Opinion
Case No.: CV 99-11952-GHK (MANx).
May 17, 2000
I. Background and Procedural History
Plaintiff Jae Won Jeong, a United States and California citizen who claims that he was a Korean national during World War II ("WWII"), brought his complaint in Los Angeles Superior Court on October 4, 1999. Jeong alleges that he was forced to labor without compensation at a cement plant in Korea during the war under inhumane conditions. He sues Onoda Cement Co., Ltd., the Japanese business entity that allegedly operated the plant where he was forced to work, along with several other Defendants including (1) Taiheiyo Cement Corp. ("Taiheiyo (Japan)"), a Japanese business entity that is a successor to Onoda by merger; and (2) three alleged California corporations that are subsidiaries of Taiheiyo (Japan): (a) California Portland Cement Co.; (b) Lone Star Northwest Inc.; and (c) Taiheiyo Cement U.S.A.
Jeong purports to represent a class of plaintiffs. There has been no briefing on the issue of class certification.
In its joinder in its co-Defendants' removal notices, Taiheiyo (Japan) states that Lone Star recently changed its name to Glacier Northwest, Inc. Because all of the parties' other filings refer to this entity as Lone Star, though, we refer to it as such in this Order.
Jeong's alleged causes of action all arise under California law. He brings claims for: (1) compensation under Cal. Code Civ. Pro. § 354.6, the recently enacted statute that purports to allow WWII forced-labor victims to sue certain business entities until 2010; (2) unjust enrichment; (3) injuries in tort; and (4) unlawful business practices under Cal. Bus. Profs. Code § 17200 et seq.
At various points after Jeong filed his complaint, all the currently existing Defendants filed notices of removal. On November 23, 1999, we ordered the Defendants who initially removed, Taiheiyo U.S.A. and California Portland, to show cause why we should not remand this case. They filed a response to our order to show cause ("OSC"); Defendants Lone Star and Taiheiyo (Japan) also introduced new arguments for removal in their removal notices. Jeong subsequently filed a reply, which addresses Defendants' response to our OSC as well as the arguments raised in the subsequent removal notices.
II. Discussion
A. Lack of Diversity
As the parties seeking to invoke our diversity jurisdiction, Defendants have the burden to establish jurisdictional facts such as the citizenship of the parties. See Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992); Bautista v. Pan Am. World Airlines, Inc., 828 F.2d 546, 552 (9th Cir. 1987); Schroeder v. TWA, 702 F.2d 189, 191 (9th Cir. 1983); 1 Schwarzer, Tashima Wagstaffe, Federal Civil Procedure Before Trial §§ 2:656, 2:658, 2:1093 at 2D-23 to 24, 2D-213 (1999).
Here, Defendants do not dispute that Taiheiyo U.S.A. and California Portland are, like Jeong, citizens of California. Nonetheless, they argue that we should look beyond their California citizenship and find that complete diversity exists in this case.
The parties disagree about whether Defendant Lone Star is a California corporation or a Washington corporation. This dispute does not affect our conclusion that complete diversity is lacking in this case due to the undisputed California citizenship of Taiheiyo U.S.A. and California Portland.
1. Alter ego theory
"'[I]n a suit involving a subsidiary corporation, the court looks to the state of incorporation and principal place of business of the subsidiary, and not to its parent.'" Danjaq, S.A. v. Pathe Comms. Corp., 979 F.2d 772, 775 (9th Cir. 1992), quoting 1 Moore, Moore's Federal Practice ¶ 0.77[2.-5] (2d ed. 1992).
The only exception to this rule occurs "where the subsidiary is the alter ego of the parent corporation." Id. If the subsidiary is merely the alter ego of the parent, we look to the two corporations' combined business activities to determine where we should locate their citizenship for diversity purposes. See id.; 13B Wright, Miller Kane § 3625 at 636 (1990). In this case, Taiheiyo (Japan) allegedly had 1999 sales of $2.5 billion. Lone Star Removal Notice 9:12; see also Compl. ¶ 26 (alleging that Taiheiyo (Japan) had "consolidated net sales of 609.7 billion Japanese Yen [about $5.6 billion] as of March 31, 1999"). By contrast, Lone Star states that the 1998 net sales of the California Defendants were about $535 million. Lone Star Removal Notice 11:16 n. 8. So if we were to look at the companies' combined business activities to determine citizenship, we might conclude that the "California Defendants" should be treated as citizens of Japan.
But we do not reach any analysis of Defendants' combined business activities because there is not enough evidence that the California Defendants should be treated as alter egos of Taiheiyo (Japan). Whether a subsidiary is merely the alter ego of its parent is a question of fact. It turns on considerations such as the degree of control exercised by the parent, the relationship of the two corporations' activities, the membership of the board of directors, and the maintenance of separate corporate books. 13B Wright, Miller Kane § 3625 at 636.
