Amicus Curiae Brief — American Ins. Assn. v. Garamendi

MOTION FILED

FER? A OTS

bs

No. 02-722

IN THE

Supreme Court of the United States

AMERICAN INSURANCE ASSOCIATION, ET AL.,

Petitioners,

Vv.

JOHN GARAMENDI, IN HIS CAPACITY AS COMMISSIONER OF

INSURANCE FOR THE STATE OF CALIFORNIA,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

MOTION OF MITSUBISHI MATERIALS

CORPORATION ET AL. FOR LEAVE TO FILE AND

BRIEF AMICI CURIAE IN SUPPORT OF

PETITIONERS

WALTER DELLINGER

(Counsel of Record)

JOHN H. BEISNER

JOHN B. NIBLOCK

PAMMELA QUINN*

O’MELVENY & MYERS LLP

555 13th Street, N.W.

WASHINGTON, D.C. 20004

(202) 383-5300

*Admitted in Virginia only

Counsel for Mitsubishi Materials Corpo-

ration and Mitsubishi Materials (U.S.A.)

Corporation

(Additional counsel listed on inside cover)

DAVID M. BALABANIAN

BINGHAM MCCUTCHEN LLP

Three Embarcadero Center

SAN FRANCISCO, CA 94111

(415) 393-2000

Counsel for Mitsui & Co. Ltd.

and Mitsui & Co. (U.S.A.), Inc.

KATHRYN DAVIS

MORRISON & FOERSTER LLP

425 Market Street

SAN FRANCISCO, CA 94107

(415) 268-7000

Counsel for Isikawajima-Harima

Heavy Industries Co., Ltd. and

THI, Inc.

MARGARET K. PFEIFFER

STACY R. STOLLER

SULLIVAN & CROMWELL LLP

125 Broad Street

NEW YORK, NY 10004

(212) 558-4000

Counsel for Nippon Steel

Corporation and Nippon Steel

Trading Co. Ltd.

NATHAN LANE III

JOSEPH A. MECKES

SQUIRE, SANDERS & DEMPSEY LLP

One Maritime Plaza, Suite 300

SAN FRANCISCO, CA 94111

(415) 954-0200

Counsel for Ishihara Sangyo

Kaisha, Ltd. and Mitsui

Engineering & Shipbuilding Co.,

Lid.

ARNE D. WAGNER

MORRISON & FOERSTER LLP

425 Market Street

SAN FRANCISCO, CA 94107

(415) 268-7000

Counsel for Mitsubishi

Corporation and Mitsubishi

International Corporation

PAUL J. HALL

ERIK K. LARSON

NIXON PEABODY LLP

Two Embarcadero Center, 27th Fl.

SAN FRANCISCO, CA 94111

(415) 984-8200

Counsel for Mitsui O.S.K. Lines,

Ltd.

JUNJI MASUDA

MASUDA & EJIRI

399 Park Avenue, 18th FI.

NEW YORK, NY 10022

(212) 486-2525

Counsel for Japan Energy Corporation,

Irvine Scientific Sales Co., Inc., and Japan

Energy U.S.A.

IN THE

Supreme Court of the Anited States

No. 02-722

AMERICAN INSURANCE ASSOCIATION, ET AL.,

Petitioners,

v.

JOHN GARAMENDI, IN HIS CAPACITY AS COMMISSIONER OF

INSURANCE FOR THE STATE OF CALIFORNIA,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

MOTION OF MITSUBISHI MATERIALS

CORPORATION ET AL. FOR LEAVE TO FILE A

BRIEF AMICI CURIAE IN SUPPORT OF

PETITIONERS

Mitsubishi Materials Corporation, Mitsubishi Materials

U.S.A. Corporation, Irvine Scientific Sales Co., Inc., Ishihara

Sangyo Kaisha Ltd., Ishikawajima-Harima Heavy Industries

Co., Ltd., THI, Inc., Japan Energy Corporation, Japan Energy

U.S.A., Mitsubishi Corporation, Mitsubishi International

Corporation, Mitsui & Co., Ltd., Mitsui & Co. (U.S.A.), Inc.,

Mitsui Engineering and Shipbuilding Co., Ltd., Mitsui

O.S.K. Lines, Ltd., Nippon Steel Corporation, and Nippon

il

Steel U.S.A., Inc., move, pursuant to Rule 37.2, for leave to

file the attached brief amici curiae in support of petitioners

in this case. While the petitioners have consented to the fil-

ing of this brief, respondent Insurance Commissioner John

Garamendi has not consented. Correspondence reflecting

the consent of the petitioners has been lodged with the Court.

Mitsubishi Materials Corporation is a Japanese corpora-

tion that produces a variety of products, including cement,

aluminum beverage cans, copper, and electronic compo-

nents. Mitsubishi Materials U.S.A. Corporation, a California

corporation, is a wholly owned subsidiary of Mitsubishi Ma-

terials Corporation. Mitsubishi Materials U.S.A. Corpora-

tion is primarily engaged in the sale of fabricated metal

products, machine tools and accessories, and cutting tools in

the United States and Canada.

Ishihara Sangyo Kaisha Ltd. is a Japanese corporation

engaged in the production and marketing of industrial chemi-

cals, including primarily titanium dioxide pigments, and bio-

sciences products.

Ishikawajima-Harima Heavy Industries Co., Ltd., is a

Japanese corporation that provides technology-oriented

products and services to the industrial, private, and public

sectors, including manufacturing equipment, bridge

construction, and environmental control systems. IHI, Inc., a

Delaware corporation, is a wholly owned subsidiary of Ishi-

kawajima-Harima Heavy Industries Co., Ltd. THI, Inc. is

engaged in sales and repair services related to Ishikawajima-

Harima Heavy Industries Co., Ltd.'s products.

Japan Energy Corporation is a Japanese corporation,

which is engaged primarily in the business of refining and

processing petroleum, and the sale of petroleum products and

electronic materials. Irvine Scientific Sales Co., Inc. is a

California corporation and is a wholly owned subsidiary of

Japan Energy Corporation. Its main business is manufactur-

ill

ing and selling cell culture products and cytogenetics and

diagnostic products. Japan Energy U.S.A. is a Delaware

corporation and a wholly owned subsidiary of Japan Energy

Corporation. It is currently not engaged in any particular

business.

Mitsubishi Corporation is a Japanese corporation which,

as a general trading company, is engaged in a diversified

range of businesses, including information technology, en-

ergy, metals, machinery, chemicals, food, textiles, clothing,

lumber and paper. Mitsubishi International Corporation is a

wholly owned subsidiary of Mitsubishi Corporation, a New

York corporation. It too is a general trading company; its

primary businesses are international trade involving com-

modities, consumer and industrial products; project man-

agement; and strategic finance and investment.

Mitsui & Co., Ltd. is a Japanese corporation. Mitsui &

Co. (U.S.A.), Inc. is a New York corporation and a wholly

owned subsidiary of Mitsui & Co., Ltd. Mitsui & Co., Ltd.

and Mitsui & Co. (U.S.A.), Inc. are international trading

companies and providers of business services.

Mitsui Engineering and Shipbuilding Co., Ltd. is a Japa-

nese corporation engaged mainly in the business of design-

ing, engineering, and manufacturing of ships, oceanographic

equipment, steel structures, machinery, chemical and indus-

trial facilities.

Mitsui O.S.K. Lines, Ltd. is a Japanese corporation that

provides ocean and other transportation worldwide.

Nippon Steel Corporation is a Japanese corporation hav-

ing its principal place of business in Tokyo, Japan. Nippon

Steel U.S.A., Inc. is a Delaware corporation having its prin-

cipal place of business in New York, and is a wholly owned

subsidiary of Nippon Steel Corporation.

iv

These companies have a vital interest in this case. Col-

lectively, the companies are defending dozens of lawsuits

brought pursuant to a California statute, Cal. Civ. Proc. Code

§ 354.6 (“Section 354.6”), that is part of the same broad

statutory scheme by which California seeks to regulate the

resolution of claims arising out of World War II, and which

includes the insurance regulation at issue in this case, the

Holocaust Victim Insurance Relief Act of 1999 (“HVIRA”),

Cal. Ins. Code § 13800 et seg.. The constitutionality of Sec-

tion 354.6 — which creates a cause of action for persons seek-

ing damages for forced and slave labor during World War II

— has been evaluated on many of the same bases as the

HVIRA, with the Ninth Circuit recently holding Section

354.6 to be an unconstitutional infringement of the United

States’ exclusive power over war claims and the field of for-

eign affairs. Thus, the decision in this case may affect the

litigation of claims premised on Section 354.6. Because of

the importance of these issues to each of the companies, they

seek leave to file this brief amici curiae in order to assist the

Court in its consideration of the issues in this case.

Respectfully submitted,

WALTER DELLINGER

(Counsel of Record)

JOHN H. BEISNER

JOHN B. NIBLOCK

PAMMELA QUINN*

O’MELVENY & MYERS LLP

555 13th Street, N.W.

