Opinion ID: 781209
Heading Depth: 2
Heading Rank: 1

Heading: The RCC Is a Foreign State Under the FSIA.

Text: 12 The Foreign Sovereign Immunities Act provides the exclusive source of subject matter jurisdiction over suits involving foreign states and their instrumentalities. Gates v. Victor Fine Foods, 54 F.3d 1457, 1459 (9th Cir.1995); Joseph v. Office of Consulate Gen. of Nig., 830 F.2d 1018, 1021 (9th Cir.1987). The FSIA grants federal courts subject matter jurisdiction over actions brought against an agency or instrumentality of a foreign state. 28 U.S.C. § 1603(a). An `agency or instrumentality of a foreign state' means any entity 13 (1) which is a separate legal person, corporate or otherwise, and 14 (2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and 15 (3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (d) of this title, nor created under the laws of any third country. 16 28 U.S.C. § 1603(b). 17 The parties, and we, agree that the RCC satisfies the requirements of § 1603(b)(1) and (b)(3). The only point of dispute is whether the RCC satisfies one of the alternative conditions of § 1603(b)(2). [T]here are two ways in which an entity can fulfill the requirements of § 1603(b)(2). Either the entity can be an `organ of a foreign state,' or the entity can have a majority of its shares or other ownership interest owned by `a foreign state or a political subdivision thereof.' Corporacion Mexicana de Servicios Maritimos, S.A. de C.V. v. M/T Respect, 89 F.3d 650, 654 (9th Cir.1996) (quoting Gates, 54 F.3d at 1461). In this case, the first condition is met, so we need not consider the second. 3 18 We have observed that [the FSIA]'s legislative history suggests that Congress intended the terms `organ' and `agency or instrumentality' to be read broadly. Gates 54 F.3d at 1460. For example, the House Report stated that 19 entities which meet the definition of an agency or instrumentality of a foreign state could assume a variety of forms, including a state trading corporation, a mining enterprise, a transport organization such as a shipping line or airline, a steel company, a central bank, an export association, a governmental procurement agency or a department or ministry which acts and is suable in its own name. 20 H.R. Rep. No. 94-1487, at 15-16 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6614. We have also explained: 21 In defining whether an entity is an organ, courts consider whether the entity engages in a public activity on behalf of the foreign government. In making this determination, courts examine the circumstances surrounding the entity's creation, the purpose of its activities, its independence from the government, the level of government financial support, its employment policies, and its obligations and privileges under state law. 22 Patrickson v. Dole Food Co., 251 F.3d 795, 807 (9th Cir.2001), cert. granted in part, 536 U.S. 956, 122 S.Ct. 2657, 153 L.Ed.2d 834 (2002) (citing Corporacion Mexicana, 89 F.3d at 654-55; Gates, 54 F.3d at 1461). An entity may be an organ of a foreign state even if it has some autonomy from the foreign government. Patrickson 251 F.3d at 808; see also Gates 54 F.3d at 1461 (stating that because the [state] is not directly involved in the day-to-day activities of [the entity] does not mean that it is not exercising control over the entity). 23 The Japanese government created the RCC expressly to perform a public function. The district court found that the RCC was created pursuant to several laws enacted by the Japanese Diet, namely Article 3.1 of Tokeutei Jutaku Kinyu Senmon Kaisha no Saiken Saimu no Shori no Sokushin tou ni kansuru Tokubetsu Sochi Hou, and supplementary provisions of Yokin Hoken Hou. The district court stated that [t]he Japanese government created the RCC to carry out Japanese national policy related to revitalization of the Japanese financial system. Additionally, the district court found that [o]ne of the primary functions of the RCC is to purchase, administer, collect and dispose of non-performing loans purchased from failed financial institutions, such as [the Bank], at the request of the Deposit Insurance Corporation of Japan, (`DICJ'), in accordance with Japanese Law. The district court also noted that many of the RCC's activities are performed exclusively by the RCC and the DICJ and that [o]ther companies are not permitted to perform such activities even if they are in the loan collection business. Further, the district court found that [t]he RCC is funded by the Japanese government, that Japanese law provides that the [government-owned] DICJ will compensate the RCC for all losses at the end of every fiscal year, and that [t]he financial impact of any failure to collect the [EIEG] loans and guarantees assigned by [the Bank] to the RCC, or of a monetary damage award ... in favor [of] EIE Guam against the RCC, will ultimately be borne by the Japanese government and the Japanese taxpayers. The district court's findings of fact all are supported in the record and thus are not clearly erroneous. 