Dole Food Company v. Patrickson – Oral Argument – January 22, 2003

Media for Dole Food Company v. Patrickson

Audio Transcription for Opinion Announcement – April 22, 2003 in Dole Food Company v. Patrickson

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William H. Rehnquist:

We’ll hear argument now in Number 01-593, the Dole Food Company versus Patrickson, and a companion case.

Mr. Paden.

Peter R. Paden:

Mr. Chief Justice, and may it please the Court:

The Dead Sea Bromine Company is an instrumentality of Israel under the Foreign Sovereign Immunities Act for three principal reasons.

Sandra Day O’Connor:

Is it… is it owned in the same capacity now as it was earlier?

Peter R. Paden:

No… no, it is not, Your Honor.

Sandra Day O’Connor:

And was it owned at the time the suit was filed?

Peter R. Paden:

At the time this suit was filed, the company had been privatized.

It was privatized in 1995.

Sandra Day O’Connor:

Right.

Right, and so are you going to address, then, how it comes under the statute at all in those circumstances?

Peter R. Paden:

I certainly intend to do that, Your Honor.

Sandra Day O’Connor:

Yes.

Peter R. Paden:

The three reasons, in sum, are that, throughout the period of time giving rise to the claims, Israel owned a majority of the shares or other ownership interests in the company.

We contend that this broad phrase plainly encompasses the majority ownership of Dead Sea Bromine that Israel indisputably possessed through a tiered ownership structure.

Secondly, a contrary interpretation cannot be reconciled with the basic purposes of the act.

The same policy that Congress found applicable to directly owned entities apply equally to their subsidiaries where the foreign State retains a majority interest.

To restrict instrumentalities to entities in which States hold legal title to the shares of stock would exclude a large number of the very types of State-owned commercial enterprises, shipping and airlines, mining operations and the like, that Congress specifically intended to bring within the reach of the statute.

Antonin Scalia:

Yes, but it’s a lot of trouble to track these things back, you know, who owns shares many tiers up, and Congress might well have simply determined we will honor the sovereignty of other States when they’re the principal stockholder of a corporation.

Where… where they are not, we are not impugning their sovereignty by going ahead and permitting… permitting suit against the entity.

That’s certainly a rational… a rational disposition, and the language seems to suggest that.

Peter R. Paden:

Well, Your Honor, I… I don’t disagree that that would be a rational disposition, but I don’t think there’s any indication in the case law, and there have been numerous cases where tiered entities have appeared before courts, that it’s posed any particular problem to identify the tiered ownership structure.

I… I’m not aware of any cases where… where that’s posed an enormous issue, and the computation of ownership and corporate… corporate responsibility for subsidiaries is an issue that lawyers deal with every day in commercial litigation, and lawyers have well-established techniques to ferret out the corporate change of ownership and it’s… it’s done all the time.

We don’t think… it clearly can be an issue, but we don’t think that that’s a particularly insurmountable issue here, and, in fact, there’s certainly no indication–

Antonin Scalia:

Your… your principle would apply no matter how many tiers up they go?

I… I assume you don’t think the second tier is the limit?

Peter R. Paden:

–So long as the State’s ownership interest is the majority ownership interest, Your Honor, there could be–

Antonin Scalia:

Even though the name of the State does not appear until you get six tiers up?

Peter R. Paden:

–That’s correct.

Our position would be that so long as the State’s interest is a majority interest, that would be the limiting principle, and I think that’s what the words of the statute seem to us to suggest–

Anthony M. Kennedy:

Why do you limit to the majority?

Supposing they have practical control as in other situations, you look at who really runs the company.

Peter R. Paden:

–Well, the statute says majority ownership, Your Honor, and we think that–

Anthony M. Kennedy:

But it doesn’t say majority ownership of grandchildren of the parent.

Peter R. Paden:

–It says a majority ownership interest, Your Honor, and we think a majority ownership interest is about as broad a term as… as could be conjured up to try to describe generically the concept of ownership.

I think Congress had in mind that this statute was going to apply to entities from nations all around the world, with many different kinds of economic systems, and in some countries the notion of ownership isn’t even so clearly established.

Anthony M. Kennedy:

Well, I… I suppose it could mean ownership of other forms, for instance, an oil-drilling venture, a working interest of 70 percent, which is not usually called a share.

It’s–

Peter R. Paden:

That’s true.

Anthony M. Kennedy:

–So… so there… there’s work for that phrase in the statute to do without adopting your position, it seems to me.

Peter R. Paden:

There is.

There are certainly other kinds of ownership in our legal system… partnership interests are an obvious example… which don’t necessarily refer to share ownership.

But ownership interest is a very, very broad term, and it… we think that if Congress had intended this to be so specifically limited to direct… directly owned entities, it would have said directly owned–

David H. Souter:

Well, it can–

Ruth Bader Ginsburg:

–Your argument would be stronger if it were a stand-alone term, but it isn’t.

It comes after shares, and so one can say, well, we’re going to read ownership interest, shares or other ownership interest as something, say, equivalent to a stock certificate.

You… it… it doesn’t just say, ownership interest, and I think that that’s why the statute itself doesn’t answer the question.

Peter R. Paden:

–Well, we think, Your Honor, that the phrase needs to be read as a whole, and we do not believe that this is a situation, when the statute is read as a whole, that the… that the principle of redundancy and superfluousness which Judge Kozinski felt, decided in this case dictated the… the restriction to direct ownership should apply.

Antonin Scalia:

Do you… do you agree with the respondents’ contention, the United States’ contention that foreign countries would not… would not give us this break, that generally speaking, in international law they… they’ll only look to the ownership of the immediate company?

Peter R. Paden:

I… I think that that’s true, Your Honor, but I think it requires a comment.

I think that the… the structure of this statute very uniquely reflects our Federalist system, and… and the… this alleged disparity between treatment in this country and other countries I think is something of a red herring.

Congress for the most part, in establishing this system, I believe it’s fair to say contemplated that commercially owned ventures of foreign States would be subject to suit, that–

Antonin Scalia:

I… I thought… I remember when they enacted the FSIA.

I was around, and I… I recollect quite vividly that its object was to bring United States domestic law into conformity with the new, accepted international determination of when… when sovereign immunity should be respected and when it shouldn’t, and if that’s the case, and if you acknowledge that the general principle internationally is not to go beyond the ownership of the immediate company, then I don’t know why language which… which is susceptible of that meaning shouldn’t be given that meaning.

Peter R. Paden:

–I think there’s an answer to that question, Your Honor.

In… in foreign nations, an entity would be subject to suit, but it would typically be subject to suit… I don’t think there are too many foreign countries that have our Federalist system, and certainly not too many foreign countries that have our deeply ingrained right to a jury trial.

Congress, for the most part, was saying these suits should go forward.

