Court Opinion

ID: 7108
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:24:57+00
Date Added: 2024-06-11T15:04:37.222057
License: Public Domain

United States Court of Appeals,

                            Fifth Circuit.

                             No. 94-10113.

            Theodore S. PAPAILA, Plaintiff-Appellant,

                                    v.

            UNIDEN AMERICA CORP., Defendant-Appellee.

                            April 28, 1995.

Appeal from the United States District Court for the Northern
District of Texas.

Before JONES, DUHÉ and STEWART, Circuit Judges.

     DUHÉ, Circuit Judge:

     Theodore Papaila sued Uniden America Corp. (UAC) alleging

employment grievances including discrimination based on race and

national origin.      On   UAC's   motion    for   summary   judgment,   the

district   court    held   that    the      race   and   national   origin

discrimination claims were precluded by the United States-Japan

Treaty of Friendship, Commerce and Navigation, Apr. 2, 1953, U.S.-

Japan, art. VIII(1), 4 U.S.T. 2063, 2070.           Plaintiff voluntarily

dismissed his other claims and appeals the summary judgment.              We

affirm.

                             I. Background

     UAC is an Indiana Corporation and a wholly owned subsidiary of

Uniden Corporation, a Japanese entity based in Tokyo.           Plaintiff,

a caucasian of American national origin, alleges that Japanese

citizens who are employees of UAC receive favorable treatment:

they receive higher base salaries, fringe benefits (e.g., housing

and tuition allowances), and job protection (transfer rather than

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discharge in case of poor job performance) that Plaintiff did not

receive.    Plaintiff was demoted then terminated by UAC.

     The summary judgment evidence established that, of UAC's

approximate 400 employees, only sixteen are Japanese citizens who

were treated differently than other employees.                      Each of those

sixteen employees, called by the parties "expatriates," was sent on

a temporary work assignment by the Japanese parent to protect its

interests in the subsidiary.           The remainder of UAC's employees,

including    six    of   Japanese   race      and     national    origin       (but    not

citizenship), were directly controlled by UAC and did not receive

the same preferential treatment as the expatriates.

                             II. Treaty Provision

     Under the Treaty a Japanese corporation may incorporate a

subsidiary under the laws of the United States.                  Treaty, art. VII,

4 U.S.T. at 2068.        Once it does so, the subsidiary is an American

corporation,       subject   to   American       laws,    including       Title       VII.

Article VIII(1) of the Treaty provides, "[C]ompanies 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."     4     U.S.T.    at   2070.         The   Treaty     allows    a    foreign

corporation such as Uniden Japan to discriminate in favor of

citizens from its own country in filling the specified high-level

positions within the United States. See Wickes v. Olympic Airways,

745 F.2d 363, 367 (6th Cir.1984) (interpreting similar provision in

United States-Greek Treaty of Friendship, Commerce & Navigation);

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see also MacNamara v. Korean Air Lines, 863 F.2d 1135, 1145 (3rd

Cir.1988) ("[T]he provision was necessary for the limited purpose

of securing to foreign investors the freedom to place their own

citizens in    key   management   positions.")   (interpreting    similar

provision in United States-Korean Treaty), cert. denied, 493 U.S.
944, 110 S. Ct. 349, 107 L. Ed. 2d 337 (1989).

     Thus, Article VIII to a limited extent permits Japanese

companies to discriminate in favor of their fellow citizens because

of their citizenship.

              III. Standing to Assert Rights of Parent

      As a domestic corporation, UAC has no rights under Article

VIII(1), because Article VIII(1) applies only to "companies of

[Japan]."    Sumitomo Shoji Am., Inc. v. Avagliano, 457 U.S. 176,

189, 102 S. Ct. 2374, 2381, 72 L. Ed. 2d 765 (1982) (holding that

American subsidiary of a Japanese parent had no Treaty defense

because the subsidiary was not a "company of Japan").            Sumitomo

limited its ruling to the subsidiary's assertion of rights on its

own behalf and "express[ed] no view as to whether [the subsidiary]

may assert any Article VIII(1) rights of its parent."       Id. at 189

n. 19, 102 S. Ct. at 2382 n. 19.     UAC contends that it has standing

to assert the Treaty defense of its parent.

      We agree, following the lead of our sister circuit that has

held that a subsidiary may assert the Treaty rights of the parent,

"at least to the extent necessary to prevent the treaty from being

set at naught."      Fortino v. Quasar Co., 950 F.2d 389, 393 (7th

Cir.1991).    As in Fortino, Uniden Japan rather than UAC made all

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the   allegedly   discriminatory       decisions   in   the   employment

relationship with the expatriates.1         The rationale of Fortino

applies to this case:

      A judgment that forbids [UAC] to give preferential treatment
      to the expatriate executives that its parent sends would have
      the same effect on the parent as it would have if it ran
      directly against the parent: it would prevent [Uniden Japan]
      from sending its own executives to manage [UAC] in preference
      to employing American citizens in these posts.

Fortino, 950 F.2d at 393.

      Since UAC did not itself cause any of the discriminatory

conduct, we hold that UAC may invoke its parent's Treaty rights, at

least with respect to those employment decisions dictated by the

parent.   Cf. id. (distinguishing Sumitomo for the very reason that

"there was no contention [in Sumitomo ] that the parent had

dictated the subsidiary's discriminatory conduct").2

      1
      The expatriates were hired in Japan by the parent and were
assigned by the parent to UAC. They all hold managerial
positions, and their mission is to manage Uniden Japan's
shareholder interests. They are subject to transfer at the
request of Uniden Japan. Their salaries are set in Japan and
Uniden Japan directs that UAC maintain a separate UAC payroll
account for the expatriates; the parent sets their salaries,
wages, benefits, hours and evaluates their job performance. 2 Rawle
298-302.
      2
      Additionally, we note that all of the alleged favoritism
was based on citizenship. Fortino recognized a difference
between distinctions based on citizenship, which are permitted by
the Treaty, and distinctions based on national origin, which
Title VII prohibits. Fortino, 950 F.2d at 391-92. Like the
subsidiary in Fortino, UAC employees of Japanese race and
national origin who were not Japanese citizens were not shown
favoritism. Id. at 393. Arguably, Title VII is not implicated.
See 42 U.S.C.A. § 2000e-2(a)(1) (West 1994) (prohibiting
employment discrimination based on race or national origin); see
also Fortino, 950 F.2d at 393 (noting that favoring Japanese-
American employees would have been "true national-origin
discrimination since they are not citizens of Japan").

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                          IV. Conclusion

     The domestic subsidiary may assert the Article VIII(1) Treaty

rights on behalf of its Japanese parent corporation.   This Treaty

right includes the right to favor Japanese citizens in placing

executives to manage its shareholder interest.   Plaintiff fails to

demonstrate a genuine issue of material fact that would preclude a

summary judgment in favor of UAC on Plaintiff's claims of Title VII

discrimination.   Plaintiff's request that this Court render a

judgment for him is denied.

     AFFIRMED.

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