Recent Development on Corporate Liability in U.S. Courts for Conduct Outside the United States

This week the U.S. Supreme Court issued its much-awaited decision in Kiobel v. Royal Dutch Petroleum Co., which addressed the question of whether a federal court may recognize a cause of action under the Alien Tort Statute (“ATS”) for violations of the “laws of nations” occurring within the territory of a sovereign nation other than the United States.1  The Supreme Court ruled that a court’s power to recognize ATS causes of action is limited by the presumption against extraterritorial application, and rejected the claim in Kiobel on that basis.  While failing to address other significant issues such as corporate liability and whether ATS actions may be brought under an aiding and abetting theory, the Court’s opinion is a landmark victory for corporations, which, over the past 30 years, have been subject to an increasing number of U.S. lawsuits for their activities in foreign countries. 

The ATS is a jurisdictional statute, which the Supreme Court held in Sosa v. Alvarez-Machain provides U.S. courts jurisdiction to consider an alien’s federal common-law claim for violations of well-established and well-defined international law norms. 

The ATS claims in Kiobel were brought by 12 Nigerian nationals, now living in the United States, against certain Dutch, British, and Nigerian oil companies.  According to the complaint, these foreign corporations enlisted the help of the Nigerian government to violently suppress local residents’ protests of the subsidiary’s oil exploration and production activities in Nigeria.  The plaintiffs asserted claims of aiding and abetting Nigeria’s alleged human rights abuses committed in violation of international law.

The Second Circuit had dismissed the plaintiffs’ claims on the ground that corporations, unlike individuals, could not be held liable for violations of international law.  Although the Supreme Court originally granted certiorari on this issue, it later asked for additional briefing and oral argument on whether the ATS provides jurisdiction over extraterritorial conduct.  The Supreme Court’s decision, based on this broader issue, affirmed the Second Circuit’s dismissal of the claims.

In a majority opinion authored by Chief Justice Roberts (joined by Justices Scalia, Kennedy, Thomas, and Alito), the Supreme Court held that the presumption against extraterritoriality applies to the ATS and that the presumption is not rebutted by the ATS’s text, history, and purpose.  Accordingly, the Court held that the presumption “constrains courts from exercising their [federal-common law] powers under the ATS.”  The Court explained that nothing from the ATS’s history suggests that Congress “intended federal common law under the ATS to provide a cause of action for conduct occurring in the territory of another sovereign.”  The Court then applied its holding and ruled that “petitioners’ case seeking relief for violations of the law of nations occurring outside the United States is barred.”  In so holding, the Court noted that all of the alleged conduct at issue occurred abroad.

In addition to fully joining the majority, Justice Kennedy and Justice Alito (joined by Justice Thomas) wrote separate concurring opinions.  Justice Kennedy noted that many human rights abuse victims can seek redress through the Torture Victim Protection Act (“TVPA”).  He left open the possibility that there may be cases “covered neither by the TVPA nor by the reasoning and holding of today’s case,” and that in such cases, proper implementation of the presumption against extraterritoriality “may require some further elaboration and explanation.”  Justice Alito added that no ATS claim can overcome the presumption “unless the domestic conduct is sufficient to violate” the limited class of international law norms recognized in Sosa.

In a separate opinion, concurring only in the judgment, Justice Breyer (joined by Justices Ginsburg, Sotomayor, and Kagan) agreed that the ATS does not provide jurisdiction under the facts in this case.  The minority, however, rejected the presumption-against-extraterritoriality approach, finding that ATS jurisdiction attaches “where (1) the alleged tort occurs on American soil, (2) the defendant is an American national, or (3) the defendant's conduct substantially and adversely affects an important American national interest, and that includes a distinct interest in preventing the United States from becoming a safe harbor . . . for a torturer or other common enemy of mankind.”

The Court’s ruling presents a sea change in ATS litigation by fully embracing the same type of strong presumption against extraterritorial application that is applied to other federal statutes.  Further, in expressly stating that there was no evidence that Congress “intended federal common law under the ATS to provide a cause of action for conduct occurring in the territory of another sovereign,” the Court did not appear to limit its reasoning to the situation presented in Kiobel, where both the plaintiffs and defendants were foreign and the tortious conduct all occurred abroad.  Exactly how far the rationale will extend to other circumstances—such as where the defendant is a U.S. corporation and/or some of the underlying conduct occurred in the United States—remains an open question. Further, the Court did not address the availability of aiding and abetting liability or resolve the conflict over the issue whether a corporation, as opposed to an individual, may be sued under the ATS.  Thus, although Kiobel is a true game changer and certainly provides a strong pro-defendant signal to the lower courts, there are open issues that will undoubtedly continue to be litigated in U.S. courts.

[1] 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.”  28 U.S.C. §1350. 

Please click here to read more about the case and contact Bob LoebLaurie Strauch Weiss or James Stengel for more information or inquiries regarding any ATS issues that your company is facing.

Our Team

The litigators at Orrick have significant experience with ATS cases.  For example, Appellate partner Bob Loeb, while at the U.S. Department of Justice, was involved in most of the major ATS litigation in the last decade, including Kiobel, Doe v. Unocal, Alvarez-Machain v. Sosa (arguing to the Ninth Circuit sitting en banc), In re Apartheid Litigation, and Sarei v. Rio Tinto (arguing to the Ninth Circuit sitting en banc).

Laurie Strauch Weiss, head of Orrick’s Mass Torts and Product Liability (MTPL) practice, and James Stengel, a partner in the MTPL practice, have extensive experience with ATS litigation. In In re Agent Orange Product Liability Litigation, Laurie and Jim helped to secure a historic and complete win for The Dow Chemical Company in actions brought under the ATS alleging personal injuries from exposure to the herbicide Agent Orange during the Vietnam War. Their other significant and recent ATS matters include Abagninin v. Amvac Chemical Corp. and Viera v. Eli Lilly.

If you are interested in learning more about recent ATS case developments or more generally the application of U.S. law abroad, contact us for a free subscription to The World in U.S. Courts: Orrick’s Quarterly Review of Decisions Applying U.S. Law to Foreign Activities.