Petition for Writ of Certiorari — USX Corp. v. Adriatic Insurance

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Supreme Court, U.S.

FILE O

No. 03-953 DEC 24 2003

en oe ence

Se ——————_

OFFICE OF THE CLERK

In The

Supreme Court of the Anited States

USX CORPO. ATION; BESSSMER AND

LAKE ERIE RAILROAD COMPANY,

Petitioners,

ADRIATIC INSURANCE COMPANY, ET AL.,

Respondents.

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Third Circuit

PETITION FOR WRIT OF CERTIORARI

JAMES C. MARTIN J. MICHAEL JARBOE

Counsel of Record U.S. STEEL CORPORATION

LAWRENCE E. FLATLEY 600 Grant Street,

GEORGE L. STEWART, II 15th Floor

TRACI SANDS REA Pittsburgh, PA 15219

REED SMITH LLP (412) 433-2880

435 Sixth Avenue

Pittsburgh, PA 15219

(412) 288-3131

Attorneys for Petitioners

USX Corporation and

_ Bessemer and Lake

Erie Railroad Company

| RECEIVED

| pre 3 6 2003 COPKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

: " ariek OE THE CLERK

SUPREME COURT, U.S.

QUESTIONS PRES:;NTED

In Dole Food Co. v. Patrickson ‘23 S. Ct. 1655 (2003),

this Court held that for purposes «@ determining removal

jurisdiction under the Foreign Sovereign Immunities Act

(FSIA), £ U.S.C. § 1603, an entitys status as an agency or

instrumentality of a foreign government must be deter-

mined based on facts existing at the time the lawsuit is

filed. This Court also held that inuirect, tiered ownership

was insufficient to confer instrumentality status under the

majority «;wnership prong of § 1603(b)(2).

In light of these two holdings in Dole Food, the opin-

ion below presents two independent questions for this

Court’s review:

(1) Whether the Third Circuit’s opinion below

conflicts with and contravenes this Court’s hold-

ing in Dole Food by finding that instrumentality

status for purposes of the “organ” prong of

§ 1603(b)(2) can be determined based on facts ex-

isting years before the filing of the lawsuit, as

opposed to those existing at the time of filing;

and

(2) Whether the Third Circuit’s opinion below

conflicts with and contravenes this Court’s hold-

ing in Dole Food by finding that indirect, tiered

ownership is sufficient to confer instrumentality

status under the “organ” prong of § 1603(b)(2).

Petitioners and Appellants respectfully request that

this Court grant review on these questions.

PARTIES TO THE PROCEEDINGS

Petitioners

U.S. Steel Corporation and Bessemer and Lake Erie

Railroad Co.

Respondents

Adriatic Insurance Company; AG Group, The Successor In

Interest to Securitas A.G.; AIU Insurance Company;

Allianz Underwriters Insurance Company; Allianz Versi-

cherungs A.G.; Allstate Insurance Company, The Successor

in Interest to Northbrook Excess & Surplus Insurance

Company and Northbrook Insurance Company; American

Insurance Company; American Reinsurance Company;

AON Corporation, The Successor in Interest to Union

Indemnity Insurance Company of New York; Arkwright

Mutual Insurance Company; Atlanta International Insur-

ance Company; Birmingham Fire Insurance Company;

Centennial Insurance Company; Continental Casualty

Company; Continental Insurance Company; Danielson

National Insurance, The Successor in Interest to the

Mission Insurance Company; Employers Mutual Casualty

Company; European General Reinsurance Company of

Zurich; Evanston Insurance Company; Excess Insurance

Company, LTD.; Federal Insurance Company; Fireman’s

Fund Insurance Company; First State Insurance Com-

pany; Government Employees Insurance Company;

Granite State Insurance Company; Haftpflichtverband

Der Deutschen Industrie Versicherungsverein A.G-.;

Hartford Accident and Indemnity Company; Insurance

Company of the State of Pennsylvania; International

——ee

PARTIES TO THE PROCEEDINGS - Continued

Insurance Company; Lexington Insurance Company;

National Casualty Company; National Union Fire Insur-

ance Company of Pittsburgh, PA; Northbrook Excess &

Surplus Insurance Company; Northbrook Insurance

Company; Rotterdamse Assurantiekas N.V.; St. Paul

-Surplus Line Insurance Company; Sentry Insurance, A

Mutual Company, As Assumptive Reinsurer of the Great

Southwest Fire Insurance Company; Swiss Reinsurance

Company; Tudor Insurance Company; Twin City Fire

Insurance Company; United States Fire Insurance Com-

pany; Vanliner Insurance Company, The Successor in

Interest to The Great Southwest Fire Insurance Company;

Westchester Fire Insurance Company; Zurich Insurance

Company; Zurich International LTD; Certain of the Under-

writers and International Insurers Subscribing to Lloyd's

Policy Nos. 77DD2126C, 78BH3189, 78BH3190, 78BH3191,

PY021577, PY021378/78DD1459C, 79BH1269, 79BH1270,

78DD1406C, 79BH1271, 79BH1272, 80DD19C/PY021379,

79BH5311, 79BH5312, PY135179, PY021379A, 80BH0659,

80BH0660, 80BH0661, 80BH0662, PY172180/80DD2562C,

PY172280/80DD2563C, HA081280/LBM/1HB06910, 2KA42270/

HA081281/LBR, KY019382, KY019482, KY021982, AND

KY021881; Icarom, Formerly known as Insurance Corpo-

ration of Ireland; and Icarom plc, formerly known as

Insurance Corporation of Ireland

DISCLOSURE STATEMENT

Petitioner and Appellant United States Steel Corpora-

tion is a successor by merger of USX Corporation. There is

no public company that holds more than 10 percent of

United States Steel Corporation’s stock.

Petitioner and Appellant Bessemer and Lake Erie

Railroad is a second-tier subsidiary of Great Lakes Trans-

portation, LLC, a privately held Delaware limited liability

company. There is no public company that owns more than

10 percent of Bessemer’s stock.

—_——————

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ...0......sscscsssssssssscssesssreeessen i

PARTIES TO THE PROCEEDINGS......ss.sscssssssssssssses ii

DISCLOSURE STATEMENT .....s.scccssssssscssssssssssssssssssse iv

TABLE OF AUTHORITIES......-.sssscsscsscsscsssssssssssssseseses vi

CO ETE AT a 1

I. OPINIONS BELOW. ...sssscssccscccsssscssssssssssssssesssee 1

Il. JURISDICTION ...-ccccssssssssssscssssescesssssscessesssssssen 1

Ill. STATUTORY PROVISIONS INVOLVED.......... 2

IV. STATEMENT OF THE CASE.....sssccccccsssssseceeeee 3

V. REASONS TO GRANT THE WRIT.........css000000 10

A. The Third Circuit’s Opinion Conflicts With

And Contravenes This Court’s Holding In

Dole Food That Jurisdiction Under The

FSIA Depends On The Facts Existing At

The Time The Lawsuit Is Filed................... 11

B. The Third Circuit’s Opinion Conflicts With

And Contravenes This Court’s Holding In

Dole Food That Indirect, Tiered Ownership

Is Insufficient To Confer Instrumentality

Status Under The Majority Ownership

Precengt OF Tin Fee cccins cevicrnsvscrventasteninnensexeses 16

VI. CONCLUBION cccccccrreccccsosecssesercccsevecessoessesersesoves 23

TABLE OF AUTHORITIES

Page

CASES

A, B, C, D, E, F v. Zemin, 282 F. Supp 2d 875 (N.D.

ils SDUTED sceniceisusnccnassreevadhidaaiaamaiaeaeliiaen 4

Abrams v. Societe Nationale des Chemins de Fer

Francais, 332 F.3d 173 (2nd Cir. 2003)..........ceeeceeee 4

Altmann v. Republic of Aus., 317 F.3d 954 (9th Cir.

SITE vacvvciigsiereieineentnnsecnractaaaiemiiamaenantaaaannaaiaiemes 4

BP Chems. Ltd. v. Jiangsu Sopo Corp., 285 F.3d 677

CTA GIR: IE ccnicersssenssenisiniwcisenieansiisdnientenammaniaiiaa 4

Conn. Bank of Commerce v. Republic of Congo, 309

A BED CR GR, Ba iivviccstevcccevssensscnvccnsineoee nesapmeeeuicidinite 4

Dole Food Co. v. Patrickson, 123 S. Ct. 1655 (2008)..... passim

_ EIE Guam Corp. v. The Long Term Credit Bank of

Japan, Ltd. , 322 F.3d 635 (9th Cir. 2003).................. 4,18

Gulf Petro Trading Co. v. Nigerian Nat'l Petroleum

Corp., 2003 U.S. Dist. LEXIS 19018 (N.D. Tex.

FID icacesincusoninsinsienaiainustaidinniaenhiainianam iain aaa 4

In re Air Crash Disaster Near Roselawn, 96 F.3d

Sie CFU GRE, SID saxsiceseecinssdieeetnaiannteaminasan 21

In re Surinam Airways Holding Co., 974 F.2d 1255

CER CARR, Bali iiestonisdsnctenssibeidaabasamnctaeneuaee ane 21

Int’l Ins. Co. v. Caja Nacional De Ahorro Y Seguro,

OS FG SIS CF Ge Bec cinevvisccesecntesarssimerteenrstcctocs 4

Karaha Bodas Co. v. Perusahaan Pertambangan

Minyak Dan Gas Bumi Negara, 313 F.3d 70 (2nd

GARE, SED vciniciverisvnseechecnivenniuensietidaniammacmmaaiaa ana 4

Keene Corp. v. United States, 508 U.S. 200 (1998)............ 12

Vii

TABLE OF AUTHORITIES -— Continued

Page

Keller v. Cent. Bank of Nig., 227 F.3d 811 (6th Cir.

Ee aT NN NO Ae TM NAME LK SII Sir, 2A RA A 4

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

ER RR Re emt RINE A RW 14, 18

Monegasque de Reassurances S.A.M. (monde Re) v.

Nak Naftagaz of Ukr, 311 F.3d 488 (2nd Cir.

ee NiciebntecinsdesiciintaecMaimaitiatat stair ei I Se ee 4

Nolan v. Boeing Co., 919 F.2d 1058 (5th Cir. 1990)........... 21

Presidential Comm’n on Good Gov't v. United States

Dist Court for the Dist. Of Haw. (In re Republic of

Phil.), 309 F.3d 1143 (9th Cir. 2002) ...................ceeeeeeeee 4

Price v. Socialist People’s Libyan Arab Jamahiriya,

ee ee ee is SI ee incciininechiiiinntanitatriaiisiniisbiaitianicenaans 4

Rodriguez v. Republic of Costa Rica, 297 F.3d 1 (1st

IG Se cschieiseiaaiecinncesiscnstclsidnhasihlitehedhapcisla cacti tale aac ae 4

Simons v. Lycee Francais De New York, 2003 U.S.

Dist. LEXIS 17644 (S.D.N.Y. 2003) ...........................0000. 4

Southern Ocean Seafood Co. v. Holt Cargo Sys.,

Inc., 1997 WL 539763 (E.D. Pa. Aug. 11, 1997)....... 14, 18

Southway v. Cent. Bank of Nig., 328 F.3d 1267

ee EE CE iniesicnsishinsntisinicataissatisininwiaescmenee demiteaon 4

World Wide Demil, LLC v. Nammo, 2002 U.S. App.

Eee Oe CE Gi BI cetccewtesicincncsvepencentecensinscnesnns 4

World Wide Minerals, LTD. v. Republic of Kaz, 296

Re Pe ees CAE SI ncnciichesinciniinshcsiniinindespdinanisdenniaidatuasiaaas 4

PO TE ee a Pee SS RE eG a EE UE N Ten etry ENE MMR? Pee,

Vili

TABLE OF AUTHORITIES — Continued

Page

STATUTES

ee NT TITLED sntsticsciaitacipnsinissasenaalenciiaiicraiciipaiidaganienbeiiaslaamaouses 2

Be es Oe IEEE cathiccccbinahoshidailictnpsiiictbonaplatiidncieds 1, 2, 5, 6, 11

TE: Te PI IIE iiss si siisisicinnipinasininnceinumnsniabiiiinnes passim

TEXTS

H.R. Rep. No. 94-1487 (1976), reprinted in 1976 ~

ik Foe oS SS SRN Neemenrey eon Tiana adidas 21, 22

rae SNe I GN aipcctsseinieceniscccsnniintnicdcsiainitiatidnsianin 19

PETITION

Petitioners respectfully request that a writ of certio-

rari issue to review the judgment of the Court of Appeals

for the Third Circuit, entered September 25, 2003.

OPINIONS BELOW

This petition is from the United States. Court of

Appeals for the Third Circuit’s opinion in USX Corp. v.

Adriatic Ins. Co., et al., No. 00-3424, 345 F.3d 190, 2003

WL 22211498 (8rd Cir. 2003), which affirmed an unpub-

lished opinion of the United States District Court for the

Western District of Pennsylvania dated September 11,

2002.

A copy of the court of appeals’ September 25, 2003

opinion is included in the Appendix at App. 1.A copy of the

district court’s March 29, 1996 opinion is included at App.

54. A copy of the district court’s March 22, 2000 opinion is

included at App. 90.-A copy of the district court’s Septem-

ber 11, 2002 opinion is at App. 178.

II.

JURISDICTION

The district court originally exercised federal jurisdic-

tion pursuant to 28 U.S.C. § 1441(d) and 28 U.S.C. § 1603

on the basis that ICAROM ple (“ICI/Icarom”), the sole

third party defendant in this case, qualified as an “in-

strumentality of a foreign state” under the FSIA. USX

challenged that exercise of federal jurisdiction in the

district court and on appeal before the United States

ee ees i a at Dae ok

ncn LLL

Court of Appeals for the Third Circuit. The court of ap-

peals entered an order on May 1, 2001, remanding the

action to the district court for discovery on the jurisdic-

tional issue. The May 1, 2001 order also provided for USX

to file a renewed motion to remand at the conclusion of the

permitted discovery. :

Once discovery was completed, USX renewed its

original motion to remand the action to state court. The

district court denied USX’s renewed motion on September

11, 2002. USX appealed to the Third Circuit. The court of

appeals affirmed the district court’s decision upholding

federal jurisdiction on September 25, 2003. USX timely

filed this Petition for Writ of Certiorari within 90 days of

the judgment of the court of appeals. This Court’s jurisdic-

tion is based on 28 U.S.C. § 1254(1).

ITI.

STATUTORY PROVISIONS INVOLVED

28 U.S.C. § 1441(d):

Section 1441. Actions removable generally

(d) Any civil action brought in a state court

against a foreign state as defined in

section 1603(a) of this title may be re-

moved by the foreign state to the dis-

trict court of the United States for the

district and division embracing the

place where such action is pending.

Upon removal the action shall be tried

by the court without a jury. Where re-

moval is based upon this subsection,

the time limitations of section 1446(b)

of this chapter may be enlarged at any

time for cause shown.

28 U.S.C. § 1603(b):

Section 1603. Definitions

For purposes of this chapter —

(a) A “foreign state” except as used in sec-

tion 1608 of this title, includes a political subdi-

vision of a foreign state or an agency or

instrumentality of a foreign state as defined in

subsection (b).

(b) An “agency or instrumentality of a for-

eign state” means 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 citizen 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.

IV.

STATEMENT OF THE CASE

Like Dole Food Co. v. Patrickson, 123 S.Ct. 1655

(2003), this case presents a recurring and important

question regarding the appropriate construction of the

Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C.

§ 1603 (2003). Enacted by Congress in 1976, the FSIA is

intended to bring the United States in line with interna-

tional practice by providing foreign states and their

agencies and instrumentalities with a means of easing the

risks associated with li*igation in the United States. To

strike an appropriate balance between fostering comity

with foreign nations and protecting the interests of liti-

gants, the FSIA imposes various restrictions on plaintiffs.

Among these are the denial of a right to a jury trial, the

imposition of special service of process rules, and a limita-

tion on the execution of judgments.

* Much of today’s business, commercial and tort litigation involves

foreign parties. The FSIA accordingly is invoked with frequency in

resolving these disputes. See, e.g., Abrams v. Societe Nationale des

Chemins de Fer Francais, 332 F.3d 173 (2nd Cir. 2003); Southway v.

Cent. Bank of Nig., 328 F.3d 1267 (10th Cir. 2003); EIE Guam Corp. v.

Long Term Credit Bank of Japan, 322 F.3d 635 (9th Cir. 2003); Altmann

v. Republic of Aus., 317 F.3d 954 (9th Cir. 2002); Karaha Bodas Co. v.

Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 313 F.3d 70

(2nd Cir. 2002); World Wide Demil, LLC v. Nammo, 2002 U.S. App.

LEXIS 23959 (4th Cir. 2002); Monegasque de Reassurances S.A.M.

(monde Re) v. Nak Naftagaz of Ukr, 311 F.3d 488 (2nd Cir. 2002);

Presidential Comm’n on Good Gov't v. United States Dist. Court for the

Dist. Of Haw. (In re Republic of Phil.), 309 F.3d 1143 (9th Cir. 2002);

Conn. Bank of Commerce v. Republic of Congo, 309 F.3d 240 (5th Cir.

2002); World Wide Minerals, LTD. v. Republic of Kaz, 296 F.3d 1154

(D.C. Cir. 2002); Rodriguez v. Republic of Costa Rica, 297 F.3d 1 (1st

Cir. 2002); Price v. Socialist People’s Libyan Arab Jamahiriya, 294 F.3d

82 (D.C. Cir. 2002); Int’ Ins. Co. v. Caja Nacional De Ahorro Y Seguro,

293 F.3d 392 (7th Cir. 2002); BP Chems. Ltd. v. Jiangsu Sopo Corp., 285

F.3d 677 (8th Cir. 2002); Keller v. Cent. Bank of Nig., 227 F.3d 811 (6th

Cir. 2002); Gulf Petro Trading Co. v. Nigerian Nat'l Petroleum Corp.,

2003 U.S. Dist. LEXIS 19018 (N.D. Tex. 2003); Simons v. Lycee Fran-

cais De New York, 2003 U.S. Dist. LEXIS 17644 (S.D.N.Y. 2003); A, B,

C, D, E, F v. Zemin, 282 F. Supp 2d 875 (N.D. Til. 2003).

