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SUMITOMO SHOJI AMERICA v. AVAGLIANO ET AL.

SUPREME COURT OF THE UNITED STATES


decided*fn*: June 15, 1982.

SUMITOMO SHOJI AMERICA, INC
v.
AVAGLIANO ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT.

Burger, C. J., delivered the opinion for a unanimous Court.

Author: Burger

[ 457 U.S. Page 177]

 CHIEF JUSTICE BURGER delivered the opinion of the Court.

We granted certiorari to decide whether Article VIII(1) of the Friendship, Commerce and Navigation Treaty between

[ 457 U.S. Page 178]

     the United States and Japan provides a defense to a Title VII employment discrimination suit against an American subsidiary of a Japanese company.

I

Petitioner, Sumitomo Shoji America, Inc., is a New York corporation and a wholly owned subsidiary of Sumitomo Shoji Kabushiki Kaisha, a Japanese general trading company or sogo shosha.*fn1 Respondents are past and present female secretarial employees of Sumitomo.*fn2 All but one of the respondents are United States citizens; that one exception is a Japanese citizen living in the United States. Respondents brought this suit as a class action claiming that Sumitomo's alleged practice of hiring only male Japanese citizens to fill executive, managerial, and sales positions violated both 42 U. S. C. § 1981 and Title VII of the Civil Rights Act of 1964, 78 Stat. 253, as amended, 42 U. S. C. § 2000e et seq. (1976 ed. and Supp. IV).*fn3 Respondents sought both injunctive relief and damages.

[ 457 U.S. Page 179]

     Without admitting the alleged discriminatory practice, Sumitomo moved under Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the complaint. Sumitomo's motion was based on two grounds: (1) discrimination on the basis of Japanese citizenship does not violate Title VII or § 1981; and (2) Sumitomo's practices are protected under Article VIII(1) of the Friendship, Commerce and Navigation Treaty between the United States and Japan, Apr. 2, 1953, [1953] 4 U. S. T. 2063, T. I. A. S. No. 2863. The District Court dismissed the § 1981 claim, holding that neither sex discrimination nor national origin discrimination are cognizable under that section. 473 F. Supp 506 (SDNY 1979). The court refused to dismiss the Title VII claims, however; it held that because Sumitomo is incorporated in the United States it is not covered by Article VIII(1) of the Treaty. The District Court then certified for interlocutory appeal to the Court of Appeals under 28 U. S. C. § 1292(b) the question of whether the terms of the Treaty exempted Sumitomo from the provisions of Title VII.

The Court of Appeals reversed in part. 638 F.2d 552 (CA2 1981). The court first examined the Treaty's language and its history and concluded that the Treaty parties intended Article VIII(1) to cover locally incorporated subsidiaries of foreign companies such as Sumitomo. The court then held that the Treaty language does not insulate Sumitomo's executive employment practices from Title VII scrutiny. The court concluded that under certain conditions, Japanese citizenship could be a bona fide occupational qualification for high-level employment with a Japanese-owned domestic corporation and that Sumitomo's practices might

[ 457 U.S. Page 180]

     thus fit within a statutory exception to Title VII.*fn4 The court remanded for further proceedings.*fn5

We granted certiorari, 454 U.S. 962 (1981), and we vacate and remand.

II

Interpretation of the Friendship, Commerce and Navigation Treaty between Japan and the United States must, of course, begin with the language of the Treaty itself. The clear import of treaty language controls unless "application of the words of the treaty according to their obvious meaning effects a result inconsistent with the intent or expectations of its signatories." Maximov v. United States, 373 U.S. 49, 54 (1963). See also The Amiable Isabella, 6 Wheat. 1, 72 (1821).

[ 457 U.S. Page 181]

     Article VIII(1) of the Treaty provides in pertinent part:

"[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." (Emphasis added.)*fn6

[ 457 U.S. Page 182]

     Clearly Article VIII(1) only applies to companies of one of the Treaty countries operating in the other country. Sumitomo contends that it is a company of Japan, and that Article VIII(1) of the Treaty grants it very broad discretion to fill its executive, managerial, and sales positions exclusively with male Japanese citizens.*fn7

Article VIII(1) does not define any of its terms; the definitional section of the Treaty is contained in Article XXII. Article XXII(3) provides:

"As used in the present Treaty, the term 'companies' means corporations, partnerships, companies and other associations, whether or not with limited liability and whether or not for pecuniary profit. Companies 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." (Emphasis added.)

Sumitomo is "constituted under the applicable laws and regulations" of New York; based on Article XXII(3), it is a company of the United States, not a company of Japan.*fn8 As

[ 457 U.S. Page 183]

     a company of the United States operating in the United States, under the literal language of Article XXII(3) of the Treaty, Sumitomo cannot invoke the rights provided in Article VIII(1), which are available only to companies of Japan operating in the United States and to companies of the United States operating in Japan.

