Amicus Curiae Brief — Korean Air Lines v. MacNamara

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In the Supreme Court of the

OCTOBER TERM, 1989 FILED |

ye PO |

KOREAN AIR LINES, PETITIO

v JOSEPH F. SPANIOL, JR.

CLERK

US, r

THOMAS V. MACNAMARA

THOMAS V. MACNAMARA, CROSS-PETITIONER

Vv.

KOREAN AIR LINES

ON PETITION AND CROSS-PETITION

FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

KENNETH W. STARR

Solicitor General

JAMES P. TURNER

Acting Assistant Attorney General

LAWRENCE G. WALLACE

Deputy Solicitor General

ROGER CLEGG

Deputy Assistant Attorney General

EDWIN S. KNEEDLER

Assistant to the Solicitor General

JESSICA DUNSAY SILVER

IRVING L. GORNSTEIN

Attorneys

ABRAHAM D. SOFAER Department fo Justice

Legal Adviser Washington, D.C. 20530

Department of State (202) 633-2217

Washington, D.C. 20520

CHARLES A. SHANOR

General Counsel

Equal Employment Opportunity Commission

Washington, D.C. 20507

QUESTIONS PRESENTED

Article VIII(1) of the Treaty of Friendship, Com-

merce and Navigation between the United States and

the Republic of Korea (8 U.S.T. 2223) provides that

“companies of either Party shall be permitted to en-

gage, within the territories of the other Party, * * *

executive personnel * * * of their choice.”” The ques-

tions presented in this suit under Title VII of the

Civil Rights Act of 1964 (42 U.S.C. 2000e et seq.)

and the Age Discrimination in Employment Act of

1967 (29 U.S.C. 621 et seq.) are:

1. Whether Article VIII(1) gives a Korean com-

pany operating in the United States the right to se-

lect a Korean citizen for an executive position when

that choice is based not on citizenship, but on race,

national origin, or age.

2. Whether a Korean company is barred from ex-

ercising its Article VIII(1) right to select Korean

citizens for executive positions in the United States

because of their citizenship if that practice has a

disparate impact on other individuals of a certain

race, national origin, or age.

3. Whether a Korean company’s Article VIII(1)

right to “engage” executives of its choice encom-

passes the right to discharge a United States national

in order to replace him with a Korean citizen.

4. Whether the court of appeals properly focused

on the “executive” status of cross-petitioner’s succes-

sor, rather than on cross-petitioner’s own status, in

deciding if Article VIII(1) protected the decision to

discharge cross-petitioner in order to replace him

with a Korean citizen.

5. Whether the district court abused its discretion

in enforcing a discovery cut-off date.

(1)

TABLE OF CONTENTS

Page

Statement 1

Argument:

A. Herean Air Lines’ petition .................................. 5

B. MacNamara’s cross-petition -..................-....--.----- 17

Conclusion 21

TABLE OF AUTHORITIES

Cases:

Avigliano v. Sumitomo Shoji America, Inc., 638

F.2d 552 (2d Cir. 1981), vacated, 457 U.S. 176

CN hes a ia ..-14-15, 16-17

Bryan V. Itasca County, ‘426 U.S. 373 (1976) eect 13

Carlucci v. Doe, 109 S. Ct. 407 (1988) -..........2202.2.. 19

Espinoza V. Farah Mfg. Co., 414 U.S. 86 (1978).... 6

Kolovrat v. Oregon, 366 U.S. 187 (1961) -......... 10

McCulloch v. Sociedad Nacional de Marineros de

Honduras, 372 U.S. 10 (1963) . 19

O’Connor v. Donaldson, 422 U.S. 563 (1975) -......... 15

Societe Nationale Industrielle Aerospatiale Vv.

United States District Court, 482 U.S. 522

(1987) 10

Speiss v. C. Itoh & Co., 648 F.2d 353 (5th Cir.

