## Facts

- Quasar Co. operated in the United States as a marketing arm for products manufactured in Japan by its corporate parent group.
- The Japanese parent periodically assigned Japanese executives to work at Quasar in managerial roles on a temporary basis.
- These expatriate executives entered the United States under treaty-based visas and, though formally employed by the Japanese parent, worked under Quasar’s day-to-day control.
- In 1985, after a major downturn, the parent sent an additional Japanese executive to reorganize Quasar’s operations, including large-scale layoffs.
- Three American executive employees were terminated during the restructuring.
- No Japanese expatriate executives were terminated; some were rotated back to Japan and received pay increases.
- The terminated employees alleged that Quasar favored Japanese nationals for executive positions and terminated plaintiffs because they were Americans (national origin), and also because of age.

## Issues

1. Whether the U.S.–Japan Treaty of Friendship, Commerce and Navigation (FCN Treaty) provision allowing enterprises to employ key personnel “of their choice” provides a defense to Title VII national-origin discrimination claims challenging preference for Japanese executives.
2. Whether relief against Quasar that restricts preferential treatment of Japanese expatriate executives unlawfully interferes with the Japanese parent’s treaty rights, even if the parent is not a named party.
3. Whether Title VII (and related employment statutes) abrogated the treaty-based staffing right absent clear congressional intent.

## Decision

- The Seventh Circuit reversed the district court’s judgment for the plaintiffs on the Title VII national-origin theory and remanded.
- The court held the FCN Treaty’s “of their choice” clause protected a Japanese enterprise’s ability to staff key executive (and similar) positions in the United States with Japanese nationals.
- Because an order forbidding Quasar from favoring parent-sent expatriate executives would effectively prevent the parent from exercising its treaty right, the district court’s ruling could not stand.
- Evidence that Japanese expatriates were retained while American executives were terminated was not, by itself, unlawful under Title VII where the challenged staffing decisions fell within the treaty’s protected scope.

## Legal Principles

- A self-executing FCN treaty provision permitting employment of key personnel “of their choice” can operate as a defense to Title VII national-origin claims to the extent the claim targets treaty-protected staffing preferences.
- Absent clear congressional intent, later-enacted federal statutes are not read to abrogate specific treaty-based rights.
- Courts consider the practical effect of relief against a U.S. subsidiary; an injunction that functionally bars a foreign parent from exercising treaty staffing rights is treated as an impermissible interference with those rights.
- The treaty-based preference is limited to positions within the treaty’s contemplated category (e.g., key executive or technical roles); Title VII otherwise remains applicable to non-protected employment decisions.

## Conclusion

The Seventh Circuit held that the U.S.–Japan FCN Treaty allowed a Japanese enterprise, through its U.S. operation, to prefer Japanese nationals for certain key posts, limiting Title VII national-origin liability where the challenged employment actions fell within that treaty-protected staffing prerogative, and it reversed and remanded the district court’s contrary judgment.


Fortino v. Quasar Co., 950 F.2d 389 (7th Cir. 1991)