WASHINGTON, D.C. 20004

(202) 383-5300

© Admined in Virginie only

Counsel for Amici Curiae

Mitsubishi Materials Corporation and

Mitsubishi Materials U.S.A. Corporation

February 24, 2003

v

TABLE OF CONTENTS

Page

er I crtenratincscitenttitatitnintnnemsnimens! vi

INTEREST OF AMICI CURIA .........00:scccccecssessessessessccseeses |

SUMMARY OF ARGUMENT. .......0:.0ccccccsssecssessecssesscsseeseees l

nO aT 4

I. CALIFORNIA’S HOLOCAUST VICTIM

INSURANCE RELIEF ACT IS PART OF A

BROAD EFFORT BY STATES TO INJECT

THEMSELVES INTO UNITED STATES FOR-

a CTU ccrccrsrcinseteienteneiitsinennitiniptisneniinniniaitsiainmntnenel 4

A. The California Legislative Scheme.......................00+. +

B. Judicial Challenges to the Scheme.......................+. 10

C. Other State Legislation Providing Claims for

ey Ce er iicenincintseasiiersdiienisianenereemesenme 12

Il. CALIFORNIA’S STATUTORY SCHEME IS

AN UNCONSTITUTIONAL INTRUSION INTO

Pe ee erencencnsininnuntnsnesnnetenmneminmnsecate 13

A. California’s Statutory Scheme Is Unconstitu-

tional Under the Foreign Affairs Doctrine Ar-

EO 13

B. The Continuing Importance of the Foreign

Affairs Doctrine

Ill. THE CALIFORNIA SCHEME IS AN EXER-

CISE OF EXTRATERRITORIAL JURISDIC-

TION THAT VIOLATES DUE PROCESS ................. 20

IV. EVEN IF IT AFFIRMS THE JUDGMENT BE-

LOW, THE COURT SHOULD BE CAREFUL

NOT TO ENDORSE THE ENTIRE WORLD

WAR II SCHEME AND SCHEMES LIKE IT............. 26

ee erccnnsencenensnersdsannmanancesaninnnnneenenmemnaneenionnss 27

vi

TABLE OF AUTHORITIES

Page(s)

CASES

Allstate Ins. Co. v. Hague,

Se eC a ovcieesutrmsiecininincnenesionnitaniitainitiisit 20, 21, 25

Alperin v. Vatican Bank,

2003 WL 220434 (N.D. Cal. Jan. 3, 2003) .0........ccccceceeeee 10

BMW vy. Gore, |

ee iicieciaesieitininiitaapaaersiiiaaataiiaataiaaataael 25

Burger-Fischer v. Degussa,

65 F. Supp. 2d 248 (D.N.J. 1999) ..0......ccccccescescescsseseseees 16

Chae Chan Ping v. United States,

a Se Cee heinvrieteniesniecttccecentesisimcenientnetsiiicasiiieaiuats 14

Crosby v. National Foreign Trade Council,

Se ee escxsccnsinctsissnnecenstieanictnanneanicnmmeanininii 19

De Veau v. Braisted,

Ee GI crircsinnnnicentesieeminiinnaneseninamantituiamnetaieans 23

Deuts ch v. Turner Corp.,

2000 WL 33957691 (C.D. Cal. Aug. 25, 2000)............... 10

Deutsch v. Turner Corp.,

FET FBO BORO Oe Cae BOG cncccccccesercccscccccsccescseces passim

Dole v. United Steelworkers of Am.,

ea a Sa icrnicuneeicesemesnenemisnibeeiiieainannentnindinidaneiitenes 25

Eastern Enters. v. Apfel,

ey See cnenccicnsinniiinnasinnaitaniiniinantaiaiiitananbiiamens 18

— = parse Se

Vii

TABLE OF AUTHORITIES

(continued)

Page(s)

Gerling Global Reinsurance Corp. of Am. v. Gallagher,

267 F.3d 1228 (11th Cir. 2001)... eee eeeeeeeeees passim

Gerling Global Reinsurance Corp. of Am. v. Low,

186 F. Supp. 2d 1099 (E.D. Cal. 2001)...........cccceeseeenees 10

Gerling Global Reinsurance Corp. of Am. v. Low,

Fg ee 10

Gerling Global Reinsurance Corp. of Am. v. Low,

ee ee crreesssnsesnemeremmennnne 10

Gerling Global Reinsurance Corp. of Am. v. Quackenbush,

2000 WL 777978 (E.D. Cal. June 9, 2000)... 10

Healy v. Beer Inst.,

er ey Ce nenremessnmnemenmnmnenemnnmne 24

Hines v. Davidowitz,

ee es ee ennceresensimeannnnnninemene 14

Home Ins. Co. v. Dick,

Se ee Se ee iccvecccntnnerecstencnnisceenmenmnenesinenes 21, 25

In re Aircrash in Bali, :

ee 16

In re Assicurazioni Generali S.p.A. Holocaust Ins. Litig.,

228 F. Supp. 2d 348 (S.D.N.Y. 2002)........:cccccsceeseeeereeeeees 5

In re Japanese P.O.W. Cases, Jud. Coun. Coord. Proc. No.

4153 (Cal. Super. Ct. Oct. 19, 2001)........ccccccceeereeeeeeees 15

In re World War II Era Japanese Forced Labor Litig.,

114 F. Supp. 2d 1160 (N.D. Cal. 2001) ..........cccccceseeeeeees 11

Vill

TABLE OF AUTHORITIES

(continued)

Page(s)

In re World War II Era Japanese Forced Labor Litig.,

114 F. Supp. 2d 939 (N.D. Cal. 2000) ...........ccceceeseeseeeees 10

In re World War II Era Japanese Forced Labor Litig.,

164 F. Supp. 2d 1153 (N.D. Cal. 2001) .........ccccceeeeeees 10

Iwanowa v. Ford Motor Co.,

67 F. Supp. 2d 424 (D.N.J. 1999) ............. sesidaliliapniiianeies 16

Jeong v. Onoda Cement Co., No. BC 217805 (Cal. Super. Ct.

ey Se: SE cxnsisioreninetinianeniinntinsantenganisantstnnnnniinniapeen 15

John Hancock Mut. Life Ins. Co. v. Yates,

I ccterertincasentoninensinieinaninintininaieneninnene 24

Kolovrat v. Oregon,

ey Cee ercrncensecisesensenpnepensinnniemitinibeniteisadonniennnion 14

Landgraf v. USI Film Prods., |

ee es ee tatenensecsensienegnctnicseniinerineimmmnnitiasanti 18

McCluney v. Jos. Schlitz Brewing Co.,

ge RL | eee 25

Mitsubishi Materials Corp. v. Superior Ct., 2003 WL

253877 (Cal. App. 4th Feb. 6, 2003) ............. 11, 12, 16, 20

New Motor Vehicle Bd. v. Orrin W. Fox Co.,

ge .23

Nguyen v. INS,

es He I cninidiihansisnnensiisiinsnneaniiniciaaeppneniinemeinnnianeed 22

Phillips Petroleum Co. v. Shutts,

rs Fe i enctenticnnnementennsnenimnnnen 20, 21, 25

ix

TABLE OF AUTHORITIES

(continued)

Page(s)

Schreiber v. Burlington Northern, Inc.,

Een 25

Stewart v. Kahn,

ET eT 13

Sumitomo Shoji Am. v. Avagliano,

ee ee ee iccitetitintniipesepercinntannennensessimannmeses 16

Taiheiyo Cement Corp. v. Superior Ct.,

129 Cal. Rptr. 2d 451 (Cal. App. 2d 2003)..........:..... 11,15

United States v. O'Hagan,

ee et i aritencerennincttsininnmsncmnensensicendemmenenianatiines 25

United States v. Pink,

Ee eee 13,14

Ware v. Hylton, .

Be PD serrtecarencensnciecmninsinnsnstinnnidmanentes 13

Watson v. Employers Liab. Assurance Corp.,

ee eieticinanentantetacinniinnitinrcaninnnanmasnsetes 21

Zivkovich v. Vatican Bank,

2002 WL 31971730 (N.D. Cal. Aug. 23, 2002)............... 10

Zschernig v. Miller, 389 U.S. 429 (1968) .............00000 passim

STATUTES AND BILLS

A.B. 1334, 1998 Assemb., Reg. Sess. (Cal. 1998)................. 7

A.B. 1715, 1998 Assemb. Reg. Sess. (Cal. 1998).................. 7

x

TABLE OF AUTHORITIES

(continued)

Page(s)

A.B. 600, 1999 Assemb., Reg. Sess. (Cal. 1999)..............04. 7

Ariz. Rev. Stat. §§ 20-490 et seg. (2002)..........cccccceceeeeeeeeees 12

Cal. Civ. Proc. Code § 354.4 (2000).............csccccssccssssecseeeees 19

Cal. Civ. Proc. Code § 354.5 (1998) ..........ccceeeceeeeeeeees 7, 8, 26

Cal. Civ. Proc. Code § 354.6 (1999) ............ccsccseseeeeees passim

Holocaust Victim Insurance Relief Act of 1999, Cal. Ins.

ee passim

Md. Code Ann., Ins. §§ 28-101 et seg. (1999)............cccceeee 12

a, I crercccctrtcieitenneinenenceniipennsicion 12

8m FG ee ee 1?