One of the purposes of the act was to bring commercially owned ventures of foreign States within the subject of… of litigation and make them susceptible to claims, but Congress said that in doing that, because of potential sensitivities that could exist, they would accord those entities the same kinds of privileges that the Federal Government gets when the Federal Government waives its immunity, so that–

Antonin Scalia:

How can they be sensitive to something that they’re willing to do to us?

I mean, the… the potential sensitivity, if… if they would hold the United States liable in such a situation, I mean, would… would not recognize sovereign immunity of the… of the indirectly owned United States entity, how could they be offended by our doing the same?

Peter R. Paden:

–My sense is that the Congress’ concern about sensitivities was… was a little different than that.

I don’t think the notion was offense at being sued.

I think the notion is that foreign States would have a… an… a… an interest, potentially… not in every single case, but potentially significant interest in the manner and treatment of claims against entities that… that they owned.

They may have–

Ruth Bader Ginsburg:

Is your point that there are no other countries that have our dual Federal system with State courts and Federal courts, so you’re not urging that there’s substantive sovereign immunity.

You’re saying, on the jurisdiction side, you should have a right, or Congress meant to give you a right to have access to Federal court rather than State court.

Peter R. Paden:

–That’s correct, Your Honor.

There… there are cases, but I think they’re quite rare, where a commercial entity might actually be able to contend that it has immunity, but for the most part, Congress was thinking–

Ruth Bader Ginsburg:

Are you contending that here?

Peter R. Paden:

–Well, we’ve pled it in our answer, Your Honor, but the issue has… has not been crossed in this particular case, because the judge in… in the district court held that we weren’t even a foreign State, so the question didn’t even arise.

There are… whether or not an entity is immune, of course, if it is a foreign State, depends upon whether one of the exceptions in the statute applies, and the commercial activity exception requires direct effects on the United States, and so forth.

There’s… there are issues of treaty waivers, there are a number of issues–

Ruth Bader Ginsburg:

For purposes of your argument now, can we assume that you are not claiming the substantive immunity and the question is a forum question, whether you can have access to a Federal forum?

Peter R. Paden:

–I think you can assume that, Your Honor, but I think–

Sandra Day O’Connor:

Counsel for… I’m just not sure we ever get to this question.

This statute, the foreign sovereign immunity statute is written in the present tense.

It talks about an entity that is a separate legal person, and a majority of whose shares or other ownership interest is owned by a foreign State, and when the action was filed, there was no such ownership, so how do we even get to the first question?

Peter R. Paden:

–We get to the first question, Your Honor, because the use of the present tense does not clearly indicate the point in time at which the present tense exists.

This statute uses the present tense in many circumstances in some of the subsequent provisions that discuss immunity to discuss actions that clearly took place at the time the events arose.

William H. Rehnquist:

Well, what do we do with diversity jurisdiction?

Supposing a person… supposing diversity jurisdiction exists at the time the suit is filed, but by the time it gets up on appeal, it does not?

Peter R. Paden:

I don’t… the font, the jurisdictional font of this statute, Your Honor is not diversity, it’s Federal question.

This court–

William H. Rehnquist:

No, but I… I would like to know just for purposes of analogy, the… when something exists at the time the suit is filed, but is lost during its process.

Peter R. Paden:

–I think that’s going to have to be an issue that is decided in… in cases as they develop.

There have been some cases where entities were privatized during the course of litigations, and courts, I believe, have consistently held that in that case, the immunity… the Foreign Sovereign Immunities Act jurisdictional premise is not lost because it existed at the time of the claim.

The preponderant case law here, Your Honor, has been to look either to the time of the acts that gave rise to the claim, or to the time of the filing of the suit, and there’s a… a nice opinion by Judge Kaplan in the Southern District, in… in the Belgrade case, which kind of synthesizes those cases.

We… the… in the jurisdictional determination under this statute, the way it’s structured, a court very frequently has to look at the acts giving rise to the claim in order even to decide if it has jurisdiction, because, as Your Honor will recall, in section 1330, jurisdiction depends upon a determination, a) that a party is a foreign State, and b) that one of the exceptions applies, and most of those exceptions require an examination, whether or not the acts that gave rise to the claim were commercial in nature, where they took place, so that the… it’s not at all unusual in the context of this statute to say that the actions that gave rise to the claim are the point of reference for the jurisdictional determination.

Stephen G. Breyer:

Why… why would we do that?

If we… if we took your view, there are quite a few jurisdictional statutes, I guess, which talk about action against a foreign State.

Stephen G. Breyer:

Wouldn’t we then have to read all those to say they mean actions against a former foreign State, so if you sued Illyria or Bohemia, you would suddenly discover you could get into Federal court, while if you don’t take your… your approach, you’d say the… the question of… that you’re worried about will arise when they get to the substance of the issue in the State court.

Peter R. Paden:

Your Honor, we think that looking at the time of the events that gave rise to the claim is the approach that most closely comports with the policies and purposes behind this act.

What Congress was sensitive about is when the actions of foreign State instrumentalities are called before the courts of the United States to be adjudicated, and Congress indicated that there were sensitivities in those situations that… should be respected by according a broad right to hear in court–

Stephen G. Breyer:

What’s… what’s the sensitivity if somebody decides to sue Czarist Russia?

Peter R. Paden:

–Well, there’s probably a statute of limitations claims on that, Your Honor, but I think the question is whether the… whether the acts that gave rise to the claim are at issue in the case, and I don’t think it’s difficult to imagine–

Antonin Scalia:

You know, there… I… I just don’t agree with you that that’s… that’s the policy of the United States.

There… apart from who can get into Federal court, there… there is in Federal law a thing called the Act of State Doctrine under which we will… we will honor and accept the action of a foreign country conducted within its own borders and will not allow that to be challenged in a suit in the United States.

It’s a… it’s a longstanding doctrine, and yet we do… certainly do not say that any time an act of State is involved in a piece of litigation, there’s Federal jurisdiction.

This act doesn’t seek to do that.

It seems to me the Federal jurisdiction has nothing to do with whether the actions of a foreign State are the… are the subject matter of the litigation, but rather whether the foreign State is a party to the litigation.

Peter R. Paden:

–Well, Your Honor, except for Judge Kozinski below, every circuit court that has looked at this and looked at the legislative history has concluded, as did the ABA working group, which recently did an extensive study of this statute, and that group was made up of prominent international relations professors and practitioners, that actions of foreign States remain potentially politically sensitive even after an entity is sold.

The potential here is the point.

This is kind of a prophylactic statute.

I don’t think anybody’s saying that in each and every case, there will be intense foreign relations issues, but I… for example, the foreign State may very well have ongoing financial obligations for pre-privatization acts.

That’s the case with one of the amici before the Court today in the State of France.

Ruth Bader Ginsburg:

Mr. Paden, if you would look particularly to the diversity statute, and now there’s a… a provision that expressly deals with a foreign State, everything else in diversity, you would agree, it depends on the time suit was brought, and so if you moved in the interim… there was diversity when it happened, but you move in the interim, when the complaint is filed there’s no more diversity.

