Sumitomo Shoji America, Inc. v. Avagliano

PETITIONER: Sumitomo Shoji America, Inc.
LOCATION: Tyler Independent School District

DOCKET NO.: 80-2070
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 457 US 176 (1982)
ARGUED: Apr 26, 1982
DECIDED: Jun 15, 1982

Abram Chayes - on behalf of Sumitomo Shoji America, Inc
Lewis M. Steel - on behalf of Avagliano et al
Lawrence G. Wallace - on behalf of the United States as amicus curiae

Facts of the case


Media for Sumitomo Shoji America, Inc. v. Avagliano

Audio Transcription for Oral Argument - April 26, 1982 in Sumitomo Shoji America, Inc. v. Avagliano

Warren E. Burger:

We will hear arguments next in Sumitomo Shoji against Avagliano.

Mr. Chayes, I think you may proceed whenever you are ready.

Abram Chayes:

Mr. Chief Justice, and may it please the Court, this case concerns the international obligations of the United States under the Treaty of Friendship, Commerce, and Navigation with Japan and similar treaties with many other countries, an obligation to permit a foreign investor to manage and control its investment in this country by engaging executives and other specialists of its choice.

Sumitomo Shoji America is a company organized and existing under the laws of the State of New York.

It is a wholly owned subsidiary of Sumitomo Japan, a general trading company or Sogo Shoji, with more than 100 offices around the world.

Plaintiffs below are women who are or were employed as secretaries by Sumitomo.

They brought suit under Title VII of the Civil Rights Act, alleging two principal causes of action.

First, in Paragraph 12 of the complaint, they allege that Sumitomo discriminated against them by restricting them to clerical positions on the ground that they were women, and second, in Paragraph 13, that Sumitomo had discriminated against them by restricting them to clerical positions on the ground of their nationality.

Sumitomo answered denying the claims of discrimination and asserting that its employment practices challenged in the complaint were authorized by the Friendship, Commerce and Navigation Treaty, and on this basis Sumitomo moved to dismiss the complaint for failure to state a claim on which relief could be granted.

The district court denied this motion, holding that Sumitomo as a New York company was not entitled to the benefit of the Treaty.

That question was certified for interlocutory appeal under Section 1292(b) of the judicial code.

On the issue certified, the Second Circuit reversed the district court.

It held, as did the Fifth Circuit in a substantially identical case, Spiess versus C. Itoh, Incorporated, that a wholly owned U.S. subsidiary of a Japanese investor could indeed invoke the protection of the Treaty, but contrary to the Fifth Circuit, the Second Circuit went on to hold that on the merits the Treaty did not preclude examination under Title VII of Sumitomo's employment practices with respect to senior personnel.

On this ground, it affirmed the district court's denial of the motion to dismiss, and we took our petition for certiorari from that decision.

Now, I want to go directly to the Treaty issues that I think are at the heart of this case.

Indeed in my view, the deeper question of this case is whether the United States will faithfully carry out Treaty obligations undertaken with two dozen foreign countries, obligations that it placed in the Treaty and placed in the Treaty for its own purposes.

There are two issues under the Treaty, two components to the Treaty question.

The first is who may invoke the employment right under the Treaty, and the second is what is the scope of that right.

As to the first, who may invoke the right, I think that need not detain us long.

Both courts of appeals decided that a wholly owned subsidiary of a foreign investor was entitled to the benefit of the employment right.

And why?

Because neither court of appeals could perceive any sound reason or basis in policy for distinguishing in terms of the employment right between foreign investment carried out through a branch and foreign investment carried out through a locally organized subsidiary.

I suppose, Professor Chayes, you would carry that down to a subsidiary of a subsidiary.

Abram Chayes:

Well, I think that is true.

That is our... our position is that the foreign investor has a right to manage and control his investment in the United States by engaging executive personnel of his choice, and if his investment is... takes the form of a subsidiary of a subsidiary, the answer is the same.

What about a subsidiary, if you want to call it that, owned 40 percent by a foreign parent, or 55 percent?

Abram Chayes:

Fifty-five percent wouldn't bother me.

The regulations--

How wouldn't it bother you?

Abram Chayes:

--Well, the regulations under the Immigration and Naturalization Act provide and have provided always that a 51-percent controlled subsidiary has the nationality of the state of its owner.