ROBERT N. SCOLA, JR., District Judge.
THIS MATTER is before the Court on the Report and Recommendation from the Honorable Edwin G. Torres, United States Magistrate Judge, regarding the Defendants' Motions to Dismiss the Indictment. Judge Torres's Report recommends that Defendant Hidalgo's Motion to Dismiss (ECF No. 67) be granted, and that Defendant Florida West International Airways, Inc.'s Motion to Dismiss (ECF No. 94) be denied. (Report of Magistrate, ECF No. 191.) The Government and Hidalgo have filed objections to the Report. (Obj's, ECF Nos. 198 & 200.). On February 10, 2012, the Court held a hearing on the parties' objections.
Judge Torres's Report and Recommendation contains detailed factual findings which are thoroughly explained and supported by the evidence. Additionally, the Report cogently addresses the legal issues and accurately resolves each of them. Finally, the Report provides a well-reasoned and complete response to all of the issues raised by the Government and Hidalgo in their objections. Having considered Judge Torres's Report, and the parties' objections, and having made a complete de novo review of the record, this Court finds Judge Torres's Report and Recommendation cogent and compelling.
It is
EDWIN G. TORRES, United States Magistrate Judge.
This matter is before the Court on Defendants' Motions to Dismiss Indictment and Request for Evidentiary Hearing (the "Motions") [D.E. 67, 94]. This Court has thoroughly reviewed the Motions, responses, replies, the Parties' supplemental filings, the exhibits filed with the Court and is otherwise appraised of the entire record in this case. The Court also held a lengthy two-day evidentiary hearing on August 22 and 23, 2011, at which the Parties presented arguments on the pending Motions. For the following reasons, Defendant Rodrigo Hidalgo's Motion should be
These Motions present a familiar third-party breach of contract issue arising in a relatively novel plea agreement context. At bottom, Rodrigo Hidalgo ("Hidalgo") and Florida West International Airways, Inc. ("Florida West") (collectively the "Defendants") move to dismiss the pending indictment arguing that, by seeking this indictment, the Government has breached a 2009 plea agreement that immunized them.
Several years ago, the Government investigated a large price-fixing conspiracy affecting the air cargo industry. As a result of that investigation, the Government indicted, among other air cargo providers, LAN Cargo, S.A. ("LAN Cargo") for participating in this alleged price-fixing conspiracy. On January 21, 2009, the Government and LAN Cargo executed a plea agreement whereby LAN Cargo plead guilty to violating the Sherman Antitrust Act, 15 U.S.C. § 1, and paid a fine in exchange for immunity to certain employees and related corporations. [D.E. 67-1, hereafter ("Plea Agreement")]. These immunity provisions state:
Id. at 14-15 (emphasis added).
As additional background, LAN Cargo's parent company is LAN Airlines, S.A. ("LAN"), a Chilean-based airline engaged in the business of air passenger travel. LAN Cargo, its wholly owned subsidiary, handles the air cargo division of LAN and provides cargo related services to South and North America through a network of companies. Because certain countries regulate whether a foreign owned company may operate an airline within its borders, LAN Cargo maintains a close relationship with companies domesticated in those
On December 2, 2010, the Government indicted the Defendants and others with one count of participating in an antitrust conspiracy involving "international air transportation services for cargo between Miami, Florida and Colombia and elsewhere." [D.E. 1]. The Indictment alleges that from January 2002 until February 14, 2006 Hidalgo participated in a conspiracy to suppress and eliminate competition by fixing and coordinating certain components of cargo rates, including peak season, security and fuel surcharges for international air cargo shipments in violation of the Sherman Antitrust Act, 15 U.S.C. § 1. It is further alleged that Florida West joined and participated in this conspiracy from August 2002 until February 14, 2006. Id.
Specifically, Hidalgo asserts that paragraph 15 of the Plea Agreement provides immunity to him under all three categories:
Hidalgo contends that he is immunized under the first two categories of the Plea Agreement because during the indictment period he was simultaneously an executive of LAN Cargo and LAN Cargo's subsidiaries South Florida Air Cargo ("SFAC") and Florida West.
Taking Hidalgo's dual employment argument in parts, he first contends very simply that, if the evidence demonstrates that he worked as a LAN Cargo executive, then he is immunized from prosecution. Next, Hidalgo asserts the equally straightforward premise that, as a Florida West executive (which he undisputedly was), he is immunized as a subsidiary of LAN Cargo. However, because the Plea Agreement leaves the term "subsidiary" undefined, whether Florida West is a "subsidiary" of LAN Cargo is a disputed issue. Hidalgo argues that Florida West is a "subsidiary" of LAN Cargo as a matter of law based on two purportedly dispositive
Similarly, Florida West contends that paragraph 14 of the Plea Agreement affords it immunity as a "subsidiary" of LAN Cargo. [D.E. 94 at 2]. Alternatively, and in response to Hidalgo's purported dual employment position, Florida West asserts that Hidalgo's alleged conspiratorial actions cannot be imputed to it because as a LAN Cargo executive his actions were not performed within the scope of his Florida West employment. [D.E. 160 at 2].
The Government disputes that either Hidalgo or Florida West is immunized by the Plea Agreement. With respect to Hidalgo, as a preliminary matter, the Government rejects the notion that, while ostensibly just a Florida West executive, he was also silently a LAN Cargo executive during the indictment period. But, even assuming he was, the Government disputes that he was a LAN Cargo executive during this period. Next, the Government rejects Hidalgo's "subsidiary" interpretation and contends that, as a matter of law, a parent corporation must own a majority share of another company to create a parent-subsidiary relationship. And because LAN Cargo (or LAN) owned only 25% of Florida West, it is not a subsidiary. Alternatively, assuming the Court concludes Florida West is a subsidiary of LAN, the undisputed facts demonstrate that Hidalgo's "primary responsibilities" were not for the sale of air cargo services for LAN Cargo.
As for Florida West, because the Government maintains that Florida West is not a subsidiary of LAN Cargo, it is excluded from paragraph 14 of the Plea Agreement. Moreover, the Government asserts that paragraph 14 actually carves Florida West (by description) out of that provision. Finally, the Government rejects Florida West's "imputed conduct" argument because Hidalgo acted solely on behalf of Florida West during the indictment period. [D.E. 159 at 12-14].
On June 2, 2011, we held an initial hearing to determine whether an evidentiary hearing was necessary. After entertaining the Parties' arguments, we granted the Defendants' motion for an evidentiary hearing.
During the two-day evidentiary hearing, the Parties presented nine witnesses and dozens of documents. Including himself, Hidalgo called four witnesses (Michael Cuda, Jaime Silva, Steven Leonard and Alberto Faret) to testify about Hidalgo's relationship with Florida West and LAN Cargo, as well as LAN Cargo's relationship with Florida West. Each witness previously worked for either LAN Cargo or SFAC/Florida West (with Hidalgo), and testified with personal knowledge regarding these corporations, Hidalgo's employment status and the interplay therein. Relevant to these subjects, the Government called Joachim Haubold and Maria Martinez only. Haubold had worked for a consulting company providing services to LAN Cargo and Florida West. Haubold testified with personal knowledge as to how the industry recognized the relationship between LAN Cargo and Florida West, his interactions with these companies, and the role that Hidalgo played in that relationship. Martinez provided narrow testimony relating only to Hidalgo's LAN Cargo employment based on her personal
In addition to these witnesses, the Parties called the attorneys who principally drafted the Plea Agreement — Government attorney Mark Grunvig and LAN Cargo attorney James Dick. These witnesses testified with personal knowledge as to the intent of the Government and LAN Cargo when they executed the Plea Agreement, whether they intended to immunize Florida West or its employees and the meaning of the term "subsidiary" as used in the Plea Agreement.
We reach our conclusions based predominately on the facts presented during the evidentiary hearing. Hidalgo convincingly proffered evidence to support the factual assertion that 1) he was an executive of both LAN Cargo and Florida West; and 2) LAN Cargo exercised actual control over Florida West. On rebuttal, the Government failed to impeach Hidalgo (or his witnesses) or proffer sufficient independent evidence (through its witnesses or documents) to discredit Hidalgo's factual assertions. In fact, the Government's witnesses partially corroborated Hidalgo's position.
