Dole Food Co. v. Patrickson
The Supreme Court ruled that a company only counts as a foreign government's "instrumentality" under the Foreign Sovereign Immunities Act if that government directly owns a majority of its shares — owning a majority stake in a parent company several layers up isn't enough.
The Court also held that this ownership status is measured at the moment a lawsuit is filed, not at the time of the events that led to the suit, which meant two Israeli-linked chemical companies could not use the law to move their case out of state court.
“A corporation is an instrumentality of a foreign state under the FSIA only if the foreign state itself owns a majority of the corporation's shares.”
The Court's core holding that only direct share ownership creates instrumentality status.
How it got here: A federal district court rejected the Dead Sea companies' claim to foreign-instrumentality status; the Ninth Circuit affirmed that rejection, and the companies sought Supreme Court review.
The Case in Depth
What happened
Farm workers from Costa Rica, Ecuador, Guatemala, and Panama sued Dole Food Company and others in Hawaii state court, claiming they were injured by a pesticide used on farms in their home countries. Dole brought in two additional companies, Dead Sea Bromine Co. and Bromine Compounds, which were linked through several layers of corporate ownership to the State of Israel and claimed they were entitled to move the case into federal court as instrumentalities of a foreign government.
The question before the Court
Can a company count as an arm of a foreign government under a special immunity law if that government only owns it indirectly, through a corporate parent several layers up?
The Court's answer
No — the Court ruled that only direct ownership counts. A company is an "instrumentality" of a foreign government under the Foreign Sovereign Immunities Act only if that government itself owns a majority of the company's own shares. Owning a majority stake in a parent company that, in turn, owns the company in question isn't enough, because under ordinary corporate law principles a parent's shareholders don't automatically own the parent's subsidiaries.
The Court also decided a second, related question: this ownership status is measured at the time the lawsuit is filed, not when the underlying injury occurred. Applying both rules, the two chemical companies linked to Israel through several corporate layers did not qualify, and any ownership connection had ended before the suit was filed anyway.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Governments that structure state-owned businesses through multiple layers of subsidiaries \u2014 common with national oil companies, holding companies, and other state enterprises \u2014 may lose access to the special protections and federal court removal rights the law offers, unless the government owns the specific subsidiary directly. Companies and their lawyers must now track ownership at the time a suit is filed, not when the underlying conduct occurred.
What changes now
The Court's ruling on the ownership question is final. The companies' case is not eligible for removal to federal court as instrumentalities of Israel, so the underlying pesticide-injury lawsuit continues on whatever track state and federal courts had already set for it. Separately, the Court dismissed the companion case (No. 01-593) because the losing side did not ask the Court to review that portion of the lower court's ruling.
What this does not decide
The decision does not resolve the underlying pesticide-injury claims against Dole and the other companies, and it does not address whether the federal common law of foreign relations could support removing the case to federal court \u2014 that issue was left undisturbed because no party asked the Court to review it.
Concurrences and dissents
Dissent in part — Justice Breyer
“The majority's rule is not better for a foreign nation, say, Mexico or Honduras, which may use "a tiered corporate structure to manage and control important areas of national interest, such as natural resources,"”Breyer's warning that the ruling disadvantages governments that use layered corporate structures.
Justice Breyer agreed with most of the majority's opinion but disagreed with the rule limiting instrumentality status to direct share ownership. He argued that the statutory term 'other ownership interest' is not a technical term and should cover a foreign government's ownership of a subsidiary through a parent company, since nothing in the statute's purpose justifies treating direct and indirect state ownership differently. He pointed to earlier cases treating shareholders as effective 'owners' of assets held by their corporations and warned that the majority's rule would let governments lose important legal protections based purely on how many corporate layers they used.
How the Court got there
The legal reasoning, step by step
- The Court examined the statutory definition of an 'agency or instrumentality of a foreign state,' which requires that a foreign government own a majority of the entity's 'shares or other ownership interest.'
- Relying on basic corporate-law principles that a corporation and its shareholders are legally separate, the Court reasoned that owning a majority of a parent company's shares does not mean owning the shares of that parent's subsidiaries further down the corporate chain.
- The Court rejected the argument that control over a company's operations could substitute for formal share ownership, holding that the statute's text ties instrumentality status specifically to ownership of shares, not to practical influence.
- Turning to timing, the Court read the statute's present-tense wording ('is owned') as requiring that instrumentality status be assessed at the moment the lawsuit is filed, consistent with the long-standing rule that a court's jurisdiction depends on the facts as they existed when the case was brought.
- Applying both rules to the facts, the Court found that Israel never directly owned a majority of the two companies' shares, and any ownership relationship had ended before the lawsuit was filed, so the companies could not qualify as instrumentalities of Israel.