# Amicus Curiae Brief — Powerex Corporation v. California (No. 05-584)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2006

## Text

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Nos. 06-85 and 05-584
In the Supreme Court of the Gnited States

POWEREX CORP., PETITIONER
v.

RELIANT ENERGY SERVICES, INC., ET AL.

POWEREX CORP. DBA POWEREX ENERGY CORP.,
PETITIONER

Vv.

STATE OF CALIFORNIA, EX REL. BILL LOCKYER,
ATTORNEY GENERAL OF CALIFORNIA

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

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

Pau. D. CLEMENT

Solicitor General
Counsel of Record

PETER D. KEISLER
Assistant Attorney General

EDWIN S. KNEEDLER
Deputy Solicitor General

DOUGLAS H. HALLWARD-DRIEMEIER

Joun B. BELLINGER I] Assistant to the Solicitor General
Legal Adviser MARK B. STERN
CATHERINE W. BROwWK H. THOMAS BYRON III
Assistant Legal Adviser Attorneys
Department of State Department of Justice
Washington, D.C. 20520 Washington, D.C. 20530-0001
(202) 514-2217

QUESTION PRESENTED

Whether petitioner, which is wholly owned by a crown
corporation that is itself wholly owned by the Canadian
Province of British Columbia, and which performs obligations
and exercises rights of the Province pursuant to treaties with
the United States, is entitled to the protections of the Foreign
Sovereign Immunities Act of 1976, 28 U.S.C. 1602 et seq., as
an “organ of a foreign state or politica! subdivision thereof,”
28 U.S.C. 1603(b)(2).

TABLE OF CONTENTS

Statement
Discussion
I. The court of appeals misapplied an important
provision of the FSIA, and its analysis conflicts with
that of other circuits
II. The question presented is an important one, and
No. 05-85 is an appropriate vehicle in which to
resolve it
Conclusion

TABLE OF AUTHORITIES

Cases:

Amoco Petroleum Additives Co., In re, 964 F.2d 706
(7th Cir. 1992)

Argentine Republic v. Amerada Hess Shipping
Corp., 488 U.S. 428 (1989)

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

Corporacion Mexicana de Servicios Maritimos, S.A.
de C.V. v. M/T Respect, 89 F.3d 650 (1996)

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

Filler v. Hanvit Bank, 378 F.3d 213 (2d Cir.), cert.
denied, 543 U.S. 1022 (2004)

Freeport- McMoRan,Inc. v. KN Energy, Inc., 498
U.S. 426 (1991), cert. denied, 502 U.S. 1122 (1992) ... 16

Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S.
567 (2004)

Kelly v. Syria Shell Petroleum Dev. B.V., 213 F 3d
841 (5th Cir.), cert. denied, 531 U.S. 979 (2000) .... 9,12

dt)

IV

Cases—Continued: Page

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

Dt? ccivscesubdactehenstecsebeossres tas 15, 18, 20
Letherer v. Alger Group, L.L.C., 328 F.3d 262 (6th

SUD <guscbecneudess ssdbedvieaneee tkeeessdes 15
Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 740 (1976) .... 19
Linton v. Airbus Industrie, 30 F.3d 592 (5th Cir.),

cert. denied, 513 U.S. 1044 (1994) .............055. 15
Nolan v. Boeing Co., 919 F.2d 1058 (5th Cir. 1990),

cert. denied, 499 U.S. 962 (1991) ..........6 eee eee. 19
Patrickson v. Dole Food Co., 251 F.3d 795 (9th Cir.

2001), aff’d, 538 U.S. 468 (2003) ........ 0c cee eeees 5,9
Poore v. American-Amicable Life Ins. Co., 218 F 3d

DT CEE. dudtocdécacseuseccecevces 15, 16
Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996) .. 15
Shell Oil Co., In re, 966 F.2d 1130 (7th Cir. 1992) ...... 17
St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S.

DED chcduncdedetaeuacecsessddadicsdueveces 16
Thermtron Products, Inc. v. Hermansdorfer, 423 U.S.

DE Siovbvedusebeudaetedshadudcocteveses 14, 15
Things Remembered, inc. v. Petrarco, 516 U.S. 124

GEL. wdaccséeunddSedcdceesbecctecedetes 6, 14, 15, 19

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

DED saecbeeedaoesascaddsubduscasbueneduces 15
Trans Penn Wax Corp. v. McCandless, 50 ¥ 3d 217

SP, MED chccvancaheocesbcucncdus dbatuteecen 15
United States v. Jorn, 400 U.S. 470 (1971) ............ 19

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

Cases—Continued: Page

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

Dy crccsdbemnsnenevevesudade 8,9, 10, 11, 12, 13, 19
Willingham v. Morgan, 395 U.S. 402 (1969) ........... 18
Van Meter v. State Farm Fire & Cas. Co., 1 F.3d 445

PSL db uheess sdb eceteserescouneucens és 17
Verlinden E.V. v. Central Bank of Nigeria, 461 U.S.