At a minimum, Hidalgo makes a prima facie showing of employment. At the evidentiary hearing, Hidalgo testified that he was a LAN Cargo executive during the indictment period. [D.E. 183, August 22, 2011 hearing transcript, Hidalgo 44:17-20, 96:21-23, 161:8-20; Leonard 31:23-24 (Rodrigo was "a top person at LAN Cargo")].
Further, because he was sent abroad, Hidalgo was considered an "expatriado," 53:15-16; D. Ex. 12, i.e., a label given only to LAN Cargo employees who were assigned to a particular company, but who still reported to LAN Cargo and received LAN Cargo benefits. See Faret 33:16-23; Hidalgo 53:8-14. As multiple witnesses testified, LAN Cargo's CEO Armando Valdivieso ("Valdivieso") was Hidalgo's immediate boss for nearly the entire indictment period. 8/22 Tr. Cuda 5:17-19, 7:1-2; Silva 19:9-16; Leonard 26:15-21.
Hidalgo testified that he undertook work responsibilities relating to LAN Cargo that were separate from his responsibilities to either SFAC or Florida West; he referenced numerous reports and emails to support this contention. These documents related to LAN Cargo's performance and other confidential information that were shared only with high level LAN Cargo executives. Hidalgo 66:22-67:17; see, e.g., D. Ex. 14, 16, 19, 94, 245. Importantly, these LAN Cargo materials were not shared with Florida West's CEO Mansour Rasvanad ("Rasvanad") because, accordingly to Hidalgo, Rasvanad was not a LAN Cargo executive (unlike Hidalgo). Hidalgo 67:11-17; 94:1-3. Moreover, Hidalgo negotiated and entered into contracts on behalf of LAN Cargo, not merely Florida West. E.g., D. Ex. 211 and Hidalgo 78:18-79:8 (negotiating a warehouse contract for the benefit of the companies in the LAN Cargo group); D. Ex. 46 and Hidalgo 79:20-80:11 (discussing Hidalgo dividing up usage of airplanes between LAN Cargo and Florida West); Hidalgo 162:7-16 (explaining that he entered into contracts on behalf of LAN Cargo). To facilitate his functions, Hidalgo often met with top LAN Cargo executives at LAN Cargo's office regarding LAN Cargo business. Id. 62:3-8; Leonard 33:14-24. Moreover, customers, third parties, and other LAN employees considered Hidalgo a LAN Cargo executive. D. Ex. 190, 210; Haubold 188:9-24, 189:19-22; Hidalgo 55:19-24.
Another factor that bolsters Hidalgo's factual assertion is that LAN Cargo dictated his compensation package. LAN Cargo's CEO Valdivieso set his salary, bonus and benefit structure, see Hidalgo 54:13-55:6; 162:2-8, which was similar to other LAN Cargo executives. Id. at 59:5-22. LAN Cargo, rather than Florida West, paid him substantial annual bonuses. See D. Exs. 4, 5, 6, 7 (receipts of payments from LAN Cargo (2003) and Professional Aviation Management, LLC ("PAM") (2004-2006)); Hidalgo 60:5-61:59:7, 158:3-10 (Hidalgo testified that the bonuses were based on LAN Cargo's performance — not Florida West's — as compensation for his work as a LAN Cargo executive). Moreover, the evidence suggests that his bonus payments were independent of Florida West because, according to Hidalgo, they could increase when Florida West suffered losses, see 8/22 Hidalgo 60:15-61:7, and were received without the knowledge of Florida West's CEO Rasvanad. Id. at 101:23-102:21. And, finally, Hidalgo received the same benefits as other LAN Cargo executives (such as stock options, flights, insurance, vacation). D. Ex. 7, 8, 9, 12, 58; Hidalgo 58:7-59:3, 73:7-12 (invited to LAN Cargo parties).
Hidalgo explains that he had to conceal his employment relationship with LAN Cargo from the public because, by broadcasting his status as a LAN Cargo executive, he could raise suspicions that LAN Cargo (a foreign airline) controlled Florida West (a domestic air cargo carrier) in contravention of 49 U.S.C. §§ 41101(a)(1),
In response, the Government attacks Hidalgo's factual proffer in two main respects: 1) by impeaching the testimony of Hidalgo and his supporting witnesses and 2) calling rebuttal witnesses Martinez and Haubold. And, to a lesser degree, the Government subsequently submitted rebuttal affidavits. In each respect, however, the Government fails to debunk Hidalgo's dual employment theory, discredit the testimony of Hidalgo (or his witnesses) or present admissible evidence to support its rebuttal position.
First, the Government attempts to discredit Hidalgo's assertion that he was a LAN Cargo executive. In so doing, it focuses on specific instances where Hidalgo held himself out as a Florida West executive and maintained an image with the public that he worked solely for that company. See Hidalgo 25:23-26:16 (referencing an email in which Hidalgo stated that Florida West is a separate and independent airline); 133:3-18 (Hidalgo explains that a customer who wants to do business with LAN Cargo, and thus fly separate routes, must contact LAN Cargo as opposed to Florida West); 104:22-25 (Hidalgo told the government he worked for Florida West); 112:2-113:1 (Hidalgo admits to carrying a Florida West, not a LAN Cargo, business card). However, we find the Government's position unavailing because it is predicated on the assumption that Hidalgo cannot simultaneously work for both LAN Cargo and Florida West. Yet, this is precisely Hidalgo's argument.
Even though Hidalgo held himself out as a Florida West employee, Hidalgo's witnesses substantially corroborate that he was a LAN Cargo executive. These witnesses testified based on their personal knowledge of how Hidalgo interacted with LAN Cargo's Valdivieso and operated between Florida West and LAN Cargo to support Hidalgo's position. The Government attempts to minimize their testimony, however, by noting they lack direct personal knowledge regarding Hidalgo's LAN Cargo employment status. This is expected though — they do not represent LAN Cargo. But, their testimony still supports the factual assertion that Hidalgo held a unique position, apart from their Florida West counterparts, and that he specifically interacted with LAN Cargo. As such, we credit their testimony and find it corroborates Hidalgo's position.
Next, the Government called rebuttal witnesses Martinez and Haubold. Between these two, only Martinez provided testimony relevant to Hidalgo's employment argument. Haubold (who testified regarding control) explained that Hidalgo was always "affiliated" with LAN Cargo
However, while we credit her testimony, the record makes clear that Martinez served an exclusively administrative function for LAN Cargo and that, in such a role, Martinez would not have otherwise known of Hidalgo's unique position within LAN Cargo. Moreover, by testifying that Hidalgo's payments (if made) did not pass through LAN Cargo's payroll, Martinez's testimony fails to rebut Hidalgo's position. Indeed, Hidalgo specifically contends that his bonuses were paid through a third-party vendor PAM, not LAN Cargo. Thus, tempered by these facts, Martinez's testimony that Hidalgo was not a LAN Cargo employee based on payroll records is unconvincing.
Beyond Martinez, the Government failed to offer any additional testimony to rebut Hidalgo's LAN Cargo employment argument. The Government chose not to call a single LAN Cargo, LAN, Florida West or PAM executive to refute Hidalgo's testimony even though, as it turns out, Ernesto Ramirez ("Ramirez"), a LAN Cargo Executive and Florida West board member, was physically present at the courthouse during both days of the evidentiary hearing. See 8/23 Tr. 214:23-215:20. Moreover, Paul Gartlan ("Gartlan"), PAM's owner and CEO, is a local Miami resident whose attorney was also physically present in the courtroom during both days of the evidentiary hearing. See 8/22 Tr. 3:17-19; 8/23 Tr. 3:15-16.