I take it you’re asking us, within the very same statute, 1332(a), to interpret a foreign State differently so that its nationality at the time of suit doesn’t count, only at the time of the act, and that would be anomalous within very same provision, 1332(a), that you would treat one one way, citizens of different States, that has to be as of the time the complaint is filed, but a foreign State only at the time the event occurred.

Peter R. Paden:

Well, two responses, if I may.

First of all, we’re not suggesting that it should only be the time of the events that gave rise to the claim.

We believe the appropriate rule is the rule expressed in the consensus of case law today, that it would be either the time the claim was filed, or the time of the acts.

But your question about section… section 1330 is… is a very good question.

Ruth Bader Ginsburg:

It was 1332 I’m–

Peter R. Paden:

1332, that refers to claims by foreign States.

When a foreign State entity is… is a plaintiff and chooses to come to this Court.

The… the statute that we’re alluding to is when… when people are trying to assert claims against these entities and… and bring them into court and have their actions adjudicated in courts that the State–

Ruth Bader Ginsburg:

–So you’re saying in court… to be a plaintiff, the foreign State would have to be… it would have to be a foreign entity at the time suit was brought?

Peter R. Paden:

–The instrumentality has a choice whether or not to come to court in that circumstance, Your Honor, and invoke… and… and–

Ruth Bader Ginsburg:

It’s not a question of whether it… it chooses to.

It… does it have access?

Peter R. Paden:

–The… the–

Ruth Bader Ginsburg:

In other words, does it have to qualify as a foreign instrumentality when it brings the suit?

Peter R. Paden:

–I don’t think–

Ruth Bader Ginsburg:

Suppose it’s been privatized.

Can it come into Federal court and say, we were at the time of this incident that we’re suing about?

Peter R. Paden:

–I believe that if the acts at… at stake took place at the time it was a foreign sovereign, it should be able to do that, Your Honor.

Ruth Bader Ginsburg:

Those are… then you are interpreting within the very same statute a citizen of a State would be treated one way, or a… a… an entity that was once a foreign State but is no longer would be treated another way?

Peter R. Paden:

That’s correct.

I think the question… whether or not an entity is a foreign State, the analysis is the same, but for purposes of when that analysis is pertinent, it may be different.

It may be different when we’re talking about what… the rules about execution of judgments than at the time of filing a claim.

The… the opposite rule, we think, leads to greater anomalies.

Under the opposite rule, you… there’s a very clear prospect.

There’s almost an inevitability that liabilities attributable to acts of State instrumentalities are going to be adjudicated outside the structure and protections of this act.

State court juries all around the country will be sitting in judgment on acts of State-owned entities, and that is fundamentally contrary to what Congress wanted to… to have happen.

In this very case I think we… we posed a hypothetical that, if we just change the facts significantly but slightly, if… if Dead Sea Bromine was the sole manufacturer of the toxic, the pesticide at issue in this case, and if Dead Sea Bromine, the acts of a… an instrumentality of the State of Israel, closely monitored and overseen through the Government company’s law structure, have been alleged to be the sole manufacturer of this product, the man… the party that sought and obtained approvals through, as alleged in the complaint, not being entirely candid about known health risks, had knowingly marketed it in the Third World, had been… whose actions had been called appalling by Senator Leahy in a public hearing, if that entity was on trial before a lot of different juries in various parts of Texas and Louisiana, being called up as a Israeli chemical company who had done all these things, I think it’s not at all difficult to imagine that the State of Israel might have some interest in that case.

Ruth Bader Ginsburg:

Well, you’ve made another significant change, because it wasn’t the plaintiffs who brought the Israeli corporations into this action.

The plaintiffs sued Dole, I thought, and Dole impleaded the Israeli company.

Peter R. Paden:

That’s definitely true, Your Honor, but I’m simply trying to show that there could be a hypothetical situation that’s not entirely far-fetched, where… where a State’s ongoing interest in litigation against an entity for acts that took place when the State had responsibility for it in the sense that it owned it, were at stake.

Stephen G. Breyer:

Well, but if the State gives up the corporation, and no longer is part of it, I would have thought that that’s just one of the risks that they’d have to run.

Why… why… I mean, they… if they want… if they’re worried about it, keep control of the corporation.

If you’re not that worried about it, then when you release the corporation, you’re subject to a lot of State court lawsuits.

Is that… why is that–

Peter R. Paden:

Well–

Stephen G. Breyer:

–I can’t get much of a feeling one way or the other about that, to tell you the truth.

I… I don’t… can you say something that will make it quite clear that would be a terrible thing?

Peter R. Paden:

–That’s clearly a policy judgment, and what we’re left with is this… the wording of the statute and the purposes and policies that lay behind it, and we think that with that information before us, Congress’ concern about the risk and the sensitivities both in terms of uniform… the desirability for uniform decisions and potential risks and bias that can take place in multifarious State court juries, those were to be not present when we were going to allow claims to go forward against State entities, and where the acts at issue are the acts of the State entity, those same interests would seem to be implicated.

Many States… privatization, of course, is a fairly widespread phenomenon in the last decade, and what happened to our client has happened to many formerly State majority-owned entities.

Stephen G. Breyer:

And a lot of those tort claims are going to be for continuing actions, so in your view, if the chemical is disseminated partly while the State is the owner of the company and partly while it isn’t, then what happens?

Peter R. Paden:

If… so long as within the allegations of the complaint, actions of a foreign State instrumentality are at stake, then it should be within the claim.

Your Honor, this case poses an even, I think more stark example.

As… as noted by the court below, this particular litigation is, I think in Judge Kozinski’s words, one part of a large broadbased litigation, I think he used the word war.

Peter R. Paden:

The Delgado case out of the Fifth Circuit was… it arose out of cases that began in 1994 in Texas, based on the same claims, based upon the same structure of parties, and at that time we were majority-owned by Israel, so under the rule propounded by the respondents and the Solicitor General there would be Federal jurisdiction over the… that part of the cases, but if someone waited to sue until later, there wouldn’t be.

I think Credit Lyonnais seems to be in the same position, based upon the… the information in the… in the amicus brief.

Ruth Bader Ginsburg:

Mr. Paden, because–

Anthony M. Kennedy:

–I have one… one small procedural question.

Why is Dole properly before us?

I want to make you feel welcome here, but–

[Laughter]

Peter R. Paden:

I do, Your Honor.

Anthony M. Kennedy:

You… you impleaded… you impleaded the Dead Sea Companies, and they’re the ones–

Peter R. Paden:

I’m… I represent Dead Sea, Your Honor.

Anthony M. Kennedy:

–Oh, you represent Dead Sea?

Peter R. Paden:

Yes.

Dole is–

Anthony M. Kennedy:

Why… why is Dole properly here?