DD sis ds ceceedesebeebectedssateeuseeacnes iF

Treaties and statutes:

Treaty Between the United States of America and
Canada Relating to Cooperative Development of
the Water Resources of the Columbia River Basin,
Fe, Bic Hs EP Se UU cece ccstosnesseechenens 2

Treaty between Canada and the United States of
America Relating to the Skagit River and Ross
Lake, and the Seven Mile Reservoir on the Pend
D’Oreille River, Apr. 2, 1984, T.1.A.S. No. 11088,

PE CUSED bb ve nteccevsceccdeccousédedevews 2
Act of Oct. 1, 1996, Pub. L. No. 104-219, § 1, 110 Stat.
BED Ceccgeccensdsccestovcecooscensesdceceuaeri 16
Federal Employees Liability Reform and Tort
Compensation Act of 1988, 28 U.S.C. 2679(d) ....... 14
Foreign Sovereign Immunities Act of 1976, 28 U.S.C.
BOUOPORE, ccccvcccccsevessscccéecvéousecioseeees 1
SP CME EUUNEED cccccesszccenessésosapes 1,3, 7,17
BP RE DEED occvecresdecovcenevetsed 1,7,17

BP Pian TESS hecccccveveasessices 5, 6, 7, 11

Statutes—Continued:

Judicial Improvements and Access to Justice Act,
Pub. L. No. 100-702, § 1016(c)(1), 102 Stat. 4670

28 U.S.C,

28 U.S.C.

28 U.S.C.

28 U.S.C. 1441(d)

28 U.S.C. 1442(a)

28 U.S.C. 1442(a)(1)

28 U.S.C. 1447(c)

28 U.S.C. 1447(c) (1982)
28 U.S.C. 1447(d)

Miscellaneous:

H.R. Rep. No. 889, 100th Cong., 2d Sess. Pt. 1 (1988) ... 17
H.R. Rep. No. 1487, 94th Cong., 2d Sess. (1976) .. 8, 10,19
S. Rep. No. 366, 104th Cong., 2d Sess. (1996)

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

This brief is submitted in response to the Court’s order
inviting the Solicitor General to express the views of the United
States.

STATEMENT

1. The Foreign Sovereign Immunities Act of 1976 (FSIA),
28 U.S.C. 1602 et seq., is “the sole basis for obtaining jurisdic-
tion over a foreign state” in either state or federai court. Ar-
gentine Repudlic v. Amerada Hess Shipping Corp., 488 U.S.
428, 434 (1989). The FSIA defines the term “foreign state” to
include “an agency or instrumentality of a foreign state,” 28
U.S.C. 1603(a), which, in turn, is defined to mean:

any entity—(1) which is a separate legal person, corporate
or otherwise, and (2) which is an organ of a foreign state or
political subdivision thereof, or a majority of whose shares

or other ownership interest is owned by a foreign state or
political subdivision thereof, and (3) which is neither a citi-
zen of a State of the United States as defined in section
1332(c) and (d) of this title, nor created under the laws of
any third country.

28 U.S.C. 1603(b). The FSIA “guarantees foreign states the
right to remove any civil action from a state court to a federal
court.” Verlinden B.V. v. Central Bank of Nigeria, 461 U.S.
480, 489 (1983) (citing 28 U.S.C. 1441(d)).

2. Petitioner is a corporation organized under the laws of
the Province of British Columbia, a political subdivision of
Canada. Petitioner is wholly owned by the British Columbia
Power and Hydro Authority (BC Hydro), a provincial crown
corporation that is in turn wholly owned by the Province of
British Columbia. 05-85 Pet. App. 53a, 58a. As a crown cor-
poration, BC Hydro is subject to the control and direction of

2

provincial officials, and BC Hydro pays its net revenue to the
provincial government. /d. at 58a-59a.

Some of BC Hydro’s responsibilities include implementing
on behalf of Canada the Columbia River Treaty between the
United States and Canada, which is designed to control the
flow of the Columbia River for both flood control and power-
generation purposes benefitting both nations. 05-85 Pet. App.
50a-5la.' Under the treaty-based management system, Cana-
dian dams sometimes must release more water than would be
optimal] for their own power-generating purposes, in order to
maintain water levels in the United States. /d. at 5la. In
those circumstances, the treaty provides that the United
States will reimburse BC Hydro (as assignee of Canada) for
foregone power-generating opportunities. See id. at 51a, 55a.

BC Hydro generates more electric power than the Prov-
ince needs. In 1988 BC Hydro created petitioner as a wholly
owned subsidiary to market BC Hydro’s excess power capac-
ity to the United States, including the power to which Canada
is entitled under the Columbia River Treaty. See 05-85 Pet.
App. 53a, 55a. In addition, petitioner is responsible for pro-
viding power to the City of Seattle as required in the Skagit
River Treaty between the United States and Canada.” See id.
at 56a-57a. Petitioner’s income is consolidated with that of
BC Hydro and transferred either to the Province itself or to
a special rate-stabilization account according to a formula
specified by the Province. See id. at 202a-204a.

3. a. In No. 05-85, respondent plaintiffs—including the
State of California and individual energy consumers—sued

' See Treaty Between the United States of America and Canada Relating
to Cooperative Development of the Water Resources of the Columbia River
Basin, Jan. 17, 1961, 15 U.S.T. 1555; 05-85 Pet. App. 61a-137a.

* See Treaty Between Canada and the United States of America Relating
to the Skagit River and Ross Lake, and the Seven Mile Reservoir on the Pend
D’Oreille River, Apr. 2, 1984, T.1.AS. No. 11088; 05-85 Pet. App. 138a-146a.

3

respondent cross-plaintiffs (among others) in California state
court, seeking damages for alleged manipulation of the elec-
tricity market in violation of state law. The respondent cross-
plaintiffs filed cross-complaints against several entities in-
cluding petitioner, BC Hydro, and two federal government
agencies, the Bonneville Power Administration (BPA) and the
Western Area Power Administration (WAPA). The cross-
complaints seek indemnification and allege that petitioner and
the other cross-defendants participated in or contributed to
the manipulation of energy markets.

Petitioner and BC Hydro filed notices removing the case
to federal district court pursuant to the FSIA, 28 U.S.C.
1441(d). The federal agencies invoked 28 U.S.C. 1442(a)(1) as
additional authority for removal. 05-85 Pet. App. 19a. The
respondent plaintiffs moved to remand the case to state court.
They argued that the court lacked jurisdiction to adjudicate
the claims against BC Hydro and the federa! agencies because
they were immune from suit on the cross-claims, and that
petitioner was not entitled to the protections of the FSIA
because it was not an agency or instrumentality of British
Columbia. See id. at 20a, 22a, 33a, 38a.

