Fortino v. Quasar Co., a Div. of Matsushita Elec. Corp. of America

• Decision Date: 03 December 1991
• Docket Number: Nos. 91-1123,91-1197 and 91-1564,s. 91-1123
• Citation: 950 F.2d 389
• Parties: 57 Fair Empl.Prac.Cas. (BNA) 712, 57 Empl. Prac. Dec. P 41,117, 21 Fed.R.Serv.3d 127 John FORTINO, Carl Meyers, and F. William Schulz, Plaintiffs-Appellees, Cross-Appellants, v. QUASAR COMPANY, A DIVISION OF MATSUSHITA ELECTRIC CORPORATION OF AMERICA, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 389

950 F.2d 389

57 Fair Empl.Prac.Cas. (BNA) 712,

57 Empl. Prac. Dec. P 41,117, 21 Fed.R.Serv.3d 127

John FORTINO, Carl Meyers, and F. William Schulz, Plaintiffs-Appellees, Cross-Appellants, v. QUASAR COMPANY, A DIVISION OF MATSUSHITA ELECTRIC

CORPORATION OF AMERICA, Defendant-Appellant, Cross-Appellee.

Nos. 91-1123, 91-1197 and 91-1564.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 15, 1991.

Decided Dec. 3, 1991.

Steven L. Bashwiner, Brian W. Bulger, Timothy J. Patenode, Gail C. Kalinich, Katten, Muchin & Zavis, Chicago, Ill., Paul L. Bressan, argued, Kelley, Drye & Warren, Los Angeles, Cal., for Matsushita Electric Corporation of America, defendant-appellant, cross-appellee.

Gwendolyn Young Reams, John F. Suhre, Carolyn L. Wheeler, Donald R. Livingston, Paula R. Bruner, E.E.O.C., Washington, D.C., for amicus curiae E.E.O.C.

Before BAUER, Chief Judge, and POSNER and FLAUM, Circuit Judges.

POSNER, Circuit Judge.

This suit charges the American subsidiary of a Japanese company with discriminating against its American executives on the basis of their age and national origin, in violation of the Age Discrimination in Employment Act, 29 U.S.C. § 626(b), and Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., respectively. A jury and judge (only the age claim was triable to a jury, since Title VII authorizes only equitable relief) awarded the three plaintiffs--John Fortino, Carl Meyers, and F. William Schulz, all former executives of Quasar Company, an unincorporated division of a U.S. corporation wholly owned by Matsushita Electric Industrial Company, Ltd., of Japan--$2.5 million in damages, to which the judge added almost $400,000 in attorneys' fees and costs. 751 F.Supp. 1306 (N.D.Ill.1990).

The most important question is whether a claim of discrimination on the basis of national origin is tenable when, as in this case, the discrimination is in favor of foreign citizens employed temporarily in the United States in accordance with a treaty between the U.S. and Japan that entitles companies of each nation to employ executives of their own choice in the other one. The plaintiffs ask us to close our eyes to the treaty because Quasar failed to mention it to the district judge. Ordinarily we will not consider a point that was not raised in the district court, but we can do so, Singleton v. Wulff, 428 U.S. 106, 121, 96 S.Ct. 2868, 2877, 49 L.Ed.2d 826 (1976), and, for the sake of international comity, amity, and commerce, we should do so when we are asked to consider the bearing of a major treaty with a major power and principal ally of the United States. Comity between the federal government and the states, though a weaker interest because states of the U.S. are only quasi-sovereigns, is an accepted reason for an appellate court to consider issues that would otherwise have been deemed waived because not raised in timely fashion, as held in Younger v. Harris, 401 U.S. 37, 40, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), and the other cases cited in Thomas v. State of Indiana, 910 F.2d 1413, 1415-16 (7th Cir.1990). This is a stronger case for overlooking waiver--especially since Quasar does not, as we understand its position, argue that the treaty is a defense to Title VII, and hence a ground for appeal, but merely that it is part of the essential background for understanding why this case is not within the scope of the statute. The treaty permits discrimination on the basis of citizenship, not of national origin; Title VII forbids discrimination on the basis of national origin, not of citizenship. The treaty is a reminder that the two forms of discrimination--citizenship and national origin--must not be run together, since one is permitted by treaty and the other forbidden by statute.

