November 5, 2021 - This Week at the Ninth

This Week at The Ninth: Compulsion and Coercion

This week, the Ninth Circuit explains the requirements for administrative summonses compelling testimony, and addresses whether a farm laborer was subjected to economic duress and undue influence when signing an arbitration agreement.

UNITED STATES V. BEN GHEE TAN

The Court holds that 19 U.S.C. § 1509(a)(2) does not require that an administrative summons to compel testimony include a detailed description of the subject matter of the investigation and the requested testimony.

The panel: Judges Graber, Christen, and Owens, with Judge Graber writing the opinion.

Key highlight: “[B]ecause the purpose of the interview is investigative, specificity ahead of time could hinder the investigation by either encouraging evasion or foreclosing the pursuit of new, relevant avenues of inquiry that come to light during questioning.”

Background: Defendant Ben Ghee Tan operates businesses that import agricultural merchandise. The director of a section within the United States Customs and Border Protection division of the Department of Homeland Security that specializes in agricultural imports served on Tan an administrative summons to compel him to provide testimony. After Tan refused to appear, the government filed a petition to enforce the summons under 19 U.S.C. § 1510. The district court granted the petition, and Tan appealed.

Result: The Ninth Circuit affirmed. The Court rejected Tan’s argument that 19 U.S.C. § 1509(a)(2), which states that the government must provide “reasonable notice” when issuing an administrative summons for testimony, requires the government to provide a notice that describes with reasonable particularity the subjects about which it intends to question to summoned person, so that the person can prepare ahead of time. Unlike the statute’s provision for the production of records, which requires both reasonable notice of the examination of records and reasonable specificity in the description of records sought, the statute requires only reasonable notice when the government is summoning a person to provide testimony. The court determined that it must give effect to these textual differences and that Tan’s interpretation of “reasonable notice” as encompassing a “reasonable specificity” requirement would render the “reasonable specificity” clause redundant in the subsection describing the requirements for compelling the production of documents. The Court was not persuaded that it should borrow the requirements of Federal Rule of Civil Procedure 30(b)(6), where a notice for the deposition of a corporation must specify the areas of inquiry with “reasonable particularity.” The Rules of Civil Procedure do not apply to, or supplant, the statutory process that Congress established in § 1509, and Rule 30(b)(6)’s “reasonable particularity” phrase is absent from § 1509(a)(2). The Court instead concluded that § 1509(a)(2)’s “reasonable notice” requirement means that the interviewee must be given sufficient time to arrange to attend the interview. The Court rejected Tan’s reliance on the legislative history of § 1509 both because the text of the statute is clear and because nothing in it altered the Court’s conclusion about the meaning of “reasonable notice.”

Finally, the Court rejected the argument that the government had not satisfied the other requirements for enforcement of an administrative summons. To obtain such enforcement, the government need only make a prima facie case for enforcement, showing that the investigation will be conducted pursuant to a legitimate purpose, that the inquiry may be relevant to the purpose, that the information sought is not already within Customs’ possession, and that the administrative steps required by the statute have been followed. Customs director had submitted a declaration swearing that (1) Customs was engaged in an ongoing investigation into whether Tan and companies that he owned operated, or controlled had complied with customs laws; (2) Customs did not already possess the information sought; and (3) Customs complied with each of the procedural requirements of 19 U.S.C. § 1509(c) and 19 C.F.R. § 163.7. That sufficed to obtain enforcement.

DARIO MARTINEZ-GONZALEZ V. ELKHORN PACKING CO. LLC

The Court holds that a farm laborer who was directed to sign an arbitration agreement in a hotel parking lot, after traveling to the U.S., without an opportunity to read the agreement or consult an attorney, was not subjected to economic duress or undue influence under California law.

Panel: Judges Siler (Sixth Circuit), Rawlinson, and Bumatay, with Judge Bumatay writing the opinion and Judge Rawlinson dissenting.

Key Highlight: “As an appellate court, we hesitate to overturn a district court’s factual findings. But where, as here, we are firmly convinced the district court overlooked key facts, it is our duty to reverse.”

Background: Elkhorn Packing Company hired Dario Martinez-Gonzalez, a resident of Mexico, to pick lettuce in Monterey County, California. After a few days on the job, Elkhorn held an orientation session in a hotel parking lot, where it lined up 150 employees, including Martinez-Gonzalez, and asked them to quickly sign employment paperwork, which included arbitration agreements. Martinez-Gonzalez later sued Elkin, alleging violations of federal and state labor and wage laws. The district court denied Elkhorn’s motion to compel arbitration, holding that Martinez-Gonzalez signed the arbitration agreement under economic duress and undue influence.

Result: The Ninth Circuit reversed. First, the Court evaluated whether the arbitration contract could be rescinded because of economic duress. Under California law, economic duress requires (1) a “wrongful act” (2) that “is sufficiently coercive to cause a reasonably prudent person faced with no reasonable alternative” to agree to an unfavorable contract, (3) where consent would not have been given absent duress. Elkhorn did not commit a wrongful act, the Court concluded, because it did not make any false claim or bad-faith threat. While “the timing of the orientation program disadvantaged Martinez-Gonzalez,” Elkhorn did not have a “coercive purpose” or bad faith motive in asking him to sign the agreement after he had arrived in the United States. Martinez-Gonzalez also failed to demonstrate a lack of reasonable alternatives, the Court said. He never asked whether signing the agreement was necessary, and Elkhorn never said he would be fired if he didn’t sign. In any event, the Court reasoned, Martinez-Gonzalez could have revoked the agreement if he wanted.

Next, the Court addressed “undue influence,” which has two elements: (1) “undue susceptibility in the servient person” and (2) “excessive pressure by the dominating person.” Martinez-Gonzalez was not especially vulnerable to pressure, the Court concluded. While he “may come from a modest socioeconomic background, he was able to support himself and his family prior to working for Elkhorn.” And the fact that he eventually quit his job at Elkhorn “confirms that he had no undue susceptibility.” Nor did Elkhorn use “excessive pressure,” the Court said. While the arbitration agreement was presented after Martinez-Gonzalez arrived in the U.S., in a hotel parking lot with nowhere to sit down, following a full work day, and with no time allotted to read the agreement or consult an attorney, the Court found it “implausible” that “Martinez-Gonzalez’s will was overborne.” The parking lot “was conveniently located at the workers’ hotel”; the workers’ fatigue and hunger were not “oppressive” conditions; Elkhorn didn’t directly “interfere” with Martinez-Gonzalez’s ability to read the agreement or consult an attorney; Elkhorn urged the workers to hurry merely to accommodate others waiting in line; and Elkhorn’s general instructions to “follow the company’s rules” were not about the arbitration agreements. The Court thus remanded to determine whether Martinez-Gonzalez’s claims fall within the scope of the arbitration agreement.

Judge Rawlinson dissented. In her view, the majority gave insufficient deference to the district court’s fact findings under the clear error standard. “[T]he wrongful act required to establish economic coercion need not constitute a tort or a crime,” Judge Rawlinson pointed out. And the majority overlooked many of the district court’s factual findings, including that Martinez-Gonzalez was dependent on Elkhorn for housing and transportation, reasonably believed that he could only work for Elkhorn on his visa, and that signing the agreements was presented as mandatory. “Overall, my colleagues in the majority pay lip service to the deference we owe to the district court’s factual findings,” Judge Rawlinson wrote, “while simultaneously making their own factual findings based on their own weighing of the evidence.”