The FSIA, in conjunction with 28 U.S.C. § 1441(d),

provides that an action brought in state court against an

“agency or instrumentality” of a foreign state may be

removed to federal court, where the defendant will be

accorded the protections noted above. To qualify for such

protections, the putative agency or instrumentality must

demonstrate either that a majority of its shares are owned

by a foreign state, or that it is an “organ” of a foreign state.

In Dole Food, this Court held, for purposes of removal

jurisdiction, that an entity’s status as an “agency or

instrumentality” of a foreign government must be deter-

mined based on the facts that exist at the time the lawsuit

is filed. The Court also held that indirect, tiered ownership

is insufficient to confer instrumentality status under the

majority ownership prong of § 1603(b)(2). In this case, the

Third Circuit has contravened both of these holdings.

First, it did not determine instrumentality status based on

the facts as they existed at the time the lawsuit was filed;

rather, it relied on facts as they existed more than ten

years preceding the lawsuit. Second, it found, based pri-

marily on these same dated facts, that while indirect,

tiered ownership was insufficient to confer instrumental-

ity status under the majority ownership prong of

§ 1603(b)(3), such ownership could be relied on to confer

“organ” status.

A. The Initial Proceedings Regarding Removal

Under The FSIA

In 1995, USX brought an. action in Pennsylvania state

court, based entirely on state-law claims, seeking insur-

ance coverage under hundreds of excess umbrella liability

insurance policies issued by dozens of domestic and

international insurers, including insurers active in the

London Insurance Market. The London Market Insurers

included the Insurance Corporation of Ireland (hereinafter

referred to as “ICI/Icarom”). ICI/Icarom was incorporated

in 1935 as a private, commercial insurance company. In

1985, the company was placed in “administration,” the

Irish equivalent of bankruptcy. Since that time, ICI/Icarom

has operated strictly as a runoff company, winding down

its remaining liabilities. ICI/Icarom does not engage in any

public activities on behalf of the Republic of Ireland or,

indeed, in any public activity at all. ICI/Icarom has a

handful of employees, none of whom are civil servants,

who manage the organization’s finances and pay out

existing liabilities.

Despite its rather insignificant participation in USX’s

insurance coverage portfolio,’ ICI/Icarom removed the

Pennsylvania action to federal court pursuant to 28 U.S.C.

§ 1441(d), claiming agency or instrumentality status as a

foreign sovereign under the majority ownership prong of

§ 1603(b)(2) of the FSIA. Thereafter, USX voluntarily

dismissed its lawsuit. USX then refiled its complaint in

state court in Pennsylvania, this time expressly excluding

any alleged “agency or instrumentality of a foreign state,”

including ICI/Icarom, from the suit.

Three of the defendants in the subsequent suit,

however, filed third-party complaints against ICI/Icarom,

* Of the hundreds of insurance policies implicated by USX’s

lawsuit, which aggregate in excess of $1.6 billion of insurance coverage,

ICI/Icarom had a fractional participation in only six of them, with a

total exposure of between $1.3 and $1.6 million, or 0.1% of the total

coverage at issue.

ed selena bhi certs ina abibk. et

Piatt ahaha att Twa cnc

asserting contribution claims for any liability resulting

from USX’s insurance coverage action. ICI/Icarom again

removed the action to federal court, relying exclusively on

\the Republic of Ireland’s indirect ownership of a majority

of ICI/Icarom’s stock as the predicate for its alleged status

as an “agency or instrumentality” of a foreign state.

USX promptly moved to remand the action to state

court. By order dated March 29, 1996, the district court

denied USX’s remand motion, as well as USX’s related

motion to engage in jurisdictional discovery. The district

court held that ICI/Icarom was an agency or instrumental-

ity of a foreign state based solely on the Republic of Ire-

land’s indirect, tiered ownership of ICI/Icarom’s stock.

(App. 79).

The parties then proceeded to litigate the substantive

insurance coverage issues, and on March 22, 2000, the

district court issued an Opinion and Order granting

summary judgment in favor of the defendant insurers.

(App. 90). USX timely appealed both the March 19, 1996

and March 22, 2000 orders to the United States Court of

Appeals for the Third Circuit.’ The court of appeals en-

tered an Order on May 1, 2001, remanding the action so

that USX could conduct jurisdictional discovery. The Third

Circuit retained jurisdiction over the merits of the action,

but specifically provided for USX to file a renewed motion

to remand after the completion of discovery.

Once the jurisdictional discovery had been completed,

USX renewed its motion to remand. On September 11,

* The March 22, 2000 order is not at issue in this petition and

therefore not included in the Appendix that accompanies it.

2002, the district court denied that motion, again holding

that the Republic of Ireland’s indirect, tiered ownership of

stock was sufficient to confer foreign state status on

ICI/Icarom under the FSIA. (App. 210). This time, how-

ever, the district court alternatively held that [Ci/Icarom

was an “organ” of the Republic of Ireland under the FSIA —

a jurisdictional basis that ICI/Icarom had never raised

until responding to the renewed motion to remand, seven

years after USX’s original motion to remand was filed.

(App. 210). USX appealed the district court’s decision.

B. The Proceedings Leading To The Third Circuit’s

Expansive Interpretation Of The FSIA

While this case was pending before the Third Circuit,

this Court rendered its decision in Dole Food Co. v. Pa-

trickson, 123 S. Ct. 1655 (2003). There, this Court held

that: (1) indirect, tiered ownership is insufficient to confer

agency or instrumentality status under the majority

ownership prong of the FSIA; and (2) for purposes of

removal jurisdiction, agency or instrumentality status

must be determined based on the record facts as they exist

at the time the lawsuit is filed. Jd. at 1663.

Consistent with this Court’s reasoning, the Third

Circuit rejected ICI/Icarom’s claim that the Republic of

Ireland’s indirect, majority ownership of ICI/Icarom was

sufficient to confer instrumentality status. This did not

resolve the matter, however, as the Third Circuit then

affirmed the district courts alternate holding that

ICI/Icarom, in any event, was an “organ” under the FSIA.

(App. 47).

Since this latter issue presented a question of first

impression for the Third Circuit, the court of appeals

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looked to how the term “organ” was construed in other

circuits. In that regard, the Ninth Circuit had the most

developed jurisprudence on this issue, and the Third

Circuit accordingly looked to the Ninth Circuit’s approach

in crafting its own. (App. 32). The Third Circuit noted that

in determining organ status, the Ninth Circuit focuses on

“whether the entity ‘engages in a public activity on behalf

of the foreign government.’” (App. 32). To answer this

over-arching question, the Ninth Circuit considers: (1) the

circumstances of the entity's creation; (2) the purpose of its

activities; (3) the level of financial support from the

government; (4) the entity’ employment policies with

respect to whether it is staffed by government employees;

and (5) its obligations and privileges under state law.

(App. 32).

In making its determination on organ status, however,

the Third Circuit departed significantly from the Ninth

Circuit’s approach. Specifically, the Third Circuit focused

on the ownership structure of the entity, a factor that has

no counterpart in the Ninth Circuit’s approach. The Third

Circuit then gave this novel factor paramount importance,

placing much emphasis on the Republic of Ireland’s

governmental interest in indirectly acquiring ICI/Icarom’s

shares in 1985 — fifty years after ICI/Icarom was incorpo-~

rated as a private company and ten years before this suit

was filed. (App. 37, 38). After interjecting these irrelevant

and stale ownership facts into its analysis, the Third

Circuit found that five of the seven factors weighed in

favor of ICI/Icarom’s organ status and accordingly upheld

the FSIA’s application as a basis for removal. (App. 47).

REASONS FOR GRANTING THE PETITION

The Court should grant certiorari for two principal

reasons.

First, the opinion below conflicts with and contra-

venes this Court’s decision in Dole Food, 123 S. Ct. 1655,

by determining jurisdiction under the FSIA based on facts

existing more than ten years prior to the filing of the

lawsuit. In Dole Food, this Court, relying on the express

language of the FSIA, held that the facts to be considered

in the jurisdictional calculus are those that exist at the

time the lawsuit is filed.

Second, the opinion below conflicts with and contra-

venes this Court’s holding in Dole Food that indirect,

tiered ownership is insufficient to confer instrumentality

status under the majority ownership prong of the FSIA. It

does so by according this indirect ownership factor signifi-

cant weight in determining instrumentality status under

the “organ” prong of the same subsection. The Third

Circuit’s analysis creates this conflict by allowing indirect,

tiered ownership to serve as a proxy to confer instrumen-

tality status under the organ prong of § 1603(b), where

such status would be rejected under the majority owner-

ship prong.

Despite the primacy of Dole Food, the Third Circuit

has struck out on its own and recast the prevailing “organ”

analysis in a way that materially expands the scope of

what now will be considered an agency or instrumentality

of a foreign state under the FSIA. This expansion, in turn,

goes well beyond Congress’s stated goal of promoting

comity with foreign nations. This Court’s intervention thus

PP eee a, OF pe ee ee ee eh ee el ee a Ce OE ee eS OR, Se eee Oe a ey ket Ne MP ee ge te

en te

is needed to settle: (1) the conflicts engendered by the

Third Circuit’s approach; and (2) the controlling standards

for determining removal under the FSIA.

This Court is, of course, the ultimate arbiter on the

construction of federal statutes, and as it did in Dole Food,

it can re-establish the balance Congress intended in

enacting the FSIA. Further, the issues raised here con-

cerning the appropriate construction of the FSIA are

squarely presented on this record. Subject matter jurisdic-

tion rests solely on the basis of § 1603(b), and through the

putative organ status of a single, third-party defendant.

A. The Third Circuit’s Opinion Conflicts With And

Contravenes This Court’s Holding In Dole Food

That Jurisdiction Under The FSIA Depends On

The Facts Existing At The Time The Lawsuit Is

Filed

An entity may remove an action to federal court

through 28 U.S.C. § 1441(d) if that entity qualifies as a

“foreign state” under the FSIA. Section (a) of the FSIA

defines a foreign state as including any “agency or instru-

mentality of a foreign state as defined in subsection (b).”

28 U.S.C. § 1603 (2003). Subsection (b) in turn defines an

“agency or instrumentality of a foreign state” as an entity:

(1) which is a separate legal person, corporate

or otherwise, and

(2) which is an organ of a foreign state or politi-

cal 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 citizen 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.

(Id.)

In Dole Food, the appellant companies (the Dead Sea

Companies) argued that the FSIA should operate like

other status-based immunities and that, for removal

jurisdiction purposes, instrumentality status should be

determined based on the facts existing at the time of the

conduct giving rise to the suit. Dole Food, 123 S.Ct. at

1662. This was a critical issue because any relationship

between the Dead Sea Companies and the State of Israel

had been severed before the suit was brought. Jd. at 1663.

Noting that the language of § 1603(b)(2) is expressed

in the present tense, this Court disagreed and instead

concluded that instrumentality status should be deter-

mined “at the time suit is filed.” Jd. at 1662. The Court

then compared -this jurisdictional provision with federal-

diversity jurisdiction, which “depends on the citizenship of

the parties at the time the suit is filed.” Jd. “Construing

§ 1603(b) so that the present tense has real significance is

consistent with the ‘longstanding principle that the juris-

diction of the Court depends upon the state of things at

the time of the action brought.’” Id. (quoting Keene Corp.

v. United States, 508 U.S. 200, 207 (1993)).

Thus, this Court held that the Dead Sea Companies

could not be considered an agency or instrumentality of

Israel, even if they could have demonstrated such status

at some time prior to the lawsuit. The issue was not

whether the Dead Sea Companies ever could have claimed

agency or instrumentality status, but whether they had

that status at the time federal jurisdiction under the FSIA

was invoked.

A. . cet ee rm

To be sure, the Dole Food case implicated the majority

ownership prong of § 1603(b)(2), but this Court’s holding

on the time as of which jurisdictional status should be

determined — considering the record facts as they existed

at the time the lawsuit was filed — was not so limited.

Rather, its holding plainly extended — based on the lan-

guage of the statute and general jurisdictional principles —

to any attempt to invoke the jurisdiction of the federal

courts under § 1603(b)(2). The Third Circuit’s opinion

below, however, rejected this aspect of Dole Food, appar-

ently because the “organ” prong of § 1603(b)(2), as opposed

to the majority ownership prong, was implicated. For

purposes of determining when jurisdictional status must

be determined, however, that is a distinction without a

difference.

Here, the court of appeals held that ICI/Icarom was

an agency or instrumentality of the Irish government

based predominately on the government’s important

interest in indirectly acquiring ICI/Icarom in 1985, and

not on ICI/Icarom’s activities at the time the suit was filed.

By 1990, ICI/Icarom’s business operations, including its

entire book of Irish business, had been sold off to a French

company, and any important government interest the Irish

government had protected by acquiring ICI/Icarom in 1985

had evaporated. At the time of the lawsuit, all that re-

mained of the corporate entity in the Republic of Ireland

was a shell of a bankrupt company that was neither

operated nor controlled by the Irish government; rather, it

simply was running off liabilities on policies issued before

the government acquired its interest. Therefore, as in Dole

Food, the corporate entity here effectively had severed its

relationship with the foreign state prior to the lawsuit.

Any test that focuses primarily on the foreign state’s

rationale for indirectly acquiring an entity's shares ten

years prior to the invocation of federal jurisdiction neces-

sarily conflicts with the rule that the critical inquiry with

respect to the relevant jurisdictional facts (whether

through organ status or majority ownership) must be

made at the time the lawsuit is filed. The Third Circuit’s

disregard of the time of filing standard results in

ICI/Icarom being held an agency or instrumentality of a

foreign government — defined by well established jurispru-

dence to mean that it performs public activities on behalf

of a foreign state — even though at the time of the filing of

the lawsuit in 1995 ICI/Icarom conducted no public activi-

ties whatsoever. This point is underscored by the record in

this action; the Republic of Ireland was fully apprised of

this case yet never took the position, in over seven years of

litigation, that ICI/Icarom ever engaged in any public

activity on its behalf.

This timing divergence is particularly acute here

because the clear language of § 1603(b) mandates an

approach at odds with the Third Circuit’s. As this Court

stated in Dole Food: “The statutory language will not

support a control test that mandates inquiry in every case

into the past details of a foreign nation’s relation to a

corporate entity in which it does not own a majority of the

shares.” Dole Food, 123 S.Ct. at 1662. Yet, that “past

details” inquiry is precisely what the Third Circuit’s

analysis endorses.

Further, this timing divergence is even more profound

because it can be outcome determinative, as was the case

with the Dead Sea Companies and is the case with

ICV/Icarom here. In this case, the Third Circuit conspicu-

ously relied on factors stemming from the ownership

structure of the entity and the Republic of Ireland’s

important governmental interest in bailing out the entity's

corporate parent in 1985, ten years prior to the filing of

the lawsuit. Of further note is that the 1985 bailout

occurred fifty years after the entity was initially created as

a private, commercial insurance company, and it is during

this period that USX purchased the policies at issue in this

case. There would be no colorable argument for ICI/Icarom

to claim status as an instrumentality of the Irish govern-

ment from 1935 to 1984. By 1990, ICI/Icarom had sold off

its assets and remaining business. By 1995, when the

lawsuit was filed, ICI/Icarom was winding down, no longer

engaged in the business of insuring Irish citizens, and not

conducting activities on behalf of the Irish government.

If the decision below remains uncorrected, entities

seeking the protections of the FSIA as “organs” of foreign

governments will point to the facts and circumstances that

pre-date the filing of the litigation - an approach expressly

rejected in Dole Food. Yet, there is no reconciling a time-of-

filing standard for determining instrumentality status for

purposes of the majority ownership prong of § 1603(b)(2)

with an “any time in an entity's history” standard for

making the determination for purposes of the organ prong.

This disparity is inexplicable, unnecessary, and should be

rectified through this Court’s prompt intervention.

B. The Third Circuit’s Opinion Conflicts With And

Contravenes This Court’s Holding In Dole Food

That Indirect, Tiered Ownership Is Insufficient

To Confer Instrumentality Status Under The

Majority Ownership Prong Of The FSIA

When this Court rendered its decision in Dole Food, it

made explicit that a foreign state’s indirect, tiered owner-

ship of an entity’s stock is insufficient to establish instru-

mentality status under § 1603(b)(2)’s ownership prong.

Dole Food, 123 S.Ct. at 1660. The Court held that “a

foreign state must itself own a majority of the shares of a

corporation if the corporation is to be deemed an instru-

mentality of the state under the provisions of the FSIA.”

Id.

As the factual background here reveals, this Court’s

holding in Dole Food on the majority ownership prong of

§ 1603(b)(2) figured prominently in this litigation. For

nearly seven years, the majority ownership prong provided

the impetus for removal under the FSIA. But here, as the

Third Circuit recognized, the holding in Dole Food pre-

cluded removal on that basis. With respect to ICI/Icarom’s

jurisdictional status, there was at best indirect, tiered

ownership by the foreign state. That did not meet the Dole

Food standard.

Undeterred, the Third Circuit took the same indirect

ownership facts and relied on them in conferring “organ”

status under that prong of § 1603(b)(2). The organ prong

thereby became a proxy sufficient to convert ICI/Icarom

into an instrumentality of a foreign state based on indirect

ownership, where such ownership had been insufficient to

do so under the statute’s majority ownership prong. The

Third Circuit’s transparent reliance on facts showing

indirect, tiered ownership is in direct contravention of this

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Court’s reasoning in Dole Food. The Third Circuit recog-

nized as much in its opinion, noting that it had opened the

door for entities to attempt to avoid Dole Food by resorting

to the organ prong. As the Third Circuit put it:

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 controlled by foreign

states through tiering arrangements and because

of the widely differing forms of ownership and

control foreign states may exert over entities.

