Courtesy of West LegalEdcenter's Wall Street Lawyer - Securities in the Electronic Age.
The U.S. Supreme Court announced on Oct. 17, 2011, that it would hear a case that could decide the question of whether corporations can be held accountable for human rights abuses committed with their assistance in foreign countries.
The case-- Kiobel v. Royal Dutch Petroleum NV 1--will allow the Court to address the 222-year old Alien Tort Statute (ATS),2 a law passed by the very first U.S. Congress in 1789, but one that has received scant attention from the Supreme Court until recently. The ATS allows foreign citizens to file lawsuits against any entity under U.S. governance--citizens, non-citizen residents, corporations--for alleged violations of international law, including human rights abuses, even if those abuses did not occur on U.S. soil.
In addition to Kiobel, the Court agreed to hear a second case-- Mohamad v. Rajoun 3--concerning the Torture Victim Protection Act (TVPA)4, and whether organizations or corporations can be held liable under the TVPA. The cases are likely to be heard in tandem.
While the question of whether corporations can be held liable under the ATS or the TVPA has been the subject of legal debate, some corporations--including Exxon Mobil Corp., Chevron Corp., Yahoo! Inc., Bridgestone Corp., and Coca-Cola Co.--have all been sued under the ATS to varying degrees of success.
Unlike any current ATS cases still winding their way through the federal court system, several lawyers noted that it's unlikely that any dismissed ATS cases--even if they were dismissed for lack of jurisdiction reasons--would be re-filed if indeed the Supreme Court allows for corporate liability under the ATS.
The Supreme Court will begin hearing oral arguments in Kiobel and Mohamad early in 2012, with a decision expected by the end of June.
History of the ATS
The ATS was part of the Judiciary Act of 1789, and was intended to assure foreign governments that the fledgling United States would act to prevent violations of customary international law and offer remedy to those wronged. Though little of the legislative history of the creation of the ATS has survived, it has been surmised by legal scholars that it was enacted in response to several international incidents in which foreign citizens living in the U.S. had no legal remedy for acts committed against them.
Most famous of these incidents was the assault of French diplomat Fran9500186ois Barb95008976-Marbois5 in 1784. Barb95008976-Marbois learned he had no legal standing in the U.S., prompting Congress to request that individual states allow for lawsuits brought by foreign citizens claiming violation of international law. However, after only a few states enacted such a provision, Congress created the ATS.
Despite its potentially weighty matter, the ATS gathered dust for almost two centuries, being cited and used only in the rarest of instances. In 1980, all that changed when the U.S. Court of Appeals for the Second Circuit decided Filartiga v. Pena-Irala 6 and revolutionized how the ATS would be used and by whom. Human rights advocates, victims of torture under foreign dictatorships, foreign citizens claiming abuse overseen or directed by U.S. corporations all became the new face of ATS plaintiffs. Since 1980, dozens of ATS claims have been brought, although many of them have been dismissed by the courts. To date, there have been only two successful ATS claims against a corporation--one by jury verdict and one entered by default--according to a legal database that tracks such cases.
In Filartiga, two Paraguayan citizens living in the U.S. brought a lawsuit against another U.S. resident, a Paraguyan former police chief. The plaintiffs alleged that the former police chief had tortured and murdered a member of their family, and they claimed that under the ATS U.S. federal courts had jurisdiction over their suit. Although the district court dismissed the case, citing lack of jurisdiction, the Second Circuit reversed that decision, citing that U.S. courts were indeed a proper venue for ATS cases. Perhaps sensing the can of worms the ruling might open, one Second Circuit judge urged that the Filartiga ruling "should not be misread or exaggerated to support sweeping assertions" that any violation of international human rights is automatically under the umbrella of the ATS.
To date, the Supreme Court has heard only one case that directly addressed the ATS. In 2004, the Court ruled in Sosa v. Alvarez-Machain, 7 a case in which the plaintiff, Humberto Alvarez-Machain, had been indicted for the murder of U.S. Drug Enforcement Agency officer and was kidnapped in Mexico by agents working for the U.S. government and brought to the U.S. for trial. Alvarez-Machain sued under the ATS, claiming his abduction was illegal under international law, and the Ninth Circuit Court agreed.