1981), vacated, 457 U.S. 1128 (1982) -._....... 15, 16, 17

Sumitomo Shoji America, Inc. v. Avagliano, 457

U.S. 176 (1982) mt passim

Wards Cove Packing Co. Vv. Atonio, 109 S. Ct. 2115

I ce 19

Whitney v. Robertson, 124 U.S. 190 (1888) _........ 19

Wickes v. Olympic Airways, 745 F.2d 363 (6th

Cir. 1984) 15

Treaties, statutes and regulation:

Treaty of Friendship, Commerce and Economic

Development, Nov. 23, 1949, United States-

Uruguay, art. V (4), reprinted in 96 Cong. Rec.

12,083 (1950) ....... 7

(IIT)

Treaties, statutes and regulation—Continued :

Treaty of Friendship, Commerce and Navigation,

Apr. 2, 1953, United States-Japan, 4 U.S.T. 2063

T.LA.S. No. 2868 ..... ss

Nov. 28, 1956, United States-Republic of Korea,

8 U.S.T. 2217, T.LA.S. No. 3947:

pte % 1 8 GRA RCR SE aan

Page

Art. XIII (1), 8 U.S.T. 2223 ... passim

Age Discrimination in Employment Act of 1967,

, ip Fel ee” ” Reels Sento 2, 5, 10, 12, 14, 19

Civil Rights Act of 1964, Tit. VII, 42 U.S.C. 2000e

ON ih elise hat encesnstonmsicnbilnte 2,5, 10, 12, 14, 19

Immigration and Naturality Act, 8 U.S.C. 1101

(a) (15) (EB) (i)

RE eG) CUT) ainsi cineenidcicerrnene

Miscellaneous:

Commercial Treaties: Hearing Before the Sub-

comm. of the Senate Comm. on Foreign Rela-

tions, 88d Cong., Ist Sess. (1953) -......20000000...

Foreign Service Despatch No. 144 from The

pe Seer ome

Foreign Service Despatch No. 914 from Brussels

RS | SRR ee ee |, ROTA

Foreign Service Despatch No. 2529 from Bonn

1 Me Gs” + ARR eeaer ere Fe ik ene

Walker, Provisions on Companies in United States

Commercial Treaties, 50 Am. J. Int’l Law 373

(QE ddibndncdtctventieis, cis

7,9

In the Supreme Court of the United States

OCTOBER TERM, 1989

No. 88-1449

KOREAN AIR LINES, PETITIONER

Vv.

THOMAS V. MACNAMARA

No. 88-1551

THOMAS V. MACNAMARA, CROSS-PETITIONER

Vv.

KOREAN AIR LINES

ON PETITION AND CROSS-PETITION

FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

This brief is submitted in response to the Court’s

invitation to the Solicitor General to express the views

of the United States.

STATEMENT

1. Petitioner Korean Air Lines (KAL) is a Ko-

rean corporation with branch offices in the United

States. In 1974, cross-petitioner Thomas MacNamara

began working for KAL as a salesman. In 1977, he

was promoted to district sales manager for Delaware,

Pennsylvania, and southern New Jersey. In 1982,

KAL reorganized its American operations. As part

of that reorganization, KAL dismissed MacNamara,

who was then 57 years old, and replaced him with a

(1)

Korean citizen who was 42 years old and who had

entered the United States pursuant to an E-1 treaty

trader visa.’ After the reorganization, MacNamara’s

replacement served as district sales manager for the

area extending from Pennsylvania to Florida. KAL

also dismissed its other American managers and re-

placed them with Korean citizens. Pet. App. A3, Al1-

A12.?

