Senorino R. Cruz, v. United States of America



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Senorino R. Cruz,

v.

United States of America.
Compensation and the Legacy and Future of Agricultural Guest Worker Programs

Mario Carlasare

KiKi Mosley

Public Interest Law and Policy

Professor Staudt

Fall 2009

Bracero(ra): temporary farm worker, day laborer
History of the Bracero Guest Worker Programs in the United States
Between 1942 and 1962 an estimated 4.6 million Mexican seasonal farm workers (“braceros”) entered the United States.1 The “wartime Bracero program” (1942 – 1947) accounted for admission of 50,000 – 60,000 Mexican workers per year.2 The consolidated cases that constitute the Cruz v. U.S. class action litigation concern ex-farm workers that are current U.S. residents that contracted for agricultural work between 1942 and 1946 only.3

The United States Bracero programs were a series of guest worker programs to recruit Mexican farm and railroad laborers.4 The programs were created by bilateral agreement between the United States and Mexican governments beginning in 1917.5 The first formal Bracero project (1917 – 1921) was highly criticized by the Mexican Government because many experienced significant discrimination and were repatriated to Mexico penny-less.6 As a result, the Mexican government insisted that the second Bracero project (1942-1964) - the War-Time Bracero Project and the subject of the Cruz v. U.S. class action litigation, insisted on increased legal protection for their citizens.7

The Official Bracero Agreement as revised April 26, 1943 provided for transportation, living expenses, and repatriation as established by Article 29 of the Mexican Federal Labor Laws.8 Article 29 of the Mexican Federal Labor Laws provided that participants in the official program have contracts in writing, notarized, and approved by the consulate where the bracero was to be employed.9 American farmers were protected from the braceros that refused repatriation and chose to remain in the United States illegally by a clause that provided that repatriation fees would be returned to the farmer.10

The war-time bracero entered into contract with the United States Government.11 The farmer then contracted with the United States government as a “sub-employer” for the number of braceros they required for that season’s work.12 The money at issue in the Cruz litigation was part of a savings plan negotiated by the Mexican Government as the “Rural Savings Fund.”13 Under the program U.S. employers deducted 10% of the braceros’ salary which was then transferred to the U.S. government.14 The United States government then transferred the funds to Wells Fargo Bank, that was then responsible for transferring the funds to Banco de Credito Agricola, a government bank.15 Upon repatriation to Mexico, the bracero would have access to the 10% that was deducted from their pay.16 Most participants in the Bracero Program made immediate complaint upon returning to Mexico when they were told there was no record of their funds.17

The Mexican Government maintained that they had no record of the funds coming to Banco Credito de Agricola (now Banrural).18 Banrural had continually maintained that there was no documentation that the funds ever reached the bank.19 In 1999 when The Orange County Register requested that Wells Fargo release any documentation of the funds withheld from the braceros’ paychecks proof of the Rural Savings Plan materialized.20 The Wells Fargo documentation, dated 1944 and 1945, was part of a report by a then vice-president of the bank’s trip to Mexico to meet with officials from Banco Nacional de Mexico, regarding the transfers.21 Until Wells Fargo produced these documents, the only proof of the transfers were the original pay stubs showing deductions and worker’s recollections of the program’s existence.22

Banrural has been implicated in unfair tactics towards farm laborers spanning long since the 1940’s.23 Banrural remains the number one provider of agrarian credit in Mexico, they do not allow unionization and often take such a large cut of profits that laborers often don’t get a wage.24 The funds withheld as part of the savings program were thought to total well into the millions of dollars for the war-time braceros.25 The discovery of the Wells Fargo documentation provided the Mexican and Mexican American former and their families the necessary documentation to seek a return of their funds.

The Cruz v. U.S. settlement provides relief for American bracero only.26 The compensation pursuant to Cruz provided that the claimant:



  1. Must be a U. S. resident who was a bracer between January 1, 1942 and December 31, 1946 (includes naturalized citizens and dual-citizens).

  2. Hold a Mexican passport, voting card or military service card.

  3. Hold an original individual work contract, issued by a U.S. employer, showing participation in the bracer program between 1942 and 1946.

