PowerEx Corp. v. Reliant Energy Services, Inc. - Oral Argument

Argument of David C. Frederick

Chief Justice Roberts: We'll hear argument first this morning in case 05-85, Powerex Corporation versus Reliant Energy Services.

Mr. Frederick.

Mr. Frederick: Thank you, Mr. Chief Justice, and may it please the Court.

In 1988, the Government of British Columbia created Powerex to perform a variety of public functions including the marketing of surplus hydropower generated by development of the Province's natural resources pursuant to bilateral agreements with the United States.

The Ninth Circuit, however, denied Powerex its rightful status as an organ of a foreign State entitled to remove this case from State court to Federal court.

Before addressing the appellate jurisdiction issue, I'd like to highlight briefly the two key errors by the Ninth Circuit in rejecting Powerex's organ status.

First, the court articulated the wrong test for determining an entity's status as an organ of a foreign State.

The factors the Ninth Circuit found dispositive are inconsistent with the FSIA; and second, the court overlooked crucial evidence of Powerex's public functions that are the best indication of its sovereign status.

The British Columbia Government receives and distributes the proceeds from Powerex's operations, supervises Powerex through BC Hydro, subjects Powerex to provincial laws not applicable to private companies and grants Powerex special benefits including exemption from taxation.

Justice Souter: Mr. Frederick, are you going to get to the 1447(d) problem?

Mr. Frederick: Yes.

Let me address that now.

The court's... the district court's remand order was appealable because it was not issued under 1447(c).

Justice Ginsburg: The district court thought it was and when we did, the district court said I have no authority in... under... over any of these people.

So back it goes.

Mr. Frederick: The district court made two mutually exclusive statements, that remand was proper and that it lacked subject matter jurisdiction.

Because of that inconsistency, the court of appeals--

Justice Scalia: Removal.

Removal was--

Justice Ginsburg: --talking that... where are these statements?

Justice Scalia: --You said remand was proper.

That's the--

Mr. Frederick: --Sorry.

That removal was proper under the sovereign removal provisions of 1441(d) and 1442(a).

It also then said it lacked subject matter jurisdiction.

Justice Souter: But at the point it was acting it was remanding, and its basis for remanding was not that it thought the removal had been proper; the basis for its remanding was that it said it lacked jurisdiction over three of the other cross defendants.

Mr. Frederick: But immunity was the basis of the district court's thinking that it had to remand.

Justice Souter: It may have been, leaving aside the question of whether it was right or wrong, it may have been wrong.

But what it thought it was doing it seems to me is fairly clearly remanding for a jurisdictional reason.

Mr. Frederick: And what this Court's cases say, Justice Souter, is that the remand has to be a ground cognizable under 1447(c).

Chief Justice Roberts: Those cases are all... all based on Thermtron.

You don't have any doubt that Thermtron would come out the other way today, do you?

Mr. Frederick: I certainly do--

Chief Justice Roberts: --in light of, in light of the statutory language as it exists now?

Mr. Frederick: --Mr. Chief Justice, the Thermtron rule has been reaffirmed no less than four times by this Court, notwithstanding two statutory amendments.

It has been reaffirmed and stare decisis on the basis of statute is the strongest form of stare decisis.

So I do--

Chief Justice Roberts: But stare decisis on the basis of statute is kind of a weak basis when the statute's been changed.

Mr. Frederick: --Mr. Chief Justice, the Thermtron rule was reaffirmed earlier this term in the Osborn case, has been reaffirmed in prior cases lead... from the time it was decided even through statutory amendments.

Our submission is that if Congress intended to change that rule, it could have done so clearly.

And we note that the Respondents here don't ask for Thermtron to be overruled, and it is clear from the amicus on their side, that the only way you could rule in favor of the Respondents in this case would be to overrule Thermtron.

Justice Ginsburg: But Thermtron was such a far cry from this case.

In Thermtron the district judge said yes, I have jurisdiction but I'm just too busy, so I'm going to toss this case back to the State court.

Mr. Frederick: But here, Justice Ginsburg, the court did have jurisdiction because removal was properly effectuated once the entities that we moved were identified correctly as sovereigns, either foreign sovereigns in the case of BC Hydro, or Federal sovereigns in the case of BPA.

Justice Scalia: --But we go into that question all the time, 1447(d) is a nullity.

I mean, if in every case you're going to be able to appeal whether indeed there was lack of jurisdiction, you're going to be able to appeal every case.

Mr. Frederick: No, you're not, Justice Scalia, and here's why.

Immunity is not a ground for remand because it is not a precondition for a removal by a sovereign.

It is a separate freestanding issue.

It is a status determination that determines whether removal is proper by those sovereigns.

Justice Scalia: That would be fine if 1447(d) said that there is no appeal so long as the basis for removal was proper, but that's not what it says.

Mr. Frederick: But if in Thermtron the court, the district court had said my docket is too busy, I therefore lack subject matter jurisdiction and remand under 1447(c), I don't think there's any doubt that the courts would look beyond the label given.

Justice Ginsburg: I don't think the court said in Thermtron, so therefore, I have no subject matter jurisdiction.

Mr. Frederick: I'm speaking hypothetically, Justice Ginsburg.

My point is that the label the district court attached here was the wrong label, and that's why the court of appeals to satisfy--

Justice Ginsburg: Why?

Why was it wrong when with respect to the sovereign parties, the district court said I have... these people are totally immune from suit; therefore, I have no jurisdiction over them.

Mr. Frederick: --Because it is inconsistent with the notion that remand orders have no preclusive effect to remand a case on the ground that the sovereigns are immune, and force them to relitigate their immune status in State court.

That is precisely why Congress enacted these sovereign removal provisions.

Justice Souter: Then what you are really arguing for is, in effect, a separate rule, and that is that 1447(d) has an exception when we are dealing with foreign sovereign immunities.

Mr. Frederick: That's our backup submission, Justice Souter.

You do not need to reach that if you agree with our principal submission and--

Justice Souter: But the trouble with the principal submission, it seems to me, is that we have said that even if the district court has come to an erroneous conclusion about jurisdiction, if it understands that it is making a jurisdictional ruling, that is not appealable.