Here, Jeong alleges in his complaint that all the Defendants are alter egos of each other. He asserts that "[t]here exists a unity of interest between all the defendants such that any individuality and separateness between these entities have ceased, and all the defendants are alter ego of each other entities [sic] or subsidiaries owned wholly or in majority by the defendants. Adherence to the fiction of the separate existence between these defendants would promote injustice under the circumstances of this case." Compl. ¶ 41. Aside from this broad assertion, however, Jeong's complaint includes no factual allegations of an alter-ego relationship between Taiheiyo (Japan) and the California Defendants. By itself, Jeong's conclusory allegation of an alter-ego relationship is not enough to establish that we should treat the California Defendants as citizens of Japan.
For its part, Lone Star makes a rather half-hearted attempt to argue that Taiheiyo U.S.A. and California Portland are, as Jeong so vaguely alleges in his complaint, alter egos of Taiheiyo (Japan). But Lone Star introduces no evidence showing that the California Defendants are in fact alter egos of Taiheiyo (Japan). It merely asserts that we should treat them as alter egos because they are "sued as" such in Jeong's complaint. Lone Star Removal Notice 11:12. But we cannot ignore the corporate form just because a conclusory statement in the complaint suggests that we might. See Danjaq, 979 F.2d at 775 ("Absent a showing that the subsidiary is merely an alter ego of its parent corporation, there is no justification for ignoring the separate corporate structures and looking to the subsidiary's activities to determine the parent's principal place of business. . . . We therefore hold that the citizenship of a parent is distinct from its subsidiary where, as here, there is no evidence of an alter ego relationship.") (emphasis added). Lone Star does not allege, let alone prove, any of the actual facts needed to show that any of the California Defendants is the alter ego of Taiheiyo (Japan), such as control exercised by Taiheiyo (Japan), a close relationship between the corporations' activities, shared directors, and unified corporate books.
Therefore, Defendants have not carried their burden to show that we should treat the California Defendants as citizens of Japan for diversity purposes.
2. Fraudulent joinder
In a sense, Defendants' fraudulent joinder argument is the flip side of the alter ego argument discussed above. Defendants contend that Jeong has no real claim against any of the California Defendants because none of these Defendants had anything to do with inflicting his alleged injuries in WWII, and Jeong will be unable to hold them liable for Onoda's acts on the basis of successor or alter ego liability. Jeong counters by arguing that California courts might apply the "reverse veil piercing" doctrine of alter ego liability to hold the California Defendants liable for Onoda's alleged acts during WWII, perhaps on the ground that the California Defendants were acquired and maintained by their Japanese parent with funds garnered partly through the use of Jeong's labor.
Since Defendants' argument here is essentially the opposite of the alter ego argument that we just rejected, we might expect it to succeed. After all, if we determine that there is no evidence that the California Defendants are alter egos of Taiheiyo (Japan), then we might conclude that Jeong will be unable to recover from the California Defendants on the basis of the reverse veil piercing theory, and that the California Defendants are therefore fraudulently joined.
But Defendants' fraudulent joinder argument fails because there is a different standard of proof involved. A party invoking fraudulent joinder to establish diversity bears a heavy burden. "'The removing party must prove that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the in-state defendant in state court, or that there has been outright fraud in the plaintiff's pleadings of jurisdictional facts.'" Davis v. Prentiss Properties Ltd., Inc. 66 F. Supp.2d 1112, 1113 (C.D. Cal. 1999), quoting Green v. Amerada Hess Corp., 707 F.2d 201, 205 (5th Cir. 1983). The plaintiff's failure to state a cause of action against a resident defendant must be "'obvious according to the settled rules of the state.'" Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998), quoting McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987).
Thus, the issue here is whether it is settled law in California that an American subsidiary of a foreign corporation cannot be held liable pursuant to Cal. Code Civ. Pro. § 354.6 for the alleged use of forced labor by its parent during WWII.
The doctrine of reverse veil piercing has been used to hold a corporation liable either for the debts of a shareholder or the debts of a subsidiary. See Towe Antique Ford Found. v. IRS, 999 F.2d 1387, 1391-92 (9th Cir. 1993) (holding that under Montana law, reverse piercing doctrine would allow IRS to reach assets of corporation to recover on debts of shareholder who was the corporation's alter ego); Securities Investor Prot. Corp. v. Stratton Oakmont, Inc., 234 B.R. 293, 319-23 (Bankr. S.D.N.Y. 1995) (applying New York law to hold subsidiary liable for parent's debts under reverse piercing doctrine).
Lone Star acknowledges, in a backhand way, that no reported California decision has taken up the issue of reverse veil piercing. See Lone Star Removal Notice 10:14-15.