After the hearing, the Government submitted affidavits to rebut the hearing evidence. Strikingly, the Government relied on affidavits from Ramirez and Gartlan. [D.E. 158-3,4]. Their affidavits, and specifically Gartlan's, corroborate rather than refute Hidalgo's position regarding his bonus. Indeed, Gartlan explains that his limited records inconclusively elucidate the specific purpose of Hidalgo's payments. Yet, he attests that PAM is in the business of, in part, paying bonuses, that Hidalgo submitted the invoices to PAM, that Ramirez (a LAN Cargo executive) approved the payments, and that LAN reimbursed PAM for the payments. [158-3]. Thus, the argument that LAN Cargo paid Hidalgo a bonus in 2005, 2006 and 2007 is uncontradicted.
In sum, Hidalgo presents evidence of an entire career within the LAN Cargo organization, direct and anecdotal evidence of his specific involvement with LAN Cargo decisions, dominion by his LAN Cargo superior regarding specific employment and direct control by LAN Cargo over his compensation package. With that said, and while we credit Hidalgo's testimony (and that of his witnesses), the evidence is qualified by the self-serving nature of Hidalgo's testimony and his witnesses' incomplete knowledge as to his employment (as they are not LAN Cargo representatives). Plus, the Government presents some evidence to supports its position that Hidalgo worked for Florida West only. But, on balance, after weighing all available credible testimony and evidence, we find that
As noted above, paragraph 15(a) of the Plea Agreement immunizes employees of LAN Cargo's subsidiaries. It is undisputed that Hidalgo was a Florida West executive during the indictment period. Therefore, the issue turns on whether Florida West was a subsidiary of LAN Cargo. The Government and Defendants advance divergent interpretations of the undefined term "subsidiary." The Government contends that majority ownership is a prerequisite, while the Defendants argue that a combination of ownership and actual control is sufficient. Leaving the legal question aside, from a factual standpoint, the dispositive inquiry is whether LAN Cargo exercised actual control over Florida West during the indictment period. Moreover, aside from the subsidiary context, this issue is also relevant tangentially to Hidalgo's LAN Cargo employment status. See I.B.i., supra.
Hidalgo contends that LAN Cargo controlled Florida West's strategic "big picture" decisions through Hidalgo, as a LAN Cargo executive. See Hidalgo 49:2-8; Leonard 33:8-9. This level of control, Hidalgo contends, comports with LAN Cargo's position of control within the LAN corporation. LAN Cargo was responsible for LAN's cargo division and LAN Cargo's executives controlled, from a strategic big picture perspective, the entire "LAN Cargo Group," which included ABSA, MAS Air, SFAC and Florida West. While LAN Cargo only owned 25% of Florida West,
One such example of control relates to LAN Cargo's involvement with Florida West's competitors and cost issues. See Hidalgo 69:1-70:5, D. Ex. 22 (email from Hidalgo to three LAN Cargo executives informing them that "we" have to pay attention to a potential competitor that may begin servicing "Central America as well as South America" and that "[t]his is a threat we have to assess."), Exs. 18, 21, 23, 105; and Hidalgo 65:11-66:7, D. Ex. 29 (in response to an email relating to "U.S. Custom and Border operations and costs" sent to Hidalgo and multiple LAN Cargo executives (but not Rasnavad), LAN Cargo's CEO Valdivieso directs Hidalgo to meet with him to "coordinate on how to tackle this issue").
Moreover, the record evidence is replete with other examples of how LAN Cargo controlled both major and minor strategic decisions for Florida West, including: routes,
In isolation, these individual factors are insufficient to support a factual finding of control. However, when viewed together, in light of the testimony and documents provided, Hidalgo establishes, at a minimum, a prima facie showing that LAN Cargo exercised actual control over Florida West throughout the indictment period. Indeed, LAN Cargo controlled (or significantly influenced) nearly every facet of Florida West.
In addition to these examples, Hidalgo argues control by way of analogy too. Hidalgo argues that Florida West was created to provide direct carrier services that its predecessor company SFAC provided as an indirect carrier. In effect, that Florida West succeeded SFAC, which was a wholly owned LAN Cargo subsidiary. The testimony establishes that Florida West operated in exactly the same way as SFAC, with the same sales team servicing the same area and providing services to the same customers. Except for a change in paperwork and the company name listed on the airway bill, SFAC and Florida West (in the eyes of the market) were indistinguishable. See Hidalgo 43:13-24, 116:1-9; Haubold 183:17-184:10 (testified that other than the name change, Florida West was the same as its predecessor company SFAC); see also Cuda 8:8-25 (explaining that employees of SFAC received the same benefits as employees of Florida West). Moreover, the Government concedes that there was no material difference between SFAC and Florida West. See 8/23 Tr. Gallagher 187:11-20.
Thus, as the analogy goes, if LAN Cargo controls the LAN Cargo Group, which includes various wholly-owned subsidiaries, and Florida West is part of the LAN Cargo Group, then LAN Cargo controls Florida West akin to a wholly-owned subsidiary irrespective of its technical minority ownership.
In response, the Government again seeks to rebut Hidalgo's position by discrediting his witnesses and calling a rebuttal witness, Joaquin Haubold. However, the Government again fails in both respects.
Consistently, the Government cross-examined Hidalgo's witnesses on the issue of whether Florida West and LAN Cargo were the same or separate companies. Unvariably, they all concede that Florida West and LAN Cargo were separate entities, operating separate routes. Cuda 11:17-22, Silva 25:23-26:19. However, in the process, the Government bolstered Hidalgo's control argument. For instance, the Government presented Jaime Silva with an email exchange that took place between Hidalgo and a dissatisfied customer. Silva 24:15-27:12, Govt. Ex. 56. In that email, Hidalgo explained to the customer that Florida West and LAN Cargo are separate entities. Id. Silva testified that he agreed with the statement in Hidalgo's email and, more broadly, that Hidalgo was truthful.
Silva, however, went on to qualify his testimony and explain that Florida West maintained a separate public and private persona due to a federal regulation. Silva 26:4-19. Silva completed his explanation by highlighting the dissatisfied customer's response to Hidalgo which stated, "if Florida West wishes to conclude this issue on a pure business level, Sovereign will likewise conduct its future business decisions in the same vein, and in so doing all commercial relations with ABSA, Florida West and LAN and MAS Air will cease from Brazil, Colombia, Guatemala and Peru." See 27:3-7, Govt. Ex. 56. Thus, this exchange supports the assertion that the LAN Cargo Group, including Florida West, operated as a single unit. Moreover, as Faret conceded during cross, while LAN Cargo Group may not officially exist, the group of parallel companies controlled by LAN Cargo
Next, the Government called Haubold, its sole rebuttal witness on the control issue. Haubold, who was sequestered before testifying, provided the single most effective, compelling portion of testimony during the evidentiary hearing and unequivocally testified that LAN Cargo operated and exercised control over a network of airlines (including Florida West) known informally as the LAN Cargo Group.
Haubold worked for a consulting company that provided general sales agent ("GSA") services to various LAN Cargo group companies including LAN Cargo and Florida West. As a GSA, Haubold provided these companies with local sales agents and received a commission from the sales. 8/22 Tr. Haubold 168:1-17, 170:15.
The Government called Haubold to specifically testify that Florida West and LAN Cargo were two separate companies. This was made clear during his direct examination: "Were your interactions always with an independent Florida West?" and "Your interactions were always with Florida West as an independent company, is that correct?" 8/23 Tr. Gallagher at 177:7-13. While Haubold conceded that legally LAN Cargo and Florida West may be separate companies,
Haubold maintained that the LAN Cargo Group was "a network of different airlines in the region that have managed to gain great credibility within Latin America, especially within Colombia, to provide a very good solid cargo service. One of them was ABSA, one was MAS Air coming from Mexico, ..., and one of them was Florida West as part of the network." Id. at 183:1-7. Moreover, he corroborated that SFAC became Florida West in 2002 and that other than changing certain paperwork, the company was considered the same within the marketplace and operated as the same. 183:17-184:10. And, he agreed that Hidalgo was considered a "Chilean" or one of the individuals directly linked to the LAN Cargo Group along with other LAN Cargo executives, such as Valdivieso and Ramirez. Id. at 184:11-22.