Mr. Frederick: --But Justice Souter, it did so.

The case... the cases in which the Court has said so have always been grounds... jurisdictional grounds cognizable under 1447(c).

Immunity from suit is not such a ground, because the purpose of having the removal provision on the basis of status is to allow the Federal courts to decide the immunity status.

If the court sends the case back to State court on immunity grounds, it does not have preclusive effect in the State courts.

The State courts will be obliged to relitigate sovereign immunity status and there will be no recourse except through appeal through the State court--

Justice Scalia: Well, you're into your backup argument now.

Mr. Frederick: --No.

Justice Scalia: The backup argument that you're now making, that not your principal argument.

Mr. Frederick: No, Justice Scalia, that's not our backup argument.

Our point is that in this case, the district court had jurisdiction by virtue of the successful removals, which everybody conceded were correct, that the label that it attached, immunity is subject matter jurisdiction, is not a label for a ground recognized in 1447(c).

So it was appropriate for the court of appeals to exercise appellate jurisdiction to determine whether or not the remand was a mandatory remand under 1447(c) or a discretionary one of the type this Court has recognized in the Cohill case.

Justice Ginsburg: Did you request... when the question of Powerex... authority over Powerex was before the district court, did you request that the district court give you a 1292(b) order before the court remanded the case, so that you could have gotten the case... the question up on appeal?

Mr. Frederick: I don't believe that we did, Justice Ginsburg.

This case was remanded.

A motion... motions for clarification were subsequently brought.

But a 1292(b) order was not requested by Powerex.

Justice Ginsburg: Because that would have taken care of it if the district judge agreed to delay the remand to allow this question of law to be determined by the court of appeals.

Mr. Frederick: It is certainly the case that in searching through the docket entries, you'll discover that there was a holding by the district court of the remand, which is in itself an unusual procedure.

But the point that is important here is that even apart from that, when the court had jurisdiction pursuant to the removal provisions, it did not lose subject matter jurisdiction by finding the immunity claims upon the part of the Federal and foreign sovereigns.

And it is their theory that the district court never had subject matter jurisdiction, and that has to be wrong because it conflicts with the purposes behind the removal provision to give the sovereigns the opportunity to litigate their immunity defenses in Federal court.

Justice Scalia: They don't care whether it had subject matter jurisdiction or not.

It's not an essential part of their case.

Their case is even if it did, it mistakenly thought it didn't, and remand it, end of case.

Mr. Frederick: Their submission in this Court, however, is that there was no subject matter jurisdiction.

Justice Scalia: That's their backup argument, I think.

Mr. Frederick: Well, their backup argument should be rejected by the Court as wrong.

Justice Breyer: If in fact it goes back to the State court and you litigate it, you lost, can you raise as a point of appeal that you did not receive two things the statute guaranteed you?

One was a determination in the Federal court that you're an organ of a Federal State, and second, a bench trial?

Mr. Frederick: Justice Breyer, there's no provision--

Justice Breyer: No, but could you?

Mr. Frederick: --By the time the appeals in the State court would have been exhausted, the very benefits--

Justice Breyer: No, I'm just asking could you, yes or no.

I--

Mr. Frederick: --We would certainly make the argument.

Justice Breyer: --Yes, okay.

Now if you lost in the State court, could you then use that as a basis for asking this Court to accept jurisdiction?

And if they... if we did, we took it and we heard the case, reverse, and send it back for the proper tribal under the statute?

Mr. Frederick: Justice Breyer, I would not want to foreclose any arguments that we might try to make; but let me point out to you that in the years that it would take to march through the State court system, Powerex, as a sovereign, would be denied its right to have a bench trial--

Justice Breyer: See, what I'm getting at is whenever there's an erroneous remand, the practical problems that you raise are present.

And they're awful.

I don't deny them.

I mean, they're right there in the statute, it foresees them.

So I wonder, is there any difference in this case from every case where the remand is erroneous?

Mr. Frederick: --I do think foreign sovereigns are different, and Congress intended to treat--

Justice Breyer: In terms of the legal right to get the trial to which the law entitles you on your view of the law, there is no difference.

Mr. Frederick: --The foreign sovereign is entitled to a bench trial.

It is entitled to other procedural protections with respect to treatment of garnishment, other--

Justice Breyer: And you would get those eventually, it would just have to happen.

Mr. Frederick: --It would be after... it would be--

Chief Justice Roberts: But that's purely... pure question begging.

I mean, the whole issue on the merits is whether it's a foreign sovereign or not.

And you can't assume that you're correct when the remand provision or the provision barring appeal when it's been remanded doesn't care whether you're correct.

The idea is, you can get a correct determination in State court through up to review by this Court eventually, as you can in Federal court.

There's no reason to assume that the Federal court is the only place you would get a correct determination.

Mr. Frederick: --But Mr. Chief Justice, the point of having Congress enact these removal provisions and to ensure jurisdiction in the federal court for sovereigns on the basis of their status is entirely to vindicate those rights and interests.

If Powerex were sued for not--

Justice Scalia: It's... it's the same with diversity jurisdiction.

You can make the same argument.

There's nothing distinctive here.

This statute says that in a foreign sovereign immunity case you have a right to be tried in Federal court.

Fine.

But the statute also says that if you're a defendant in a diversity suit, you have a right to trial in federal court.

And I don't know why this is any more demanding of an exception to 1447(d) than is ordinary diversity jurisdiction, where Congress has said you're entitled to trial in federal court.

Mr. Frederick: --Diversity is different, Justice Scalia, and here's why.

When a case is removed on diversity grounds, the court of appeals... the district court is obliged to examine the bases of diversity.

That is what the court's removal duty is.

When a foreign sovereign removes a case, the district court's duty is to determine is this a foreign State within the meaning of the FSIA.

If it is, I have jurisdiction.

Justice Stevens: Mr. Frederick, may I just follow up on Justice Breyer's question?

It seems to me that your answer suggests that you have two bites at the apple because you... all the way along, you might win.

And if you won, then it wouldn't matter.

If you lose, you always have the argument that you've made here, let's go back and start over again.

Mr. Frederick: Justice Stevens, I don't think we would win at all in that circumstance because we would be forced as a foreign State to litigate in State court contrary to Congress's will.

