Amicus Curiae Brief — Powerex Corp. v. Reliant Energy Services, Inc.

©

Nos. 05-85 and 05-584

In the Supreme Court of the Gnited States

POWEREX CORP., PETITIONER

Vv.

RELIANT ENERGY SERVICES, INC., ET AL.

POWEREX CORP. DBA POWEREX ENERGY CORP.,

PETITIONER

Vv.

STATE OF CALIFORNIA, EX REL. BILL LOCKYER, .

ATTORNEY GENERAL OF CALIFORNIA

ON PETITIONS FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

PAUL D. CLEMENT

Solicitor General

Counsel of Record

PETER D. KEISLER

Assistant Attorney General

EDWIN S. KNEEDLER

Deputy Solicitor General

DouGLAS H. HALLWARD-DRIEMEIER

JOHN B. BELLINGER III Assistant to the Solicitor General

Legal Adviser MARK B. STERN

CATHERINE W. BROWN oe BYRON I]

Assistant Legal Adviser ttorneys .

Department of State Department of Justice

lischincion * C. 20520 Washington, D.C. 20530-0001

202) 514-2217

—

QUESTION PRESENTED

Whether petitioner, which is wholly owned by a crown

corporation that is itself wholly owned by the Canadian

Province of British Columbia, and which performs obligations

and exercises rights of the Province pursuant to treaties with

the United States, is entitled to the protections of the Foreign

Sovereign Immunities Act of 1976, 28 U.S.C. 1602 et seq., as

an “organ of a foreign state or political subdivision thereof,”

28 U.S.C. 1603(b)(2).

AE

(I)

TABLE OF CONTENTS

Page

PP ee Pree a DL e ne Mee Lee ere ER ee 1

EE Oe OR RE A PE Ne ee Te Oe 6

I. The court of appeals misapplied an important

provision of the FSLA, and its analysis conflicts with

PUES eccccveccusedccncasseusseecs 6

II. The question presented is an important one, and

No. 05-85 is an appropriate vehicle in which to

NEE Sunewdees 6st cnutcceuniedadennsedances 13

EEE sid ondcanecunacdéetesustanenuaseounseneveces 20

TABLE OF AUTHORITIES

Cases:

Amoco Petroleum Additives Co., In re, 964 F.2d 706

LEED seh Ksddscdeenes sumer ehecewacasenss 15

Argentine Republic v. Amerada Hess Shipping

i Gr PIED ccc ndcdcicccccccoasesecces 1

Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343 (1988) ... 15

Corporacion Mexicana de Servicios Maritimos, S.A.

de C.V. v. M/T Respect, 89 F.3d 650 (1996) .......... 12

Dole Food Co. v. Patrickson, 538 U.S. 468 (2003) ...... “ee

Filler v. Hanvit Bank, 378 F.3d 213 (2d Cir.), cert.

Re, BE Te SD co vccccccccccevesceccecse 9

Freeport- McMoRan,Inc. v. KN Energy, Inc., 498

U.S. 426 (1991), cert. denied, 502 U.S. 1122 (1992) ... 16

Grupo Dataflux v. Atlas Global Group, L.P., 541 US.

EE Ses deveedidenesscuccenendedacessésesus 16

Kelly v. Syria Shell Petroleum Dev. B.V., 213 F.3d

841 (5th Cir.), cert. denied, 531 U.S. 979 (2000) .... 9,12

(111)

Cases—Continued: Page

Kircher v. Putnam Funds Trust, 126 8. Ct. 2145

ee ae ee kee 15, 18, 20

Letherer v. Alger Group, L.L.C., 328 F.3d 262 (6th

teak eee ise aids ea keen 15

Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 740 (1976) .... 19

Linton v. Airbus Industrie, 30 F.3d 592 (5th Cir.),

cert. denied, 513 U.S. 1044 (1994) ................. 15

Nolan v. Boeing Co., 919 F.2d 1058 (5th Cir. 1990),

cert. denied, 499 U.S. 962 (1991) ........... eee eens 19

Patrickson v. Dole Food Co., 251 F.3d 795 (9th Cir.

2001), aff'd, 538 U.S. 468 (2003) ........-.---.-6- 5, 9

Poore v. American-Amicable Life Ins. Co., 218 F.3d

ee 15, 16

Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996) .. 15

Shell Oil Co., In re, 966 F.2d 1130 (7th Cir. 1992) ...... 17

St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S.

EE iced ete ee ae eee eedessennieds sae 16

Thermtron Products, Inc. v. Hermansdorfer, 423 U.S.

DEED icncnuvabdncddsédekeetacsestensaees 14, 15

Things Remembered, Inc. v. Petrarco, 516 U.S. 124

SE asc en dédb she diesecdideeniaweeseus 6, 14, 15, 19

Transit Cas. Co. v. Certain Underwriters at Lloyd’s,

119 F.3d 619 (8th Cir. 1997), cert. denied, 522 U.S.

FFT TT TT TTT TTT TT TTT TTT TTT 15

Trans Penn Wax Corp. v. McCandless, 50 F.3d 217

SE ED « Kenctingdksadedssuwsnvens tv eenteues 15

United States v. Jorn, 400 U.S. 470 (1971)... ......... 19

United States v. Sisson, 399 U.S. 267 (1970) ........... 19

Cases—Continued: Page

USX Corp. v. Adriatic Ins. Co., 345 F.3d 190

(3d Cir. 2003), cert. denied, 541 U.S. 903

GED exbcsbesccsiscesmnaaee 8, 9, 10, 11, 12, 13, 19

Willingham v. Morgan, 395 U.S. 402 (1969) ........... 18

Van Meter v. State Farm Fire & Cas. Co., 1 F.3d 445

GERGANA TEED ovis concccccsscddcescueriaeeeeee 17

Verlinden E.V. v. Central Bank of Nigeria, 461 U.S.

