing State Bank of India, 229 N.L.R.B. 838, 841 (1977)). The Board distinguished Benz v. Compania Naviera Hidalgo, 353 U.S. 138 (1957), and McCulloch v. Sociedad Nacional de Marineros, 372 U.S. 10 (1963), on the ground that in those cases the Court had "declined to construe the Act as extending to the internal operations of foreign flagships employing alien seamen only temporarily located in the United States" (App., infra, 8a). /3/ The Board then rejected petitioner's contention that its exercise of jurisdiction here would be inconsistent with the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. 1602-1611 (1982) (FSIA). Following State Bank of India, 229 N.L.R.B. at 842, the Board held that the legislative history of the FSIA indicated Congress's intent to preserve immunity only for the "public acts" of a foreign state (App., infra, 9a-10a). In the Board's view, neither the policy of the NLRA nor any general public policy militated against the exercise of jurisdiction over instrumentalities of foreign states conducting commercial activities in the United States (App., infra, 9a). The Board further noted that the FSIA explicitly denies immunity to any foreign state in any case in which "the action is based upon a commercial activity carried on in the United States by the foreign state" (App., infra, 10a & n.13). See 28 U.S.C. 1605(a)(2). The Board acknowledged that petitioner's purpose was to implement foreign policy objectives of the Federal Republic of Germany by providing cultural services. But it pointed out that "(t)he FSIA defines a 'commercial activity' as meaning 'either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to (its) nature * * * rather than * * * its purpose'" (App., infra, 10a-11a (quoting 28 U.S.C. 1603(d)) (emphasis added by Board, footnote omitted)). In support of its conclusion, the Board cited the House Report on the FSIA, which stated "that 'employment or engagement of laborers, clerical staff or public relations or marketing agents' by a foreign government is an activity included within the definition of 'commercial activity'" (App., infra, 11a (quoting H.R. Rep. No. 1487, 94th Cong., 2d Sess. 16 (1976)). /4/ The Board directed that an election be held within thirty days of the issuance of its decision (App., infra, 14a). 2. Petitioner filed a complaint in federal district court seeking declaratory and injunctive relief against the Board's assertion of jurisdiction and direction of election. The district court issued a preliminary injunction prohibiting the Board from proceeding further with the representation proceeding or conducting an election (Pet. App. A17-A21). Initially, the district court addressed the question whether the case was governed by the general rule that in order to challenge a Board direction of an election, an employer must "allow() the representation election to go forward and, in the event that the union should prevail, refus(e) to bargain with the union as a prerequisite to * * * review (in the court of appeals)" (Pet. App. A18). The court held that, despite this rule, it had jurisdiction to review the Board's decision under McCulloch v. Sociedad National, supra, since the employment activities of Goethe House were "controlled entirely by the West German government" and thus "(r)equiring Goethe House to submit to NLRB jurisdiction might well conflict or otherwise interfere with the German government's employment objectives in implementing cultural foreign policy" (Pet. App. A18-A19). This "entanglement", the court held, permitted district court review in advance of the representation election (ibid.). The court then found that petitioner would suffer irreparable harm if required to comply with the Board's direction of election "since Goethe House's employment policies are controlled entirely by the German government, and could engender diplomatic embarrassment if the union prevailed in the election. Goethe House would be forced either to bargain with the union * * * or, alternatively, to obtain review it would have to commit an unfair labor practice under the National Labor Relations Act * * * " (Pet. App. A19). Finally, the district court held that petitioner likely would prevail on the merits because, under the FSIA, the Board could not "intervene into the underlying employment structure of a conceded arm of a foreign state that is not involved in commercial activity" (Pet. App. A20). According to the district court, the commercial activity exception under the FSIA has been found to provide jurisdiction only "as to employment contracts between the foreign state or instrumentality and a single individual" (Pet. App. A20-A21). 3. A divided court of appeals, concluding that the district court lacked jurisdiction to review the Board's direction of election, reversed its decision (Pet. App. A3). The court of appeals noted that there have been only two cases in which this Court has found district court jurisdiction to review a Board representation proceeding: McCulloch and Leedom v. Kyne, 358 U.S. 184 (1958) (Pet. App. A6). The court of appeals explained that the "extremely narrow (Kyne) exception to the general rule that Board representation orders are not subject to direct judicial review" applies "(o)nly where the Board has clearly violated an express provision of the (NLRA)" (Pet. App. A6-A7, quoting 2 The Developing Labor Law 1717 (C. Morris 2d ed. 1983)). Because petitioner alleged that the Board's action violated the FSIA, and not an express provision of the NLRA, the Kyne exception did not apply here (Pet. App. A7). Nor, according to the court of appeals, was there any basis for district court jurisdiction under McCulloch (Pet. App. A8-A9), where the international protest provoked by the Board's assertion of jurisdiction over foreign seamen serving on a Honduran flag vessel had justified the district court's pre-election review. In McCulloch, the certification of an American union as representative of those seamen would have