(App. 35).

Yet, this Court expressly had refused to endorse such

an analysis when looking at instrumentality status under

the majority ownership prong. In Dole Food, this Court

observed that the Dead Sea Companies “appear to think

that, in determining instrumentality status under the Act,

control may be substituted for an ownership interest.

Control and ownership, however, are distinct concepts.”

Dole Food, 123 S. Ct. at 1662. The Court thus was unwill-

ing to credit indirect ownership when determining agency

and instrumentality status under the FSIA because it did

not focus on the relevant issue — a foreign state’s present

control of the public activities of the putative agency or

instrumentality.

Although the Court’s statement about indirect owner-

ship and control was made in the context of its analysis of

the majority ownership prong, this Court's rejection of

ownership as a factor relevant to determining instrumen-

tality status is consistent with the language and purpose

of § 1603(b)(2) and the FSIA as a whole. As summarized by

the Ninth Circuit, the primary focus under the organ

analysis of the FSIA is “whether the entity engages in a

public activity on behalf of a foreign government.” Patrick-

son v. Dole Food Co., Inc., 251 F.3d 795, 807 (9th Cir.

2001). In keeping with this focus, courts opining on organ

status have focused on whether the entity performs a

public activity on behalf of the government — not on the

government's activities or reasons for indirectly acquiring

the entity's shares. See, e.g., EIE Guam Corp. v. The Long

Term Credit Bank of Japan, Ltd., 322 F.3d 635 (9th Cir.

2003) (finding of organ status because the entity expressly

performs the “public function” of administering non-

performing loans and conducting other activities private

companies are not permitted to perform under Japanese

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

841, 848 (5th Cir. 2000) (finding of organ status because

the entity functions for the “national purpose” of develop-

ing the government’s mineral resources); Southern Ocean

Seafood Co. v. Holt Cargo Sys, Inc., 1997 WL 539763 (E.D.

Pa. Aug. 11, 1997) (finding of organ status because the

entity functions for the “national purpose” of regulating

national fishing resources and ensuring compliance with

foreign treaties).

Instead of principally considering whether ICI/Icarom

performs public activities on behalf of the Republic of

Ireland as a baseline inquiry, the Third Circuit relied

predominately on the rationale for the Republic of Ire-

land’s decision to acquire ICI/Icarom’s stock years before

this lawsuit was filed. The result is that the Third Circuit

test defines organ status so expansively as to include the

very organizations that this Court held in Dole Food could

not be labeled instrumentalities under the proper con-

struction of majority ownership prong in § 1603(b)(2).

Applying the Third Circuit analysis to the Dead Sea

Companies in Dole Food illustrates the inconsistency in

the two approaches. The Dead Sea Companies initially

were organized by the Knesset, Israel’s national legisla-

ture, to develop and market the Dead Sea’s resources “in a

manner consistent with Israel’s national interests.” 2001

U.S. Briefs 594 (2002). The Companies were charged with

regulating the “efficient exploitation of the minerals of the

Dead Sea, which — as natural resources of the State of

Israel — should serve ‘the interests of the economy of the

State.’” Id. (emphasis added). The Dead Sea Companies,

furthermore, were subject to “substantial control and

oversight” of the “highest ranking officials and bodies of

the Israeli government.” Id. The Dead Sea Companies

additionally argued before this Court that the State of

Israel “owned” these companies in the “colloquial sense of

that term.” Dole Food, 123'S. Ct. at 1660. These factors

notwithstanding, this Court held that the Dead Sea

Companies were not agencies or instrumentalities of the

State of Israel because of the tiered nature of the owner-

ship structure at the time of filing.

The same inconsistency is demonstrated by the record

facts here. As the Third Circuit recognized, ICI/Icarom was

incorporated in 1935 as a private, commercial insurance

company. ICI/Icarom conducted its private, commercial

business of selling insurance policies until its 1985 place-

ment in administration, the Irish equivalent of bank-

ruptcy. Since then, ICI/Icarom has operated strictly as a

run-off company, employing a handful of non-government

employees to wind up its remaining liabilities. ICI/Icarom,

therefore, clearly has conducted no ongoing public activity

on behalf of the Republic of Ireland. Rather, the Republic

of Ireland’s relationship with ICI/Icarom is limited solely

to its indirect acquisition of ICI/Icarom’s stock in 1985 as

part of a government bailout of AIB, one of Ireland’s

largest banks and the former owner of ICI/Icarom.

Thus, the same sort of ownership facts that would not

support instrumentality status for the Dead Sea Compa-

nies in Dole Food are given conclusive weight in the Third

Circuit’s organ analysis. Accordingly, should the Dead Sea

Companies find themselves defending a lawsuit in a state

court within the Third Circuit, they now would be able to

remove to federal court under § 1603(b) of the FSIA.

Under the Third Circuit’s analysis, it is difficult to con-

ceive of an entity whose shares are indirectly owned by a

foreign state that would not be entitled to organ status.

That is particularly true where, as here, the Third Circuit

has extended the indirect ownership inquiry to any time in

the entity’s history.

Finally, although the Third Circuit purported to follow

the factorial approach established by the Ninth Circuit for

considering “organ” status under the FSIA, the two Cir-

cuits are in conflict as well. As noted above, the Third

Circuit added “indirect ownership” to the Ninth Circuit’s

list of analytical factors and, relying on facts relevant to

this new factor, conferred organ status on ICA/Icarom. It is

the significance given to the facts related to indirect

ownership, not the Ninth Circuit's factorial approach

itself, that brings the Third Circuit’s holding into conflict

with Dole Food. But consideration of those indirect owner-

ship facts also contravenes the Ninth Circuit’s approach.

Indeed, the Ninth Circuit does not specifically identify

indirect ownership — or ownership of any kind — as a

relevant factor, much less an outcome determinative one,

for determining organ (and thus instrumentality) status

under the FSIA.

In the wake of an increasingly troubled and integrated

global economy, this result will increase the number of

cases in federal courts presenting solely state law issues."

Under the Third Circuit’s expansive analysis, any entity

indirectly acquired by a foreign government similarly

would be empowered to invoke federal jurisdiction in any

case in which it is just a tangential party. The federal

courts uniformly have interpreted the FSIA to allow even

a single third-party defendant to remove an entire action

asserting solely state law claims to federal court. See, e.g.,

In re Air Crash Disaster Near Roselawn, 96 F.3d 932 (7th

Cir. 1996); In re Surinam Airways Holding Co., 974 F.2d

1255 (11th Cir. 1992); Nolan v. Boeing Co., 919 F.2d 1058

(5th Cir. 1990). That is precisely what happened in this

case, where ICI/Icarom was not sued by USX, but was

impleaded by a named defendant seeking contribution on

the order of approximately 0.1% of the interest at stake in

the litigation.

This result extends the scope of the FSIA well beyond

the intent of Congress. Congress enacted the FSIA in 1976 .

in order to “codify the so-called ‘restrictive’ principle of

sovereign immunity, as presently recognized in interna-

tional law.” H.R. Rep No. 94-1487, at 7 (1976), reprinted in

1976 U.S.C.C.A.N. 6605. There is “a wide acceptance of

the so-called restrictive theory of sovereign immunity; that

is, that the sovereign immunity of foreign states should be

‘ Not only will the Third Circuit’s analysis expose the federal

courts to significantly more claims of organ status, but it also will

increase the work load for federal district courts by opening the door to

additional discovery on indirect ownership before a threshold determi-

nation on federal jurisdiction may be rendered.

‘restricted’ to cases involving acts of a foreign state which

are sovereign or governmental in nature, as opposed to

acts which are either commercial in nature or those which

private persons normally perform.” Jd. at 14.

The House Reports fortify the baseline inquiry for

organ status that for an entity to be considered an organ of

a foreign state, it must presently conduct public activities

on behalf cf that foreign state. Absent this fundamental

inquiry, the statute simply does not follow the restrictive

principle of sovereign immunity. The Third Circuit’s test,

however, extends the FSIA’s reach to corporations indi-

rectly owned by foreign states without regard to whether

they perform sovereign acts. “Foreign sovereign immunity

... 1s not meant to avoid chilling foreign states or their

instrumentalities in the conduct of their business but to

give foreign states and their instrumentalities some

protection from the inconvenience of suit as a gesture of

comity between the United States and other sovereigns.”

Dole Food, 123 S. Ct. at 1663.

The inevitable consequence is that the same organiza-

tion may be considered an organ of a foreign state in the

Third Circuit, but not elsewhere. Thus, whether an entity

can remove to federal court will depend on the fortuity of

where the action is initiated. This lack of uniformity is

particularly troubling with a jurisdictional statute like the

FSIA and should be immediately corrected by this Court.

The level of confusion engendered by the Third Circuit’s

opinion, therefore, requires immediate guidance from this

Court in the form of a ruling clarifying the extent federal

courts may exercise jurisdiction under the organ provision

of the FSIA. This is the only way to ensure needed consis-

tency among the Circuits, and to settle any lingering

oe ee

‘hk inate eee Rae tnt hies Stit stan, atti Rita seit Gua Siesin Fats jek. te

pet ah ae pha hy

remaining jurisdictional issues posed by the FSIA in the

wake of this Court’s decision in Dole Food.

VI.

CONCLUSION

The Third Circuit’s opinion below conflicts with this

Court’s holding in Dole Food in two important respects

that confound the appropriate jurisdictional inquiries

under the FSIA. Petitioners respectfully urge this Court to

grant certiorari in order to resolve these conflicts and

provide clarity on a recurring issue of federal jurisdiction

with worldwide implications.

DATED: December 24, 2003.

Respectfully submitted,

JAMES C. MARTIN J. MICHAEL JARBOE

Counsel of Record U.S. STEEL CORPORATION

LAWRENCE E. FLATLEY 600 Grant Street,

GEORGE L. STEWART, II 15th Floor

TRACI SANDS REA Pittsburgh, PA 15219

REED SMITH LLP (412) 433-2880

435 Sixth Avenue

Pittsburgh, PA 15219

(412) 288-3131

Attorneys for Petitioners

and Appellants USX

Corporation and

Bessemer and Lake

Erie Railroad Company

App. 1

345 F.3d 190

USX CORPORATION; BESSEMER AND LAKE ERIE

RAILROAD COMPANY v. ADRIATIC INSURANCE

COMPANY; AG GROUP, The Successor in Interest to

SECURITAS A.G.; ATU INSURANCE COMPANY;

ALLIANZ UNDERWRITERS INSURANCE

COMPANY; ALLIANZ VERSICHERUNGS A.G.;

ALLSTATE INSURANCE COMPANY, The Successor

in Interest to NORTHBROOK EXCESS & SURPLUS

INSURANCE COMPANY and NORTHBROOK

INSURANCE COMPANY; AMERICAN INSURANCE

COMPANY; AMERICAN REINSURANCE COMPANY;

AON CORPORATION, The Successor in Interest to

UNION INDEMNITY INSURANCE COMPANY OF

NEW YORK; ARKWRIGHT MUTUAL INSURANCE

COMPANY; ATLANTA INTERNATIONAL

INSURANCE COMPANY; BIRMINGHAM FIRE

INSURANCE COMPANY; CENTENNIAL

INSURANCE COMPANY; CONTINENTAL

CASUALTY COMPANY; CONTINENTAL

INSURANCE COMPANY; DANIELSON NATIONAL

INSURANCE, The Successor in Interest to the

MISSION INSURANCE COMPANY; EMPLOYERS

MUTUAL CASUALTY COMPANY; EUROPEAN

GENERAL REINSURANCE COMPANY OF ZURICH;

EVANSTON INSURANCE COMPANY; EXCESS

INSURANCE COMPANY, LTD.; FEDERAL

INSURANCE COMPANY; FIREMAN’S FUND

INSURANCE COMPANY; FIRST STATE INSURANCE

COMPANY; GOVERNMENT EMPLOYEES

INSURANCE COMPANY; GRANITE STATE

INSURANCE COMPANY; HAFTPFLICHTVERBAND

DER DEUTSCHEN INDUSTRIE

VERSICHERUNGSVEREIN A.G.; HARTFORD

ACCIDENT AND INDEMNITY COMPANY;

INSURANCE COMPANY OF THE STATE OF

PENNSYLVANIA; INTERNATIONAL INSURANCE

Sas

pire

App. 2

COMPANY; LEXINGTON INSURANCE COMPANY;

NATIONAL CASUALTY COMPANY; NATIONAL

UNION FIRE INSURANCE COMPANY OF

PITTSBURGH, PA; NORTHBROOK EXCESS &

SURPLUS INSURANCE COMPANY; NORTHBROOK

INSURANCE COMPANY; ROTTERDAMSE

ASSURANTITEKAS N.V.; ST. PAUL SURPLUS LINE

INSURANCE COMPANY; SENTRY INSURANCE,

A MUTUAL COMPANY, As Assumptive Reinsurer

of the GREAT SOUTHWEST FIRE INSURANCE

COMPANY; SWISS REINSURANCE COMPANY;

TUDOR INSURANCE COMPANY; TWIN CITY FIRE

INSURANCE COMPANY; UNITED STATES FIRE

INSURANCE COMPANY; VANLINER INSURANCE

COMPANY, The Successor in Interest to The GREAT

SOUTHWEST FIRE INSURANCE COMPANY;

WESTCHESTER FIRE INSURANCE COMPANY;

ZURICH INSURANCE COMPANY; ZURICH

INTERNATIONAL LTD.; CERTAIN OF THE

UNDERWRITERS AND INTERNATIONAL

INSURERS SUBSCRIBING TO LLOYD’S POLICY

NOS. 77DD2126C, 78BH3189, 78BH3190, 78BH3191,

PY021577, PY021378/78DD1459C, 79BH1269,

79BH1270, 78DD1406C, 79BH1271, 79BH1272,

80DD19C/PY021379, 79BH5311, 79BH5312, PY135179,

PY021379A, 80BH0659, 80BH0660, 80BH0661,

80BH0662, PY172180/80DD2562C,

PY172280/80DD2563C, HA081280/LBM/1HB06910,

2KA42270/HA081281/LBN, KY019382, KY019482,

KY021982, AND KY021882; ICAROM, Formerly

known as INSURANCE CORPORATION OF

IRELAND; ICAROM plc, formerly known as

INSURANCE CORPORATION OF IRELAND;

USX Corporation and Bessemer and Lake Erie

Railroad Company, Appellants.

No. 00-3424

App. 3

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

August 1, 2003, Reargued

September 25, 2003, Filed

SUBSEQUENT HISTORY:

As Corrected October 6, 2003.

PRIOR HISTORY: On Appeal from the United States

District Court for the Western District of Pennsylvania.

(D.C. Civ. No. 95-00866). Honorable Gustave Diamond,

District Judge. USX Corp. v. Adriatic Ins. Co., 99 F. Supp.

2d 593, 2000 U.S. Dist. LEXIS 4115 (W.D. Pa., 2000).

DISPOSITION: Affirmed.

COUNSEL:

Lawrence E. Flatley, George L. Stewart II, Traci

Sands Rea, John A. Camp, Reed Smith, Pittsburgh, PA, J.

Michael Jarboe, (argued on April 3, 2001, and August 1,

2003), Law Department of U.S. Steel Corporation, Pitts-

burgh, PA, Attorneys for Appellants USX Corporation and

Bessemer and Lake Erie Railroad Company.

Martin R. Baach, Stephen H. Marcus, Geovette E.

Washington (argued on August 1, 2003), Baach, Robinson

& Lewis, Washington, DC, Bernard D. Marcus, Robert L.

Allman, II, Marcus & Shapira, Pittsburgh, PA, James P.

Davenport (argued on April 3, 2001), Nussbaum & Wald,

Washington, DC, Attorneys for Appellees Certain Under-

writers at Lloyd’s, London and Certain Companies in the

London Market.

William H. Briggs, Jr., Leslie S. Ahari, Benjamin C.

‘ Eggert, Ross, Dixon & Bell, Washington, DC, Attorneys for

App. 4

Appellees Continental Casualty Company and Continental

Insurance Company.

Stephen A. Cozen (argued on April 3, 2001, and

August 1, 2003), Jay M. Levin, Gaele McLaughlin Bar-

thold, Cozen & O’Connor, Philadelphia, PA, Attorneys for

Appellees AIU Insurance Company; Birmingham Fire

Insurance Company; Granite State Insurance Company;

Insurance Company of the State of Pennsylvania; Lexing-

ton Insurance Company; National Union Fire Insurance

Company of Pittsburgh, Pennsylvania; and Certain of the

Underwriters at Lloyd’s.

Wendy L. Mager, Grayson Barber, Smith, Stratton,

Wise, Heher & Brennan, Princeton, N.J. Anthony W. a

Hinkle, Cipriana & Werner, Pittsburgh, PA, Attorneys for

Appellee Centennial Insurance Company.

R. Kenneth Willman, Willman & Arnold, Pittsburgh,

PA, Attorneys for Appellees Arkwright Mutual Insurance

Company and Employers Mutual Casualty Company.

Richard S. Dorfzaun, David B. Fawcett, Jr., Dickie,

McCamey & Chilcote, Pittsburgh, PA, Attorneys for

Appellee National Casualty Company.

Thomas V. Gebler, Jr., Robb, Leonard & Mulvihill,

Pittsburgh, PA, Attorneys for Appellee Federal Insurance

Company.

Roderick T. Dunne, Karbal, Cohen, Economou, Silk &

Dunn, Chicago, IL. James A. Mollica, Mollica & Murray,

Pittsburgh, PA, Attorneys for Appellee Evanston Insur-

ance Company.