2. Following his discharge, MacNamara_ sued

KAL, alleging that his firing was based on race, na-

tional origin, and age, in violation of Title VII of

the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq.,

and the Age Discrimination in Employment Act of

1967 (ADEA), 29 U.S.C. 621 et seg. KAL moved to

dismiss the complaint on the ground that its conduct

was protected by Article VIII(1) of the Treaty

of Friendship, Commerce and Navigation (FCN

Treaty) of November 28, 1956, between the United

States and the Republic of Korea, 8 U.S.T. 2223,

T.LA.S. No. 3947. The first sentence of Article

VIII(1) of the FCN Treaty provides: ‘Nationals

and companies of either Party shall be permitted to

engage, within the territories of the other Party, ac-

countants and other technical experts, executive per-

1Under the Immigration and Nationality Act, a treaty

trader is someone who enters the United States “solely to

carry on substantial trade, principally between the United

States and the foreign state of which he is a national.” 8

U.S.C. 1101 (a) (15) (E) (i). To gain entry as a treaty trader,

an alien must also show that he “will be engaged in duties of a

supervisory or executive character, or, if he is or will be

employed in a minor capacity, he has the specific qualifica-

tions that will make his services essential to the efficient

operation of the employer’s enterprise and will not be em-

ployed solely in an unskilled manual capacity.” 22 C.F.R.

41.40(a) (1987).

2“Pet. App.” refers to the appendix to the petition for a

writ of certiorari in No. 88-1449.

sonnel, attorneys, agents, and other specialists of

their choice.” 8 U.S.T. 2223.°

Treating KAL’s motion to dismiss as one for sum-

mary judgment, the district court granted the motion

(Pet. App. A27-A47). The court construed Article

VIII(1) to give Korean companies “the right to se-

lect nationals who have Treaty Trader status as ex-

ecutive personnel without regard to American em-

ployment laws,” and it concluded that KAL had val-

idly exercised that right because it replaced Mac-

Namara with a Korean national who held a treaty

trader visa (Pet. App. A42). The district court re-

jected MacNamara’s contention that although Article

VIII(1) permits a Korean company to select Korean

nationals for executive positions on the basis of their

citizenship, it does not confer a right to make such

selections because of race, national origin, or age. In

its view, this interpretation would nullify the “of

their choice” language of Article VIII(1) and impede

a foreign company’s ability to manage its invest-

ments in the host country. Pet. App. A42.

3In Sumitomo Shoji America, Inc. v. Avagliano, 457 U.S.

i76 (1982), the Court held that the identical provision of the

FCN Treaty with Japan (Treaty of Friendship, Commerce

and Navigation, Apr. 2, 1953, United States-Japan, 4 U.S.T.

2063, T.I.A.S. No. 2863) did not protect the employment de-

cisions of a company that was the subsidiary of a Japanese

company but was incorporated in the United States. The

Court concluded, in accordance with the position of the Ex-

ecutive Branch, that such a subsidiary is a company of the

United States, not of Japan, within the meaning of the FCN

Treaty. Because the Court found Article VIII(1) inapplica-

ble. it had no occasion to coxzsider the scope of the employ-

ment privileges accorded by that Article or their interaction

with Title VII. See 457 U.S. at 189-190 n.19. In this case, it

is undisputed that KAL is a company of Korea for purposes

of Article VIII(1) of the FCN Treaty with Korea, and that

KAL therefore is entitled to invoke whatever employment

privileges are accorded by that Article.

3. The court of appeals reversed and remanded for

further proceedings on MacNamara’s claims of in-

tentional discrimination (Pet. App. A1-A26). It held

that the purpose of Article VIII(1) “is to assure

foreign corporations that they may have their busi-

ness in the host country managed by their own na-

tionals if they so desire” (Pet. App. A9). It also held,

however, that “Article VIII(1) was not intended to

provide foreign businesses with shelter from any law

applicable to personnel decisions other than those

that would logically or pragmatically conflict with

the right to select one’s own nationals as managers

because of their citizenship” (ibid.). The court of

appeals therefore concluded that “[i]nsofar as Title

VII and the ADEA proscribe intentional discrimina-

tion on the basis of race, national origin, and age,”

there is no “theoretical or practical conflict between

them and the right conferred by Article VIII(1)”

(ibid.). See id. at A13-A24. On the other hand, the

court concluded that “to the extent that Title VII and

the ADEA proscribe personnel decisions based on

citizenship solely because of their disparate impact

on older managers, a particular racial group, or per-

sons whose ancestors are not from the foreign coun-

try involved,” there is a “conflict” between Article

VIII(1) and the antidiscrimination laws, and that

conflict “must be resolved in favor of Article VIII

(1)” (id. at A9). See id. at A24-A26.*

4The court of appeals’ holding regarding the interaction

of Article VIII(1) and the antidiscrimination laws was in

accordance with the position of the United States, which filed

a brief as amicus curiae.