GEPGRIEED «necccccsceccesesecuneweneeaneunee 1,7

Treaties and statutes:

Treaty Between the United States of America and

Canada Relating to Cooperative Development of

the Water Resources of the Columbia River Basin,

um. BE, BEG, BS ae SEED wv v cde nccédecucavaseuce 2

Treaty between Canada and the United States of

America Relating to the Skagit River and Ross

Lake, and the Seven Mile Reservoir on the Pend

D’Oreille River, Apr. 2, 1984, T.I.A.S. No. 11088,

PEP CSRS GED vecivessecedvdeusésasedenuenian 2

Act of Oct. 1, 1996, Pub. L. No. 104-219, § 1, 110 Stat.

SUE 0000a00nise0setehscdestenesbeemeeeee 16

Federal Employees Liability Reform and Tort

Compensation Act of 1988, 28 U.S.C. 2679(d) ....... 14

Foreign Sovereign Immunities Act of 1976, 28 U.S.C.

SCONE cc ccnvcccvseeceussssacdbenteeeee 1

SP GREED oonascducacuscusaendnes 1,3, 7,17

BP Se GD sv nccndcdncednevetenene 1,7,17

Be UBL. TERRE cc ccvencccsesecveses 5, 6, 7, 11

VI

Statutes—Continued: Page

Judicial Improvements and Access to Justice Act,

Pub. L. No. 100-702, § 1016(¢)(1), 102 Stat. 4670 ..... 16

ci cs eg id endeseneseeeccesess 7

ee ts Bee ceeeenencacseceses 17

ine dsndacsatsevessiesi« eae

EE ee 1,3, 7,18

sec ebencdyeseseceres 18

i eco e ec kkdcecereeeeaneceeses 3, 18

re 4, 14, 15

EE vnc ccaccdgeceeocaceoseseoeses 16

ade ec dere besetesocencee sss 4,14

Miscellaneous:

H.R. Rep. No. 889, 100th Cong., 2d Sess. Pt. 1 (1988) ... 17

H.R. Rep. No. 1487, 94th Cong., 2d Sess. (1976) .. 8, 10, 19

S. Rep. No. 366, 104th Cong., 2d Sess. (1996) .......... 18

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

This brief is submitted in response to the Court’s order

inviting the Solicitor General to express the views of the United

States.

STATEMENT

1. The Foreign Sovereign Immunities Act of 1976 (FSIA),

28 U.S.C. 1602 et seq., is “the sole basis for obtaining jurisdic-

tion over a foreign state” in either state or federal court. Ar-

gentine Republic v. Amerada Hess Shipping Corp., 488 U.S.

428, 434 (1989). The FSIA defines the term “foreign state” to

include “an agency or instrumentality of a foreign state,” 28

U.S.C. 1603(a), which, in turn, is defined to mean:

any entity—(1) which is a separate legal person, corporate

or otherwise, and (2) which is an organ of a foreign state or

political subdivision thereof, or a majority of whose shares

or other ownership interest is owned by a foreign state or

political subdivision thereof, and (3) which is neither a citi-

zen of a State of the United States as defined in section

1332(c) and (d) of this title, nor created under the laws of

any third country.

28 U.S.C. 1603(b). The FSIA “guarantees foreign states the

right to remove any civil action from a state court to a federal

court.” Verlinden B.V. v. Central Bank of Nigeria, 461 U.S.

480, 489 (1983) (citing 28 U.S.C. 1441(d)).

2. Petitioner is a corporation organized under the jaws of

the Province of British Columbia, a political subdivision of

Canada. Petitioner is wholly owned by the British Columbia

Power and Hydro Authority (BC Hydro), a provincial crown

corporation that is in turn wholly owned by the Province of

British Columbia. 05-85 Pet. App. 53a, 58a. As a crown cor-

poration, BC Hydro is subject to the control and direction of

(1)

2

provincial officials, and BC Hydro pays its net revenue to the

provincial government. /d. at 58a-59a.

Some of BC Hydro’s responsibilities include implementing

on behalf of Canada the Columbia River Treaty between the

United States and Canada, which is designed to control the

flow of the Columbia River for both flood control and power-

generation purposes benefitting both nations. 05-85 Pet. App.

50a-5la.' Under the treaty-based management system, Cana-

dian dams sometimes must release more water than would be

optimal for their own power-generating purposes, in order to

maintain water levels in the United States. 7d. at 51a. In

those circumstances, the treaty provides that the United

States will reimburse BC Hydro (as assignee of Canada) for

foregone power-generating opportunities. See id. at 51a, 55a.

BC Hydro generates more electric power than the Prov-

ince needs. In 1988 BC Hydro created petitioner as a wholly

owned subsidiary to market BC Hydro’s excess power capac-

ity to the United States, including the power to which Canada

is entitled under the Columbia River Treaty. See 05-85 Pet.

App. 53a, 55a. In addition, petitioner is responsible for pro-

viding power to the City of Seattle as required in the Skagit

River Treaty between the United States and Canada.’ See id.

at 56a-57a. Petitioner’s income is consolidated with that of

BC Hydro and transferred either to the Province itself or to

a special rate-stabilization account according to a formula

specified by the Province. See id. at 202a-204a.

3. a. In No. 05-85, respondent plaintiffs—including the

State of California and individual energy consumers—sued

' See Treaty Between the United States of America and Canada Relating

to Cooperative Development of the Water Resources of the Columbia River

Basin, Jan. 17, 1961, 15 U.S.T. 1555; 05-85 Pet. App. 61a-137a.

> See Treaty Between Canada and the United States of America Relating

to the Skagit River and Ross Lake, and the Seven Mile Reservoir on the Pend

D’Oreille River, Apr. 2, 1984, T.1.A.S. No. 11088; 05-85 Pet. App. 138a-1 46a.