Peter R. Paden:

–Dole, I believe… Dole is interested in… in confirming the jurisdiction of the Federal court over this case and the jurisdiction of the Federal court will be established if our position is established, and to this extent, we have a common interest in this case, apart from–

Ruth Bader Ginsburg:

Did you… did you join in removing, or did Dole file the removal petition?

Peter R. Paden:

–We filed the removal petition, Your Honor.

I believe that Dole filed a supplemental removal petition on different grounds alleging Federal question jurisdiction, which–

Ruth Bader Ginsburg:

Right.

That’s how it got up to the Ninth Circuit.

Anthony M. Kennedy:

Yes, and… and Dole was dismissed on that… on that ground, and that hasn’t been appealed.

Peter R. Paden:

–Correct.

That’s–

Anthony M. Kennedy:

That… that hasn’t been brought–

Peter R. Paden:

–That’s correct.

Stephen G. Breyer:

–And is there diverse… there’s no diversity because there isn’t complete diversity?

Peter R. Paden:

Yes, that’s correct, Your Honor.

Stephen G. Breyer:

I see.

Peter R. Paden:

If I may, I’d like to reserve the rest of my time for rebuttal.

William H. Rehnquist:

Very well, Mr. Paden.

William H. Rehnquist:

Mr. Massey, we’ll hear from you.

Jonathan S. Massey:

Mr. Chief Justice, and may it please the Court:

I’d like to begin with the first question presented.

Owning shares of stock in a parent corporation in our view should not be equated with owning shares in the subsidiary.

I’d like to deal with the text of the act, and the structure, and its purposes, beginning with the distinctive text of 1603(b)(2), which, as Justice Ginsburg noted, does not refer to ownership in the abstract, it refers to a special legal kind of ownership.

It says, a majority of shares or other ownership interests and, in using that familiar phraseology of corporate law, it’s borrowing something which is related to the Meyer opinion, I think, that Justice Breyer delivered this morning, the notion that there’s a degree of separateness between a corporation and a shareholder.

That case, as we heard it, turned on the liabilities that the shareholder would not bare–

William H. Rehnquist:

Well, what… what is the phrase that you say is familiar from corporate law?

Jonathan S. Massey:

–Well, the concept of a majority of shares.

William H. Rehnquist:

Are you talking about a phrase, or a concept?

Jonathan S. Massey:

Well, the phrase in particular, Your Honor.

William H. Rehnquist:

Okay.

Jonathan S. Massey:

The… as… I’m sorry, the concept.

William H. Rehnquist:

So you’re not saying that the phrase, shares or other ownership interest, is a familiar phrase–

Jonathan S. Massey:

Phrase… no, Your Honor, I’m saying it’s a concept, the concept of what it means to own a majority of shares in a corporation and, in particular, 1603(b)(2) is written from the perspective of the subsidiary.

It’s written from a bottom-up perspective, rather than a top-down perspective, and it asks, from the subsidiary’s perspective, who owns the majority of its shares and it is, in our view, the corporate entity which sits directly atop the subsidiary, rather than the foreign State, which may stand several tiers removed.

It’s sort of telling that in the Dead Sea Company’s own corporate disclosure statement, they list as their… as the owner of Dead Sea… Israel Chemicals Limited, which is the company which sits directly above Dead Sea Bromine.

The corporate disclosure statement then goes on to say that Israel Chemicals Limited is, in turn, held by another company, which is the Israel Corporation, and it doesn’t explain that the Israel… it doesn’t state that the Israel Corporation is the owner of Dead Sea Bromine.

That’s just the natural way we talk about it in the… in the… especially in the corporate law realm, which Congress was adopting in 16(b)… 1603(b)(2).

There are several textual clues in section 1603 that Congress was adopting the principle of corporate separateness.

1603(b)(1) requires that a corporation be… a… a showing that the agency be a separate legal person.

1610(b), which governs attachments, limits attachments of property to claims against the particular agency or instrumentality against whom the claim is raised, and this Court, in the First National Citibank case, held that the… under the FSIA, the… the property and assets of a foreign-owned corporation are distinct from the property and assets of the foreign State itself, so this is not even a case like Bestfoods, where this Court said that Congress’ silence was audible in… in that Congress was legislating against these background corporate law principles.

Here, there are quite clear textual signs that Congress was adopting a principle of corporate law.

Now, the primary argument on the other side, this that is a… the indirect shareholding is a form of other ownership interest, and I… we think that is not a proper reading of this statute.

As Justice Kennedy pointed out, there are other forms of ownership interests in the world.

There are shares in an oil venture.

The Tennessee Valley Authority, for example, doesn’t have stock.

The Federal Government simply owns it.

The stock has been retired.

Congress was dealing here with foreign legal systems which may have different ways of framing equity interests.

Jonathan S. Massey:

Socialist countries, for example, you can imagine there might not be shares, so in our view the phrase, other ownership interests, is meant to take into account those sorts of equity holdings, so in this case–

Stephen G. Breyer:

–Because?

Because?

Jonathan S. Massey:

–Well, because Congress was dealing with other foreign owners, other–

Stephen G. Breyer:

You know, I mean–

Jonathan S. Massey:

–Yes.

Stephen G. Breyer:

–nobody doubts that there are other ways of owning corporations.

They’re just saying, one other way of owning it is like, under the Public Utility Holding Company Act, you have a… a pyramid of shares with intervening corporations.

They’re not saying that’s the only other way.

They’re saying that’s one other way, and then you say, no, that one other way is not another way, because?

Jonathan S. Massey:

Because there… we believe it’s… there are two reasons, primarily.

First, is… the first part of the phrase, shares, already takes care of stock.

It would be unreasonable, in our view, to say indirect stock counts as other–

Stephen G. Breyer:

Because?

Jonathan S. Massey:

–Because stock is not an other kind of interest.

Stephen G. Breyer:

Because?

Jonathan S. Massey:

Because it’s already been listed–

Stephen G. Breyer:

No… nobody’s saying stock is.

Jonathan S. Massey:

–Sure.

Stephen G. Breyer:

What they’re saying is, stock in intervening corporations organized in certain ways–

Jonathan S. Massey:

Right.

Stephen G. Breyer:

–as under the Public Utility Holding Company Act, is one other way, and I still haven’t heard the word… you see, that’s why I keep asking, because.

Jonathan S. Massey:

Right.

Stephen G. Breyer:

Because to me it’s an unusual way, not that unusual.

The… the law books are filled with cases involving that, under the act I cited, and… and so they say, that’s one way.

Jonathan S. Massey:

That–

Stephen G. Breyer:

Now I want to know why that isn’t one way.

Jonathan S. Massey:

–Because it–

Stephen G. Breyer:

One other way.

Jonathan S. Massey:

–Right.

Jonathan S. Massey:

First, because it’s still stock.

Even if it’s indirectly held, it’s still stock.

Stephen G. Breyer:

And I don’t quite see that, because–

Jonathan S. Massey:

Well–

Stephen G. Breyer:

–Go ahead.