It appears unlikely that this case would fulfill the elements generally required for reverse piercing at common law, as set forth by the courts that have adopted the theory. In Securities Investor, for example, the bankruptcy court stated that courts examining reverse piercing have looked for "a control relationship between the parent and the subsidiary." Securities Investor, 234 B.R. at 323. The factors involved in traditional veil piercing — such as interlocking directorates, inadequate capitalization, and common office space — come into play, and the court should consider whether the parent corporation is a mere shell that depends on the subsidiary's business operations to function. See id.
Here, aside from his conclusory allegation that "all the defendants are alter ego[s] of each other," Compl. ¶ 41, Jeong pleads no facts showing that any of the California Defendants have any control over Taiheiyo (Japan). Although it does not produce evidence, Lone Star states that none of the California Defendants control or have any ownership interest in Taiheiyo (Japan) and that Taiheiyo (Japan) is not undercapitalized. Lone Star Removal Notice 10:23-11:3. Indeed, there does not appear to be any reason to suspect that the California Defendants have anything but a run-of-the-mill subsidiary relationship with their parent, Taiheiyo (Japan).
There also appears to be no reason to conclude that the California Defendants would be considered successors in interest to Onoda. Successor liability exists where "a corporation organizes another corporation with practically the same shareholders and directors, transfers all the assets but does not pay all the first corporation's debts, and continues to carry on the same business[.]" 9 Witkin, Summary of California Law § 19 at 532 (9th ed. 1989). There is no evidence or factual allegation that any or all of the California corporations possess all of Onoda's former assets. Jeong alleges conclusorily that each and every Defendant is "a successor in interest to Onoda Cement Co., Ltd.," Compl. ¶¶ 23, 27, 30, 32, 35, 38, 40. But Jeong's complaint also appears to acknowledge that it is Taiheiyo (Japan) that, via merger, now holds Onoda's former assets, id. ¶¶ 21, 24, and has 500 subsidiaries including the California Defendants, id. ¶ 25. In his reply, Jeong does not contest Lone Star's argument that the California Defendants would not be considered Onoda's successors, as the term is defined under California law.
Nonetheless, we cannot conclude that it is "obvious according to the settled rules" of California that Jeong cannot hold the California Defendants liable in this case. The reason is the language and legislative history of § 354.6. The law states, in relevant part:
Any Second World War slave labor victim, or heir of a Second World War slave labor victim, Second World War forced labor victim, or heir of a Second World War forced labor victim, may bring an action to recover compensation for labor performed as a Second World War slave labor victim or Second World War forced labor victim from any entity or successor in interest thereof, for whom that labor was performed, either directly or through a subsidiary or affiliate.
Cal. Code Civ. Pro. § 354.6(b) (emphasis added).
Taken together, the underlined phrases appear to mean that a plaintiff can recover "through a subsidiary or affiliate" of the entity, or successor thereof, that forced him to labor during the war. That is, the statute essentially creates a "reverse veil piercing" option for the plaintiff by permitting him to recover from an American subsidiary or affiliate of a foreign parent company regardless of whether the subsidiary has any control of the parent or had anything to do with the acts allegedly committed in WWII. Indeed, there is evidence that the legislature was concerned about the ability of companies that allegedly employed slave labor, and their affiliates, to profit from their relationship with California. The bill states that the state treasurer, CALPERS, and the State Teacher's Retirement System "shall monitor and report to the Legislature on investments of the state and its pension funds in companies doing business in California, and affiliates of those companies, that owe compensation to victims of slave and forced labor from 1929 to 1945." Cal. Stats. 1999 ch. 216 (S.B. 1245) § 3.
The statute's legislative history also supports a "reverse veil piercing" reading. An earlier version of the bill evidently stated that a plaintiff could bring an action against "any person or entity who received the benefit of" the plaintiff's forced labor. Committee Report for 1999 California Senate Bill No. 1245, 1999-00 Regular Session, May 11, 1999. Concerned that this was too broad, the legislature narrowed the law with the intent to permit actions "against any person or entity, or the parent or subsidiary companies of such entities, for whom the plaintiff actually performed labor." Id. As with the text of the law itself, this language suggests that a plaintiff may sue a subsidiary or affiliate of the firm that allegedly enslaved him.
Because the California courts apparently have not ruled on the issue of what entities are proper defendants under § 354.6, and the language and intent of the statute suggests that subsidiaries are proper defendants, we cannot state with certainty that Jeong has no cause of action against the California Defendants. As a result, we cannot conclude that the California Defendants are fraudulently joined. Therefore, diversity is not a ground for removal.