3

respondent cross-plaintiffs (among others) in California state

court, seeking damages for alleged manipulation of the elec-

tricity market in violation of state law. The respondent cross-

plaintiffs filed cross-complaints against several] entities in-

cluding petitioner, BC Hydro, and two federal government

agencies, the Bonneville Power Administration (BPA) and the

Western Area Power Administration (WAPA). The cross-

complaints seek indemnification and allege that petitioner and

the other cross-defendants participated in or contributed to

the manipulation of energy markets.

Petitioner and BC Hydro filed notices removing the case

to federal district court pursuant to the FSIA, 28 U.S.C.

1441(d). The federal agencies invoked 28 U.S.C. 1442(a)(1) as

additional authority for removal. 05-85 Pet. App. 19a. The

respondent plaintiffs moved to remand the case to state court.

They argued that the court lacked jurisdiction to adjudicate

the claims against BC Hydro and the federal agencies because

they were immune from suit on the cross-claims, and that

petitioner was not entitled to the protections of the FSIA

because it was not an agency or instrumentality of British

Columbia. Seed. at 20a, 22a, 33a, 38a.

The district court granted the motion to remand. The

court held that, as “a corporation wholly-owned by a political

subdivision of a foreign government,” BC Hydro qualified as

a “foreign state” for purposes of the FSIA, 05-85 Pet. App.

21a (citing 28 U.S.C. 1603(a)), and that the claims against it

did not fall within any of the FSIA’s exceptions to immunity,

see id. at 2la-33a. The court also held that BPA and WAPA

were immune from suit, id. at 40a, and that because the state

court had lacked jurisdiction over the claims against BPA and

WAPA, by derivation, so did the federal court, id. at 43a-44a.

The district court concluded that petitioner did not come

within the statutory definition of an agency or instrumental-

ity, and therefore did not qualify as a “foreign state” under

4

the FSIA. 05-85 Pet. App. 33a-38a. The district court held

that petitioner is not an “organ” of British Columbia because

petitioner does not exercise regulatory authority, is not im-

mune from suit under Canadian law, and is not subject to ac-

tive oversight by the provincial government. /d. at 35a. The

court also observed that the provincial government does not

appoint petitioner’s corporate officers, and petitioner’s em-

ployees are not treated as civil servants. /bid. Nor, the court

held, is petitioner an agency or instrumentality under the

“ownership” test, because the Province does not directly own

a majority of petitioner’s shares. /d. at 36a-38a.

The district court remanded the action to state court. 05-

85 Pet. App. 44a. B.C. Hydro and the federal agency cross-

defendants sought to clarify that the claims against them had

been dismissed on immunity grounds, but the district court

denied their requests. The court reasoned that, because it

could not exercise jurisdiction over the claims against the

immune defendants, it could not dismiss those claims, and was

instead required by 28 U.S.C. 1447(c) to remand the entire

action (including the claims as to which there was immunity)

to state court. See C.A. E.R. (PWX) 900, 904.

b. Petitioner, respondent cross-plaintiffs, BPA and WAPA

each appealed. 05-85 Pet. App. 8a-9a. Respondent cross-

plaintiffs challenged the holding that BC Hydro, BPA and

WAPA were immune from suit; BPA and WAPA appealed the

district court’s failure to dismiss the claims against them be-

fore remanding; and petitioner challenged the denial of its

status as an agency or instrumentality of the Province. /bid.

The court of appeals’ opinion first held that 28 U.S.C.

1447(d) did not preclude appellate review of the district

court’s order. The court reasoned that the district court had

removal jurisdiction over the case at the outset because of BC

Hydro’s status as a foreign state and BPA and WAPA’s status

as federal] agencies. 05-85 Pet. App. 10a. Because the district

5

court had jurisdiction, and had exercised that jurisdiction to

decide the claims of immunity and the status of petitioner, the

court of appeals held that it was “not deprived by § 1447(d) of

jurisdiction to review these substantive rulings.” /bid.

The court then held (on the appeal of the respondent cross-

plaintiffs) that BC Hydro, BPA, and WAPA were entitled to

immunity. 05-85 Pet. App. lla, 14a. It also held (on the ap-

peal of the federal agencies) that the district court erred in

refusing to dismiss the claims against the federal agencies

because, in a removed action, a defendant’s immunity “is vin-

dicated only by the district court’s dismissal of the claims.”

Id. at 16a.

With respect to petitioner’s appeal, the court of appeals

affirmed the district court’s conclusion that petitioner does

not qualify as an “organ of a foreign state or political subdivi-

sion thereof,” 28 U.S.C. 1603(b)(2). 05-85 Pet. App. 14a. The

court stated that its determination of organ status would turn

ultimately on “whether the entity engages in a public activity

on behalf of the foreign government,” and that it would “look

to the purposes of an entity’s activities, the entity’s independ-

ence from government, the level of financial support received

from the government, and the entity’s privileges and obliga- _

tions under the law.” /d. at 15a (quoting Patrickson v. Dole

Food Co., 251 F.3d 795, 807 (9th Cir. 2001), aff’d on other

grounds, 538 U.S. 468 (2003)). The court of appeals stated

that petitioner, like the entities in Patrickson, “was not run

by government appointees, was not staffed with civil servants,

was not wholly owned by the government, was not immune

from suit, and did not exercise any regulatory authority.” Jd.

at 15a-16a. The court acknowledged that petitioner offered

evidence that it “serves a public purpose,” but concluded that

petitioner’s “high degree of independence from the govern-

ment of British Columbia, combined with its lack of financial

support from the government and its lack of special privileges

6

or obligations under Canadian law dictate [the] holding that

PowerFEx is not an organ of British Columbia.” /d. at 16a.

4. In No. 05-584, respondent (the California Attorney Gen-

eral) sued petitioner in state court, alleging that petitioner

had manipulated the energy market in violation of state law.

05-584 Pet. App. 4a-5a. Petitioner removed the case to federal

district court, on the grounds that it is a foreign state under

the FSIA and that respondents’ claims necessarily raised

federal questions. /d. at 5a. The district court remanded. /d.

at 4a-15a. With respect to petitioner’s FSIA argument, the

district court relied on the Ninth Circuit’s earlier decision at

issue in No. 05-85. Jd. at 14a.