Jonathan S. Massey:

–Okay, and then second is, you’re absolutely right, the law books are filled, the U.S. Code is filled with many other phrasings of direct, indirect references to affiliates, references to beneficial ownership, all the kinds of things, a control test, as Justice Stevens mentioned, all the kinds of things that could capture this kind of interest, but instead we have the very distinctive phrasing that says, stock, and in our view, once you count stock first as a direct majority ownership, you shouldn’t go back and count it again as an indirect form.

Stephen G. Breyer:

Now–

Jonathan S. Massey:

The other ought to be reserved–

Stephen G. Breyer:

–I know that’s your… your view.

Jonathan S. Massey:

–I know.

I know.

Stephen G. Breyer:

Now… but let me push the because–

Jonathan S. Massey:

Yes.

Stephen G. Breyer:

–one step further.

Suppose I thought that the word, other ownership interest, is at least open to this unusual type of arrangement as one form of ownership interest.

Jonathan S. Massey:

Right.

Stephen G. Breyer:

Still you should say, you shouldn’t interpret it that way, because?

Jonathan S. Massey:

Because the number of principles that animate the statute, first, this is a jurisdictional statute.

Jurisdictional statutes should be construed precisely with clear, bright line rules and, in our view, the… the kind of direct legal ownership of stock is a kind of bright line rule and the Court should not depart from it.

Second, the statute already contains, in the first clause of 1603(b)(3), the… the so-called Oregon test.

The Oregon test captures governmental entities which perform sovereign functions which are staffed by Government employees over which the Government has a significant degree of control.

That’s not at issue in this case.

That was decided both by… in both courts below adverse to the petitioners, and it’s not before this Court, but that clause would capture all of the stereotypical cases at the heart of the Foreign Sovereign Immunities Act, so we ought not stretch this part of the statute to cover it.

Stephen G. Breyer:

All right, now if I think it is not a stretch, but just another form of ownership–

Jonathan S. Massey:

Right.

Stephen G. Breyer:

–I’m putting this hypothetically–

Jonathan S. Massey:

Right.

Stephen G. Breyer:

–I then go on to think, you know, I cannot think of a reason in the world, not even one, not even a shadow of one, as to why Congress would have wanted to say, when country X owns business A, it gets into Federal court, but when everything is the same, but for a stack of papers this thick which puts a bunch of intervening paper corporations between A and Z, it doesn’t want it to get into Federal court, I think what could they… what human being could possibly think of any conceivable reason for drawing that difference, and at that point… I’m putting it as strongly as I can… I come up with a blank.

I can’t think of one.

I used to have relatives who had little tiny corporations, and the number in between was a matter of tax law or something.

Stephen G. Breyer:

It was the same person sitting at the same desk–

Jonathan S. Massey:

Right.

Stephen G. Breyer:

–doing the same thing.

Jonathan S. Massey:

Right.

Stephen G. Breyer:

Now, I put it as strongly as I can.

Jonathan S. Massey:

Right, and of course Congress is… Congress has to legislate by category.

It’s not simply dealing with the example of 100 percent subsidiaries.

Congress is drawing a general rule and, as a general rule, the… the line it drew was reasonable because Congress was interested in facilitating suits against foreign States in the United States courts.

That’s one of the purposes that’s laid out in 1602 in the statute, and reading the statute the petitioners’ way would disserve those purposes.

First, it would impose important procedural burdens on litigants that Congress did not want to impose.

It would eliminate traditional State long arm statutes.

It would eliminate the right to jury trial.

It would create immunity questions, because once immunity is invoked–

William H. Rehnquist:

Why… why would it eliminate the right to jury trial?

Jonathan S. Massey:

–Well, under the FSIA, once a… a… an entity is deemed to be a foreign State, the right to jury trial is lost, even if an exception to immunity is subsequently found to apply.

It would… the… the other burdens it imposes, it eliminates the traditional attachment provision that’s–

Stephen G. Breyer:

Of course it does have a few… but nonetheless my question is, what conceivable reason could there be for saying those special advantages disappear when there is country A, and when there is country A to Z, since the only difference between A and A to Z, I’d repeat, is a bunch of paper?

Jonathan S. Massey:

–Well, again, as I said, Congress is not just legislating with that specific example of 100 percent subsidiaries, it’s using a… the general category.

It… it has to operate by general rule.

I think other examples, though, would show that when you have multiple tiers, there… the surprise factor significantly increases.

Congress was concerned that litigants would be surprised to discover that they were not dealing with an ordinary commercial entity but, rather, a foreign State, and that surprise factor increases as you go down the corporate tier to the nth tier.

Also, there are potentially complex factual inquiries as you go down the… a… a tier.

In this case, there are organization charts which show how the shareholdings have been computed, but consider, when ownership is not expressed through shares but through some percentage of assets or partnership interests which are not going to be reflected in a shareholder ledger, but are going to be the potential subject of controversy in a court, and I think the potential for factual disputes increases.

Ruth Bader Ginsburg:

Mr. Massey–

Jonathan S. Massey:

Yes.

Ruth Bader Ginsburg:

–we’re trying to find out, not was… what Congress did was reasonable–

Jonathan S. Massey:

Yes.

Ruth Bader Ginsburg:

–but what did Congress do.

Jonathan S. Massey:

Of course.

Ruth Bader Ginsburg:

Of course if it… what it did was reasonable, that… nobody could doubt that that would be fine, and in determining what… what Congress did, the petitioners pointed to a number of statutes that use the word, directly, when they meant to cut out the subsidiaries.

Jonathan S. Massey:

Yes.

Ruth Bader Ginsburg:

They say, shares, or… or a company directly owned by, and this statute is silent.

It doesn’t say, directly owned.

Jonathan S. Massey:

That… that’s… that’s correct, Your Honor.

In our view, Congress didn’t have to use directly, because it was using this familiar corporate concept of a majority ownership of shares.

That implies direct, because the owner of a majority of shares in… in this tiering relationship is the corporation immediately above the subsidiary, it’s not–

Antonin Scalia:

Is there any context in which we have held that a majority ownership of shares, that… that phrase is satisfied by… by second-tier ownership?

Jonathan S. Massey:

–Where this Court has held it?

Antonin Scalia:

Yes.

Jonathan S. Massey:

I’m… I’m not aware of any… of any case, Your Honor.

Sandra Day O’Connor:

Do you plan to address the other question–

Jonathan S. Massey:

Yes.

Sandra Day O’Connor:

–in the case?

Jonathan S. Massey:

Yes, Your Honor.

Let me do that right now, because I think the timing question is… is a independent way of resolving this case.

Ever since 1824, when Chief Justice Marshall announced Mollan against Torrance, the rule has been that jurisdiction is determined as of the date of filing the complaint.

The Chief Justice asked, what is the rule in diversity cases?

Well, since Anderson and Watt in 1891, diversity cases have been held to be… to be governed by that rule, and the response we hear is that this is a Federal question case, but, of course, even Federal question cases are governed by the familiar rule that the date is given by the… the filing of the complaint.