Elit R. Felix II, Margolis Edelstein, Philadelphia, PA,

Attorneys for Appellees Allianz Underwriters Insurance

App. 5

Company; Atlanta International Insurance Company;

Tudor Insurance Company; and Atlanta International

Insurance Company.

Robert A. Arcovio, Judy Thomas, Margolis Edelstein,

Pittsburgh, PA, Attorneys for Appellees American Insur-

ance Company and Fireman’s Fund Insurance Company.

C. Leon Sherman, C. Leon Sherman & Associates,

Pittsburgh, PA, George R. Hardin, Hardin, Kundla,

McKeon, Poletto & Polifroni, Springfield, NJ, Attorneys for

Appellees International Insurance Company; United

States Fire Insurance Company; and Westchester Fire

Insurance Company.

William Savino, Michael Cassell, Chris Fichtl, Rivkin,

Radler, Uniondale, NY, Attorneys for Appellees American

Reinsurance Company; Government Employees Insurance

Co.; Sentry Insurance Company, Assumptive Reinsurer of

the Great Southwest Fire Insurance Company; and

Vanliner Insurance Company, the Successor in Interest to

the Great Southwest Fire Insurance Company.

Jeffrey Bouslog, Oppenheimer, Wolff & Donnelly,

Minneapolis, MN. Kevin P. Lucas, Manion, McDonough &

Lucas, Pittsburgh, PA, Attorneys for Appellee St. Paul

Surplus Line Insurance Company.

Louis C. Long, Meyer, Darragh, Buckler, Bebenek &

Eck, Pittsburgh, PA, Attorneys for Appellee Zurich Insur-

ance Company. |

Arthur J. Liederman, Morrison, Mahoney & Miller,

New York, NY, Attorneys for Appellees Adriatic Insurance

Company; Allianz Versicherungs A.G.; European General

Reinsurance Company of Zurich; Haftpflichtverband der

See Tree reece

III

App. 6

Deutschen Industrie Versicherungsverein A.G.; and Swiss

Reinsurance Company.

Allen D. Windt, Ardmore, PA, Attorneys for Appellee

Excess Insurance Company, Ltd.; First State Insurance

Company; Hartford Accident & Indemnity Company; and

Twin City Fire Insurance Company.

JUDGES:

BEFORE: ROTH, STAPLETON, and GREENBERG,

Circuit Judges.

OPINION BY:

OPINION:

OPINION OF COURT

GREENBERG, Circuit Judge.

GREENBERG

I. INTRODUCTION

This matter comes on before this court on appeal from

a summary judgment entered for the defendants and from

orders denying motions to remand this insurance policy

coverage case to the state court in which it had been

initiated. This litigation, though not reaching trial, has

been protracted and has followed complex underlying

proceedings in other consolidated cases. Though, as will be

seen, we summarily will resolve the substantive issue

before us which we find not to be difficult, we nevertheless

set forth the background of the case in some detail.

App. 7

Appellants USX Corporation and Bessemer and Lake

Erie Railroad Company (“B&LE”), its subsidiary at the

times material to this action (together herein usually

called “USX”), have sought indemnification from the

approximately 50 appellees (“insurers”) under umbrella

liability insurance policies the insurers issued to USX.’

These policies were developed for a program which USX

initiated in the 1970s when, in consultation with its

domestic insurance broker, Marsh & McLennan, it deter-

mined to obtain insurance for catastrophic liabilities.

Ultimately USX obtained liability insurance in further-

ance of this program covering seven periods from May 12,

1977, to April 1, 1983. From May 12, 1977, through De-

cember 1, 1979, the programs included between four and

six layers of insurance providing $128.1 million to $151

million of coverage for liability imposed in excess of a $50

million self-insured retention. From December 1, 1979, to

April 1, 1983, the programs involved between six and

seven layers of insurance providing between $275 million

and $325 million of coverage in excess of a $25 million self-

insured retention. The multi-layered umbrella policies

included broad comprehensive coverage based on London

umbrella insurance policies and provided:

Underwriters hereby agree, subject to the limita-

tions, terms and conditions hereinafter men-

tioned, to indemnify the Assured for all sums

which the Assured shall be obligated to pay by

reason of the liability:

* USX’s most recent corporate disclosure statement under Fed.

R.App. P. 26.1 indicates that B&LE is now a wholly owned subsidiary of

Great Lakes Transportation, LLC, a Delaware limited liability com-

pany.

App. 8

(a) imposed upon the Assured by law ... for

damages on account of:

(i) Personal Injuries

(ii) Property Damage

(iii) Advertising Liability,

caused by or arising out of each occurrence hap-

pening anywhere in the world.

Joint App. at 133.7 The term “Personal Injuries” was

defined as:

bodily injury ... mental injury, mental anguish, :

shock, sickness, disease, disability, false arrest,

false imprisonment, wrongful eviction, detention,

malicious prosecution, discrimination, humilia-

tion; also libel, slander or defamation of charac-

ter or invasion of rights of privacy, except that

which arises out of any advertising activities.

Joint App. at 135. The policies, however, excluded coverage

for liability arising out of discrimination based on race,

creed, color or national origin. “Advertising liability”

included:

1) Libel, slander or defamation;

2) Any infringement of copyright or of title or of

slogan;

* USX explains that the various policies issued were “in all

respects material to this dispute ... identical to the 1971 London

umbrella form.” Br. at 10-11. In this opinion we refer to the original

appendix filed in this court as “Joint App.” and the appendix filed after

the remand on the jurisdictional issue that we describe below as “Juris.

JA.”

App. 9

3) Piracy or unfair competition or idea

misappropriation under an implied contract;

4) Any invasion of right of privacy;

committed or alleged to have been committed in

any advertisement, publicity article, broadcast or

telecast and arising out of the Named Assured’s

advertising activities.

Joint App. at 135-36. The term “occurrence” was defined

as:

an accident, or a happening, or an event, or a

continuous or repeated exposure to conditions,

which unexpectedly and unintentionally results

in a personal injury, property damage or adver-

tising liability during the policy period. All such

exposure to substantially the same general con-

ditions existing at or emanating from one prem-

ises location shall be deemed one occurrence.

Joint App. at 136.

In 1982, B&LE pleaded nolo contendere to an indict-

ment in the United States District Court for the District of

Columbia for a violation of the Sherman Antitrust Act, 15

U.S.C. § 1, for participating in a conspiracy in restraint of

trade. The district court convicted and sentenced B&LE

and on appeal the court of appeals affirmed. United States

v. Bessemer & Lake Erie R.R. Co., 230 U.S. App. D.C. 316,

717 F2d 593 (D.C.Cir. 1983). The criminal case was

followed by massive civil litigation in which numerous

entities involved in the lower Lake Erie iron ore transpor-

tation market (including five steel companies, three dock

companies and three trucking companies) filed ten sepa-

rate civil suits in various United States district courts

App. 10

against several railroads (including B&LE) which oper- |

ated docks to receive iron ore and from which to transport |

the ore to inland steel mill locations. The complaints

alleged that the railroads had agreed to restrain trade by

denying or preventing the introduction of self-unloading

vessels and by preventing non-railroad-owned docks and

trucking firms from participating in the transportation of

iron ore from the upper Great Lakes and Eastern Canada

to discharge ports on the lower Great Lakes and the

Detroit River.

The ten civil cases were consolidated and transferred

to the United States District Court for the Eastern District

of Pennsylvania in April 1984 and became known as MDL

587, the In re Lower Lake Erie Iron Ore Antitrust Litiga-

tion. The court tried MDL 587 in two phases, a liability

phase followed by a damage phase. The jury in the liability

phase rendered verdicts determining that B&LE had

participated with the other railroads in a conspiracy to

restrain trade in nine of the ten cases in violation of

sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2, and

Ohio law. In eight of the cases, the jury awarded substan-

tial damages for losses the MDL plaintiffs suffered, and

thereafter the court entered final judgments reflecting

trebled damages under the federal antitrust laws and

double damages under Ohio law. According to USX, the

district court entered final judgments totaling $638.5

million against B&LE which ultimately satisfied them by

paying over $592 million. The cases against the defen-

dants other than B&LE were settled or dismissed before or

during the trial leaving it as the sole defendant. B&LE

appealed to this court but on May 27, 1993, we affirmed

the district court’s judgment against it. In re Lower Lake

Erie Iron Ore Antitrust Litig., 998 F.2d 1144 (3d Cir. 1993).

App. 11

B&LE filed a petition for certiorari but the Supreme Court

denied it and thus the underlying litigation is over.

In particular certain of the facts related to the con-

spiracy are as follows. The railroads owned docks which

used “huletts” or heavy cranes to unload ore from standard

freighters (“bulkers”) to railroad cars to be transported to

inland steel mills. As technology advanced self-unloaders

were developed that eliminated the need for huletts and

made the railroads’ unloading equipment obsolete. Fur-

thermore, use of self-unloaders would have permitted

unloading of ore at private docks the railroads did not own

and would have made it possible for ore to be shipped

inland in trucks rather than on railroad cars.

In the appeal in the civil antitrust suit we explained

that the railroads accomplished the restraint of trade and

delayed the introduction of self-unloaders:

by charging the same rate for unloading a self-

unloader as for unloading a bulker, by refusing to

approve commodity line haul rates from private

docks which would have handled self-unloaders,

and by concertedly refusing to make dock prop-

erty available for use by private docks. ...

In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d at

1168. The railroads charged tariffs that assessed the same

dock handling service charges for self-unloading vessels as

for conventional vessels, even though they provided much

greater services for the conventional vessels. Moreover, the

railroads charged certain shippers and competitors trans-

portation rates from railroad-owned docks to steel mills

that were much lower than the transportation rates

available from private docks to the steel mills. Certain

;

‘ |

App. 12

railroads also refused to sell or lease property for use as

private iron ore docks.

The policies did not include the usual provisions

providing for the insurers to defend the insured for claims

within the policies, and in fact, the insurers did not defend

B&LE in the Jn re Lower Lake Erie Litigation. USX,

however, did seek indemnity from the insurers after the

judgment against B&LE was entered. The insurers re-

fused this demand and consequently on March 31, 1995,

USX filed a coverage action in the Court of Common Pleas

of Allegheny County, Pennsylvania, naming most of the

insurers who had participated in its catastrophic liability

insurance program from May 12, 1977, to April 1, 1983, as

defendants. ICAROM ple (““ICAROM”), one of the named

defendants and the successor to the Insurance Corporation

of Ireland (“ICI”), removed that action to the United States

District Court for the Western District of Pennsylvania on

the grounds that it was an “agency or instrumentality of a

foreign state” within the meaning of 28 U.S.C. § 1603

(“section 1603”), a provision of the Foreign Sovereign

Immunities Act of 1976, 28 U.S.C. § 1602 et seg. (“FSIA”),

and thus could remove the action pursuant to 28 U.S.C.

§ 1441(d) (“section 1441(d)”) which provides that a foreign

state may remove a state court action to the district court.

Section 1441(d) compliments 28 U.S.C. § 1330(a) which

gives district courts jurisdiction over actions against

foreign states as defined in section 1603(a). An “agency or

instrumentality of a foreign state” is itself a foreign state

within sections 1441(d) and 1603.

On May 18, 1995, USX voluntarily dismissed its first

Common Pleas Court action without prejudice and initi-

ated the current action in the same court by filing a

complaint identical to its original complaint except that it

App. 13

excluded as defendants any entity that was an “agency or

instrumentality of a foreign state” within the meaning of

section 1603 and did not include ICAROM. Br. of Appel-

lants at 6; Joint App. at 372. Three of the named insurers

then filed separate third-party complaints joining

ICAROM as a third-party defendant, asserting claims for

contribution against it.

ICAROM reacted by again filing a notice of removal

pursuant to section 1441(d), claiming that it was an

agency or instrumentality of a foreign state within the

meaning of section 1603. USX countered by filing a motion

to remand the action to the state court on the ground that

ICAROM was not an agency or instrumentality of a

foreign state. By an order dated July 18, 1995, the district

court stayed all proceedings, including discovery, pending

disposition of the jurisdictional issue that USX raised by

its motion to remand. The district court subsequently

denied the motion to remand as well as USX’s related

motion to engage in jurisdictional discovery by a compre-

hensive opinion and order dated March 29, 1996, and

entered April 1, 1996, as it found that ICAROM was an

agency or instrumentality of a foreign state.

The court then lifted the stay and the parties engaged

in substantive discovery following which all parties filed

motions for summary judgment. On March 22, 2000, the

court issued a comprehensive opinion and order granting

the insurers’ motions for summary judgment and denying

USX’s motion for partial summary judgment. USX Corp. v.

Adriatic Ins. Co., 99 F. Supp. 2d 593 (W.D. Pa. 2000).

USX timely appealed from the orders of April 1, 1996,

and March 22, 2000, and, following briefing and oral

argument, we entered an order on May 1, 2001, without an

™

App. 14

accompanying opinion, reversing the order of April l,

1996, but only to the extent that it denied USX’s motion

for leave to engage in discovery with respect to subject

matter jurisdiction. We did not, however, disturb the order

for summary judgment. In the same order we remanded

the case to the district court to allow discovery on the

jurisdictional issue and, even though we retained jurisdic-

tion, we authorized USX to move in the district court at

the completion of jurisdictional discovery for an order

vacating the final judgment in the case and remanding the

case to the state court. Our order further provided for the

parties to file supplemental briefs in this court after

completion of the remand proceedings.” In fact, the parties

engaged in jurisdictional discovery on the remand follow-

ing which USX again moved to remand the case to the

state court. On September 11, 2002, the district court

issued another comprehensive opinion and order denying

the motion to remand.‘ In that opinion the district court

deemed the notice of removal amended to correct any

asserted deficiency in it.

After the district court rendered its September 11,

2002 opinion and order but before the parties filed their

supplemental briefs and before we rescheduled oral

* If the district court had vacated the final judgment and remanded

the case to the state court presumably the appeal would have become

moot and we would have dismissed it. We are not concerned here with

whether 28 U.S.C. § 1447(d) then would have precluded the insurers

from appealing.

* The district court had issued yet another comprehensive opinion

in this case regarding a matter not in issue on this appeal on Septem-

ber 30, 1998. See USX Corp. v. Adriatic Ins. Co., 64 F. Supp. 2d 469

(W.D. Pa. 1998).

App. 15

argument, the parties filed a joint motion asking us to

hold the case in abeyance until the Supreme Court decided

the appeal in Dole Food Co. v. Patrickson, 155 L. Ed. 2d

643, 123 S.Ct. 1655 (2003), as they anticipated, correctly

as it turned out, that Dole would resolve an aspect of the

jurisdictional question we were to consider on the appeal.

We granted that motion and thén, after the Court decided

Dole, the parties filed their supplemental briefs and we

scheduled and entertained oral argument and now decide

the case in this opinion. Even though USX did not file an

amended notice of appeal to encompass the September 11,

2002 order, in view of the unusual circumstance that we

remanded the case to the district court but retained

jurisdiction, we will treat the appeal as including that

order though it is not specifically listed in the notice of

appeal.

II. DISCUSSION

There are two overarching issues on this appeal. First,

USX contends that the district court did not have subject

matter jurisdiction because the only asserted basis for

exercise of such jurisdiction is that ICAROM, a third-party

defendant, is a foreign state within the meaning of the

FSIA as “an agency or instrumentality” of the Republic of

Ireland whereas it is no such thing. Thus, in USX’s view

the district court should have granted its motion to re-

mand and never have addressed this case on the merits. It

further contends that the insurers are barred by waiver

for reasons that we will explain below from raising an

aspect of their argument supporting the district court’s

exercise of jurisdiction. Second, USX contends that if the

district court had jurisdiction it erred in granting the

a. 7” oo

App. 16

insurers summary judgment on the merits. We, of course,

consider the jurisdictional issue first.

A. - THE JURISDICTIONAL QUESTION

The district court’s ruling that ICAROM is an agency

or instrumentality of a foreign state for purposes of sub-

ject-matter jurisdiction under the FSIA presents a ques-

tion of law subject to plenary review, and we exercise

plenary review over the denial of the motion to remand.

Werwinski v. Ford Motor Co., 286 F.3d 661, 665 (3d Cir.

2002); Fed. Ins. Co. v. Richard I. Rubin & Co., 12 F.3d

1270, 1282 (3d Cir. 1993). While we would review the

district court’s factual findings for clear error if they were

disputed, In re Texas E. Transmission Corp. PCB Con-

tamination Ins. Coverage Litig., 15 F.3d 1230, 1238 n.8 (3d

Cir. 1994), there are no disputes of historical fact here, and

thus we reject the insurers’ contention that we should

review the district court’s finding that ICAROM was an

agency or instrumentality of a foreign state deferentially

for clear error. Indeed, USX indicates that it “does not

dispute the District Court’s factual findings relating to

ICI/ICAROM’s alleged organ status.” Reply Br. at 9. We

review the district court’s decision to deem the notice of

removal amended to correct any asserted deficiency in it

on an abuse of discretion basis. See Scattergood v. Perel-

man, 945 F.2d 618, 627 (3d Cir. 1991). The district court

exercised jurisdiction pursuant to section 1441(d) which

permits foreign states as defined in the FSIA to remove

actions brought against them to the district court and we

have jurisdiction under 28 U.S.C. § 1291.

Section 1603, which is as we have indicated a provi-

sion of the FSIA, provides:

App. 17

For purposes of this chapter

(a) A “foreign state”, except as used in section

1608 of this title, includes a political subdivision

of a foreign state or an agency or instrumentality

of a foreign state as defined in subsection (b).

(b) An “agency or instrumentality of a foreign

state” means any entity

(1) which is a separate legal person, corpo-

rate 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 subdivi-

sion thereof, and

(3) which is neither a citizen of a State of

the United States as defined in section

1332(c) and (d) of this title, nor created un-

der the laws of any third country.

and waters, continental or insular, subject to the

jurisdiction of the United States.