Justice Stevens: Yes, but--

Mr. Frederick: Whatever arguments that may be preserved--

Justice Stevens: --But you might win that litigation.

It's not impossible, is it?

Mr. Frederick: --It is certainly not impossible, but the point--

Justice Stevens: And if you lose, you always have a point on appeal and may start all over again later on.

Mr. Frederick: --It is unclear to me, and I'm not sure that I've seen any of this Court's cases that would suggest that the denial of that kind of procedural right would be grounds for reversing a State court judgment.

And our position is that Congress intended to protect the bench trial right, the immunity defenses of a foreign sovereign, because the organ status questioned--

Justice Ginsburg: Did anybody in this case... did any of the Defendants in this case request a trial by jury?

Mr. Frederick: --I don't recall whether the Defendants do, but it is clear that the Plaintiffs would be entitled to a jury trial--

Justice Ginsburg: And have they asked for it?

Has any party asked for a jury trial?

If not, that part of the case seems academic.

Mr. Frederick: --Well, the case has settled, Justice Ginsburg, prior to the formal invocation of trial procedures, and so--

Justice Ginsburg: The case is settled?

Mr. Frederick: --As explained in the cert petition papers, the case is on appeal in the State court system on objections to the settlement, and it will not be mooted during the course of this Court's action on the case.

But the invocation of jury that would be done normally just before trial has not been an issue that's been presented.

Justice Ginsburg: Well, that's different than it is in the Federal courts.

You have to... can't wait to the eve of trial to demand a jury.

Mr. Frederick: Well, what the Plaintiffs here assert is that they would be denied their right to jury trial, and I presume that that means they intend to ask for one and to perpetuate that request.

Our position, as we explain in a footnote in our reply brief, is that they have a jury trial right as against Duke and Reliant; they do not as against the foreign sovereigns that they have sued.

So at root, the case is about the kind of comity and dignity that the courts of the United States will accord to foreign sovereigns.

If Powerex were sued on the basis of non-commercial acts, it would not be entitled to have its immunity defense vindicated if the district court is held to have no jurisdiction, notwithstanding the proper removal under 1441(d).

I'd like to save the reminder of my time for rebuttal, please.

Argument of Douglas Hallward-Driemeier

Chief Justice Roberts: Thank you, Mr. Frederick.

Mr. Hallward-Driemeier.

Mr. Hallward-Driemeier: Mr. Chief Justice, and may it please the Court:

This Court has recognized repeatedly that the bar on appellate review in 1447(d) applies only to remands under 1447(c).

This Court has held that the courts of appeals have authority to decide whether a remand order was, in fact, one within the authority of 1447(c).

In fact, just this term in Osborn, the district court remanded the case on the basis of 1447(c) for purported lack of subject matter jurisdiction.

Justice Ginsburg: Osborn made it very clear that was an extraordinary case where Congress had explicitly ordered two conflicting things.

One, it said no remand of a case of this type, and then it said no review of remands.

So the Court was as clear as it could be that only when you have those conflicting signals does that court... does that case have any application.

Mr. Hallward-Driemeier: Your Honor is absolutely correct.

Osborn concerned a particular kind of categorical exception from 1447(c).

Our argument is that as a categorical matter, the basis of remand in this case was not one within the scope of 1447(c).

That although the District Court termed the sovereign immunity of the defendant's jurisdictional, it was not jurisdictional in the relevant sense.

And this Court held precisely that in the Oliver American trading case.

There, a case removed by Mexico was dismissed by the district court on the basis of its immunity and the district court certified that holding as a jurisdictional decision immediately appealable to this Court.

Yet this Court looked beyond that label attached by the district court and held that sovereign immunity is not jurisdictional in the relevant sense because it does not limit the authority of the Federal courts qua Federal courts but rather is a general rule that would preclude suit in State court as well.

Likewise, under 1447(c) it is not a basis to remand that the defendant is immune.

When Congress authorized sovereign defendants to remove cases to Federal court to vindicate their immunity, it did not intend that when the district court upheld that immunity, it would be remanded to State court which would be free to disregard the Federal court's decision.

Justice Breyer: One technical question.

The same one.

I would to be... imagine it is a diversity case.

Imagine that a Federal court erroneously remands it.

A trial gets up to this Court.

And we say it was diverse.

It shouldn't have been remanded.

Now what's... is that like... can that happen?

I guess.

And is the remedy then wipe out the State proceedings, go back to Federal court?

What happens?

Has that have ever been a case like that?

Mr. Hallward-Driemeier: Yes.

Justice Breyer: What happened?

Mr. Hallward-Driemeier: The Missouri Pacific Railway case holds that even this Court, on review of a State court judgment following remand cannot review the remand order itself.

It can review issues of Federal law that were decided by the State courts on remand but--

Justice Breyer: And it is called, the case, Missouri--

Mr. Hallward-Driemeier: --Missouri Pacific Railway case.

Chief Justice Roberts: Counsel, what... what do you do about 1447(e) which says that if after removal joinder might defeat subject matter jurisdiction, the court can deny joinder or permit joinder and remand the action.

In other words, you have got subject matter jurisdiction but the statute contemplates it may... later... later you may lose subject matter jurisdiction and you can remand it there.

And I suppose that that needs to be interpreted in pari materia with (c) so that the remands would not be subject to review.

It seems to me the same situation here.

You have got allegedly subject matter jurisdiction.

It is later defeated, and it is remanded.

Why shouldn't that be covered by (c)?

Mr. Hallward-Driemeier: What, what's notable is that Congress enacted 1447(e) at the same time that it amended 1447(c).

It provided in 1447(e) for an authority to remand in a particular instance where the court lost subject matter jurisdiction post-removal.

It had of course been the rule since this Court's decision in St. Paul Mercury Indemnity, that post-removal events did not defeat the removal court's jurisdiction; and in the statute it was made explicit that 1447(c) authorized remand only when the case was removed improvidently and without jurisdiction.

And when Congress amended the language in 1998 to make clear that non-jurisdictional defects in removal had to be raised immediately or were forfeited, it at the same time... and added the language, or changed the language in the second sentence that raises problems for our argument; at the same time, it added 1447(e) to provide, as I said, a particular authority to remand based on post-removal events that would have been unnecessary if, as Respondents urge, 1447(c) was intended to confer general authority to remand on the basis of post-removal events.