B. Complete Preemption
Section 1441(a) of Title 28 provides that a defendant may remove to federal court a civil action "brought in a State court of which the district courts of the United States have original jurisdiction." This means that "'[o]nly state court actions that originally could have been filed in federal court may be removed to federal court by the defendant.'" Young v. Anthony's Fish Grottos, Inc., 830 F.2d 993, 996 (9th Cir. 1987), quotingCaterpillar, Inc. v. Williams, 107 S. Ct. 2425, 2429 (1987).
Therefore, an action is removable based on federal question jurisdiction if the plaintiff's complaint, although it purports to bring a claim based on state law, is properly characterized as presenting a federal claim. See Toumajian v. Frailey, 135 F.3d 648, 653 (9th Cir. 1998); Young, 830 F.2d at 996 (quotingCaterpillar). Conversely, "[i]f the plaintiff could not have asserted a federal claim based on the allegations of her state law complaint, she could not have brought the case originally in federal court as required for removal jurisdiction under section 1441." Young, 830 F.2d at 997.
For this reason, simple preemption of a state law claim by federal law is not enough to justify removal. Rather, a case can be removed only if federal law "supplants" the plaintiff's state law claim with a federal claim. Id. Federal law can provide a defense to a state law claim — as it may in this case — without justifying removal. See Toumajian, 135 F.3d at 654. This is a distinction that Defendants miss when they argue that removal jurisdiction is proper because federal foreign policy concerns should bar Jeong from obtaining any of the relief he seeks. Indeed, Defendants cite cases that had nothing to do with removal jurisdiction, but instead involved only defensive preemption. See Olson v. General Dynamics Corp., 960 F.2d 1418, 1423 (9th Cir. 1991) (holding that claim was defensively preempted under ERISA);Aldrich v. Mitsui, No. 87-912-Civ-J-12 (M.D. Fla. 1988) (dismissing unjust enrichment claim brought by former POW on grounds that it was preempted by Treaty of Peace With Japan).
Defendants also argue that the Treaty of Peace With Japan and the War Claims Act "supplant" Jeong's state law claims because the Treaty provided for reparations to be paid by Japan and the Act provided a scheme whereby victims of forced labor could bring claims for compensation.
Defendants' argument fails because neither the Treaty nor the Act gave any forced labor victim a right to bring a suit for compensation in federal court. The Treaty provided for seizure of certain Japanese property by the Allied powers and other forms of reparation. Treaty Art. 14 §§ 1, 2(I). It also provided for the transfer of certain funds from Japan and its nationals to the International Committee of the Red Cross to be used for benefit of former prisoners of war. Id. Art. 16. But the Treaty provides no one with a private right of action to seek compensation in federal court for forced labor performed for a Japanese business entity.
The War Claims Act of 1948, meanwhile, set up a Commission and gave it jurisdiction to, inter alia, "receive and adjudicate" claims by civilian American citizens who were captured by the Japanese government during the war. 50 U.S.C. App. §§ 2002, 2004. The Act did not provide for any claim to be brought in federal court. Indeed, the Act stated that "[t]he action of the Commission in allowing or denying any claim under this title shall be final and conclusive on all questions of law and fact and not subject to review by any other official of the United States or by any court by mandamus or otherwise. . . ." 50 U.S.C. App. § 2010.
As Jeong points out, the Act evidently did not extend to claims brought by Korean nationals, as he allegedly was at the time. This fact is not necessary to our removal jurisdiction inquiry, however, because the Act simply did not create a cause of action that could be brought in federal court for anyone, regardless of his or her nationality.
In 1954, Congress abolished the War Claims Commission and transferred its duties to the Foreign Claims Settlement Commission, an agency within the Department of Justice. See 22 U.S.C. § 1622 et seq. Decisions of the Commission remained unreviewable by any court. § 1622g.
Defendants acknowledge that the War Claims Act made no provision for any federal court review of claims for compensation, but argue that we still have removal jurisdiction under 28 U.S.C. § 1331 because reparations claims arise under federal law. They essentially argue that we have original jurisdiction over reparations claims, even though Congress, in the only laws that Defendants point to that create any sort of reparations claim whatsoever, expressly stated that we lack any power to review such claims. Defendants' argument presumably would read a grant of district court jurisdiction into any federal statute that creates an administrative claims process, regardless of whether Congress has expressly insulated that process from judicial review. Section 1331 is not so broad: It grants district courts "original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States" (emphasis added). There is no "civil action" against alleged wrongdoers under the War Claims Act because Congress decided to create an administrative claims process instead. See Dillon v. Combs, 895 F.2d 1175, 1177 (7th Cir. 1990) (stating that Section 1331 does not by itself furnish a private right to enforce a federal law in federal court; "the entitlement to enforce the federal rule generally must be found within the statute in question"). Therefore, the War Claims Act provides no basis for removal.
