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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0204%3A14

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2007
- **Citation:** 551 U.S. 224

## Text

—

5 Bala ———————___

POWEREX CORP., PETITIONER
v.
RELIANT ENERGY SERVICES, INC., ET AL.

ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS-
FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING PETITIONER

PAUL D. CLEMENT
Solicitor General
Counsel of Record
PETER D. KEISLER
Assistant Attorney General

EDWIN S. KNEEDLER
Deputy Solicitor General

DouUGLAS H. HALLWARD-DRIEMEIER
Assistant to the Solicitor

General
MARK B. STERN
JOHN B. BELLINGER Ill H. THOMAS BYRON III
Legal Adviser Attorneys

Department of State

Washington, D.C. 20520 Department of Justice

Washington, D.C. 20530-0001
(202) 514-2217

BEST AVAILABLE COPY

QUESTIONS PRESENTED

1. 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 Provinee 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).

2. Whether the court of appeals had jurisdiction to review
the district court’s remand order, notwithstanding 28 U.S.C.
1447(d).

(1)

TABLE OF CONTENTS

Page
IE Ue CE « vc cncanvasievencessacessver 1
PE s ccensnn eee hehe snsoeseru skeet aneebedeeusua ]
IIIS oc vosucsntaccasulencenunndesacens 6
Argument:
I. Because the district court had removal jurisdic-

il.

tion, its subsequent remand order was subject to
EE 5. o's Kou pwadadenwes Geceacnvauss 7
A. Section 1447(d) does not preclude

appellate review of an order remanding a

properly removed case on the basis of the

district court’s post-removal rulings ........... 7
B. Because this case was properly removed,

the court of appeals had jurisdiction to

review the district court’s rulings in the exercise

I icc enw detaeedsdesdedcess 11
Petitioner is an agency or instrumentality of
the Province for purposes of the FSIA............ 16

A. Inthe FSIA, Congress restricted the

scope of foreign state immunity while

expanding the class of entities that could

invoke the Act’s procedural benefits ......... 16
B. Congress intended the definition of

agency or instrumentality to be flexible

SN sé cath cnaheeecestscaucaseannnes 20
C. Petitioner is an organ of British Columbia

because it serves a public purpose on

GME GT URS FUGVENED onc cece cccccccccscces 22

(IIT)

IV

Table of Contents—Continued: Page

D. The court of appeals’ analysis of the
various factors in isolation failed to appre-
ciate the extent of petitioner’s relationship

to BC Hydro and the Province .............. 25

ED Shdbsuadduvedeasadeadiecdewadcienisisasecee 30

EEE Kbaduvevesuecceswasdncdsbsassvackseecuseeuns la
TABLE OF AUTHORITIES

Cases:

Acron Inv., Inc. v. FSLIC, 363 F.2d 236 (9th Cir.),

cert. denied, 385 U.S. 970 (1966) ...............2... 24
Alfred Dunhill of London, Inc. v. Republic of Cuba,

EE ors Cup ntkicubedeeeesaseuen’s 16, 17
American Nat'l Red Cross v. S.G., 505 U.S. 247

ee ee ee re re Peer 19
Amoco Petroleum Additives Co., In re, 964 F.2d 706

CT oe tee de ee ee has adad 8
Beacon Threatres, Inc. v. Westover, 359 U.S. 500

DE ied weed eee EUR Usama es ol ee es dy 16

Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343 (1988) .. 8,9
Cherry Cotton Mills, Inc. v. United States,

Se CED duivdavesthonssndvnescseccesess 19
City of Waco v. United States Fid. & Guar. Co.,

ED dnnascénsnndndcecneccnsesnanes 15
Coale v. Societe Coop. Suisse de Charbons, 21 F.2d

Ps HD cc cKdveucdeccavsstcescearars 17

Corporacion Mexicana de Servicios Meritimos, S.A.
de C.V. v. M/T Respect, 89 F 3d 650 (9th Cir. 1996) ... 22

Cases—Continued: : Page

Department of Employment v. United States,
SED Wa PCED os cccdceusundtisweneespenees 19, 22

Dole Food Co. v. Patrickson, 538 U.S. 468 (2003) .... 19, 20
Emergency Fleet Corp. v. Western Union Tel. Co.,

eer eee 20
FSLIC v. Ticktin, 490 U.S. 82 (1989) ...........-.6.- 19
Filler v. Hanvit Bank, 378 F.3d 213 (2d Cir.), cert.

denied, 543 U.S. 1022 (2004) ............ cece eeees 21
First Nat! City Bank v. Banco Para el Comercio

Exterior, 462 U.S. 611 (1983) .............4.. 23, 27, 28
Franchise Tax Bd. v. Construction Laborers

Vacation Trust, 463 U.S. 1(1983) .............006. 14
Freeport-McMoRan, Inc. v. KN Energy, Inc.,

GA ae SED 0c 0s ccccescivevasissacespassans 8
Grupo Dataflux v. Atlas Global Group, L.P.,

OES Ue Be GE nv cd cnccvendeensédscsceeusauun 8
Guaranty Trust Co. v. United States, 304 U.S. 126

GREED 6.0.6. 00h000000600000604000 00000 16
Inland Waterways Corp. v biisee 309 U.S. 517

ED on vevcccnssceu40scenee. sus 5ueusneseeeeeee 19
Keifer & Keifer v. RFC, 306 U.S. 381 (1939) .........-. 19

Kelly v. Syria Shell Petrolewm Dev. B.V., 213 F.3d
841 (5th Cir.), cert. denied, 531 U.S. 979 (2000) ... 21, 22

Kircher v. Putuam Funds Trust, 126 S. Ct. 2145 |

GD 0.000 6eeuensaeasessanessnadaaaeenneeceee 5, 11
Kunzi v. Pan-Am, 833 F.2d 1291 (9th Cir. 1987) ......... 9
Lebron v. National R.R. Passenger Corp., 513 US.

SPOGINEED pe cicscntvcnsanescectenevantesucemenue 24

Lehmenv. Nakshian, 453 U.S. 156 (1981) ............ 16

VI

Cases—Continued: Page

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

ee he dan kein ech eweeseds 8
Linton v. Airbus Industrie, 30 F.3d 592 (5th Cir.),

cert. denied, 513 U.S. 1044 (1994) .... 000000... S
Mitchell v. Forsyth, 472 U.S. 5M (1985)... 2... eee ee 16
Nolan v. Boeing Co., 919 F.2d 1058 (Sth Cir. 1990),

cert. denied, 499 U.S. 962 (1991) .................. 12
Oliver Am. Trading Co. v. Mexico, 264 U.S. 440

ee ee i ia een edeebees 13
Oklahoma Tax Comm'n v. Graham, 489 U.S. 838

RS ES TEN ein RS a a 15
Osborn v. Haley, 1278. Ct. 881 (2007) ........ 8, 10, 12, 15

Patrickson v. Dole Food Co., 251 F.3d 795 (9th Cir.
2001), aff'd and dismissed in part, 538 U.S. 468

a 5, 21
Poore v. American-Amicable Life Ins. Co.,
218 F.3d 1287 (11th Cir. 2000) .................. 8, 10

Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996) .... 8
Reddam v. KPMG LLP, 457 F.3d 1054 (9th Cir.

Dili eeekCeeb eek ebhekeeeekéeteseececs es 8
Sloan Shipyards Corp. v. U.S. Shipping Bd.

Emergency Fleet Corp., 258 U.S. 549 (1922) ......... 17
St. Paul Mercury Indem. Co. v. Red Cab Co.,

ee ise se cucacheeeagene Y
Steel Co. v. Citizens for Better Env't, 523 U.S. 83

REE Ea Lee 13

Thermtron Prods., Inc. v. Hermansdorfer,
EE cccdrsacavestnioeses 7, 8, 11, 12, 14

Vil

Cases—Continued: Page
Things Remembered, Ine. v. Petrarca, 516 U.S. 124

Be Pniet deenctucnibnstendonsdcceanthescdesases 7,13
Trans Penn Wax Corp. v. McCandless, 50 F.3d 217

SS ED 00 6064bsnkcngscdcavenntedanetescedas 8

Transit Cas. Co. v. Certain Underwriters at Lloyd's,
119 F.3d 619 (8th Cir. 1997), cert. denied, 522 U.S.