Petitioner appealed to the Ninth Circuit, which sua sponte

dismissed the appeal for lack of jurisdiction, citing 28 U.S.C.

1447(d), and this Court’s decision in Things Remembered, Inc.

v. Petrarco, 516 U.S. 124, 128 (1995). 05-584 Pet. App. 1a.

DISCUSSION

The court of appeals’ application of the FSIA’s “organ of a

foreign state” provision, 28 U.S.C. 1603(b)(2), is erroneous

and conflicts with decisions of other courts of appeals. More-

over, the issue is an important, recurring, and sensitive one

that warrants this Court’s consideration. Although respon-

dents assert several purported obstacles to the Court’s reach-

ing that issue, we believe that the petition in No. 05-85 pres-

ents an appropriate vehicle for this Court’s review. Accord-

ingly, the United States suggests that the Court grant review

on the first question presented in No. 05-85, and hold the peti-

tion in No. 05-584 pending resolution of No. 05-85.

I. THE COURT OF APPEALS MISAPPLIED AN IMPORTANT

PROVISION OF THE FSIA, AND ITS ANALYSIS CON-

FLICTS WITH THAT OF OTHER CIRCUITS

A. The FSIA establishes a “comprehensive scheme” gov-

erning the extent to which “foreign sovereigns may be held

7

liable in a court in the United States.” Verlinden B.V. v. Cen-

tral Bank of Nigeria, 461 U.S. 480, 496-497 (1983). In recog-

nition of the fact that many states engage in commercial activ-

ities not unlike those of private actors, the FSIA codifies the

“restrictive theory” of foreign sovereign immunity, according

to which foreign states may be sued for their “commercial

activities.” /d. at 487-488. Although the FSIA denies immu-

nity to foreign states in those circumstances, “[iJn view of the

potential sensitivity of actions against foreign states and the

importance of developing a uniform body of law in this area,

the Act guarantees foreign states” certain procedural

protections, such as the right to remove a civil action from

state to federal court. Jd. at 489. The FSIA also guarantees

a foreign state the right to a bench, rather than jury, trial in

federal court on claims as to which they are not immune, see

28 U.S.C. 1330(a), 1441(d).

Congress recognized that there are any number of ways in

which foreign governments may organize their operations and

functions, and it made certain that the FSIA would be flexible

enough to accommodate that variety. Thus, Congress ex-

tended the protections of the FSIA to an “agency or instru-

mentality” of a foreign state, 28 U.S.C. 1603(a), and provided

that entities could qualify as an “agency or instrumentality”

in several ways, 28 U.S.C. 1603(b). The statutory definition

establishes a categorical rule with respect to an entity “a ma-

jority of whose shares or other ownership interest is owned by

a foreign state or political subdivision thereof.” 28 U.S.C.

1603(b)(2). See Dole Food Co. v. Patrickson, 538 U.S. 468, 474

(2003) (construing that categorical protection to require direct

ownership by the foreign state or political subdivision). In

contrast to that categorical rule, the other prong of the defi-

nition—“an organ of a foreign state or political subdivi-

sion” —is intended to have a more functional application that

is not dependent on a particular form of organization. See

8

H.R. Rep. No. 1487, 94th Cong., 2d Sess. 15-16 (1976) (recog-

nizing that an agency or instrumentality “could assume a vari-

ety of forms, including a state trading corporation, a mining

enterprise, a transport organization such as a shipping line or

airline, a steel company, a central bank, an export association,

a governmental procurement agency or a department or min-

istry which acts and is suable in its own name”).

This Court has never addressed the meaning or application

of this prong of FSIA’s definition of an agency or instrumen-

tality, yet that provision has taken on additional importance

since the Court’s decision in Dole Food. Whereas before the

Dole Food decision, entities such as petitioner were often

afforded protection under the FSIA’s majority-ownership

test, those entities must now rely exclusively on the immunity

for organs of foreign states. See, e.g., USX Corp. v. Adriatic

Ins. Co., 345 F.3d 190, 199 (3d Cir. 2003) (noting that the dis-

trict court had initially upheld the defendant’s foreign state

status under the majority-ownership test, but, after Dole

Food, had reevaluated the question under the “organ of a

foreign state” prong), cert. denied, 541 U.S. 903 (2004); id. at

208 (“A flexible approach is particularly appropriate after

Dole, inasmuch as courts likely now will be asked to evaluate

the possible organ status of a wide variety of entities con-

trolled by foreign states through tiering arrangements and

because of the widely differing forms of ownership or control

foreign states may exert over entities.”).

B. At first glance, the courts of appeals may appear to

have adopted similar approaches to determining whether an

entity qualifies as an organ of a foreign state. Each considers

multiple factors including, inter alia, the circumstance of the

entity’s creation, its purpose, the involvement of the state in

its affairs, its employment practices, any financial support or

grant of exclusive economic rights from the state, and its priv-

ileges and obligations under local law. See 05-85 Pet. App.

9

15a; Filler v. Hanvitt Bank, 378 F.3d 213, 217 (2d Cir.), cert.

denied, 543 U.S. 1022 (2004); USX, 345 F.3d at 209; Patrick-

son, 251 F.3d at 807;° Kelly v. Syria Shell Petroleum Dev.

B.V., 213 F.3d 841, 846-847 (5th Cir.), cert. denied, 531 U.S.

979 (2000).

A closer study, however, reveals a critical divergence in the

manner in which the various circuits apply their seemingly

similar tests. The Third and Fifth Circuits, for example, have

emphasized “the need fora * * * flexible approach under

the organ prong of section 1603(b)(2),” USX, 345 F.3d at 208,

and that a court should “wet-apply [the factors] mechanically

or require that all five support an organ-determination,”

Kelly, 213 F.3d at 847. Moreover, those courts understand

the need to apply the factors with constant reference to the

ultimate question: whether the defendant is “an entity that

engages in activity serving a national interest and does so on

behalf of its national government.” USX, 345 F.3d at 209.

