Board of Regents of Univ. Of Texas v. Nippon Tel.

• Decision Date: 01 February 2007
• Docket Number: No. 05-51432.,05-51432.
• Citation: 478 F.3d 274
• Parties: The BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM, on behalf of The University of Texas at Austin; Hydro-Quebec, Plaintiffs-Appellees, v. NIPPON TELEPHONE AND TELEGRAPH CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

478 F.3d 274

The BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM, on behalf of The University of Texas at Austin; Hydro-Quebec, Plaintiffs-Appellees, v. NIPPON TELEPHONE AND TELEGRAPH CORPORATION, Defendant-Appellant.

No. 05-51432.

United States Court of Appeals, Fifth Circuit.

February 1, 2007.

William A. Brewer, III, James Stephen Renard (argued), Joyce Marie Hellstern, Bickel & Brewer, Daniel Francisco Perez, Akin Gump Strauss Hauer & Feld, Dallas, TX, for Plaintiffs-Appellees.

Gerald C. Conley (argued), Timothy E. Taylor, Tonya M. Gray, Andrews & Kurth, Dallas, TX, for Defendant-Appellant.

Appeal from the United States District Court for the Western District of Texas.

Before BARKSDALE, DeMOSS and PRADO, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judges.

Having removed this action from state court, Nippon Telegraph & Telephone Corporation (NTT), Japan's largest telecommunications company, challenges the district court's denial of its motion to dismiss. In this interlocutory appeal, NTT asserts: it is an "organ of a foreign state", pursuant to the Foreign Sovereign Immunity Act (FSIA), 28 U.S.C. § 1603(b)(2); and, therefore, it is entitled to immunity from federal (and state) court jurisdiction, 28 U.S.C. § 1604. The Board of Regents of the University of Texas System (UT) and Hydro-Qubec (HQ) (collectively, UT/HQ) contend this action should be remanded to Texas state court, claiming: NTT's supplemental removal notice, in which NTT first asserted foreign-sovereign status, was not timely filed; and, in the alternative, jurisdiction is lacking because NTT does not qualify as an "organ of a foreign state", and, therefore, cannot assert subject-matter jurisdiction under 28 U.S.C. §§ 1330 or 1331.

NTT's supplemental removal notice was timely. But, because NTT does not qualify as an "organ of a foreign state", subject-matter jurisdiction is lacking. Accordingly, the district court's denial of foreign-sovereign status is AFFIRMED. The Federal Circuit's having earlier rejected NTT's other asserted basis for subject-matter jurisdiction (patent-law, under 28 U.S.C. § 1338(a)), the district court's ruling it has jurisdiction is VACATED, and this action is REMANDED to district court for remand to Texas state court. AFFIRMED IN PART; VACATED IN PART; REMANDED.

I.

UT/HQ alleges: an NTT research scientist learned of confidential information for certain lithium rechargeable-battery technology while visiting the University of Texas at Austin from 1993 to 1994 under the tutelage of a UT professor; upon returning to NTT in Japan, the research scientist disclosed the confidential information, which NTT used in November 1995 to apply for a Japanese patent that was published in May 1997; and, unaware of NTT's misappropriation and patent application, UT filed for a provisional United States patent in April 1996 and entered into a licensing agreement with HQ in January 1997, giving HQ exclusive rights to the lithium rechargeable-battery technology. UT's United States patent was granted in June 1999. UT/HQ asserts NTT's Japanese patent interfered with their ability to commercialize their licensing agreement.

Accordingly, in June 2001, UT/HQ filed this action in Texas state court, claiming, inter alia, tortious interference, unfair competition, misappropriation of trade secrets, conversion, and breach of a confidential relationship. The action seeks actual and punitive damages, disgorgement of profits, and a constructive trust over the Japanese patent for the benefit of UT/HQ.

In July 2001, NTT removed this action to district court, pursuant to 28 U.S.C. § 1441, et seq. NTT asserted that, because UT/HQ's claims required determining questions of federal patent law, subject matter jurisdiction was proper under 28 U.S.C. §§ 1331 (generally granting jurisdiction over actions arising under federal law) and 1338(a) (providing jurisdiction for claims arising under federal patent laws). Subsequently, believing foreign-sovereign status existed as an additional subject-matter-jurisdiction basis for removal, see 28 U.S.C. §§ 1330 and 1441(d), NTT in October 2001 moved for an extension of time to file a supplemental notice of removal. (NTT never asserted diversity jurisdiction pursuant to 28 U.S.C. § 1332 because NTT and H/Q are citizens of foreign states. E.g., Giannakos v. M/V Bravo Trader, 762 F.2d 1295, 1298 (5th Cir.1985) ("Diversity does not exist where aliens are on both sides of the litigation.").)