RE obs ddeaddacecssseccecudsintéasbecusues 8
United States v. Deutsches Kalisyndikat Gesellschaft,

Se ae SEP as GUD cvcetccececccecccesnees 17
United States v. Jorn, 400 U.S. 470 (1971) 2.0... ..0... 13

USX Corp. v. Adriatic Ins. Co., 345 F.3d 190
(3d Cir. 2003), cert. denied, 541 U.S. 903

Re dwewanndecdesstercésuneees 21, 22, 24, 26, 27, 30
Verlinden B.V. v. Central Bank of Nigeria,
Ge EEE oes ccccnescicesevessacess 1, 16,17

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,
eh, es Ss EP SE du bb cadevcdacctesucies 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 Pond
D’Oreille River, Apr. 2, 1984, T.1.A.S. No. 11,088 .... 3

Act of Nov. 19, 1988, Pub. L. No. 100-702,
A, I, GED oo oéocccccovevecacccecses 7)

VIII

Statutes—Continued: Page
Act of Oct. 1, 1996, Pub. L. No. 104-219, § 1,
PP ch dsdecccuseunnss Ghee nerereeescoses 10
Foreign Sovereign Immunities Act of 1976,
PEL dcvcenscnevedcdabaniemecdseud l
ED vccduudvieteucsecuned 1, 4, 12, 20
SE denincdecdecucuess 1, 12, 18, 20, 26
ED \ chducdencdctisedvivedustonns 5
ED «be cuicasescadevenenewanuns 19
SE ba dctuddatevesuséssceadleshined 19
aD ccaucatbausehskekdcuvauaseses 17
Pe MED ccececdcakssdneusentacnens 17, 19
SE CD, Seon dutengeutensesedaauadnes 17
SE ED ni cddcvesdedccesseecunnsens 17
EE 6d cicieckbevaeeunsuneenbaws 19
Government Corporation Control Act, ch. 557,
DED cn cc cucnshucecsduseuacseees 24
rrr re TT 29
SD o£ cc ncucedeccududpedeeusseahouses 24
NS ao cep cnacedboudesiensunesendaoonets 28
PEED ¢ cnduccdevecsenddccescdsisetdocsuss 25
Eo ccna dadeeebadassevessbeseeas 25
EE een ids sSectenné wuienwnsdheaes 14, 16
40) cach a ectnwnsed decent smeenukes 17
Ds tbh diccavedbasensedsbnasderiasieden 19
nc cbv conc deetueyeEkeesheseideeubebe 1]
ED ces ccnddundsduusddwedduaanewn 1, 16, 17

Ps BEE sev ecccsoceccteccesesescescesets 4,11,14

1X

Statutes—Continued: Page
PC EE Reed edebbccededctscesibcensénnes oe 15
Pe ED bc ndusieccdessadudsndconnkenes 4,11
PE DEED | 660 vin Sacvineccccsvesesaeus 9, la
PG CUED cnccntecccduccssduswans 9, 10, la
28 U.S.C. 1447(c) (Supp. 111996) ................005- 10
i Pere T TTC rere ree passim
SP ED sbcakediendneucses bivncuncnee passim
EG Sct dGesks dnd dddawbacndnnanwests 24, 25
Gade eGedccebncededecsascadceneavevkes 25
SPEED shupywaddnnheadducneevesudennns 12

Miscellaneous: ;

BC Hydro, Annual Report 2006 ........... 25
Comment, The Jurisdictional Immunity of Foreign

Sovereigns, 63 Yale L.J. 1148 (1954) ............... 17
PGE, CU SUUPEEED ciccvedevessceccscceseses 30

Bernard Fensterwald, Jr., Sovereign Immunity and
Soviet State Trading, 63 Harv. L. Rev. 614 (1950) .... 18
William C. Hoffman, The Separate Entity Rule in
International Perspective: Should State
Ownership of Corporate Shares Confer Sovereign
Status for Immunity Purposes ?,

I iin I A 18
H.R. Rep. No. 799, 104th Cong., 2d Sess. (1996) ........ 10

H.R. Rep. No. 889, 100th Cong., 2d Sess. Pt. 1
GE dee cakinsencdsaddenndnusenunegsccnceces 9, 10

Miscellaneous—Continued: Page

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

Letter from Jack B. Tate, Acting Legal Adviser, U.S.
Dep't of State, to Philip B. Perlman, Acting Att’y
an ccdnenesestkesscvsecaewaes 16, 17

S. Rep. No. 366, 104th Cong., 2d Sess. (1996) .......... 15

INTEREST OF THE UNITED STATES

The United States has an interest in the proper interpreta-
tion of the Foreign Sovereign Immunities Act of 1976 (FSIA),
28 U.S.C. 1602 et seqg., and in the proper procedures to be fol-
lowed when federal agencies and foreign sovereigns remove
a case to federal court. In response to the Court’s invitation,
the Solicitor General filed a brief at the petition stage ex-
pressing the views of the United States. ;

STATEMENT

1. The FSIA “contains a comprehensive set of legal stan-
dards governing claims of immunity in every civil action
against a foreign state or its political subdivisions, agencies,
or instrumentalities.” Verlinden B.V. v. Central Bank of Ni-
geria, 461 U.S. 480, 488 (1983). The FSIA defines “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, 461 U.S. at 489, and that, “lujpon re-
moval{,| the action shall be tried by the court without jury,”
28 U.S.C. 1441(d). Those rights exist whether or not the for-
eign state is immune from suit in the particular case, and they
extend to agencies and instrumentalities of a foreign state as
well as the foreign state itself. /bid.; 28 U.S.C. 1603(a).

(1)

2

2. Petitioner is a corporation organized under the laws 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. Pet.
App. 53a, 58a. BC Hydro, by law, “is for all its purposes an
agent of the government and its powers may be exercised only
as an agent of the government.” /d. at 166a. The directors of
BC Hydro are appointed by the Lieutenant Governor in Coun-
cil and hold office during pleasure, and the exercise of the
board of directors’ powers is subject to the approval of the
Lieutenant Governor in Council. /d. at 166a-167a.

BC Hydro’s responsibilities include the construction of
dams, storage facilities, and reservoirs, and the generation,
transmission, and distribution of electricity. Pet. App. 32a,
167a-168a. BC Hydro is also responsible for 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. /d. at 50a-51a.'
Under the treaty-based management system, Canadian 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. /d. at 5la. The treaty ac-
cordingly provides that the United States will reimburse the
Province (as assignee of Canada) for foregone power-generat-
ing opportunities. See id. at 5la, 5da.

BC Hydro generates more electric power than the Prov-
ince needs. In 1988, BC Hydro created petitioner, at the di-
rection of the Province, as a wholly owned subsidiary to mar-
ket BC Hydro’s excess power to the United States. See Pet.

' See Treaty Between the United States of America and Canada Relating
to Cooperative Development of the Water Resources of the Columbia River

Basin, signed Jan. 17, 1961, entered into force Sept. 16, 1964, 15 U.S.T. 1555;
Pet. App. 61a-137a.

3

App. 30a; J.A. 267. The directors of petitioner are appointed
by the board of BC Hydro. J.A. 234. A majority of peti-
tioner’s directors are members of the BC Hydro board, ibid.,
and appointment of the single outside member was subject to
the concurrence of the Office of the Premier, zbid.; Pet. App.
58a-59a. Petitioner’s business activities are subject to a risk
management policy established and overseen by BC Hydro,
and there is close operational coordination between BC Hydro
and petitioner to optimize BC Hydro’s generating capacity. |
Id. at 28a. Petitioner’s income is consolidated with that of BC
Hydro, ibid., and a significant portion of those consolidated
profits are either transferred to the Province, id. at 202a-
204a, or taken into account in the rate charged for BC Hy-
dro’s power, thereby subsidizing the cost of power to the Prov-
ince’s citizens, see J.A. 206.

After petitioner was created, it worked together with the
Province in negotiating agreements regarding Canada’s enti-
tlement under the Columbia River Treaty. See Pet. App. 55a.
Ultimately, the Province assigned to petitioner its rights un-
der that Treaty. See J.A. 133-159. In addition, petitioner is
responsible for providing power to the City of Seattle as re-
quired in the Skagit River Treaty between the United States
and Canada.” See J.A. 190-194.

3. a. Plaintiffs—including the State of California and indi-
vidual energy consumers—sued cross-plaintiffs (among oth-
ers) in California state court, seeking damages for alleged
manipulation of the electricity market in violation of state law.
The latter parties filed cross-complaints against petitioner,
BC Hydro, the Bonneville Power Administration (BPA), and
Western Area Power Administration (WAPA), alleging that
they participated in the manipulation of energy markets.