That’s… United States against Keene Corporation in 1993 reflected that principle.

And as Justice Ginsburg noted, even if some parts of the act are a Federal question, it’s also telling that in 1332(a)(4), Congress created a new species of diversity jurisdiction, so accepting the petitioners’ argument here would lead to the anomalous situation where there’s a diversity part of the statute that’s going to be governed by the Mollan against Torrance rule, and there will be a Federal question part of the statute that would be governed by a different rule.

Ruth Bader Ginsburg:

Mr. Paden said that that (a)(4) would be interpreted by the different rule, so he’s being consistent with–

Jonathan S. Massey:

Okay… well, I misunderstood.

I apologize, but then that also means that there are some diversity rules that are being interpreted one way, and other diversity rules being interpreted a different way.

Either way, there’s an anomaly, and it appears to us the simplest way to resolve it would simply be to adhere to the longstanding principle that the date on which the complaint is filed is the relevant time to take a snapshot.

That’s also more administratively feasible, because you can imagine that the rule of when the underlying conduct occurred is a… is a… might be difficult to determine in some cases.

In this–

William H. Rehnquist:

–Or it might also extend over a considerable period of time.

Jonathan S. Massey:

–That’s correct, Your Honor.

I agree completely.

And so it’s… it’s more reasonable to assume Congress was legislating against the background understanding that the date of filing of the complaint would be determinative.

Jonathan S. Massey:

It used the present tense in 1603.

In 1441(d), which is the removal provision at issue here, it talked about a case against a foreign State, and in our view, it’s more reasonable, it’s more naturally read to think that a case is a case against a foreign State only if the entity actually is a foreign State at the time, as opposed to being Czarist Russia.

1608, which is the special service provision, also indicates that Congress is contemplating entities that actually were foreign States, because–

Stephen G. Breyer:

Well, their point, though, is that, first my examples were slightly absurd, and… which they were… and secondly, that in any real case where… where you have, say, Communist Russia you’re suing, or… or more recent former States, you’re… you’re actually suing the State, and the… the defense is, but that State no longer exists, like Bosnia or something.

There are a few things that are more involved in foreign relationships, and… and boy, to suddenly throw that to 50 State courts is a total nightmare if you’re really worried about the foreign State, so even though it creates differences between the diversity jurisdiction and the other, we better keep these in Federal court, or we’re all in trouble.

I mean, that’s what I took them to say.

Jonathan S. Massey:

–Right.

Well, I think the… the answer to the jurisdiction point and the sort of State court point is that they’re already is a provision in the diversity statute, 1332(a)(3), I believe it is, that deals with citizens of foreign countries, so there’s already diversity jurisdiction for suits against foreign corporations after they’ve been privatized.

They would be able… any claim against the Government would be protected by the act of State doctrine, as Justice Scalia noted.

There could be no… of course, no direct liability imposed–

Stephen G. Breyer:

It works all right with the corporations, but what if you’re actually suing the State, which still has some assets somewhere?

How does that work?

Jonathan S. Massey:

–Well, that, of course, isn’t… that’s not going to be before this Court today, but–

Stephen G. Breyer:

Oh, no, but if we go into the foreign State, former foreign States don’t count, we’ve decided that, and so I… just curious.

I don’t want to do it blindly.

Jonathan S. Massey:

–Well, no, I’m… we’re not asking you to decide anything about… about former foreign States.

I think–

Stephen G. Breyer:

Is there a reading that… that throws out the corporation that used to be owned but now isn’t by a foreign State, but keeps the former foreign State within?

Jonathan S. Massey:

–Well, the… the whole immunity that foreign States enjoy is governed by 1604 and 1605, and… and the provision that we’re focusing here is… is just the definition of agency and instrumentality, so I… I think this Court could safely leave for another day the issue of the former foreign State.

It… it’s not at the… it’s not in the provision that we are asking this Court to interpret, and… and it’s governed by different provisions which Your Honors could… could leave for another day.

Ruth Bader Ginsburg:

Mr. Massey, practically, is it so in these litigations that if you can’t remove to the Federal court, the State courts keep them and try them, whereas if you remove them to the Federal court, they are then dismissed on forum nonconvenience?

Jonathan S. Massey:

Well, it’s… undoubtedly the forum nonconvenience defense would be raised in State court as well.

In this case, the… no proceedings of any substance have occurred, so nobody–

Ruth Bader Ginsburg:

But in this category of case–

Jonathan S. Massey:

–Yes.

Ruth Bader Ginsburg:

–is that the general pattern?

Jonathan S. Massey:

That is the… yes, that’s the general pattern.

It’s… that’s correct and, of course, I think there would also be an immunity asserted.

The Dead Sea petitioners have preserved that.

It’s in joint appendix 57, and… and the… the issue of whether they would be entitled to immunity, or whether the commercial activity exception would apply or something, hasn’t been litigated yet.

William H. Rehnquist:

When was the Foreign Sovereign Immunities Act passed?

Jonathan S. Massey:

1976, Your Honor.

William H. Rehnquist:

We presumably lived, then, for 200 years without it, these cases being tried in State court?

Jonathan S. Massey:

That’s correct, Your Honor.

The… the… under the… the prevailing doctrine of the separate entity rule, any separate unit or corporation was not entitled to immunity, that’s correct, and it was governed by, after 1952 the Tate letter, which the… which the State Department issue didn’t… this Court has described the procedural history in Verlinden, but you’re absolutely correct, Your Honor.

I… I think that in the… at the end of the day, what… what is at issue here is a statute which Congress adapted in 1602, set outting out… setting out the purposes to facilitate suits against foreign entities, and also, as Justice Scalia noted, it referred to principles of international law in 1602, and here, we’re… the petitioners are asking this Court to aggravate the difference between U.S. law and the law of every other country.

These petitioners do not receive immunity even in the courts of Israel or anywhere else, and the concerns about State courts and juries could be addressed through other provisions which enact… which are enacted in the diversity statute which govern every other corporation in the world.

If there are no further questions–

William H. Rehnquist:

Thank you, Mr. Massey.

Mr. Minear, we’ll hear from you.

Jeffrey P. Minear:

Thank you, Mr. Chief Justice, and may it please the Court:

Congress enacted the FSIA against the backdrop of venerable corporate law principles, including the principle that a parent corporation and subsidiary are distinct, and that the shareholders of a parent corporation are not the shareholders of a subsidiary corporation.

We submit that the FSIA refers to share ownership in that familiar legal sense.

Viewed in that light, a foreign State’s majority ownership of the shares of a parent gives the foreign State control over the subsidiary, but it does not give that foreign State ownership of the subsidiary’s shares.

If Congress had intended that the FSIA would extend agency or instrumentality status to the foreign State’s control of the subsidiary, it could easily have said exactly that.

Stephen G. Breyer:

Well, they don’t think of these things all the time, so… so what… what about… they just don’t.

