Sumitomo Shoji America, Inc. v. Avagliano

Background

Sumitomo Shoji America, a New York corporation wholly owned by a Japanese trading company, was sued by current and former female secretarial employees. The women alleged the company hired only male Japanese citizens for executive, managerial, and sales positions and brought claims under Title VII and §1981. The District Court dismissed the §1981 claim but allowed Title VII claims to proceed, finding the locally incorporated subsidiary was not covered by Article VIII(1) of the U.S.-Japan Friendship, Commerce and Navigation Treaty. The Court of Appeals interpreted the Treaty differently and suggested Japanese citizenship might qualify as a bona fide occupational qualification for some jobs.

Reasoning

The central question was whether Article VIII(1) of the U.S.-Japan Treaty lets a foreign parent’s U.S. subsidiary evade Title VII. The Supreme Court looked to the Treaty text, especially Article XXII(3), which defines companies as those constituted under the laws where they are incorporated. Because Sumitomo was incorporated under New York law, the Court concluded it is a company of the United States and not a company of Japan covered by Article VIII(1). The Court also noted that both the U.S. State Department and Japan’s Ministry of Foreign Affairs agree with this plain-text interpretation. The Court vacated the Court of Appeals judgment and remanded the case for further proceedings consistent with this holding.

Real world impact

The decision means U.S.-incorporated affiliates of foreign firms cannot use Article VIII(1) to defeat federal employment-discrimination suits; Title VII claims may proceed against them. The Court did not decide whether Japanese citizenship can be a bona fide occupational qualification or whether a business necessity defense applies; those factual defenses remain for the lower courts to resolve.