  4. Show original proof of wages by a U.S. employer for work between 1942 and 1946.

  5. Produce Social Security records showing payment from the work program between 1942 and 1946.

  6. Produce their original consular identification card.

  7. If a surviving spouse or child – identification and all of the above documents.27

The amount of documentation required to recover the $3,500 settlement proved prohibitive to many ex-braceros. Matthew Piers, an attorney at Hughes Socol Piers Resnick & Dym, Ltd., one of the law firms that represented the plaintiffs in the Cruz litigation expressed his frustration by stating,

“I think the braceros deserve much more than what we are getting for them, I

think this is a small measure of justice. I don’t have the slightest doubt that there

are legitimate complaints about all the eras of regarding how horribly they

were treated and the fact that they had monies taken from them. Its powerfully

anecdotal. But we had no documentation for the post World War II period.”28
Litigation: Cruz v. U.S. – “Cruz 1”
Senorino Ramirez Cruz, et al. v. United States, et al. (Cruz 1) was initially filed in the District Court of Northern California on March 2, 2001, by , and named Mexico, Banco de Mexico, Banco Nacional de Credito Rural (“Banrural” - Mexican Defendants), the United States, and Wells Fargo Bank as defendants.29 In April 2002, the court consolidated Cruz with three other cases from the District Court of the District of Columbia: De La Torre v. U.S., Chavez v. U.S., and Barba v. U.S30. These cases differed from Cruz in several ways. First, while the Cruz complaint alleged a class period lasting until 1949, the other cases covered a period until 1964.31 Second, the consolidated cases alleged additional causes of action against the United States under the Administrative Procedures Act, 5 U.S.C. § 702, and against Mexico, the Mexican banks, and Wells Fargo under the Anti-Peonage Act, 42 U.S.C. § 1994.32 Third, Cruz made allegations of unfair competitive practices under California.33 Despite these differences, all three cases were similar in nature and had the same defendants as Cruz.34 Under Fed.R.Civ.P. 42(a), the court chose to consolidate all the cases to simplify the deposition and discovery process.35 Following a second amended complaint submitted by the plaintiffs in July, 2001, all the defendants filed motions to dismiss.36 In granting the defendants’ motions to dismiss, Justice Breyer of the District Court of Northern California focused on three determinative issues in his opinion: First, whether the Mexican Defendants qualified as foreign sovereignties and were immune from the suit; second, whether the plaintiffs had sufficiently stated a cause of action against Wells Fargo; and third, whether the claim against the United States were barred by statutes of limitation.37

Foreign Sovereign Immunities Act

The Foreign Sovereign Immunities Act (“FSIA”) became law in 1976 and formalized a State Department policy initiated in 1952 with the publication of the Tate Letter, which called for a more restrictive approach to granting sovereign immunity.38 Before 1952, foreign states usually had absolute immunity from suit in the United States.39 The court found the Mexican defendants immune since the alleged conduct took place prior to 1952, and granted their motion to dismiss.40 The main issue for the court was plaintiffs’ contention that the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. §§ 1330, 1602-1611, be applied retroactively to the pre-1952 conduct of the defendants.41 The Mexican defendants argued that since the events of the bracero program occurred before the onset of the State Department’s shift in policy, FSIA was inapplicable and the court lacked subject matter jurisdiction.42



Landgraf v. USI Film Products

The court relied heavily on Landgraf v. USI Film Products.43 In Landgraf the Supreme Court refused to apply several measures of the Civil Rights Act of 1991 to a discrimination case awaiting appeal.44 The Court in Landgraf stressed that the historical presumption against retroactively enforcing new law could usually only be overcome by “an express statutory command . . .”45 The main question in Landgraf, and for Justice Breyer in Cruz, was whether the legislative intent behind such a statutory command was to attach new legal consequence to acts committed in the past.46 The court did not find an express command, or any clear indication from Congress that FSIA was meant to be enforced retroactively.47


Legislative Intent of the FSIA

Justice Breyer, in his opinion, relied heavily on the fact that Congress neglected to specifically negate time as a factor, and included a ninety-day grace period before which the FSIA would come into effect.48 The purpose of the grace period might have been to provide foreign states with notice of the new restrictive limits on immunity under the FSIA.49 One reason Congress ultimately passed the FSIA was to resolve ambiguities that often became problematic in applying the restrictive policies of the Tate Letter, since it had never been formally adopted into law.50 For Justice Breyer, the FSIA was not an effort to “change law that was 24 years old,” but an attempt to organize The Tate Letter’s inconsistent policies into a new comprehensive law.51 In light of this history, and the lack of a more definite expression from Congress to the contrary, Justice Breyer held that the FSIA only applied to claims arising after 1952.52 Still, some of the named plaintiffs in the Cruz complaint, one being Liborio Santiago Perez, claimed they had worked under the bracero program until 1962.53 Justice Breyer, however, found that the “undisputed terms of the bracero program,” clearly made the onset of any cause of action impossible after 1952, and granted the Mexican defendant’s motion to dismiss.54



Wells Fargo

The Cruz plaintiffs also alleged numerous different causes of action against Wells Fargo, including breach of contract, fiduciary duty, resulting trust, accounting, unjust enrichment, conversion, and unfair business practice.55 In addition, the complaints of the three cases consolidated with Cruz alleged a violation of the Anti-Peonage Act.56



