By Christina Hioureas[1]
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I. Introduction
Kiobel v. Royal Dutch Petroleum, a Second Circuit Court of Appeals decision issued on September 17, 2010, [2] follows a recent trend in jurisprudence curtailing plaintiffs’ claims for human rights violations under the Alien Tort Statute (the “ATS” or the “Act,” also known as the Alien Tort Claim Act, “ATCA”).[3] In this decision, the court held that because it found that corporations have not been held liable for violations of customary international law, they cannot be subject to suit under the ATS.[4] As a result, plaintiffs bringing ATS claims against corporations (primarily through a theory of aiding and abetting human rights abuses committed by States), could be losing one of their most sympathetic jurisdictions.
However, the Second Circuit’s new position on the ATS is not shared—and indeed is clearly rebuffed—by other recent circuit court decisions. On July 8, 2011, in Doe VIII v. Exxon Mobil Corp., the Court of Appeals for the District of Colombia held that corporations can be held liable under the ATS for violations of customary international law committed under foreign color of law.[5] In so holding, the court reinstated the claimant’s suit that Exxon Mobil Corporation funded a military unit that tortured civilians near Exxon’s natural gas plant in Indonesia.[6]
Then, on July 11, 2011, in Flomo v. Firestone Natural Rubber Co., LLC, the Seventh Circuit similarly held, in a unanimous decision, that ATS liability extended to corporations.[7] The claim related to Firestone’s rubber plantation in Liberia, in which the plaintiffs alleged that Firestone indirectly used “hazardous child labor in violation of customary international law.”[8]
To provide clarification on this issue, on October 17, 2011, the U.S. Supreme Court granted the petition for writ of certiorari in Kiobel v. Royal Dutch Petroleum.[9] The case will be heard in tandem with Mohamad v. Rajoub.[10] The issues before the Court are (1) whether corporate liability under the ATS is a question on the merits or an issue of subject matter jurisdiction and (2) whether corporations are immune from tort liability for violations of customary international law.[11]
II. Background on the ATS
The ATS provides: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.”[12] The statute does not specify who may be liable under the Act, leaving open the scope of liability.
Despite having been adopted in the 1789 Judiciary Act, the ATS remained nearly dormant until the 1980 Second Circuit Court of Appeals decision Filartiga v. Peña-Irela, where the court held that under the ATS federal courts had jurisdiction over civil claims for torture occurring outside of the U.S. by an individual.[13]
The Second Circuit, in Kadic v. Karadzic,[14] further elaborated its interpretation of the ATS. In that case, the plaintiff brought an ATS claim against Bosnian Serb leader Radovan Karadzic in his personal capacity. The basis of the claim was Karadzic’s command authority over the self-proclaimed Republika Srpska, in committing genocide, war crimes, and crimes against humanity against the Bosnian and Croatian populations.[15] The Second Circuit held that the ATS does not require State action for all alleged offenses.[16] Instead, it interpreted the ATS as including offenses introduced by the Nuremberg Trials, the Geneva Conventions, and the Genocide Convention. The court concluded that non-State actors could violate the law of nations and therefore could be subject to the ATS.[17]
The U.S. Supreme Court addressed the scope of the ATS for the first time in Sosa v. Alvarez-Machain.[18] In Sosa, an arbitrary detention case, a Mexican national was abducted by the Drug Enforcement Agency (“DEA”), transported to the United States to be prosecuted for torture and murder, and later acquitted. Sosa brought an ATS claim against the U.S., the DEA agents, and the (former) Mexican policeman and Mexican civilians who assisted them, alleging that his false arrest and arbitrary detention were in violation of the ATS. The Court found that the ATS granted federal courts jurisdiction over a narrow set of causes of action derived from the “present–day law of nations” provided that the claims rest on “norm[s] of international character accepted by the civilized world and defined with a specificity comparable to the features of the 18th–century paradigms recognized.”[19] Applying this standard, the Court refused to recognize arbitrary detention as a cause of action under the ATS.[20]
Although unrelated to the issue before it, the Court mentioned in a footnote—footnote 20—that “a related consideration is whether international law extends the scope of liability for a violation of a given norm to the perpetrator being sued, if the defendant is a private actor such as a corporation or an individual,”[21] without providing further guidance on the matter. While the decision in Sosa reaffirmed the purpose and use of the ATS, it opened up a series of questions regarding the statute, including that of corporate defendant liability under the Act for complicity in human rights violations.