The district court granted the motion to remand. The
court held that, as “a corporation wholly-owned by a political
subdivision of a foreign government,” BC Hydro qualified as
a “foreign state” for purposes of the FSIA, 05-85 Pet. App.
21a (citing 28 U.S.C. 1603(a)), and that the claims against it
did not fall within any of the FSIA’s exceptions to immunity,
see id. at 21a-33a. The court also held that BPA and WAPA
were immune from suit, t¢@. at 40a, and that because the state
court had lacked jurisdiction over the claims against BPA and
WAPA, by derivation, so did the federal court, id. at 43a-44a.

The district court concluded that petitioner did not come
within the statutory definition of an agency or instrumental-
ity, and therefore did not qualify as a “foreign state” under

4

the FSIA. 05-85 Pet. App. 33a-38a. The district court held
that petitioner is not an “organ” of British Columbia because
petitioner does not exercise regulatory authority, is not im-
mune from suit under Canadian law, and is not subject to ac-
tive oversight by the provincial government. /d. at 35a. The
court also observed that the provincial government does not
appoint petitioner’s corporate officers, and petitioner's em-
ployees are not treated as civil servants. /bid. Nor, the court
held, is petitioner an agency or instrumentality under the
“ownership” test, because the Province does not directly own
a majority of petitioner’s shares. /d. at 36a-38a.

The district court remanded the action to state court. 05-
85 Pet. App. 44a. B.C. Hydro and the federal agency cross-
defendants sought to clarify that the claims against them had
been dismissed on immunity grounds, but the district court
denied their requests. The court reasoned that, because it
could not exercise jurisdiction over the claims against the
immune defendants, it could not dismiss those claims, and was
instead required by 28 U.S.C. 1447(c) to remand the entire
action (including the claims as to which there was immunity)
to state court. See C.A. E.R. (PWX) 900, 904.

b. Petitioner, respondent cross-plaintiffs, BPA and WAPA
each appealed. 05-85 Pet. App. 8a-9a. Respondent cross-
plaintiffs challenged the holding that BC Hydro, BPA and
WAPA were immune from suit; BPA and WAPA appealed the
district court’s failure to dismiss the claims against them be-
fore remandir z; and petitioner challenged the denial of its
status as an agenty or instrumentality of the Province. /bid.

The court of appeals’ opinion first held that 28 U.S.C.
1447(d) did not preclude appellate review of the district
court’s order. The court reasoned that the district court had
removal jurisdiction over the case at the outset because of BC
Hydro’s status as a foreign state and BPA and WAPA’s status
as federal agencies. 05-85 Pet. App. 10a. Because the district

5

court had jurisdiction, and had exercised that jurisdiction to
decide the claims of immunity and the status of petitioner, the
court of appeals held that it was “not deprived by § 1447(d) of
jurisdiction to review these substantive rulings.” /bid.

The court then held (on the appeal of the respondent cross-
plaintiffs) that BC Hydro, BPA, and WAPA were entitled to
immunity. 05-85 Pet. App. lla, 14a. It also held (on the ap-
peal of the federal agencies) that the district court erred in
refusing to dismiss the claims against the federal agencies
because, in a removed action, a defendant’s immunity “is vin-
dicated only by the district court’s dismissal! of the claims.”
Id. at 16a.

With respect to petitioner’s appeal, the court of appeals
affirmed the district court’s conclusion that petitioner does
not qualify as an “organ of a foreign state or political subdivi-
sion thereof,” 28 U.S.C. 1603(b)(2). 05-85 Pet. App. 14a. The
court stated that its determination of organ status would turn
ultimately on “whether the entity engages in a public activity
on behalf of the foreign government,” and that it would “look
to the purposes of an entity’s activities, the entity’s independ-
ence from government, the level of financial support received
from the government, and the entity’s privileges and obliga-
tions under the law.” /d. at 15a (quoting Patrickson v. Dole
Food Co., 251 F.3d 795, 807 (9th Cir. 2001), aff'd on other
grounds, 538 U.S. 468 (2003)). The court of appeals stated
that petitioner, like the entities in Patrickson, “was not run
by government appointees, was not staffed with civil servants,
was not wholly owned by the government, was not immune
from suit, and did not exercise any regulatory authority.” /d.
at 15a-16a. The court acknowledged that petitioner offered
evidence that it “serves a public purpose,” but concluded that
petitioner’s “high degree of independence from the govern-
ment of British Columbia, combined with its lack of financiai
support from the government and its lack of special privileges

6

or obligations under Canadian law dictate [the] holding that
Power Ex is not an organ of British Columbia.” /d. at 16a.

4. In No. 05-584, respondent (the California Attorney Gen-
eral) sued petitioner in state court, alleging that petitioner
had manipulated the energy market in violation of state law.
05-584 Pet. App. 4a-5a. Petitioner removed the case to federal
district court, on the grounds that it is a foreign state under
the FSIA and that respondents’ claims necessarily raised
federal questions. /d. at 5a. The district court remanded. /d.
at 4a-15a. With respect to petitioner’s FSIA argument, the
district court relied on the Ninth Circuit’s earlier decision at
issue in No. 05-85. Id. at 14a.

Petitioner appealed to the Ninth Circuit, which sua sponte
dismissed the appeal for lack of jurisdiction, citing 28 U.S.C.
1447(d), and this Court’s decision in Things Remembered, /nc.
v. Petrarco, 516 U.S. 124, 128 (1995). 05-584 Pet. App. la.