Chief Justice Roberts: But you don't have any doubt that a remand under 1447(e) would be covered by 1447(d), do you?

Mr. Hallward-Driemeier: No.

And the courts of appeals that have considered that question likewise hold that a remand under 1447(e) is right in pari materia with (d) although the courts seem to be split on whether the decision to allow the joinder is a separable decision appealable under Waco or not.

But... but that issue is not presented.

But what is significant is that had Congress intended by the amendment of 1447(c) to authorize for the first time remand on the basis of post-removal events, 1447(e) would have been unnecessary; and yet, the legislative history, the 1447(e), makes clear that Congress believed that in the absence of that provision, the Court would have been limited to two alternatives.

Authorize the joinder... or deny the joinder, or dismiss the case.

Justice Scalia: How is that relevant here?

Where is the post-removal event?

Mr. Hallward-Driemeier: The post-removal event here is the recognition of the defendant's sovereign immunity.

Justice Scalia: Well, that's not an event.

That's... that's an epiphany, it's not an event.

[Laughter]

Mr. Hallward-Driemeier: Well, according... well, apparently the district court viewed it as a post-removal event that deprived it, or defeated, divested--

Justice Scalia: Very strange meaning of event.

Mr. Hallward-Driemeier: --Well, I... Your Honor--

Justice Scalia: I mean the sovereign immunity didn't exist from the outset.

Nothing changed.

Mr. Hallward-Driemeier: --But... but the district court's order is clear.

And it is absolutely correct in this regard that removal jurisdiction existed at the outset.

So the court does not lack removal jurisdiction.

The reference in 1447(c), second sentence to "lacks subject matter jurisdiction", refers to lacks removal jurisdiction.

And in fact, this Court used that shorthand repeatedly in the Kircher decision to describe 1447(c), lacks removal jurisdiction.

This Court--

Justice Scalia: When did it say that?

I really find it very hard to accept that argument, when its says... you know... it doesn't use lacks removal jurisdiction, that's what it means.

It is such an easy thing to say.

Mr. Hallward-Driemeier: --Well, the Court has to go back to the history of the statute, how it's evolved.

Clearly pre-1998, authority to remand was only if it was removed without jurisdiction.

And so the question is when Congress changed the language to lacks subject matter jurisdiction, did it mean lacks removal jurisdiction?

Which it--

Justice Ginsburg: Under the... under the district court's view, would there have been original jurisdiction against Powerex?

Mr. Hallward-Driemeier: --No, it would not have.

But that's because of the peculiarities of the difference between original jurisdiction under the FSIA, section 1330(a), and removal jurisdiction under the FSIA.

Whereas original jurisdiction depends upon a conclusion that the defendant is not immune, Congress conferred removal jurisdiction whenever a foreign sovereign is defended.

Justice Kennedy: Then can you--

Mr. Hallward-Driemeier: Likewise in 1442(a), which was about the Federal--

Justice Kennedy: --Can, can you tell me, if the Petitioner does not prevail here, the case goes back to the State court.

Can the immunity argument be raised in the State court?

Mr. Hallward-Driemeier: --The immunity argument could be raised in State court.

That's what this Court held in Kircher.

But the defendant would be forever denied its right to a bench trial under Federal law.

That right is limited to suits in the Federal courts by its term; 1441(d)--

Justice Kennedy: In other words the State court couldn't say well you know, this district court was wrong; there's really immunity under the Federal statute.

The State court can't hold that?

Mr. Hallward-Driemeier: --The State--

Justice Kennedy: Because then you'd have constant... eternal shuttling back and forth, that's why.

Mr. Hallward-Driemeier: --The State court could reconsider Powerex's status as a foreign sovereign, but it wouldn't have many, if any, implications in the State court because Powerex isn't claiming immunity in this case.

It's only invoking the procedural benefits of the FSIA which include that the case be litigated in the Federal court before a judge rather than a jury.

And it would be forever denied the benefits, those important procedural benefits of the statute if this Court doesn't uphold review of the--

Justice Ginsburg: Well, we don't know--

Justice Kennedy: In other words, the... the Federal determination bars the State court from redetermining that there's immunity?

That the State court can't say, "Federal court, you're wrong"?

Mr. Hallward-Driemeier: --The issue of immunity of Powerex was never raised in this case.

It can review the question of whether it is an organ of the State it but it cannot review the remand determination that Powerex can never be granted the procedural benefits of Federal foreign order bench trial.

Thanks, Your Honor.

Argument of Leonard B. Simon

Chief Justice Roberts: Thank you, Counsel.

Mr. Hallward-Driemeier: Mr. Simon.

Mr. Simon: Mr. Chief Justice, and may it please the Court.

There are two reasons, independent and sufficient reasons why there is in appellate jurisdiction in this case.

The first most narrow and simple reason to vacate the decision below for lack of jurisdiction, is to follow this Court's precedents which accept the district court's remand order for what it is and what it says it is, a remand for lack of subject matter jurisdiction under 1447(c), unremovable under 1447(d).

That is a simple direct route to that result.

There is a second approach suggested by a lot of the briefing and some of the argument Your Honors have heard this morning.

And I want to lay it out briefly for the Court.

And it is that, as the law professor amici have suggested, there is some amount of confusion in the lower courts, I might say with due respect, evasion of 1447(d) in the lower courts, by judge-made exceptions to 1447(d), created by some but not all of the courts of appeal.

And the Court could clear out some of this underbrush, mooting many of the issues that Mr. Frederick and the that Solicitor General have raised.

Thermtron after Carnegie Mellon, addressing the question Justice Kennedy raised in his concurring opinion, in Things Remembered versus Petrarca, Thermtron does not say what many of the lower courts think it does.

Thermtron does not say what my adversaries say it does, because Thermtron has been partially overruled by Carnegie Mellon.

The notion that the only proper remand is a 1447(c) remand is ancient history after Carnegie Mellon, and therefore the notion that the only remand covered by 1447(d) is a remand under 1447(c) is also ancient history.