Furthermore, Haubold discussed various emails that he sent to Hidalgo, Valdivieso
In sum, Hidalgo presents evidence that LAN Cargo operates as a figure head that controls a group of companies known informally as the LAN Cargo Group. This "Group" consisted of LAN Cargo, ABSA, MAS Air and SFAC/Florida West. The evidence Hidalgo proffers supports this factual assertion. However, similar to this employment argument, much of his evidence suffers from a self-serving perspective or divergent conclusions (as in how his documents could be interpreted). But, after weighing the quality of the evidence presented on both sides, tempered by Haubold's testimony and certain compelling examples of control (i.e. routes, competitors), we conclude that the totality of evidence supports Hidalgo's position. Again, our ultimate conclusion that Hidalgo presents prima facie evidence that LAN Cargo exercises actual control over Florida West is bolstered by the Government's failure to rebut this argument with testimony from a LAN, LAN Cargo or Florida West representative.
The Parties were directed to present evidence discussing the intent of the drafters when LAN Cargo and the Government entered into the Plea Agreement. [D.E. 124]. The purpose of such evidence, of course, is to resolve ambiguity. However, because the Court concludes the Plea Agreement is unambiguous, this extrinsic evidence is irrelevant.
Typically, the utility of a motion to dismiss an indictment is very limited. See generally United States v. Pendergraft, 297 F.3d 1198, 1204 (11th Cir.2002); United States v. Critzer, 951 F.2d 306, 307 (11th Cir.1992). However, when a defendant asserts the defense of immunity (which is the case here), a motion to dismiss is appropriate. See United States v. Salman, 378 F.3d 1266, 1267 n. 3 (11th Cir.2004); United States v. San Pedro, 781 F.Supp. 761 (S.D.Fla.1991) (dismissing an indictment based on the immunity provision of a plea agreement).
Hidalgo and Florida West assert that the Government breached the Plea Agreement, which purportedly immunizes them from prosecution. The Plea Agreement's immunity provisions extend to the therein named signatory defendants LAN Cargo and ABSA, and certain classes of related individuals and corporations. By its terms, deciding specifically which related individuals and corporations the Plea Agreement immunizes turns on the undefined term "subsidiary." Because the undefined term raises interpretation concerns, we turn to principles of contract law to affix its appropriate scope. United States v. Jefferies, 908 F.2d 1520, 1523 (11th Cir.1990) (commercial contract principles are applied to interpret and enforce plea agreements).
In the process of analyzing plea agreements, courts have necessarily drawn on the most relevant body of developed rules and principles of private law, those pertaining to the formation and interpretation of commercial contracts. See id.; Wilson v. Washington, 138 F.3d 647, 652 (7th Cir.1998); United States v. Fields, 766 F.2d 1161, 1168 (7th Cir.1985). However, Jefferies cautioned that this analogy should not be taken too far and summarized certain standards that apply to plea agreements:
908 F.2d at 1523 (citations and quotations omitted).
Hidalgo and Florida West are unnamed in the Plea Agreement. As a result, this raises a preliminary matter as to whether Hidalgo and Florida West are intended third party beneficiaries and thus
Here, because neither Hidalgo or Florida West are mentioned by name, the question is whether LAN Cargo, ABSA and the Government entered into the Plea Agreement for the direct and substantial purpose of conferring a benefit on a class of individuals that either Hidalgo or Florida West belong. Based on the express terms of paragraphs 14 and 15(a), the signatory parties unmistakably intended to confer immunity on a discrete class of corporations and individuals in addition to LAN Cargo and ABSA that could include the Defendants. See Bochese, 405 F.3d at 982-83 (citing American Sur. Co. of New York v. Smith, 100 Fla. 1012, 130 So. 440, 441 (Fla.1930) ("Where, therefore, it is manifest from the nature or terms of a contract that the formal parties thereto intended its provisions to be for the benefit of a third party, as well as for the benefit of the formal parties themselves, the benefit to such third party being the direct and primary object of the contract, or amongst such objects, such third party may maintain an action on the contract even though he be a stranger to the consideration.")) (emphasis added).
The plea agreement unquestionably conferred a direct benefit on a class of individuals: immunity. Moreover, the Plea Agreement evinced an intent to extend this benefit to a definable class of third parties: employees of a LAN Cargo, employees of LAN Cargo's subsidiaries, and subsidiary corporations of LAN Cargo and ABSA. Vencor Hosps., for instance, concluded that the plaintiff was an intended third party beneficiary because the contract stated "benefit payments may be made to the ... `hospital'" and because that plaintiff hospital had received "benefit payments" it was conferred a benefit. 169 F.3d at 680. Here, the facts are more compelling because the plea agreement language defines a finite and identifiable class of corporations and individuals that are specifically related to the signatory defendants. But see Bochese, 405 F.3d at
Hidalgo advances two meritorious arguments to support his immunity position. First, that LAN Cargo employed him. This inquiry largely presents an issue of fact resolved by the Court relying on record evidence and guidance from helpful case law. Second, that he was an employee of two LAN Cargo subsidiaries: SFAC and Florida West. The second inquiry presents a more difficult question and asks whether Florida West is a subsidiary of LAN Cargo based on its 25% minority ownership and exercise of actual control. This latter inquiry presents a mixed question of fact and law. We discuss each in turn.
Hidalgo and the Government dispute whether he was a LAN Cargo employee. Each party relies largely on the record developed during the evidentiary hearing to support their respective positions.
The Government counters arguing that Hidalgo: 1) worked for Florida West only; 2) did not hold himself out as a LAN Cargo employee to others in the airline industry; 3) told customers and the government that he was employed by Florida West; 4) ceased receiving payments from LAN Cargo's payroll in 2002 when he left SFAC; 5) held no title at LAN Cargo; 6) did not appear on a LAN Cargo organizational chart; 7) did not carry a LAN Cargo business card; and 7) never sent or received email from a LAN Cargo email address. [D.E. 159 at 3; 168 at 6-8].
If we accept each of these factors as true (which the record supports), Hidalgo's dual employment position prevails. Indeed, it would be illogical for Hidalgo to hold himself out as a LAN Cargo employee, appear on a LAN Cargo organizational chart, carry a LAN Cargo business card or appear on LAN Cargo's payroll if the relationship was intentional concealed to objectively comply with the Federal Aviation Act. The corollary, of course, is that Hidalgo is expected to hold himself out as a Florida West employee. All of these factors comport with the premise that Hidalgo's position was private, known only internally. In this vain, the thrust of the Government's argument with respect to work performed or not performed solely
To be sure, Hidalgo does not argue that he served as a specific LAN Cargo officer with a distinct role and specific job description. Hidalgo argues, instead, that he served as both a LAN Cargo executive and Florida West executive. And the evidence he proffered demonstrates that Hidalgo indeed acted as an emissary between the decisionmaking LAN Cargo "brain" and its functional Florida West "body." The Government flatly disputes this position; largely as based on self-serving evidence and an implausible theory. However, the record syncs with this theory. As a result, much of the characteristics the Government contends are probative of an employment relationship, i.e., title, business card, organizational chart, and payroll, are inapposite in this atypical situation.
Although neither party cites a single case to support their respective positions, we find a review of case law and statutes dealing with employer-employee relationships is helpful. This area of jurisprudence demonstrates common indices of an employment relationship that are relevant to this situation including, but not limited to: control; supervision; power to determine pay rate or method of pay; right to (directly or indirectly) hire, fire, or modify employment conditions; preparation of payroll or payment of wages; provision of employees benefits; tax treatment of the employee; duration of the relationship; and, whether the hiring party has the right to assign additional duties. See, e.g., Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992) (defining a "common-law test for determining who qualifies as an `employee,'" applied in various contexts); Berrocal v. Moody Petroleum, Inc., No. 07-22549-CIV, 2010 WL 1372410, at *9-10 (S.D.Fla. Mar. 31, 2010) (discussing relevant employment characteristics in the employee-joint employer Fair Labor Standards Act context); Restatement (Second) of Agency § 220(2) (1958) (listing nonexhaustive criteria for identifying master-servant relationship); Rev. Rul. 87-41, 1987-1 Cum. Bull. 296, 298-299 (setting forth 20 factors as guides in determining whether an individual qualifies as a common-law "employee" in various tax law contexts).