The relevance and weight of any particular factor in a given

case depends on the extent to which it informs that ultimate

test. See id. at 214 (“[wJeighing the[] factors qualitiatively as

well as quantitatively”).

Although the Ninth Circuit also makes reference to “the

ultimate question,” 05-85 Pet. App. 15a, in practice it proceeds

mechanically through a checklist. Its analysis, in full, of the

factors as they apply to petitioner in No. 05-85 was as follows:

[Petitioner] was not run by government appointees, was

not staffed with civil servants, was not wholly owned by the

government, was not immune from suit, and did not exer-

cise any regulatory authority. Even though [petitioner]

* In Patrickson, the Ninth Circuit held that the foreign entity there was

neither an organ of nor majority-owned by a foreign state or political

subdivision. This Court granted a petition for a writ of certiorari to consider

only the question of majority ownership.

10

offers some evidence that it serves a public purpose, its

high degree of independence from the government of Brit-

ish Columbia, combined with its lack of financial support

from the government and its lack of special privileges or

obligations under Canadian law dictate our holding that

[petitioner] is not an organ of British Columbia.

Id. at 15a-16a (emphasis added) (citation omitted). In other

words, the court of appeals disregarded the substantial evi-

dence that petitioner “serves a public purpose” because it did

not conform with the result indicated by the court’s mechani-

ca} application of other specified factors. The court did not

analyze those factors to see what light they shed on whether

petitioner was serving the interests of the Province.

The crucial differences between the courts of appeals’ ap-

proaches can best be appreciated by comparing the analysis

of the Ninth Circuit in No. 05-85 with that of the Third Circuit

in USX. For example, the Ninth Circuit found it significant

that petitioner “was not immune from suit” under Canadian

law. 05-85 Pet. App. 16a. In contrast, the Third Circuit deter-

mined that whether the defendant “is subject to suit” in its

home country “should not be considered [as] part of the organ

analysis.” USX, 345 F.3d at 214. It noted that, in order to be

an organ, “an entity must be a separate legal person” and that

“the right to sue and be sued [is] one factor to consider” in

that analysis. /d. at 214 & n.24; id. at 209 n.17 (citing H.R.

Rep. No. 1487, supra, at 15).* Similarly, whereas the Ninth

Circuit counted the fact that petitioner engaged in commer-

cial, rather than regulatory, activities against it, 05-85 Pet.

* The Ninth Circuit’s focus on petitioner’s lack of immunity in Canada as a

basis to deny petitioner all of the protections of the FSIA is particularly

inappropriate when the entity engages in commercial activities that Congress

likewise determined should not be protected by foreign sovereign immunity in

the United States (even though an organ of a foreign state engaging in such

activities would still enjoy the other protections of the FSIA).

11

App. 16a, the Third Circuit cautioned that “too heavy a focus

on the commercial nature of an entity’s activities would tend

to confuse the question of the level of protection provided by

the FSIA (full immunity or not) with the antecedent question

* * * whether the entity comes within the purview of the

FSIA at all,” USX, 345 F.3d at 210.

The Ninth Circuit also determined as a factor against peti-

tioner that it was “not wholly owned by the government,” 05-

85 Pet. App. 15a-16a, by which it meant that petitioner “is not

owned by the Province, but by BC Hydro,” zd. at 16a. But

that improperly weights the inquiry against treating an entity

as an organ of a foreign state. That inquiry will generally be

salient only for entities that do not satisfy the majority-own-

ership test. Such entities should not start the inquiry

whether they satisfy Section 1603(b)(2)’s alternative standard

with one strike against them. In contrast, the Third Circuit

found that when a foreign government “has complete control

over all shares of [the defendant] albeit through a tiered ar-

rangement,” by which the subsidiary serves the government’s

purposes, “this factor weighs in favor of a finding of organ

status.” USX, 345 F.3d at 213.

Similarly, whereas the Ninth Circuit emphasized that peti-

tioner is “not staffed with civil servants,” 05-85 Pet. App. 15a,

the Third Circuit held that fact to be “of little relevance,” and

emphasized instead the fact that a government minister ap-

proved the entity’s administrator, USX, 345 F.3d at 212-213.

And, in contrast to the Ninth Circuit, which held that the Prov-

ince’s assignment to petitioner of the Province’s entitlement

to hydro-electric power under the Columbia River Treaty did

not qualify as “financial support from the government,” 05-85

Pet. App. 16a, the Third Circuit observed that the exploitation

and distribution of natural resources is a “government pur-

pose” that “would weigh * * * heavily in favor of organ sta-

tus,” USX, 345 F.3d at 210 (citing Kelly, 213 F.3d at 848, and

12

Corporacion Mexicana de Servicios Meritimos, S.A. de C.V.

v. M/T Respect, 89 F.3d 650, 654-655 (9th Cir. 1996)).

C. A proper analysis of the question demonstrates that

petitioner is an organ of the Province.’ Under the proper

approach, the court of appeals should have focused on the fact

that petitioner was created for the purpose of marketing for

export the Province’s excess resource—electric power—in-

cluding, in particular, marketing Canada’s entitlement to

power generated by BPA pursuant to the Columbia River

Treaty and providing power to the City of Seattle as required

of the Province in the Skagit River Treaty. See 05-85 Pet.