It’s… and that’s… we have… that’s why we have a difficult problem, so I wondered, with the language, and nobody accepts… I just want to know the reason for this, and I’m sure it’s not a tenable interpretation, because nobody’s advanced it, but if you look at the first part, literally speaking, it says a foreign State includes an instrumentality of a foreign State, and so an instrumentality of a foreign State, is, among other things, a corporation, the majority of shares of which the foreign state owns.

And that’s true as to the first corporation in the tier, A. Well, now, since A is included in the term, foreign State, it therefore is a foreign State.

That’s what it says.

And therefore, B is a company whose shares, the majority of which are owned by a foreign State, and so forth down the line.

Now, literally, that’s what it says, and so what’s wrong if I can’t think of any reason why they’d want a difference, and the… that language literally covers it, what’s wrong with that?

Jeffrey P. Minear:

There’s a very strong textual indication that that’s not a correct reading, and that is found in section 1623(b)(2), where it speaks of a majority of whose shares or other ownership interest is owned by the foreign State, or political subdivision thereof.

Stephen G. Breyer:

Yes.

Jeffrey P. Minear:

Now, obviously, if Congress had intended that recursive use that you’ve described, they would not have included, political subdivision thereof, which is also a part of a foreign State and, in fact, that provision excludes agency or instrumentality.

We think what the Court can draw from this is that Congress was using foreign State in a very strict sense of simply a foreign nation.

Stephen G. Breyer:

Or… but you’re referring there back to the intent of Congress.

I see that linguistic point, but if we’re referring back to the intent of Congress, I’m back to my question I asked before, what possible intent of Congress could the interpretation that you advance further?

I mean, what reason is there?

The same questions I asked before.

I’m just–

Jeffrey P. Minear:

We think–

Stephen G. Breyer:

–you’ve got me back to that because of your response, which referred to the intent of Congress.

Jeffrey P. Minear:

–We think there are two very clear reasons.

First of all, Congress was drawing a bright line.

We think that Congress wanted to avoid litigation over where to litigate.

Nothing’s more wasteful than that… and by doing so it spoke to ownership of majority of shares in the traditional legal sense, which provides a very bright line rule.

We also think that this… this reading must be… must take into account that we’re not speaking solely of the interest of foreign nations, but also of the interest of American litigants.

Congress was trying to strike a balance between the two, and the balance that we suggest here is one that recognizes that American litigants have an interest in a clear delineation of who is entitled to foreign sovereign status and who is not.

We think our interpretation reflects both of those concerns.

Sandra Day O’Connor:

But the statute does refer to other ownership interests.

Jeffrey P. Minear:

Yes, it–

Sandra Day O’Connor:

Other forms of ownership.

What does that cover, then?

Jeffrey P. Minear:

–Again, Your Honor, we think that it ought to be… that this term ought to be interpreted in terms of a… a test that provides a bright line rule.

We think other ownership interest refers to something that is an alternative to shares, such as, as Justice Kennedy has described in ownership in… in a joint venture.

We don’t think that Congress intended to complicate the inquiry by making inquiries into whether something that is sometimes described as control should be treated as a different type of ownership interest.

We think that here, that what Congress was seeking was clarity, and the interpretation that we’re providing is designed to provide that clarity for foreign nations and for American litigants as well.

Now, we think it’s important to remember that Congress drew this line with the understanding that foreign instrumentalities is a narrow term, particularly as used by foreign nations.

Foreign nations by and large would not provide immunity to corporations.

We believe that Congress took the step of extending it to a first-tier corporation, but concluded that that is where the line should be drawn, it should go no further, and we think a narrow construction of this term is also appropriate in… in the face of the fact that Congress is granting a special privilege, a comity-based privileged, that not ought to be extended beyond what other foreign nations recognize in applying their immunity laws to the United States.

This is particularly so when the construction that we urge is very likely to lead to foreign friction with other nations.

Because, as… because foreign nations do not recognize the immunity that’s being sought here in their own courts, it’s very unlikely that they will object to our recognition of nonimmunity on the same basis in our courts.

Now, even if this Court concluded that the FSIA granted agency or instrumentality status to subsidiaries, the Dead Sea companies would still not qualify because, as noted before, they did… did not have that status at the time that this suit was brought.

We think that the diversity statute model provides the appropriate test here.

Diversity jurisdiction is predicated on whether or not the parties are diverse at the time the suit is brought.

It’s based on the status of the parties.

Likewise, jurisdiction that is based on the status of a foreign entity ought to be determined at the foreign ownership’s–

Stephen G. Breyer:

How do you deal with somebody who sues Yugoslavia, as a State?

I mean, they find some assets owned by Yugoslavia, they go sue them.

Jeffrey P. Minear:

–I think–

Stephen G. Breyer:

What… that goes to a… West Virginia State court?

Jeffrey P. Minear:

–I think the question here is, who exactly are they suing?

Stephen G. Breyer:

They’re suing Yugoslavia.

That’s the–

Jeffrey P. Minear:

They might be suing–

Stephen G. Breyer:

–the… it says, defendant, Yugoslavia.

Jeffrey P. Minear:

–But that suit most likely has to be served on someone, and it’s likely–

Stephen G. Breyer:

There is somebody over there who claims to be the recipient of lawsuits… I mean, we could easily construct a serious problem, or you may have looked into it in telling me it just isn’t a problem, and I’d like to hear you say that, if that’s so, because it would help.

Jeffrey P. Minear:

–We think it’s unlikely to be a problem.

I cannot say that we… we can… can certify that this problem would never arise, but typically, these types of suits are brought against another State that now stands in the shoes of the former State, and there might be interesting questions of law with regard to the liability of that suit, but they may never be reached because in that case, the suit is being brought–

Stephen G. Breyer:

Okay, so you’re telling me, and you’ve looked into it, this isn’t really a problem, it’s theoretical, not real?

Jeffrey P. Minear:

–We think it is primarily a theoretical problem.

We think that Congress had no compelling reasons to provide immunity for past agencies and instrumentalities that are no longer associated with the foreign… foreign State.

As Justice Scalia pointed out, there’s other mechanisms, such as the Act of State Doctrine, that provide protection of the foreign sovereign interests in those cases and, in any event, a foreign corporation, even after it has become privatized, still has access to Federal court jurisdiction under the alienage diversity statute, provided that it satisfies the… the requirements that Congress has set forth.

Finally, I’d like to note that because two questions are presented here, the Court does have discretion to reach both of those questions, and we think that there would be an advantage in clarity in the law if the Court did address both the so-called tiering question and the timing question, since they both have led to disputes among litigants in the lower courts.

They… both issues have been fully briefed and, as I say, the Court does have that power to make that determination if it so chooses.

John Paul Stevens:

Mr. Minear, I don’t understand how the Act of State Doctrine would apply to sales of Israel pesticide in Central America.

Jeffrey P. Minear:

It most likely would not apply–

John Paul Stevens:

Yes.

