Bd Regents Univ TX v. Nippon Tele TelegrBd Regents Univ TX v. Nippon Tele Telegr
Before BARKSDALE, DeMOSS, and PRADO, Circuit Judges.
RHESA HAWKINS BARKSDALE, Circuit Judge:
Having removed this action from state court, Nippon Telegraph & Telephone Corporation (NTT), Japan‘s largest telecommunications company, challenges the district court‘s denial of its motion to dismiss. In this interlocutory appeal, NTT asserts: it is an “organ of a foreign state“, pursuant to the Foreign Sovereign Immunity Act (FSIA),
NTT‘s supplemental removal notice was timely. But, because NTT does not qualify as an “organ of a foreign state“, subject-matter jurisdiction is lacking. Accordingly, the district court‘s denial of foreign-sovereign status is AFFIRMED. The Federal Circuit‘s having earlier rejected NTT‘s other asserted basis for subject-matter jurisdiction (patent-law, under
I.
UT/HQ alleges: an NTT research scientist learned of confidential information for certain lithium rechargeable-battery technology while visiting the University of Texas at Austin from 1993 to 1994 under the tutelage of a UT professor; upon returning to NTT in Japan, the research scientist disclosed the confidential information, which NTT used in November 1995 to apply for a Japanese patent that was published in May 1997; and, unaware of NTT‘s misappropriation and patent application, UT filed for a
Accordingly, in June 2001, UT/HQ filed this action in Texas state court, claiming, inter alia, tortious interference, unfair competition, misappropriation of trade secrets, conversion, and breach of a confidential relationship. The action seeks actual and punitive damages, disgorgement of profits, and a constructive trust over the Japanese patent for the benefit of UT/HQ.
In July 2001, NTT removed this action to district court, pursuant to
On 26 November 2001, the district court, inter alia, denied UT/HQ‘s motion to remand for lack of subject-matter jurisdiction. Reasoning that UT/HQ‘s tortious-interference claim requires determining whether UT/HQ‘s patent overlaps NTT‘s patent, the district court held: it had federal-question jurisdiction over that claim, pursuant to
Over the next several years, the parties filed approximately 50 deadline-extension motions. By a June 2004 order, the district court denied, inter alia, NTT‘S motion to dismiss based on sovereign immunity. Bd. of Regents, Univ. of Tex. Sys. v. Nippon Tel. & Tel. Corp., No. A-01-CA-478 (W.D. Tex. 1 June 2004). Rather than appeal to this court, NTT appealed to the United States Court of Appeals for the Federal Circuit. That court held, contrary to the district court‘s 26 November 2001 order, that UT/HQ‘s claims did not require the determination of questions arising under federal patent laws. Bd. of Regents, Univ. of Tex. Sys. v. Nippon Tel. & Tel. Corp., 414 F.3d 1358, 1365 (Fed. Cir. 2005).
II.
As a threshold matter, our jurisdiction to review the denial of NTT‘s motion to dismiss exists under the “collateral order” doctrine, an exception to
This opinion first addresses whether NTT‘s supplemental removal notice was timely. Because it was, NTT‘S foreign-sovereign-status claim is at issue. NTT is not entitled to such status; therefore, federal subject-matter jurisdiction is lacking. Accordingly, removal was improper.
A.
UT/HQ‘s timeliness contention, which implicates subject-matter jurisdiction, is unavailing. We review questions of such jurisdiction de novo. Delgado v. Shell Oil Co., 231 F.3d 165, 175 (5th Cir. 2000). The procedure for removal from state to federal court is governed by
In its 26 November 2001 order, the district court determined NTT‘s mid-July 2001 receipt of UT/HQ‘s complaint did not constitute sufficient service of process, because it did not comply with the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. UT/HQ does not contest this ruling. After successfully moving for a time extension, UT/HQ properly served NTT on 1 February 2002. Because NTT‘s supplemental notice of removal was submitted before it was properly served with process, the supplemental notice was timely.
B.
(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 . . . nor created under the laws of any third country.
UT/HQ concedes NTT meets prongs (1) and (3) of
Foreign-sovereign status is a question of law, reviewed de novo; underlying findings of fact are reviewed for clear error. Kelly v. Syria Shell Petroleum Dev. B.V., 213 F.3d 841, 845 (5th Cir. 2000). Our caselaw has developed a five-factor framework to assist in determining
(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.
Id. at 846-47 (alteration in original) (quoting Supra Med. Corp. v. McGonigle, 955 F. Supp. 374, 379 (E.D. Pa. 1997) (citing Corporacion Mexicana de Servicios Maritimos, S.A. de C.V. v. M/T Respect, 89 F.3d 650, 655 (9th Cir. 1996))). Cognizant of this court‘s caveat that these factors should not be applied mechanically because there is no “clear test” for determining organ status, we find them apposite here, as did our court in Kelly, and as have other circuits in similar cases. See, e.g., USX Corp. v. Adriatic Ins. Co., 345 F.3d 190, 209 (3d Cir. 2003); Alpha Therapeutic Corp. v. Nippon Hoso Kyokai, 199 F.3d 1078 (9th Cir. 1999), withdrawn on other grounds sub nom. Alpha Therapeutic Corp. v. Kyokai, 237 F.3d 1007 (9th Cir. 2001). Under the Kelly factors, NTT does not qualify as an “organ” of the Japanese Government.