On 26 November 2001, the district court, inter alia, denied UT/HQ's motion to remand for lack of subject-matter jurisdiction. Reasoning that UT/HQ's tortious-interference claim requires determining whether UT/HQ's patent overlaps NTT's patent, the district court held: it had federal-question jurisdiction over that claim, pursuant to 28 U.S.C. §§ 1331 and 1338(a); and, accordingly, it had supplemental jurisdiction over the entire action, pursuant to 28 U.S.C. § 1367(a) ("district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy").

Over the next several years, the parties filed approximately 50 deadline-extension motions. By a June 2004 order, the district court denied, inter alia, NTT's motion to dismiss based on sovereign immunity. Bd. of Regents, Univ. of Tex. Sys. v. Nippon Tel. & Tel. Corp., No. A-01-CA-478 (W.D. Tex. 1 June 2004). Rather than appeal to this court, NTT appealed to the United States Court of Appeals for the Federal Circuit. That court held, contrary to the district court's 26 November 2001 order, that UT/HQ's claims did not require the determination of questions arising under federal patent laws. Bd. of Regents, Univ. of Tex. Sys. v. Nippon Tel. & Tel. Corp., 414 F.3d 1358, 1365 (Fed.Cir.2005). Lacking such jurisdiction, the Federal Circuit transferred this appeal to this court: to determine whether NTT properly raised foreign sovereignty as an additional basis for subject-matter jurisdiction; and, if so, to review the district court's denial of NTT's motion to dismiss, claiming foreign-sovereign immunity.

II.

As a threshold matter, our jurisdiction to review the denial of NTT's motion to dismiss exists under the "collateral order" doctrine, an exception to 28 U.S.C. § 1291's allowing appeals only from final decisions. Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 545-47, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). "[R]ecogniz[ing] that the entitlement under the FSIA is an immunity from suit rather than a mere defense to liability... [which] is effectively lost if a case is erroneously permitted to go [forward]", an interlocutory appeal lies from a denial of foreign-sovereign immunity. Stena Rederi AB v. Comision de Contratos del Comite, 923 F.2d 380, 385 (5th Cir.1991) (internal quotations and citation omitted).

This opinion first addresses whether NTT's supplemental removal notice was timely. Because it was, NTT's foreign-sovereign-status claim is at issue. NTT is not entitled to such status; therefore, federal subject-matter jurisdiction is lacking. Accordingly, removal was improper.

A.

NTT filed its initial removal notice on 23 July 2001, having received a copy of UT/HQ's complaint in mid-July. The timeliness of this removal notice, which asserted federal-patent questions as the basis for federal jurisdiction, is not at issue. Instead, at issue is NTT's supplemental removal notice, which asserted foreign-sovereign status as a removal basis. It was submitted with NTT's 15 October motion, which requested an extension of time to file such a supplemental notice. The district court denied that motion on the ground that NTT failed to show cause, pursuant to 28 U.S.C. § 1441(d) ("time limitations [for removal] ... may be enlarged at any time for cause shown"). (As discussed infra, because NTT had not yet been properly served with process, its request for an extension of time to file its supplemental notice was not necessary.) Relying on 28 U.S.C. § 1447(c), requiring certain motions to remand to "be made within 30 days after the filing of the notice of removal", and focusing on considerations of judicial economy, UT/HQ contends this supplemental removal notice was untimely because it was submitted more than 30 days after NTT's initial notice.

UT/HQ's timeliness contention, which implicates subject-matter jurisdiction, is unavailing. We review questions of such jurisdiction de novo. Delgado v. Shell Oil Co., 231 F.3d 165, 175 (5th Cir. 2000). The procedure for removal from state to federal court is governed by 28 U.S.C. § 1446(b); it requires a removal notice to "be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based ...." 28 U.S.C. § 1446(b) (emphasis added). The Supreme Court clarified this language in Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 347-48, 119 S.Ct. 1322, 143 L.Ed.2d 448 (1999), holding the time for removal commences on formal service of process, "not by mere receipt of the complaint unattended by any formal service". Id. at 348, 119 S.Ct. 1322 (emphasis added); see also City of Clarksdale v. Bellsouth Telecomms., Inc., 428 F.3d 206, 210 (5th Cir. 2005) (summarizing Murphy Bros. holding); Badon v. RJR Nabisco Inc., 224 F.3d 382, 390 n. 12 (5th Cir.2000) ("The 30 day period in no event begins to run prior to service of process on the defendant." (citing Murphy Bros.)).

In its 26 November 2001 order, the district court determined NTT's mid-July 2001 receipt of UT/HQ's complaint did not constitute sufficient service of process, because it did not comply with the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. UT/HQ does not contest this ruling. After successfully moving for a time extension, UT/HQ prope...