App. 55a, 56a-57a. Rather than emphasizing that the Province

does not provide direct financing to petitioner, it should have

focused on the fact that petitioner plays an important role in

discharging Canada’s treaty obligations, that the Province

assigned to petitioner its rights to Canada’s entitlement under

the Columbia River treaty, “a very significant resource,” 7d.

at 55a, and that petitioner’s net income is returned to the

Province via BC Hydro’s consolidated income statements, see

id. at 202a-204a. Instead of counting against petitioner the

fact that its employees are not civil servants, the court should

have emphasized that members of petitioner’s board of direc-

tors are appointed by BC Hydro’s board, which is appointed

by the Provincial Lieutenant Governor, and that outside mem-

bers of petitioner’s board “were subject to concurrence by the

Office of the Premier,” id. at 58a-59a. Rather than declaring

that petitioner is “not wholly owned by the government,” zd.

at 15a-16a, it should have attached significance to the fact that

the Province owns 100% of BC Hydro, which in turn owns

100% of petitioner. On a proper analysis, the court of appeals

* The United States believes the courts below erred in failing to recognize

petitioner’s status as an organ of British Columbia that is entitled to the

procedural protections of the FSJ A, but takes no position on the merits of the

claims at issue in these cases.

13

should have concluded that petitioner is an organ of the Prov-

ince of British Columbia.°

Il. THE QUESTION PRESENTED IS AN IMPORTANT

ONE, AND NO. 05-85 IS AN APPROPRIATE VEHICLE

IN WHICH TO RESOLVE IT

A. As noted above, a proper understanding of the “organ”

prong is of considerable significance under the FSIA in light

of Dole Food’s clarification of the majority-ownership test for

agency or instrumentality status. See USX, 345 F.3d at 208

(quoted at p. 8, supra). A proper application of that prong is

particularly important in this case. Canada is our Nation’s

largest trading partner, and Canada and its Provinces have

numerous crown corporations that engage in trade with the

United States. See 05-85 Pet. 24-25. Petitioner was created

by BC Hydro—the Province’s statutory agent for the promo-

tion of hydroelectric development—specifically to market BC

Hydro’s surplus electric power outside the Province, including

power the Province is entitled to receive or obligated to pro-

vide under treaties between the United States and Canada.

Petitioner marketed power valued at approximately $11 bil-

lion Canadian between 2000 and 2004, see ibid., and a large

part of that power goes to States in the Ninth Circuit. Thus,

if the court of appeals’ decision is not overturned, it will bind

petitioner in virtually all suits brought against it.

B. The respondent plaintiffs in No. 05-85 do not attempt to

defend the merits of the court of appeals’ classification of

* As noted in the text, the fact that petitioner is 100% owned by a crown

corporation that is, in turn, the statutory agent of and wholly owned by the

Province is highly significant to petitioner's status as an organ of the Province.

Petitioner also urges that the fact that BC Hydro owns Powerex as the

Province’s agent warrants a finding that petitioner satisfies the “ownership”

prong, based on a case-by-case analysis. See 05-85 Pet. i, 29. The Court need

not grant review on that question because petitioner qualifies as an "organ"

under a correct application of the FSIA.

14

petitioner. Rather, they-urge that the court of appeals’ ap-

proach to the issue is not “new or different,” 05-85 Br. in Opp.

6, and that, in any event, the Court cannot decide the issue

because 28 U.S.C. 1447(d) precludes appellate review of the

district court’s remand order, 05-85 Opp. 4, and because plain-

tiffs’ claims have been settled and dismissed, id. at 6. The

first argument is incorrect, as we have demonstrated, see pp.

6-13, supra, and the other objections are not well founded.

1. In No. 05-85, the court of appeals held that it had “juris-

diction to review the district court’s ruling on substantive

issues of controlling law on the merits of the case.” Pet. App.

6a. That conclusion was correct. The district court plainly

had subject-matter jurisdiction at the time of removal, and its

subsequent rulings did not divest it of that jurisdiction. Ap-

pellate review of the district court’s remand order is therefore

not barred by 28 U.S.C. 1447(d).’

This Court has made clear that Section 1447(d) must be

read in pari materia with 28 U.S.C. 1447(c). See Thermtron

Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 343 (1976).

“{O)Jnly remands based on grounds specified in § 1447(c) are

immune from review under § 1447(d).” Things Remembered,

’ A similar issue relating to appeal from the denial of immunity under the

Federal Employees Liability Reform and Tort Compensation Act of 1988, 28

U.S.C. 2679(d), is presented in Osborn v. Haley, No. 05-593 (argued October 30,

2006). Although the Court could hold this case pending resolution of Osborn,

the better course would be to grant the petition in 05-85 outright and without

waiting for a final decision in Osborn. If appellate jurisdiction is upheld in

Osborn, that will only underscorethat jurisdiction is appropriate here. On the

other hand, if the Court finds appellate jurisdiction to be lacking in Osborn, it

will be important to clarify that a similar result does not apply in the FSIA

context, when the effect of such a rule would be to defeat Congress’s judgment

that questions regarding entitlement to the protections of the FS1A be decided

in federal court if a foreign government entity elects a federal forum—at least

where, as here, an entity that both courts below found is a foreign state (BC

Hydro) also remains as a party to the case on remand.

15

Inc. v. Petrarca, 516 U.S. 124, 127 (1995). See Kircher v.

Putnam Funds Trust, 126 S. Ct. 2145, 2153 (2006) (same).

Thus, this Court has reviewed a remand order based on a

district court’s crowded docket, Thermtron, 423 U.S. at 340-

341, a remand based on abstention, Quackenbush v. Allstate

Ins. Co., 517 U.S. 706, 710-712 (1996), and the discretionary

remand of state law claims after the federal law claims that

had supported removal were eliminated from the case,

Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 348 (1988).

Each of those cases was properly removed to federal district

court, the district court therefore was properly vested with

jurisdiction from the outset, and the purported ground for the

remand was not one authorized by Section 1447(c).°

One ground for remand provided in Section 1447(c) is lack

of subject matter jurisdiction. But that reference must be

understood, and has been understood by the majority of the

courts of appeals, as limited to remand orders for a lack of

subject matter jurisdiction at the time of removal.’ That

* Cohill held that “Section{] * * * 1447(c) * * * dofes] not apply to cases

over which a federal court has pendent jurisdiction,” and that therefore “the

remand authority conferred by the removal statute [Section 1447(c)} and the

remand authority conferred by the doctrine of pendent jurisdiction overlap not

at all.” 484 U.S. at 355 n.11. It follows from Cohill’s holding that a discretion-

ary remand of pendent claims is not a remand under Section 1447(c) and such

a remand is not within Section 1447(d)’s bar to appellate review. See Kircher,

126 S. Ct. at 2153. But see Things Remembered, 516 U.S. at 130 (Kennedy, J.,

concurring) (stating that Cohill did not decide “whether subsection (d) would

bar review” of orders remanding pendent claims as a matter of discretion).

