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Avigliano v. Sumitomo Shoji America Inc.

decided: January 9, 1981.

LISA M. AVIGLIANO, DIANNE CHENICEK, ROSEMARY T. CRISTOFARI, CATHERINE CUMMINS, RAELLEN MANDELBAUM, MARIA MANNINA, SHARON MEISELS, FRANCES PACHECO, JOANNE SCHNEIDER, JANICE SILBERSTEIN, REIKO TURNER AND ELIZABETH WONG, PLAINTIFFS-APPELLEES,
v.
SUMITOMO SHOJI AMERICA, INC., DEFENDANT-APPELLANT .



Interlocutory appeal pursuant to 28 U.S.C. § 1292(b) from an order of the District Court for the Southern District of New York, entered by Judge Charles H. Tenney denying defendant's motion to dismiss plaintiffs' claims of discrimination in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e, et seq., on the ground that the 1953 Treaty of Friendship, Commerce and Navigation between the United States and Japan exempts defendant from any legal challenge to its practice of filling its executive-level positions with Japanese nationals. Affirmed and remanded .

Before Lumbard, Mansfield and Meskill, Circuit Judges.

Author: Mansfield

Sumitomo Shoji America, Inc. ("Sumitomo"), a New York-incorporated, wholly-owned subsidiary of a Japanese commercial firm, appeals pursuant to 28 U.S.C. § 1292(b) from an order of the District Court for the Southern District of New York entered by Judge Charles H. Tenney, denying its motion to dismiss this class action against it by female secretarial employees claiming that its practice of hiring only male Japanese nationals for management-level positions discriminates against them on the basis of sex and national origin in violation of Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e, et seq. ("Title VII"), the Civil Rights Act of 1966, 42 U.S.C. § 1981, and the Thirteenth Amendment. Dismissal was sought by Sumitomo pursuant to F.R.Civ.P. 12(b)(6) on the ground that the 1953 Treaty of Friendship, Commerce and Navigation between the United States and Japan, 4 U.S.T. 2063 (the "Treaty" or "Japanese Treaty"), exempts Japanese trading companies and their wholly-owned subsidiaries incorporated in the United States from the application of Title VII. Judge Tenney denied Sumitomo's motion insofar as it sought dismissal of plaintiffs' Title VII claims,*fn1 on the ground that the Treaty was not meant to protect the employment practices of Japanese subsidiaries incorporated in the United States. D.C., 473 F. Supp. 506. Sumitomo sought an immediate appeal of this question under 28 U.S.C. § 1292(b), and that request was granted.*fn2

We affirm, but on grounds other than that relied on by the district court. We hold that Sumitomo was entitled to invoke the employment provisions of the Treaty, but that the Treaty does not exempt Japanese companies operating in the United States, whether or not they are incorporated in the United States, from American laws prohibiting discrimination in employment.

The Japanese Treaty is a commercial agreement designed to encourage trade and investment between the United States and Japan. It is one of several dozen similar treaties entered into by the United States in the post-World War II period, and carries on a tradition antedating the Constitution. See generally, 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 Treaties ). The general aim of these treaties is to

"establish or confirm in the potential host country a governmental policy of equity and hospitality to the foreign investor. This means, above all, assurance that the enterprise and property of the alien will be respected and that he will be accorded equal protection of the laws alike with citizens of the country." Id. at 230.

In the Japanese Treaty, as in almost all other Friendship, Commerce and Navigation ("FCN") agreements, the goal of equal protection of the laws is put into effect by means of specific provisions "based in general upon the principles of national and of most-favored-nation treatment unconditionally accorded." 4 U.S.T. at 2066.

The heart of the Japanese Treaty is Article VII, which the State Department has called "the basic "establishment' provision." Outgoing Airgram No. A-453, Department of State to USPOLAD, Tokyo, dated January 7, 1952. Article VII provides in relevant part that:

"Nationals and companies of either Party shall be accorded national treatment with respect to engaging in all types of commercial, industrial, financial and other business activities within the territories of the other Party, whether directly or by agent or through the medium of any form of lawful juridical entity. Accordingly, such nationals and companies shall be permitted within such territories: (a) to establish and maintain branches, agencies, offices, factories and other establishments appropriate to the conduct of their business; (b) to organize companies under the general company laws of such other Party, and to acquire majority interests in companies of such other Party ; and (c) to control and manage enterprises which they have established or acquired. Moreover, enterprises which they control, whether in the form of individual proprietorships, companies or otherwise, shall, in all that relates to the conduct of the activities thereof, be accorded treatment no less favorable than that accorded like enterprises controlled by nationals and companies of such other Party." 4 U.S.T. at 2069. (Emphasis supplied.)

In order to facilitate the staffing of overseas operations, the Treaty provides in Article I that:

"Nationals of either Party shall be permitted to enter the territories of the other Party and to remain therein:

(a) for the purpose of carrying on trade between the territories of the two Parties and engaging in related commercial activities...." Id. at 2066,

and in Article VIII that

"Nationals and 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 ...


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