Defendants also insist that we have removal jurisdiction even though Jeong may no longer possess any remedy under federal law. It may be true that removal jurisdiction can exist even if the federal law which grants jurisdiction provides no relief to the plaintiff. See Caterpillar, 482 U.S. at 391 n. 4; Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557, 560-61 (1968). But Defendants' argument is a red herring. We cannot even reach the issue of whether relief might be available unless we possess jurisdiction to hear the plaintiff's claim. See Avco, 390 U.S. at 561 ("The nature of the relief available after jurisdiction attaches is, of course, different from the question whether there is jurisdiction to adjudicate the controversy."). Here, we have no jurisdiction to hear any federal claim against a Japanese company for compensation for forced labor during WWII. We never reach the issue of relief.
Finally, Defendants argue that Jeong's claims are completely preempted because "the right to relief under state law requires resolution of a substantial question of federal law in dispute," quoting Franchise Tax Board of Cal. v. Construction Laborers Vacation Trust, 463 U.S. 1, 13 (1983). But Franchise Tax Board was discussing a situation where "some substantial, disputed question of federal law is a necessary element of one of the well-pleaded state claims, or that one or the other claim is 'really' one of federal law." Id. (emphasis added). The court distinguished the situation where federal law merely provides the defense of preemption. Id. at 13-14. Here, no element of Jeong's claims depends on federal law; his prima facie case for compensation based on forced labor is strictly a matter of state law. Federal law enters the picture only as a defense, because the point of contention is whether Jeong, even if he can prove all the elements of his state law claims, is still barred by preemption from obtaining any relief.
In sum, there is no complete preemption here to provide a ground for removal jurisdiction.
C. Foreign Sovereign Immunities Act (FSIA)
1. Removal Jurisdiction Over Foreign States
Under 28 U.S.C. § 1441(d), "[a]ny 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 of the United States for the district and division embracing the place where such action is pending." Section 1603(a), in turn, defines a "foreign state" as including "a political subdivision of a foreign state or an agency or instrumentality of a foreign state." Section 1603(b) goes on to define 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 as defined in section 1332(c) and (d) of this title, nor created under the laws of any third country."
The removing Defendant bears the burden of showing that it is an agent or instrumentality of a foreign state. See Alpha Therapeutic Corp. v. Nippon Hoso Kyokai, 199 F.3d 1078, 1084 (9th Cir. 1999); see also Gould, Inc. v. Pechiney Ugine Kuhlmann, 853 F.2d 445, 451 n. 5 (6th Cir. 1988) (stating that the defendant has the burden to produce prima facie evidence that the FSIA applies and the plaintiff's claim does not fit into one of the Act's exceptions; if the defendant carries this burden, the plaintiff must produce evidence that the FSIA does not apply). To resolve the issue of jurisdiction under the FSIA, we "must look at the substance of the allegations" and review any evidence submitted by the parties, such as affidavits. Cargill Int'l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012, 1019 (2d Cir. 1993).
2. Defendants Have Not Shown that the FSIA Applies
In their notices of joinder in the removal, Lone Star and Taiheiyo (Japan) argue that Defendants have the right to remove because Onoda was an agent or instrumentality of Japan for purposes of the FSIA and 28 U.S.C. § 1441(d) at the time that the events giving rise to Jeong's claims allegedly occurred. Defendants do not contend that any of them is currently an agent or instrumentality of Japan. See Taiheiyo (Japan) Removal Notice 5:21-22.
Defendants assert that the FSIA applies because "Onoda was controlled and directed by Japanese Government during World War II as part of Japan's effort." Lone Star Removal Notice 2:24-26. Defendants do not contend that the Japanese government had any ownership interest in Onoda, so we interpret Defendants' assertion that Japan "controlled and directed" Onoda as an allegation that Onoda was "an organ of" Japan under the FSIA.
Jeong argues that Taiheiyo (Japan)'s notice of joinder in its fellow Defendants' notice of removal was untimely, but Jeong cites no authority to support this contention, and we reject his argument.
A defendant must file its notice of removal "within thirty days after the receipt by the Defendant, through service or otherwise, of a copy of the initial pleading . . . or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter." 28 U.S.C. § 1446(b).
Jeong appears to be suggesting that Taiheiyo (Japan) had an obligation to join in Lone Star's notice of removal, which Lone Star filed on December 22, 1999. This argument is foreclosed byMurphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 119 S. Ct. 1322, 1328-29 (1999), where the Supreme Court held that the 30-day clock in § 1446(b) does not begin to run until the defendant is served with the summons, even if the defendant received a copy of the complaint prior to service. The Court premised its holding on "a bedrock principle: An individual or entity named as a defendant is not obliged to engage in litigation unless notified of the action, and brought under a court's authority, by formal process." Id. at 1325. Under this principle, a defendant cannot become a true participant in the action until it is served, see id. at 1327, and cannot be required to join in a removal notice filed before it was served.See also Salveson v. Western States Bankcard Ass'n, 731 F.2d 1423, 1429 (9th Cir. 1984) ("a party not served need not be joined; the defendants summonsed can remove by themselves"), superseded on other grounds by 28 U.S.C. § 1441(e).