Like the district court (see Pet. App. A37-A42), the court

of appeals rejected MacNamara’s arguments that the FCN

Treaty right is not implicated because he was not an “execu-

tive” within the meaning of Article VIII(1) and because a

Korean company’s right to “engage” executive personnel of

ARGUMENT

The decision of the court of appeals is correct and

does not conflict with any decision of this Court or

with any live precedent of another court of appeals.

Moreover, this case is in an interlocutory posture,

because the court of appeals has remanded the case

to the district court to permit MacNamara to pro-

ceed with his claims of intentional discrimination.

In the absence of a fully developed record and a final

determination by the courts below on the merits of

MacNamara’s claims and their interaction with peti-

tioner Korean Air Lines’ FCN Treaty rights in this

setting, it would be premature for the Court to con-

sider KAL’s assertions that the prohibitions in Title

VII and the ADEA against intentional discrimina-

tion based on race, national origin, or age conflict

with KAL’s rights under Article VIII(1) of the FCN

Treaty. The petition and cross-petition for a writ of

certiorari therefore should be denied.

A. Korean Air Lines’ Petition

1. KAL contends (Pet. 7-9) that Article VIII(1)

gives it an absolute right to select any Korean na-

tional holding a treaty trader visa for an executive

position, even if that choice is made on a ground

prohibited by Title VII or the ADEA. The court of

appeals correctly rejected that contention. Although

Article VIII(1) gives Korean companies a right to

fill executive positions in the United States with

Korean citizens because of their Korean citizenship,

its choice does not encompass the right to fire an existing

employee (Pet. App. A9-A13). The court reasoned that

MacNamara’s replacement, who was a Korean national, served

as an “executive” (even if MacNapaara did not), and that

the right to “engage” the replacement necessarily encom-

passed the incidental right to terminate MacNamara so that

his duties could be assigned to the replacement (ibid.).

it does not sanction :mployment decisions that are

based on race, sex, religion, age, or even national

origin.°

a. The limited reach of Article VIII(1) is clear

from its background. The FCN Treaty between the

United States and Korea is one of a series of FCN

treaties entered into by the United States after

World War II. Sumitomo Shoji America, Inc. v.

Avagliano, 457 U.S. 176, 181 n.6, 185 & n.13 (1982).

All of the FCN treaties contain an employment priv-

ilege that is similar to Article VIII(1) of the FCN

Treaty with Korea. The negotiators on behalf of the

United States insisted upon those provisions for a spe-

cific reason. When the postwar FCN treaties were

being negotiated, many countries had “percentile”

restrictions that required United States companies op-

erating abroad to hire a certain percentage of their

workforce from the host country. As this Court has

recognized, the employment provisions in the FCN

treaties “were intended to avoid the effect of strict

percentile limitations on the employment of Ameri-

cans abroad and ‘to prevent the imposition of ultra-

nationalistic policies with respect to essential execu-

tive and technical personnel.’”” Sumitomo, 457 U.S.

at 181 n.6, quoting Walker, Provisions on Companies

in United States Commercial Treaties, 50 Am. J.

Int’] Law, 373 383 (1956). By overriding percentile

laws, the FCN treaties were designed to enable

United States companies to hire United States citi-

zens for key positions abroad and to grant reciprocal

rights to the companies of our treaty partners.

5 Nationality (or citizenship) does not mean the same thing

as national origin. Nationality refers to the status of belong-

ing to a country through birth or naturalization; national

origin refers to the country from which a person or his

ancestors came. See Espinoza v. Farah Mfg. Co., 414 U.S. 86

(1978).