Congress has given us a simple and strong message, which is when we're disputing the forum, when the parties in a case are legitimately and in good faith disputing forum, State court versus Federal court, Congress has said take one shot at it, let an Article III judge determine whether the forum is State court or Federal court, and move on to the merits.

Justice Breyer: Well, what, what reason would Congress have for wanting a system that says... and there are many, many, many people in the United States who would like to sue Pakistan.

They would like to sue China.

They would like to sue Russia.

There are all kinds of places they would like to sue.

And why would Congress want to have a system that says to those countries, you can come into Federal court and get your claim adjudicated, whether it is really you, China a; but by the way, if the Federal judge makes a mistake, there you are in Mississippi, Alabama, Illinois, any one of 50 different states?

In front of juries, the very thing that we gave you this statute so you wouldn't have to do.

Now what would their theory be?

Mr. Simon: It--

Justice Scalia: Can I,... I'm not sure it is even that he made a mistake.

It is even worse than that.

If he gets it right and finds that you are a sovereign--

Mr. Simon: --Let me try to answer it--

Justice Scalia: --you can go back to State court.

I mean, that's even worse.

He gets it right.

Mr. Simon: --Let me try to answer both questions.

The problem is whether he gets it right or wrong, we spend two years in a court of appeals.

But Your Honor, you're assuming there's an immunity issue in this case.

With due respect, my adversaries are arguing someone else's case.

There is no immunity claim in this case by Powerex.

There is one petition, one petitioner.

Justice Breyer: They were saying they were an organ of--

Mr. Simon: They were saying they were an organ.

Justice Breyer: --Yeah, and therefore they are immune unless... unless they fall within an exception.

And it may be they do.

Is that not right?

Mr. Simon: No.

They conceded that they fell within the exception.

Justice Breyer: Well, I'm saying, that's how the statute works.

Mr. Simon: Right.

Justice Breyer: But I take it if you win this, it's precisely the same, in respect to a person who has total immunity.

Mr. Simon: No.

Justice Breyer: Why not?

Mr. Simon: I would disagree Your Honor.

Justice Breyer: Why not?

Mr. Simon: A party who has total immunity--

Justice Breyer: Yeah.

Mr. Simon: --Would have removed the case the same way--

Justice Breyer: Yeah.

Yeah.

Mr. Simon: --And it would have presented two arguments to the district court.

It would have argued number one, we are a foreign sovereign; maybe it wins, maybe it loses.

And number two.

We are immune.

Justice Breyer: Yes.

Mr. Simon: There is a solid line of cases that suggests the decision on immunity... first of all let me say, I think it is somewhat far-fetched that a party that would actually be immune, say the King of Saudi Arabia, would end up being in this third lowest category of foreign... purported foreign sovereigns and end up in the position Powerex is in.

But if it did, in other words we have three categories.

We have immunes, we have non-immunes who got Federal court, and then we have would-be foreign sovereigns like Powerex, who end up in State court.

And I'm suggesting for a party to fall from the first category to the third in front of an Article III judge--

Justice Breyer: And a Judge makes a big mistake--

Mr. Simon: --Makes a big mistake.

Justice Breyer: --China comes in--

Mr. Simon: Right.

Justice Breyer: --And says of course you're China.

And then it signs a remand order.

Mr. Simon: I would submit, Your Honor, the question has never been addressed by this Court.

The lower courts suggest that that is a collateral order.

The immunity issue, not the remand issue.

We actually now have a Waco type case.

Justice Breyer: No.

Well, after all... if you're going to say, you say that one is reviewable on appeal.

Mr. Simon: The immunity--

Justice Breyer: Is it or not, in your view?

Mr. Simon: --In my view, the immunity issue, but not the remand is reviewable on appeal--

Justice Breyer: Fine.

And now all they want here is the organ issue reviewed on appeal.

Mr. Simon: --Right.

And the difference is--

Justice Breyer: And what's the difference between the one and the other?

Mr. Simon: --The difference is that the immunity issue is reviewed on appeal because there is a line of court of appeal cases... a majority, not a unanimous majority, never blessed by this Court... which suggests that immunity is so important, don't need a lawyer, you don't go to court, you don't say a word, you don't spend a dollar, you walk away... so important that you are entitled to an immediate--

Justice Breyer: Okay, and you agree with that?

Mr. Simon: --And I agree with that.

Justice Breyer: Fine.

Then why is it in your opinion that the immunity thing is so important that they get this collateral appeal, but the organ thing is not so important since all, what turns on that is whether they're going to have their non-jury trial.

Mr. Simon: Well, I want to come back non-jury trial and answer Justice Ginsburg's question because I don't think she got the right answer.

But the reason it's more important is this is, as Justice Scalia said, like a diversity decision, this is a litigation who sells power in the Pacific Northwest and admits that it competes with Enron, Duke, and Reliant, and it is disputing whether it belongs in a State court in San Diego or the Federal court across the street in San Diego, leaving aside the jury issue.

And that is precisely the kind of dispute that Congress suggested in 1447(d) and its predecessors, which have been on the books for more than 100 years, ought to be done once.

What do they say, one and done?

Is that what they say in the district court?

Justice Alito: You're saying this all turns on our assessment of the strength of the interest in remaining in Federal court?

Is that what it boils down to?

Mr. Simon: No, it turns on the strength of getting an immediate decision on the immunity question.

The immunity question I think is a question of an entirely different nature than the question of forum.

In the--

Justice Ginsburg: The immunity question, the immunity question is the same in State or Federal court, because the statute as it's written, any foreign sovereign, China, whatever, is as immune from State court jurisdiction as it is from Federal court jurisdiction because Congress said so.

But with respect to the commercial enterprise, Congress said, we're going to give you a Federal court and we're going to give you a judge trial.

That doesn't apply to State courts.

Mr. Simon: --That's correct.

But Congress said, we're going to give you a Federal forum and a bench tribal if you convince us that you are an agency or instrumentality of a foreign State.

This, this corporation Powerex failed to make that convincing showing.

Having failed to make that convincing showing, again, they are debating in the appellate courts and tying litigants up for two, five years over whether this case should be litigated in State court or in Federal court.