Following Filartiga, and particularly following Sosa, a flurry of ATS claims were brought against corporations.[22] However, these decisions did not result in a conclusive line of reasoning.
III. Kiobel, Exxon, and Flomo: Recent Decisions on Corporate Liability Under the ATS
Recent circuit court decisions have shown the divergent approaches to corporate liability under the ATS. To clarify this ambiguity, the U.S. Supreme Court granted certiorari in Kiobel v. Royal Dutch Petroleum.
Kiobel v. Royal Dutch Petroleum addressed directly the issue of corporate liability under the ATS.[23] In Kiobel, Nigerian residents brought a claim against Dutch, British, and Nigerian oil corporations for allegedly aiding and abetting the Nigerian government in the attacking, detaining, torturing, and extrajudicial killing of residents who protested the environmental effects of the corporations’ oil explorations in Nigeria.[24] The plaintiffs alleged that the corporations aided and abetted the Nigerian military by providing it with transportation, food, and compensation.[25] The issue before the Second Circuit was whether the ATS granted it jurisdiction over civil actions brought against corporations under the law of nations.[26] The court held that it did not. It decided that “international law, and not domestic law, governs the scope of liability for violations of customary international law under the ATS,”[27] including the determination of liability for aiding and abetting[28] and whether customary international law “recognize[s] the defendants’ responsibility for that violation.”[29]
To make this assessment, the Kiobel court interpreted footnote 20 of Sosa as prescribing courts to look to customary international law “to determine both whether certain conduct leads to ATS liability and whether the scope of liability under the ATS extends to the defendant being sued,” rather than applying domestic law (which provides that corporations are liable as juridical persons).[30] Based on this interpretation, the court reviewed the decisions of international criminal tribunals, treaties, and academic commentaries. It concluded that “although customary international law has sometimes extended the scope of liability for a violation of a given norm to individuals, it has never extended the scope of liability to a corporation.”[31] The court explicitly held that individuals acting on behalf of a corporation could be held liable under the ATS, deciding that “[n]othing in this opinion limits or forecloses suits under the ATS against a corporation’s employees, managers, officers, directors, or any other person who commits, or purposefully aids and abets, violations of international law.”[32]
In a concurring opinion, Judge Leval disagreed with the majority’s “creation of an unprecedented concept of international law that exempts juridical persons from compliance with its rules.”[33] He criticized the majority’s reliance upon international criminal law jurisprudence, highlighting that although some tribunals have not granted jurisdiction over corporations, this can be theoretically justified because, inter alia, corporations, as juridical persons, cannot have criminal intent.[34] However, an inability to have criminal intent does not bar corporations from having civil compensatory liability.[35] Judge Leval also emphasized that corporations have not been held liable before international criminal tribunals because they do not have jurisdiction to determine civil liability, as civil liability for human rights abuses is left to States.[36] Instead of exempting corporations from liability, Judge Leval would have dismissed the claims on the basis that the plaintiffs’ factual allegations did not support a “reasonable inference that the Appellants acted with a purpose of bringing about the alleged abuses.”[37]
Although Kiobel clarified, to some extent, the issue of corporate liability under the ATS, the decision left a number of issues unresolved and possibly opened doors to future litigation. First, by finding that customary international law determines the scope of the ATS, the decision suggests that, if corporate liability were to become a norm of customary international law, it could be the basis for liability under the ATS. Second, because the court found that claims could be brought against individuals acting on behalf of a corporation, the decision could lead to a flood of cases against corporate officers and directors. Third, the concurring opinion provides an alternative line of reasoning that other federal courts may adopt.