violated Honduran law (Pet. App. A8); the court saw no comparable situation here, where certification of District 65 "would neither encroach on the membership of a German union nor violate German law" (Pet. App. A8-A9). The court of appeals also found the district court's concern about international embarrassment to be "largely unfounded" (Pet. App. A9). It noted that "(e)ven if the Union were certified as the bargaining agent of Goethe House's non-German employees," and Goethe House would therefore have to bargain with the Union over wages, hours and other terms and conditions of employment, "Goethe House would have no duty to bargain over how it performed its mission of promoting German culture" (Pet. App. A9). The court also noted that the fact that the German employees of Goethe House were already unionized "belie(d) the prospect that the presence of a union for the non-German employees would hamper Goethe House's operations" and made less than "uniquely compelling" the argument that the West German Government needed "unilateral control" over the remaining, non-unionized employees (Pet. App. A9-A10). The court refused to predicate any prediction of international embarrassment on the possibility that petitioner's employees, if found subject to the Board's jurisdiction, might strike and picket. The court noted that petitioner's employees would have the right to strike and picket irrespective of Board jurisdiction, and that the right to organize might lessen, not heighten, the possibility of strikes and picket lines (Pet. App. A10-A11). Finally, the court of appeals found that this case differed from Kyne and McCulloch because the petitioner would be able to obtain review of the Board's representation decision in a refusal to bargain proceeding (Pet. App. A12). In McCulloch, this Court ruled only on a case brought by a union (which would not have had recourse to review through a refusal to bargain proceeding) and declined to review a case brought by an employer (which had recourse to indirect review) (ibid.). /5/ Judge Lumbard dissented. In his view, McCulloch stood for the "broad premise that conflicts with foreign sovereigns are to be avoided," and thus the issue of petitioner's immunity from Board jurisdiction under the FSIA should be "resolved speedily" (Pet. App. A14). ARGUMENT The decision of the court of appeals is correct. The court's denial of pre-election judicial review under the circumstances of this case does not conflict with any decision of this Court or of any other court of appeals. The decision does not address the merits of the Board's assertion of jurisdiction. Further review at this stage is therefore unwarranted. 1. Petitioner contends (Pet. 8-9) that the court of appeals erred in concluding that this case does not fit within the McCulloch exception /6/ to the rule precluding pre-election judicial review. /7/ As the court of appeals concluded, however, this case does not implicate the concerns that animated the Court to sustain district court review in McCulloch. In McCulloch, the Board had directed an election to determine the representational rights of "foreign seamen aboard vessels under foreign flags" and the Board's action already had "aroused vigorous protests from foreign governments." The Court found that these circumstances presented "a uniquely compelling justifiction for prompt judicial resolution of the controversy over the Board's power" (372 U.S. at 16-17). /8/ For several reasons, there is no similar "uniquely compelling justification" for departing from the statutory review provisions in this case. First, the concerns that led the McCulloch court to find district court jurisdiction at the pre-election stage are not present here. Thus, the court of appeals rejected the suggestion that the holding of a Board-supervised election might "cause disturbances and embarrassment in international relations" (Pet. App. A9). The Federal Republic of West Germany, by letter to the Board, has indicated that it believes that the Board lacks jurisdiction and has noted that an assertion of jurisdiction by the Board raises questions of reciprocity concerning employees of American institutions in Germany. See App., infra, 1a n.1. Immediate pre-election review is not necessary to deal with that objection, however. In fact, petitioner's German nationals are represented by a German union; District 65, if certified, could not require petitioner to bargain over how it performed its cultural mission; and according petitioner's non-German employees representational rights would not increase the likelihood that they would engage in potentially embarrassing strikes and picketing, for they already are empowered to engage in such activity by state and federal law. Pet. App. A9-A12. Second, in this case, unlike McCulloch and Kyne, petitioner has a means of obtaining review in the court of appeals through the statutory review procedure (Pet. App. A12-A13). Until that review is completed, petitioner would be under no compulsion to bargain with the Union (assuming the union won the election and were certified). Thus, petitioner's apprehension (Pet. 11) that "the Board (will) * * * become involved in matters that are exclusively the concerns of a foreign sovereign" -- by forcing petitioner to bargain with an American union and to submit to grievance and arbitration proceedings -- is premature. Nor should such indirect review of the ultimate issue whether the Board properly exerted jurisdiction here occasion embarrassment in foreign affairs (see Pet. 7). A so-called "technical" refusal to bargain is the recognized method for an employer to challenge a Board representation decision (see note 5, supra). Indeed, the court of appeals' opinion states that petitioner must follow that procedure in order to obtain review under the American legal system. 