DISCUSSION

The court of appeals’ application of the FSIA’s “organ of a
foreign state” provision, 28 U.S.C. 1603(b)(2), is erroneous
and conflicts with decisions of other courts of appeals. More-
over, the issue is an important, recurring, and sensitive one
that warrants this Court’s consideration. Although respon-
dents assert several purported obstacles to the Court’s reach-
ing that issue, we believe that the petition in No. 05-85 pres-
ents an appropriate vehicle for this Court’s review. Accord-
ingly, the United States suggests that the Court grant review
on the first question presented in No. 05-85, and hold the peti-
tion in No. 05-584 pending resolution of No. 05-85.

I. THE COURT OF APPEALS MISAPPLIED AN IMPORTANT
PROVISION OF THE FSIA, AND ITS ANALYSIS CON-
FLICTS WITH THAT OF OTHER CIRCUITS

A. The FSIA establishes a “comprehensive scheme” gov-
erning the extent to which “foreign sovereigns may be held

7

liable in a court in the United States.” Verlinden B.V. v. Cen-
tral Bank of Nigeria, 461 U.S. 480, 496-497 (1983). In recog-
nition of the fact that mary states engage in commercial activ-
ities not unlike those of private actors, the FSIA codifies the
“restrictive theory” of foreign sovereign immunity, according
to which foreign states may be sued for their “commercial
activities.” Jd. at 487-488. Although the FSIA denies immu-
nity to foreign states in those circumstances, “[i}n view of the
potential sensitivity of actions against foreign states and the
importance of developing a uniform body of law in this area,
the Act guarantees foreign states” certain procedural
protections, such as the right to remove a civil action from
state to federal court. /d. at 489. The FSIA also guarantees
a foreign state the right to a bench, rather than jury, trial in
federal court on claims as to which they are not immune, see
28 U.S.C. 1330(a), 1441(d).

Congress recognized that there are any number of ways in
which foreign governments may organize their operations and
functions, and it made certain that the FSIA would be flexible
enough to accommodate that variety. Thus, Congress ex-
tended the protections of the FSIA to an “agency or instru-
mentality” of a foreign state, 28 U.S.C. 1603(a), and provided
that entities could qualify as an “agency or instrumentality”
in severa) ways, 2? U.S.C. 1603(b). The statutory definition
establishes a categorical rule with respect to an entity “a m:
jority of whose shares or other ownership interest is owned by
a foreign state or political subdivision thereof.” 28 U.S.C.
1603(b\2). See Dole Food Co. v. Patrickson, 538 U.S. 468, 474
(2003) (construing that categorical protection to require direct
ownership by the foreign state or political subdivision). In
contrast to that categorical rule, the other prong of the defi-
nition—“an organ of a foreign state or political subdivi-
sion” —is intended to have a more functional application that
is not dependent on a particular form of organization. See

8

H.R. Rep. No. 1487, 94th Cong., 2d Sess. 15-16 (1976) (recog-
nizing that an agency or instrumentality “could assume a vari-
ety of forms, including a state trading corporation, a mining
enterprise, a transport organization such as a shipping line or
airline, a steel company, a central bank, an export association,
a governmental procurement agency or a department or min-
istry which acts and is suable in its own name”).

This Court has never addressed the meaning or application
of this prong of FSIA’s definition of an agency or instrumen-
tality, yet that provision has taken on additional! importance
since the Court’s decision in Dole Food. Whereas before the
Dole Food decision, entities such as petitioner were often
atforded protection under the FSIA’s majority-ownership
test, those entities must now rely exclusively on the immunity
for organs of foreign states. See, e.g., USX Corp. v. Adriatic
Ins. Co., 345 F.3d 190, 199 (3d Cir. 2003) (noting that the dis-
trict court had initially upheld the defendant's foreign state
status under the majority-ownership test, but, after Dole
Food, had reevaluated the question under the “organ of a
foreign state” prong), cert. denied, 541 U.S. 903 (2004); id. at
208 (“A flexible approach is particularly appropriate after
Dole, inasmuch as courts likely now will be asked to evaluate
the possible organ status of a wide variety of entities con-
trolled by foreign states through tiering arrangements and
because of the widely differing forms of ownership or control
foreign states may exert over entities.”).

B. At first glance, the courts of appeals may appear to
have adopted similar approaches to determining whether an
entity qualifies as an organ of a foreign state. Each considers
multiple factors including, inter alia, the circumstance of the
entity's creation, its purpose, the involvement of the state in
its affairs, its employment practices, any financial support or
grant of exclusive economic rights from the state, and its priv-
ileges and obligations under local jaw. See 05-85 Pet. App.

9

15a; Filler v. Hanvitt Bank, 378 F.3d 213, 217 (2d Cir.), cert.
denied, 543 U.S. 1022 (2004); USX, 345 F.3d at 209; Patrick-
son, 251 F.3d at 807;° Kelly v. Syria Shell Petroleum Dev.
B.V., 213 F.3d 841, 846-847 (5th Cir.), cert. denied, 531 U.S.
979 (2000).

A closer study, however, reveals a critical divergence in the
manner in which the various circuits apply their seemingly
similar tests. The Third and Fifth Circuits, for example, have
emphasized “the need fora * * * flexible approach under
the organ prong of section 1603(b)(2),” USX, 345 F.3d at 208,
and that a court should “not apply [the factors] mechanically
or require that all five support an organ-determination,”
Kelly, 213 F.3d at 847. Moreover, those courts understand
the need to apply the factors with constant reference to the
ultimate question: whether the defendant is “an entity that
engages in activity serving a national interest and does so on
behalf of its national government.” USX, 345 F.3d at 209.
The relevance aiid weight of any particular factor in a given
case depends on the extent to which it informs that ultimate
test. See id. at 214 (“[wleighing the[] factors qualitiatively as |
well as quantitatively”).