First, NTT was not created for a national purpose. See Kelly, 213 F.3d at 846. NTT contends its enabling statute obligates it to provide universal service to Japan. That statute is better understood, however, as prohibiting NTT from unilaterally terminating service to existing customers because, at its inception, NTT held a monopoly it no longer possesses. Along that line, NTT was created to privatize what had been a government-controlled monopoly and to promote competition. NTT‘s predecessor,
Second, the Japanese Government does not actively supervise NTT. See Kelly, 213 F.3d at 846. NTT contends Japanese Government authorization is required for numerous NTT transactions, including: appointing or dismissing board members, distributing profits, appointing auditors, issuing new shares, executing mergers, and amending its articles of incorporation. Requiring government authorization, however, is not active supervision. Otherwise, any regulated public-service provider could claim sovereign status. None of the regulatory powers NTT cites allow the Japanese Government to affirmatively manage NTT affairs; they merely provide passive oversight, related to, and in some cases identical with, the requirements of other governments’ regulatory bodies, such as
Third, NTT is not required to hire public employees. See Kelly, 213 F.3d at 846. Indeed, NTT admits its employees are private employees, not paid by the Japanese Government. Concomitantly, NTT‘s non-management employees are members of a private trade union. NTT invites our court to categorize its employees as quasi-civil servants because Japan‘s Law on Retirement Benefits for National Public Employees provides that employees, who migrate between Japanese Government employment and NTT, receive reciprocal retirement credit. The purpose of this credit, however, is to properly account for NTTPC (and early NTT) employees’ years of service, whose employment had been with a Japanese Government entity. NTT‘s quasi-civil-servant assertion is unavailing.
Fourth, NTT does not “hold[] exclusive rights to some right in [Japan]“. See id. (emphasis added). Lacking any basis to assert exclusive rights, NTT points to its obligations to provide universal service and to conduct telecommunications research. Our
Fifth, and finally, NTT is not treated as a governmental organ under Japanese law. See id. at 847. NTT maintains it is similar to Nippon Hoso Kyokai (NHK), a public Japanese television-broadcasting corporation, which the Ninth Circuit held was an organ of the Japanese Government. Alpha Therapeutic Corp., 199 F.3d at 1084-85, withdrawn on other grounds sub nom. Alpha Therapeutic Corp. v. Kyokai, 237 F.3d 1007 (9th Cir. 2001). Like NHK, NTT is a “designated public institution” under Japan‘s Disaster Measures Basic Law. Id. at 1084. Unlike NHK, which was the only “designated public institution” television station and which Japanese law prohibited from earning profits, id., NTT is not the only “designated public institution” telecommunications company and is permitted to earn profits and distribute them to shareholders. Furthermore, NTT‘s funding is not derived from a government-mandated receiver‘s fee, as was NHK‘s. Id. Finally, while NTT is subject to the World Trade Organization (WTO) Agreement on
As stated, consideration of the guiding Kelly factors clearly favors concluding NTT is not an organ of Japan. Nevertheless, NTT urges its status is similar to the organ status awarded under a claimed broader approach in Alpha Therapeutic Corp., 199 F.3d at 1084; USX Corp., 345 F.3d at 208-13; Kelly, 213 F.3d at 847; and First National City Bank v. Banco para el Comercio Exterior de Cuba, 462 U.S. 611 (1983) (“Bancec“). Each of these cases, however, is readily distinguishable.
Regarding Alpha Therapeutic Corp., in addition to the differences between NHK and NTT already discussed, NHK was required to satisfy specific Government-mandated goals, including promoting Japanese culture, industry, and trade, and providing entertainment to Japanese citizens abroad, 199 F.3d at 1084; NTT serves no such Government purpose. Similarly, unlike USX Corp., in which Ireland acquired complete (even if partially indirect) control over an insurance company to avert disaster in its insurance and banking industries, 345 F.3d at 209-13, NTT is neither completely controlled by Japan nor constituted to prevent national market catastrophe.
Along this line, NTT is distinct from the Syrian oil entity accorded organ status in Kelly. 213 F.3d at 848. Syria created
The last of the decisions under which NTT seeks shelter, Bancec, is not an FSIA case, but remains persuasive due to its factual similarities and application of federal and international equitable common-law principles. In Bancec, the Supreme Court stated:
A typical government instrumentality . . . is created by an enabling statute . . . prescrib[ing] . . . manage[ment] by a board selected by the government . . . [, is] established as a separate juridical entity, with the powers to hold and sell property and to sue and be sued . . . [, and] is run as a distinct economic enterprise ....
NTT shares some of these “typical government instrumentality” characteristics, but not others. More important, however, is Bancec‘s holding: the foreign entity at issue was not immune from suit in the United States. Emphasizing that no mechanical formula can consistently and appropriately determine foreign-sovereign status, the Court declared its decision was “the product of the application of internationally recognized equitable principles to avoid the injustice that would result from permitting a foreign
III.
For the foregoing reasons, NTT is not entitled to foreign-sovereign status. Coupled with the Federal Circuit‘s having found no jurisdiction under federal-patent law, there is no subject-matter jurisdiction. Accordingly, removal was improper.
Therefore, the district court‘s denial of foreign-sovereign status is AFFIRMED; its ruling it has jurisdiction is VACATED; and this action is REMANDED to district court for remand to Texas state court.
AFFIRMED IN PART; VACATED IN PART; REMANDED
RHESA HAWKINS BARKSDALE
CIRCUIT JUDGE