Justice Ginsburg: There was a sovereign party who said: I'm out of this; I have suit immunity.

And that was the B.C.--

Mr. Simon: B.C. Hydro.

Justice Ginsburg: --What happened to B.C. Hydro?

Because as I understand the district court sent that party back, too.

Mr. Simon: The district court found that they were immune, properly followed the law, but determined because it believed it had no subject matter jurisdiction that it should then stop at that point, that it should just walk away from the case and remand it, over the vehement disagreement of B.C. Hydro and the parallel vehement disagreement of the Bonneville Power Administration.

The Ninth Circuit when it erroneously took the appeal on the remand also clarified or straightened out that issue.

Justice Ginsburg: Yes, but it couldn't... if you are right, then the Ninth Circuit never should have touched this case.

So what happens to the three parties, two U.S. parties, one British Columbia, who are entitled to suit immunity?

Mr. Simon: Well, what's happened so far is nothing, which might tell us that in the practical world when a Federal district judge says that B.C. Hydro is immune and then remands a multi-plaintiff, multi-defendant, multi-cross defendant case to San Diego Superior Court, it is exceedingly that the San Diego Superior Court will reconsider the immunity.

But if it did--

Justice Alito: But could it?

Mr. Simon: --I suppose it could, but if it did that matter is subject to appeal and subject to ultimate certiorari review in this Court.

So I think we're talking about a frolic.

Justice Alito: I thought the argument you were making a few minutes ago, if I understood it correctly, was that B.C. Hydro would not have been barred by 1447(d) from taking an appeal to contest the remand; is that correct or not.

Mr. Simon: I think B.C. Hydro could have taken a collateral order, a collateral order appeal.

Justice Alito: Whether it's a collateral order or not just goes to whether it falls under 1291.

It doesn't speak at all to the issue of 1447.

Mr. Simon: B.C. Hydro could have attempted to appeal the immunity decision under a series of decisions which suggest that immunity is so important that it ought to be decided right then.

Justice Alito: The difference between that immunity and Powerex's status is what?

It's simply the fact that there's a stronger interest in allowing immediate appellate review, Federal appellate review of the determination of the remand of a party that claims to be a sovereign as opposed to Powerex's status as an organ?

Mr. Simon: Among several other things.

There is a stronger interest in that, and we are not debating about the forum.

Again, we have the Kircher case from last term saying State courts are perfectly capable of resolving this issue.

That is a quotation actually from the Missouri Pacific case.

Justice Alito: If we think that Powerex, that there's a strong interest in having Powerex remain in Federal court if it's entitled To that under the Foreign Sovereign Immunities Act, that would be suffer to get around 1447(d)?

Mr. Simon: I think Justice Scalia was correct to say there is just as strong an interest in a diversity case in having a New York corporation trying to escape--

Justice Kennedy: But I'm having, I'm having the same problem as Justice Alito and Justice Breyer.

Can you say in just a few sentences the difference between the case where there is sovereign immunity, China, the China hypothetical, and this case where it's organ immunity?

Mr. Simon: --Yes, if I could--

Justice Kennedy: You're telling us that one is more important than the other, but there's no textual basis in the statute for us to make that distinction.

Mr. Simon: --I think there are two differences, so if I could.

One is textual and one is important.

Let me start with the textual difference.

The textual difference is that 1447(d) speaks to remands, and so to the extent the district court remanded the matter to State court the remand is untouchable on appeal or by mandamus because of 1447(d).

And if the foreign... if the foreign relations body, lobby, doesn't like that, if the State Department doesn't like, that they can go to the Capitol and get that fixed quite easily.

There are half a dozen exceptions to 1447(d) for class actions, for Native Americans, for civil rights cases, and they can get their own exceptions.

So to the extent what the trial court did was remand, it is untouchable.

That is my textual answer.

It's a remand,--

i.e. Waco, in which the court says the remand is untouchable, the dismissal of the unnecessary or indispensable party is reviewable.

So what I would say is, although the remand is untouchable, the denial of immunity... and that's why I kept saying collateral order; I apologize if that confused you, Justice Alito.

I meant that line of cases about going straight up even though the case was continuing.

While the case continues in State court, where it belongs under 1447(d), it would appear under this line of collateral order cases that the denial of immunity per se could go up on its own--

Justice Kennedy: I'm asking why is denial of immunity for sovereign status different from denial of organ status giving you a right to a bench trial, etcetera?

Mr. Simon: --Possibly, possibly this court would decide that question the other way.

But--

Justice Breyer: We have this very old judge like me.

China is there.

And he says: This isn't China; Formosa is China.

So he says remand.

So there we are, China is now in the Western District State Court for Illinois and they're suing them for a lot of money.

Now, you said, I thought, before that where that happened, and they wrongly denied immunity, they could, China, appeal in the Federal system.

I thought you said that.

Mr. Simon: --Yes.

Justice Breyer: All right.

Mr. Simon: But not the remand.

Justice Breyer: What?

Mr. Simon: But not the remand.

Justice Breyer: All they want is a definitive appeal that this is really China, all right.

Now, can they do that, yes or no?

You said yes.

So I thought Justice Kennedy's question was, if they can do that, why can't Powerex appeal in exactly the same way on the question of whether they're an organ.

What's the difference?

Mr. Simon: The first difference is what I said in response to Your Honor's question was I think they could do that under some cases from the courts of appeal.

I know they can't appeal the remand because we have an act of Congress which--

Justice Breyer: I don't care.

I don't call this an appeal of a remand.

What this is, it is an Appeal of the determination precedent to remand that Powerex is not an organ.

Mr. Simon: --Well, Justice Breyer--

Justice Breyer: That would make them just as happy, I believe.

Mr. Simon: --Justice Breyer, think about a multi-party case and maybe my answer will be clearer to you.

In a multi-party case my position is the remand stands, the case goes back to Missouri or Mississippi or wherever your hypothetical was, but at the same time, I do believe that the potentially immune party, which is not here in this courtroom today, the potentially immune party, could seek to review of what is a dispositive ruling.

Remember, that's a dispositive ruling.

They win the case.

That's very different than a venue ruling.