Although the Ninth Circuit also makes reference to “the
ultimate question,” 05-85 Pet. App. 15a, in practice it proceeds
mechanically through a checklist. Its analysis, in full, of the
factors as they apply to petitioner in No. 05-85 was as follows:

[Petitioner] was not run by government appointees, was
not staffed with civil servants, was not wholly owned by the
government, was not immune from suit, and did not exer-
cise any regulatory authority. Even though [petitioner]

* In Patrickson, the Ninth Circuit held that the foreign entity there was
neither an organ of nor majority-owned by a foreign state or political
subdivision. This Court granted a petition for a writ of certiorari to consider
only the question of majority ownership.

10

offers some evidence that it serves a public purpose, its
high degree of independence from the government of Brit-
ish Columbia, combined with its lack of financial support
from the government and its lack of specia! privileges or
obligations under Canadian |aw dictate our holding that
[petitioner] is not an organ of British Columbia.

Id. at 15a-16a (emphasis added) (citation omitted). In other
words, the court of appeals disregarded the substantial evi-
dence that petitioner “serves a public purpose” because it did
not conform with the result indicated by the court's mechani-
cal application of other specified factors. The court did not
analyze those factors to see what light they shed on whether
petitioner was serving the interests of the Province.

The crucial differences between the courts of appeals’ ap-
proaches can best be appreciated by comparing the analysis
of the Ninth Circuit in No. 06-85 with that of the Third Circuit
in USX. For example, the Ninth Circuit found it significant
that petitioner “was not immune from suit” under Canadian
law. 05-85 Pet. App. 16a. In contrast, the Third Circuit deter-
mined that whether the defendant “is subject to suit” in its
home country “should not be considered [as] part of the organ
analysis.” USX, 345 F.3d at 214. It noted that, in order to be
an organ, “an entity must be a separate legal person” and that
“the right to sue and be sued [is] one factor to consider” in
that analysis. /d. at 214 & n.24; id. at 209 n.17 (citing H.R.
Rep. No. 1487, supra, at 15). Similarly, whereas the Ninth
Circuit counted the fact that petitioner engaged in commer-
cial, rather than regulatory, activities against it, 05-85 Pet.

* The Ninth Cireuit’s focus on petitioner's lack of immunity in Canada as a
basis to deny petitioner all of the protections of the FSIA is particularly
inappropriate when the entity engages in commercial activities that Congress
likewise determined should not be protected by foreign sovereign immunity in
the United States (even though an organ of a foreign state engaging in such
activities would still enjoy the other protections of the FSIA).

1]

App. 16a, the Third Circuit cautioned that “too heavy a focus
on the commercial nature of an entity’s activities would tend
to confuse the question of the level of protection provided by
the FSIA (full immunity or not) with the antecedent question
* * * whether the entity comes within the purview of the
FSIA at all,” USX, 345 F.3d at 210.

The Ninth Circuit also determined as a factor against peti-
tioner that it was “not wholly owned by the government,” 05-
85 Pet. App. 15a-16a, by which it meant that petitioner “is not
owned by the Province, but by BC Hydro,” id at l6a. But
that improperly weights the inquiry against treating an entity
as an organ of a foreign state. That inquiry will generally be
salient only for entities that do not satisfy the majorit y-own-
ership test. Such entities should not start the inquiry
whether they satisiy Section 1603(b)(2)’s alternative standard
with one strike against them. In contrast, the Third Circuit
found that when a foreign government “has complete control
over all shares of (the defendant] albeit through a tiered ar-
rangement,” by which the subsidiary serves the government’s
purposes, “this factor weighs in favor of a finding of organ
status.” USX, 345 F.3d at 213.

Similarly, whereas the Ninth Circuit emphasized that peti-
tioner is “not staffed with civil servants,” 05-85 Pet. App. 15a,
the Third Circuit held that fact to be “of little relevance,” and
emphasized instead the fact that a government minister ap-
proved the entity’s administrator, USX, 345 F.3d at 212-213.
And, in contrast to the Ninth Circuit, which held that the Prov-
ince’s assignment t# petitioner of the Province’s entitlement
to hydro-electric power under the Columbia River Treaty did
not qualify as “financial support from the government,” 05-85
Pet. App. 16a, the Third Circuit observed that the exploitation
and distribution of natura! resources is a “government pur-
pose” that “would weigh * * * heavily in favor of organ sta-
tus,” USX, 345 F.3d at 210 (citing Kelly, 213 F.3d at 848, and

12

Corporacion Mexicana de Servicios Meritimos, S.A. de C.V.
v. M/T Respect, 89 F.3d 650, 654-655 (9th Cir. 1996)).

C. A proper analysis of the question demonstrates that
petitioner is an organ of the Province.’ Under the proper
approach, the court of appeals should have focused on the fact
that pet‘cioner was created for the purpose of marketing for
expurt the Province’s excess resource—electric power—in-
cluding, in particular, marketing Canada’s entitlement to
power generated by BPA pursuant to the Columbia River
Treaty and providing power to the City of Seattle as required
of the Province in the Skagit River Treaty. See 05-85 Pet.
App. 55a, 56a-57a. Rather than emphasizing that the Province
does not provide direct financing to petitioner, it should have
focused on the fact that petitioner plays an important role in
discharging Canada’s treaty obligations, that the Province
assigned to petitioner its rights to Canada’s entitlement under
the Columbia River treaty, “a very significant resource,” id.
at 55a, and that petitioner’s net income is returned to the
Province via BC Hydro’s consolidated income statements, see
id. at 202a-204a. Instead of counting against petitioner the
fact that its employees are not civil servants, the court should
have emphasized that members of petitioner’s board of direc-
tors are appointed by BC Hydro’s board, which is appointed
by the Provincial Lieutenant Governor, and that outside mem-
bers of petitioner’s board “were subject to concurrence by the
Office of the Premier,” id. at 58a-59a. Rather than declaring
that petitioner is “not wholly owned by the government,” id.
at 15a-16a, it should have attached significance to the fact that
the Province owns 100% of BC Hydro, which in turn owns
100% of petitioner. On a proper analysis, the court of appeals

* The United States believes the courts below erred in failing to recognize
petitioner's status as an organ of British Columbia that is entitled to the
procedural protections of the FS1A, but takes no position on the merits of the
claims at issue in these cases.