Re te Se

The negotiating history of the FCN treaties con-

firms this purpose of the employment provisions, as

this Court recognized in Sumitomo. There, the Court

quoted diplomatic correspondence stating that the

purpose of the parallel provision in the FCN Treaty

with the Federal Republic of Germany was “ ‘to pre-

clude the imposition of “percentile” legislation.’ ”

See 457 U.S. at 181 n.6, quoting Foreign Service

Despatch No. 2529 from Bonn, at 1 (Mar. 18, 1954)

(C.A. Supp. App. 21).° By contrast, there is noth-

ing in the negotiating histories of the FCN trea-

ties to suggest that the employment provisions were

lesigned to-excuse a foreign company from comply-

ing with those nondiscrimination requirements of

domestic law that do not prohibit it from engaging

its own nationals to fill key positions.

Indeed, the purpose of the employment provisions

is directly expressed in the FCN Treaty with Uru-

guay, which served as the model for most subsequent

FCN treaties. That Treaty conferred a right to hire

key personnel “regardless of nationality.” Treaty of

Friendship, Commerce and Economic Development,

Nov. 238, 1949, United States-Uruguay, art. V(4)

reprinted in 96 Cong. Rec. 12,088 (1950). This lan-

guage clearly conveys the understanding that foreign

companies would be free to select executives and

other essential personnel on the basis of their nation-

ality, but does not imply a sweeping immunity from

6 See also Foreign Service Despatch No. 144 from The

Hague, at 4 (Aug. 16, 1954) (C.A. Supp. App. 32) (“the big

problem to which the sentence * * * was addressed was so-

called percentile legislation’) ; Foreign Service Despatch No.

914 from Brussels, at 5 (Mar. 11, 1955) (“the abuse the

sentence was designed to correct [was] ‘percentile’ laws and

other governmental fiats circumscribing freedom of choice of

high-grade personnel on a purely nationality basis”) (C.A.

Supp. App. 39).

all domestic employment laws. Although some sub-

sequent treaties that were modeled on the Uruguayan

Treaty retained the “regardless of nationality” lan-

guage, most did not. This difference in language was

not intended to effect a change in meaning; rather,

the phrase “of their choice” in the Korean and other

FCN treaties (quoted at pages 2-3, supra), is simply

shorthand for “of their choice, regardless of nation-

ality.” See Commercial Treaties: Hearing Before the

Subcomm. of the Senate Comm. on Foreign Rela-

tions, 838d Cong., 1st Sess. 9 (1953) (describing four

treaties, including three with the shortened “of their

choice” language, as containing a “[r]ight to engage

technical and managerial personnel regardless of na-

tionality.”).

The second sentence of Article VIII(1) of the FCN

Treaty also shows that foreign companies were to

remain subject to domestic laws that do not interfere

with the right to hire on the basis of nationality. The

second sentence gives foreign companies the right to

employ accountants and other experts who have not

satisfied the professional standards of the host coun-

try, but only for particular purposes.’ The clear im-

plication is that companies normally must hire only

those professionals who do have the qualifications re-

quired by the host country—a principle that is at

odds with petitioner’s notion that the first sentence of

7 The second sentence of ao VIII(1) provides (8 U.S.T.

2223 (emphasis added) ) :

Moreover, such nationals and companies shall be per-

mitted to engage accountants and other technical ex-

perts regardless of the extent to which they have quali-

fied for the practice of a profession within the ter-

ritories of such other Party, for the particular purpose

of making examinations, audits and technical investiga-

tions for, and rendering reports to, such nationals and

companies in connection with the planning and operation

of their enterprises * * *.

Article VIII(1) grants a right of choice that is un-

fettered by domestic law.

Finally, the construction given Article VIII(1) by

the court below is consistent with the broader object

of the FCN treaties generally. As this Court ex-

plained in Sumitomo, “[t]he purpose of the [FCN]

Treaties was not to give foreign corporations greater

rights than domestic companies, but instead to assure

them the right to conduct business on an equal basis

without suffering discrimination based on their alien-

age.” 457 U.S. at 187-188. That purpose is ex-

pressed most directly in Article VII of the FCN

Treaty with Korea, which gives foreign companies

“national treatment with respect to engaging in all

types of commercial, industrial, financial and other

activities,” including the right “to control and man-

age enterprises which they have established or ac-

quired.” 8 U.S.T. 2222. Under a regime of “na-

tional treatment,” a foreign company is entitled to

the same rights and is subject to the same respon-

sibilities as a domestic company. Sigitomo, 457 U.S.

at 188.