Significantly section 1603(b)(2) is two-pronged as it speci-

fies that an entity may be an “agency or instrumentality”

by reason of being owned by a foreign state or being its

organ.

Originally the district court denied the motion to

remand on the basis of its finding that the Republic of

Ireland owned “a majority” of ICAROM’s shares, a conclu-

sion it reached because the court determined that the

“tiered” ownership through which Ireland owned

ICAROM, i.e., the ownership of an entity that in turn

owned ICAROM, was sufficient to establish Ireland’s

App. 18

ownership of ICAROM itself for purposes of the FSIA.

Following the remand the district court adhered to that

conclusion and, in addition, held that ICAROM was an

agency or instrumentality of Ireland as its “organ,” a

finding that it had not made in its April 1, 1996 opinion.

Thus, as it originally had done, it determined that it had

jurisdiction and denied the motion to remand.

In Dole, however, after the district court denied USX’s

renewed motion to remand, the Supreme Court rejected

the “tiered” ownership theory under the FSIA as it held

that a subsidiary of an instrumentality is not itself an

instrumentality. The parties agree that Dole is controlling

here to the extent that the district court upheld its exer-

cise of jurisdiction predicated on the majority ownership

prong of section 1603(b)(2), and thus we cannot affirm its

order denying remand on the basis of that conclusion. The

insurers contend, however, that the district court did have

jurisdiction inasmuch as ICAROM is, as the district court

held, an organ of the Irish government and by reason

thereof is its agency or instrumentality. USX answers that

the insurers cannot rely on the organ prong of section

1603(b\X2) for determining if ICAROM is an agency or

instrumentality of Ireland as they have waived their right

to do so, and, in any event, ICAROM is not an organ of the

Irish government.

In view of the jurisdictional discovery and the submis-

sions of the parties we know a great deal about ICAROM

which, as we have indicated, formerly was known as the

App. 19

Insurance Corporation of Ireland.’ ICI was incorporated as

a limited liability company in Dublin in 1935 and rapidly

grew to become the largest liability and marine insurer in

Ireland. In the 1970s it expanded its operations into

foreign markets, including the London Insurance Market.

In 1981, Allied Irish Banks (“AIB”) acquired 25% of ICI,

and in 1983 purchased the remainder of ICI and assumed

its full control. By 1984, however, AIB determined that

ICI’s continued viability was in question, due in part to

losses associated with its London business.

In early 1985, AIB informed the Irish government of

ICI’s precarious position. At the time, AIB was one of the

largest banks in Ireland, and ICI was a leading insurer to

corporate Ireland. On March 15, 1985, the Irish govern-

ment, hoping to avoid ICI’s collapse and to minimize the

general economic repercussions that such a collapse could

trigger, took emergency action. AIB transferred all shares

of ICI for the nominal sum of IR £ 5 to Gebhard Limited

(“Gebhard”), a shelf company that an Irish law firm

assisting the Irish government had formed to acquire the

ICI shares. Gebhard then assumed a guarantee AIB

previously had given to the Institute of London Under-

writers on behalf of ICI. The agreement to assume the

guarantee was subject to approval by the Irish Minister

for Industry, Trade, Commerce, and Tourism (“the Minis-

ter”). Two high-ranking civil servants held Gebhard’s only

two shares’ in trust for the Minister. That same day, ICI

* The district court in its comprehensive opinion of September 11,

2002, set forth the facts related to ICAROM in great detail.

* Under Irish law, a company such as Gebhard that is not a public

limited company (“plc”) must have at least two shareholders.

emia

App. 20

was placed into administration pursuant to the Insurance

Act of 1983 (“the 1983 Act”) authorizing appointment of an

administrator to take over the management of insolvent

insurers for the purpose of placing them on sound com-

mercial and financial footing, a process similar to compa-

rable American proceedings. The statute authorizes the

administrator to access the Insurance Compensation Fund

(“ICF”), a mechanism used to channel funds to finance

insurers’ operations. The Minister nominated William

McCann, a partner in the accounting firm of Gregg,

Gardner & Company, as ICI’s provisional administrator,

and Ireland’s High Court made his appointment perma-

nent on March 25, 1985.

On March 20, 1985, Gebhard changed its name to

Sealuchais Arachais Teoranta (“SAT”). SAT had no em-

ployees and was simply a holding company, which, as the

Minister described in an address to Parliament, had no

“influence over the management of the company in ad-

ministration ... because the company in administration is

managed by the administrator who has set aside the board

of the company in administration and is acting in accor-

dance with the law and the directions of the court.” Juris.

J.A. at 297.

On April 8, 1985, the Irish Parliament passed the

Insurance (Miscellaneous Provisions) Act of 1985 (“the

1985 Act”), retroactively authorizing the acquisition of

SAT (formerly Gebhard) effective as of March 15, 1985.

The 1985 Act further provides that the Minister may hold

the shares of SAT as he or she sees fit and that SAT’s

shareholders must hold the shares in trust for the Minis-

ter and pay all dividends or other monies received to the

Minister for the benefit of the Exchequer. Moreover, the

1985 Act provides that the Minister may require the

App. 21

shareholders to transfer their shares back to the Minister

or his designee and that upon the death of a shareholder,

the shares automatically vest in the Minister without the

need for any transfer of shares. The 1985 Act authorizes

the Minister to appoint the directors of SAT after consulta-

tion with the Minister of Finance and provides that the

directors hold office on terms and conditions the Minister

determines subject to being removed by him or her at any

time. Finally, the 1985 Act authorizes the Minister to

guarantee payment by ICI under certain insurance poli-

cies issued by the Institute of London Underwriters and

requires the Minister to report to Parliament concerning

payments made under such guarantee.

Because Irish law requires a public limited company

(“ple”) to have at least seven shareholders, the government

arranged for legal title to six of ICI’s 120 million common

shares to be vested in civil servants who hold the shares in

trust for the Minister. SAT retained the remaining

119,999,994 shares. Notwithstanding the 1985 Act's

provisions allowing the Minister to acquire and hold its

shares as the Minister sees fit, the Minister never has

acquired direct legal title to the shares of SAT.

In 1990, the administrator negotiated the sale of ICI’s

ongoing insurance operations in Ireland (“the Irish Busi-

ness”), as well as ICI’s trade name and goodwill. The

administrator sought and obtained permission from the

government to test the market for such a sale and subse-

quently initiated a competitive process to generate tender

offers from outside companies. When the field was reduced

to two competitors, the administrator made a formal

recommendation to the government which the cabinet

approved. ICI thereafter sold its trade name and the Irish

Business to Orkandale Holdings, Ltd. (“Orkandale”), a

App. 22

subsidiary of Assurances Generales de France (“AGF”). All

of ICI’s shares were transferred to Orkandale for a short

time during which Orkandale exercised a put option that

caused all of the assets, other than the Irish Business and

ICI’s trade name, as well as the ICI shares to revert to

SAT. These procedures allowed AGF to take advantage of

ICI’s tax losses in the range of £ 150 million. After it shed

the Irish Business and the ICI trade name, ICI was

renamed ICAROM. ICAROM has not underwritten new

business but rather has operated as a “runoff company,”

the entire purpose of which is to wind up its remaining

liabilities, the complete discharge of which is not expected

to be accomplished until 2040 or 2050.

According to USX, ICAROM is nothing more than a

private company in administration under the 1983 Act

authorizing such action for insolvent insurers. It points

out that the administrator, not the government, manages

and controls ICAROM’s day-to-day operations, ICAROM

does not have board or shareholder meetings, and no

actions, appointments, or other corporate business can be

conducted by shareholder vote. The administrator’s

management of ICAROM is subject only to approval by the

High Court. As USX emphasizes, the only other insurer to

have operated under administration pursuant to the 1983

Act is an Irish insurance company known as PMPA/Primor

(“PMPA”), in which the government never has claimed any

ownership interest. The ICF has provided the outside

funding of ICAROM and the government has not funded

ICAROM directly. The government has not incurred costs

as a result of the operation and administration of

ICAROM other than having foregone interest on a £ 32

million loan that the Irish Exchequer agreed to provide

App. 23

interest-free as part of a 1992 Financing Agreement for

ICAROM’s benefit.’

Notwithstanding the circumstances to which USX

alludes, the record demonstrates that the government has

played a role in financing ICAROM and in overseeing the

administrator's management of the company. The admin-

istrator regularly consults with the Department of Enter-

prise, Trade, and Employment on all significant matters

and all major decisions are made with the department’s

approval. The administrator delivers a formal presenta-

tion annually to the Departments of Enterprise, Trade,

and Employment and Finance regarding the status of

ICAROM’s operations and prepares quarterly reports that

are forwarded to the same departments. The departments

supported the nomination of the current administrator

before the High Court and approved the current general

manager prior to his appointment by the administrator.

Although the government has not provided funding

directly to ICAROM, it has channeled funds into the ICF

so that they can be disbursed to ICAROM. Under a 1985

Financing Agreement, £ 100 million was advanced to the

ICF for the benefit of ICAROM. AIB provided £ 70 million,

while the government, through the Irish Central Bank,

provided a £ 30 million loan.* Under the 1985 Agreement,

interest on the £ 30 million loan in the amount of £ 3.5

million per annum was to be paid by AIB and other private

" We believe that the government also has had costs in terms of the

use of time of its officials on ICAROM matters though our result does

not depend on these costs having been incurred.

* ICAROM repaid in full the £ 100 million in September of 2000.

App. 24

banks. In fact, interest rates fell and the interest due was

less than the £ 3.5 million per annum set by the agree-

ment. Although the government was entitled to retain the

extra funds (approximately £ 2.1 million), it disbursed the

excess interest payments to ICAROM. In 1992, there was

another Financing Agreement executed whereby AIB

made an aggregate payment of £ 176 million, at a rate of

£ 8.8 million per year for 20 years, to the ICF, while the

government, through the Exchequer, contributed the one-

time interest-free loan of £ 32 million discussed above. The

foregone interest amounted to approximately £ 2.1 million

per year. ICAROM is expected to repay these advances in

2012.

Finally, ICAROM received, through the ICF, the

proceeds of four commercial loans from three separate

financial institutions in the amount of £ 65 million. The

Irish Department of Finance guaranteed that the ICF

would have sufficient funds to satisfy the obligations on

these four loans, as authorized by Irish statute, although

it did not directly guarantee them. Those loans have been

fully repaid, and the government has not been obligated to

make good on its guarantees.

1. Waiver

The first aspect of the jurisdictional dispute that we

address is whether the insurers waived the right to rely on

the “organ” basis of jurisdiction.°

* We recognize that it could be argued that the insurers other than

ICAROM do not have standing to advance the jurisdictional argument

inasmuch as only ICAROM could have removed the case. We will not

(Continued on following page)

App. 25

ICAROM’s notice of removal states:

Removal of this action is expressly author-

ized by 28 U.S.C. § 1441(d), which provides, in

pertinent part: “Any civil action brought in a

State against a foreign state as defined in section

1603(a) of this title may be removed by the for-

eign state to the district court of the United

States for the district and division embracing the

place where such action is pending.”

ICAROM is a “foreign state” within the

meaning of 28 U.S.C. § 1603(a). That section de-

fines a “foreign state” as, inter alia, “an agency or

instrumentality of a foreign state as defined in

subsection (b).” Subsection (b) of § 1603, in turn

defines “an agency or instrumentality of a foreign

state” as “any entity” that (1) “is a separate legal

person, corporate or otherwise,” (2) “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) “is neither a citizen

of a State of the United States ... nor created

under the laws of any third country.” Id.

§ 1603(b).

ICAROM meets all of these criteria. It is a

corporation organized pursuant to the laws of the

Republic of Ireland. A majority of ICAROM’s

shares or other ownership interest is owned by

the government of the Republic of Ireland.

ICAROM is neither a citizen of the United States

nor created under the laws of any third country.

linger on this point, however, inasmuch as ICAROM itself is defending

the district court’s denial of the motions to remand.

App. 26

ICAROM is therefore a “foreign state” within the

meaning of 28 U.S.C. § 1603(a).

Joint App. at 492 (alteration in original). USX does not

contend that ICAROM does not satisfy the first and third

requirements of section 1603(b) for an entity to be an

“agency or instrumentality of a foreign state.”

Prior to our remand of the case ICAROM argued that

it satisfied the second element of section 1603(b) because

Ireland owned a majority of its shares and the district

court agreed with that contention. On the remand, as we

have indicated, the district court adhered to its earlier

conclusion that Ireland owned ICAROM through a “tiered”

arrangement within the FSIA’s definition of majority

ownership by a foreign state. Juris. J.A. at 37. Since that

time, however, as we also have indicated, the Supreme

Court has held that a subsidiary of an instrumentality is

not itself entitled to instrumentality status, so that “tier-

ing” arrangements cannot provide the basis for finding

foreign state status under the majority ownership prong of

section 1603(b)(2). Rather, that prong applies “only if the

foreign state itself owns a majority of the corporation’s

shares.” Dole, 123 S.Ct. at 1662.

The district court, however, also considered ICAROM’s

alternative argument on the remand under the “organ”

prong of section 1603(b)(2), which ICAROM explicitly first

advanced at that time, and held that ICAROM qualified as

an organ of Ireland and thus was its agency or instrumen-

tality. In answer to USX’s argument that ICAROM waived

the right to invoke the “organ” prong by referencing only

the majority ownership prong in the notice of removal, the

district court deemed the notice amended under 28 U.S.C.

§ 1653, which provides that “[d]efective allegations of

a __

App. 27

jurisdiction may be amended, upon terms, in the trial or

appellate courts,” noting that the notice of removal “in-

voked § 1603 in its entirety” and that ICAROM’s “organ”

argument “is premised on the same facts that support its

invocation of the instrumentality prong.” Juris. J.A. at 37-

40. ICAROM does not dispute that it initially relied on the

majority ownership prong of section 1603(b)\(2), but it

argues that its notice of appeal nevertheless referenced

section 1603 as a whole. It further contends that, in any

event, even if it belatedly advanced the organ prong

argument it caused USX no prejudice by doing so and its

procedure was reasonable inasmuch as before Dole it

appeared that a tiering arrangement would satisfy the

majority ownership prong of section 1603(b)\(2) and,

indeed, we so had held with respect to ICAROM itself in In

re Texas E. Transmission Corp., 15 F.3d at 1238 n.8. It also

contends that the same set of facts underlie an analysis

under both the ownership and organ prongs of section

1603(b)(2).

Section 1653 gives both district and appellate courts

the power to remedy inadequate jurisdictional allegations,

but not defective jurisdictional facts. Newman-Green, Inc.

v. Alfonzo Larrain, 490 U.S. 826, 831-32, 109 S. Ct. 2218,

2222, 104 L. Ed. 2d 893 (1989). Moreover, we have held

that a district court abused its discretion by not allowing

plaintiffs to amend their complaint to allege jurisdiction

on diversity grounds where diversity existed but had not

” It-is clear that USX, initially not contesting ICAROM’s foreign

state status under section 1603(b), tried to avoid creating a basis for

federal jurisdiction by dismissing its initial state court action and then

bringing a second state court action omitting ICAROM.

App. 28

been a necessary basis for jurisdiction before the federal

claims in the case were dismissed. Scattergood, 945 F.2d at

627.

In this case, ICAROM stated all three elements of the

“agency or instrumentality” definition in its notice of

removal, including as part of the second element as de-

fined in section 1603(b)(2) both the majority ownership

prong and the organ prong. It then alleged that “ICAROM

meets all of these criteria.” Joint App. at 492. To be sure,

in its brief recitation of the facts supporting that allega-

tion, ICAROM noted that Ireland owned a majority of its

shares, thus directly referencing only the majority owner-

ship prong of section 1603(b)(2). Although jurisdiction

under that prong cannot be sustained after Dole, any

possible defect in the notice of removal is of the sort that

we ordered the district court to cure with respect to a

complaint pursuant to section 1653 in Scattergood which

seems to us to be persuasive authority in this parallel

situation. Here, reliance on the organ prong as a basis for

jurisdiction was not clearly required until the Supreme

Court clarified that tiering arrangements would not

satisfy the majority ownership prong of section 1603(b)(2).

Moreover, although, under Dole, Ireland does not own

ICAROM for purposes of the FSIA, its mistaken allegation

to that effect bears on a point central to the organ inquiry,

namely, Ireland’s control over ICAROM.

Thus, the same allegations contained in the notice of

removal, amended only to clarify that Ireland controls,

rather than owns, ICAROM through SAT, support the

crucial allegation of the notice, namely, that ICAROM

satisfies all the requirements to be an agency or instru-

mentality of Ireland as set forth in section 1603(b). In

other words, although the allegation of ownership most

App. 29

clearly relates to the majority ownership prong of section

1603(b\(2), it is also highly relevant to ICAROM’s organ

status. The district court’s amendment of the notice

pursuant to section 1653 therefore did not add new juris-

dictional facts and did not rely on a basis of jurisdiction

different from that originally alleged,” namely that

ICAROM is an agency or instrumentality of Ireland under

section 1603. All it did was amend the ownership allega-

tion in light of an intervening clarification in the law.”

" USX cites a number of cases disallowing amendments creating

an entirely new basis for jurisdiction. See, e.g., Blakeley v. United Cable

Sys., 105 F. Supp. 2d 574, 579-80 (S.D. Miss. 2000); Iwag v. Geisel

Compania Maritima, S.A., 882 F. Supp. 597, 601 (S.D. Tex. 1995); see

also 14C Charles Alan Wright, et al. Federal Practice and Procedure

§ 3733, at 358-61 (3d ed. 1998) (“[A]Jmendment of the removal notice

may correct an imperfect statement of citizenship, or state the previ-

ously articulated grounds more fully, or correct the jurisdictional

amount. Completely new grounds for removal jurisdiction may not be

added and missing allegations may not be furnished, however.”)