13

should have concluded that petitioner is an organ of the Prov-
ince of British Columbia.*

Il. THE QUESTION PRESENTED IS AN IMPORTANT
ONE, AND NO. 0-85 1S AN APPROPRIATE VEHICLE
IN WHICH TO RESOLVE IT

A. As noted above, a proper understanding of the “organ”
prong is of considerable significance under the FSIA in light
of Dole Food’s clarification of the majority-ownership test for
agency or instrumentality status. See USX, 345 F.3d at 208
(quoted at p. 8, supra). A proper application of that prong is
particularly important in this case. Canada is our Nation’s
largest trading partner, and Canada and its Provinces have
numerous crown corporations that engage in trade with the
United States. See 05-85 Pet. 24-25. Petitioner was created
by BC Hydro—the Province’s statutory agent for the promo-
tion of hydroelectric development—specifically to market BC
Hydro’s surplus electric power outside the Province, including
power the Province is entitled to receive or obligated to pro-
vide under treaties between the United States and Canada.
Petitioner marketed power valued at approximately $11 bil-
lion Canadian between 2000 and 2004, see ibid., and a large
part of that power goes to States in the Ninth Circuit. Thus,
if the court of appeals’ decision is not overturned, it will bind
petitioner in virtually all suits brought against it.

B. The respondent plaintiffs in No. 05-85 do not attempt to
defend the merits of the court of appeals’ classification of

* As noted in the text, the fact that petitioner is 100% owned by a crown
corporation that is, in turn, the statutory agent of and wholly owned by the
Province is highly significant to petitioner’s status as an organ of the Province.
Petitioner also urges that the fact that BC Hydro owns Powerex as the
Province’s agent warrants a finding that petitioner satisfies the “ownership”
prong, based on a case-by-case analysis. See 05-85 Pet. i, 29. The Court need
not grant review on that question because petitioner qualifies as an “organ’
under a correct application of the FSIA.

14

petitioner. Rather, they urge that the court of appeals’ ap-
proach to the issue is not “new or different,” 05-85 Br. in Opp.
6, and that, in any event, the Court cannot decide the issue
because 28 U.S.C. 1447(d) precludes appellate review of the
district court's remand order, 05-85 Opp. 4, and because plain-
tiffs’ claims have been settled and dismissed, id. at 6. The
first argument is incorrect, as we have demonstrated, see pp.
6-13, supra, and the other objections are not well founded.

1. In No. 05-85, the court of appeals held that it had “juris-
diction to review the district court's ruling on substantive
issues of controlling law on the merits of the case.” Pet. App.
6a. That conclusion was correct. The district court plainly
had subject-matter jurisdiction at the time of removal, and its
subsequent rulings did not divest it of that jurisdiction. Ap-
pellate review of the district court’s remand order is therefore
not barred by 28 U.S.C. 1447(d).”

This Court has made clear that Section 1447(d) must be
read in pari materia with 28 U.S.C. 1447(c). See Thermtron
Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 343 (1976).
“[O}nly remands based on grounds specified in § 1447(c) are
immune from review under § 1447(d).” Things Remembered,

" A similar issue relating to appeal from the denial of immunity under the
Federal Employees Liability Reform and Tort Compensation Act of 1988, 28
U.S.C. 267% d), is presented in Osborn v. Haley, No. 05-593 (argued October 30,
2006). Although the Court could hold this case pending resolution of Osborn,
the better course would be to grant the petition in 05-85 outright and without
waiting for a final decision in Osborn. If appellate jurisdiction is upheld in
Osborn, that will only underscore that jurisdiction is appropriate here. On the
other hand, if thy Court finds appellate jurisdiction to be lacking in Osborn, it
will be important to clarify that a similar result does nct apply in the FSIA
context, when the effect of such a rule would be to defeat Congress's judgment
that questions regarding entitlement to the protections of the FSI A be decided
in federal court if a forergn government entity elects a federal forum—at least
where, as here, an entity that both courts below found is a foreign state (BC
Hydro) also remains as a party to the case on remand

15

Inc. v. Petrarca, 516 U.S. 124, 127 (1995). See Kircher v.
Putnam Funds Trust, 126 5. Ct. 2145, 2153 (2006) (same).
Thus, this Court has reviewed a remand order based on a
district cvurt’s crowded docket, Thermtron, 423 U.S. at 340-
341, a remand based on abstention, Quackenbush v. Allstate
Ins. Co., 517 U.S. 706, 710-712 (1996), and the discretionary
remand of state law claims after the federal law claims that
had supported removal were eliminated from the case,
Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 348 (1988).
Each of those cases was properly removed to federal district
court, the district court therefore was properly vested with
jurisdiction from the outset, and the purported ground for the
remand was not one authorized by Section 1447(c).”

One ground for remand provided in Section 1447(c) is lack
of subject matter jurisdiction. But that reference must be
understood, and has been understood by the majority of the
courts of appeals, as limited to remand orders for a lack of
subject matter jurisdiction at the time of removal.’ That

* Cohill held that “Section{] ** * 1447(c, * * * dofes] not apply to cases
over which a federal court has pendent jurisdiction,” and that therefore “the
remand authority conferred by the removal statute [Section 1447(c)| and the
remand authority conferred by the doctrine of pendent jurisdiction overlap not
at all.” 484 U.S. at 355.11. It follows from Cohill’s holding that a discretion-
ary remand of pendent claims is not a remand under Section 1447(c) and such
a remand is not within Section 1447(d)’s bar to appellate review. See Kircher,
126 S. Ct. at 2153. But see Things Remembered, 516 U.S. at 130 (Kennedy, J.,
concurring) (stating that Coil did not decide “whether subsection (d) would
bar review” of orders remanding pendent. claims as a matter of discretion).