The Governments of Japan and the United States support this interpretation of the Treaty. Both the Ministry of Foreign Affairs of Japan and the United States Department of State agree that a United States corporation, even when wholly owned by a Japanese company, is not a company of Japan under the Treaty and is therefore not covered by Article VIII(1). The Ministry of Foreign Affairs stated its position to the American Embassy in Tokyo with reference to this case:

"The Ministry of Foreign Affairs, as the Office of [the Government of Japan] responsible for the interpretation of the [Friendship, Commerce and Navigation] Treaty, reiterates its view concerning the application of Article 8, Paragraph 1 of the Treaty: For the purpose of the Treaty, companies constituted under the applicable laws . . . of either Party shall be deemed companies thereof and, therefore, a subsidiary of a Japanese company which is incorporated under the laws of New York is not

[ 457 U.S. Page 184]

     covered by Article 8 Paragraph 1 when it operates in the United States."*fn9

The United States Department of State also maintains that Article VIII(1) rights do not apply to locally incorporated subsidiaries.*fn10 Although not conclusive, the meaning attributed to treaty provisions by the Government agencies

[ 457 U.S. Page 185]

     charged with their negotiation and enforcement is entitled to great weight. Kolovrat v. Oregon, 366 U.S. 187, 194 (1961).*fn11

Our role is limited to giving effect to the intent of the Treaty parties. When the parties to a treaty both agree as to the meaning of a treaty provision, and that interpretation follows from the clear treaty language, we must, absent extraordinarily strong contrary evidence, defer to that interpretation.*fn12

III

Sumitomo maintains that although the literal language of the Treaty supports the contrary interpretation, the intent of Japan and the United States was to cover subsidiaries regardless of their place of incorporation. We disagree.

Contrary to the view of the Court of Appeals and the claims of Sumitomo, adherence to the language of the Treaty would not "overlook the purpose of the Treaty." 638 F.2d, at 556. The Friendship, Commerce and Navigation Treaty between Japan and the United States is but one of a series of similar commercial agreements negotiated after World War II.*fn13 The primary purpose of the corporation provisions of

[ 457 U.S. Page 186]

     the Treaties was to give corporations of each signatory legal status in the territory of the other party, and to allow them to conduct business in the other country on a comparable basis with domestic firms. Although the United States negotiated commercial treaties as early as 1778, and thereafter throughout the 19th century and early 20th century,*fn14 these early commercial treaties were primarily concerned with the trade and shipping rights of individuals. Until the 20th century, international commerce was much more an individual than a corporate affair.*fn15

As corporate involvement in international trade expanded in this century, old commercial treaties became outmoded. Because "[corporations] can have no legal existence out of the boundaries of the sovereignty by which [they are] created," Bank of Augusta v. Earle, 13 Pet. 519, 588 (1839), it became necessary to negotiate new treaties granting corporations legal status and the right to function abroad. A series of Treaties negotiated before World War II gave corporations legal status and access to foreign courts,*fn16 but it was not until the

[ 457 U.S. Page 187]

     postwar Friendship, Commerce and Navigation Treaties that United States corporations gained the right to conduct business in other countries.*fn17 The purpose of the Treaties was

[ 457 U.S. Page 188]

     not to give foreign corporations greater rights than domestic companies, but instead to assure them the right to conduct business on an equal basis without suffering discrimination based on their alienage.

The Treaties accomplished their purpose by granting foreign corporations "national treatment"*fn18 in most respects and by allowing foreign individuals and companies to form locally incorporated subsidiaries. These local subsidiaries are considered for purposes of the Treaty to be companies of the country in which they are incorporated; they are entitled to the rights, and subject to the responsibilities of other domestic corporations. By treating these subsidiaries as domestic companies, the purpose of the Treaty provisions -- to assure that corporations of one Treaty party have the right to conduct business within the territory of the other party without suffering discrimination as an alien entity -- is fully met.

[ 457 U.S. Page 189]

     Nor can we agree with the Court of Appeals view that literal interpretation of the Treaty would create a "crazy-quilt pattern" in which the rights of branches of Japanese companies operating directly in the United States would be greatly superior to the right of locally incorporated subsidiaries of Japanese companies. 638 F.2d, at 556. The Court of Appeals maintained that if such subsidiaries were not considered companies of Japan under the Treaty, they, unlike branch offices of Japanese corporations, would be denied access to the legal system, would be left unprotected against unlawful entry and molestation, and would be unable to dispose of property, obtain patents, engage in importation and exportation, or make payments, remittances, and transfers of funds. Ibid. That this is not the case is obvious; the subsidiaries, as companies of the United States, would enjoy all of those rights and more. The only significant advantage branches may have over subsidiaries is that conferred by Article VIII(1).

IV

We are persuaded, as both signatories agree, that under the literal language of Article XXII(3) of the Treaty, Sumitomo is a company of the United States; we discern no reason to depart from the plain meaning of the Treaty language. Accordingly, we hold that Sumitomo is not a company of Japan and is thus not covered by Article VIII(1) of the Treaty.*fn19 The judgment of the Court of Appeals is vacated,

[ 457 U.S. Page 190]

     and the case is remanded for further proceedings consistent with this opinion.

Vacated and remanded.

Disposition

638 F.2d 552, vacated and remanded.


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