Jeffrey P. Minear:

–in this situation because obviously, the Act of State Doctrine applies to the acts of a foreign State in–

John Paul Stevens:

Within its own–

Jeffrey P. Minear:

–within… within–

John Paul Stevens:

–Yes.

Jeffrey P. Minear:

–its own territory, within is own jurisdiction.

If there are no further questions, thank you, Your Honor.

William H. Rehnquist:

Thank you, Mr. Minear.

Mr. Paden, you have 7 minutes remaining.

Peter R. Paden:

Thank you, Your Honor.

First, with respect to the phrase, ownership interest, Mr. Massey suggested that the issues here, and I believe Mr. Minear as well, are related to the issues in the recently decided Meyer case, with which I confess I’m not familiar, but I think also the Bestfoods kind of case.

We think those cases are very different.

Peter R. Paden:

Those cases relate to liability-creating statutes and, in the context of a statute that creates liability, whether Congress intended for traditional rules of corporate veil-piercing to be eased somewhat in assigning liability in the case of the Superfund law to the… to the owner of the contaminated facility.

This is not a statute that gives rise to liability.

It defines a category of entities that are within the scope of the… of the group that Congress intended to… to vest with a certain limited protection when they will be sued in… in the United States, namely, a broad right to a Federal forum, and so forth.

William H. Rehnquist:

We… we have always construed jurisdictional statutes quite narrowly, going all the way back to Strawbridge against Curtis, that said you have to have complete diversity under the diversity statute, and it seems to me you’re asking for something different than that here.

Peter R. Paden:

I think, Your Honor, that the… in the first place, of course, the statute has to be construed to the best one can on the words of the statute and the congressional intent.

I think there is some interesting language.

I… I believe it’s the Delta case of the Sixth Circuit, or maybe the Texas Eastern case in the Third Circuit… talking about why, in the context of this law, there actually should be a broad interpretation of diversity.

Really, that’s just another way of saying because Congress intended to bring within it a certain defined category of… of entities.

I think it’s very hard to… to articulate a reason why Congress would have wanted to bring commercial operations of foreign States within the scope of the statute and say… let me back up a moment.

There was a time when Dead Sea Works was the immediate parent of Dead Sea Bromine, and Dead Sea Works was owned by the State of Israel.

Dead Sea Works’ job is to extract manganese and potassium from the Dead Sea.

Dead Sea Bromine’s job is to extract Dead… bromine from the Dead Sea.

It’s impossible to come up with a rationale why Congress wanted Dead Sea Works to be within the purpose… the purview of this statute and Dead Sea Bromine not to be.

Stephen G. Breyer:

Well, they listed two.

They said, first of all it’s easier for the court not to have to go through the morass of paper and try to figure out who owns what where, and the second one is that, because it’s less surprising, at least the customers and others will know, likely, who owns the company, and know it’s the State.

Those were their two responses.

Peter R. Paden:

Correct.

I… in terms of ownership interest, I think it’s… it’s a well-known and widely used phrase in our law as well as others to be a generic broadbased term.

We did a little research on some publicly available information just to try to find companies that I think we can say are well-known to be… have certain relationships, and I think it’s fair to say, based on news articles and so forth, that General Electric Company is widely understood to own NBC, the broadcasting network.

It turns out that General Electric Company is the 100 percent shareholder of a company called NBC Holdings, Inc., which is the 100 percent shareholder of NBC, Inc., the broadcasting company.

I think the chairman of the board of GE would be astonished to hear the United States and the respondents explain that GE does not have an ownership interest in NBC.

It’s–

Ruth Bader Ginsburg:

I think that was conceded, that for purposes of newspapers reports, and… yeah, we understand that you would have five tiers down, if only one person owns it, you say, well, that person owns it, even if it’s the fifth tier down, but the question is, in this context of a jurisdictional statute… and I wanted to ask you particularly, you’ve just heard Mr. Minear’s argument, do we, as a Court, owe any special respect to what the executive tells us a statute that deals in the foreign affairs realm means?

Peter R. Paden:

–Your Honor, I think in this case that… that we think that the respect that is owed to the Justice and State Departments in this case is… is measured by the persuasiveness of the opinions that they’re offering.

Essentially, they’re offering a legal interpretation of the meaning of the statute and congressional intent.

I don’t think they’ve said that the interpretation that we’re offering here will impair or jeopardize the conduct of our foreign relations.

In fact, the only comment in their brief about this is to note that there have not been frictions in foreign relations as a result of the extant state of the law, and the extant state of the law is really in our favor on both points.

There are a number of cases where privatized entities have been held to be agencies or instrumentalities, and certainly where tiered entities have been, so we think it really is a matter of an analysis of the legal opinions about statutory construction and… and whether–

Ruth Bader Ginsburg:

But the… the Government says you are the one who’s saying, oh, a foreigner might be offended by the jury trial, whatever.

Peter R. Paden:

–We’re trying to honor the intent of Congress, Your Honor.

Peter R. Paden:

Congress–

Ruth Bader Ginsburg:

And… and the Government answers no, that we don’t think this is going to be disturbing foreign nations.

You’re the one who says that it will.

Peter R. Paden:

–I think what’s salient is what Congress said, Your Honor, and Congress said that when claims are brought, when we are going to allow claims against foreign State entities for their commercial activities or whatever in this country, we’re going to accord them the kinds of… the Federal jurisdiction breadth and lack of jury trial which we accord to ourselves when we agree to be sued.

John Paul Stevens:

May I ask you what the purpose of filing this lodging was, this gigantic paper?

Are we supposed to read this to figure out what the corporate relationships were, or what was the purpose?

Peter R. Paden:

Your Honor, that contains a lot of very detailed material in support of the information that we thought pertinent describing the particular structure of the Government companies law and the legal regimes–

John Paul Stevens:

But is this typical of what a district judge would have to look through to figure out ownership under your theory?

Peter R. Paden:

–No, sir.

It doesn’t–

[Laughter]

–not at all.

That had nothing really to do with ownership.

We… we actually originally put that material in the record in support of our argument that the company was an organ of the State of Israel within the kind of emerging case law there, and what that material shows is the extensive, detailed interrelationship between the Government companies authority in Israel.

They made decisions about whether or not the company was going to have to use company cars, about whether or not they were… they made… they made… they had input in the operation of this company to a minute degree of detail and to, of course, very profound decisions such as budget decisions, who would be on the board of directors.

This company, under the Government companies law, a Government subsidiary company is treated, for all intents and purpose the same, whether it’s indirectly held, as a Government company which is directly owned, and it… and this detailed material is really in support of several pages in our brief where we… where we provide a… a long paragraph with a series of examples of the extent of the interrelationship between the Government of Israel, the ministers of finance, the Government companies authority, and so forth.

William H. Rehnquist:

Thank you, Mr. Paden.

Peter R. Paden:

Thank you, Your Honor.

William H. Rehnquist:

The case is submitted.