* See, e.g., Lethererv. Alger Group, L.L.C., 328 F 3d 262, 265 (6th Cir. 2003)
(“appellate review of remand orders is prohibited only where the district court
remands because it lacks subject matter jurisdiction at the time of removal”),
Poorev. American-Amicoble Life Ins. Co., 218 F.3d 1287, 1290-1291 (1 1th Cir.
2000), Transit Cas. Co. v. Certain Underwriters at © ‘oyd’s, 119 F 3d 619, 623
(8th Cir. 1997), cert. denied, 522 U.S. 1075 (1998); Trans Penn Wax Corp. v.
McCandless, 50 F 3d 217,223 (3d Cir. 1995), Jn re Amoco Petrolewm Additives
Co., 964 F 2d 706, 708-709 (7th Cir. 1992). But see Linton v. Airbus Industrie,

16

reading is consistent with the general rule that a federal
court’s subject matter jurisdiction is fixed at the time the suit
is brought and is not defeated by subsequent acts. See, e.g.,
Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 574
(2004); Freeport- McMoRan,Inc. v. KN Energy, Inc., 498 U.S.
426 (1991), cert. denied, 502 U.S. 1122 (1992); St. Paul Mer-
cury Indem. Co. v. Red Cab Co., 303 U.S. 283, 294 (1938).

That reading is also consistent with the history of the re-
moval statutes. Before 1988, the text of Section 1447(c) made
explicit that it authorized remand based only on defects at the
time of removal. It allowed remand “{i]f at any time before
final judgment it appears that the case was removed improvi-
dently and without jurisdiction.” 28 U.S.C. 1447(c) (1982). In
1988, Congress amended Section 1447(c) to distinguish be-
tween two types of defects in removal jurisdiction—-a defect
in removal procedure, and a defect in the district court’s sub-
ject matter jurisdiction—and to provide that procedural de-
fects are waived if not raised promptly. The amended provi-
sion specified that “a motion to remand the case on the basis
of any defect in removal procedure must be made within 30
days” of removal, while it continued to require remand “{ilf at
any time before fina) judgment it appears that the district
court lacks subject matter jurisdiction.” Pub. L. No. 100-702,
§ 1016(c)(1), 102 Stat. 4670. In 1996, the provision was again
amended to clarify that waivable objections to removal include
“any defect other than lack of subject matter jurisdiction.”
Pub. L. No. 104-219, § 1, 110 Stat. 3022.

As a number of courts of appeals have concluded, after
reviewing the change in statutory text and the legislative his-
tory, “the proper inquiry is still whether the court had juris-
diction at the time of removal.” Poore, 218 F.3d at 1290. See

30 F.3d 592, 599-600 (5th Cir.) (“jurisdictional remands premised on post-
removal events are not reviewable”), cert. denied, 513 US. 1044 (1994).

17

Van Meter v. State Farm Fire & Cas. Co., 1 F.3d 445, 450 n.2
(6th Cir. 1993); Jn re Shell Oil Co., 966 F.2d 1130, 1133 (7th
Cir. 1992). Congress did not intend to depart from the well
established rule “that jurisdiction present at the time a suit is
filed or removed is unaffected by subsequent acts.” /d. at
1133. Rather, Congress's focus in adopting the textual change
was on ensuring that plaintiffs raise promptly any objection
to removal on purely procedural grounds. See H.R. Rep. No.
889, 100th Cong., 2d Sess. Pt. 1, at 72 (1988). The statute's
current structure bears that out. The reference in the first
sentence of Section 1447(c) to “any defect other than lack of
subject matter jurisdiction” makes clear that by the phrase
“lack of subject matter jurisdiction” Congress means a partic-
ular, non-waivable, “defect” in removal.”

In this case, the district court stressed that no party con-
tested that the actions could be removed pursuant to 28
U.S.C. 1441 and 1442. See 05-85 Pet. App. 20a. That recogni-
tion of the propriety of the court's removal jurisdiction at the
outset is entirely correct and is, in itself, sufficient to take this
case outside the scope of Section 1447(d). The district court
itself recognized (and the court of appeals affirmed) that, as
a crown corporation wholly owned by the Province of British
Columbia, BC Hydro qualifies as an agency or instrumentality
of Canada and therefore as a foreign state under 28 U.S.C.
1603(a) and (b). 05-85 Pet. App. 12a-l4a, 2la. Therefore BC

The legislative history of the 1988 change also reflects that Congress
understood the mandatory (and wnreviewable) remand for lack of subject
matter jurisdiction at the time of removal that is referred to in Sect’on 1447(c)
to be distinct from a diseretionary remand after the court had exercised its
removal jurisdiction to resolve disputed federal questions. See H_R. Rep No
889, supra, at 72 (emphasizing that “|t he amendment is written in terms of a
defect in ‘removal procedure’ in order to avoid any implication that remand is
unavailable after disposition of all federal questions leaves only State law
questions that might be decwed as a matter of ancillary or pendent jurisdiction
or that instead might be remanded”)

18

Hydro had the right to remove the action under 28 U.S.C.
1441(d) in order to have its claim of immunity decided by a
federal, rather than state, forum. See ibid. (“Any civil action
brought in a State court against a foreign state as defined in
section 1603(a) of this title may be removed by the foreign
state to the district court.”). The district court did, in fact,
exercise its removal jurisdiction to adjudicate BC Hydro’s
claim of immunity, which the court upheld. 05-85 Pet. App.
21a-33a. As federal agencies, BPA and WAPA were likewise
entitled to remove the action pursuant to 28 U.S.C. 1442(a)(1)
and have their immunity from suit adjudicated by the federal
district court, which they did. See 05-85 Pet. App. 7a, 39a-40a;
see Kircher, 126 S. Ct. at 2155 n.12 (noting that under Section
1442(a), the federal defendant need only raise a “colorable”
defense of federal immunity in order to remove, because that
section “reflects a congressional! policy that ‘federal! officers,
indeed the Federal Government itself, require the protection
of a federal forum’”) (quoting Willingham v. Morgan, 395
U.S. 402, 407 (1969)).""