Tex. Ins. Code Ann. § 21.74 (2001).............cccccssecessseseeeenees 12

Wash. Rev. Code §§ 48.104.010 et seg. (1999)...........cccceeee 12

OTHER AUTHORITIES

Br. of United States, Suk Yoon Kim v. Ishkawajima Harima

Heavy Indus. Co., Ltd., Nos. 01-17197 et al. (9th Cir. filed

NG i eienecescenscssncintensnssseammmennaninninnnnen 16

Cal. Assemb. Ins. Comm., Assemb. Republican Bill

Analysis, A.B. 1715, Reg. Sess. (Apr. 14, 1998)............... 7

The Federalist No. 80 (Alexander Hamilton) ....................+- 13

Floor Speech for S.B. 1245 (Cal. Sen. Tom Hayden)............ 8

t

»

¥

OR TIN a Ra om

xi

TABLE OF AUTHORITIES

(continued)

Page(s)

Earl H. Fry, The Expanding Role of State and Local

Governments in U.S. Foreign Affairs (1998) .............000+0. 19

Holocaust Claims Panel Picks Leader, L.A. TIMES, Oct. 22,

Todd Jascott, Reemergence of the Zschernig Doctrines and

the Foreign Affairs Powers as a Limit on a State’s Power

to Act, 10 TULANE J. INT’L & Comp. L. 423 (2002) ........ 20

Letter from Tom Hayden, Cal. Sen., to Stuart Eizenstat,

Undersecretary of State (June 3, 1999) .........ccccccceceeseeeeees 6

Paul O’Donoghue, Holocaust claim forms planned, Daily

NEWS OF L.A., July 16, 1999 (A.B. 600) ...0......eceeeeeeeeeeee 7

Office of Ins. Advisor, Enrolled B. Rep., A.B. 1715, Reg.

AE: Hae ssesesiiniccsienecinsnninrieiansniintaineasedsnmanminesianatenseadl 6

S. Rules Comm., A.B. 600, Reg. Sess. (Cal. Sept. 2, 1999). .4

Statement of Interest of United States, Jn re World War IJ

Era Japanese Forced Labor Cases, MDL No.

1347 VRW (N.D. Cal. filed Dec. 6, 2000).........0...0..000.. 17

Edward T. Swaine, Negotiating Federalism: State

Bargaining and the Dormant Treaty Power, 49 DUKE L.J.

EERSTE evn es ny ee en 19

Transcript, Jeong v. Onoda Cement Co., No. BC217805

ee 18

Treaty of Peace with Japan, Sept. 8, 1951, art. 14(b), 3

as Mn eacdeienideeicihhamninnnichniddesinsinenneniteivininatitienasiaenininasensid 8,17

xii

TABLE OF AUTHORITIES

(continued)

Page(s)

1 Laurence H. Tribe, American Constitutional Law (3d ed.

STITT cshetitiientinessdeieeaaeiehiidnia a ficea aaa aaa a 13

Tom Tugend, Slave Labor Bill Passed, JEWISH J. OF

8 ee 4

The Views of the Government of Japan on the Laws Against

Japanese Companies by Former American Prisoners of

War and Others (Note Verbale from Embassy of Japan to

U.S. Dept. of State, Aug. 8, 2000) .....0.........ccessseseeees 17, 18

Henry Weinstein, 5 Holocaust Survivors Sue German Firm

Over Slave Labor, L.A. TIMES, Mar. 6, 1999 ....0.....0.0....... 5

Henry Weinstein, Hope Raised for Holocaust Claim

Payouts, L.A. TIMES, Apr. 14, 1999 00000... ceeeseeeeeees 5, 6, 16

SS cs. ee

BRIEF OF MITSUBISHI MATERIAL CORPORA-

TION ET AL. AS AMICI CURIAE IN SUPPORT OF

PETITIONERS

Mitsubishi Materials Corporation, Mitsubishi Materials

U.S.A. Corporation, Ishihara Sangyo Kaisha Ltd., Ishikawa-

jima-Harima Heavy Industries Co., Ltd., [HI, Inc., Japan En-

ergy Corporation, Irvine Scientific Sales Co., Inc., Japan En-

ergy U.S.A., Mitsubishi Corporation, Mitsubishi Interna-

tional Corporation, Mitsui & Co., Ltd. Mitsui & Co.

(U.S.A.), Inc., Mitsui Engineering and Shipbuilding Co.,

Ltd., Mitsui O.S.K. Lines, Ltd., Nippon Steel Corporation,

and Nippon Steel U.S.A., Inc. respectfully submit this brief

amici curiae in support of the petitioners in this case.’

INTEREST OF AMICI CURIAE

The interest of amici curiae is set forth in the foregoing

Motion for Leave to File.

SUMMARY OF ARGUMENT

1. California’s Holocaust Victim Insurance Relief Act of

1999 (“HVIRA”) is part of a broad effort by the State of

California to inject itself into U.S. foreign policy. Specifi-

cally, the HVIRA is part of a scheme to force the settlement

of claims against allegedly unpaid insurance policies issued

by European insurers to Europeans in the years leading up to

and including World War I. California enacted this scheme

in direct contravention of the express wishes of the United

States and despite the federal government’s pursuit of a ne-

' Pursuant to Supreme Court Rule 37.6, amici curiae state that no

counsel for any petitioner or respondent authored this brief in whole or in

part. No person or entity, other than amici curiae, made a monetary con-

tribution to the preparation or submission of this brief.

2

gotiated resolution of such claims through an international

commission.

Rather than working to resolve World War II claims

through that commission, California proceeded to enact leg-

islation creating new state-law claims, disregarding the dan-

ger that such claims might prompt companies to cease par-

ticipating in the federally sponsored international commis-

sion. California’s legislative effort ultimately encompassed

several related measures, which collectively authorized per-

sons to bring their time-barred World War II insurance

claims, and established a system — including the public dis-

closure requirement directly at issue in this case — to compile

the information to facilitate such claims. California eventu-

ally broadened the scheme by passing a companion statute

creating a state-law cause of action for former U.S. prisoners

of war and others subjected to forced labor during World

War II.

The various provisions of these California efforts have

generated much litigation. Courts have approached these

cases in a variety of ways, most often concluding that the

provisions are invalid.

2. California’s statutory scheme violates the foreign af-

fairs doctrine. It is well settled that States have no right to

interfere with federal authority in the area of foreign affairs.

State laws that do so disrupt the ability of the federal gov-

ernment to conduct foreign relations. Permitting California

to enforce its insurance regulation — which regulates foreign

insurance companies and does so as part of a broader effort

to create causes of action against foreign corporations —

would have the same undesirable effects on U.S. foreign poi-

icy that this Court held unconstitutional in cases such as

Zschernig v. Miller.

California’s comprehensive World War II legislative

scheme, as well as the equally intrusive conduct of other

ee eS on OE

3

state and local governments in other areas of foreign affairs,

demonstrates the need for this Court to reaffirm that the for-

eign affairs doctrine remains a vital constitutional principle.

A clear statement by this Court as to how the Zschernig doc-

trine applies to statutes like the insurance regulation at issue

and to related statutes, such as the cause of action provisions

of the California scheme, would be of immeasurable assis-

tance to those currently immersed in litigation brought about

by California’s World War II legislation.

. 3. The California scheme also violates principles of due

process. It violates the fundamental prohibition against

States’ regulating conduct outside their borders. California

has no connection with the underlying conduct it is seeking

to regulate, which occurred in foreign countries by foreign

nationals with no connection to California during the rele-

vant time period. At no time prior to the enactment of Cali-

fornia’s scheme could any of the parties have foreseen that

California law might govern any claims arising from their

conduct.

4. No matter how the Court decides this case, it should

be aware of the potential implications its decision might have

for challenges to other, arguably more egregious provisions

of the scheme. While a ruling in this case that the HVIRA is

unconstitutional would almost surely invalidate the other

provisions of the scheme a fortiori, those other provisions

are, as the Ninth Circuit recently recognized, unconstitu-

tional regardless of the outcome in this case.

Of course, the substantive merit of challenges to these

other provisions is not before the Court here. However, be-

cause the decision in this case will be relied upon by courts

and counsel litigating the constitutionality of these other, re-

lated California statutes, the Court should be aware of these

cause-of-action-creating provisions in determining how to

resolve the constitutional challenges to the HVIRA.

4

ARGUMENT

I. CALIFORNIA’S HOLOCAUST VICTIM INSUR-

ANCE RELIEF ACT IS PART OF A BROAD EF-

FORT BY STATES TO INJECT THEMSELVES

INTO UNITED STATES FOREIGN POLICY.

A. The California Legislative Scheme.

In 1997, California launched its efforts to resolve claims

arising from World War II. California was concerned about

the issue of unpaid insurance claims discovered “in the

course of researching Holocaust claims to European bank

deposits.”” S. Rules Comm., A.B. 600, Reg. Sess., at 3 (Cal.

Sept. 2, 1999).

From the time the issue of unpaid insurance claims first

arose, the United States advocated formal, mediated negotia-

tions between the interested parties under the auspices of an

international commission. The State Department believed

? California’s decision to revive and enforce insurance claims for

wholly foreign conduct arose initially out of private lawsuits asserting

direct injury from the confiscation of assets by the government of Nazi

Germany. These lawsuits —- and subsequent congressional hearings and

eventual settlement — opened the floodgates to numerous lawsuits assert-

ing claims arising of actions taken by compamies under the control of

Nazi Germany and its allies during World War II.