24 Those factors all point toward the RCC's being an organ of the Japanese government and, therefore, an instrumentality covered by the FSIA. EIEG attempts to overcome the weight of those factors by pointing out that the RCC is a private company that is engaged in a primarily commercial concern; that 29 other Japanese companies are authorized by the Japanese Ministry of Justice to collect distressed loans and assets; that the RCC's employees are not civil servants; and that the RCC is not a public corporation, a designation which, in Japan, is reserved for corporations established by the national government by special law as instruments for activities required by the state. 25 None of those arguments is availing. A company may be an organ of a foreign state for purposes of the FSIA even if its employees are not civil servants. Gates, 54 F.3d at 1461. As discussed above, the RCC and the DICJ engage in exclusive functions that other loan collection companies may not perform. As to the commercial nature of the RCC's work, we have held that Congress' statement in the legislative history that a `state trading company' and `an export association' can be `organs' of a foreign state indicates Congress' belief that an entity's involvement in commercial affairs does not automatically render the entity non-governmental. Id. Finally, the district court's key assertion that the RCC's purpose is to carry out Japanese national policy related to the revitalization of the Japanese financial system is well supported in the record. 26 On balance, the relevant factors weigh in favor of a conclusion that the RCC is an organ of Japan. Additionally, the RCC compares favorably with other entities that we have labeled organs of foreign states under the FSIA. 27 In Gates, we held that Alberta Pork, a Canadian marketing board for hog producers formed pursuant to Alberta law, was an organ of the Province of Alberta. Id. This was so despite the fact that the Alberta Agricultural Products Marketing Council, which established the board, did not exercise day-to-day control over the board, but had only an active supervisory role. Id. at 1460. The Council could authorize the board to set quotas for hog farmers, require farmers to provide information relating to the production and marketing of specified products, pay service charges, and the like. Id. at 1461. Noting the many ways in which the Council could delegate tasks to Alberta Pork, we held that the board was an organ of the Province of Alberta. Id. 28 In Corporacion Mexicana, we held that a subsidiary of a Mexican agency that owned and exploited that nation's petroleum resources was an organ of Mexico. The subsidiary was a separate legal entity. It was empowered to own property and carry on business in its own name and was administered by eight board members who were appointed by the federal government. 89 F.3d at 654. The government of Mexico guaranteed the subsidiary's performance. Id. In holding that the subsidiary was an organ of Mexico, we quoted the district court's explanation that 29 [the subsidiary] is an integral part of the United Mexican States. [It] was created by the Mexican Constitution, Federal Organic Law, and Presidential Proclamation; it is entirely owned by the Mexican Government; is controlled entirely by government appointees; employs only public servants; and is charged with the exclusive responsibility of refining and distributing Mexican government property. 30 Id. at 655. 31 The RCC shares important similarities with the Mexican subsidiary in Corporacion Mexicana: Each body was created directly by public law, and the government guaranteed each body's performance. The RCC is even more clearly an organ of a foreign state than Alberta Pork was in Gates. 32 In view of the circumstances of its founding; its funding and financial connection to the government and taxpayers of Japan; its mission; and its purpose, we hold that the RCC is an organ of the Japanese government. It is therefore a foreign state within the meaning of the FSIA and is entitled to exercise the rights afforded foreign states under the FSIA. 33