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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2004
- **Citation:** 541 U.S. 903

## Text

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,
v.

ADRIATIC INSURANCE COMPANY, ET AL.,

Respondents.
Sf

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.

ii

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

iv
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

vi

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

1

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.

I.
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

2

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)

3

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

4

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).

5

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

6

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.

8

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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Whence a og ir ht ain rh sas

mee ne a a

9

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).

10

V.
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

11

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

12

(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

13

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.

14

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

Fe

15

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.

16

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

By ee ere

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ms ee a Oe, ee Pe ee TY

17

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

18

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).

+
4
S
&

19

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

20

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.

21

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.

22

‘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

23

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

rE
Sas
A
ee
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

ae

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

ee

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

;
%
4
‘ |

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.

(c) The “United States” includes all territory
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
y

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

Ce

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,

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386001_0893%3A1. Public record. Not legal advice.