Here, Taiheiyo (Japan) states that it was served (allegedly defectively) on December 27, 1999. Jeong states that Taiheiyo (Japan) was served "on or about December 26, 1999," Pl.'s Reply 1:12, but this is too vague to raise a factual dispute that Taiheiyo (Japan) was served before December 27, 1999. Setting aside Taiheiyo (Japan)'s contention that service was defective and assuming for the sake of argument that service was proper, Taiheiyo (Japan) had until January 26, 2000 to file its notice of joinder in the removal. This was in fact the day that Taiheiyo (Japan) filed its notice. The fact that Jeong may not have received the notice until January 28, 2000 is irrelevant, at least as long as Taiheiyo (Japan) mailed the notice to Jeong's counsel on or before January 26, 2000. Fed.R.Civ.P. 5(b). Taiheiyo (Japan) has submitted a proof of service stating that it mailed its notice of joinder in the removal to Jeong's counsel on January 26, and Jeong does not dispute that it was in fact mailed on this date.
We assume without deciding that 28 U.S.C. § 1603 applies to an entity that was an agent or instrumentality of a foreign state at the time of its challenged conduct, but is not such an agent or instrumentality at the time of suit. See General Elec. Capital Corp. v. Grossman, 991 F.2d 1376, 1380-1382 (8th Cir. 1993) (holding that FSIA applied if the defendant was a foreign state at the time of its alleged wrongdoing, even if it is not at the time of suit); Gould, 853 F.2d at 450 (same); Jugobanka A.D. Belgrade, 2 F. Supp.2d 407, 414 (S.D.N.Y. 1998) (reasoning that "the correct approach under the FSIA is to ask whether the underlying conduct took place on the foreign state's watch, even if that state is no longer in control of the party by the time of the lawsuit, or, alternatively, whether the defendant [is] currently a foreign state, regardless of its status at the time of the underlying conduct"). Cf. Straub v. A P Green, 38 F.3d 448, 451 (9th Cir. 1994) (citing General Electric Capital andGould, and suggesting in dictum that FSIA would apply to a party that was a foreign state at the time of the alleged wrongdoing). But see Ocasek v. Flintkote Co., 796 F. Supp. 362, 365 (N.D. Ill. 1992) (stating that the FSIA does not apply unless an entity is a foreign state at the time of suit).
We likewise assume without deciding that Defendants might have a right to remove under 28 U.S.C. § 1441(d) even though it was one of their alleged predecessors in interest, Onoda, and not any of them, that supposedly was an agency or instrumentality of Japan. But cf. Gates v. Victor Fine Foods, 54 F.3d 1457, 1461-62 (9th Cir. 1995) (holding that wholly owned subsidiary of an agency or instrumentality of a foreign state was not itself an agency or instrumentality of the state).
Defendants claim that the government of Japan essentially nationalized Onoda, along with many other manufacturing concerns, to further its war effort. Taiheiyo (Japan) states that on April 25, 1944, the Japanese government effectively took control of Onoda under the Munitions Company Law, which had been enacted in December, 1943. Taiheiyo (Japan) Removal Notice 3:20-4:16.
A firm subject to the provisions of the Munitions Company Law very well might be considered an organ of the Japanese government. We give broad meaning to the terms "organ" and "agency or instrumentality" in the FSIA. See Gates, 54 F.3d 1457, 1460 (9th Cir. 1995). In recently holding that a Japanese broadcaster, NHK, was an organ of the state under the FSIA, the Ninth Circuit observed that the district court had found that the Japanese government exerted control over NHK's programming, budget, and operations in various ways, including (1) appointing NHK's managing board; (2) giving supervision of NHK's board and budget to a government minister; (3) funding NHK through a government-mandated fee on televisions; and (4) requiring any changes to NHK's articles of incorporation to be approved by the minister. Alpha Therapeutic, 199 F.3d at 1084. The court also found it significant that NHK was created by law, had to broadcast for the "'public welfare'" and meet certain government programming goals, could not earn profits, and was termed a "'designated public institution.'" Id.