- 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 Pond
D’Oreille River. with annex, signed Apr. 2. 1981, entered inte force Dec. 14,
1984, T.L.A.S. No. 11,088; Pet. App. 138a-1 46a.

dq

Petitioner and BC Hydro removed the case to federal dis-
trict court pursuant to the FSIA, 28 U.S.C. 1441(d). The fed-
eral agencies invoked 28 U.S.C. 1442(a)(1) as additional au-
thority for removal. Pet. App. 19a. The 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 the
cross-claims, and that petitioner could not remove under the
FSIA because it was not an agency or instrumentality of Brit-
ish Columbia. Jd? at 20a, 22a, 33a, 38a.

The district court granted the motion to remand. Pet. App.
18a-44a. 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, id. at
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 lacked jurisdiction over the claims against BPA and
WAPA, so did the federal court, because its jurisdiction on
removal was derivative of that of the state court, ¢d. at 43a-
44a. The court concluded, however, that petitioner did not
come within the statutory definition of an agency or instru-
mentality, and therefore did not qualify as a “foreign state”
under the FSIA. /d. at 33a-38a.

BC Hydro, BPA, and WAPA sought to clarify that the
claims against them had been dismissed, but the district court
denied their requests. The court reasoned that, because it
could not exercise jurisdiction over the claims against those
parties, it could not dismiss the claims, and was instead re-
quired by 28 U.S.C. 1447(¢) to remand the entire action to
state court. See J.A. 281-286, 287-289.

b. The cross-plaintiffs, BPA, WAPA, and petitioner cach
appealed. Pet. App. 8a-9a. The court of appeals first held
that 28 U.S.C. 1447(d) did not bar appellate review. The court
reasoned that the district court had removal jurisdiction over

5

the case at the outset because of BC Hydro’s status as a for-
eign state and BPA and WAPA’s status as federal agencies.
Id. at 10a. Because the district 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 cross-plaintiffs)
that BC Hydro, BPA, and WAPA were entitled to immunity.
Pet. App. lla, 14a. It also held (on the appeal of BPA and
WAPA) that the district court erred in refusing to dismiss the
claims against them because, in a removed action, a defen-
dant’s immunity “is vindicated only by the district court’s
dismissal of the claims.” /d. at 16a.

With respect to petitioner’s appeal, the court of appeals
affirmed, holding that petitioner is not an “organ of a foreign
state or political subdivision thereof,” 28 U.S.C. 1603(b)(2).
Pet. App. 14a. The court stated that its determination of or-
gan status would turn ultimately on “whether the entity en-
gages in a public activity on behalf of the foreign govern-
ment,” and that it would “look to the purposes of an entity’s
activities, the entity’s independence from government, the
level of financial support received from the government, and
the entity’s privileges and obligations under the law.” /d. at
15a (quoting Patrickson v. Dole Food Co., 251 F.3d 795, 807
(9th Cir. 2001), aff’d and dismissed in part, 538 U.S. 468
(2003)). The court of appeals observed that 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 exercise any regulatory author-
ity.” /d. at 15a-16a. The court acknowledged that petitioner
offered evidence that it “serves a public purpose,” but the
court concluded that what it regarded as petitioner’s “high
degree of independence from the government of British Co-
lumbia, combined with its lack of financial support from the
government and its lack of special privileges or obligations

6

under Canadian law dictate {the} holding that PowerEx is not
an organ of British Columbia.” Jd. at 16a.

SUMMARY OF ARGUMENT

1. The district court recognized that BC Hydro, BPA, and
WAPA properly removed this action to federal court in order
to vindicate their sovereign immunity from suit. The court
nevertheless remanded the case to state court on the ground
that, although the defendants properly removed, their immu-
nity prevented the court from actually hearing the claims
against them. That is not a proper basis for remand under
Section 1447(c), which provides for remand only on the basis
of a defect in removal procedure or jurisdiction, not on the
basis of developments in federal court after a case was prop-
erly removed. More particularly, with respect to this case,
Congress specifically provided for removal by foreign states
and the United States, as well as their agencies and instru-
mentalities, in large part to permit questions of immunity to
be decided by the federal courts. Plainly, it did not intend an
affirmative finding of immunity to be a basis for remanding
the immune parties to state court. Because the district
court’s remand was not for a reason specified in Section
1447(c), review of its order was not barred by Section 1447(d).

2. The court of appeals’ mechanical application of the test
for whether an entity is an “organ” of a foreign state was
flawed. The factors must be applied flexibly in service of, and
with constant reference to, the ultimate question: whether the
defendant serves a public purpose on behalf of its govern-
ment. Many of the factors the court found lacking, such as
immunity under domestic law, would be significant if they
were present because they would be strongly suggestive of a
certain type of government entity, but their absence is not
significant. Many United States government instrumentali-
ties lack some of the factors the court of appeals emphasized,
and the test has to be flexible enough to capture the wide
variety of government instrumentalities. Much more signifi-

7

cant, in this case, are the circumstances of petitioner’s cre-
ation, its close involvement with BC Hydro—its sole share-
holder, and the Province’s wholly owned statutory agent—on
matters of public interest, and the close financial relationship
between petitioner and BC Hydro. Under a proper analysis,
it is clear that petitioner qualifies as an “organ” of the Prov-
ince.

ARGUMENT

I. BECAUSE THE DISTRICT COURT HAD REMOVAL JU-
RISDICTION, ITS SUBSEQUENT REMAND ORDER WAS
SUBJECT TO APPELLATE REVIEW

The district court plainly had subject-matter jurisdiction
at the time of removal, and it properly proceeded to resolve
numerous questions of federal law in the exercise of that ju-
risdiction. The district court’s erroneous decision, after hold-
ing several of the defendants immune from the claims against
them, to remand the entire case to the state court was subject
to review by the court of appeals. The language and history
of 28 U.S.C. 1447(d), and this Court’s decisions construing
that provision, make clear that a district court’s order re-
manding a case that was properly removed at the outset is not
subject to Section 1447(d)’s bar on appellate review.

A. Section 1447(d) Does Not Preclude Appellate Review Of
An Order Remanding A Properly Removed Case On The
Basis Of The District Court’s Post-Removal Rulings

1. 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., Ine. v. Hermansdorfer, 423 U.S. 336, 343 (1976).
“{O)|nly remands based on grounds specified in § 1447(c) are
immune from review under § 1447(d).” Things Remembered,
Ine. 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 upheld appellate review of remand or-

8

ders based on: a district court’s decision to overturn the At-
torney General’s certification that a federal employee was
acting within the scope of his employment and thus immune
from suit, Osborn v. Haley, 127 S. Ct. 881, 893-896 (2007); a
district court’s crowded docket, Thermtron, 423 U.S. at 340-
341; 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 re-
moval were eliminated from the case, Carnegie-Mellon Univ.
v. Cohill, 484 U.S. 343, 348, 355 n.11 (1988). Each of those
cases was properly removed to federal district court. The
district court therefore was properly vested with jurisdiction
from the cutset, and the purported ground for the remand
was not one encompassed within Section 1447(c) or, therefore,
by the bar to appellate review in Section 1447(d).

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 all but one of the
courts of appeals to address the issue, as limited to remand
orders based on a defect in subject matter jurisdiction at the
time of removal that rendered the removal itself jurisdiction-
ally improper.’ That 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 subse-
quent events. See, e.g., Osborn, 127 8. Ct. at 896; Grupo
Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 574
(2004); Freeport-McMoRan, lne. v. KN Energy, Inc., 498 U.S.

* See, «.y., Reddam v. KPMG LLP, 457 F.3d 1054. 1058 (9th Cir. 2006);
Letherer vy. Alger Growp, L.L.C., 328 F.5d 262, 265 (6th Cir. 2003); 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.3d619, 623 (8th Cir.
1997), cert. denied, 522 U.S. 1075 (1998); Trans Penn Wax Corp. v. McCand-
less, 50 F.3d 217. 223 (3d Cir. 1995); /n re Amoco Petroleum Additives Co., 9A
F.2d 706, 708-709 (7th Cir. 1992). But see Linton v. Airbus Industrie, 30 F.3d
592, 599-600 (Sth Cir.), cert. denied, 513 U.S. 1044 (1994).

9

426 (1991); Cohill, 484 U.S. at 350-351; St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 294 (1938).

