Papaila v. Uniden America Corp. ( 1995 )

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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