As discussed earlier, Hidalgo demonstrates that several of these characteristics apply to his LAN Cargo employment. However, in light of the undefined, amorphous nature of Hidalgo's position, we find the evidence relating to his compensation package the most probative. Hidalgo contends that LAN Cargo either determined or paid his salary, bonus and benefits during the indictment period. As for his salary, Florida West paid him (this is undisputed); nevertheless, Hidalgo contends that LAN Cargo set the actual amount. The Government presents no evidence to rebut this testimony including, but not limited to, Rasnavad, Valdivieso, Ernesto, Ureta or Germani.
Next, Hidalgo contends that PAM's payments of at least $75,000 in 2005, 2006 and 2007 represent bonus payments from LAN Cargo. Again, the Government presents no evidence to rebut this specific claim (as discussed above, Martinez's payroll testimony fails). The Government first half-heartedly attempts to characterize them as "severance" payments, which Hidalgo emphatically denied. Hidalgo 164:22-165:1. Later, the Government submits new evidence and affidavits from Ureta and Gartlan that discuss this issue. Abandoning the severance argument, Ureta unconvincingly attests that during his tenure (2006 forward) he had "no knowledge" of payments to Hidalgo from "LAN/LAN Cargo" or any amounts "budgeted" for Hidalgo. [D.E. 159-1]. Yet, technically, his affidavit fails to specifically rebut Hidalgo's position outright because in fact PAM, not "LAN/ LAN Cargo," actually paid Hidalgo. Indeed, Ureta's failure to pin down LAN Cargo (especially since he is its current CEO) corroborates Hidalgo's dual employment argument. And, contrary to Ureta's position, PAM's CEO Gartlan attests that PAM is an "employee leasing company" that pays "bonuses" for individuals hired by clients, such as LAN or LAN Cargo. [D.E. 158-3]. And that although he has "no other information" relating to the payments, LAN Cargo's Ramirez authorized PAM to pay each invoice and LAN subsequently reimbursed PAM for those payments. Id.
Putting aside the lack of rebuttal evidence from the evidentiary hearing, or that the Government secured two affidavits after-the-fact on this issue, ultimately, neither LAN Cargo nor PAM is able to present a viable explanation or unequivocally deny that Hidalgo received
Finally, Hidalgo points to his receipt benefits and contends that he received benefits commensurate with this status a LAN Cargo executive, which he contends was greater than the benefits he would have otherwise received solely as a Florida West employee. While the Government disputes the probative value of this evidence, Hidalgo asserts that he received additional complimentary flights, held an insurance card that read "LAN Chile Airlines Executive," and was referred to as an "expatriado" and an "executive" in LAN communications. The Government again dismisses these contentions as self-serving, but fails to rebut the evidence with any specific testimony or documents. Moreover, unlike the salary or bonus issues, the Government's subsequent affidavits fail to even comment on this issue.
Again, we recognize that some of Hidalgo's position is supported solely by his testimony and testimony from individuals who worked with him at SFAC or Florida West. But, we find Hidalgo's and his witnesses's testimony credible.
As a preliminary matter, Hidalgo is immune from prosecution for the period of the indictment when he worked for SFAC: January 1, 2002 through July 31, 2002. Hidalgo was an employee of SFAC during the period January 2002 until July 31, 2002. 8/22 Tr. Hidalgo 115:22-116:5, 206:2-3. And SFAC was a wholly owned subsidiary of LAN Cargo. Hidalgo 38:17-19; 8/23 Tr. Dick 162:23-25. Thus, under the terms of paragraph 15, Hidalgo is immunized for his conduct during that period. To be sure, Mark Grundvig, the Government attorney who drafted the Plea Agreement, testified that this result is correct. 8/23 Tr. 48:8-13; 93:23-94:18 ("If South Florida Air Cargo was a subsidiary of LAN Cargo [
Hidalgo makes a prima facie showing that LAN Cargo exercised actual control over Florida West. The question then is whether LAN Cargo's actual control combined with its 25% minority ownership interest, is sufficient to establish that Florida West is LAN Cargo's subsidiary. As noted above, this question turns on the Plea Agreement's undefined term.
After a thorough review of the legal authority relied on by Hidalgo and the Government, we begin the discussion by concluding that the Plea Agreement is
Hidalgo and the Government agree that the Plea Agreement is unambiguous, but they advance divergent interpretations for the agreement's unambiguous term. This will not necessarily render the Plea Agreement ambiguous. See, e.g., Frulla, 543 F.3d at 1252. Rather, the question is whether the term or provision in question is susceptible to more than one reasonable interpretation because of uncertain meanings of terms, missing terms or other facial deficiencies. Id.; Orkin Exterminating Co., Inc. v. F.T.C., 849 F.2d 1354, 1360 (11th Cir.1988); see also Green v. Biddle, 8 Wheat. 1, 21 U.S. 1, 38, 5 L.Ed. 547 (1823) ("where the words of a law, treaty or contract, have a plain and obvious meaning, all construction, in hostility with such meaning, is excluded."); Ennis v. Warm Mineral Springs, Inc., 203 So.2d 514, 518 (Fla. 2d DCA 1967) ("If a contract is susceptible to two constructions, one of which is fair, customary, and such as a prudent man would naturally execute, while the other would make it inequitable and unnatural, the reasonable, logical and rational interpretation should be adopted.").
If a contract has more than one reasonable interpretation, then the court must necessarily turn to extrinsic evidence to determine the intent of the parties at the time of contracting to resolve the ambiguity. Frulla, 543 F.3d at 1252. If extrinsic evidence proves unhelpful, then the court should construe the plea agreement against the government. United States v. Copeland, 381 F.3d 1101, 1105 (11th Cir.2004); United States v. Clark, 218 F.3d 1092, 1095 (9th Cir.2000); United States v. Harvey, 791 F.2d 294, 300 (4th Cir.1986). However, a court should not blindly construe a document against the government when extrinsic evidence elucidates that the parties' intent comports with the intent advanced by the government. See Southern Dredging Co., Inc. v. United States, 35 F.3d 557, at *5 (4th Cir.1994) (applying this principle in the plea agreement context); Harvey, 791 F.2d at 303. With these principles in mind, we turn to the Parties' respective arguments.
The Government argues the term "subsidiary" naturally and ordinarily denotes a corporation that another company has a majority ownership stake in. The Government relies on various sources for this proposition. See Black's Law Dictionary 394 (9th ed.2009) ("a corporation in which a parent corporation has a controlling share"); accord 18 Am.Jur.2d Corporations
On the other hand, Hidalgo advances a broader interpretation and relies on a statutory definition from Delaware's Code on corporate law. See 8 Del. C. § 220(a)(2) ("`Subsidiary' means any entity directly or indirectly owned, in whole or in part, by the corporation of which the stockholder is a stockholder and over the affairs of which the corporation directly or indirectly exercises control."); see also Weinstein Enterprises, Inc. v. Orloff, 870 A.2d 499 (Del. 2005) (citing 8 Del. C. § 220(a)(2)). Thus, unlike the Government's "majority ownership" definition, this interpretation shifts the focus from ownership to a factual question of actual control. Indeed, Hidalgo contends that under Delaware law, the "dispositive inquiry" in determining whether a company is a subsidiary is not majority ownership but rather "whether the stockholder `controls the affairs' of the corporation." Weinstein, 870 A.2d at 507. Continuing, Hidalgo asserts that the Delaware Supreme Court explained, for a shareholder such as LAN Cargo who "owns less than a numerical majority of a corporation's voting shares" to be deemed to have a controlling interest, "the plaintiff must establish the actual exercise of control over the corporation's conduct by that otherwise minority stockholder." Id. at 507 (emphasis in original). In fact, much of Hidalgo's authorities focus on the issue of control and otherwise assume the court will adopt the statutory definition used in Weinstein. See, e.g., Amadeus Global Travel Distribution v. Orbitz, LLC, 302 F.Supp.2d 329 (D.Del.2004) (concluding that an affiliate with less than a majority ownership did not exercise actual control over the corporation); In re Western Nat'l Corp. Shareholders Litig., No. 15927, 2000 WL 710192, at *9 (Del.Ch. May 20, 2000) (court concluded that a minority shareholder
Based on the Plea Agreement's use of the term "subsidiary," the plain and ordinary meaning of that term, and the principles set forth above, we conclude that the Government offers the only reasonable interpretation: a "subsidiary" is a corporation in which a parent corporation owns a controlling share. Hidalgo's alternative interpretation, after due consideration, is simply not reasonable.
