Spiess v. C. Itoh & Co. (America), Inc.
| Decision Date | 24 April 1981 |
| Docket Number | No. 79-2382,79-2382 |
| Citation | 643 F.2d 353 |
| Parties | 25 Fair Empl.Prac.Cas. 849, 25 Empl. Prac. Dec. P 31,768 Michael E. SPIESS, Jack K. Hardy and Benjamin F. Rountree, Plaintiffs-Appellees, v. C. ITOH & COMPANY (AMERICA), INC., Defendant-Appellant. . Unit A |
| Court | U.S. Court of Appeals — Fifth Circuit |
Fulbright & Jaworski, Joe P. Martin, Neil Martin, Nancy Morrison O'Connor, Houston, Tex., for defendant-appellant.
Foreman, Dyess, Prewett, Rosenberg & Henderson, Edward John O'Neill, Jr., Charles E. Humphrey, Jr., Houston, Tex., for plaintiffs-appellees.
Lutz Alexander Prager, Marcia Beth Ruskin, E. E. O. C., Washington, D. C., for amicus curiae.
Appeal from the United States District Court for the Southern District of Texas.
Before COLEMAN, CHARLES CLARK and REAVLEY, Circuit Judges.
This interlocutory appeal presents an important issue of first impression in this circuit. C. Itoh & Company (America), a New York corporation wholly owned by a Japanese parent corporation, argues that a 1953 treaty between the United States and Japan permits it to hire only Japanese citizens for managerial and technical positions, in spite of American laws prohibiting discrimination on the basis of national origin. We hold that the treaty affords American subsidiaries of Japanese corporations the limited right to discriminate in favor of Japanese nationals in filling these positions.
Michael E. Spiess and other American employees of C. Itoh-America filed a class action under Title VII of the Civil Rights Act and 42 U.S.C. section 1981. The complaint charged that the company had discriminated against its American employees by making managerial promotions and other benefits available only to Japanese citizens. C. Itoh-America filed a motion to dismiss, asserting that the Treaty of Friendship, Commerce and Navigation between the United States and Japan, April 2, 1953, 4 U.S.T. 2063, T.I.A.S. No. 2863, precluded the plaintiffs' suit. Article VIII(1) of the Treaty provides that
companies of either Party shall be permitted to engage, within the territories of the other Party, accountants and other technical experts, executive personnel, attorneys, agents and other specialists of their choice.
C. Itoh-America argued that the language permitting companies to engage executive personnel "of their choice" cloaks the company with absolute immunity from American employment discrimination laws as to these positions.
The trial court denied C. Itoh-America's motion to dismiss, relying primarily on article XXII(3) of the Treaty. Under article XXII(3),
(c)ompanies constituted under the applicable laws and regulations within the territories of either Party shall be deemed companies thereof and shall have their juridical status recognized within the territories of the other Party.
The trial court reasoned that C. Itoh-America, a New York corporation, had been "constituted" under the laws of the United States. As a result, the court concluded that C. Itoh-America was a "company of the United States" under the plain meaning of article XXII(3), even though it was wholly owned by C. Itoh & Company, Ltd., a Japanese corporation. Because C. Itoh-America, in this view, was not a company of one party operating within the territory of the other, the trial court ruled that it could not assert the article VIII(1) right to choose executive personnel of its choice. See Spiess v. C. Itoh & Co. (America), Inc., 469 F.Supp. 1, 6 (S.D.Tex.1979). Upon a motion by C. Itoh-America, however, the district court permitted the company to take an interlocutory appeal. The following question was certified to this court under 28 U.S.C. section 1292(b):
Does the 1953 Treaty of Friendship, Commerce and Navigation between the United States and Japan provide American subsidiaries of Japanese corporations with the absolute right to hire managerial, professional and other specialized personnel of their choice, irrespective of American law proscribing racial discrimination in employment?