(footnote omitted). These cases are inapposite, however, as new grounds

for removal have not been added and new factual allegations have not

been made.

* ICAROM submitted the affidavit of Brendan Murphy, its former

general manager, in opposition to USX’s original motion to remand

setting forth the history and purpose of the government’s involvement

with ICAROM and other facts that pertain not only to the majority

ownership analysis but to the organ analysis. The Supreme Court has

upheld removal where jurisdictional facts required to support the

removal were found in later-filed affidavits rather than in the notice of

removal. Willingham v. Morgan, 395 U.S. 402, 407 n.3, 89 S. Ct. 1813,

1816 n.3, 23 L. Ed. 2d 396 (1969) (“This material should have appeared

in the petition for removal. However, for purposes of this review it is

proper to treat the removal petition as if it had been amended to

include the relevant information contained in the later-filed affidavits.

See 28 U.S.C. § 1653.”). Other courts more recently have allowed

consideration of facts contained in later-filed affidavits, treating those

facts as an amendment of the notice of removal under section 1653. See,

e.g., Cohn v. Petsmart, Inc., 281 F.3d 837, 840 n.1 (9th Cir. 2002)

(Continued on following page)

App. 30

ICAROM alleges now, as it did originally, that jurisdiction

exists under section 1441(d) because it is an agency or

instrumentality of the Republic of Ireland under section

(holding that the district court did not err in construing an affidavit

setting forth the facts supporting the amount in controversy in a

diversity case as an amendment under section 1653 to the notice of

removal which stated summarily, without alleging any underlying facts,

that the amount in controversy exceeded $75,000); cf. Miller v. Princi-

pai Life Ins. Co., 189 F. Supp. 2d 254, 257-58 (E.D. Pa. 2002) (holding

that, even assuming that the defendant’s initial removal petition was

defective in that it did not state that a codefendant was only a nominal

defendant, Willingham permitted treatment of an amended notice of

removal filed more than 30 days after the filing of the original removal

notice and after service of a motion to remand as an amendment of the

original notice under section 1653). Furthermore, this approach is

consistent with 28 U.S.C. § 1446(a), which, borrowing language from

the liberal pleading standard of Fed. R. Civ. P. 8(a), was amended in

1988 to require only a “short and plain statement of the grounds for

removal.” See Charles Alan Wright et al., 14C Federal Practice and

Procedure § 3733, at 351-56 (3d ed. 1998) (describing the amendment of

section 1446(a) and stating: “[TJhe better rule is that detailed grounds

for removal need not be set forth in the notice. Rather, it should be

sufficient if the court is provided the facts from which removal jurisdic-

tion can be determined. Thus, the same liberal rules employed in

testing the sufficiency of a pleading should apply to appraising the

sufficiency of a defendant’s notice of removal,” (footnotes omitted)).

Accordingly, although we are mindful that courts construe removal

statutes strictly with all doubts resolved in favor of remand, see Boger

Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990), we are

satisfied that sections 1446(a) and 1653, together with the Supreme

Court’s opinion in Willingham, permit a court to consider jurisdictional

facts contained in later-filed affidavits as amendments to the removal

petition where, as here, those facts merely clarify (or correct technical

deficiencies in) the allegations already contained in the original notice.

To the extent, if any, that cases like Fuller v. Exxon Corp., 131 F. Supp.

2d 1323, 1327 (S.D. Ala. 2001), take a more restrictive view of section

1653, we decline to adopt their reasoning.

App. 31

1603.” Thus, the district court’s determination to allow the

amendment amplifying the notice of removal clearly was

within its sound discretion.“

* We also point out that section 1653 need be invoked to permit an

amendment only after the expiration of the 30-day period within which

an action may be removed under 28 U.S.C. § 1446(b), during which time

a removal notice may be amended freely. See Shaw v. Dow Brands, Inc.,

994 F.2d 364, 368 (7th Cir. 1993). Under 28 U.S.C. § 1441(d), however,

“where removal is based upon this subsection [governing removal by a

foreign state], the time limitations of section 1446(b) of this chapter

may be enlarged at any time for cause shown.” Because the 30-day time

limit on free amendments of the petition is derived from section

1446(b), section 1441(d) would appear to allow a foreign state to amend

its removal petition freely during the 30-day time period and for cause

at any other time. Furthermore, it appears that an amendment for

cause under section 1441(d) likely could be on broader grounds than

might be permissible under 28 U.S.C. § 1653 although we do not rely on

that possibility here. See footnote 11 supra. We are satisfied that USX

suffered no prejudice as a result of the district court’s consideration of

the organ prong because ICAROM raised this argument shortly after

remand from this court so that USX had ample time to respond to it,

and because in part the same facts are relevant under either the

ownership or organ prong of section 1603(bX2) although they could not

satisfy the ownership prong here. In this regard we observe that when

we asked at oral argument what prejudice that USX suffered by reason

of ICAROM’s possibly late identification of the organ prong of section

1603 as a basis for foreign state status and thus for district court

jurisdiction, USX’s attorney was not able to make a specific indication

of what it might be. Certainly USX had ample time to develop the facts

with respect to ICAROM’s organ status.

“ Certain insurers contend that USX has waived the waiver issue

by not discussing the fact that the district court deemed the notice

amended under section 1653 and not arguing that it abused its

discretion in doing so. Supp. Br. at 30 & n.8. Inasmuch as USX’s brief

does discuss section 1653, albeit briefly, USX Br. at 29, it did not waive

this issue.

App. 32

2. Analysis Under the Organ Prong

The FSIA does not define the term “organ” as used in

section 1603(b)(2) and we have not had occasion to con-

sider the meaning or application of that term under the

statute. Other courts have developed a flexible approach to

determine whether an entity qualifies as an organ of a

foreign state under the FSIA and thus is its agency or

instrumentality. The Court of Appeals for the Ninth

Circuit asks whether the entity “‘engages in a public

activity on behalf of the foreign government.’” EOTT

Energy Operating Ltd. P’ship v. Winterthur Swiss Ins. Co.,

257 F.3d 992, 997 (9th Cir. 2001) (quoting Patrickson v.

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

part, dismissed in part, 155 L. Ed. 2d 643, 123 S. Ct. 1655

(2003)). In doing so, that court considers factors including

“‘the circumstances surrounding the entity’s creation, the

purpose of its activities, its independence from the gov-

ernment, the level of government financial support, its

employment policies, and its obligations and privileges

under state law.’” Id. (quoting Patrickson, 251 F.3d at

807). The court also has stated that “the Act’s legislative

history suggests that Congress intended the terms ‘organ’

and ‘agency or instrumentality’ to be read broadly.” Gates

v. Victor Fine Foods, 54 F.3d 1457, 1460 (9th Cir. 1995).

The Court of Appeals for the Fifth Circuit looks to similar

factors: “(1) whether the foreign state created the entity

for a national purpose; (2) whether the foreign state

actively supervises the entity; (3) whether the foreign

state requires the hiring of public employees and pays

their salaries; (4) whether the entity holds exclusive rights

to some right in the [foreign] country; and (5) how the

entity is treated under foreign state law.’” Kelly v. Syria

Shell Petroleum Dev. B.V., 213 F.3d 841, 846-47 (5th Cir.

2000) (quoting Supra Med. Corp. v. McGonigle, 955 F.

App. 33

Supp. 374, 379 (E.D. Pa. 1997)). That court, however, does

not apply those factors mechanically and does not require

that all five support a determination that an entity is an

organ. Id. These two courts of appeals appear to be the

only ones to have considered directly the factors leading to

a conclusion that an entity is an organ of a foreign state.

A primary purpose of the FSIA is to make it difficult

for private litigants to bring foreign governments into

court, thereby avoiding affronting them. Patrickson, 251

F.3d at 806 (citing First Nat’l City Bank v. Banco Nacional

de Cuba, 406 U.S. 759, 762, 92 S. Ct. 1808, 1810-11, 32 L.

Ed. 2d 466 (1972)). In passing the FSIA, Congress adopted

the so-called restrictive theory of sovereign immunity,

whereby a foreign state (including its agencies and in-

strumentalities) is immune from suit for its public or

sovereign activities, but not for its commercial or private

activities. H.R. Rep. No. 94-1487, at 7 (1976), reprinted in

1976 U.S.C.C.A.N. 6604, 6605. Even when a case involves

a foreign state’s private activities, however, the FSIA

provides the state with particularized procedural treat-

ment in some circumstances, for example, regarding

venue, 28 U.S.C. § 1391(f), rule of decision, id. § 1606, and

execution, id. § 1610. Furthermore, as is evident from this

case, a foreign state defendant, when named as a third-

party defendant may remove the entire case to a district

court, even where it is merely one among almost 50

otherwise non-foreign state defendants. The court then

must try the case without a jury. 28 U.S.C. § 1441(d).

The FSIA therefore provides for suit in federal court

in a potentially broad array of cases, with significant

procedural consequences, some of which a plaintiff likely

will not welcome. With respect to the jurisdictional provi-

sions of the FSIA, the legislative history states: “Such

App. 34

broad jurisdiction in the Federal courts should be condu-

cive to uniformity in decision, which is desirable since a

disparate treatment of cases involving foreign govern-

ments may have adverse foreign relations consequences.”

H.R. Rep. No. 94-1487, at 13, 1976 U.S.C.C.A.N. at 6611.

Thus, in considering the scope of the FSIA the point has

not been lost on us that the presence of a foreign state

third-party defendant has resulted in the disposition in a

district court of a case even though it had been brought in

a state court and overwhelmingly involves domestic

parties and state law issues and, in the absence of the

foreign state party, would have remained in the state

court.”

In deciding whether to adopt the Court of Appeals for

the Ninth Circuit’s standard for determining whether an

entity constitutes an organ of a foreign state, we therefore

should be mindful of the congressional goals of promoting

uniformity of decision and avoiding impairing foreign

relations because the consequences of the presence of

FSIA-predicated jurisdiction are so significant. Surely, a

bright-line rule of the sort the Supreme Court adopted

with respect to the majority ownership in Dole provides for

the greatest uniformity of decision. Nevertheless inasmuch

as the statute and legislative history are silent as to a

definition of the term “organ,” and that term inherently is

vague and does not have a well-established common law

meaning, Congress’s inclusion of the term within the

definition of “agency or instrumentality” of a foreign state

* Of course, the same thing can happen when there is diversity of

citizenship even though, as here, the plaintiff initiated the action in a

state court.

App. 35

suggests the need for a more flexible approach under the

organ prong of section 1603(b\(2) than the Court adopted

in Dole with respect to the ownership prong of that sec-

tion.

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 controlled by foreign states through tiering ar-

rangements and because of the widely differing forms of

ownership or control foreign states may exert over entities.

See Joseph W. Hardy, Jr., Note, Wipe Away the Tiers:

Determining Agency or Instrumentality Status Under the

Foreign Sovereign Immunities Act, 31 Ga. L. Rev. 1121,

1161, 1164-66, 1172-73 (1997). Nonetheless, we must be

vigilant to protect the goal of uniformity and therefore in

determining whether an entity is an organ should consider

factors similar, if not identical, to those considered by the

Courts of Appeals of the Ninth and Fifth Circuits.

We agree with the Court of Appeals for the Ninth

Circuit that for an entity to be an organ of a foreign state

it must engage in a public activity on behalf of the foreign

government. Requiring less would open the door to situa-

tions in which a party only tangentially related to a

foreign state could claim foreign state status and avail

itself (and, incidentally, any other defendants in the case)

of the FSIA’s procedural provisions which, as we have

indicated, plaintiffs are not likely to welcome. This result

would be unfair to plaintiffs, who in some such cases

might not have reason to know of the slight relationship of

their dealings with the foreign states, and who, therefore,

likely would not have had the opportunity to consider this

important fact when negotiating contracts by, for example,

negotiating for waiver clauses, or when initiating suit by

App. 36

following the special procedures required by the FSIA.”

Joseph W. Dellapenna, Refining the Foreign Sovereign

Immunities Act, 9 Willamette J. Int'l L. & Disp. Resol. 57,

93 (2001). Requiring less would not further the goal of

avoiding adverse foreign relations. On the other hand,

requiring more would pose potential foreign relations

problems.

One district court, taking a narrow view of the term

“organ,” cited a Supreme Court case interpreting the term

“agency or instrumentality” of the Federal government for

purposes of the Federal Tort Claims Act to support its

conclusion that organ status under the FSIA turns not on

“the degree to which an entity is subject to government

regulation aimed at assuring compliance with government

goals,” but on “the ‘power of the Federal Government to

control the detailed physical performance of the contrac-

tor.” See Edlow Int’l Co. v. Nuklearna Elektrarna Krsko,

441 F. Supp. 827, 832 (D.D.C. 1977) (quoting United States

v. Orleans, 425 U.S. 807, 814, 96 S. Ct. 1971, 1976, 48 L.

Ed. 2d 390 (1976)). The court therefore concluded that the

entity involved in that case, a “worker’s organization”

founded under the constitution and laws of the Socialist

Federal Republic of Yugoslavia (“SFRY”), was not an organ

of the ultimate control over its policies and operations

because its SFRY despite the extent to which the state

** Indeed, as this case demonstrates, a party might be dealing with

an entity that was not an organ of a foreign state at the time of its

dealings. Here USX obtained its insurance coverage for periods before

Ireland became involved in ICI and thus it was not dealing with an

organ of Ireland at that time. But we are holding that ICAROM was an

organ when USX sued it and it removed the case and its status at that

time is what matters. See Dole, 123 S. Ct. at 1662.

App. 37

exercised “daily operations [were] virtually free of direct

government control.” Jd. This narrow a construction of the

term “organ” could have potentially adverse effects on

foreign relations insofar as foreign states may place

significant national value in an entity yet not directly

control its daily operations. The Court of Appeals for the

Ninth Circuit’s definition finds a happy medium whereby

an entity that engages in activity serving a national

interest and does so on behalf of its national government

qualifies for the protections of the FSIA, including a

federal forum.

In making this assessment, factors employed by both

the Courts of Appeals for the Ninth and Fifth Circuits are

relevant, although no one is determinative: (1) the circum-

stances surrounding the entity’s creation; (2) the purpose

of its activities; (3) the degree of supervision by the gov-

ernment; (4) the level of government financial support; (5)

the entity’ employment policies, particularly regarding

whether the foreign state requires the hiring of public

employees and pays their salaries; and (6) the entity’s

obligations and privileges under the foreign state’s laws.”

To this list, we should add an additional factor: (7) the

" It is important to note with respect to the sixth factor that

characteristics such as the entity’s ability to sue and be sued in its own

name, to contract in its own name, and to own property in its own name

are not particularly significant with respect to a finding of organ status,

given that all entities claiming agency or instrumentality status must,

under 28 U.S.C. § 1603(bX1), be a “separate legal person.” Congress

intended this term to encompass “a corporation, association, founda-

tion, or any other entity which, under the law of the foreign state where

it was created, can sue or be sued in its own name, contract in its own

name or hold property in its own name.” H.R. Rep. 94-1487, at 15, 1976

U:S.C.C.AN. at 6614.

App. 38

ownership structure of the entity. Under the organ prong,

as opposed to the majority ownership prong of section

1603(b\(2), a foreign state might own only 10% of an

entity; it might own directly 50% of the entity; or it might

own even 100% of a holding company that owns 100% of

the entity. On the other hand it is possible that a foreign

state might not own any portion of any entity that never-

theless is its organ as section 1603(b)(2) does not require a

foreign state to have any ownership interest in an entity

for it to be its organ. Courts should consider how these

different ownership structures might influence the degree

to which an entity is performing a function “on behalf of

the foreign government.””

Before applying these factors to this case, we reiterate

that USX “does not dispute the District Court’s factual

findings relating to ICI/Icarom’s alleged organ status.”

USX Supp. Reply Br. at 9. USX contends only that the

district court misapplied the relevant legal factors in

considering those facts.

“ Given this analysis, it is clear that the factual allegations of

ICAROM’s notice of removal, which include the assertion that Ireland

owns a majority of ICAROM’s shares, are relevant to the organ analysis

as well as to the majority ownership analysis on which ICAROM

originally focused. Even if we did not add “ownership structure” as a

seventh factor to consider in the organ analysis the allegation likely

would be relevant to the third factor, namely, the degree of supervision

by the government.

App. 39

a. The Circumstances Surrounding ICAROM’s

Creation

It is undisputed that ICI was created as a purely

commercial, private company in 1935 for the for-profit

business purpose of selling insurance policies. USX relies

heavily on this fact, and on the fact that since being placed

in administration ICAROM has continued as a commercial

venture by selling off the Irish Business and by running

off liabilities. We believe, however, that USX misunder-

stands the nature of this factor. First, while this factor

certainly would weigh more heavily in favor of organ

status where the entity originally was created for a gov-

ernment purpose, see, e.g., Kelly, 213 F.3d at 848 (noting

that the entity in question was created by government

decree to develop and explore the government’s mineral

resources); Corporacion Mexicana de Servicios Maritimos,

S.A. de C.V. v. M/T Respect, 89 F.3d 650, 654-55 (9th Cir.

1996) (noting that the entity in question was created by

Mexican law to refine and distribute property of the

Mexican government), it should not be applied so me-

chanically as to ignore the possibility that a foreign state

later may acquire an initially private company and use it

for government purposes. Furthermore, that ICAROM’s

activities may have been predominantly (or entirely)

commercial has little bearing on this factor (although it is

relevant to the second factor). In any event, a foreign state

receives the benefit of the FSIA’s procedural provisions in

actions arising out of its commercial activities, so 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 we face here, namely,

whether the entity comes within the purview of the FSIA

at all.