Plaintiffs’ lawyers supplemented their litigation efforts with equally

vigorous efforts in legislative halls, lobbying state legislatures to create a

variety of different statutory mechanisms for resurrecting and recovering

on old claims against the distant corporate ancestors of today’s deep

pocket corporations. These lobbying efforts were particularly successful

in California. Indeed, one of the main authors of the statute directly at

issue in this case was a plaintiffs’ lawyer, who crafted the legislation to

eliminate some of the glaring problems with her cases. In these cases,

counsel sought relief for torts committed over 50 years earlier in foreign

countries with no connection to the state court venues in which she was

bringing the claims. See Tom Tugend, Slave Labor Bill Passed, JEWISH

J. OF GREATER L.A., July 23-29, 1999 (S.B. 1245).

5

that such a commission was the best way to balance its dual

goals of “justice for Holocaust survivors and trying to avoid

foreign policy tensions if sanctions are exercised against ma-

jor (European-based] insurers.” Henry Weinstein, Hope

Raised for Holocaust Claim Payouts, L.A. TIMES, Apr. 14,

1999, at A3 [hereinafter Weinstein, Hope Raised] (quoting

Undersecretary of State Stuart E. Eizenstat) (A.B. 600).

The international commission was finally organized on

August 25, 1998. Jn re Assicurazioni Generali S.p.A. Holo-

caust Ins. Litig., 228 F. Supp. 2d 348, 353 (S.D.N.Y. 2002).

Its purpose was to find a means of resolving all disputed in-

surance claims arising out of the Holocaust. Jd. In October

1998, former Secretary of State Lawrence S. Eagleburger

was chosen to chair the commission. “The 13-member

commission is composed of representatives of the Israeli

government, several Jewish organizations, several state in-

surance commissioners, including California Insurance

Commissioner Chuck Quackenbush, and representatives of

six European insurance companies that have been sued by

Holocaust survivors and the heirs of Holocaust victims.”

Holocaust Claims Panel Picks Leader, L.A. TIMES, Oct. 22,

1998 (A.B. 1715).

Although California was a key participant in the interna-

tional commission — sponsored by the United States, Ger-

many, and others — it never fully supported the commission’s

mission. See Henry Weinstein, 5 Holocaust Survivors Sue

German Firm Over Slave Labor, L.A. TIMES, Mar. 6, 1999,

at AlS (S.B. 1245) (noting that one of the insurance

scheme’s sponsors and coauthors, state Sen. Tom Hayden,

“gave a critical review of the performance thus far of an in-

> Each of the newspaper articles cited herein are articles located in

the legislative bill files of A.B. 1715 (1998), A.B. 600 (1999), and S.B.

1245 (1999). The applicable bill number is parenthetically indicated

after each article, as above.

6

ternational commission that was created last year in an at-

tempt to resolve the controversy over Holocaust-era insur-

ance claims”); Weinstein, Hope Raised, supra, at A3 (de-

scribing constant “tensions between state and federal offi-

cials . . . over how best to reach agreements between Holo-

caust survivors and Swiss banks and German corporations’”’).

Rather than work to resolve asserted World War II

claims through the commission, California adopted the strat-

egy of passing legislation creating mew claims against insur-

ance companies and others who had done business with the

Nazi regime. The State Department objected to the legisla-

tion on the ground that it was incompatible with the federal

policy for addressing these issues, but it was enacted none-

theless. See Letter from Tom Hayden, Cal. Sen., to Stuart

Eizenstat, Undersecretary of State (June 3, 1999) (noting the

State Department’s criticism and expressing disagreement

with the federal government’s position). Ultimately, Cali-

fornia enacted the insurance claims legislation notwithstand-

ing concerns that the new laws “might prompt companies to

cease their participation in the [federally supported interna-

tional] commission process, thus possibly further delaying

payments to elderly Holocaust survivors.” Weinstein, Hope

Raised, supra, at A3.

The legislative effort undertaken in California was de-

signed to rival the scheme advocated by the federal govern-

ment. The several measures collectively purport to provide a

cause of action for insurance claims that could be filed

through 2010, and establish a system by which plaintiffs

would be able to compile the information necessary to facili-

tate the assertion of such claims.* See A.B. 1334, 1998 As-

* The entirety of the scheme did not become law in 1998, when it

was first passed by the legislature. Because the insurance disclosure

regulation at issue in this case conflicted with another related bill, then-

Governor Wilson vetoed the disclosure bill. Office of Ins. Advisor, En-

rolled B. Rep., A.B. 1715, Reg. Sess., at 5 (Cal. 1998) (“If both bills

7

semb., Reg. Sess. (Cal. 1998); A.B. 1715, 1998 Assemb.

Reg. Sess. (Cal. 1998); A.B. 600, 1999 Assemb., Reg. Sess.

(Cal. 1999).

The insurance regulation now before the Court serves the

purpose of enabling potential claimants to obtain information

needed to bring suit. The avowed aim of the provision was

“to ensure that Holocaust survivors and their descendants

obtain their nghtful contractual compensation” from Euro-

pean insurance companies that had not paid claims by pro-

viding the public with the information necessary to reveal

and prosecute a claim. Cal. Assemb. Ins. Comm., Assemb.

Republican Bill Analysis, A.B. 1715, Reg. Sess., at 1 (Apr.

14, 1998).°

The entire insurance claims scheme became law on July

28, 1999, when Governor Gray Davis signed the public dis-

closure bill, A.B. 600. Assembly Bill 600 became the Holo-

caust Victim Insurance Relief Act of 1999 (“HVIRA”), Cal.

Ins. Code §§ 13800 et seqg., the provision directly at issue

here. This provision is important, but as noted, is part of a

larger whole, whose true centerpiece is Cal. Civ. Proc. Code

§ 354.5(b) (1998), which provides that

[we]}re signed, there would be two different code sections that give the

Insurance Commissioner different instructions on when to revoke an in-

surer’s certificate [of] authority.”). The insurance disclosure provision

(A.B. 600) passed the legislature again the following session and was

signed into law by Governor Gray Davis.

* The legislation was aimed at the same European insurers who were

targeted in lawsuits filed in the late 1990s, and who were also part of the

United States’ international commission initiative. Specifically, the

companies at whom the regulation was aimed are “French, German, Ital-

ian and Swiss insurance companies” accused by California of “stalling

and retaining as profits the money that should have been paid out to

Holocaust victims and their heirs.” Paul O’Donoghue, Holocaust claim

forms planned, DAILY NEWS OF L.A.., July 16, 1999, at 3 (A.B. 600).

8

any Holocaust victim,'®) or heir or beneficiary of a

Holocaust victim, who resides in this state and has a

claim arising out of an insurance policy or policies

purchased or in effect in Europe before 1945 from an

insurer [that sold life, property, liability, health, an-

nuities, dowry, educational, casualty, or any other

insurance covering persons or property to persons in

Europe at any time before 1945] may bring a legal

action to recover on that claim in any superior court

of the state for the county in which the plaintiff or

one of the plaintiffs resides, which court shall be

vested with jurisdiction over that action until its

completion or resolution.

This centerpiece is effectuated by the statute of limita-

tions provision, authorizing suits to be filed through Decem-

ber 31, 2010, Cal. Civ. Proc. Code § 354.5(c), and the public

disclosure of information regarding unpaid insurance claims

required by the HVIRA, see Cal. Ins. Code §§ 13800 et seq.

Concluding that it had not “done enough to punish [the]

corporations” that had aided Axis governments during

World War II, the legislature quickly adopted additional leg-

islation. The new provision of the World War II scheme

created a state-law cause of action for former U.S. prisoners

of war and others forced to work for private companies dur-

ing World War II, despite the fact that all claims against Ja-

pan and its nationals had been explicitly settled and waived

by the 1951 Treaty of Peace with Japan. Treaty of Peace

with Japan, Sept. 8, 1951, art. 14(b), 3 U.S.T. 3169; see also

® A “Holocaust victim” is defined as “any person who was perse-

cuted during the period of 1929 to 1945, inclusive, by Nazi Germany, its

allies, or sympathizers.” Jd. § 354.5(a)(1).

” See Cal. Sen. Tom Hayden, Floor Speech for S.B. 1245 (on file in

legislative bill file of S.B. 1245).

vy

:

9

infra pp. 16-17, note 13 (further discussion of Treaty of

Peace).

The forced labor provision, Cal. Civ. Proc. Code § 354.6

(1999) (“Section 354.6”) provides that

[alny Second World War slave labor victim," or

heir of a Second World War slave labor victim, Sec-

ond World War forced labor victim," or heir of a

Second World War forced labor victim, may bring

an action to recover compensation for labor per-

formed as a Second World War slave labor vicum or

Second World War forced labor victim from any en-

tity or successor in interest thereof, for whom that

labor was performed, either directly or through a

subsidiary or affiliate. That action may be brought

in a superior court of this state, which court shall

have jurisdiction over that action until its completion

or resolution.

Cal. Civ. Proc. Code § 354.6(b). The statute provides that

claims brought under it may be brought until 2010. Jd. §

354.6(c).