The Japanese Treaty is one in a long line of Friendship, Commerce and Navigation (FCN) treaties negotiated on a bilateral basis between the United States and other countries. Since the negotiation of the first FCN treaty with France in 1778, American diplomats have used the FCN device to establish the ground rules by which private commerce between American citizens and citizens of other countries is regulated. See generally Walker, Modern Treaties of Friendship, Commerce and Navigation, 42 Minn.L.Rev. 805, 806 (1958) (hereinafter cited as Modern Treaties). The FCN format is a flexible one, and it has been used at different times to serve different foreign policy goals. The central theme of the FCN treaty, however, has remained. An FCN treaty is the medium through which two nations provide "for the rights of each country's citizens, their property and other interests, in the territories of the other, and for the rules mutually to govern their trade and shipping." Walker, Treaties for the Encouragement and Protection of Foreign Investment: Present United States Practice, 5 Am.J.Comp.L. 229, 230-31 (1956) (hereinafter cited as United States Practice).
The FCN treaties, including the Japanese Treaty, are self-executing treaties, that is, they are binding domestic law of their own accord, without the need for implementing legislation. See Zenith Radio Corp. v. Matsushita Electric Industrial Co., Ltd., 494 F.Supp. 1263, 1266 (E.D.Pa.1980). Such treaties are "the supreme law of the land," and supersede inconsistent state law. U.S.Const. art. VI, cl. II; United States v. Pink, 315 U.S. 203, 230, 62 S.Ct. 552, 565-66, 86 L.Ed. 796, 817-818 (1942); De Tenorio v. McGowan, 510 F.2d 92, 95 (5th Cir. 1975). See also Oregon-Pacific Forest Products Corp. v. Welsh Panel Co., 248 F.Supp. 903, 910 (D.Or.1965) (). Even federal statutes "ought never to be construed to violate the law of nations if any other possible construction remains." The Charming Betsy, 6 U.S. (2 Cranch) 64, 118, 2 L.Ed. 208, 226 (1804), quoted in McCulloch v. Sociedad Nacional de Marineros de Honduras, 372 U.S. 10, 21, 83 S.Ct. 671, 678, 9 L.Ed.2d 547, 555 (1963). Only when Congress clearly intends to depart from the obligations of a treaty will inconsistent federal legislation govern. Id. Thus, unless federal civil rights laws reflect an affirmative disavowal of the rights provided by the Treaty, it is our duty to implement the treaty rights.
The district court held that C. Itoh-America was an American company for the purposes of the Treaty, and thus could not assert the article VIII rights extended to Japanese corporations operating in this country. In the trial court's view, "(a)rticle XXII(3) unequivocally states that for the purpose of the Treaty the nationality of the corporation is determined by the place of incorporation." Spiess v. C. Itoh & Co. (America), Inc., 469 F.Supp. 1, 6 (S.D.Tex.1979). We reject this construction of article XXII(3).
The district court's reading of article XXII(3) is compatible with the text of the Treaty, but it fails to account for the unique nature of an international agreement. Unlike domestic legislation, treaties must create a common ground between differing cultures before the rights of the parties can be defined. The negotiating history of the Treaty makes clear that article XXII(3) was designed for this purpose. A contemporaneous memorandum prepared by State Department negotiators demonstrates that the provision was intended, not to determine which forms of corporate organization were entitled to assert Treaty rights, but to ensure that unfamiliar organizations would be recognized as "companies" by the legal institutions of the respective countries. The memorandum noted the following colloquy:
Mr. Nagai (a Japanese negotiator) then asked what "juridical status" meant, and inquired whether the recognition of juridical status mentioned in paragraph three (of article XXII) meant anything more than the recognition of the existence of a juridical person.
Mr. Bassin (the American negotiator) replied that "juridical status" meant "legal status," the legal position of an organization in, or with respect to, the rest of the community. The recognition mentioned in the second sentence of paragraph three, he added, meant merely the recognition by either Party of the existence and legal status of juridical persons organized under the laws of the other Party.
(a) "company" is defined simply and broadly to mean ... any "artificial" person acknowledged by its creator, as distinguished from a natural person, whether or not for pecuniary profit. Every association meeting this simple test of valid existence must be accounted by the other party a company of the party of its creation, and have its juridical status recognized without any reservation for the laws of the forum.
Id. at 380-81. Walker also emphasized that there was a
clear distinction maintained in the treaties between the so-called "civil" and "functional" capacities of companies. The recognition of status and nationality does not of itself create substantive rights; these are dealt with elsewhere on their own merits. Thus the acknowledgment of a...
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