Justice Souter: Regardless of how they would get up on it, assuming they could get up on the immunity question, our series of questions is why do we draw or why should we draw a distinction between immunity and federal bench trial?

And your answer is, I take it, immunity is dispositive; Federal bench trial is not?

Mr. Simon: Immunity is dispositive and Federal bench trial is not... and is no different from the day to day decisions district courts make all the time about the choice between a State court and a Federal court in the area of remands and removals.

Justice Ginsburg: Immunity, suit immunity, is you can't be sued anyplace, not in State court, not in Federal court; you can't be sued, period.

But now it is admitted that you can be sued.

That's not in dispute in this case, right?

Mr. Simon: That's correct.

Justice Ginsburg: So the only question is where.

Mr. Simon: And that is my core--

Justice Ginsburg: The question is if--

Mr. Simon: --Excuse me.

That is my core point, that Congress told us when the only question is where, we stop after one level and we move on to the merits.

Justice Stevens: Can you help me with--

Mr. Simon: I would like to answer your question about a jury, but I think I interrupted Justice Stevens.

Justice Stevens: --I just want to be sure your position.

Assume that there is a remand that was improper and cannot be appealed under your theory and the Powerex argues all along, I was entitled to a Federal forum and a non-jury trial.

And the State court says no all the way up.

Can they file a petition for certiorari saying, we had a Federal right that was denied us, not the remand but our entitlement to a bench trial?

Can they petition for certiorari at the end of the State proceeding in your view.

Mr. Simon: Other than the jury question, I think the answer would be no because of 1447(d), because I think 1447(d) would suggest that that's an appeal of a remand.

But again, you're asking questions that I believe have not been addressed by this Court or even lower courts.

Justice Stevens: I'm just wondering what your position is.

Mr. Simon: A clever enough lawyer I suppose could argue that at that point that we're no longer challenging the remand, the remand has happened and been completed and the trial has taken place; we're now simply challenging the results.

And maybe that clever lawyer would win the day.

Justice Souter: And in effect he would say... I mean, I assume what the clever lawyer would say is, you, State court, cannot try me at all.

The feds can do what they want about remand and it gets back here.

But because I'm entitled to a bench trial, you cannot try me at all.

Isn't that the argument?

Mr. Simon: Oh, I think in State court a clever litigant could argue all these points over again, because 1447(d)--

Justice Scalia: But his clever opponent would say--

[Laughter]

--that what 1447(d) means is that you can be tried in State courts.

That's precisely what it says.

Justice Souter: And ultimately when the two clever parties got to the State supreme court, they would have these two opposing issues and ultimately if we granted cert this Court would decide it, wouldn't it.

Mr. Simon: --This Court would ultimately decide it and they would ultimately decide questions such as whether the jury or, to put it the other, the bench trial issue has been preserved.

Justice Breyer: Why not say, depending on the clever lawyers, or non-clever as the case may be, why not just say Congress intended that you do get an underlying appeal in the Federal system, for what is at stake is not simply where the case will be tried, but rather significant and important rights attach in the Federal court that do not attach in the State court.

And therefore, it is like, the appeal you get when they... when what is at stake is immune or not, and by doing that we avoid four more years of litigation and the necessity to hire clever lawyers.

Mr. Simon: Well, Congress has said... Congress has said the contrary.

And there are often important differences between State and Federal courts.

Justice Breyer, I think you have some experience in California.

We have 9 to 3 jury verdicts.

You will have a litigant here next year saying that the difference between a removal and a remand is a unanimous jury verdict or a 9 to 3 jury verdict, and that's really important.

Now, I would just briefly like to go back to Justice Ginsburg's question about a jury because I don't think she got the full answer.

Let me give it to you, Justice Ginsburg.

The jury issue is virtually... I would say not virtually.

The jury issue is out of this case based on my adversary's reply brief.

I will tell you why.

We did ask for a jury trial in our case and we were upset about the whole notion of this case being removed on a cross-claim we were not involved in... we never sued Powerex... losing our right to a jury trial on this important case.

Mr. Frederick's reply brief says at footnote 4, page 3... or footnote 3, page 4; I apologize... that our right to jury trial is not threatened here and that under certain lower court decisions, which he is correct they do exist... I'm not sure they're unanimous... Our right to jury trial would survive even though he would have a right to a bench trial under his theory.

Well, there is no right to a jury trial on the cross claim against Mr. Frederick's client.

The cross claim in the California court, which got this whole ball of wax rolling, is a cross claim for equitable indemnification and declaratory relief, equitable claims as to which there is no right to a jury trial.

So I think we are all now in agreement on a jury trial.

We are arguing someone else's case.

Some day a litigant will appear in this Court and present the issue of jury trial--

Justice Ginsburg: --But there is still the question of Federal forum over State forum.

Mr. Simon: --There is, and that's the issue that I think Congress has clearly and definitively said, the State courts have pretty good judges, pretty good juries, pretty good systems and certiorari procedures to this Court.

In Kircher, the Court's opinion says,

"the State courts are perfectly competent to resolve these issues. "

The cost of this case being frozen for 3 or 4 years while we debated these issues... and these issues are very difficult.

I would say, we don't only have a backup position, we have a backup backup position.

Because we think, number one, the court should be taken at its word.

We think, number two, the court had no subject matter jurisdiction.

Removing jurisdiction is not subject matter jurisdiction.

If you look at the book, Chapter 89, Section 1441, et cetera, it's titled Removal of Cases From State Courts.

You won't find the word "subject matter jurisdiction" in there anywhere.

A removal petition removes a case from the State court to the Federal court, where if it's a foreign sovereign immunities case, the Federal court decides if it has subject matter jurisdiction.

That's what 1330 says in haec verba.

It's what this Court's decision in Verlinden versus Central Bank of Nigeria says in haec verba.

Verlinden says every court that gets a foreign sovereign immunities case must determine at the outset whether it has subject matter jurisdiction by determining if the foreign sovereign is immune.

Which means that Judge Whaley was correct when he decided that by concluding he had an immune party in front of him, he had no jurisdiction.

And it was equally correct for Bonneville, when he determined that United States versus Myers says the same thing, so that he had no subject matter jurisdiction.

And in addition, there was a derivative jurisdiction doctrine.