* A “Second World War slave labor victim” is defined as “any per-

son taken from a concentration camp or ghetto or diverted from transpor-

tation to a concentration camp or from a ghetto to perform labor without

pay for any period of time between 1929 and 1945, by the Nazi regime,

its allies and sympathizers, or enterprises transacting business in any of

the areas occupied by or under control of the Nazi regime or its allies and

sympathizers.” Cal. Civ. Proc. Code § 354.6(a)(1).

* A “Second World War forced labor victim” is defined as “any per-

son who was a member of the civilian population conquered by the Nazi

regime, its allies or sympathizers, or prisoner-of-war of the Nazi regime,

its allies or sympathizers, forced to perform labor without pay for any

period of time between 1929 and 1945, by the Nazi regime, its allies and

sympathizers, or enterprises transacting business in any of the areas oc-

cupied by or under control of the Nazi regime or its allies and sympathiz-

ers.” Cal. Civ. Proc. Code § 354.6(a)(2).

10

B. Judicial Challenges to the Scheme.

All of these similar, related provisions were challenged

in state and federal court under several legal theories. Al-

though most courts concluded that these statutes were invalid

for constitutional or other reasons, they differed in their ap-

proaches, and in some cases in their conclusions.

In the cases below, the Ninth Circuit concluded that the

HVIRA did not violate the foreign affairs doctrine, see Ger-

ling Global Reinsurance Corp. of Am. v. Low, 240 F.3d 739

(9th Cir. 2001), or principles of due process, see Gerling

Global Reinsurance Corp. of Am. v. Low, 296 F.3d 832 (9th

Cir. 2002). In so doing, it reversed the district court twice,

which had concluded that the statute did both things. See

Gerling Global Reinsurance Corp. of Am. v. Low, 186 F.

Supp. 2d 1099 (E.D. Cal. 2001) (due process); Gerling

Global Reinsurance Corp. of Am. v. Quackenbush, 2000 WL

777978 (E.D. Cal. June 9, 2000) (foreign affairs).

In comparison, the forced labor provision, Section 354.6,

has been found more problematic than the HVIRA. For ex-

ample, one district court, Deutsch v. Turner Corp., 2000 WL

33957691 (C.D. Cal. Aug. 25, 2000), dismissed an action

brought by a Holocaust slave labor victim on political ques-

tion grounds.’ Several decisions concluded that Section

354.6 ran afoul of the Treaty of Peace with Japan, which

fully and finally resolved all wartime claims against Japan

and its nationals. See Jn re World War II Era Japanese

Forced Labor Litig., 164 F. Supp. 2d 1153, 1157 (N.D. Cal.

2001) (Forced Labor (Filipinos)) (holding that the Treaty of

Peace with Japan barred their claims for damages); /n re

World War II Era Japanese Forced Labor Litig., 114 F.

'° Likewise, Alperin v. Vatican Bank, 2003 WL 220434 (N_D. Cal.

Jan. 3, 2003), and Zivkovich v. Vatican Bank, 2002 WL 31971730 (N_D.

Cal. Aug. 23, 2002), held plaintiffs’ claims, alleging injuries during

World War II, were barred by the political question doctrine.

eg baa f

a) ae RR,

1]

Supp. 2d 939 (N.D. Cal. 2000) (Forced Labor (Allied J)

(same); see also Mitsubishi Materials Corp. v. Superior

Court, 2003 WL 253877 (Cal. App. 4th Feb. 6, 2003)

(same). In another Northern District of California decision,

the court concluded that Section 354.6 was an unconstitu-

tional intrusion on the exclusive foreign affairs power of the

United States. Jn re World War II Era Japanese Forced La-

bor Litig., 114 F. Supp. 2d 1160, 1178 (N.D. Cal. 2001)

(Forced Labor (Ailied II)) (discussing forced labor claims by

Korean and Chinese civilians).

The Ninth Circuit affirmed all of these district court

holdings on the grounds that the forced labor provision is an

unconstitutional exercise of foreign affairs power. See

Deutsch v. Turner Corp., 317 F.3d 1005 (9th Cir. 2003).

The Deutsch court held that Section 354.6 is an unconstitu-

tional violation of the United States’ exclusive power to

make foreign policy and decide the terms on which wars and

war claims are to be resolved. The court also expressed

doubts as to whether the provisions setung forth a new stat-

ute of limitations — which “would actually revive claims that

been previously time-barred, thus upsetting the repose of po-

tential defendants” — comported with due process. See id. at

1020 n.4.

The Deutsch decision was announced just days after one

California court of appeal rejected the views of the United

States that claims under Section 354.6 could not be decided

by California courts and allowed to go forward alleged

forced labor suits brought by persons of Korean and Japa-

nese origin. See Taiheiyo Cement Corp. v. Superior Court,

129 Cal. Rptr. 2d 451 (Cal. App. 2d 2003). In direct

contradiction to the Ninth Circuit’s opinion in Deutsch, the

court of appeal rejected the defense based on the foreign re-

lations preemption doctrine. See 129 Cal. Rptr. at 472. The

court of appeal also rejected defendants’ due process and po-

litical-question arguments. See id. Yet, just a few weeks

later, another California court of appeal concluded that such

12

other California court of appéal concluded that such claims

could not proceed, on the ground that claims of Allied pris-

oners of war are barred by the 1951 Treaty of Peace with Ja-

pan. See Mitsubishi Materials Corp. v. Superior Court, 2003

WL 253877 (Cal. App. 4th Feb. 6, 2003) (holding that the

Treaty of Peace with Japan barred their claims for damages).

C. Gther State Legislation Providing Claims for

World War II Injuries.

At roughly the same time that the first provision of the

California scheme was enacted, Florida’s Holocaust Victims

Insurance Act (FHVIA) also took effect. See Gerling Global

Reinsurance Corp. of Am. v. Gallagher, 267 F.3d 1228, 1229

(11th Cir. 2001). Like California’s HVIRA, the FHVIA re-

quired each insurer doing business in Florida to publicize

information regarding policies issued by its affiliates in

Europe between 1920 and 1945. See id. at 1229-30. The

public disclosure requirement of the Florida statute, along

with a provision “creat{ing] a new ten-year statute of limita-

tions for the presentation of [such] claims,” facilitated the

bringing of a private cause of action by individuals seeking

damages for the non-payment of a Holocaust-era policy. /d.

at 1230. “Accordingly, a Florida insurer could be liable . . .

based upon the non-payment of a Holocaust-era policy by a

separate foreign company that it does not control, but with

which it happens to be affiliated.” Jd. at 1230-31.

Although Florida’s scheme was invalidated on due proc-

ess grounds by the Eleventh Circuit, Gallagher, 267 F.3d at

1229, several other States also have enacted statutes contain-

~ ing provisions similar to the HVIRA and the FHVIA. See,

e.g., Ariz. Rev. Stat. §§ 20-490 et seg. (2002); Md. Code

Ann., Ins. §§ 28-101 et seg. (1999); Minn. Stat. § 60A.053

(2000); N.Y. Ins. Law §§ 2701 et seg. (1998); Tex. Ins. Code

Ann. § 21.74 (2001); Wash. Rev. Code §§ 48.104.010 et seq.

(1999). The Arizona statute was enacted soon after the

i ee

13

Ninth Circuit’s decision below, upholding the HVIRA

against constitutional challenge. Thus, if this Court were to

affirm the Ninth Circuit, European insurers and their affili-

ates may be forced to determine whether to continue doing

business in at least eight States — and possibly many more.

Il. CALIFORNIA’S STATUTORY SCHEME IS AN

UNCONSTITUTIONAL INTRUSION INTO FOR-

EIGN AFFAIRS.

A. California’s Statutory Scheme Is Unconstitutional

Under the Foreign Affairs Doctrine Articulated by

This Court.

It has been well settled since this nation’s founding that

the resolution of war claims is exclusively the responsibility

of the federal government to address, through treaties, state-

to-state agreements, or otherwise. See Ware v. Hylton, 3

U.S. (Dall.) 199, 230 (1796). “Power over external affairs is

not shared by the States; it is vested in the national govern-

ment exclusively.” United States v. Pink, 315 U.S. 203, 233

(1942). States have neither the power nor the right to inter-

fere with the federal priority in this area. See Stewart v.

Kahn, 78 U.S. 493, 506-07 (1871) (States cannot interfere

with federal war- and peace-making powers, which include

- the power to “remedy the evils which have arisen from [a

war’s] rise and progress”).

Indeed, “all [foreign policy] responsibility is reposed at

the national level rather than dispersed among the states and

localities.” 1 Laurence H. Tribe, American Constitutional

Law §§ 4-5 (3d ed. 2000). The exclusivity of federal power

over foreign affairs is crucial to our system of government:

“The Union will undoubtedly be answerable to foreign pow-

ers for the conduct of its members. And the responsibility

for an injury ought ever to be accompanied with the faculty

of preventing it.” The Federalist No. 80 (Alexander Hamil-

ton). It is clear that matters concerning war are part of the

14

“inner core” of the foreign relations power that is denied to

the States. Deutsch, 317 F.3d at 1022."

This Court has long held that the foreign affairs powers

specified in the Constitution reflect the general principle that

power over foreign affairs is reserved to the federal govern-

ment. See, e.g., Pink, 315 U.S. at 233; Chae Chan Ping v.