The employment privilege in Article VIII(1) is a

“corollary” to this general principle of national treat-

ment. Foreign Service Despatch No. 2529, supra, at

1 (C.A. Supp. App. 21). To be sure, the employment

privilege is not written in “national treatment”

terms, but that is only because it was necessary in

this instance to go beyond strict national treatment

in order to guarantee equality in the relevant scnse.

While percentile laws and other restrictions on the

hiring of aliens applied to domestic and foreign em-

ployers alike, they had a far more severe impact on

foreign employers, who were prevented from hiring

their own nationals. Article VIII(1) therefore re-

lieves foreign employers from the effect of such laws,

even if local employers remain subject to them. In

this way, Article VIII(1) gives foreign employers

the same access to their citizens for executive posi-

tions as local companies have to their citizens, and

thereby establishes a basis for competitive equality.

Unlike percentile restrictions, the provisions of

Title VII and the ADEA that prohibit discrimination

on grounds other than citizenship do not place for-

eign companies at a competitive disadvantage; in-

stead, they have precisely the same effect on foreign

companies as on domestic companies. Accordingly,

it would be inconsistent with the basic national-

treatment framework of the FCN Treaty to rely on

Article VIII(1) as a basis for implying an exemption

from Title VII and the ADEA for the selection of

key personnel by foreign companies. Just as local

companies may not select employees on grounds such

as race, national origin, and age, foreign companies

may not do so.

b. For the foregoing reasons, the Department of

State has interpreted the employment privileges in

FCN treaties as providing no defense to claims of

intentional discrimination based on race, sex, religion,

national origin, or age. The Third Circuit properly

gave “‘great weight’” to this interpretation (Pet.

App. A20-A21, quoting Kolovrat v. Oregon, 366 U.S.

187, 194 (1961)), just as this Court gave great

weight to the Executive Branch’s construction of

the employment provisions of the Japanese FCN

Treaty in Sumitomo, 457 U.S. at 184-185. See also

Societe Nationale Industrielle Aerospatiale v. United

States District Court, 482 U.S. 522, 535-536 & n.17

(1987).

KAL asserts (Pet. 9) that the State Department’s

interpretation of Article VIII(1) conflicts with that

of the Korean Government. The court of appeals,

however, correctly “perceive[d] no conflict between

the position of the United States government and that

if.

11 -

of the Korean government” (Pet. App. A21 n.13).

Significantly, KAL offers no support for its assertion

that the Korean Government has taken a conflicting

position. The only expressions of views by the Re-

public of Korea that are in the record in this case

were set forth in two opinions issued by its Ministry

of Foreign Affairs on October 25, 1984, which are

discussed in an affidavit of the Counsellor to the Em-

bassy of the Republic of Korea in Washington. See

C.A. App. 779-780. In the first opinion, the Ministry

of Foreign Affairs stated that the FCN Treaty would

prevail over the domestic law of Korea if there were

a conflict; in the second opinion, the Ministry took the

position that the right of foreign companies to “en-

gage” employees of their choice includes the right to

terminate existing employees. Jbid. In neither opin-

ion did the Ministry of Foreign Affairs express any

view on the precise scope of the treaty right. In par-

ticular, it did not express a view on whether the

Treaty gives a Korean company a right to choose a

Korean national for an executive position when that

choice is made on the basis of race, national origin,

or age, rather than Korean citizenship. Nor are we

aware of any other occasion on which the Republic

of Korea expressed a view on that question. KAL

therefore fails in its attempt to discredit the State

Department’s interpretation of Article VIII(1) by

asserting that the Korean Government has adopted a

contrary position.

ce. KAL argues (Pet. 8) that its interpretation of

Article VIII(1) is superior to that adopted by the

Third Circuit because the former is consistent with -

the literal meaning of the “of their choice” language

in Article VIII(1). For this reason, KAL further ar-

gues, the decision below disregards this Court’s ad-

monition in Sumitomo that the plain meaning of the

FCN Treaty language should control in the absence

of substantial reasons to the contrary. See Pet. 8,

citing 457 U.S. at 189. The issue here, however, is

quite different from that in Sumitomo. There, the

definitional provision of the FCN Treaty with Japan

supplied an explicit answer to the question whether a

subsidiary incorporated under the laws of the United

States was to be regarded as a company of Japan.