* See, e.g., Lethererv. Alger Group, L.L.C.,328 F.3d 262, 265 (6th Cir. 2003)

(“appellate review of remand orders is prohibited only where the district court

remands because it lacks subject matter jurisdiction at the time of removal”);

Poore v. American-Amicable Life Ins. Co., 218 F.3d 1287, 1290-1291 (11th Cir.

2000); Transit Cas. Co. v. Certain Underwriters at Lloyd's, 119 F.3d 619, 623

(8th Cir. 1997), cert. denied, 522 U.S. 1075 (1998); Trans Penn Wax Corp. v.

MeCandless, 50 F.3d 217, 223 (3d Cir. 1995); Jn re Amoco Petroleum Additives

Co., 964 F.2d 706, 708-709 (7th Cir. 1992). But see Linton v. Airbus Industrie,

16

reading is consistent with the general rule that a federal

court’s subject matter jurisdiction is fixed at the time the suit

is brought and is not defeated by subsequent acts. See, e.g.,

Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 574

(2004); Freeport- McMoRan,Inc. v. KN Energy, Inc., 498 U.S.

426 (1991), cert. denied, 502 U.S. 1122 (1992); St. Paul Mer-

cury Indem. Co. v. Red Cab Co., 303 U.S. 283, 294 (1938).

That reading is also consistent with the history of the re-

moval statutes. Before 1988, the text of Section 1447(c) made

explicit that it authorized remand based only on defects at the

time of removal. It allowed remand “[i]f at any time before

final judgment it appears that the case was removed improvi-

dently and without jurisdiction.” 28 U.S.C. 1447(c) (1982). In

1988, Congress amended Section 1447(c) to distinguish be-

tween two types of defects in removal jurisdiction—a defect

in removal procedure, and a defect in the district court’s sub-

ject matter jurisdiction—and to provide that procedural de-

fects are waived if not raised promptly. The amended provi-

sion specified that “a motion to remand the case on the basis

of any defect in removal procedure must be made within 30

days” of removal, while it continued to require remand “[i]f at

any time before final judgment it appears that the district

court lacks subject matter jurisdiction.” Pub. L. No. 100-702,

§ 1016(c)(1), 102 Stat. 4670. In 1996, the provision was again

amended to clarify that waivable objections to removal include

“any defect other than lack of subject matter jurisdiction.”

Pub. L. No. 104-219, § 1, 110 Stat. 3022.

As a number of courts of appeals have concluded, after

reviewing the change in statutory text and the legislative his-

tory, “the proper inquiry is still wnether the court had juris-

diction at the time of removal.” Poore, 218 F.3d at 1290. See

30 F.3d 592, 599-600 (5th Cir.) (“jurisdictional remands premised on post-

removal events are not reviewable”), cert. denied, 513 U.S. 1044 (1994).

17

Van Meter v. State Farm Fire & Cas. Co., 1 F.3d 445, 450 n.2

(6th Cir. 1993); In re Shell Oil Co., 966 F.2d 1130, 1133 (7th

Cir. 1992). Congress did not intend to depart from the well

established rule “that jurisdiction present at the time a suit is

filed or removed is unaffected by subsequent acts.” Jd. at

1133. Rather, Congress’s focus in adopting the textual change

was on ensuring that plaintiffs raise promptly any objection

to removal on purely procedural grounds. See H.R. Rep. No.

889, 100th Cong., 2d Sess. Pt. 1, at 72 (1988). The statute’s

current structure bears that out. The reference in the first

sentence of Section 1447(c) to “any defect other than lack of

subject matter jurisdiction” makes clear that by the phrase

“lack of subject matter jurisdiction” Congress means a partic-

ular, non-waivable, “defect” in removal.'°

In this case, the district court stressed that no party con-

tested that the actions could be removed pursuant to 28

U.S.C. 1441 and 1442. See 05-85 Pet. App. 20a. That reecogni-

tion of the propriety of the court’s removal jurisdiction at the

outset is entirely correct and is, in itself, sufficient to take this

case outside the scope of Section 1447(d). The district court

itself recognized (and the court of appeals affirmed) that, as

a crown corporation wholly owned by the Province of British

Columbia, BC Hydro qualifies as an agency or instrumentality

of Canada and therefore as a foreign state under 28 U.S.C.

1603(a) and (b). 05-85 Pet. App. 12a-14a, 21a. Therefore BC

The legislative history of the 1988 change also reflects that Congress

understood the mandatory (and unreviewable) remand for lack of subject

matter jurisdiction at the time of removal that is referred to in Section 1447(c)

to be distinct from a discretionary remand after the court had exercised its

removal jurisdiction to resolve disputed federal questions. See H.R. Rep. No.

889, supra, at 72 (emphasizing that “|t he amendment is written in terms of a

defect in ‘removal procedure’ in order to avoid any implication that remand is

unavailable after disposition of all federal questions leaves only State law

questions that might be decided as a matter of ancillary or pendent jurisdiction

or that instead might be remanded”).

18

Hydro had the right to remove the action under 28 U.S.C.

1441(d) in order to have its claim of immunity decided by a

federal, rather than state, forum. See zbid. (“Any civil action

brought in a State court against a foreign state as defined in

section 1603(a) of this title may be removed by the foreign

state to the district court.”). The district court did, in fact,

exercise its removal jurisdiction to adjudicate BC Hydro’s

claim of immunity, which the court upheld. 05-85 Pet. App.