The Supreme Court did not, however, and reversed the Ninth Circuit's ruling, holding that Alvarez-Machain's abduction and detention had not been a violation of international law under the ATS. The Court then used Sosa to establish some ground rules for ATS claims. The Court held that Sosa did not establish a cause of action under the ATS, meaning that federal courts are not required to recognize any stated claim that infringes on any international law or any treaty; rather, the Court stated that ATS claims could only be made on what it called "a modest set of actions alleging violations of the law of nations".
Despite the ground rules set by the Supreme Court, human rights activists continued to bring ATS cases on behalf of victims, citing abuses by corporations or foreign individuals and seeking relief.
Recent Key Cases under the ATS
In addition to Sosa and Filartiga, there have been several other ATS cases that have helped define and refine the statute. These include:
Presbyterian Church of Sudan v. Talisman Energy, Inc.
In October 2009, the Second Circuit Court established in Presbyterian Church of Sudan v. Talisman Energy, Inc., 8 that the standard for establishing liability (corporate or otherwise) for aiding and abetting under the Alien Tort Statute must include "purpose rather than knowledge alone." Some ATS legal scholars saw this as a big blow to activists who they claimed were using the statute to enforce international human rights law, mostly upon corporations they viewed as working in concert with repressive governments to violate human rights. With the standard now established in Presbyterian Church that plaintiffs had to demonstrate that defendants were not just aware of the violations, but indeed had acted to aid them with the purpose of committing those violations, human rights activists definitely had a more difficult hurdle to clear.
In the Presbyterian Church case, Talisman Energy of Canada was accused of aiding the government of the Sudan with the forced and brutal removal of Sudanese citizens living near Talisman oil facilities. In dismissing the ATS claims, the Second Circuit stated that plaintiffs had failed to establish the company's "purposeful complicity in human rights abuses."
Those critical of the use of the ATS for human rights abuse litigation praised the ruling. The Washington Legal Foundation stated: "The decision could derail many other ATS suits against multinational corporations, including one highly publicized ATS suit against numerous companies that did business with apartheid South Africa."
While the Second Circuit established the purposeful standard, other circuit courts, notably the Ninth and 11th Circuits, have disagreed.
Chowdhury v. Worldtel Bangladesh Holding
Chowdhury v. Worldtel Bangladesh Holding Ltd. 9 is one of the few identified ATS cases against a corporation that has been successfully brought to trial and won by the plaintiff.
In Chowdhury, the plaintiff--Nayeem M. Chowdhury, a Bangladeshi businessman--sued under the ATS, claiming defendants Wordtel, a landline telephone provider, and its CEO, a U.S. citizen named Amjad H. Khan, had hired Bangladeshi paramilitary police to arrest and torture him. When the U.S. District Court for the Eastern District of New York dismissed the claim in 2008, citing failure to establish liability of aiding and abetting, the plaintiff then amended his complaint to claim that the Bangladeshi police were hired by the defendants and in fact were acting as the defendants' agents in their actions. Plaintiff also claimed the defendants ratified the illegal actions by orchestrating them and benefitting by them.
Under the new "agency and ratification" argument, the case was tried in 2009 with the jury finding for the plaintiff. The jury verdict showed that even the tougher standards set by the Second Circuit in ATS cases could be circumvented by unique arguments tailored to the circumstances of each individual case.
SINALTRAINAL v. Coca-Cola Co.
SINALTRAINAL v. Coca-Cola Co. 10 was brought in 2001 on behalf of SINALTRAINAL--the major union representing Coca-Cola bottling plant workers in Colombia--and included as plaintiffs the families of two murdered union officers, Isidro Gil and Adolfo de Jesus Munera.
The SINALTRAINAL lawsuit charged Coca-Cola bottlers in Colombia with the systematic intimidation, kidnapping, torture and murder of union leaders in efforts to crush their union. Plaintiffs claimed that seven union leaders and a friendly plant manager who was also a member of the union were murdered between 1990 and 2002. The lawsuit charged that Coca-Cola bottlers in Colombia "contracted with or otherwise directed paramilitary security forces that utilized extreme violence and murdered, tortured, unlawfully detained or otherwise silence trade union leaders."