See 457 U.S. at 182. And it was that definitional

provision to which the Court referred in Swmitomo

in stating that the “literal language” of the FCN

Treaty barred the subsidiary from invoking the pro-

tection of the employment provision. See id. at 183.

Here, by contrast, neither Article VIII(1) nor the

definitional provision of the FCN Treaty with Korea

supplies a definition or further elaboration of the

critical language “of their choice” in Article VIII(1).

Nor does the phrase “of their choice,” in itself,

have any one plain meaning. For example, the broad-

est (and perhaps most literal) construction of Arti-

cle VIII(1) would give KAL the right to make an

unfettered “choice” of executive personnel from

among American applicants on grounds prohibited by

Title VII and the ADEA—.g., it could select a white

American over a black American, solely on the basis

of race. KAL has recognized that such an interpreta-

tion is untenable, and it therefore has argued that

Article VIII(1) affords it an absolute right of choice

only when it selects a Korean national who holds a

treaty trader visa. But this suggested limitation does

not appear in the language of Article VIII(1), and

it therefore serves to highlight that a proper con-

struction of Article VIII(1) cannot depend on an ef-

fort to identify the supposedly literal or plain mean-

ing of the phrase “of their choice,” standing alone.*

8 KAL’s argument that the literal language of the first sen-

tence of Article VIII(1) gives it an absolute right of choice,

unfettered by any restraints imposed by domestic law, is also

eat

In these circumstances, it is most sensible to con-

strue the phrase “of their choice” by reference to

those restrictions on an employer’s freedom of choice

that the treaty Parties sought to eliminate. As we

have shown, the Third Circuit’s construction is based

on that analysis, because it recognizes the right of a

foreign company to select its own nationals on the

basis of their citizenship, so that it can manage its

investments and operations in the United States

through personnel in whom it has the most confidence.

By contrast, there is nothing in the text, structure, or

background of the FCN treaties suggesting an intent

to confer an affirmative right on a foreign company

to make a “choice” that is not based on such legiti-

mate business concerns, but instead is based on such

otherwise prohibited and extraneous factors as race,

sex, national origin, or age. Thus, the interpretation

adopted by the Third Circuit gives effect to the cen-

tral purpose of Article VIII(1), while at the same

time avoiding an expansive interpretation that would

unnecessarily bring that Article into conflict with

intervening legislation that embodies the profound

national commitment to eliminating discrimination.

Compare Bryan v. Itasca County, 426 U.S. 373, 386-

387 (1976).°

inconsistent with the language of the second sentence of that

Article. The second sentence plainly contemplates that-a

foreign company may engage only those professional person-

nel who possess the qualifications required by domestic law,

except in certain limited circumstances. See pages 8-9 & note

7, supra.

®In any event, this Court made clear in Sumitomo that

even where the language of a treaty is clear, it does not con-

trol when it produces a result that is demonstrably incon-

sistent with the intent of the parties and the construction

given the treaty by responsible Executive Branch personnel.

457 U.S. at 185. That would be the result of KAL’s interpre-

tation here.

d. KAL contends (Pet. 9) that the ruling below

will discourage foreign investment in the United

States because foreign companies cannot choose their

executives with complete assurance that their deci-

sions will not be challenged in court. But under the

Third Circuit’s decision, if a foreign company hires

its executives on the basis of their citizenship, it will

have a complete defense to a suit under Title VII

and the ADEA. Given this important protection,

there is no reason to believe that the ruling below will

substantially deter foreign investment. It is signifi-

cant in this regard that the Third Circuit’s decision

in this case is not a novel development; it is consist-

ent with the position of the Executive Branch and

with the general thrust of other court of appeals’

decisions. See pages 16-17, infra. Yet despite this

general consensus in recent years, we are not aware

of any indication that foreign investment has been

deterred as a result of this construction of the FCN

treaties and their interaction with domestic antidis-

crimination laws; indeed, we have been informed by

the Department of State that it has not received any

representations by foreign governments to that effect.