Count One: Breach of Contract

The plaintiffs made two breach of contract claims. The first involved the contracts formed between Wells Fargo, the United States, and Mexico. The plaintiff’s complaint argued that Wells Fargo broke its contractual duty when it failed to make deposits into Banco de Mexico or provide the bank with documents detailing the withheld funds.57 The court dismissed this assertion, pointing out that the bank/depositor relationship is a unique kind of contract.58 Historically, courts have refused to grant third party beneficiaries the right to raise a claim for breach of a contract between a bank and depositor.59 The second claim alleging breach of contract involved the agreement between the United States and Mexico, and was also dismissed. The plaintiffs attempted to characterize Wells Fargo as an agent of the United States and Mexico, upon whom liability could be placed. 60 Again, Justice Breyer immediately pointed out that under California law, an agent could not be held liable over the contract’s principal party.61



Count Two: Fiduciary Duty and Resulting Trust

A fiduciary relationship exists where a special relationship charges one with a duty to act for the benefit or well being of another.62 The plaintiff’s complaint alleged that Wells Fargo had a fiduciary duty towards the braceros: to execute the successful transfer of the worker’s withheld earnings to Banrural.63 In considering the presence of a fiduciary duty, the court cited a five factor test from the case of Wallis v. Superior Court, 160 Cal.App.3d 1109 (1984), but stated that “where, as here, there is no relationship between plaintiff and defendant bank … reference to the Wallis factors is inappropriate.”64 Banks are not usually considered fiduciaries for their depositors.65 Since the braceros themselves had absolutely no official relationship, contractual or otherwise, with Wells Fargo, the court dismissed plaintiff’s allegation of fiduciary duty for failure to plead sufficient facts.66

Likewise, the plaintiff’s cause of action for a resulting trust also failed. A resulting trust comes into effect by operation of law when a transferee (Wells Fargo), contrary to the original intent of the parties, ends up taking some kind of beneficial interest.67 Even though the plaintiff’s complaint stated that Wells Fargo failed to transfer the funds to the Mexican banks, it did not however allege that any of the defendants expected Wells Fargo to hold those funds in trust for the braceros.68 Ironically, Justice Breyer relied on the plaintiff’s own complaint in dismissing the cause of action for resulting trust, saying, “as alleged (emphasis added)…Wells Fargo was merely a conduit to facilitate the transfer of funds….”69

Count Three: Accounting and Unjust Enrichment

Count three was also dismissed for failure to find a fiduciary relationship between Wells Fargo and the braceros.70 The plaintiffs cited the Restatement of Restitution for the proposition that a person (Wells Fargo) acting on behalf of other () in receiving property from a third person has a duty “to account to the other for such property.”71 Justice Breyer stressed that Wells Fargo at no time claimed to represent the braceros and therefore were not required to offer an accounting.72 The same problem arose in the plaintiffs’ claim of unjust enrichment and led to another dismissal. For a defendant to be unjustly enriched, they must have wrongfully received something beneficial from the plaintiff. Justice Breyer once again pointed out that Wells Fargo was merely an “intermediary to a transaction,” and received no wrongful benefit from the .73



Remaining Counts: Conversion, Unfair Business Practice and the Anti-Peonage Act

Funds were originally withheld from the braceroschecks by the United States, to be refunded upon the workers return to Mexico.74 Plaintiffs argued that because the savings plan was designed as an incentive for braceros to return to Mexico at the end of the growing season, the braceros did not technically own these funds when they were in Wells Fargo’s possession.75 For conversion, the court required that the parties sue “only for property it owns at the alleged time of conversion.”76

Plaintiffs’ argued that the braceros had an equitable ownership interest in the funds that entitled them to raise the claim.77 The court dismissed this idea for the same reason it refused to recognize a fiduciary duty by Wells Fargo: as a third party, the plaintiffs simply did not have the right to raise a claim for interests that weren’t yet theirs.78 The court again relied on the reasoning that the banking relationship gives rise to special rules.79 Upon making a deposit, title instantly passes to the bank, blocking claims for conversion. Id. Furthermore, the plaintiffs’ complaint failed to allege any effort by the to have the U.S. make the deposits “special”, which would have forced Wells Fargo to keep the withholdings separate from other monies. Id.