2. That reading is also consistent with the historical devel-
opment of Section 1447(c). Before 1988, the text of Section
1447(¢) made explicit that it authorized remand only based on
defects at the time of removal. It mandated remand “{iJf at
any time before final judgment it appears that the case was
removed improvidentiy and without jurisdiction.” 28 U.S.C.
1447(c) (1982). In Thermtron, the Court recognized that “only
remand orders” issued on the ground that “removal was im-
provident and without jurisdiction{] are immune from re-
view.” 423 U.S. at 346. Thus, under the pre-1988 version, it
was Clear that an order remanding a properly removed case
based on post-removal developments, such as the dismissal of
the federal claims on which removal was based, was not a
remand order under Section 1447(c) and was therefore not
immune from review under Section 1447(d). See, e.g., Cohill,
484 U.S. at 348; Kunzi v. Pan-Am, 833 F.2d 1291, 1295 (9th
Cir. 1987) (where district court found removal jurisdiction
proper, case “could not have been removed ‘improvidently and
without jurisdiction,’ and thus the remand|[] could not have
been based on section 1447(c)”).

That rule was not altered by later amendments to Section
1447(c), which established different time limitations for re-
mands based on two types of defects in removal—a defect in
removal procedure and a defect in removal relating to subject
matter jurisdiction. In 1988, Congress amended Section
1447(c), Pub. L. No. 100-702, § 1016(¢)(1), 102 Stat. 4670, to
require a party to file “[a] motion to remand tie case on the
basis of any defect in removal procedure * * * within 30 days”
or forfeit the objection. 28 U.S.C. 1447(c) (1988). The House
Report explained that “[sJo long as the defect in removal pro-
cedure does not involve a lack of federal subject matter juris-
diction,” there is no reason the case should be sent back to
state court long after the fact. H.R. Rep. No. 889, 100th
Cong., 2d Sess. Pt. 1, at 72 (1988). In contrast, with regard to

10

a “defect” that did “involve a lack of federal subject matter
jurisdiction,” 7bid., the amended statute required remand “at
any time before final judgment,” 28 U.S.C. 1447(c) (1988).*

In 1996, the provision was again amended, Pub. L. No. 104-
219, § 1, 110 Stat. 3022, to clarify that waivable objections to
removal include “any defect other than lack of subject matter
jurisdiction.” 28 U.S.C. 1447(c) (Supp. II 1996). The refer-
ence to “any defect”—like the similar reference in the 1988
House Report—makes clear that the phrase “lack of subject
matter jurisdiction” means a non-waivable jurisdictional “de-
fect” in the removal itself. /bid.; see H.R. Rep. No. 799, 104th
Cong., 2d Sess. 1 (1996) (“30-day limit applies to any ‘defect’
other than the lack of subject matter jurisdiction”).

The foregoing history demonstrates that Congress did not
intend to broaden the class of unreviewable remand orders,
but rather sought only to ensure that plaintiffs promptly raise
any objection to the removal on non-jurisdictional grounds.
See H.R. Rep. No. 889, at 72. As under Thermtron, “the
proper inquiry is still whether the court had jurisdiction at
the time of removal.” Poore, 218 F.3d at 1290; see n.3, supra.

3. There are, moreover, sound reasons why Congress
would not bar appellate review of decisions rendered by the
district court in the exercise of acknowledged jurisdiction.
Section 1447(c) is an “antishuttling provision{].” Osborn, 127
S. Ct. at 895. “Ordinarily, when the plaintiff moves to remand
a removed case for lack of subject matter jurisdiction, the
federal district court undertakes a threshold inquiry; typically

' The House Report makes clear that Congress understood a mandatory
(and therefore unreviewable) remand for lack of subject matter jurisdiction at
the time of removal to be distinct from a remand in a properly removed case
after the court had resolved disputed federal questions, which was discretion-
ary. See H.R. Rep. No. 889, 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”).

11

the court determines whether complete diversity exists or
whether the complaint raises a federal question.” /bid. (em-
phasis added). Such “threshold” jurisdictional questions,
which determine whether the case was properly removed in
the first place, should, and most often will, be decided at the
outset. Section 1447(d) embodies Congress’s judgment that
little would be gained, and much lost, from protracted appel-
late litigation about whether such threshold determinations
were correct. See Kircher v. Putnam Funds Trust, 1268. Ct.
2145, 2152 (2006).

Those considerations are quite different where, as here,
the district court unquestionably possessed jurisdiction over
the removed case from the outset and proceeded to adjudicate
rights of the parties under federal law. At that point, consid-
erations of efficiency may weigh against transfer of the case
back to state court, which would be “perfectly free to reject
the remanding court’s” federal rulings. Kircher, 126 S. Ct. at
2157. That is particularly true in a case like this, when the
district court remanded only after making rulings on federal
issues that confirmed that a federal forum was appropriate.
Assuring access to the federal! judicial system for resolution
of such questions is the reason that Congress provided for
removal in the first place. See Thermtron, 423 U.S. at 344
(comparing remand of “an otherwise properly removed ac-
tion” to dismissal and referral to state court of “an action
properly filed in the federal court in the first instance”).

B. Because This Case Was Properly Removed, The Court Of
Appeals Had Jurisdiction To Review The District Court's
Rulings In The Exercise Of That Jurisdiction

1. In this case, the district court stressed that no party
contested that the actions could be removed pursuant to 28
U.S.C. 1441 and 1442. See Pet. App. 20a. As federal agencies,
BPA and WAPA were entitled to remove the action pursuant
to 28 U.S.C. 1442(a)(1) and have their amenability to suit ad-
judicated by the federal district court, which they did. See

12

Pet. App. 7a, 39a-40a. Similarly, as a crown corporation
wholly owned by the Province of British Columbia, BC Hydro
unquestionably qualifies as an agency or instrumentality of
Canada and therefore as a foreign state under 28 U.S.C.
1603(a) and (b). Pet. App. 12a-14a, 21a. Therefore, BC 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 the federal
court, which claim the court upheld. Pet..App. 21a-33a.

Because removal by BC Hydro, BPA, and WAPA was
proper, the district court had (and retained) subject-matter
jurisdiction over the entire case irrespective of the “foreign
state” status of petitioner. Remand therefore was not re-
quired by 28 U.S.C. 1447(c). See, e.g., 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, 94th Cong., 2d Sess. 32.
(1976). It follows that the bar to appellate review in Section
1447(d)—which applies only to “remand orders issued under
§ 1447(c) and invoking the [mandatory] grounds specified
therein,” Osborn, 127 S. Ct. at 893 (quoting Thermtron, 423
U.S. at 346) (brackets added in Osborn)—does not apply to a
district court order remanding a case after it resolved certain
questions of federal law properly brought before it.”

2. The district court made no reference to Section 1447(c)
in its initial remand order. The court did, however, invoke

* In holding that appellate review of (he remand order was not barred in
Osborn, the Court relied on the specification in 28 U.S.C. 2679%(d)(2) that the
Attorney General's certification that the defendant federal employee was acting
within the scope of his employment “shall conclusively establish scope of office
or employment for purposes of removal.” The Court concluded that that “anti-
shuttling” provision must be given precedence over 28 U.S.C. 1447(d). The
Attorney General's certification is the threshold jurisdictional predicate for
removal under 28 U.S.C. 2679(d\2). The specification that his certification is
conclusive “for purposes of removal” thus serves to foreclose any contention
that remand is required by Section 1447(c) if the district court overturns that
certification. Here, because removal jurisdiction was unquestionably proper
from the outset, the absence of a provision like Section 2679(d)(2) is irrelevant.

15

that provision in subsequent orders that, inter alia, denied
motions by BC Hydro, BPA, and WAPA to clarify that the
claims against them had been dismissed on immunity
grounds. J.A. 283, 288. The district court’s belated invocation
of Section 1447(¢), and its statement that the case was “re-
manded for lack of subject matter jurisdiction,” J.A. 283-284,
are not dispositive. A court’s characterization of its action is
not binding on this Court either to confer or to deny appellate
jurisdiction. See, e.g., United States v. Jorn, 400 U.S. 470, 478
n.7 (1971) (plurality opinion of Harlan, J.) (trial court’s char-
acterization of its action as “acquittal” did not deprive Court
of appellate jurisdiction); Oliver Am. Trading Co. v. Mexico,
264 U.S. 440, 442 (1924) (district court’s characterization of
dismissal of Mexico on grounds of immunity as a “jurisdic-
tional question” did not bar this Court from “determining for
itself whether the question which was certified is in truth one
of the jurisdiction of the lower court as a federal court”);
Things Remembered, 516 U.S. at 134 (Ginsburg, J., concur-
ring). Allowing a district court’s mischaracterization of its
decision as “jurisdictional” to defeat appellate jurisdiction is
particularly problematic in light of the oft-remarked confu-
sion surrounding that term. See Steel Co. v. Citizens for
Better Env't, 523 U.S. 83, 90 (1998) (“Jurisdiction is a word of
many, too many, meanings.”).