A firm designated a Munitions Company apparently would have possessed some similar hallmarks of government control, at least as far as its "Munitions Business" was concerned. Taiheiyo (Japan) attaches to its removal notice a purported copy of the Munitions Company Law as well as an English translation; neither is authenticated by declaration. Id. Ex. D. The English text provided by Taiheiyo (Japan) states that a "Munitions Company," as designated by Japan's government "shall conduct its Munitions Business responsibly and perform at its maximum capacity" to assist the war effort. Id. Ex. D at 20. It also provides for, inter alia, the appointment of a government-approved production director at each Munitions Company to direct its Munitions Business; the conscription into national service of "production directors, production managers and others engaged in Munitions Business"; and government authority to alter the firm's articles of incorporation and fire its executives. Id. Ex. D at 21-23.
Whatever the effect of the Munitions Company Law may have been, however, Defendants have failed to show that they are entitled to removal under 28 U.S.C. § 1441(d) because they have not demonstrated the extent to which Onoda was subject to the Munitions Company Law at the time that it allegedly injured Jeong. Although Taiheiyo (Japan) states that the Japanese government controlled Onoda "during World War II," it concedes that the government did not designate Onoda a munitions company until "early 1944." Taiheiyo (Japan) Removal Notice 3:9, 4:12. In fact, Taiheiyo (Japan) produces an unauthenticated Japanese document (and its alleged English translation) which purports to be a "designation order" showing that the Munitions Company Law was applied to Onoda on April 25, 1944. Taiheiyo (Japan) Removal Notice Ex. E. Moreover, it is not clear that Onoda's operations in Korea were covered by the designation order. Taiheiyo (Japan)'s English translation of the purported order states that "[t]he above-referenced entity [Onoda Cement Co., Ltd.] is hereby designated as a Munitions Company as follows" [emphasis added], and then lists eight specific factories engaged in "Munitions Business." Id. The document does not state, and Defendants do not specifically allege, that any of the listed factories were in Korea. The factory at which Jeong alleges that he labored does not appear to be on the list. Compare id. with Compl. ¶ 62 (alleging that Jeong was forced to work at a "camp in Chun-Nae Ri, Chun-Nae Myun, the southern part of Ham-Kyung province located Northeast of Seoul, Korea").
Indeed, another document submitted by Taiheiyo (Japan) suggests that Onoda's operations in Korea were not subjected to the Munitions Company Law until December, 1944, if at all. Taiheiyo (Japan) has provided an unauthenticated five-page excerpt of a historical account by Soon-Won Park entitled Colonial Industrialization Labor in Korea: The Onoda Cement Factory (Harvard 1999). Taiheiyo (Japan) Removal Notice Ex. F. Park writes that although "the Onoda Company was designated a war-related company" in April, 1944, it was not until December, 1944 that four factories, including the "Ch'onnaeri" factory, "were similarly designated." Id. at 31.
In sum, Defendants' only evidence that Onoda ever might have been an organ of Japan comes in the form of unauthenticated exhibits — which would be inadmissible under the Federal Rules of Evidence — showing that Onoda became a Munitions Company no earlier than April, 1944, and suggesting that the factory where Jeong allegedly labored was not designated as "war-related" until December, 1944. Jeong alleges that he was sent to the labor camp in Chun-Nae Ri at the end of January, 1944. Compl. ¶ 62. Jeong's complaint does not allege when his period of forced labor for Onoda ended, and Defendants produce no evidence and make no allegations bearing on this fact. As a result, there is no indication in the record that Jeong was even still allegedly laboring for Onoda in April or December, 1944.
Without a basis for concluding that Onoda was an agent or instrumentality of Japan when it allegedly caused Jeong's injuries, we cannot assert removal jurisdiction under § 1441(d). While it may seem unfair to penalize Defendants for a vagueness in Jeong's complaint, we must bear in mind that Defendants have the burden to prove jurisdictional facts. We cannot confer jurisdiction on ourselves by filling in the blanks in Jeong's complaint.
The Ninth Circuit has stated that it "has applied the FSIA to cases in which foreign governments acquired control over private entities after the conduct underlying the lawsuit has occurred."Straub, 38 F.3d at 451, citing West v. Multibanco Comermex, S.A., 807 F.2d 820, 823 (9th Cir. 1987) and Wolf v. Banco Nacional de Mexico, S.A., 739 F.2d 1458, 1460 (9th Cir. 1984). But in Straub,West, and Wolf, the defendant entity was the agent or instrumentality of a foreign state at the time of suit. See Straub, 38 F.3d at 451; West, 807 F.2d at 823; Wolf, 739 F.2d at 1460 (observing that entity was nationalized during suit). As we discussed above, Defendants do not claim that any of them is currently an agency or instrumentality of Japan.
Defendants make much of the fact that Jeong alleges that the factory where he labored "was operated by and for the benefit of [Onoda] under the color of the Japanese authority," that his labor "benefited the Japanese war effort," and that it was the Japanese government that sent him to Onoda's plant after he refused to join Japan's military. Compl. ¶¶ 59, 62-63, 69. But the fact that the Japanese government may have encouraged, facilitated, and benefited from the use of forced labor by Onoda does not mean that the government controlled Onoda to such a degree that the firm was a government organ rather than a private entity.