21a-33a. As federal agencies, BPA and WAPA were likewise

entitled to remove the action pursuant to 28 U.S.C. 1442(a)(1)

and have their immunity from suit adjudicated by the federal

district court, which they did. See 05-85 Pet. App. 7a, 39a-40a;

see Kircher, 126 8. Ct. at 2155 n.12 (noting that under Section

1442(a), the federal defendant need only raise a “colorable”

defense of federal immunity in order to remove, because that

section “reflects a congressional policy that ‘federal officers,

indeed tre Federal Government itself, require the protection

of a federa! forum’”) (quoting Willingham v. Morgan, 395

U.S. 402, 407 (1969)).”

Because (as the district court recognized, 05-85 Pet. App.

20a) removal by BC Hydro, BPA, and WAPA was proper, the

! The logic of respondent plaintiffs’ argument against appellate jurisdiction

would appear to be that the court os appeals did not even have jurisdiction over

the appeals by BPA and WAPA fro1: the district court’s refusal to dismiss

them from the case rather than remana.ng the case back to state court with

those federal agencies as parties, even though no party contested in district

court that the cases were properly removed tased on the presence of those

agencies as defendants, see 05-85 Pet. App. 20a, an./ the district court correctly

determined that both agencies were immune from suit. That result would

deprive federal agencies of an important protection afforded by the removal

statute (and sovereign immunity): the ability to remove vhe case from state

court for the very purpose of securing dismissal from the case on immunity

grounds at the outset. See S. Rep. No. 366, 104th Cong, 2d Sess. 30-31 (1996)

(Section 1442(a)(1) reflects “Congress’ intent that questions concerning * * *

the scope of Federal immunity * * * be adjudicated in Federal court”).

19

district court had subject-matter jurisdiction over the entire

case irrespective of the sovereign status of petitioner. See,

e.g., USX, 345 F.3d 190; Nolan v. Boeing Co., 919 F.2d 1058

(5th Cir. 1990), cert. denied, 499 U.S. 962 (1991); see also H.R.

Rep. No. 1487, supra, at 32. The bar to appellate review in

Section 1447(d) therefore does not apply to any remand order

entered by the district court after it had resolved the immu-

nity questions properly brought before it.”

Because the court of appeals correctly concluded that it

had appellate jurisdiction over the appeal in No. 05-85, the

Court should grant review in that case limited to the question

of petitioner’s status as an organ of a foreign state. In con-

trast, in No. 05-584, the court of appeals concluded that it

lacked jurisdiction. 05-584 Pet. App. la. Although the court

of appeals cited Section 1447(d) as the basis for dismissing the

appeal, there is some dispute as to whether that holding was,

in fact, based on the panel’s understanding that the prior

panel decision in No. 05-85 compelled the conclusion that the

case had not been properly removed. See 05-584 Reply 3-4.

Because the court of appeals’ one page order does not lend

itself to a full consideration of the issue by this Court, we sug-

Although the district court invoked Section 1447(c) as the basis for its

remand, that court’s characterization of its action is not binding on this Court

as to the scope of its appellate jurisdiction. See, e.g., United States v. Jorn, 400

U.S. 470, 478 n.7 (1971) (plurality opinion of Harlan, J.) (“the trial judge's

characterization of his own action cannot control the classification of the action

for purposes of our appellate jurisdiction”); United States v. Sisson, 399 U.S.

267, 279 n.7 (1970). The reviewing court must determine its own jurisdiction

independently. See Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 740, 742 (1976)

(court of appeals erred in accepting the district court's “recital” that final

judgment had been entered when the record showed the contrary); Things —

Remembered, 516 U.S. at 134 (Ginsburg, J., concurring).

20

gest that the Court hold the petition in No. 05-584 and dispose

of it consistent with the disposition of No. 05-85."

Finally, the settlement agreement reached between the

plaintiff and respondent cross-plaintiffs in No. 05-85 does not

moot the petition. Although the respondent cross-plaintiffs

have apparently offered to dismiss the cross-claims, any such

dismissal would be without prejudice to reinstating them if

the underlying settlement with the plaintiffs is overturned.

See 05-85 Reply 2-3. Petitioner has not agreed to settle on

those terms. Jbid. Moreover, it is our understanding that

certain parties object to the settlement and have recently

filed appeals concerning their objections in the state courts.

See Wholesale Eleciricity Antitrust Cases I & II, J.C.C.P.

No. 4204 (Cal. Super. Ct. San Diego County), State of

Montana’s Notice of Appeai (July 28, 2006). Thus, the petition

is not now moot, and this Court would almost certainly resolve

the case before the settlement between the plaintiff and re-

spondent cross-plaintiffs becomes final.

CONCLUSION

The petition for a writ of certiorari in No. 05-85 should be

granted limited to the first question presented. The petition

for a writ of certiorari in No. 05-584 should be held pending

resolution of No. 05-85 and then disposed of as appropriate in

light of the disposition of that case.

Respectfully submitted.

' A typical remand order merely determines which of two acceptable fora

will adjudicate the plaintiff's claim, and Congress has determined that interests

of efficiency warrant barring appellate review of that decision. See Kircher,

126 S. Ct. at 2156. In contrast, Congress has specifically determined that

proper treatment of foreign states and their agencies and instrumentalities

demands that they be afforded a federal forum, in which they would be subject

to trial only by a judge. Congress should not lightly be taken to have intended

for those benefits to be irretrievably lost by a district court’s erroneous ruling.

JOHN B. BELLINGER III

Legal Adviser

CATHERINE W. BROWN

Assistant Legal Adviser

NOVEMBER 2006

21

PAUL D. CLEMENT

Solicitor General

PETER D. KEISLER

Assistant Attorney General

EDWIN S. KNEEDLER

Deputy Solicitor General

DOUGLAS H. HALLWARD-DRIEMEIER

Assistant to the Solicitor

General

MARK B. STERN

H. THOMAS BYRON III

Attorneys