A Florida district court dismissed SINALTRAINAL in 2006, citing that U.S. federal courts had no jurisdiction under ATS in this case. In 2009, the 11th Circuit Court upheld the dismissal, also citing lack of jurisdiction. But what made SINALTRAINAL notable was that the 11th Circuit added a twist to its ruling, citing a recently decided Supreme Court case, Ashcroft v. Iqbal. 11 Under Iqbal, decided in May 2009, the Supreme Court invoked a greatly heightened standard of pleading, requiring that plaintiffs' claims must have "facial plausibility" to survive dismissal. The Court explained in its Iqbal ruling that claims have facial plausibility when the facts as stated allow courts "to draw the reasonable inference that the defendant is liable". Obviously, such a definition--ripe with subjective terms like "reasonable inference"--has given great leeway to courts to dismiss plaintiffs' claims on their face and often, very early on in the proceedings.
Given that Iqbal hurdle and the problem of establishing proof of direct corporate involvement, it would not be possible to re-file the SINALTRAINAL case even if the Supreme Court finds in Kiobel that corporations are liable under the ATS, said Dan Kovalik, senior counsel for the United Steelworkers and one of the plaintiff attorneys on SINALTRAINAL. "The Coca-Cola case was lost chiefly because the court found that, even if our allegations were taken as true, the defendants could not be tied closely enough to the human rights abuses alleged to hold them liable," Kovalik said. "Of course, we disagree with this, but the Supreme Court's decision in Kiobel would not change this outcome."
The Supreme Court and the Kiobel Case
Kiobel v. Royal Dutch Petroleum --the case now before the Supreme Court--involves a lawsuit against the Shell Oil co., the U.S. subsidiary of Royal Dutch Petroleum, that was brought under the ATS by a group of Nigerian citizens who claimed the oil company was complicit in massive human-rights abuses in the early- and mid-1990s. The plaintiffs allege that Shell Oil subsidiaries enlisted the help of the repressive Nigerian government to shut down opposition to oil exploration in the region. The situation received worldwide attention in 1995 when several activists and a well-known Nigerian author were executed by the Nigerian government after hastily-run military trials.
The Kiobel case was heard by a federal district court in 2006, which dismissed many of the plaintiffs' claims, refused to dismiss others, and turned the whole case over to the Second Circuit because of the seriousness of the charges.
In September 2010, the Second Circuit tossed out the Kiobel lawsuit, ruling that corporations can't be sued under the ATS, and refusing to recognize corporate liability for international crimes. In reaching its decision, the Second Circuit cited the previous 30 years of both Supreme Court and Second Circuit precedential rulings, stating that under those rulings, "corporate liability is not a discernible--much less a universally recognized--norm of customary international law."
The Second Circuit's dismissal of Kiobel under the principle that corporations face no liability under the ATS points up a sharp split among several Circuit Courts of Appeal.
That point was driven home on Oct. 28, when the Ninth Circuit ruled in Sarei v. Rio Tinto PLC 12 that corporations could be held liable under the ATS for international law violations such as genocide and war crimes. The Ninth Circuit Court also clarified a point raised in Sosa that legal relief may depend on the plaintiffs first exhausting all possible local remedies.
In Sarei, which has been in the court system for more than a decade, plaintiffs--residents of Papau New Guinea (PNG)--brought claims against mining group Rio Tinto alleging the company was involved in the PNG government's brutal treatment of residents living near or working in the mines. Often, plaintiffs claim, the government police used Rio Tinto company vehicles and helicopters in their actions.
In addition to the Ninth Circuit Court's ruling in Sarei, the liability of corporations under the ATS was upheld twice this year, by the Seventh Circuit Court in Flomo v. Firestone Nat. Rubber Co., LLC ;13 and then by the D.C. Circuit Court in Doe VIII v. Exxon Mobil Corp. 14
Seeming to draw a line in the sand with the Second Circuit Court, the D.C. Circuit Court wrote in its Doe ruling that "neither the text, history, nor purpose of the ATS supports corporate immunity for torts based on heinous conduct allegedly committed by its agents in violation of the law of nations."
Given this split, it's little surprise that the Supreme Court had to weigh in on whether corporations face liability under the ATS.
What Could the Court Decide on Corporate Liability?