App. 40

As the district court found, the Irish government

indirectly acquired ICI to serve the important national

interest of protecting the Irish insurance and banking

industries from financial disaster, which in turn helped to

maintain stability in the Irish economy. Juris. J.A. at 41-

42. The government did not seek any profit-making

opportunity, but rather acquired ICI to further this impor-

tant governmental interest. To advance this purpose, the

Minister acted in accordance with special legislation

adopted by the Irish Parliament. That legislation further

provided that the Minister may hold the shares of SAT as

he or she sees fit; SAT’s shareholders must hold the shares

in trust for the Minister and are bound to pay all divi-

dends or other monies received to the Minister for the

benefit of the Exchequer; the Minister may require the

shareholders to transfer their shares back to the Minister

or to his or her designee; upon the death of a shareholder,

the shares automatically vest in the Minister without the

need for any transfer of shares; the Minister appoints the

directors of SAT after consultation with the Minister of

Finance; and the directors hold office on terms and condi-

tions determined by the Minister who may remove them at

any time. Moreover, the legislation authorized the Minis-

ter to guarantee payment by ICI itself under certain

insurance policies.

USX argues that the 1985 Act is irrelevant to

ICAROM’s status as an organ because the Act authorized

the creation and acquisition of SAT, not ICI, and the organ

status of SAT is not at issue here. We do not believe,

however, that the Supreme Court’s holding in Dole re-

quires us to blind ourselves to the true nature of the 1985

Act, thus effectively extending Dole’s antitiering holding to

the organ prong of section 1603(b)(2). When the Irish

App. 41

Parliament passed the 1985 Act, SAT was a holding

company with no purpose other than holding all but six

shares of ICI. The shares were held in trust for the Minis-

ter, who could hold or dispose of them as he or she saw fit.

Thus, although the legislation nominally authorized only

the acquisition of SAT, in substance the transaction

authorized the acquisition of ICI, albeit indirectly.

In USX’s view, ICAROM is attempting to circumvent

Dole by relying on the 1985 Act under the organ prong. See

USX Reply Br. at 12. The Court’s decision in Dole, how-

ever, turned on a discrete question of statutory interpreta-

tion. The Court noted that the majority ownership prong

of section 1603(b\2) “speaks of ownership,” and that the

prong’s insistence on ownership of “shares” demonstrated

“that Congress intended statutory coverage to turn on

formal corporate ownership.” Dole, 123 S. Ct. at 1660.

Because, under basic tenets of corporate law, a parent

corporation does not “own,” i.e., have legal title to, the

assets of its subsidiary, a parent company does not own

shares of a company held by its subsidiary. Jd. at 1660-61.

As the Court noted, however, “control and ownership

_.. are distinct concepts.” Jd. at 1661. The Court rejected a

control test under the majority ownership prong because

the statutory language of the majority ownership prong of

section 1603(b\(2) makes clear that ownership, not control,

is required. Id. at 1661-62. On the other hand, the organ

prong does not speak of ownership. We find that, although

Congress favored ownership over control in the majority

ownership prong, its use of the word “organ” suggests an

emphasis on control under the organ prong. Thus, al-

though the 1985 Act in terms authorized the acquisition of

SAT, not ICI, by that time SAT owned ICI and Dole does

not prohibit us from examining the substance of the

App. 42

transaction, whereby full control of ICI effectively was

transferred to the government, even if legal title to the

shares of ICI was not.” Because an act of Parliament

authorized the government’s assumption of control over

ICI and because of the extent of the government’s in-

volvement and authority in facilitating the transaction,

this factor weighs in favor of a finding of organ status.

b. The Purpose of ICAROM’s Activities

As just discussed, the acquisition of ICI served an

important governmental interest, namely protecting the

Irish insurance and banking industries from financial

disaster and maintaining stability in the Irish economy. To

be sure, as USX points out, at least since 1990 ICAROM’s

purpose has been solely to run off claims arising under old

policies, as would a private insolvent insurance company

engaged in winding down its business. This observation,

however, does not take into account the fact that the

government played an integral role in the 1990 transac-

tion that has led ICAROM to operate in this way. In 1990,

the administrator consulted with and obtained approval

from the government, which played an active role in the

bidding process, before disposing of the Irish Business and

positioning ICAROM to operate as a runoff company.

Furthermore, the administrator still consults with the

Minister regarding major decisions and gives regular,

detailed reports on the status of ICAROM. Thus, although

ICAROM is operating solely as a runoff company, it does

” For the same reason, we are able to consider ownership structure

as a factor unto itself under the organ prong without running afoul of

Dole even where that structure involves tiering.

App. 43

so only because the government positioned it to do so and

only under the supervision of the government, as the

district court found. See Juris. J.A. at 42, 44. Moreover, in

doing this it is carrying out the undertaking of the gov-

ernment when it intervened in the first instance so that a

public financial crisis would be avoided. This factor there-

fore also favors a finding of organ status.

c. The Degree of Supervision by the Gov-

ernment

As suggested by the above discussion, the government

has played and continues to play an active role in super-

vising ICAROM’s operations though, as the district court

found, the government does not control them on a day-to-

day basis. Id. at 42. Rather, those responsibilities lie with

the administrator, subject only to approval of the High

Court, as would be the case for any private insurer in

administration under the 1983 Act. Nonetheless, the

record supports the district court’s finding that the gov-

ernment exercises “a substantial level of oversight and

control over all major decisionmaking affecting Icarom’s

ongoing financial affairs.” Id. at 44. In addition to the

reports and consultation already discussed, the govern-

ment was involved heavily in the 1990 transaction, which

positioned ICAROM as a runoff company. ICAROM’s

current administrator testified that “in all aspects of

dealing with the government ... they are very much the

boss.” Id. at 1456. A representative of the Minister testi-

fied that the Minister requires frequent consultation so

that he or she may “answer in Parliament as owners

Icarom.” Id. at 1294. The government's supervision of

ICAROM is therefore substantial, and this factor likewise

cuts in favor of a finding of organ status.

[oe EOE Bee pee ee

App. 44

d. The Level of Government Financial

Support

USX argues that the government has not provided

financial support to ICAROM for its funding has come

from the ICF. Furthermore, the only cost to the govern-

ment in supporting ICAROM, according to USX, has been

the foregone interest on the £ 32 million loan from 1992.

As the district court found, however, this understanding of

the government’s financial relationship to ICAROM

ignores the fact that the government, despite not directly

funding ICAROM, has “arranged and provided financial

support” for ICAROM and, in doing so, has subjected itself

to substantial risk. Juris. J.A. at 42. USX’s observation

that the government never has had to make good on its

guarantees is beside the point. The government has

assured ICAROM’s solvency by indirectly lending it money

despite the risk of ICAROM not repaying. Furthermore,

the government has guaranteed substantial loans made by

private lenders to ICAROM.” Finally, the government has

lost the use of approximately £ 32 million in foregone

interest, which, as the district court noted, amounts to

approximately 9% of the total funding obtained to keep

ICAROM operating during the relevant time period. The

risk the government assumed in arranging financing for

ICAROM and its foregoing interest demonstrate that the

government provided significant financial support to

* That the government guaranteed that the ICF would have

sufficient funds to satisfy any obligations under these loans rather than

guaranteeing the loans directly is a distinction of little difference

inasmuch as in either case the government ultimately bears the risk of

default.

App. 45

ICAROM. This factor therefore also weighs in favor of a

finding of organ status.

e. ICAROM’s Employment Policies

The government does not require ICAROM to hire

public employees, nor does it pay its employees’ salaries.

Although tending to ICAROM has “consumed a significant

amount of [the government’s) civil servants’ time and

effort,” as the district court found, this observation is of

little relevance, as it says nothing about the status of

ICAROM’s employees. More relevant is the fact that the

government approved both the current administrator

before the High Court appointed him and the current

general manager before the administrator appointed him.

Nonetheless, Irish civil servants do not work for ICAROM.

ICAROM pays three full-time employees who participate

in the company’s private pension plan, not a government

plan. The employment policies factor therefore weighs

against a finding of organ status.

f. Other Obligations and Privileges Un-

der Irish Law

ICAROM has no special obligations or privileges

under Irish law and this factor weighs against a finding of

organ status as in some situations an organ would have

such obligations or privileges.

g. The Ownership Structure of ICAROM

Although the government does not directly own

ICAROM, it indirectly has complete control over

ICAROM’s shares. Six of ICAROM’s shares are held in

App. 46

trust for the Minister by civil servants. SAT holds all other

shares of ICAROM, and the only two shareholders of SAT

are also civil servants who hold those shares in trust for

the Minister.” It is unsurprising, then, that the Irish

government believes, as it apparently always has, that it

is the owner of ICAROM. This position has been stated in

the Certificate of Ownership, see Juris. J.A. at 1230-31

(“On 15 March 1985 the Government of Ireland decided to

acquire ICI.... This legislation ... was enacted for the

purpose of enabling Ireland to own the shares of ICI

through the Minister. . . . As successor to the then Minister

for Industry, Trade, Commerce and Tourism, I on behalf of

Ireland, acquired ownership of the company now called

ICAROM PLC .... ”), as well as in the testimony of an

employee of the Minister, see id. at 1294 (“The position of

Ireland is that we own Icarom.”), and of the current

administrator, see id. at 1342 (“The Republic of Ireland

owns ICAROM through SAT.... ”), and current general

manager of ICAROM, see id. at 1327 (“Icarom is owned by

the Irish government.”).

USX attempts to dismiss the significance of Ireland’s

indirect ownership of ICAROM by pointing out that the

administrator with the approval of the High Court, not the

Minister, in most respects runs ICAROM on a day-to-day

basis and that the Irish government never has claimed to

own PMPA/Primor, the only other insurer to be in admini- —

stration. This argument is entirely off the mark. ICAROM

* ICAROM points out that it is not uncommon for the Irish

government to provide for statutory ownership of state-owned corpora-

tions in this manner.

App. 47

does not argue that it is an organ because it is in admini-

stration (and therefore must report to the government

through the High Court), but rather because Ireland owns

it for a purpose set forth by the Irish government. Ireland

never has owned or controlled PMPA/Primor, either

directly or indirectly, nor has it claimed that PMPA/Primor

serves any national interest. Because Ireland has complete

control over all shares of ICAROM, albeit through a tiered

arrangement involving civil servants who hold their

interests in trust for the Minister, this factor weighs in

favor of a finding of organ status.”

3. Conclusion Under the Organ Prong of sec-

tion 1603(b)(2)

Five factors therefore favor a finding of organ status,

while only two disfavor such a finding. Weighing these

factors qualitatively as well as quantitatively, we hold that

in these circumstances ICAROM clearly is an organ of the

Republic of Ireland for purposes of section 1603(b)(2). This

holding is consistent with cases from other jurisdictions

interpreting the organ prong of the section.

Significantly, in HOTT, in which ICAROM was a party,

the Court of Appeals for the Ninth Circuit declined to

decide whether it is an organ of Ireland but remanded the

case to the district court to do so. The court of appeals,

nevertheless, observed that certain characteristics favored

® As discussed above, consideration of this factor is not inconsis-

tent with Dole, a case in which the Supreme Court was confronted with

a discrete question of statutory interpretation that does not arise under

the organ prong of section 1603(b)(2).

App. 48

a finding that ICAROM was an organ of Ireland, for

example, Ireland did not acquire ICAROM for profit-

making purposes, the acquisition was accomplished to

further the public interest, Ireland placed its economic and

political resources behind ICI, the administrator reports to

the Minister, SAT is composed entirely of government

employees serving at the behest of the Minister, and

ICAROM apparently has been operated as a runoff com-

pany.” 257 F.3d at 998-99. The only factors that the court

identified as weighing against a finding of organ status

was the status of ICAROM employees, none of whom are

public servants, and ICAROM’s status under Irish law

insofar as ICAROM is subject to suit in Ireland. This

second factor should not be considered part of the organ

analysis, because an entity must be a separate legal

person to fall within the FSIA, and Congress intended that

the right to sue and be sued be one factor to consider in

deciding whether an entity is a separate legal person.”

Thus, the court of appeals effectively found that the only

factor weighing against a finding of organ status is the

status of ICAROM employees.”

* The court found the final point to be unclear from the record

before it, although it has been clarified in the record before us.

* See footnote 17, supra.

* USX argues vigorously that ICAROM should be bound by a letter

that it wrote in EOTT to the court Indicating that it was not an organ

of Ireland. We reject that argument as the court of appeals nevertheless

later considered the possibility that it was an organ and ICAROM

changed its position and argued for organ status. It seems to us that if

the court in which the letter was written did not regard it as binding on

ICAROM then neither should we. We are told by the briefs that EOTT

was settled after the remand to the district court so that the district

court did not determine ICAROM’s organ status in that litigation.

App. 49

In EIE Guam Corp. v. Long Term Credit Bank of

Japan, Ltd., 322 F.3d 635, 640-41 (9th Cir. 2003), the same

court held that the Resolution and Collection Corporation

(“RCC”), a Japanese corporation in the business of pur-

chasing, administering, collecting, and disposing of non-

performing loans purchased from failing institutions, was

an organ of the Japanese government. The court so held

even though RCC’s employees were not civil servants, RCC

was a private company engaged in a primarily commercial

concern, the government authorized 29 other Japanese

companies to collect distressed loans, and RCC was not a

public corporation, a designation reserved for corporations

established by the Japanese government by special law as

instruments for activities required by the state. Id. The

court found that such considerations were outweighed by

the fact that the Japanese Diet created the RCC pursuant

to legislation for the purpose of carrying out “Japanese

national policy related to revitalization of the Japanese

financial system.” Id. RCC also was funded by the gov-

ernment, collected nonperforming loans at the request of

the Deposit Insurance Corporation of Japan (“DICJ”), and

engaged in certain unspecified activities that were exclu-

sive to RCC and DICJ. Jd. Although this case may involve

less direct government financial support than was present

in EJE, it also appears to involve more supervision of the

entity's activities as well as complete, although indirect,

control of the entity’s shares. Here, then, as in EIJE, it is

appropriate to conclude that organ status is warranted.

Kelly involved Al Furat Petroleum Company (“Al

Furat”), which was owned 50% by Syrian Petroleum

Company (“SPC”) (which was 100% owned by the Syrian

government), and otherwise owned by two private compa-

nies. 213 F.3d at 847. The Court of Appeals for the Fifth

App. 50

Circuit held that Al Furat was an organ of the Syrian

government because a government decree created it for

the national purpose of exploring Syria’s mineral re-

sources; SPC appointed four of the eight Al Furat board

members, generally filling those positions with high-level

Syrian government officials; and Al Furat had the exclu-

sive right to explore and develop Syria’s identified petro-

leum reserves. Id. at 848. The Kelly court, however, did not

discuss any other factors. In this case, Ireland acquired

ICI to fulfill a national purpose, and although ICAROM

has an administrator rather than a board, the current

administrator was not appointed until approved by the

Minister. Furthermore, Ireland fully controls the shares of

ICAROM and has put itself at substantial financial risk in

financing ICAROM.

In Patrickson, however, the court held that two Israeli

chemical companies indirectly owned by the Israeli gov-

ernment were not organs under the FSIA. 251 F.3d at 807-

08.” The court found that, although Israel created the

companies to exploit government-owned Dead Sea re-

sources and although the government had the right to

approve the appointment of directors and officers and

changes in capital structure, and despite the facts that the

companies were obliged to present an annual budget and

financial statement to various government ministries and

the government could constrain the use of the companies’

profits and the salaries of directors and officers, these

privileges were “not considerably different from the control

a majority shareholder would enjoy under American

* On the further appeal of the case in Dole the Supreme Court did

not consider whether the companies were organs of Israel.

App. 51

corporate law.” Id. at 808. The companies were not run by

government appointees, their employees were not civil

servants, they were not wholly owned by the government,

they could sue and be sued, and they did not exercise any

regulatory authority. Jd. The court therefore affirmed the

district court’s finding that the companies were “independ-

ent commercial enterprises, heavily regulated, but acting

to maximize profits rather than pursue public objectives.”

Id.

The companies in Patrickson must be distinguished

from ICAROM in certain important respects. First, Ire-

land completely controls the shares of ICAROM.

ICAROM’s administrator, although approved by the High

Court under the 1983 Act, was the candidate supported by

the Minister. Most importantly, while the companies in

Patrickson were created for purposes of exploiting Dead

Sea resources for profit, a venture that would have been

appropriate for undertaking by a private company, Ireland

indirectly acquired ICAROM (which then still was ICI) in

furtherance of the important national and inherently

public interest of protecting the Irish insurance and

banking industries from financial disaster and to maintain

stability in the Irish economy. We are not aware of any-

thing in the record to support a conclusion that if the

government had not intervened to prevent ICI’s financial

collapse that any private entity would have done so. In

this regard, it is telling that when AIB recognized that ICI

faced collapse it turned to the government for help and not

to the rest of the banking and insurance industries.

Moreover, the government played an integral part in

arranging ICAROM’s ffinancing and in _ positioning

ICAROM to continue as a runoff company, rather than as

an ongoing concern engaged in the sale of insurance

App. 52

policies for profit. The government did all of this to protect

the insurance and banking industries for the benefit of the

Irish economy. Thus, while the relevant factors in Patrick-

son favored a finding that the companies were commercial

enterprises involved in for-profit activities, the relevant

factors suggest in this case that Ireland acquired ICAROM

to fulfill a specific national purpose to avoid financial

disruption, and that ICAROM therefore engages in a

public activity on behalf of the Irish government. The

district court thus did not err in finding that ICAROM is

an organ of the Republic of .reland for purposes of section

1603(b)(2) and therefore tie case properly was removed

under section 1441(b) and the district court was correct in

denying the motions to remand.

B. THE MERITS

In considering the merits of this case we exercise

plenary review both because this is an appeal from an

order for summary judgment, Northview Motors, Inc. v.