2. There is no merit to petitioner's further contention (Pet. 10-11) that the court of appeals should have upheld the district court's exercise of jurisdiction because the FSIA precluded the Board's assumption of jurisdiction over petitioner. The FSIA does not provide that foreign instrumentalities have absolute immunity from all legal actions in the United States. The premise of the FSIA is that the courts will determine whether, in the circumstances alleged, a foreign instrumentality is immune from suit. "(I)n order to free the Government from the case-by-case diplomatic pressures, to clarify the governing standards, and to 'assur(e) litigants that * * * decisions are made on purely legal grounds * * * ' the Act contains a comprehensive set of legal standards governing claims of immunity in every civil action against a foreign state or its political subdivisions, agents, or instrumentalities." See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 488 (1983). Thus when a civil action is brought against a foreign instrumentality, the court must determine whether the suit is one permitted by the Act. Nothing in the FSIA changes the scheme of review established by Congress for Board representation proceedings. Petitioner raised its FSIA contentions before the Board, which gave them full consideration (App., infra, 9a-13a). Petitioner will have an opportunity to obtain court of appeals review of the Board's rejection of its FSIA claims should the Union prevail in the representation election and a bargaining order issue against petitioner. Cf. State Bank of India, 808 F.2d at 534-535. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General JOSEPH E. DESIO Acting General Counsel D. RANDALL FRYE Associate General Counsel ROBERT E. ALLEN Associate General Counsel NORTON J. COME Deputy Associate General Counsel LINDA SHER Assistant General Counsel National Labor Relations Board JULY 1989 /1/ Petitioner's employees who are German nationals are represented by a German union (App., infra, 3a n.4). /2/ Section 2(6) of the Act provides in part: The term "commerce" means trade, traffic, commerce, transportation, or communication * * * between any foreign country and any State * * *. Section 2(7) of the Act provides: The term "affecting commerce" means in commerce, or burdening or obstructing commerce or the free flow of commerce, or having led or tending to lead to a labor dispute burdening or obstructing commerce or the free flow of commerce. /3/ The Board found more apposite ILA Local 1416 v. Ariadne Shipping Co., 397 U.S. 195 (1970), in which "the Court limited Benz and McCulloch to their facts in holding that a dispute centering on American longshoremen on American docks was outside the internal operations of the ship, and accordingly, was within the Board's jurisdiction" (App., infra, 8a-9a). /4/ Moreover, the Board noted, the same Report went on to say that "public or governmental and not commercial in nature, would be the employment of diplomatic, civil service, or military personnel, but not the employment of American citizens or third country nationals by the foreign state in the United States" (App., infra, 11a, quoting H.R. Rep. No. 1487, 94th Cong., 2d Sess. 16 (1976)). /5/ In McCulloch, this Court declined to decide a companion case (Empresa Hondurena de Vapores, S.A. v. McLeod, 300 F.2d 222 (2d Cir. 1962)), which had been brought by the foreign employer that had been a party to the Board proceedings. Instead, the Court vacated the court of appeals' decision in Empresa with instructions to have the district court dismiss the foreign employer's complaint "in light of (the) decision in (McCulloch)" (372 U.S. at 22). /6/ Petitioner correctly declines to press the claim that the Board acted in excess of its statutory mandate within the meaning of Leedom v. Kyne in exercising jurisdiction here. Nothing in the Act or its legislative history indicates that Congress intended to exempt from the Board's jurisdiction all activity in commerce by foreign nations. Section 2(2) of the Act, 29 U.S.C. 152(2), which defines "employer," does not exclude foreign nations or instrumentalities although it does exclude federal and state governments and instrumentalities. See State Bank of India v. NLRB, 808 F.2d 526, 530-532 (7th Cir. 1986), cert. denied, 483 U.S. 1005 (1987). /7/ Representation proceedings conducted under Section 9 of the Act, 29 U.S.C. 159, do not result in a final order that is subject to judicial review. AFL v. NLRB, 308 U.S. 401, 409 (1940); Boire v. Greyhound Corp., 376 U.S. 473, 476-477 (1964). Rather, certifications and other decisions issued in the course of such a representation case are subject to judicial review only in the courts of appeals and only in the context of a subsequent unfair labor practice proceeding -- for example, when an employer refuses to bargain with the union certified by the Board and the Board finds that the refusal to bargain is an unfair labor practice under Section 8(a)(5) of the Act (29 U.S.C. 158(a)(5)) and issues a bargaining order. Boire v. Greyhound Corp., 376 U.S. at 476-477. The final Board order in the unfair labor practice case is reviewable in the court of appeals, and the rulings made in the course of the underlying representation proceedings are reviewable in that context. Section 10(e) and (f) of the Act (29 U.S.C. 160(e) and (f)); AFL v. NLRB, 308 U.S. at 409; Boire v. Greyhound Corp., 376 U.S. at 476-477. /8/ After the McCulloch Court determined that the district court had properly asserted jurisdiction, it held on the merits that "the jurisdictional provisions of the (NLRA) do not extend to maritime operations of foreign-flag ships employing alien seamen" (372 U.S. at 13). The Court noted that Congress and the State Department, as well as settled principles of international law, recognized that the law of the "flag state ordinarily governs the internal affairs of a ship" (id. at 20, 21). The Court found no indication that Congress intended the NLRA to supersede the law of the flag state with respect to the labor relations of foreign crewmen on a foreign vessel (id. at 20). APPENDIX