For the last thirty years, courts have struggled to interpret and apply the Alien Tort Claims Act ("ATCA"), a statute that permits non-U.S. citizens to bring civil lawsuits in U.S. courts for violations of the law of nations, as defined by customary international law. Most recently, courts have strongly disagreed about whether corporations – which are commonly sued under the statute for "aiding and abetting" foreign governments and individuals in committing alleged human rights violations – can be liable under the statute. This year the Supreme Court will resolve this question in a major ATCA case, and its decision will impact corporate exposure to the substantial reputational and financial risk of litigating human rights cases in U.S. courts.
The ATCA provides jurisdiction over "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."1 The first Congress passed the ATCA in 1789, but the statute lay dormant for nearly 200 years after its enactment, providing jurisdiction in only two cases. The Second Circuit revived the ATCA in 1980 in Filartiga v. Pena-Irala, a suit brought by two Paraguayan citizens against the former inspector general of police in Paraguay for the alleged torture and murder of their son in Paraguay.2 The Second Circuit concluded that whenever an alleged torturer is found and served with process within the borders of the United States (where the former inspector general then resided), the statute provides jurisdiction.
Since Filartiga, litigants have increasingly filed lawsuits under the ATCA in a variety of human rights cases, and courts have struggled to define who constitutes a proper ATCA defendant, as well as what conduct constitutes an actionable customary international law violation. ATCA cases against corporations have become increasingly high profile and high stakes, often involving allegations that a corporation supported human rights violations by doing business in a country where those violations occurred or by providing monetary or material support to that country's officials, such as in South Africa during apartheid. At times, these cases result in large settlements in an attempt to avoid the reputational and financial risk of litigation.
In 2004, the Supreme Court considered the scope of ATCA liability for the first time in Sosa v. Alvarez-Machain and concluded that a claim based on customary international law must be sufficiently "specific, universal, and obligatory" to support a federal remedy under the ATCA.3 In its decision, the Supreme Court observed that corporate liability under the ATCA was an open question.4
In 2010, the Second Circuit held in Kiobel v. Royal Dutch Petroleum Co. that corporations cannot be liable under the ATCA.5 The Second Circuit first determined that international – and not domestic – law governs corporate liability under the statute. The Second Circuit then concluded that international law does not recognize a customary international law norm of corporate liability. In reaching this conclusion, the Second Circuit noted that the trials at Nuremburg following World War II, as well as the charters establishing the Nuremburg tribunal, limited jurisdiction to natural persons. The Second Circuit emphasized that I.G. Farben chemical company – "the corporation that made possible the war crimes and crimes against humanity perpetrated by Nazi Germany" – did not face liability for those crimes; instead, corporate executives were tried for their role in the atrocities. In addition, the Second Circuit recognized that international tribunals since Nuremburg, including the International Criminal Court, have confined jurisdiction to natural persons. In short, "no international tribunal ... has ever held a corporation liable for a violation of the law of nations."
Commentators predicted that the Second Circuit's decision in Kiobel would be the "death knell" for human rights litigation against multinational companies in U.S. courts.6 But the Seventh, Ninth, and D.C. Circuits have since held that corporations can be liable under the ATCA, disagreeing with fundamental aspects of the Second Circuit's reasoning. As a result of this Circuit split, the Supreme Court granted a petition for writ of certiorari in Kiobel on October 17, 2011, to consider (1) whether corporate civil tort liability under the ATCA is a merits question or an issue of subject matter jurisdiction, and (2) whether corporations are immune from tort liability for violations of the law of nations. The first question is significant because it determines whether courts must consider corporate liability at the outset of a case, rather than later in a proceeding, potentially avoiding lengthy and expensive discovery. The second question goes to the heart of corporate liability.