In fact, subsequent circuit court decisions did exactly that. Following the line of reasoning set out in Judge Leval’s Kiobel concurrence, the D.C. Circuit in Doe VIII v. Exxon Mobil Corp. criticized the Kiobel majority opinion and held that ATS cases can be brought against corporations.[38] In this claim, the claimants alleged that Exxon aided and abetted military members in Indonesia in committing atrocities against Aceh residents, including “genocide, extrajudicial killing, torture, crimes against humanity, sexual violence, and kidnapping.”[39] Following Judge Leval’s concurrence, the Exxon court held, “[t]he majority in Kiobel not only ignores the plain text, history, and purpose of the ATS, it rests its conclusion of corporate immunity on a misreading of [the footnote in] Sosa.”[40] To determine whether corporations were immune from ATS claims, the court differentiated between substantive and procedural law, holding that courts should turn to customary international law to determine whether the conduct falls within the ATS, but should turn to domestic law to determine who may be sued under the Act.[41] Looking to the requisite mens rea standard for aiding and abetting from decisions of the International Criminal Tribunal for the Former Yugoslavia and Rwanda as well as the Nuremberg trials, the court further held that the intent requirement for corporate liability for aiding and abetting is the “knowledge standard,”[42] rather than the “purpose standard” set out in the Second Circuit decision Presbyterian Church of Sudan v. Talisman.[43]
Similarly, in Flomo v. Firestone Natural Rubber Co., LLC, a case involving alleged use of child labor at the defendant’s rubber plantation in Liberia, the court decided two issues: whether corporations could be liable under the ATS and whether Firestone violated customary international law and, therefore, the ATS. Although the court did not find Firestone liable, it held that the ATS does apply to corporations.[44] Following the rationale in the Kiobel concurring opinion, the court identified the Kiobel majority opinion as an outlier decision and rejected the idea that corporations have never been prosecuted under international law.[45] Although it did not find liability based on the facts, the Flomo court specifically rejected two of the defendant’s arguments. The first was the idea that the claimants had to exhaust domestic remedies, stating, “imagine having been required to file suit in Nazi Germany complaining about genocide, before being able to sue under the Alien Tort Statute.”[46] Second, it rejected the defendant’s argument that the statute has no extraterritorial application.[47]
In contrast to Kiobel, which held that corporations cannot be held liable under the ATS, Exxon and Flomo held that the ATS provides for corporate liability. Both focused on the Kiobel court’s misinterpretation of Sosa’s controversial footnote 20. As a result of this circuit court split, questions surrounding footnote 20, and the increasing number of lawsuits against corporations brought under the Act, the U.S. Supreme Court has granted certiorari in Kiobel. In doing so, the Court will provide clarification to corporations engaged in the complex and often risky field of international business, particularly those engaged in business in developing States and conflict zones.
[1] Christina Hioureas is an Associate at Latham & Watkins in the Public International Law and International Dispute Resolution practice group. Ms. Hioureas completed her J.D. at the University of California Berkeley School of Law, and B.A. in Political Science with a minor in Peace & Conflict Studies at the University of California Berkeley.
[2] 621 F.3d 111 (2d Cir. 2010), reh’g denied, 642 F.3d 379 (2d Cir. 2011) (en banc), petition for cert. filed, 2011 WL 2326721 (U.S. June 6, 2011), cert. granted, 79 U.S.L.W. 3728 (U.S. Oct. 17, 2011) (No. 10-1491).
[3] 28 U.S.C. § 1350 (2006).
[4] Kiobel, 621 F.3d at 145.
[5] 654 F.3d 11, 11, 15 (D.C. Cir. July 8, 2011).
[6] Id. at 14–15.
[7] 643 F.3d 1013, 1013, 1021 (7th Cir. 2011).
[8] Id. at 1015.
[9] Kiobel, 79 U.S.L.W. 3728.