Chrysler Motors Corp., 227 F.3d 78, 87 (3d Cir. 2000), and

because we are concerned with the interpretation of

insurance policies. Medical Protective Co. v. Watkins, 198

F.3d 100, 103 (3d Cir. 1999). We have considered the

district court’s opinicn on the motion for summary judg-

ment and are in full agreement with the result the court

reached and cannot add significantly to the opinion.

Accordingly, we will affirm the order for summary judg-

ment without discussion except to take note of the district

court’s recognition of our opinion in Bensalem Township v.

International Surplus Lines Insurance Co., 38 F.3d 1303,

1309 (3d Cir. 1994), emphasizing the significance of the

reasonable expectations of the insured in ascertaining the

meaning of an insurance policy. USX, 99 F. Supp. 2d at

App. 53

610. We think it plain that USX could not reasonably have

expected when it obtained its insurance policies or at any

later time to have the coverage it sought in this case for

the consequences of its wrongful activities. While we are

aware that USX obtained and paid for broad coverage it

should have recognized that there was some limit to it and

we regard its substantive contentions, though complex, as

not meritorious.

III. CONCLUSION

For the foregoing reasons we will affirm the orders of

April 1, 1996, March 22, 2000, and September 11, 2002.

App. 54

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

USX CORPORATION and

BESSEMER AND LAKE

ERIE RAILROAD

COMPANY,

Plaintiffs,

v. Civil Action No. 95-866

ADRIATIC INSURANCE

COMPANY, et al.,

Defendants.

ICAROM, Formerly known

as INSURANCE

CORPORATION OF

IRELAND,

Additional

)

Defendant. )

OPINION

DIAMOND, D.J.

Plaintiffs commenced this action seeking indemnifica-

tion under approximately 278 umbrella and excess policies

of insurance for incurred financial losses in excess of

$590,218,296.92 which plaintiffs were required to pay as a

result of judgments and settlements following the entry of

a criminal conviction and civil judgments against plaintiff

Bessemer & Lake Erie Railroad Company (“B&LE”) based

upon its participation in a twenty year conspiracy to

violate federal and state antitrust laws. Presently before

the court are plaintiffs’ motion to remand and a number of

App. 55

other motions pertaining to this court’s subject matter

jurisdiction. For the reasons set forth below, plaintiffs’

motions to remand will be denied.

Plaintiffs initially filed this action in the Court of

Common Pleas of Allegheny County, Pennsylvania, on

March 31, 1995, seeking indemnification from the defen-

dant insurers under the same policies at issue in this

action. Plaintiffs’ initial action named as a defendant

ICAROM plc (“ICAROM”), successor to the Insurance

Company of Ireland (“ICI”).' ICAROM removed the origi-

nal action to this court on the basis that it qualified as a

“foreign state” within the meaning of 28 U.S.C. §1441(d).”-

On May 18, 1995, plaintiffs voluntarily dismissed the

original complaint without prejudice and initiated the

instant action in the Court of Common Pleas of Allegheny

County by filing an identical complaint except that it

excluded as a defendant any entity which qualified as an

‘ ICAROM was not identified by its corporate name but was named

by reference due to the policies identified in the original complaint.

From 1979 to 1982, ICI participated with certain underwriters at

Lloyd’s, London, and other companies in the London insurance market

in subscribing to shares of liability in at least six excess policies of

insurance issued to plaintiff USX Corporation. The six policies either sit

below or share in the same layer of coverage with policies issued by

Continental Insurance Company (“Continental”), Federal Insurance

Company (“Federal”) and Norfolk Insurance Company, whose policies

are identified in the original and instant action.

* This removal statute provides in pertinent part:

Any civil action brought in a state court against a foreign

state as defined in Section 1603(a) of this Title may be re-

moved by the foreign state to the district court of the United

States for the district and division embracing the place

where such action is pending... .

28 U.S.C. §1441(d).

App. 56

“agency or instrumentality of a foreign state” within the

meaning of 28 U.S.C. §1603.°

On June 6, 1995, defendants Allstate Insurance

Company (as successor to Norfolk Insurance Company)

(“Allstate”), Continental and Federal each filed separate

third-party complaints joining ICAROM as an additional

defendant to the instant action. The third-party com-

plaints joined ICAROM on the bases that it was “a neces-

sary party for the full and final adjudication” of each third-

party plaintiffs rights and that ICAROM may be required

to provide “contribution, indemnification, subrogation or

apportionment” to each third-party plaintiff. On June 7,

1995, ICAROM removed the instant action pursuant to 28

U.S.C. §1441(d). Plaintiff filed the instant motion to

remand, contending, inter alia, that ICAROM has been

improperly joined and that it cannot meet its burden of

establishing that it is an agency or instrumentality of a

foreign state within the meaning of the FSIA. Plaintiffs

* The referenced statute is part of the Foreign Sovereign Immuni-

ties Act (“FSIA”), and provides in pertinent part:

(a) A “foreign state” ... includes ... an agency or instru-

mentality of a foreign state as defined in subsection (b).

(b) An “agency or instrumentality of a foreign state” means

any entity —

(1) which is a separate legal person, corporation or

otherwise and

(2)... a majority of whose shares or other owner-

ship interest is owned by a foreign state or political

subdivision thereof and

(3) which is neither a citizen of a state of the United

States ... nor created under the laws of any third

country.

28 U.S.C. §1603(a) & (b) (1994).

App. 57

further contend that ICAROM has waived any right to

remove pursuant to the service of suit clause contained in

the policies to which it subscribed.

On July 18, 1995, an order was entered directing

counsel for ICAROM, Allstate, Continental and Federal to

file a joint response to plaintiffs’ motion to remand.

Allstate, Continental and Federal allege that the joinder of

ICAROM is proper because (1) they may have a right to

contribution from ICAROM and (2) ICAROM is a neces-

sary party because the layers of coverage to which

ICAROM subscribed must be exhausted before the third-

party plaintiffs’ policies are obligated to respond to plain-

tiffs’ losses. In addition, all responding defendants contend

that ICAROM is an instrumentality of a foreign state, that

the United States Court of Appeals for the Third Circuit’s

ruling in In re Texas Eastern Transmission Corp. PCB

Contamination Ins. Coverage Litigation, 15 F.3d 1230 (3d

Cir.), cert. denied, __ U.S. __, 115 S.Ct. 291 (1994),

recognizes ICAROM’s unqualified right to remove, that

the service of suit clause does not work a waiver of |

ICAROM’s right and that plaintiffs have failed to establish

that the joinder of ICAROM was collusive.

Plaintiffs’ instant complaint seeks damages for breach

of contract from each named defendant under the respec-

tive policies, subject to the monetary limits of those

policies, together with prejudgment and post-judgment

interest. The underlying third-party claims which gave

rise to plaintiffs’ liability are identified in the instant

complaint as “the MDL No. 587 liability.” The complaint

alleges that between 1982 and 1984, numerous third-party

plaintiffs filed ten separate civil suits in various United

States District Courts against several railroad companies

that carried iron ore from lower Lake Erie ports. These

App. 58

complaints alleged that the railroads had engaged in a

conspiracy, dating back to the 1950s, to prevent self-

loading vessels, non-railroad owned docks and trucking

firms from participating in the transportation of iron ore

from the upper Great Lakes and Eastern Canada to

discharge ports on the lower Great Lakes, the Detroit

River and steel mills in Ohio, Pennsylvania and West

Virginia. These third-party actions were consolidated by

the United States Judicial Panel on Multi-District Litiga-

tion and transferred for pretrial proceedings to the United

States District Court for the Eastern District of Pennsyl-

vania. Each complaint asserted that B&LE, in conjunction

with other railroads, had violated the Sherman Act and

the Ohio Valenteen Act. In nine of the ten cases, jury

verdicts were rendered finding that B&LE had partici-

pated in an unlawful conspiracy which injured the MDL

plaintiffs. In eight of the cases, the jury assessed substan-

tial damages against B&LE for losses suffered through

1983. Final judgments were entered on June 17, 1991,

which resulted in a total liability of $457,652,953.00

(exclusive of interest, costs and attorneys’ fees). These

judgments reflected the trebling of damage awards under

the Federal Antitrust Laws, the doubling of damage

awards under the Ohio Valenteen Act and set-offs equiva-

lent to the aggregate amount of each MDL-plaintiffs

settlements with other defendants.‘ On May 27, 1993, the

United States Court of Appeals for the Third Circuit ren-

dered an opinion affirming the district court’s judgments

* Each MDL plaintiffs also wes awarded interest at a rate of 8.16%

compounded annually through July 19, 1989, as well as costs and

attorneys’ fees.

App. 59

against B&LE. See In re Lower Lake Erie, Iron Ore Anti-

trust Litigation, 759 F.Supp. 219 (E.D.Pa. 1991), affd in

part, rev'd in part, 998 F.2d 1144 (3d Cir. 1993), cert.

denied, __ U.S. __, 114 S.Ct. 625 (1994).° Beginning in

late 1993 and continuing through 1994, plaintiffs satisfied

the judgments.

Plaintiff USX seeks indemnification for the above-

referenced loss from the insurers participating in its

umbrella liability insurance program for seven policy

periods between May 12, 1977 and April 1, 1983. The May

12, 1977, through June 1, 1978, program included five

layers of insurance providing $128.1 million of coverage

for liability imposed against USX in excess of a $50 million

self-insured retention. The June 1, 1978, through June 1,

1979, program included six layers of insurance providing

$151 million of coverage in excess of a $50 million self-

insured retention. The June 1, 1979, through December 1,

1979, program included four layers of insurance providing

$150 million of coverage in excess of a $50 million self-

insured retention. The December 1, 1979, through Decem-

ber 1, 1980, program included six layers of insurance

providing $275 million of coverage in excess of a $25

million self-insured retention. The December 1, 1980,

through December 1, 1981, program included seven layers

of insurance providing $275 million of coverage in excess

of a $25 million self-insured retention. The December 1,

1981, through April 1, 1982, program included seven

layers of insurance providing $325 million of coverage in

excess of a $25 million self-insured retention. The April 1,

® One case was remanded for a new trial on damages.

App. 60

1982, through April 1, 1983, program included six layers of

insurance providing $325 million of coverage in excess of a

$25 million self-insured retention.

Plaintiffs attached to their complaint two first layer

umbrella policies which allegedly provide the terms and

the conditions under which the vast majority of the defen-

dant insurers are obligated to provide coverage. These

policies are identified as the underlying Lloyd’s policies

and the Northbrook policy.’ As previously noted, ICI

subscribed to at least six contracts of insurance which

either sit directly below or share in the same layer of

coverage with policies issued by Continental, Federal and

Allstate and which allegedly follow the form of the Lloyd’s

policies. The Lloyd’s policies are the lead umbrella policies

in six of the seven policy periods set forth in the complaint.

Plaintiffs plead that the conspiracy in which B&LE

engaged constituted “an occurrence” within the meaning of

all the policies at issue and that the occurrence “triggered

the coverage obligations for each of the defendants’ policies

in effect for each of the policy periods identified above... .”

Complaint at 79171-72. Plaintiffs further allege that the

loss is covered by each definition of damage in the poli-

cies.’ Plaintiffs further contend that proper notice was

* The first layer policies are umbrella comprehensive general

liability policies. Plaintiffs allege that they reached agreement with

each and every other defendant that all policies in or above the first

layers for the seven policy periods would be consistent with and follow

the form of these underlying policies.

’ The underlying policies provide coverage for property damage,

personal injury and advertising liability. Plaintiffs allege, inter alia,

that the conspiratorial conduct constituted advertising liability within

the meaning of the policies because the liability arose from “unfair

(Continued on following page) %

App. 61

given or that the lack of notice did not cause prejudice to

the defendants. Plaintiffs plead that they did not expect or

intend the ultimate result of the underlying conduct and

that coverage cannot be withheld under any exclusion in

the policies. Based on the above, plaintiffs allege that each

defendant is obligated to indemnify USX and/or B&LE for

the losses arising from the judgments in the MDL litiga-

tion and pray for damages under each respective contract

of insurance.

Plaintiffs contend that ICAROM was not properly

joined in the state action under Pennsylvania Rule of Civil

Procedure 2252(a) and accordingly lacks standing to

invoke federal jurisdiction. Plaintiffs reason that the

contractual obligations which each defendant owes to

plaintiffs are independent of any obligation that ICAROM

could owe to plaintiffs because the third-party plaintiffs

have not paid and cannot be required to pay any amounts

over and above those which they respectively are obligated to

pay under their separate contracts of insurance. Plaintiffs

competition” as set forth in the definition of advertising liability.

Plaintiffs further allege that the liability arose from the publication or

advertising of the prohibitive railroad rates and charges, which were

incorporated in tariffs filed by the Interstate Commerce Commission

and published in trade journals, and that these rates and charges were

the “advertising activities” of B&LE. Plaintiffs also allege that the

liability constitutes “discrimination” under the definition of personal

injury because, inter alia, the conduct constituted a form of economic

discrimination, including the practice on the part of common carriers of

demanding without justification different rates or charges for substan-

tially the same service or the same rate for substantially different levels

of service. Finally, plaintiffs alleged that the liability constitutes

property damage because, inter alia, B&LE’s conspiratorial conduct

resulted in a diminution in the value of the third-parties’ tangible

property caused by a loss of use.

App. 62

further assert that under the precedent established in

Gould, Inc. v. Continental Casualty Co., 585 A.2d 16

(Pa.Super. 1991), Pennsylvania does not recognize a

defendant’s right to seek contribution, indemnification,

subrogation or apportionment among insurers where a

plaintiff is seeking to enforce its rights pursuant to inde-

pendent contracts of insurance.

Pennsylvania Rule of Civil Procedure 2252(a) provides

in pertinent part:

(a) ... any defendant or additional defendant

may join as an additional defendant any person,

whether or not a party to the action, who may be

... (3) jointly or severally liable with the joining

party on the plaintiffs cause of action, or (4) li-

able to the joining party on any cause of action

arising out of the transaction or occurrence or se-

ries of transactions or occurrences upon which

the plaintiff's cause of action is based.

Pa.R.Civ.P. 2252, 42 Pa.C.S. Pennsylvania courts have

noted that Rule 2252 (“is to be broadly construed to

effectuate its purpose of avoiding multiple lawsuits by

settling in one action all claims arising out of the transac-

tion or occurrence which gave rise to the plaintiffs action.”

Gordon v. Sokolow, 642 A.2d 1096, 1099 (Pa.Super. 1994).

Thus, joinder is appropriate “as long as the additional

defendant’s alleged liability is related to the claim which

the plaintiff asserts against the original defendant.” Jd.

(citing Olson v. Grutza, 631 A.2d 191, 197 (Pa.Super.

1993). Where joinder is based upon joint and several

liability and contribution, “the only substantive limitation

placed upon the right to join an additional defendant ... is

that liability must be premised on the same cause of action

alleged by the plaintiff in his or her complaint.” Jd. (quoting

App. 63

Svetz for Svetz v. Land Tool Co., 513 A.2d 403, 405

(Pa.Super. 1986), allocatur denied, 527 A.2d 544 (1987)).

Moreover, the phrase “cause of action” is likewise

broadly construed and requires only that the “additional

defendant’s liability be related to the original claim which

plaintiff asserts against the original defendant.” Id. (citing

Somers v. Gross, 574 A.2d 1057, 1058 (Pa.Super. 1990)).

Thus, joinder is inappropriate where the allegations

contained in the third-party complaint are based upon

separate and distinct legal claims, which relate to differ-

ent Sarms to be proved with different evidence or which

involve different transactions or occurrences happening at

different times. Olson, 631 A.2d at 196-98 (contrasting

cases where joinder was permissible under Rule 2252 with

cases where joinder was held improper); Gordon, 642 A.2d

at 1100 (same). Joinder is appropriate, however, as long as

the original defendant’s complaint against the additional

defendant is related in substance to the causes of action

set forth by the plaintiffs’ complaint and arises from the

same factual scenario set forth therein. Jd. This is true

even where the original defendant has the burden of

establishing an affirmative fact in order to uphold a valid

cause of action against the party sought to be joined. Id. at

1102.

Plaintiffs’ reliance on Gould in support of the conten-

tion that Pennsylvania law forecloses the joinder of

ICAROM under the instant circumstances is misplaced. In

Gould, the Superior Court affirmed he trial court’s dis-

missal of an excess carrier’s third-party complaint against

a primary insurer. Gould had commenced an action

against National Union Fire Insurance Company of

Pittsburgh (“National Union”) and several other insurance

companies seeking indemnification for sums Gould paid in

TENE RT yh era eM EEE eR AE 8 in eS >

App. 64

settlement of claims brovight by its former employees who

had suffered injuries due to the exposure of heavy metals

at a plant which was operated by Gould and its predeces-

sor from 1946 to 1979. Gould sought coverage from Na-

tional Union for 20% of the second layer of excess

insurance for a particular policy period. The limits of the

underlying insurance had been exhausted. Gould de-

manded indemnification from National Union. ~

National Union sought to join Travelers Insurance

Company (“Travelers”) under Pa.R.Civ.P. 2252(a) “on the

basis that Travelers also provided insurance to [plaintiff

and its predecessors] some time during the 33 year period

in question.” Jd. at p. 17. National Union claimed entitle-

ment to contribution from Travelers for amounts National

Union would be required to pay pursuant to Gould’s

action. Travelers filed preliminary objections, alleging that

all issues regarding outstanding coverage between Travel-

ers and Gould were settled in exchange for a $600,000.00

payment made by Travelers to Gould. As part of the

settlement agreement Gould had agreed that it would

indemnify or credit Travelers for any amount as to which

Travelers would otherwise be responsible, whether the

amount was less than, equal to or more than the

$600,000.00 that Travelers had paid. The trial court

granted Travelers’ preliminary objections, reasoning that

under the circumstances Travelers could nct be compelled

to pay National Union for any additional portion of the

loss and that there could be no prejudice suffered by any of

the other insurers because they would receive credit for

any amounts attributable to Travelers.

On appeal the Superior C

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