KAL’s fear that American courts will not honor

the FCN Treaty defense because of prejudice against

foreign companies is simply unfounded. As the court

of appeals concluded, while “factfinders can and do

err from time to time,” there is no reason to think

that the plaintiff in this case is “more likely to suc-

ceed than any other employment discrimination plain-

tiff in convincing the trier of fact that the decision

was made for some different, impermissible reason’”’

(Pet. App. A22-A23).

2. KAL argues (Pet. 7-8) that the Court should

grant certiorari to resolve a conflict between the

Third Circuit’s decision in this case and the decisions

of the Second, Fifth and Sixth Circuits in Avigliano

v. Sumitomo Shoji America, Inc., 688 F.2d 552 (2d

Cir. 1981), vacated on other grounds, 457 U.S. 176

(1982); Spiess v. C. Itoh & Co., 643 F.2d 353 (5th

Cir. 1981), vacated on other grounds, 457 U.S. 1128

(1982); and Wickes v. Olympic Airways, 745 F.2d

363 (6th Cir. 1984). Contrary to KAL’s contention,

however, there is no live conflict warranting review

by this Court.

Only one of the three appellate decisions upon which

KAL relies has any current precedential force—the

Sixth Circuit’s ruling in Wickes. However, the Sixth

Circuit there adopted precisely the same construction

of the parallel employment privilege in the FCN

Treaty with Greece as the Third Circuit adopted here.

Wickes, 745 F.2d at 367-369. In Sumitomo and

Spiess, the Second and Fifth Circuits first held that

companies incorporated in the United States but con-

trolled by foreign corporations were entitled to the

protection of the employment privilege under the

FCN Treaty with Japan; it was on that predicate

that the Second and Fifth Cireuits then construed

the scope of the privilege. This Court subsequently

held in Sumitomo that a subsidiary of a foreign com-

pany that is incorporated under the laws of the

United States is a company of the United States, not

of the foreign country, and that the subsidiary there-

fore cannot claim the protection of the employment

privilege in the Treaty. The Court therefore vacated

the lower court judgments in both Sumitomo and

Spiess. Accordingly, the rulings by the Second and

Fifth Circuits regarding the scope of the employment

privilege have no current precedential effect (O’Con-

nor v. Donaldson, 422 U.S. 568, 577-578 n.12

(1975) ), and do not give rise to a live conflict with

the decision below and Wickes.

Moreover, it is unclear to what extent the now-

vacated rulings in Sumitomo and Spiess departed, at

least as a practical matter, from the view adopted by

the Third and Sixth Circuits in this case and Wickes.

The opinions in both cases agreed that the purpose

of the employment privilege was to overcome per-

centile legislation and to afford foreign companies the

right to hire their own nationals for executive posi-

tions. Sumitomo, 638 F.2d at 559; Spiess, 643 F.2d

at 359-363. In addition, although the precise holdings

by the Second and Fifth Circuits are subject to vary-

ing interpretations, their focus was different from

that of the court below and the Sixth Circuit in

Wickes. Sumitomo and Spiess principally involved the

question whether the FCN Treaty with Japan gives

a foreign company an absolute right to select execu-

tives on the basis of nationality. The Fifth Circuit

concluded that the Treaty does confer such a right

(Spiess, 643 F.2d at 362), while the Second Circuit

concluded that the foreign company must justify such

a preference as a bona fide occupational qualification

(Sumitomo, 638 F.2d at 558-559). Neither Swmitomo

nor Spiess expressly addressed the distinct question

presented by KAL here: whether the FCN Treaty

confers a right to select a foreign national on grounds

other than nationality, such as race, national origin

or age.*°

10 The Fifth Circuit in Spiess expressly held only that the

treaty provision served to exempt a cqmpany of Japan

from domestic discrimination laws “to the extent of permit-

ting discrimination in favor of Japanese citizens in employ-

ment for executive and technical positions” (643 F.2d at 359;