United States, 130 U.S. 581, 606 (1889) (The Chinese Exclu-

sion Case). The Court most recently confirmed this bedrock

principle in Zschernig v. Miller, holding that state law “must

give way” if it “impair[s] the effective exercise of the Na-

tion’s foreign policy.” 389 U.S. 429, 440 (1968); see also

Kolovrat v. Oregon, 366 U.S. 187, 198 (1961); Hines v.

Davidowitz, 312 U.S. 52, 63 (1941). Accordingly, in

Zschernig, this Court invalidated an Oregon statute prevent-

ing nonresident aliens from inheriting property unless they

could prove that U.S. citizens had a reciprocal right to inherit

property in their home country. 389 U.S. at 430-31 & n.1.

Specifically, the Court noted that application of the Ore-

gon statute and similar state laws had “led [to] minute inquir-

ies [by the States] concerning the actual administration of

foreign law, into the credibility of foreign diplomatic state-

ments,” and other foreign affairs matters. Jd. at 435. Noting

that “foreign affairs and international relations [are] matters

'' As the Deutsch court noted:

Of the eleven clauses of the Constitution granting foreign affairs

powers to the President and Congress . . ., seven concern preparing

for war, declaring war, waging war, or settling war. Most of the

Constitution’s express limitations on state’s foreign affairs powers

also concern war. Even those foreign affairs powers in the Constitu-

tion that do not expressly concern war and its resolution may be un-

derstood, in part, as a design to prevent war. Indeed, as the Federal-

ist shows, supporters of the new Constitution believed that disunity

in international affairs risked unnecessary war. See, e.g., The Feder-

alist No. 3, at 13 (Clinton Rossiter ed. 1961).

317 F.2d at 1022-23.

15

which the Constitution entrusts solely to the Federal Gov-

ernment,” id. at 436, the Court found it “inescapable” that

the law, as applied, “affects international relations in a per-

sistent and subtle way,” id. at 440, has “more than “some in-

cidental or indirect effect on foreign countries,” and creates

“great potential for disruption or embarrassment,” id. at 434-

35 (citation omitted), and was therefore an unconstitutional

exercise of the exclusively federal foreign affairs powers.

Permitting California to enforce its legislative scheme

against European and Japanese corporations for conduct

committed in countries under the rule of “the Nazi regime”

during World War II would have precisely such undesirable

effects. The California statutory scheme is a regulation of

foreign affairs by a State in both purpose and effect. As both

its language and legislative history make clear, California’s

World War II claims legislation represents an attempt by

California to forge its own settlement of World War [l-era

claims in a manner that is contrary to the federal govern-

ment’s exclusive power to conduct foreign relations. Indeed,

the principal sponsor of Section 354.6 stated that he intro-

duced the legislation to force the United States to deal with

Holocaust claims in a manner pleasing to California's for-

eign policy view. '? See infra note 16.

'2 California has repeatedly ignored the United States’ views. Even

after the legislature decided to proceed with enactment of the World War

II scheme in the face of expressed concerns from the federal government,

the United States told California courts of such concerns and of the con-

flict between the California statute and United States aims and views,

including those underlying its post-war treaties and 50 years of subse-

quent foreign policy. At least three state courts have felt free to ignore

those views. See Taiheiyo Cement Corp. v. Superior Ct., 129 Cal. Rptr.

2d 451 (Cal. App. 2d 2003), affirming Jeong v. Onoda Cement Co., No.

BC 217805, slip op. at 11 (Cal. Super. Ct. Nov. 29, 2001) (disparaging

U.S. statement of interest and holding that U.S. foreign policy, “if it is a

policy, appears to be legally unsupportable”); Jn re Japanese P.O. W.

Cases, Jud. Coun. Coord. Proc. No. 4153, slip op. at 2 (Cal. Super. Ct.

16

For over 50 years, the federal government has utilized

diplomatic means to negotiate the resolution of World War

II-era claims on behalf of the United States.'’ California en-

acted its own statutory scheme knowing full well that the

threat of tort liability could directly influence federal foreign

policy. See Weinstein, Hope Raised, supra, at A3 (A.B.

600).

Indeed, various provisions of that scheme have an impact

on U.S. foreign relations that is much more than “incidental

or indirect.” For example, the Treaty of Peace with Japan —

which the United States was largely responsible for drafting

and negotiating and which was designed to effectuate U.S.

foreign policy for Asia that endures to the present day, see,

e.g., Br. of United States at 16-17, Suk Yoon Kim v. Ishkawa-

jima Harima Heavy Indus. Co., Ltd., Nos. 01-17197 et ai.

(9th Cir. filed June 6, 2002) — explicitly settles and waives

all claims cf the Allied governments and their nationals

against Japan and its nationals, provides a mechanism for

Oct. 19, 2001) (rejecting State Department’s views on Peace Treaty with

Japan), rev'd, Mitsubishi Materials Corp. v. Superior Ct., 2003 WL

253877 (Cal. App. 4th Feb. 6, 2003). In so doing, those courts have ig-

nored this Court's decisions requiring deference to the United States’

views. See, e.g., Sumitomo Shoji Am. v. Avagliano, 457 U.S. 176, 184-85

(1982); see also In re Aircrash in Bali, 684 F.2d 1301, 1309 (9th Cir.

1982) (courts must "studiously avoid imposing [their] own view(s] of

foreign policy objectives and must accept the foreign policy formulations

of the executive”).

'? The most striking and successful effort is reflected in the Treaty of

Peace — negotiated by the United States among its allies and Japan —

which fully and finally settled all war-related claims between the United

States, the other Allies, and Japan, as well as all their nationals. A\l-

though the Cold War prevented a final peace treaty with Germany, the

United States policy for nearly 50 years was effected in a series of trea-

ties and international agreements dealing with World War [I claims

against Germany and its nationals. See /wanowa v. Ford Motor Co., 67

F. Supp. 2d 424, 447-56 (D.N.J. 1999); Burger-Fischer v. Degussa, 65 F.

Supp. 2d 248, 255-60 (D.N.J. 1999).

17

compensating POWs, and dictates that claims of Korea and

China and their nationals are to be settled through govern-

ment-to-government arrangements, not lawsuits in U.S.

courts. See Treaty of Peace with Japan, Sept. 8, 1951, art.

4(c), 14(b), 3 U.S.T. 3169. California has attempted to sub-

vert this international agreement through the forced labor

provision, which purports to provide a cause of action for

former U.S. military personnel and others held captive and

forced to labor in Axis-occupied territory during World War

II. Cal. Civ. Proc. Code § 354.6.

The United States has taken the position that such law-

Suits threaten to have a “serious negative impact on U.S.-

Japan relations,” Statement of Interest of United States at 34,

In re World War II Era Japanese Forced Labor Cases (A\-

hed I), MDL No. 1347 VRW (N_D. Cal. filed Dec. 6, 2000),

and Japan has observed that these lawsuits are “detrimental

to bilateral relations between our two countries.” The Views

of the Government of Japan on the Laws Against Japanese

Companies by Former American Prisoners of War and Oth-

ers at 2 (Note Verbale from Embassy of Japan to U.S. Dept.

of State, Aug. 8, 2000) [hereinafter Note Verbale] (cited by.

Thus, there can be no doubt that Section 354.6 undermines

the credibility of the United States as a treaty partner, threat-

ening “great . . . disruption or embarrassment” for the na-

tional government. Zschernig, 389 U.S. at 434-35. It is dif-

ficult to imagine how state legislation could intrude more

directly on the federal government’s foreign affairs power

than by creating a cause of action permitting claims previ-

ously settled by treaty, implicitly overturning the very terms

on which the war was concluded.

In addition, California’s World War II legislation affects

U.S. foreign relations by singling out for differential treat-

ment not just Japan, but also Germany and other European

nations. The California scheme targets these countries be-

cause it focuses only on conduct involving Axis govern-

18

ments during World War II, but ignores insurance fraud and

forced labor practices perpetrated by other countries or dur-

ing other eras. The United States, Germany, Switzerland,

and Japan have all agreed that the scheme at issue threatens

to damage relations between the United States and each of

these countries. See Br. of United States in Support of Pet. at

17-18; Note Verbale, supra, at 2. Singling out disfavored

foreign regimes is just the kind of interference with U.S. for-

eign policy that Zschernig condemned. '*

This statutory scheme is a pronouncement of the foreign

policy of the State of California.'* That, in and of itself, is

beyond any State’s constitutional jurisdiction. It is all the

more so where the State’s foreign policy contradicts the

longstanding foreign policy of the United States — here, the

position that resolution of World War Il-era claims is to be

handled through negotiations, rather than private lawsuits in

state or federal courts. See, e.g., Br. of United States in Sup-

port of Pet. at 16; Br. of Gov’t of Switzerland in Support of

Pet. at 6-7; Br. of Federal Rep. Of Germany in Support of

'* Such discrimination is also a hallmark of unconstitutional —

tive legislation, yet another reason - apart from tose articulated i

Section II — that the California scheme violates due process. See Land-

graf v. USI Film Prods., 511 U.S. 244, 266 (1994) (“[P)olitical pressures

pose(] a risk that . . . retroactive legislation [may be used] as a means of

retribution against unpopular groups.”). By subjecting European and

Japanese companies to potentially massive new liability for war-related

ee yore nnpheph snag cad or ay tages yh

legal consequence to events completed before its enactment.” L at 270.