In this case, it is evident from the district court’s own or-
ders that its reference to “lack of subject matter jurisdiction”
was not a finding that it lacked removal jurisdiction. To the
contrary, the court drew a clear distinction between the ques-
tion “whether the actions were properly removed in the first
instance,” which was not contested, and the question whether
the court had “jurisdictional authority to hear the removed
claims,” because of the defendants’ immunity. Pet. App. 20a.
‘Thus, the court noted that “[njone of the parties contend that
the cross-|defendants] could not remove these actions under
the provisions of 28 U.S.C. §§ 1441 and 1442.” [bid.
“Rather,” the court continued, “[p]laintiffs argue that the

14

Court lacks jurisdiction over the removed actions and, as
such, they must be remanded.” /bid. (emphasis added). The
court stressed that “(t]he issue hinges, then, on the Court’s
jurisdictional authority to hear the removed claims, not
whether the actions were properly removed in the first in-
stance.” Ibid. (emphases added).

Those questions are, indeed, distinct. Unlike the federal
courts’ original subject matter jurisdiction over foreign states
under Section 1330, which exists only if an exception to the
foreign state’s immunity applies, removal jurisdiction under
Section 1441(d) exists over “/a/ny civil action brought in a
State court against a foreign state as defined in section
1603(a)” (emphasis added). If, in a case properly removed
under this provision, the district court concludes that the for-
eign state is immune, the proper response is to dismiss the
claims against it. That would be the point of a federal immu-
nity. Likewise, as the court of appeals held (Pet. App. 16a-
17a), when a suit against the United States or an agency, such
as BPA and WAPA, that is not subject to suit in state court is
removed under 28 U.S.C. 1442, “the proper course for a fed-
eral district court to take after removal would be to dismiss
the case altogether, without reaching the merits.” Franchise
Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1,
24 n.27 (1983) (emphasis added).

Thus, a holding that a defendant that properly removed a
case to federal court under one of those provisions is immune
from the claims against it is not a finding that the court lacked
removal jurisdiction. It therefore is neither a determination
of a “lack of subject matter jurisdiction” for purposes of Sec-
tion 1447(c), nor an order within the bar to appellate review
in Section 1447(d). To the contrary, it is a ruling that accentu-
ates the need for a federal forum, which is provided to ensure
that the federal-law immunity is fully protected. The district
court’s invocation of Section 1447(c) cannot shield a remand
order on that mistaken ground from appellate review. See
Thermtron, 423 U.S. at 350-352 (Section 1447(d) does not bar

15

review of question whether remand was of the type authorized
by Section 1447(c)).

In Sections 1442(a) and 1441(d), “Congress has expressly
provided by statute for removal | because] it desired federal
courts to adjudicate defenses based on federal immunities”
for the federal government and its agencies and officers, and
for foreign states and their agencies and instrumentalities.
Oklahoma Tax Comm'n v. Graham, 489 U.S. 838, 841-842
(1989); 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”); H.R. Rep. No. 1487, at 32
(FSIA’s removal provision reflects “the potential sensitivity
of actions against foreign states and the importance of devel-
oping a uniform body of law in this area”). It would be absurd
to think that Congress, which provided both immunity from
suit and a right of removal to federal court to vindicate that
immunity, would have intended to shield from appellate re-
view an order like that of the district court here holding that,
because the defendants have a federal immunity from suit, the
claims against them must be remanded to state court. Noth-
ing in the text, history, or purposes of Section 1447(¢) and (d)
requires that absurd result."

“ Even if Seetion 1447(4) did preclude review of the remand order itself, it
would not bar appeal of the separate aspect of the court’s order denying the
motions of BC Hydro, BPA, and WAPA to dismiss the claims against them,
which can be reversed even if the case is to be remanded. See Oshori, 127 5.
Ct. at 902 (Souter, J., concurring and dissenting in part) (citing City of Waco
v. United States Fid. & Guar. Cu., 293 U.S. 140 (1931)). Here, for example, the
court of appeals correctly upheld its appellate jurisdiction over the district
court's order denying BPA and WAPA’s motions to dismiss on immunity
grounds. Pet. App. 16a-17a. Because no party has sought review of that aspect
of the court of appeals’ judgment, it is not before the Court.

We agree with petitioner (Br. 40-41, 48-50) that, even apart from the district
court's uncontested removal jurisdiction based on the removals by BC Hydro,
BPA, and WAPA, there are strong arguments that the remand order denying
petitioner's claim to foreign state status and the right under the FSIA to a

16

II. PETITIONER IS AN AGENCY OR INSTRUMENTALITY
OF THE PROVINCE FOR PURPOSES OF THE FSIA

A. In The FSIA, Congress Restricted The Scope Of Foreign
State Immunity While Expanding The Class Of Entities
That Could Invoke The Act’s Procedural Benefits

1. Until 1952, the United States adhered to the “absolute”
theory of foreign sovereign immunity, Verlinden, 461 U.S. at
486, under which “foreign sovereigns and their public prop-
erty |[we]re * * * not * * * amenable to suit in our courts with-
out their consent,” Guaranty Trust Co. v. United States, 304
U.S. 126, 134 (1938). In 1952, the Department of State an-
nounced the adoption of the “restrictive” theory of foreign
sovereign immunity. See Letter from Jack B. Tate, Acting
Legal Adviser, to Philip B. Perlman, Acting Att’y Gen. (May
19, 1952) (Tate Letter) in Alfred Dunhill of London, Ince. v.
Republic of Cuba, 425 U.S. 682, 711-715 (1976). The Tate Let-
ter stated that thenceforth the Department would recommend
that foreign states be granted immunity only for their sover-
eign or public acts (jure imperii), and not for their commer-
cial acts (jure gestionis). Id. at 711. See Verlinden, 461 U.S.
at 486-487. The United States adopted the restrictive theory
in light of the growing acceptance of that theory among for-

federal forum and bench trial is subject to appellate review in the federal
courts. Mitchell v. Forsyth, 472 U.S. 511, 525 n.8 (1985) (“we have held that
state-court decisions rejecting a party's federal-law claim that he is not subject
to suit before a particular tribunal are ‘final’ for purposes of our certiorari
jurisdiction under 28 U.S.C. § 1257"); ef. Beacon Theatres, Inc. v. Westover, 359
U.S. 500, 511 (1959) (right to interlocutory mandamus relief for denial of jury
trial “is settled”). The right Lo a non-jury trial is an important aspect of foreign
sovereigns’ immunity from suit. Cf. Lehman v. Nakshian, 453 U.S. 156, 160-
161 (1981) (holding the United States’ immunity from a jury trial must be
separately and expressly waived). Further, that right would be irretrievably
lost in the event of a remand, because the right to a bench trial applies only in
the tederal forum. See 28 U.S.C. 1330, 1441(d).

17

eign nations and the need for a judicial forum to resolve dis-
putes stemming from the “widespread and increasing practice
on the part of governments of engaging in commercial activi-
ties.” Tate Letter (Alfred Dunhill, 425 U.S. at 714).

In 1976, Congress enacted the FSIA to establish a “com-
prehensive scheme” governing the manner by which “foreign
sovereigns may be held liable in a court in the United States,”
Verlinden, 461 U.S. at 496-497. The FSIA provides rules
ranging from the manner of serving process, 28 U.S.C.
1608(a), (b) and (¢), to the execution of judgments, 28 U.S.C.
1609-1611. As a general matter, the FSIA codifies the “re-
strictive theory” of sovereign immunity, allowing foreign
states to be sued for their “commercial activities.” Verlinden,
461 U.S. at 487-488. Even where the FSIA denies immunity,
the Act guarantees foreign states the right to remove a civil
action from state to federal court and the right to a bench,
rather than jury, trial in federal court. /d. at 489 (citation
omitted); 28 U.S.C. 1330(a), 1441(d).

2. During the time when the United States adhered to a
policy of “absolute” immunity for foreign states, a significant
practical limitation on that doctrine was the courts’ refusal to
extend immunity to separate legal entities owned by foreign
governments. Following this Court’s rule with respect to
domestic government corporations, many courts held that “la]
suit against a corporation is not a suit against a government
merely because it has been incorporated by direction of the
government, and is used as a governmental agent, and its
stock is owned solely by the government.” United States v.
Deutsches Kalisyndikat Gesellschaft, 31 F.2d 199, 202
(S.D.N.Y. 1929) (citing Sloan Shipyards Corp. v. U.S. Ship-
ping Bd. Emergency Fleet Corp., 258 U.S. 549 (1922)). See
Coale v. Societe Coop. Suisse de Charbons, 21 F.2d 180
(S.D.N.Y. 1921) (A. Hand, J.).