Quasar markets in the United States products made in Japan by Matsushita, which assigns several of its own financial and marketing executives to Quasar on a temporary basis. They are employees of Quasar and are under its day-to-day control but they also retain their status as employees of Matsushita and are designated as "MEI [Matsushita Electric Industrial] personnel" on Quasar's books. Quasar does not evaluate their performance--Matsushita does, and also keeps their personnel records and fixes their salaries and assists with the relocation of their families to the United States during the period of the assignment. These executives enter this country under "E-1" or "E-2" temporary visas, which permit the holder of the visa to work here, provided (so far as applicable to this case, which involves Japanese executives) that the work is executive or supervisory in character, the worker is a Japanese citizen, the company he is working for in the U.S. is at least half owned by Japanese nationals and has substantial trade or investment relations with Japan, and he is doing work authorized by the Treaty of Friendship, Commerce and Navigation between the United States and Japan.

In 1986 there were ten of these Japanese expatriate executives working for Quasar. (The parties call them "expatriates," though in common parlance the word is not applied to a person on merely temporary assignment to another country.) One was named Nishikawa. In 1985 Quasar had lost $20 million, and Nishikawa had been sent by Matsushita to prevent a recurrence of the loss. He was put in charge of Quasar and proceeded to reorganize the company, in the process reducing the work force, including management, by half. The three plaintiffs were among the American executives of non-Japanese origin who were discharged. None of the Japanese expatriate executives was discharged, although it appears that two were rotated back to Japan and replaced by only one new expatriate. Far from being discharged, the expatriates received salary increases; the American executives of Quasar who were not discharged did not. Two out of Quasar's three Japanese-American employees were also discharged, but none of these was an executive.

Article VIII(1) of the treaty authorizes "companies of either Party [i.e., the U.S. and Japan], to engage, within the territories of the other Party ... executive personnel ... of their choice." The propriety of Matsushita's assigning its own executives to Quasar is further confirmed by the issuance of E-1 and E-2 visas to the Japanese expatriate executives. Nevertheless the district judge based his conclusion that Quasar had violated Title VII on the better treatment the company gave the Japanese expatriates compared to its American executives in 1986: it discharged none of the former but many of the latter, and it gave raises to all of the former and none of the latter. This was favoritism all right, but discrimination in favor of foreign executives given a special status by virtue of a treaty and its implementing regulations is not equivalent to discrimination on the basis of national origin.

We may assume that just as Title VII protects whites from discrimination in favor of blacks as well as blacks from discrimination in favor of whites, McDonald v. Santa Fe Trail Transportation Co., 427 U.S. 273, 96 S.Ct. 2574, 49 L.Ed.2d 493 (1976), so it protects Americans of non-Japanese origin from discrimination in favor of persons of Japanese origin. Title VII does not, however, forbid discrimination on grounds of citizenship. Espinoza v. Farah Mfg. Co., 414 U.S. 86, 94 S.Ct. 334, 38 L.Ed.2d 287 (1973). Of course, especially in the case of a homogeneous country like Japan, citizenship and national origin are highly correlated; almost all citizens of Japan were born there. But to use this correlation to infer national-origin discrimination from a treaty-sanctioned preference for Japanese citizens who happen also to be of Japanese national origin would nullify the treaty. This is true whether the correlation is used to prove intentional discrimination, as in this case, or to establish a disparate impact that the employer must justify on nondiscriminatory grounds. The exercise of a treaty right may not be made the basis for inferring a violation of Title VII. By virtue of the treaty, "foreign businesses clearly have the right to choose citizens of their own nation as executives because they are such citizens." MacNamara v. Korean Air Lines, 863 F.2d 1135, 1144 (3d Cir.1988) (emphasis in original). See also Wickes v. Olympic Airways, 745 F.2d 363, 368 (6th Cir.1984). That right would be empty if the subsidiary could be punished for treating its citizen executives differently from American executives on the ground that, since the former were of Japanese national origin and the latter were not, it was discriminating on the basis of national origin. Title VII would be taking back from the Japanese with one hand what the treaty had given them with the other. This collision is avoided by holding national origin and citizenship separate. That was not done here.

But can Quasar, not being a Japanese company in the technical sense in which this term is used in the treaty, rely on the treaty even to the limited extent suggested? Sumitomo Shoji America, Inc. v. Avagliano, 457 U.S. 176, 102 S.Ct. 2374, 72 L.Ed.2d 765 (1982), held that an American subsidiary of a foreign parent was not protected by the treaty. But there was no contention that the parent had dictated the subsidiary's discriminatory conduct, and the Court left open the question whether the subsidiary might in such a case assert any of its parent's treaty rights. Id. at 189 n. 19, 102 S.Ct. at 2382 n. 19. We think it must be allowed to in a case such as this, at least to the extent necessary to prevent the treaty from being set at naught. A judgment that forbids Quasar to give preferential treatment to the expatriate executives that its parent sends would have the same effect on the parent as it would have if it ran directly against the parent: it would prevent Matsushita from sending its own executives to manage Quasar in preference to employing American citizens in these...