Because (as the district court recognized, 05-85 Pet. App.
20a) removal by BC Hydro, BPA, and WAPA was proper, the

' The logic of respondent plaintiffs argument against appellate jurisdiction
would appear to be that the court of appeals did not even have jurisdiction over
the appeals by BPA and WAPA from the district court's refusal to dismiss
them from the case rather than remanding the case back to state court with
those federal agencies as parties, even though no party contested in district
court that the cases were properly removed based on the presence of those
agencies as defendanis, see 05-85 Pet. App. 20a, and the district court correctly
deprive federal agencies of an unportant protection afforded by the removal
statute (and sovereign immunity): the ability to remove the case from state
court for the very purpose of securing dismissal from the case on immunity
grounds at the outset. See S. Rep. No. 366, 104th Cong., 2d Sess. 30-31 (1996)
(Section 1442/a)(1) reflects “Congress’ intent that questions concerning * ° *
the scope of Federal immunity * * * be adjudicated in Federal court”).

19

district court had subject-matter jurisdiction over the entire
case irrespective of the sovereign status of petitioner. See,
e.g., USX, 345 F.3d 190; Nolan v. Boeing Co., 919 F.2d 1058
(5th Cir. 1990), cert. denied, 499 U.S. 962 (1991); see also H.R.
Rep. No. 1487, supre xt 32. The bar to appellate review in
Sertion 1447(d) ther. _ ce does not apply to any remand order
entered by the district court after it had resolved the immu-
nity questions properly brought before it."

Because the court of appeals correctly concluded that it
had appellate jurisdiction over the appeal in No. 05-85, the
Court should grant review in that case limited to the question
of petitioner’s status as an organ of a foreign state. In con-
trast, in No. 05-584, the court of appeals concluded that it
lacked jurisdiction. 05-584 Pet. App. la. Although the court
of appeals cited Section 1447(d) as the basis for dismissing the
appeal, there is some dispute as to whether that holding was,

in fact, based on the panel's understanding that the prior
panel decision in No. 05-85 compelled the conclusion that the
case had not been properly removed. See 05-584 Reply 3-4.
Because the court of appeals’ one page order does not lend
itself to a full consideration of the issue by this Court, we sug-

* Although the district court invoked Section 1447(c) as the basis for its
remand, that court's characterization of its action is not binding on this Court
as to the scope of its appellate jurisdiction. See, e.g., U/niied States v. Jorn, 400
U.S. 470, 478 n.7 (1971) (plurality opinion of Harlan, J.) (“the trial judge's
characterwation of his own action cannot control the classification of the action
for purposes of our appellate jurisdiction”), United States v. Sisson, 399 US.
267, 279 n.7 (1970). The reviewing court must determine its own jurisdiction
independently. See Liberty Mut. ins. Co. v. Wetzel, 424 U.S. 740, 742 (1976)
(court of appeals erred in accepting the district court's “recital” that final
judgment had been entered when the record showed the contrary), Things
Remembered, 516 U.S. at 134 (Ginsburg, J., concurring)

20

gest that the Court hold the petition in No. 05-584 and dispose
of it consistent with the disposition of No. 05-85."

Finally, the settlement agreement reached between the
plaintiff and respondent cross-plaintiffs in No. 05-85 does not
moot the petition. Although the respondent cross-plaintiffs
have apparently offered to dismiss the cross-claims, any such
dismissal would be without prejudice to reinstating them if
the underlying settlement with the plaintiffs is overturned.
See 05-85 Reply 2-3. Petitioner has not agreed to settle on
those terms. /bid. Moreover, it is our understanding that
certain parties object to the settlement and have recently
filed appeals concerning their objections in the state courts.
See Wholesale Electricity Antitrust Cases I & II, J.C.C.P.
No. 4204 (Cal. Super. Ct. San Diego County), State of
Montana's Notice of Appeal (July 28, 2006). Thus, the petition
is not now moot, and this Court would almost certainly resolve
the case before the settlement between the plaintiff and re-
spondent cross-plaintiffs becomes final.

CONCLUSION

The petition for a writ of certiorari in No. 05-85 should be
granted li nited to the first question presented. The petition
for a writ of certiorari in No. 05-584 should be held pending
resolution of No. 05-85 and then disposed of as appropriate in
light of the disposition of that case.

Respectfully submitted.

'* A typical remand order merely determines which of two acceptable fora
wil] adjudicate the plaintiff's claim, and Congress has determined that interests
of efficiency warrant barring appellate review of that decision. See Kircher,
126 S. Ct. at 2156. In contrast, Congress has specifically determined that
proper treatment of foreign states and their agencies and instrumentalities
demands that they be afforded a federal forum, in which they would be subject
to trial only by a judge. Congress should not lightly be taken to have intended
for those benefits to be irretrievably lost by a district court's erroneous ruling.

PAUL D. CLEMENT

M ' feocilor (rene ral

PETER D. KEISLER
Assista» , Attorne 7 ty nerTai

EDWIN S. KNEEDLER
Deputy Solicttor General

DOUGLAS H. HALLWARD-DRIEMEIER
Assistant to the Solicitor
jouw B. BELLINGER I! General
Legal Adviser MarK B. STERN

CATHERINE W. Brow? H. THOMAS BYRON 111

Attn ; .
Assistant Legal Adviser Attorney

NOVEMBER 2006

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_0430%3A6. Public record. Not legal advice.