Some commentators characterized the separate entity rule
as applied to foreign sovereigns as a “judicial effort|| to re-
strict the applicability of the absolute theory.” Comment, The

18

Jurisdictional Immunity of Foreign Sovereigns, 63 Yale L..J.
1148, 1154 (1954). The effort was criticized as “unsatisfac-
tory” because it failed to focus on more substantial policy
concerns, such as whether the entity’s actions were under-
taken in a sovereign capacity. Jd. at 1153-1154. See Bernard
Fensterwald, Jr., Sovereign Immunity and Soviet State
Trading, 63 Harv. L. Rev. 614, 619 (1950) (criticizing rule as
“a makeweight used to avoid application of the generally un-
desirable doctrine of absolute immunity”).

The United States’ adoption of the restrictive theory of
immunity created an opportunity for the courts to refine the
separate entity rule. Just as with foreign sovereigns them-
selves, courts could hold their separate corporate entities
subject to suit when engaging in commercial activity, but not
when engaged in activity of a sovereign nature. In practice,
however, there was “chaos” among the lower courts concern-
ing separate entities. William C. Hoffman, The Separate F'n-
tity Rule in International Perspective: Should State Owner-
ship of Corporate Shares Confer Sovereign Status for Immu-
nity Purposes?, 65 Tul. L. Rev. 535, 548 (1991). There were
several approaches a court might employ: continue to apply
“the classic separate entity rule”; infer a waiver of the entity’s
immunity if “the corporate charter contained a ‘sue and be
sued’ clause”; or apply the restrictive theory to corporate
entities, with some courts “looking to the ‘purpose’ of the ac-
tivity” and others “to the ‘nature’ of the activity.” /d. at 550
n.77. Some courts “analogized to the doctrine of disregard of
the corporate form,” but diverged significantly from tradi-
tional corporate law. /d. at 548 & n.71.

When Congress enacted the FSIA, it rejected the either/or
dichotomy of the traditional separate entity rule in favor of a
considerably more calibrated approach. While Congress lim-
ited foreign states’ immunity in keeping with the restrictive
theory, it extended the Act’s protections to foreign states’
agencies and instrumentalities, see 28 U.S.C. 1608(b). Con-
gress thus rejected the analogy of piercing the corporate veil.

. 1

19

See Dole Food, 538 U.S. at 474-476. Rather, it crafted a cali-
brated set of rules that afford immunity and procedural safe-
guards to agencies and instrumentalities that are in some
ways more limited than those afforded foreign states proper.
See, e.g., 28 U.S.C. 1605(a)(3) (ess immunity from expropria-
tion claims), 1606 (limiting punitive damages against foreign
state but not instrumentality), 1608(b) (less restrictive service
of process rules for instrumentalities), #610(b) (broader rights
to execute judgments against property of instrumentalities).
But the important rights to remove a suit to federal court and
to a non-jury trial in federal court were extended to an
“agency or instrumentality of a foreign state.” H.R. Rep. No.
1487, at 32. Congress viewed such protections, even for a
commercial agency or instrumentality, as necessary “[{i]n view
of the potential sensitivity of actions against foreign states
and the importance of developing a uniform body of law in this
area.” /bid. ,

3. By providing that foreign state agencies and instrumen-
talities will generally be subject to suit for their commercial
activities, but guarantying certain procedural protections,
Congress approximated the treatment accorded agencies and
instrumentalities of the federal government. The long-stand-
ing practice with respect to government-owned corporations
is that they are subject to suit, see Keifer & Keifer v. RFC.,
306 U.S. 381, 390-391 (1939), but are nonetheless routinely
recognized as agencies or instrumentalities of the government
for other purposes, including the right to remove a suit to
federal court. See, e.g., American Natl Red Cross v. S.G., 505
U.S. 247, 249, 257 (1992) (Red Cross entitled to remove state
suit); FSLIC v. Ticktin, 490 U.S. 82, 85-86 (1989) (28 U.S.C.
1345 provides jurisdiction over suit brought by FSLIC); De-
partment of Employment v. United States, 385 U.S. 355
(1966) (Red Cross immune from state taxation); Cherry Cot-
ton Mills, Inc. v. United States, 327 U.S. 536, 539 (1946)
(claims of RFC could be asserted as counterclaims of the
United States); Ji/and Waterways Corp. v. Young, 309 U.S.

20

517, 522-524 (1940); Emergency Fleet Corp. v. Western Union
Tel. Co., 275 U.S. 415, 420-421 (1928).

B. Congress Intended The Definition Of Agency Or Instru-
mentality To Be Flexible And Inclusive

1. Congress recognized that there are many ways in which
foreign governments may organize functions carried out on
their behalf, and it made certain that the FSIA would be flexi-
ble enough to accommodate that variety. Thus, in extending
the protections of the FSIA to an “agency or instrumentality”
of a foreign state, 28 U.S.C. 1603(a), Congress provided that
entities could qualify several ways. Specifically, a “separate
legal person, corporate or otherwise,” qualifies as an “agency
or instrumentality” if it is either “an organ of a foreign state
or political subdivision thereof,” or “a majority of [its] shares
or other ownership interest is owned by a foreign state or a
political subdivision thereof.” 28 U.S.C. 1603(a) and (b).

The majority ownership prong of the definition establishes
a categorical rule of inclusion. See Dole Food, 538 U.S. at 474
(construing that categorical protection to require direct own-
ership by the foreign state or political subdivision). Thus,
Congress provided that, even “|w|here ownership is divided
between a foreign state and private interests, the entity will
be deemed to be an agency or instrumentality” as long as “a
majority of the ownership interests (shares of stock or other-
wise) is owned by a foreign state or by a foreign state’s politi-
cal subdivision.” H.R. Rep. No. 1487, at 15. There is no in-
quiry into the entity’s purpose or function—it is treated as a
sovereign based solely on majority ownership.

The other prong of the definition is intended to allow quali-
fication regardless of the entity’s particular form of organiza-
tion or control, based upon a more functional analysis. See
H.R. Rep. No. 1487, at 15-16 (recognizing that an agency or
instrumentality “could assume a variety of forms, including a
state trading corporation, a mining enterprise, a transport
organization such as a shipping line or airline, a steel com-

21

pany, a central bank, an export association, a governmental
procurement agency or a department or ministry which acts
and is suable in its own name”). “A flexible approach is par-
ticularly appropriate after Dole, inasmuch as courts likely
now will be asked to evaluate the possible organ status of a
wide variety of entities controlled by foreign states through
ticring arrangements and because of the widely differing
forms of ownership or control foreign states may exert over
entities.” l/SX Corp. v. Adriatic Ins. Co., 345 F.3d 190, 208
(3d Cir. 2003), cert. denied, 54) U.S. 903 (2004).

2. In determining whether an entity qualifies as an organ
under Section 1603(b), the courts of appeals consider multiple
factors including, ¢rter alia, the circumstances of the entity’s
creation, its purpose, the involvement of the state in its af-
fairs, any financial support or grant of exclusive economic
rights from the state, its privileges and obligations under local
law, and its employment practices. See Pet. App. 15a; Filler
v. Hanvit Bank, 378 F.3d 213, 217 (2d Cir.), cert. denied, 543
U.S. 1022 (2004); USX, 345 F.3d at 209; Patrickson, 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).

The listed factors certainly can be relevant in determining
whether an entity is an “organ” of a foreign state. But, as the
Fifth Circuit has emphasized, a court should “wot apply [the
factors] mechanically.” Kelly, 213 F.3d at 847; see also U/SX,
345 F.3d at 208. Instead, they should be consulted with con-
stant reference to the ultimate question: whether the defen-
dant is “an entity that engages in activity serving a national
interest and does so on behalf of its national government.” /d.
at 209. The weight of any particular factor in a given case
depends on the extent to which it informs that ultimate test.

~ In Patrickson, the Ninth Cireuit held that the foreign entity there was
neither an organ of nor majority-owned by a foreign state or political
subdivision. This Court considered only the question of majority ownership.

22

See id. at 214 (“[wleighing the[] factors qualitiatively as well
as quantitatively”).