This notion of "removal jurisdiction" quote unquote, it's a term we all use.

The Court used it in Kircher.

I use it.

Other people use it.

But if you start getting serious about your words, it's meaningless in this context.

We have subject matter jurisdiction and it is conferred in the area of 1330, 1331, 1332.

It is not conferred in 1441, 1442, or 1443.

It's simply not there.

So my backup argument is, he was right on every point.

And my backup argument beyond that is again, please, reread Carnegie Mellon.

Put it next to Thermtron and look at what the lower courts have done.

They have found excuse after excuse to take appeals in cases that have no business being in the courts of appeals.

They don't have immunity issues.

They don't have foreign sovereign issues.

They don't have anything.

Justice Alito: Well, the reason why they may have done that is because they've seen case after case where absolute power corrupts absolutely.

And because district judges know that remand orders are not reviewable, on occasion they will remand cases for reasons that are clearly improper.

That may be the reason.

Now on your first argument, you say that what the district judge says is dispositive.

You mean if the district judge says I lack subject matter jurisdiction because my docket is crowded, that's not--

Mr. Simon: No.

Justice Alito: --That's not--

Mr. Simon: No, Your Honor.

I overstated.

Let me say it more clearly.

Kircher, decided last term, makes clear the line between what can and can't be done.

It discusses precisely this point and it refers to the Ryan versus Contra case and it refers to the Principi case.

And it says that when the court is patently wrong about whether the issue it is discussing is subject matter jurisdiction, then this Court may enter into--

Chief Justice Roberts: Counsel, it's a good thing you've got a lot of fallback arguments because you fall back very quickly.

I would have thought your answer to Justice Alito would be, the statute says if it's remanded, it's not reviewable on appeal or otherwise.

And if it's remanded for a silly reason, that will be corrected on review of the State supreme court by this Court.

Mr. Simon: --That would be my first answer, and the Chief Justice said it much better than mine, than I have.

But I think, Your Honor, looking at Kircher, to be fair, looking at Kircher, I believe that is the position Justice Scalia took, it is concurring opinion.

And I didn't want to suggest that Justice Scalia's concurring opinion was the opinion of the Court.

The opinion of the Court wrestles with what I thought was Justice Alito's question.

What do you do if the trial judge says he has no subject matter jurisdiction and he has not simply made a garden variety jurisdictional error but he has missed what the issue is?

It's really failure to state a claim.

It's really something else.

And we of course have the Steele case which says jurisdiction has many meanings and we often get confused about them.

And the Court answered the question by saying, only when the trial court is patently wrong, patently wrong not about the jurisdictional question but as to whether it is even a jurisdictional question, only when the court is patently wrong do we second guess the court.

So--

Chief Justice Roberts: That certainly changes the argument.

So the notice of appeal that's filed or the brief on appeal says not only was the court wrong, it was patently wrong, and the court of appeals has to consider that before determining whether it has jurisdiction to review the remand order.

Mr. Simon: --If the court wants to adopt Justice Scalia's view in the prior case, in the Kircher case, my clients would be pleased with the results--

Justice Scalia: I recommend that.

[Laughter]

Mr. Simon: --But I think, Justice Roberts... I think, Mr. Chief Justice... I apologize.

Because my time is running short, I would say the key point in this case came when we sought to have a prompt dismissal in the Ninth Circuit of the appeal prior to full briefing and argument, and it was denied.

That was the point at which if a litigant simply parroted the phrase "this is patently wrong", would likely in most circuits before most panels have lost.

And this matter would have gone back to the State court 2-1/2 years before it got affirmed by the Ninth Circuit and five years before today.

Unless the Court has any further questions, I think I've completed my comments.

Rebuttal of David C. Frederick

Chief Justice Roberts: Thank you, Mr. Simon.

Mr. Frederick, you have three minutes remaining.

Mr. Frederick: Mr. Chief Justice, a non-jury trial is an aspect of sovereign immunity.

This Court's cases have recognized that.

In footnote 6 of the Government's brief, the Government cites the Lehman case which makes this point clear and argues that the point should be applicable to sovereigns in the context in which we are faced here.

The question of whether a foreign entity, and it's more complicated often in the real world, Justice Breyer, as your question's identified not simply with questions but with the kinds of entities that foreign governments create to advance public purposes.

The intent of Congress was not to have those kinds of entities tested in State court to determine whether or not they enjoyed the privileges and procedural protections of the FSIA.

And it is not simply a question of whether or not an elderly judge might choose to recognize China or Formosa, but rather the kinds of instrumentalities that were created by those governments to advance public purposes, to serve as separate political entities, and who would be performing the kinds of acts that might lead them into litigation, and--

Justice Ginsburg: And Congress said, those entities don't get any immunity, they get two things: They get a federal forum and they get a judge trial.

That's all that's at stake.

Mr. Frederick: --That's not all that's at stake, Justice Ginsburg.

There are also rights with respect to foreign states to be free of punitive damages.

There are rights to have certain property of the sovereign that would be subject to different attachment rules.

The FSIA has a whole string of procedural protections that are afforded to foreign states and their instrumentalities.

And this case ultimately is about the fact that Powerex is being subjected to multiple suits in State court, but as a result of the Ninth Circuit's holding in--

Justice Ginsburg: Are those... have they been sued by the plaintiffs in any of these cases or have they always been brought in by defendants?

Mr. Frederick: --They have been directly sued by the People of the State of California whom my brother here represents.

They have been sued by the California Attorney General.

They have been sued by the California Department of Water Resources.

And under the Ninth Circuit's precedent in this case which I urge you to overturn, Powerex has been remanded to State court, has not been permitted to appeal the remand order, and is stuck in State court in these cases without any opportunity to test what is a clearly erroneous, and what my brother doesn't make any attempt to defend, the merits of the decision, that Powerex has performed public functions, it's serving at the direction of the Government of British Columbia, and is performing these functions to advance clearly public purposes.

And yet, we are now in this Kafkaesque work world between State and Federal court where if we try to litigate all the way up through State court, it is not entirely clear whether we will ever have our organ... our status as a foreign organ ever vindicated.

Thank you.

Chief Justice Roberts: Thank you, counsel.

The case is submitted.