Plaintiffs also alleged that Wells Fargo had violated California’s Unfair Business Practice Law § 17203.80 The law governing unfair business practice affords restitution or injunctive relief to “restore to any person in interest any money or property … which may have been acquired by means of such unfair competition.”81 Just as with the conversion claim, the court did not consider the plaintiffs to be persons of interest sufficient to obtain relief under the law.82 Finally, the three consolidated complaints alleged a violation of the Anti-Peonage Act (“APA” - 42 U.S.C. § 1994).83 The APA makes relationships with “compulsory service based on indebtedness (illegal).”84 A party can obtain relief under the APA by showing indebtedness and compulsion.85 The plaintiffs accused Wells Fargo of failing to protect the braceros from a state of peonage by, among other things, mishandling the savings funds and allowing abuse of the program to continue.86 The court said that the plaintiffs failed to provide any authority for its claim that a party might be liable under the APA for failing to stop a state of peonage enforced by another.87 Just as with the plaintiffs’ other claims, the court dismissed the action saying, “Wells Fargo had no duty to protect plaintiffs . . . there was no relationship, fiduciary or otherwise . . .”88



Statute of Limitations

Plaintiffs also alleged a cause of action against the U.S. for breaching each individual bracero’s express contract under the ‘Little’ Tucker Act.89 The ‘Little’ Tucker Act, enacted in 1887, waived U.S. sovereign immunity status and allowed plaintiffs to file suit for breach of express or implied contracts pursuant to 28 U.S.C. § 1346(a)(2).90 The main issue for the court was whether the statute of limitations barred the Cruz plaintiffs’ from obtaining relief under The ‘Little’ Tucker Act.91 For federal law, the statute of limitations begins to run when the plaintiff knows, or should know, of the injury, and its cause, for which a claim is based.92 When the plaintiff is not aware of the injury, or its cause, and does not have reason to know, the cause of action can be equitably tolled.93 The statue of limitations, according to the plaintiffs, did not prevent a cause of action against the U.S. pursuant to The ‘Little’ Tucker Act because of equitable tolling.94 The plaintiffs described the braceros as unsophisticated, illiterate, and unable to understand the savings plan they were subject to.95 However, the court pointed out that the Cruz plaintiffs’ own complaint stated that the braceros did not know “the amount of money deducted from their wages.”96 The other three complaints did not allege that the braceros were ignorant to the fact that a portion of their wages was regularly withheld.97 The court held that while the braceros may have had limited understanding as to their legal rights involving the savings plan, they did have knowledge that their wages had been garnished without the issuance of a timely refund.98 Such knowledge, the court explained, is all that is required to activate the statute of limitations and make equitable tolling impossible.99 Thus, in Cruz 1, the court dismissed all the claims present in the plaintiffs’ complaint.



Cruz v. U.S.Cruz II

The Revelations ad Ramifications of Cruz II

The District Court dismissed all claims in Cruz I on August 23, 2002 and it would be another four months before the plaintiffs files a motion for reconsideration. The basis for the motion for reconsideration was based upon a Ninth Circuit decision in Altmann v. Republic of Austria.100 In Altmann, the Ninth Circuit held that FSIA could be applied retroactively in a case where an American citizen sued an art gallery and the Republic of Austria for paintings that were illegally seized by the Nazis.101 The motion for reconsideration was initially denied in June of 2003, but then granted in 2004 after the Supreme Court itself affirmed the Ninth Circuit’s decision to apply FSIA retroactively in Altmann.102

The Supreme Court decision in the Altmann provided another opportunity for the Cruz braceros to maintain a cause of action pursuant to the FSIA and those claims that were equitable in nature – resulting trust, accounting, unjust enrichment, conversion and unfair business practice.103 The court still barred the claims based on the theories of third party beneficiary and fiduciary duty, citing international agreements between the United States, Mexico, and Wells Fargo.104

FSIA and the Commercial Activity Exception

The FSIA provides an exception for a commercial activity when it is performed in the “regular course of commercial conduct or a particular commercial transaction or act.”105 The Cruz litigants argued that Mexico was not immune as a sovereign state because its conduct should be categorized as a commercial activity exception under FSIA.106 The standard for determining what kinds of activities were commercial was to be “determined by reference to the nature of the course of conduct . . . rather than by reference to its purpose.”107 Justice Breyer explained that deeming acts ‘commercial’ did not have to do with determining the overall motives of the foreign government, but rather looking for “the type of actions by which a private party engages in . . .”108 The court held that the Mexican Defendants’ actions, in failing to safeguard and redistribute the funds to the braceros, were not those of a sovereign regulator, but rather, more akin to a private player (bank or trustee).109 As such, the commercial exception applied.110 Furthermore, the court found there to be sufficient nexus between the Mexican Defendant’s alleged commercial activity and the plaintiffs’ cause of action: the Mexican Defendants had acted in concert with the U.S. for years in administering many parts of the bracero agreement and made direct transactions with Wells Fargo.111 Thus, there were numerous substantial contacts between the U.S. and the Mexican Defendants and the court ruled that sovereign immunity did not apply.112

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