C. Petitioner Is An Organ Of British Columbia Because It
Serves A Public Purpose On Behalf Of The Province

1. Petitioner is an organ of British Columbia in light of the
circumstances and purposes surrounding its creation and its
ongoing activities in relatiOn to public resources in the Prov-
ince and Canada’s rights and obligations under international
agreements. Petitioner was created at the specific direction
of the Cabinet of the Province, which decided, after debates
in the Provincial legislative assembly, J.A. 197-202, to “pro-
vide a single window agency to be responsible to market the
export of power outside the province,” J.A. 267. The govern-
ment’s decision was communicated, through the Minister of
Mines and Petroleum Resources, to BC Hydro, a crown corpo-
ration wholly owned by the Province, with the direction to
“incorporate the Export Agency” as a “wholly owned subsid-
iary of B.C. Hydro.” /bid. It is commonly recognized that
state agencies and instrumentalities frequently manage the
export of natural resources in furtherance of governmental
interests. See H.R. Rep. No. 1487, at 15-16 (“state trading
corporation” and “export association” are examples of agen-
cies or insirumentalities); U/SX, 345 F.3d at 210 (noting that
the exploitation and distribution of public resources is a “gov-
ernment purpose” that “would weigh * * * heavily in favor of
organ status”) (citing Kelly, 213 F.3d at 848, and Corporacion
Mexicana de Servicios Meritimos, S.A. de C.V. v. M/T Re-
spect, 89 F.3d 650, 654-655 (9th Cir. 1996)).

Petitioner furthers another quintessential governmental
interest: Canada and the Province have assigned to petitioner
the right to market Canada’s entitlement to power generated
by BPA pursuant to the Columbia River Treaty and the re-
sponsibility of providing power to the City of Seattle as re-
quired by the Skagit River Treaty. See Pet. App. 55a, 56a-
57a; ef. Department of Employment, 385 U.S. at 359 (noting,

23

as supporting American Red Cross’s status as government
instrumentality, that the government had “devolved upon the
Red Cross the right and the obligation to meet this Nation’s
commitments under various Geneva Conventions”). Peti-
tioner actively participated with the Province in negotiating
with the responsible American entities in carrying out the
agreements. See Pet. App. 55a.”

2. Moreover, it is evident, in light of the close relationship
between petitioner and the Province, through BC Hydro, that
petitioner engages in its activities for the benefit of the gov-
ernment. BC Hydro by statute “is for all its purposes an
agent of the government and its powers may be exercised only
as an agent of the government.” Pet. App. 166a. Thus, BC
Hydro’s interactions with petitioner are undertaken on behalf
of the government. Those interactions are considerable.

BC Hydro’s board, which is appointed by the Provincial
Lieutenant Governor, appoints the members of petitioner’s
board of directors. J.A. 234. A majority of petitioner’s board
members are also members of the BC Hydro board, ibid., and
its one outside member was “subject to concurrenée by the
Office of the Premier.” Pet. App. 59a; J.A. 234.

* The district court erroneously discounted the significance of petitioner's
role in marketing the Canadian entitlement under the Columbia River Treaty
because a provision of the assignment agreement provides that “Powerex will
not be or be construed as the agent of the Province.” See Pet. App. 56a n.11,
It is understandable that the Province, which otherwise has the corporate veil
standing between itself and its government-owned corporations, would have
made separate provision in connection with the direct assignment of its treaty
rights to petitioner to clarify that the Province would not be hefd liable for
petitioner's losses or other wrongs in regard to the assignment, nor subject
petitioner to the direct control of the Province. See First Natl City Bank vy.
Banco Para el Comercio Exterior, 462 US. 611, 625 (1983) (noting that “the
instrumentality’s assets and liabilities must be treated as clistinet from those
of its sovereign in order to facilitate credit transactions with third parties”).
The quoted provision therefore has little independent significance to peti-
tioner’s status under the ESTA beyond the fact, which the FSLA presumes, that
petitioner is a separate legal entity.

24

The Province has, moreover, sole beneficial ownership and
control of petitioner, albeit through BC Hydro. In such cir-
cumstances, the inference that petitioner is an organ of the
Province is particularly strong. See USX, 345 F.3d at 213
(when a foreign government “has complete control over all
shares of [the defendant} albeit through a tiered arrange-
ment,” and the subsidiary serves the government’s purposes,
“this factor weighs in favor of a finding of organ status”).
When no private person owns any interest in an entity, then
the ultimate fiduciary responsibility is to the state and the
state alone.’ Indeed, the United States regards its own
second-tier subsidiaries of wholly owned government corpora-
tions to be, like their parents, “wholly owned Government
corporation{s].”"* Moreover, such second-tier government
corporations are afforded numerous advantages as agencies
or instrumentalities of the government. See, e.g., 12 U.S.C.
84(c)(5) (loans to “any corporation wholly owned directly or
indirectly by the United States”), 28 U.S.C. 1733 (admissibil-

* In contrast, in Dole Food, Bromine Compounds, Ltd., was three levels
removed from the government, and private owners participated at two
different levels, thereby reducing the government's ultimate beneficial interest
to 66%, and obligating the entity to serve interests other than the government's
alone. See J.A. at 9%, Dole Food, supra, No. 01-598, J.A. 93.

See Government Corporation Control Act, ch. 557, § 101, 59 Stat. 597-598
(listing as “wholly owned Government corporation! s|” the Regional Agricul-
tural Credit Corps., Defense Plant Corp., Defense Supplies Corp., Metals
Reserve Co., War Damage Corp... RFC Mortgage Co., Petroleum Reserves
Corp., Rubber Development Corp., Tennessee Valley Associated Cooperatives,
Inc., and FSLIC); Lebrow v. National R.R. Passenger Corp., 513 U.S. 374, 388-
389 (1995) (noting, with respect to all but the last of these, that they were
incorporated by other government owned corporations); Acron Jnus., [ne. v.
FSLIC, 363 F.2d 236, 239-240 (9th Cir.) (noting that the FSLIC was, in 1945,
a wholly owned subsidiary of the Home Owner's Loan Corporation), cert.
denied, 585 U.S. 970 (1966).

25

ity of copies of records), 2408 (no requirement to post secu-
rity)."" e

The close relationship between the Province and its wholly
owned second-tier subsidiary is demonstrated in several ways.
Petitioner’s business activities are subject to a risk manage-
ment policy established by BC Hydro, and there is close coor-
dination between BC Hydro and petitioner to optimize BC
Hydro’s generating capacity. Pet. App. 28a. Petitioner's net
income is reported with BC Hydro’s on consolidated income
statements, thereby eliminating the financial effect of deal-
ings between the two. J.A. 215, 220; BC Hydro, Annual Re-
port 2006, at 83 . A significant portion of BC Hydro’s consoli-
dated profits is either transferred to the Province, id. at 262a-
204a, or taken into account in the rate charged for BC Hy-
dro’s power, with the effect that those profits subsidize the
cost of power to the Province’s citizens. See J.A. 206.

D. The Court Of Appeals’ Analysis Of The Various Factors In
Isolation Failed To Appreciate The Extent Of Petitioner's
Relationship To BC Hydro And The Province

1. Although the court of appeals made reference to “the
ultimate question” of whether petitioner “engages in a public
activity on behalf of the foreign government,” Pet. App. 15a,
it proceeded mechanically, as through a checklist. Its analy-

—

" As presently worded, Sections 1733 and 2408 confer procedural benefits
on any “agency” of the United States, but the Reviser’s notes from the 1948
revision of Title 28 confirm that that word encompasses corporations indirectly
owned by the United States. See 28 U.S.C. 1733, historical and revision notes
(the words “any corporation all the stock of which is beneficially owned by the
United States either directly or indirectly” in 28 U.S.C. 661 (1940) “were
omitted as covered by ‘or agency’ ”); 28 U.S.C. 2408, historical and revision
notes (“Word ‘agency’ was substituted” for phrase in 28 U.S.C. S70 (1940), “in
view of the creation of many independent governmental agencies since the
enactment of the original law”).

oF o~

sis, in full, of the factors as they apply to petitioner 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]
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 put to one side the substantial
evidence that petitioner “serves a public purpose” because it
did not conform with or was outnumbered by the other speci-
fied factors. The court did not analyze those factors to see
what light they shed on whether petitioner serves the public
interests of the Province. ;

2. Furthermore, the factors that the court of appeals con-
sidered are not factors of equal weight that can be counted up
and scored. Some factors would powerfully suggest agency
status if present, but their absence may carry little, if any,
significance. One example is whether petitioner is “immune
from suit” under Canadian law. Pet. App. 16a. It would be a
strong, perhaps even determinative, indication that a foreign
state regarded a separate legal entity as its “organ” if the
state extended to the entity the sovereign’s immunity from
suit in its own courts. But, the absence of such immunity can-
not, consistent with Congress's intent, be deemed a “factor| |
weighing against” that status. /bid. In order to be an organ,
“an entity must be a separate legal person,” USX, 345 F.3d at

~ 214; 28 U.S.C. 1603(b), and Congress intended that that re-
quirement could be satisfied by “any * * * entity which, un-

27

der the law of the foreign state where it was created, can sue
or be sued in its own name.” H.R. Rep. No. 1487, at 15 (em-
phasis added). See First Nat'l City Bank v. Banco Para el
Comercio Exterior, 462 U.S. 611, 624 (1983) (Bancec) (an
“instrumentality is typically established as a separate juridi-
cal entity, with the power||* * * to sue and be sued”); U’SX,
345 F.3d at 214 (concluding that whether the defendant “is
subject to suit” in its home country “should not be considered
|as] part of the organ analysis”). Indeed, treating the absence
of immunity as counting against qualification as an organ is
inconsistent with Congress’s practice of subjecting its own
corporate creations to suit while extending them other
protections as agencies or instrumentalities of the govern-
ment. See pp. 19-20, supra.