Rather, his broader interpretation conflicts with the plain and ordinary meaning of the term because it advances a specialized definition limited to a Delaware corporate statute. Without an otherwise compelling basis to do so, Hidalgo's specialized definition is inapplicable to the Plea Agreement. See, e.g., Irrizary-Sanabria v. United States, Nos. 8:02-CR-490-T-17TBM, 8:05-CV-436-T-17TBM, 2006 WL 1319417, at *6 (M.D.Fla. May 12, 2006) (citing United States v. Rubbo, 396 F.3d 1330, 1333-35 (11th Cir.2005) ("plea agreements must be interpreted `in accord with what the parties intended'" and, in the absence of record evidence to the contrary, "statutory maximum" must be given its "ordinary and natural meaning" and not the "specialized" meaning discussed in Blakely and Booker)); United States v. Jacobs, 635 F.3d 778, 782 (5th Cir.2011) (court interpreted a plea agreement and declined to utilized an alternative meaning for "departure" in sentencing context because the parties establish no intent to carry an atypical or specialized definition); Hooters of Augusta, Inc. v. American Global Ins. Co., 157 Fed.Appx. 201, 206 (11th Cir.2005) (Eleventh Circuit rejected an attempt to apply the specialized meaning for the term "privacy" defined in the Telephone Consumer Protection Act, 47 U.S.C. § 227, to trump the parties' contractual intent when the contract itself left the term "privacy" undefined. The court applied the plain, ordinary and natural meaning instead); see also Krupnick v. Ray, 61 F.3d 662, 665 (8th Cir.1995) (court refrained from applying a specialized meaning to an undefined term absent some indiction that the parties intended a specialized meaning).
Moreover, Weinstein, Hidalgo's chief authority, demonstrates that Hidalgo's interpretation is inapplicable. Indeed, Weinstein explicitly limited its holding, as did the court of chancery below, to the determination of a subsidiary "for purposes of being a section 220(a)(3) `subsidiary'" only. 870 A.2d at 501, 502, 507, 508, 509. A review of the statute, in context with its purpose, explains the basis for this restriction. Section 220(a) provides a mechanism for a plaintiff to seek the books and records of a corporation in which he or she owns stock. Id. at 505. Based on Weinstein, the purpose, at least in part, was to provide an economical and expedition mechanism for the inspection of documents. Id. This point is emphasized by the 2003 amendment to section 220 that removed the requisite showing of fraud or alter ego before a stockholder could review a subsidiary's documents. Id. Thus, as a general matter, a purpose of section 220 is to provide stockholders greater access to information, which supports the notion
Furthermore, we find that a closer reading of Hidalgo's authorities demonstrates that a minority ownership interest is insufficient to establish a parent-subsidiary relationship. For instance, Weinstein reached its conclusion after noting that the plaintiff actually held greater than a minority interest, "[the court of chancery's subsidiary] ruling was based upon the 45.16% [direct ownership], plus the six or seven percent of stock that the Weinstein Foundation owned." 870 A.2d at 7 (emphasis added). Thus, plaintiff Weinstein actually held an aggregate direct and indirect ownership interest in Mays that totaled between 51.16% and 52.16%. Id. While Weinstein did not rely specifically on the indirect ownership percentage, it still suggests that the total share of voting control exceeded a majority percentage. Here, however, Hidalgo fails to proffer any evidence that LAN Cargo owns, directly or indirectly, any share greater than 25% of Florida West.
Because the additional authorities Hidalgo cites either present similarly inapplicable specialized definitions (or cases relying on same) that conflict with the plain, ordinary meaning of the term "subsidiary," see 12 U.S.C. § 1841(a)(2)(A); United States v. Citizens & Southern Nat'l Bank, 422 U.S. 86, 95 S.Ct. 2099, 45 L.Ed.2d 41 (1975); Rose Hall, Ltd. v. Chase Manhattan Overseas Banking Corp., 576 F.Supp. 107 (D.C.Del.1983), or discuss the secondary and dependant issue of "actual control" in the minority ownership context, see Amadeus Global Travel Distribution v. Orbitz, LLC, 302 F.Supp.2d 329 (D.Del.2004); In re Western Nat'l Corp. Shareholders Litig., 2000 WL 710192, at *9 (Del.Ch.2000); Kahn v. Lynch Cmmctn. Sys, Inc., 638 A.2d 1110 (Del.1994); 8 Del. C. § 203(c)(4), we conclude that Hidalgo fails to cite any controlling authority that establishes his broader subsidiary definition as reasonable.
Moreover, Hidalgo's interpretation would produce an illogical result, which courts are keen to avoid. See Ennis, 203 So.2d at 518 (a rational and logical interpretation is favored over an illogical or irrational one). Hidalgo's interpretation, taken to its logical extreme, would result in a parent-subsidiary relationship when a "parent" corporation owns merely one percent of the stock and exercises actual control over the "subsidiary" corporation. However, this conclusion tends to muddle the distinct corporate labels ascribed to "subsidiaries" and "affiliates," the latter of which is understood more broadly to include some degree of ownership or control while the former is distinguished by requiring a controlling, majority ownership. See generally Delaware Ins. Guar. Ass'n v. Christiana Care Health Svcs., Inc., 892 A.2d 1073, 1077 (Del.2006) ("the terms `affiliate' and `subsidiary' carry their own legal significance").
Notwithstanding the foregoing, even if we agree that Hidalgo's interpretation presents a reasonable interpretation for "subsidiary" (thus rendering the Plea Agreement ambiguous), we still reach the same result because extrinsic evidence demonstrates that the intent of the drafters supports the Government's interpretation of subsidiary. See 8/23 Tr. Grunvig 22:25-23:7, 23:23-24:2, 25: 9-17; Dick 111:3 — 112:5 (no intent for "subsidiary" to include Florida West); see also Copeland, 381 F.3d at 1106 (where the language of a plea agreement is ambiguous, extrinsic evidence of the parties' intent may be considered to interpret the agreement); Southern Dredging, 35 F.3d at *5 (plea agreement is not construed against the
While the interpretation of a plea agreement is analogized to the interpretation of a private contract, this analogy is tempered by the unique nature of a plea agreement. As Jefferies makes clear, a court should avoid a "hyper-technical reading of the written agreement" and view the written document "against the background of the negotiations." 908 F.2d at 1523. Because Hidalgo advances a hyper-technical interpretation of the Plea Agreement that fails to recognize the background of the plea negotiations, we decline to accept his position. The Government's interpretation comports with the plain, natural and ordinary meaning of the unambiguous term subsidiary. The bottom line is that the plain wording of the plea agreement controls. See Santobello v. New York, 404 U.S. 257, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971); United States v. Gustama, 156 Fed.Appx. 214, 217 (11th Cir.2005); In re Arnett, 804 F.2d 1200, 1203 (11th Cir. 1986); United States v. Jackson, 173 Fed. Appx. 772, 775 (11th Cir.2006); United States v. Rewis, 969 F.2d 985, 988 (11th Cir.1992). The plain meaning of "subsidiary" necessarily requires the parent corporation to own a majority share of the subsidiary corporation. As such, Florida West is not a subsidiary of LAN Cargo.
As clarified in its closing argument [D.E. 160], Florida West seeks to dismiss the indictment for two reasons. First, that Florida West is a subsidiary of LAN Cargo and, therefore, immunized by paragraph 14 of the Plea Agreement. Alternatively, because Hidalgo is a "LAN" employee covered by the Plea Agreement his actions cannot be imputed to Florida West.
