Sumitomo Shoji America, Inc. v. Avagliano
72 L. Ed. 2d 765, 1982 U.S. LEXIS 122, 457 U.S. 176 (1982)
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Rule of Law:
For the purposes of a Friendship, Commerce and Navigation (FCN) treaty, a corporation's nationality is determined by its place of incorporation, not by the nationality of its parent company or shareholders.
Facts:
- Sumitomo Shoji America, Inc. is a corporation incorporated under the laws of New York.
- Sumitomo Shoji America, Inc. is a wholly-owned subsidiary of Sumitomo Shoji Kabushiki Kaisha, a Japanese corporation.
- A group of past and present female secretarial employees worked for Sumitomo in the United States.
- The employees alleged that Sumitomo's practice was to hire only male Japanese citizens for executive, managerial, and sales positions.
Procedural Posture:
- Past and present female employees (Respondents) filed a class-action lawsuit against Sumitomo Shoji America, Inc. (Petitioner) in the U.S. District Court for the Southern District of New York, alleging violations of Title VII.
- Sumitomo filed a motion to dismiss, claiming its hiring practices were protected by the Friendship, Commerce and Navigation Treaty between the U.S. and Japan.
- The District Court denied the motion to dismiss the Title VII claim, ruling that Sumitomo, as a U.S. corporation, was not covered by the relevant treaty article.
- The District Court certified the treaty question for an interlocutory appeal.
- On appeal, the U.S. Court of Appeals for the Second Circuit reversed in part, holding that the treaty did apply to locally incorporated subsidiaries like Sumitomo.
- The U.S. Supreme Court granted certiorari to resolve the issue.
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Issue:
Does Article VIII(1) of the Friendship, Commerce and Navigation Treaty between the United States and Japan provide an exemption from Title VII of the Civil Rights Act for a wholly owned American subsidiary of a Japanese corporation?
Opinions:
Majority - Chief Justice Burger
No. Article VIII(1) of the treaty does not apply because a U.S.-incorporated subsidiary of a Japanese company is a company of the United States, not Japan. The plain language of the treaty controls. Article XXII(3) explicitly defines 'companies' as those 'constituted under the applicable laws and regulations within the territories of either Party.' Since Sumitomo was incorporated in New York, it is a company of the United States and cannot invoke treaty rights reserved for companies of Japan operating within the U.S. This interpretation is supported by the U.S. State Department and the Japanese Ministry of Foreign Affairs, whose views are entitled to great weight. The treaty's purpose was to ensure foreign companies receive national treatment—treatment equal to domestic companies—not to grant them superior rights or an exemption from domestic laws like Title VII.
Analysis:
This decision establishes a clear and easily administrable 'place of incorporation' test for determining corporate nationality under FCN treaties. It prevents foreign-owned but U.S.-incorporated subsidiaries from using such treaties as a shield against U.S. domestic laws, particularly in the realm of employment discrimination. The ruling reinforces the principle that when a foreign enterprise chooses to operate in the U.S. through a locally incorporated entity, it accepts both the benefits and the burdens of U.S. law. This has significant implications for multinational corporations, ensuring that U.S. civil rights laws apply uniformly to all companies incorporated on U.S. soil, regardless of their parentage.
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