[10] Id.; Mohamad v. Rajoub, 634 F.3d 604 (D.C. Cir. 2011) (deciding whether the Torture Victim Protection Act permits actions against defendants that are not natural persons in a claim by the sons and widows of a decedent allegedly tortured and killed by the Palestinian Authority and the Palestine Liberation Organization), cert. granted, 80 U.S.L.W. 3128 (U.S. Oct. 17, 2011) (No. 11-88).
[11] Kiobel, 2011 WL 2326721, at i.
[12] 28 U.S.C. § 1350 (2006).
[13] 630 F.2d 876 (2d Cir. 1980).
[14] 70 F.3d 232 (2d Cir. 1995).
[15] Id. at 237.
[16] Id. at 239.
[17] Id. at 239–41.
[18] 542 U.S. 692 (2004).
[19] Id. at 725.
[20] Id. at 757.
[21] Id. at 732 n. 20.
[22] See e.g. Bowoto v. Chevron Corp., 557 F. Supp. 2d 1080 (N.D. Cal. 2008) (deciding that corporations cannot be held liable under the ATS); Doe v. Unocal Corp., 963 F. Supp. 880 (C.D. Cal. 1997) (case settled a suit against Unocal for complicity in the alleged forced labor, rape, and murder of Burmese citizens committed by the Burmese military government); Aguinda v. Texaco, Inc., 1994 U.S. Dist. LEXIS 4718 (S.D.N.Y. Apr. 11,1994) (transferring jurisdiction to Ecuador in a claim regarding whether environmental pollution resulting from Texaco’s oil exploitation violated the rights of Ecuadorian villagers). But see Romero v. Drummond Co., Inc., 552 F.3d 1303, 1315 (11th Cir. 2008) (“The text of the Alien Tort Statute provides no express exception for corporations, and the law of this Circuit is that this statute grants jurisdiction from complaints of torture against corporate defendants.” (internal citations omitted)); In re XE Services Alien Tort Litig., 665 F.Supp.2d 569, 588 (E.D. Va. 2009) (“Nothing in the ATS or Sosa may plausibly be read to distinguish between private individuals and corporations.”).
[23] 621 F.3d 111 passim (2d Cir. 2010). Prior Second Circuit decisions did not directly address the issue. See, e.g. Presbyterian Church of Sudan v. Talisman Energy, Inc., 582 F.3d 244, 261 n. 12 (2d Cir. 2009) (assuming, without explicitly holding, that corporations may be held liable under the ATS); Khulumani v. Barclays Nat’l Bank Ltd., 504 F.3d 254, 282–83 (2d Cir. 2007) (noting that because the defendants did not raise the issue, there was no need to decide whether corporations can be held liable under the ATS).
[24] Kiobel, 621 F.3d at 117, 123.
[25] Id. at 117.
[26] Id.
[27] Id. at 126.
[28] Id. at 128.
[29] Id. at 129 (internal citation omitted).
[30] Id. at 128 (emphasis in original).
[31] Id. at 120 (emphasis in original).
[32] Id. at 149.
[33] Id. at 150 (Leval, J. Concurring) (“The new rule offers to unscrupulous businesses advantages of incorporation never before dreamed of. So long as they incorporate (or act in the form of a trust), businesses will now be free to trade in or exploit slaves, employ mercenary armies to do dirty work for despots, perform genocides or operate torture prisons for a despot’s political opponents, or engage in piracy—all without civil liability to victims.”).
[34] Id. at 152.
[35] Id.
[36] Id. at 124, 151, 155.
[37] Id. at 240.
[38] Doe VIII v. Exxon Mobil Corp., 654 F.3d 11,15, 41 (D.C. Cir. July 8, 2011).
[39] Id. at 15.
[40] Id. at 54.
[41] Id. at 41.
[42] Id. at 35–39.
[43] Presbyterian Church of Sudan v. Talisman, 582 F.3d 244, 259 (2d Cir. 2009).
[44] 643 F.3d at 1017
[45] Id. at 1017–18 (finding that the “factual premise of the majority opinion in the Kiobel case is incorrect,” in particular with respect to whether the Nuremberg trials excluded corporate liability).
[46] Id. at 1025.
[47] Id.
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