As explained above, notwithstanding LAN Cargo's minority ownership interest, Florida West is not a LAN Cargo subsidiary. Therefore, Florida West is not immunized under paragraph 14 of the Plea Agreement. And, even if it was a "subsidiary" of LAN Cargo, paragraph 14 specifically carves out any "company in which LAN Cargo had an ownership interest that ended prior to the date of the Plea Agreement," i.e. January 2009. Because LAN Cargo sold its ownership interest in Florida West on or about December 20, 2007, Florida West is carved out of the Plea Agreement. See D.E. 76 at 9 n. 6. Florida West's remaining Plea Agreement arguments are either resolved above, see II.C.iii., supra, or are without merit and should be denied accordingly.
Florida West also argues that its liability, to the extent such liability exists, arises solely from the actions of Hidalgo. But, because Hidalgo's culpable actions related to his employment relationship with LAN Cargo and thus were taken outside the scope of his Florida West employment, they cannot be imputed to Florida West. Contra Grand Union Co. v. United States, 696 F.2d 888, 891 (11th Cir.1983) (holding, in the False Claims Act context, that the knowledge of an employee is imputed to the corporation when the employee acts for the benefit of the corporation and within the scope of his employment). While we agree that Florida West may have a compelling defense to criminal liability based on this argument, this is not an appropriate ground to dismiss the pending indictment. See, e.g., United States v. Singh, 518 F.3d 236, 249-251 (4th Cir. 2008) (corporation presented the aforementioned.
And, strictly from a practical standpoint, the indictment references other named defendants and "co-conspirators" and, thus, on the face of the indictment, we cannot foreclose as a matter of law that the indictment solely imposes liability on Florida West through the acts of its agent Hidalgo. See [D.E. 1 at ¶¶ 8-12]; Fed.R.Crim.P. 12(b)(2), (3)(B); United States v. Delbecq, No. 11-60146-CR-ZLOCH, 2011 WL 4383255, *1 (S.D.Fla. Aug. 17, 2011) (relying on several Eleventh Circuit cases for the proposition that a factual challenge, like the one presented here, is inappropriate in a Rule 12 motion), aff'd, 2011 WL 4375050 (S.D.Fla. Sept. 20, 2011). Florida West plainly raises a factual issue for a jury, rather than this Court, to resolve.
The Government alternatively moves to reform the Plea Agreement because, as it contends, if either Hidalgo or Florida West are immunized by the Plea Agreement the result is solely due to a mutual mistake of fact by the drafters. As such, the Government seeks the contractual remedy of reformation to correct this purported mutual mistake.
Jurisprudence in this area is fairly sparse. And, the opinions that do raise the issue of reformation of plea agreements are factually distinguishable because they relate to sentencing. See, e.g., United States v. Weaver, 905 F.2d 1466 (11th Cir.1990); United States v. Hodge, 306 Fed.Appx. 910 (6th Cir.2009); United States v. Olesen, 920 F.2d 538 (8th Cir. 1990); United States v. Kuhl, 816 F.Supp. 623 (S.D.Cal.1993); United States v. Atkinson, 979 F.2d 1219 (7th Cir.1992); United States v. Williams, 198 F.3d 988 (7th Cir.1999). Also, none of these cases cited by the Government actually reform a plea agreement by applying this civil equitable remedy. See, e.g., Weaver, 905 F.2d at 1473; Hodge, 306 Fed.Appx. at 915; Olesen, 920 F.2d at 542, Kuhl, 816 F.Supp. at 628-29; Atkinson, 979 F.2d at 1223; Williams, 198 F.3d at 994. Moreover, there is a significant weight of authority that suggests this remedy is inapplicable to plea agreements. See United States v. Ritsema, 89 F.3d 392, 398-99 (7th Cir. 1996); United States v. Skidmore, 998 F.2d 372, 374-76 (6th Cir.1993); United States v. Fagan, 996 F.2d 1009, 1013 (9th Cir.1993); United States v. Yesil, 991 F.2d 1527, 1531-32 (11th Cir.1992); United States v. Cunavelis, 969 F.2d 1419, 1422-23 (2d Cir.1992); United States v. Fernandez, 960 F.2d 771, 773 (9th Cir.1992) (per curiam); Olesen, 920 F.2d at 540-43; United States v. Partida-Parra, 859 F.2d 629, 631-33 (9th Cir.1988); United States v. Holman, 728 F.2d 809, 813 (6th Cir. 1984), cert. denied, 469 U.S. 983, 105 S.Ct. 388, 83 L.Ed.2d 323 (1984); United States v. Cruz, 709 F.2d 111, 114-15 (1st Cir. 1983); United States v. Blackwell, 694 F.2d 1325, 1338-39 n. 19 (D.C.Cir.1982). Thus, without presenting a compelling reason to rule otherwise, we conclude that the remedy of reformation is unavailable in the context of a plea agreement entered into by the Parties and approved by the court.
Assuming, however, that reformation is an available remedy, we find that its application is inappropriate for this situation.
The purported mistake arises from the intended scope of the Plea Agreement. While the Government contends the mistake is "mutual," a more accurate description is that the Government was mistaken by the scope of the agreement while LAN Cargo was only concerned with ensuring that the employees of LAN Cargo and LAN Cargo's subsidiaries were immunized, without any explicit concern for either Hidalgo or Florida West. See 8/23 Tr. Dick 111-112, 115:25-116:6. Simply because the facts subsequently establish that Hidalgo is an employee of LAN Cargo does not establish a basis for reformation because the intent of the parties is fulfilled.
Rather than reformation, arguably the more appropriate remedy in this situation is rescission because the mutual mistake relates to a basic assumption of the Plea Agreement, i.e. who were LAN Cargo's employees. See Restatement (Second) of Contracts, § 152(1) ("Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in § 154"); see id. at cmt. b, illus. 5 ("A contracts to sell and B to buy a tract of land, on the basis of the report of a surveyor whom A has employed to determine the acreage. The price is, however, a lump sum not calculated from the acreage. Because of an error in computation by the surveyor, the tract contains ten per cent more acreage than he reports. The contract is voidable by A."); see also United States v. Rodriguez-Galicia, No. 2:10-cr-32-MEF, 2010 WL 3724905, at 5 n. 4 (M.D.Ala. Sept. 17, 2010) (discussing this section of the Restatement with respect to plea agreements).
We find this illustration helpful. Similarly, the attorney for LAN Cargo and the Government relied on information supplied by LAN Cargo to define the scope of the intended language that immunized the employees of LAN Cargo and LAN Cargo's subsidiaries. Because the information received inaccurately defined that scope the intent of the Plea Agreement mistakenly afforded immunity to a larger group. Thus, because the intent is fulfilled, but expanded by a flawed basic assumption, the only available remedy is rescission. However, because the Government does not seek this remedy, we decline to apply it sua sponte.
At the end of the evidentiary hearing, after the Parties rested, after two full days of evidence, after more than two months notice, and only after the Court intimated how it may rule on the Motions, the Government expressed a strong interest to re-open the evidentiary hearing. The Government explained to the Court that it was ill-prepared for the surprise allegations that LAN Cargo controlled Florida West pursuant to a purported "secret agreement"
"The decision to reopen a case to introduce evidence after the parties have rested is committed to the sound discretion of the district court." United States v. Cohen, 888 F.2d 770, 775 (11th Cir.1989). The Eleventh Circuit delineates certain factors to guide this inquiry, including 1) the timeliness of the motion to reopen, 2) the character of the testimony to be offered, 3) the effect of granting the motion to reopen, and 4) the reasonableness of the excuse for the request to reopen. See United States v. Byrd, 403 F.3d 1278, 1284 (11th Cir.2005) (adopting factors developed in United States v. Walker, 772 F.2d 1172, 1176 (5th Cir.1985) that are relevant to "evaluate all challenges to a district court's refusal to reopen the evidence.").
