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CHICAGO-Samsung Heavy Industries Co. Ltd., a South Korean company with operations in Chicago, did not violate Title VII of the Civil Rights Act by demoting an American citizen in favor of a South Korean citizen, a federal appeals court ruled late last month.

As a South Korean corporation doing business in the United States, Samsung is protected by the Treaty of Friendship, Commerce and Navigation between the United States and the Republic of Korea, the 7th U.S. Circuit Court of Appeals ruled in Harry D. Weeks vs. Samsung Heavy Industries Co. Ltd.

The U.S.-Korea FCN Treaty is one in a series signed after World War II to encourage U.S. investment abroad. The treaties grant reciprocal protection to foreign businesses operating in the United States, allowing them to place their own citizens in key management positions.

Mr. Weeks, a former Samsung national sales manager for North America who was demoted to sales representative, alleges, among other charges, that Samsung discriminated against him based on race and national origin when it replaced him with Sung Ho Lee, a South Korean citizen. Mr. Weeks also contended Samsung was not protected by the FCN treaty in this case because the treaty allows for the choice of executives and that the position of national sales manager is not executive rank.

In affirming a lower court decision, the appeals court ruled that the FCN treaty indeed protects Samsung's employment decision.

"We are convinced that S.H. Lee's status is sufficiently 'executive' in character to come within the ambit of the plain language" found in the FCN treaty, the court said in its 43-page opinion. Samsung's "replacement of Weeks by S.H. Lee involved (Samsung's) decision to engage an executive of its choice and is therefore protected by the FCN Treaty."

Samsung's attorney, Gerald L. Maatman Jr. of Baker & McKenzie in Chicago, said the decision takes a "very, very broad" reading of the term "executive" in FCN treaties.

The question people now will argue is, "How far down into the company does the treaty go to protect a choice in preference of its own people over Americans?" he said.

Overall, "any foreign-based multinational corporation doing business in the U.S. has a significant amount of discretion, unlike its U.S. competitors, to utilize citizens of its own country" for high-level positions without violating federal laws.

Harry D. Weeks vs. Samsung Heavy Industries Co. Ltd., 7th U.S. Circuit Court of Appeals; No. 97-1857.