The court of appeals also counted as a factor against peti-
tioner that it was “not wholly owned by the government,”
Pet. App. 15a-16a, by which it meant that petitioner “is not
owned by the Province, but by BC Hydro,” jd. at l6a. That
approach, which counts the fact that an entity fails to satisfy
the majority-ownership test as a strike against recognizing it
as an organ as well, ignores that Congress specifically estab-
lished the two tests as a/ternatives in order to capture the full
“variety of forms” by which a foreign state could organize its
agencies or instrumentalities. H.R. Rep. No. 1487, at 15-16.
Other arrangements besides the traditional one of direct own-
ership can also be indicative of a significant relationship be-
tween the government and the entity.

The court also counted as a factor against petitioner that
it engaged in commercial, rather than regulatory, activities.
Pet. App. 16a. However, as the Third Circuit has cautioned,
“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 F'SIA (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.
Congress itself recognized that foreign states are especially

28
likely to create separate legal entities as agencies or instru-
mentalities of the state to conduct activities that might also be
undertaken by private corporations, such as “a mining enter-
prise, a transport organization such as a shipping line or air-
line, [or] a steel company.” H.R. Rep. No. 1487, at 16.

The fact that petitioner is “not staffed with civil servants,”
Pet. App. 15a, should also be of little significance. Precisely
because the organ prong of the test is a catch-all, it covers a
range of entities with widely varying relationships with the
state. While an organization staffed entirely with civil ser-
vants would mark an entity as particularly likely to qualify,
one would not necessarily expect to find civil servants staffing
even a wholly owned corporation. The Tennessee Valley Au-
thority, for example, “perhaps the best known of the Ameri-
can public corporations,” Bancec, 462 U.S. at 625 n.15, does
not adhere to the laws regarding public employees, see 16
U.S.C. 831b (board shall appoint officers and employees
“without regard to the provisions of Civil Service laws appli-
cable to officers and employees of the United States”). See
Bancec, 462 U.S. at 624 (instrumentalities are “often” not
subject to governmental “personnel requirements”). More-
over, to the extent that there might be any negative inference
from the fact that petitioner’s employees are not civil ser-
vants, it is insignificant in light of those features of peti-
tioner’s relationship with the Province and BC Hydro that
distinguish it from a purely private corporation. For example,
petitioner's employees participate in BC Hydro’s retirement
plan, J.A. 247-248, and members of petitioner’s board of direc-
tors are appointed by BC Hydro’s board, which is appointed
by the Provincial Lieutenant Governor, and outside members
of petitioner’s board are “subject to concurrence by the Office
of the Premier.” Pet. App. 58a-59a.

Finally, the court of appeals’ statement that petitioner
lacks “financial support from the government” and “special
privileges or obligations under Canadian law,” Pet. App. l6a,
is inaccurate. As petitioner explains (Pet. Br. 31-32), it is

29

immune from taxation by the Province and Canada’s federal
government, and it is subject to numerous financial benefits,
including the Province’s ability to make loans to it or assume
its debt. In addition, petitioner has the considerable advan-
tage of a firm commitment to export surplus power generated
by BC Hydro, the Province's statutory agent, and of being the
assignee of the Province’s rights under the Columbia River
Treaty. Petitioner is also subject to reporting requirements
that Canada imposes on corporations in which the government
owns “directly or indirectly” a majority of the shares. See id.
at 28 n.30, 30 n.31."°

3. As demonstrated, even those factors that the court of
appeals viewed as detracting from a finding of organ status
actually reinforce the close connection between the Province
and petitioner and the conclusion that petitioner serves a pub-
lie purpose on behalf of the Province. Petitioner is much more
interrelated with the Province, and much more clearly serves
a public purpose on behalf of a foreign sovereign, than many
corporations in which a government simply owns a majority
of the shares. An entity in which “ownership is divided be-
tween a foreign state and private interests,” H.R. Rep. No.
1487, at 15, may well be subject to suit and engage predomi-
nantly, even exclusively, in activities deemed “commercial”
under the FSIA, and may do so to the significant benefit of
persons other than the state. But Congress nonetheless cate-
gorically afforded such entities the protections of the Act.
The alternative “agency or instrumentality” standard should
be construed in that expansive light.

There is no reason for the courts to strain, as they did dur-
ing the period of absolute immunity (see pp. 17-18, spra), to
avoid recognizing an entity as an agency or instrumentality of

" In the United States, the Government Corporation Control Act, 31 U.S.C.
9101-9110, likewise imposes certain financial requirements, including reporting
obligations, on “Government corporation|s |,” including, as indicated above, see
p. 24 & n.10, spre, corporations indirectly owned by the government.

30

a foreign state. Under the FSIA’s framework, “the fact that
an entity is an ‘agency or instrumentality of a foreign state’
does not in itself establish an entitlement to sovereign immu-
nity.” H.R. Rep. No. 1487, at 15. But by the same token,
“[ajn entity which does not fall within the definitions of sec-
tions 1603(a) or (b) would not be entitled to sovereign immu-
nity +” any case,” regardless of whether the conduct at issue
was sovereign in nature. /bid. (emphasis added). See USX,
345 F.3d at 210. As the Departments of State and Justice
recognized when they submitted to Congress the 1973 version ~
of the FSIA, extension of the Act’s protections to agencies
and instrumentalities was “not likely” to “result in a large
number of immunity cases, as most foreign activities of such
entities are likely to be commercial and will not be entitled to
immunity.” 119 Cong. Rec. 3436 (1973). By nonetheless
bringing such entities within the FSIA’s scope, Congress con-
ferred on them its important procedural protections, as well
as immunity from suit when undertaking sovereign functions.

CONCLUSION

The court of appeals’ ruling that petitioner is not an agency
- or instrumentality of British Columbia should be reversed. If
the Court concludes that the court of appeals did not have
jurisdiction of petitioner’s appeal, the judgment of the court
of appeals should be vacated only to that extent. See n.6, su-

pra.
Respectfully submitted.

JOHN B. BELLINGER III
Legal Adviser
Department of State

MARCH 2007

dl -

PAUL D. CLEMENT
Solicitor General

PETER D. KEISLER
Assistant Attorney General

EDWIN 8S. KNEEDLER
Deputy Solicitor General

DouGLAS H. HALLWARD-DRIEMEIER
Assistant to the Solicitor
General
MARK B. STERN
H. THOMAS BYRON III
Attorneys

APPENDIX

1. 28 U.S.C. 1447(c) (1982) provides in pertinent part:

If at any time before final judgment it appears that the
case was removed improvidently and without jurisdiction, the
district court shall remand the case and may order the pay-
ment of just costs. * * *.

2. 28 U.S.C. 1447(c) (1988) provides in pertinent part:

A motion to remand the case on the basis of any defect in
removal procedure must be made within 30 days after the
filing of the notice of removal under section 1446(a). If at any
time before final judgment it appears that the district court

lacks subject matter jurisdiction, the case shall be remanded.
* ¢ & ;

3. 28 U.S.C. 1447(c) (2000) provides in pertinent part:

A motion to remand the case on the basis of any defect
other than lack of subject matter jurisdiction must be made
within 30 days after the filing of the notice of remova! under
section 1446(a). If at any time before final judgment it ap-
pears that the district court lacks subject matter jurisdiction,
the case shall be remanded. * * *.

(la)

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0204%3A14. Public record. Not legal advice.