Moreover, the new legal consequence is “substantial and potentially far-

reaching.” Eastern Enters. v. Apfel, 524 U.S. 498, 534 (1998).

'* Indeed, a California judge actually chastised the United States for

interfering with California's foreign policy by challenging Cal. Civ.

Proc. Code § 354.6: “Why is the United States now trying to put pressure

on the state of California? . .. Why are you interfering with our foreign

policy?” Jeong v. Onoda Cement Co., No. BC 217805, Tr. at 21 (Cal.

Super. Ct. Nov. 7, 2001) (emphasis added).

19

Pet. at 7. “[T]Jhe use of subnational government authority to

pursue agendas that directly contradict U.S. foreign policy is

far too dangerous and simply cannot be condoned.” Earl H.

Fry, The Expanding Role of State and Local Governments in

U.S. Foreign Affairs 132 (1998). This threat has rarely been

more apparent than it is in the context of this and similar

Statutory schemes.

B. The Continuing Importance of the Foreign Affairs

Doctrine.

States and localities have become “bolder than ever”

when it comes to injecting themselves into issues of foreign

policy. Edward T. Swaine, Negotiating Federalism: State

Bargaining and the Dormant Treaty Power, 49 DUKE L.J.

1127, 1130 (2000). During the past decade, they have en-

acted numerous statutes relating to U.S. foreign policy.'®

This trend only underscores the need for a continued — even

° For example, apart from the regulation and related legislation in-

volved in this case and the numerous simular statutes enacted in a vanety

of states, see supra p. 12, the Califormia legislature enacted a statute au-

thonzing California state courts to hear suits seeking premiums on Ar-

memuan genocide-era insurance policies, despite forum-selecnon clauses

in the policies, and extending the applicable statute of |umstanons through

2010. See Cal. Civ. Proc. Code § 354.4 (2000). Other high-profile state

involvement im foreign affairs includes. for example, the recent enact-

ment by Massachusetts, along with other states and localines, of “Burma

laws,” which restricted the abulity of the state and its agencies to purchase

from compames doing business with Burma (Myanmar) See Crosby v

Nanonal Foreign Trade Counc: 539 LS. 363, 366-67, 371 2.5 (2000).

Localines too have become embroiled in forengn affairs. For exam-

ple, m respomse to the allegations of Holocaust-cra asset laundering,

“New York City’s comprroiler banned certain Swiss banks from bid-

ding on billions of dollars m bond offerings and other contracts spon-

sored by their respective agencies,” despite the fact that “{t}hese bans

have been severely criticized by the U.S. Department of State.” Earl H.

Fry, The Expanding Role of Siate and Local Governments in US. For-

eign Affairs S (1998).

20

revitalized — doctrine circumscribing the tendency of States

and localities to assert authority where they have none.

“{T]}he need for clear boundaries in which a state may per-

missibly regulate and legislate becomes essential.” Todd

Jascott, Reemergence of the Zschernig Doctrines and the

Foreign Affairs Powers as a Limit on a State's Power to Act,

10 TULANE J. INT’L & Comp. L. 423, 444 (2002).

Except for the decision below, federal courts have uni-

formly agreed that state World War II claims recovery stat-

utes are unconstitutional. But there has been disagreement

as to why. A clear statement by this Court of how the

Zschernig doctrine applies to such statutes would be of im-

measurable assistance to the lower courts, counsel, and com-

panies involved in World War II claims litigation throughout

the federal and state judicial systems. Such clarity would

also be of service to plaintiffs pursuing claims under such

statutes. As one court has noted, “[i]t would be a disservice

to [the] heroes of World War II to create the false hope of

some sort of monetary recovery” based on state statutes that

are constitutionally infirm. Mitsubishi Materials Corp.,

2003 WL 253877, at *1.

Ill. THE CALIFORNIA SCHEME IS AN EXERCISE

OF EXTRATERRITORIAL JURISDICTION THAT

VIOLATES PRINCIPLES OF DUE PROCESS.

It is axiomatic that States may not regulate conduct oc-

curring entirely outside of their borders. Thus, where “a

State has only an insignificant contact with the parties and

the occurrence or transaction, application of its law is uncon-

stitutional.” Allstate Ins. Co. v. Hague, 449 U.S. 302, 310-

11 (1981) (plurality); id. at 333 (Powell, J., dissenting); see

also Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 822

(1985) (State “may not abrogate the rights of parties beyond

its borders having no relation to anything done or to be done

within them”) (quoting Home Ins. Co. v. Dick, 281 U.S. 397,

qe ee

a

21

410 (1930)); Watson v. Employers Liab. Assurance Corp.,

348 U.S. 66, 70 (1954) (“[A] state is without power to . . .

regulate and control activities wholly beyond its bounda-

nes.”). Consistent with this principle, the Court in Shutts

held that Kansas could not constitutionally apply its laws to

claims arising from transactions conducted between parties

who were not Kansas residents, and who had no connection

to the State. 472 U.S. at 821-22. Instead, the Court held that

“Kansas must have a ‘significant contact or aggregation of

contacts’ to the claims . . ., contacts ‘creating state interests,”

in order to ensure that the choice of Kansas law is not arbi-

trary or unfair.” 472 U.S. 797, 821 (1985) (quoting Hague,

449 US. at 312-13). A touchstone of this fairness inquiry is

“the expectation of the parties.” Jd. at 822.”

The Court has made clear that in order to constitutionally

regulate conduct, a State must have sufficient contacts both

with the parties and with the underlying subject matter being

regulated. See Hague, 449 U.S. at 310=11 (State cannot con-

stitutionally apply its law if it “has only an insignificant con-

tact with the parties and the occurrence or transaction’)

(emphasis added); accord Gallagher, 267 F.3d at 1238

(“[W]e must look not only at whether the parties regulated

by the Act have contacts with Florida, but also and more im-

portantly here at whether the subject about which this Act

seeks information has a sufficient nexus to Florida.”’).

Through its World War II compensation scheme — which

purports to create new causes of action for claims arising out

of World War II, extend the statute of limitations on such

claims, and facilitate the bringing of certain of these claims

through the required public disclosure by foreign companies

of certain types of information — California has attempted to

regulate a subject matter with which it has no relationship —

namely, conduct by citizens of European and Asian countries

that occurred solely in Europe and Asia before and during

World War Il. This conduct and these actions had no con-

22

nection to California at the time, and at no time prior to the

enactment of California’s World War II reparations scheme

could any of the foreign companies have foreseen that Cali-

fornia law might govern their conduct.

The Ninth Circuit (Pet. App. 20a) held that California has

an interest sufficient to support the HVIRA provision be-

cause, that court believed, that provision is merely a disclo-

sure requirement, directly applicable only to California in-

surers. This is quite wrong. The overriding purpose of the

HVIRA — and the World War II scheme generally — is *

identify and facilitate (i.e., to regulate) the payment of claims

arising out of World War I]-era conduct in foreign coun-

tries.'’ The specific statutory provision at issue cannot be

'’ In the courts below, the Commissioner attempted to defend the

HVIRA by asserting that Califoimg had “other legitimate purposes for

the statute, such as informing California residents about potentially valid

claims and about the character of the family of companies with whom

they might contract for insurance.” Pet. App. 16a. These eleventh-hour

justifications find no support in the statutory language or the legislative

history and do nothing to undermine the conclusion that California is

atterapting to regulate extraterritorial conduct.

As the Court recently reaffirmed, “[w]e ascertain the purpose of a

statute by drawing logical conclusions from its text, structure, and opera-

tion.” Nguyen v. INS, 533 U.S. 53, 67-68 (2001). Accordingly, subse-

quent restatements of the statutes’ purposes by the Commissioner cannot

overcome the explicit language of the legislation itself. /d. (“Statements

from the government's brief are not conclusive as to the objects of the

Statute, however, as we are concerned with the objectives of Congress,

not those of the INS.”); see also Gallagher, 267 F.3d at 1239-40 (reject-

“{could not] be squared with the Legislature’s own unequivocal state-

ment of its purpose”).

Here, the text, structure, and operation of the scheme make plain that

its sole purpose is to identify and facilitate payment of World War Il-era

claims. The HVIRA provides that “the department has an affirmative

duty to play an ‘udependent role in representing the interests of Holo-

caust survivors” (Pet. App. 115a), and insurance companies have a re-

sponsibility to “ensure the rapid resolution of these [unpaid policy

23

assessed in a vacuum, divorced from its context. Rather, it

must be viewed as part and parcel of a comprehensive legis-

lative scheme. See De Veau v. Brzisted, 363 U.S. 144, 147

(1960) (“Due consideration of the constitutional claims that

are made requires that [this section] be placed in the context

of the structure and history of the legislation of which it is a

part.”); see also New Motor Vehicle Bd. v. Orrin W. Fox Co.,

439 U.S. 96, 115 (1978) (Stevens, J., dissenting) (“[I]t is

necessary to review the statutory scheme as a whole, to iden-

tify the purpose of the specific provision challenged in this

case, and to explain the actual operation of that provision.”)).