Timeliness. The Parties presented evidence relating to Hidalgo's LAN Cargo employment and LAN Cargo's "control" over Florida West during the first day of the hearing. The second day was limited to evidence relating to the issue of intent. Thus, in all practical respects, the Parties rested on the former issues on the first day. The Government rested completely in the afternoon on the second day. Then, during closing remarks, the Court, while it adumbrated its ruling to the Parties, speculated as to the existence of other evidence that could support the Government's position. Only at this point did the Government move to reopen the evidentiary hearing. Thus, the timing suggests that the Government's motivation to reopen the hearing was more likely related to the Court's comment, rather than a surprise from the previous day. Had the Government been truly surprised on the previous day, the Government ought to have raised its concern at that time. By so doing, the Court would have credited its motion as "timely." However, because the Government waited for the Court to raise the issue, we find this factor weighs in Hidalgo's favor.
Character of testimony. The Government submits affidavits from three LAN Cargo executives (Ureta, Germani and Ramirez) and the CEO and owner of PAM (Gartlan) that purport to "assert unequivocally" that LAN Cargo did not control Florida West, that rebut the evidence Hidalgo presented to support his subsidiary argument, and rebut that LAN Cargo employed Hidalgo. Because we rule as a matter of law that Florida West is not a LAN Cargo subsidiary, we discuss the bonus/employment issue only.
The affidavits submitted by Ureta, Germani and Gartlan discuss the topic of Hidalgo's employment and his purported bonus payments. However, the admissibility and probative value of Ureta's and Germani's affidavit is tempered by the qualifying language used. Indeed, Much of their affidavits are couched in terms that exhibit personal belief rather than personal knowledge such as, "[never] did I personally ever have knowledge of", "I was not aware of, "[based on] my view of the facts and circumstances as I understood them to be", "I was unaware of any occasion in which it could accurately be said that", "it is my
Put differently, these affidavits rely on speculation and personal belief rather than personal knowledge that set forth facts that would be admissible evidence. Courts often strike or discredit this type of affidavit. See, e.g., Pace v. Capobianco, 283 F.3d 1275, 1278-79 (11th Cir.2002) ("an affidavit stating only that the affiant `believes' a certain fact exists is insufficient to defeat summary judgment by creating a genuine issue of fact about the existence of that certain fact"); Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996) ("For factual issues to be considered genuine, they must have a real basis in the record."); Stagman v. Ryan, 176 F.3d 986, 995 (7th Cir.1999) (explaining that statements that are conclusory or based on conjecture do not satisfy Rule 56(e)); Rolison v. Sterling, No. 08-0389-CG-M, 2009 WL 2514294, *6 (S.D.Ala. Aug. 13, 2009).
Effect of granting the motion. This factor relates to the prejudice imposed on the nonmovant by reopening the evidentiary hearing. See Byrd, 403 F.3d at 1287. The Government asserts that the prejudice is negligible because Hidalgo will have an opportunity to cross any new witness or present his own evidence in rebuttal. While this may be true, the prejudice arises from the benefit the Government receives by hearing Hidalgo's evidence and crafting its rebuttals accordingly. Indeed, even though the four affiants were not physically present in the courtroom, their affidavits tend to suggest they were privy to the subject matter of the hearing because they track the testimony proffered by the various witnesses. See [D.E. 159-1,2,3,4].
The prejudice caused by this advantage is echoed by several courts. See, e.g., Byrd, 403 F.3d at 1287 (the "[defendant] would have been in a position to work his testimony around theirs, changing his story in order to avoid discrepancies between the rebuttal witnesses' testimony and the defense's case. Likewise, the [defendant] would also have been aware of what the rebuttal witnesses did not know, allowing him to `decide as a strategic matter that it would be safe to ... testify to certain matters.'") (citing United States v. Walker, 772 F.2d 1172, 1180 (5th Cir.1985)). Moreover, due to the unavoidable fact that the Government submitted affidavits after hearing Hidalgo's entire direct, the fact that the affidavits so precisely track the evidence proffered by Hidalgo raises a potential rule of sequestration violation.
Reasonableness. The Government fails to offer an objectively reasonable explanation to re-open the evidentiary hearing. Its explanation that the Defendants presented a novel theory during the evidentiary hearing is simply unsupported by the record. Without question, one of the reasons we held this evidentiary hearing was to determine whether LAN controlled Florida West. See [D.E. 124, Order setting evidentiary hearing]. Even before this, Hidalgo argued that he was covered by the "subsidiary" provision of the Plea Agreement in spite of the foreign ownership regulation, thus, implying that LAN "controlled" Florida West notwithstanding that this control violated federal law. See [D.E. 67 at 12].
Regardless, the "secret" was unequivocally revealed to the Government during the June 2, 2011 non-evidentiary hearing when Hidalgo's attorney stated in open court, "[LAN] complied technically with the rule 25 percent, but I guess found this way around it. I may be creating more problems for Florida West than LAN, but my interests are, of course, to my client." [D.E. 105 at 50:18-25]. Indeed, Florida West's counsel recognized this fact and explained as much during the evidentiary hearing, "I will admit that it's a very unique set of circumstances. It was not until two months ago [i.e. the June 2, 2011 non-evidentiary hearing] that we learned that Hidalgo — there's no question, we moved for severance.... We had no idea Hidalgo was being paid like a secret agent to work for LAN." See 8/23 Tr. 226:11-17. (emphasis added). Thus, best case scenario, the Government should have been fully aware of the control issue in June 2011.
Likewise, Hidalgo raised the employment and bonus issue in his initial motion. [D.E. 67 at 2, 10]. And, during the June 2nd hearing, his counsel stated, "[Hidalgo] was assigned by LAN to Florida West, but was continued to be paid by LAN. He got bonuses sometimes of up to $75,000 a year paid by LAN while he was at Florida West." [D.E. 105 at 6:10-13]. Indeed, Florida West filed its May 18, 2011 motion to dismiss specifically for that reason. See [D.E. 97 at 3]. Thus, the record demonstrates that the Government knew (or should have known) of the Defendants' arguments well in advance of the evidentiary hearing.
But, even assuming this argument had merit, the Government's argument still fails. Accepting that the Government learned of the true nature of the Defendants' arguments during the first day of the hearing, as noted above, the Government failed to alert the Court of this issue. Also, on the second day, the record shows that Ramirez (and perhaps Gartlan) were available in court and could have testified on these specific issues. However, the Government chose not to call them. And, the specific reason for not calling Ramirez was: "[w]e didn't know what — we had no discussions with him previously. We had no idea. We had been told by counsel that he could be irrational at times. He was not someone we were willing to put on the stand." 8/23 Tr. 215:14-20. This explanation
Simply put, the Government had the ability to recover from the purported surprise when it was revealed, but chose not to do so. We find this fact dispositive:
Byrd, 403 F.3d at 1287-88 (quoting United States v. Peterson, 233 F.3d 101, 107 (1st Cir.2000)). Because we find the Government's explanation unreasonable, the fourth factor also weighs in Hidalgo's favor.
In sum, due to the prejudice Hidalgo would likely suffer, the undeniable fact that the Court not the Government raised the issue to re-open the hearing, the qualifying nature of the Government's affidavits and the unreasonable explanation offered, the Government's motion to re-open the evidentiary hearing is denied.
Based on the papers filed, evidence presented to this Court, and entire record in this matter, we find that Rodrigo Hidalgo is covered under the Plea Agreement as an employee of LAN Cargo and SFAC. However, because Florida West is not a subsidiary of LAN Cargo, Florida West is not covered by the Plea Agreement. Accordingly, we
1. Hidalgo's Motion to Dismiss [D.E. 67] should be
2. Florida West International Airways, Inc.'s Motion to Dismiss [D.E. 94] should be
In light of our Recommendation, it is also
1. The Government's Motion to Reopen Evidentiary Hearing [D.E. 158] is
2. Hidalgo's Motion to Compel Documents [D.E. 109], the Government's Motion for Pre-Hearing Rulings [D.E. 139], the Government's Motion to Modify Subpoena Issued to Mark Grundvig in His Official Capacity [D.E. 143], the Government's Motion to Quash Subpoena Issued to Scott D. Hammond in His Official Capacity [D.E. 144], Hidalgo's Motion to Strike Government's Reply to Closing Arguments [D.E. 170] and the Government's Motion to Strike Hidalgo's Response to the Government's Motion to Reopen Evidentiary Hearing [D.E. 175] are
Pursuant to Local Magistrate Rule 4(b), the parties have