When the Supreme Court decided its only previous ATS case in Sosa v. Alvarez-Machain in 2004, it held that ATS claims in Sosa were made between individual people, and not entities such as corporations. ( Mohamad also concerns whether language in the TVPA such as "individual" refers to corporations and other entities in addition to individual people.) It was this language that has greatly added to the split among the circuit courts.
Indeed, many in the legal community have been carefully watching to see if the Supreme Court would eventually address the corporate liability question in the ATS, said Paul Wolfson, a partner in the Litigation department of Wilmer Cutler Pickering Hale and Dorr LLP. "Many legal professionals have been asking the Court to decide this issue for quite a while," Wolfson said. "But it's difficult to predict at this point what the Court could decide."
One strategy that is being suggested by the Plaintiffs' Bar is having plaintiffs bring suit against individual corporate executives, like CEOs, rather than the corporate entity itself, something the Second Circuit mentioned in its Kiobel ruling, saying that suing CEOs is directly allowed under the ATS.
Other legal observers note that the key to what the Supreme Court could do in Kiobel / Mohamad may have its roots in the Court's 2010 ruling in Citizens United v. Federal Election Commission 15 that corporations and other entities had First Amendment rights in regards to political speech. Some observers contend the Supreme Court may not be able to walk back the Citizens United precedent, which invariably but not fully accurately became short-hand for "corporations are people".
Indeed, on its face, a Supreme Court decision in Kiobel / Mohamad that completely negates any corporate liability in the ATS could create an impression that under this Supreme Court, corporations may have rights, but little liability or responsibility.
Despite the uncertainty over what the Supreme Court could do in Kiobel / Mohamad, and even given the circuit-split and the confusion over corporate liability in the ATS/TVPA realm, the small but steady flow of such cases has not slowed over the years, Wolfson added. "A lot of cases have been brought already," he noted. "Plaintiffs keep bringing cases, assuming that the Supreme Court would sort it out at some point."
By the middle of next year, it's likely both sides of the debate will have the Supreme Court's answer to their request.
Gregg Wirth is the Managing Editor of Wall Street Lawyer. Mr. Wirth is an award-winning investigative journalist with more than a decade of experience covering Wall Street, the economy, politics, crime and culture. Contact: Gregg@gwirth.com.
1. Kiobel v. Royal Dutch Petroleum, 621 F.3d 111 (2d Cir. 2010).
2. The Alien Tort Statute, 28 U.S.C. section 1350.
3. Mohamad v. Rajoun, No. 09-7109 (D.C. Cir. 2011).
4. The Torture Victim Protection Act of 1991 (TVPA), Pub. L. No. 102-256, 106 Stat. 73. 5. Francois Barbe-Marbois was a French politician, perhaps best known for negotiating the Louisiana Purchase as Minister of Finance under Napoleon. Barbe-Marbois also had a long diplomatic career in America, serving as secretary of the French legation to the newly-formed United States. In 1784, Barbe-Marbois was allegedly assaulted in Philadelphia by a French military officer named Charles Julian de Longchamps. A public controversy arose because Longchamps was married to an American, and claimed to have taken an American oath of citizenship. Debate ensued over whether Longchamps was to be tried in Pennsylvania or in France, but because the U.S. at that time had no legal recourse for foreign citizens, Longchamps was eventually tried and sentenced in Pennsylvania courts.
6. Filartiga v. Pe95009618a-Irala, 630 F.2d 876 (2d Cir. 1980).
7. Sosa v. Alvarez-Machain, 542 U.S. 692 (2004).
8. Presbyterian Church of Sudan v. Talisman Energy, Inc., 07-0016-cv (2d Cir. 2009).
9. Chowdhury v. Worldtel Bangladesh Holding Ltd., 588 F. Supp. 2d 375 (E.D.N.Y. 2008).
10. Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252 (11th Cir. 2009).
11. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937 (2009).
12. Sarei v. Rio Tinto PLC, 02-cv-56256; 02-cv-56390; 09-cv-56381 (9th Cir. Oct. 25, 2011).
13. Flomo v. Firestone Nat. Rubber Co., LLC, 643 F.3d 1013 (7th Cir 2011).
14. John Doe VIII v. Exxon Mobil Corp., 658 F. Supp. 2d 131 (D.C. Cir 2011).
15. Citizens United v. Federal Election Commission, No. 08-205 (2010).