Together, the conflicting circuit decisions raise a number of arguments that the Supreme Court likely will consider. First, these courts have disagreed over whether federal common law – and not international law – governs the question of corporate liability under the ATCA. The Second Circuit held in Kiobel that it was a question of international law, because the ATCA provides jurisdiction only over violations of the law of nations. In Doe v. Exxon Mobil, however, the D.C. Circuit contended that this reasoning conflated a cause of action under the ATCA with the remedy for an ATCA violation, leading to too narrow a result.7 According to the D.C. Circuit, "for purposes of affording a remedy . . . the law of the United States and not the law of nations must provide the rule of decision in an [ATCA] lawsuit." The Seventh Circuit added in Flomo v. Firestone that this distinction between right and remedy supported corporate liability under the ATCA, because corporate tort liability is well accepted under federal common law.8
These courts also have disagreed over the significance of the lack of corporate criminal or civil prosecutions for customary international law violations. The Second Circuit found in Kiobel that this vacuum was significant evidence that corporate liability was neither specific, universal, nor obligatory. The Seventh Circuit disagreed, observing in Flomo that, for example, after the Second World War, the allied powers dissolved a number of German corporations complicit in human rights violations "on the authority of customary international law." In Exxon, the D.C. Circuit similarly criticized Kiobel because corporate liability following World War II was "more nuanced." According to the Seventh Circuit, moreover, even if no corporation has ever been prosecuted, "[t]here is always a first time for litigation to enforce a norm; there has to be."
Finally, these courts have disagreed over whether the language and purpose of the statute supports corporate liability. The Second Circuit held in Kiobel that it did not, because the ATCA was passed to allow federal courts to hear claims only for very limited international law violations recognized at the time, which included the three specific offenses against the law of nations addressed by England's criminal law: violation of safe conducts, infringement of the rights of ambassadors, and piracy. The D.C. Circuit observed in Exxon, however, that the statute "by its terms does not distinguish among classes of defendants," and held that the federal government had a strong interest in providing a remedy for and preventing violations of the law of nations, regardless of who committed these violations. In Sarei v. Rio Tinto, the Ninth Circuit compared the text and legislative history of the ATCA with that of the Torture Victim Protection Act ("TVPA"),9 a statute that permits civil suits against "an individual" who, acting in an official capacity for a foreign nation, commits torture or extrajudicial killing.10 The Ninth Circuit contended that – unlike the TVPA – the ATCA is not limited to suits against individuals, and the ATCA's legislative history does not demonstrate that Congress considered and rejected corporate liability (although some have argued that the TVPA, due to its unusual status as a "note" to the ATCA, effectively amended that statute).
The Supreme Court's decision in Kiobel will have broad implications for multinational companies and human rights activists. A decision affirming the Second Circuit's holding that corporate liability under the ATCA does not exist would effectively eliminate lawsuits seeking to hold corporations liable for human rights violations overseas. And a decision reversing the Second Circuit's holding could increase the wave of suits.
Even if the Supreme Court concludes that corporations can be liable under the ATCA, however, numerous questions regarding the statute's interpretation continue to vex the lower courts and could limit corporate liability. For example, federal courts disagree about the required mens rea for aiding and abetting liability under the statute, with the Second Circuit requiring that a corporation act with the purpose of facilitating the violation,11 and the Eleventh12 and D.C.13 Circuits applying a lower "knowledge" standard. And courts still will have to grapple with whether the underlying claims are actionable violations of customary international law, which courts have observed "is no simple task."14
1 28 U.S.C. § 1350 (2006).
2 Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir. 1980).
3 Sosa v. Alvarez-Machain, 542 U.S. 692, 732 (2004).
4 Id. at 732, n.20 ("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 individual.").
5 Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010).
6 John B. Bellinger III, “Shortening the Long Arm of the Law,” N.Y. Times, Oct. 8, 2010.
7 Doe v. Exxon Mobil Corp., 654 F.3d 11 (D.C. Cir. 2011).
8 Flomo v. Firestone Natural Rubber Co., 643 F.3d 1013 (7th Cir. 2011).
9 28 U.S.C. § 1350 note (2006) ("An individual who, under actual or apparent authority, or color of law, of any foreign nation—(1) subjects an individual to torture shall, in a civil action, be liable for damages to that individual; or (2) subjects an individual to extrajudicial killing shall, in a civil action, be liable for damages to the individual's legal representative, or to any person who may be a claimant in an action for wrongful death.").
10 Sarei v. Rio Tinto, PLC, 2011 WL 5041927, (9th Cir. Oct. 25, 2011) (en banc).
11 Presbyterian Church of Sudan v. Talisman Energy, Inc., 582 F.3d 244 (2d Cir. 2009).
12 Cabello v. Fernandez-Larios, 402 F.3d 1148 (11th Cir. 2005).
13 Exxon, 654 F.3d 11.
14 Flomo, 643 F.3d at 1015.
Stephen M. Nickelsburg, Partner in Clifford Chance's Washington, DC office, focuses on government investigations, white collar matters, complex civil litigation, and class action defense. Erin Louise Palmer, Associate in Clifford Chance's Washington, DC office, focuses on complex civil litigation.