Even if we assumed that Jeong was allegedly laboring for Onoda from January, 1944 until the end of the war, this still would not necessarily mean that Defendants are entitled to removal under § 1441(d). Based on the allegations in Jeong's complaint and the documents submitted by Defendants, Onoda's alleged decision to enslave Jeong took place at least three months before Onoda might have become an organ of the Japanese government. Although a portion of Jeong's alleged injuries might have occurred while Onoda was nationalized, the policies behind the FSIA are attenuated if Onoda undertook to injure Jeong while it was still a private company. See generally Jugobanka, 2 F. Supp.2d at 413-14 (reasoning that one goal of FSIA is to channel to federal court cases that require judicial scrutiny of a foreign sovereign's conduct). The policies behind the FSIA are further weakened by the fact that the Japanese government does not face liability in this suit. See id. at 413.
In their removal notices, Lone Star and Taiheiyo (Japan) describe the difficulties they have had locating witnesses to Onoda's activities during the war, as well as obtaining and translating documents from that period. See Lone Star Removal Notice 3:9 n. 2; Taiheiyo (Japan) Removal Notice 5:6-20. Defendants suggest that they would be able to gather more evidence of government control if given more time to do so, but they do not directly request more time to obtain such evidence before we make a decision on our removal jurisdiction. Indeed, Defendants do not identify any evidence they expect to find that would show that Onoda became an agency or instrumentality of Japan earlier than April or December, 1944. They have failed to show that any significant jurisdictional facts are in dispute, such that we might afford them an opportunity to develop more evidence.
On February 2, 2000, Defendants applied ex parte for leave to file additional briefing on the FSIA and diversity jurisdiction issues, claiming that because our OSC had addressed only the issue of complete preemption, they did not expect Jeong to try to rebut Defendants' FSIA and diversity arguments in his reply to Defendants' response to our OSC. We denied Defendants' ex parte request, stating that we would order more briefing if we felt it would assist our decision.
We do not believe that further briefing would be helpful or appropriate, as the parties have filed ample briefing on all the issues at hand. Defendants Taiheiyo U.S.A. and California Portland were served on October 19, 1999 and removed on November 17, 1999, citing complete preemption as their only ground for removal. We issued our OSC on November 23, 1999. Taiheiyo U.S.A. and California Portland, after obtaining an extension of time ex parte, responded to our OSC on December 22, 1999, addressing the complete preemption issue and also raising the issue of FSIA removal jurisdiction under 28 U.S.C. § 1441(d). On the same day, Defendant Lone Star filed its joinder in the removal, accompanied by 11 pages of briefing on new grounds for removal — diversity and FSIA jurisdiction. Five weeks later, on January 26, 2000, Defendant Taiheiyo (Japan) weighed in with its own joinder in the removal, accompanied by five more pages of briefing on FSIA jurisdiction, as well as various exhibits including those we discussed above. On January 31, 2000, Jeong replied to the response to our OSC, addressing all three of Defendants' arguments for removal.
Defendants are all represented by the same counsel. Given their position that Lone Star is able to raise the FSIA ground for removal, there was no reason that Taiheiyo U.S.A. and California Portland could not have raised this ground in their initial removal notice. Thus, Defendants had several opportunities over the course of three months to brief the FSIA issue, and availed themselves of two of them. They likewise have had ample opportunity to brief the diversity issue. We do not think that our decision making would benefit from affording Defendants yet another at-bat.
As we discuss in note 13, Defendants and their shared counsel had more than three months to gather evidence and formulate their FSIA arguments. Defendants' difficulty in investigating FSIA's possible applicability is, perhaps, an unfortunate consequence of the California legislature's decision to attempt to revive 55-year-old claims. Over that span of years, documents naturally will be lost, witnesses will die or forget facts, and languages may even evolve to the point where translation becomes difficult. The solution to these potential problems, however, is not to relax the requirement that Defendants sustain their burden to make a prima facie showing of jurisdiction in a timely removal notice. Because Defendants have failed to make such a prima facie showing, we cannot permit them to remove under 28 U.S.C. § 1441(d).
Although Defendants have failed at this stage of the case to carry their burden to show that they should be treated as foreign states under the FSIA, this does not necessarily mean that they will be unable to assert FSIA immunity in state court should they develop the necessary evidence. See 28 U.S.C. § 1604 ("Subject to existing international agreements to which the United States is a party at the time of enactment of this Act a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter.") (emphasis added).
III. Disposition
We REMAND this case to state court.
IT IS SO ORDERED.