Plainly, California’s statutory scheme is intended to se-

cure compensativn for victims of conduct by foreign gov-

ernments and nationals that took place in foreign countries

more than half a century ago during a world war. California

plainly has no serious interest specific to California in regu-

lating such conduct. The only parties and conduct currently

involved are the foreign companies who assertedly refuse

claims made by persons seeking compensation for alleged

injuries that occurred in Europe or Asia during World War

Il. Yet, California had no contact with that conduct during

the war, and thus has no constitutionally valid interest in

promulgating the regulation.

Even with respect to the HVIRA provision itself, there

can be no legitimate dispute that the essential effect of the

HVIRA is to regulate European insurance companies, by

claims], eliminating the further victimization of these policyholders and

their families (Cal. Ins. Code § 13801(e); Pet. App. 119a). In addition,

the legislature found that the HVIRA is “necessary to protect the claims

and interests of California residents, as well as to encourage the devel-

opment of a resolution to these issues through the international process or

through direct action by the State of California, as necessary.” /d.

§ 13801(f); Pet. App. 119a. This background reveals that purpose of

HVIRA was to identify and facilitate the payment of World War Il-era

claims in California and nothir.g more.

CS

24

forcing them to disclose information that will facilitate the

bringing of insurance claims on unpaid World War II-era

policies.'* The Eleventh Circuit correctly recognized that

fact in determining that the Florida counterpart of the

HVIRA infringed due process rights. Gallagher, 267 F.3d at

1238 (referring to Florida insurers as “the (nominally) regu-

lated parties”). Without question, California’s scheme im-

poses de facto regulation on foreign companies that have no

connection to the State. Thus, the “practical effect” of the

legislation is to compel “conduct beyond the boundaries of

the State.” Healy v. Beer Inst., 491 U.S. 324, 336 (1989).

That extraterritorial regulatory effect is also plainly the

law’s central purpose. In enacting the HVIRA, California

principally sought to force payment on the underlying claims

of World War Il-era victims against European insurance

companies, not to affect the insurance behavior of California

insurance companies. See Pet. App. 115a (statute seeks “to

ensure the rapid resolution of these [claims]”). The Galla-

gher court explicitly recognized that reality, noting that

“(t]he reporting provisions pertain to, and as a practical mat-

ter unquestionably seek to regulate, a subject matter — the

European affiliates’ payment or non-payment cf Holocaust-

era policy claims — with no jurisdictionally significant

relationship to Florida.” 267 F.3d at 1238.’ In short, when

viewed in its full context — as it must be — neither the par-

ties”’ nor the conduct that is the true subject of regulation

'S | ikewise, the targets of the forced labor provisions are World War

II-era European and Asian companies and their successors. Cal. Civ.

Proc. Code § 354.6(b).

'° The forced labor provisions similarly seek to facilitate compensa-

tion for conduct that took place entirely in Europe and Asia.

© The fact that some plaintiffs have since moved to California does

not provide sufficient contacts to warrant extension of California law to

claims arising at least 55 years earlier in foreign countries. See, e.g.,

John Hancock Mut. Life Ins. Co. v. Yates, 299 U.S. 178 (1936); Home

25

have a sufficient nexus with California to permit the sort of

extraterritorial regulation at issue here.

Moreover, even if the Court, viewing the HVIRA in iso-

lation, views it as “only” a disclosure regulation, that hardly

means that it does not regulate foreign companies. See Dole

v. United Steelworkers of Am., 494 U.S. 26, 28 (1990) (dis-

closure requirements are among available “regulatory

tools”); see also United States v. O’Hagan, 521 U.S. 642,

668 (1997) (Congress may design a statute “to make ‘disclo-

sure ... the preferred method of market regulation.’”) (quot-

ing Schreiber v. Burlington Northern, Inc., 472 U.S. 1

(1985)); BMW v. Gore, 517 U.S. 559, 570-71 (1996). The

Ninth Circuit itself recognized that “[s]eeking information

from insurers about their claims-paying record, to be used in

the licensing process, is a form of regulating the business of

insurance.” Pet. App. 45a n.3. No matter how it is viewed,

the California scheme attempts to export state law to govern

claims and parties that bear no relation whatever to Califor-

nia, thus violating principles of due process.

IV.EVEN IF IT AFFIRMS THE JUDGMENT BELOW,

THE COURT SHOULD BE CAREFUL NOT TO

ENDORSE THE ENTIRE WORLD WAR II

SCHEME AND SCHEMES LIKE IT.

The foregoing constitutional arguments apply as well to

the remaining provisions of the California scheme creating

causes of action for insurance and forced labor claims. Re-

Ins. v. Dick, 281 U.S. 397, 408 (1930); McCluney v. Jos. Schlitz Brewing

Co., 649 F.2d 578, 583-84 (8th Cir. 1981); see also Shutts, 472 U.S. at

821 (“[W]hile a State may . . . assume jurisdiction over the claims of

[parties] whose principal contacts are with other States, it may not use

this assumption of jurisdiction as an added weight in the scale when con-

sidering the permissible constitutional limits on choice of substantive

law.”); Hague, 449 U.S. at 319 (plurality) (a subsequent change of resi-

dence to the forum State “insufficient in and of itself to confer power on

the forum State to choose its law”).

26

gardless of how it rules in this case, the Court must be aware

of the interconnections and distinctions among all of these

provisions, and make its judgment about the HVIRA with

appropriate care for the effects of that judgment on these

other provisions.

As an initial matter, if the HVIRA is an unconstitutional

exercise of foreign affairs power or a violation of due proc-

ess, then the private causes of action provisions are invalid a

fortiori. But even if the Court concludes that the HVIRA

itself does not violate the foreign affairs doctrine or princi-

ples of due process, the private cause of action provisions of

the California scheme would still be unconstitutional under

each of those theories. Even the Ninth Circuit recognized

that the forced and slave labor provision, Section 354.6, is a

more extreme exercise of state power than the HVIRA and

that Section 354.6 is unconstitutional even if the HVIRA is

not. See Deutsch, 317 F.3d at 1019-20. As the Ninth Circuit

recognized in holding Section 354.6 unconstitutional, if the

HVIRA is construed to have the scope and effect attributed

to it by the Ninth Circuit in the case now before the Court,

the differences between such cause-of-action provisions and

the HVIRA are constitutionally significant. See Deutsch,

317 F.3d at 1020 n.4.

The forced and slave labor provision (Section 354.6),

like the cause of action provision of the insurance scheme

(Cal. Civ. Proc. Code § 354.5), is unconstitutional even if the

HVIRA is not. No plausible argument can be made that cre-

ating judicial remedies for World War II conduct by persons

having no connection with California, and which arose out of

the State (indeed out of the country), are “traditional state

regulation” with only an “incidental or indirect” impact on

27

foreign policy. Thus, such policies are an unconstitutional

exercise of state power.”'

Obviously, the Court need not concern itself with the

substantive merit of challenges to the cause of actions provi-

sions of the California statutory scheme, which are not be-

fore it at this time. But because its decision in this case will

certainly be looked to by courts and parties in litigation in-

volving such statutes, it is essential for the Court to be aware

of those provisions when addressing the issues raised by the

HVIRA.

CONCLUSION

The judgment below should be reversed.

Respectfully submitted,

WALTER DELLINGER

(Counsel of Record)

JOHN H. BEISNER

JOHN B. NIBLOCK

PAMMELA QUINN*

O’MELVENY & MYERS LLP

555 13th Street, N.W.

WASHINGTON, D.C. 20543

(202) 383-5300

* Admitted in Virginia only

*! While Deutsch did not explicitly reach the due process question,

the cause of action provisions also violate due process. Indeed, because

the cause of action provisions are directly applicable only against foreign

companies (or their recently formed U.S. subsidiaries), they-regulate out-

of-state conduct even more exclusively and directly than HVIRA, which

achieves the same result through direct regulaiion of affiliated companies

that do business in California.

DAVID M. BALABANIAN NATHAN LANE III

BINGHAM MCCUTCHENLLP JOSEPH A. MECKES

Three Embarcadero Center SQUIRE, SANDERS & DEMPSEY LLP

SAN FRANCISCO, CA 94111 One Maritime Plaza, Suite 300

(415) 393-2000

SAN FRANCISCO, CA 94111

(415) 954-0200

KATHRYN DAVIS ARNE D. WAGNER

MORRISON & FOERSTER LLP MORRISON & FOERSTER LLP

425 Market Street 425 Market Street

SAN FRANCISCO, CA 94107 SAN FRANCISCO, CA 94107

(415) 268-7000 (415) 268-7000

MARGARET K. PFEIFFER PAUL J. HALL

STACY R. STOLLER

ERIK K. LARSON

SULLIVAN & CROMWELL LLP NIXON PEABODY LLP

125 Broad Street

New YorRK, NY 10004

(212) 558-4000

Two Embarcadero Center, 27th Fl.

SAN FRANCISCO, CA 94111

(415) 984-8200

JUNJI MASUDA

MASUDA & EJIRI

399 Park Avenue, 18th FI.

New YorK, NY 10022

(212) 486-2525

Attorneys for Amici Curiae

February 24, 2003