United States Supreme Court Decides Question of Corporate Liability Under Alien Tort Statute On Broader Grounds

by Sheppard Mullin Richter & Hampton LLP
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In Kiobel v. Royal Dutch Petroleum Co., No. 10-1491, 2013 WL 1628935 (U.S. Apr. 17, 2013), the Supreme Court of the United States addressed the circuit split that arose following the 2010 decision of the United States Court of Appeals for the Second Circuit in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010). As previously reported (see also blog articles here and here), the Second Circuit in Kiobel held that tort liability under the Alien Tort Statute, 28 U.S.C. § 1350 (“ATS”), for violations of international law does not extend to corporations because corporate liability is not yet considered a norm of customary international law. The Ninth Circuit, District of Columbia Circuit, Seventh Circuit and Eleventh Circuit all reached the opposite conclusion. Although Kiobel was appealed to the Supreme Court on this narrow issue of corporate liability, the Supreme Court addressed the broader question of whether the ATS applies to conduct by anyone, whether individual or corporate, that occurs solely outside the United States. The Supreme Court held that the ATS does not apply to such foreign-only conduct. This decision confirms that, with rare exceptions, corporations cannot be held liable in federal courts for torts predicated on violations of international law that occur wholly in a foreign country.

The plaintiffs in Kiobel, a class of residents of the Ogoni region of Nigeria, alleged that defendants Royal Dutch Petroleum Company and Shell Transport & Trading Company PLC aided and abetted the Nigerian military in human rights abuses against Ogoni residents by providing the military with food, transportation, and compensation, and by allowing the military to use their property to stage military attacks in Nigeria.

The United States District Court for the Southern District of New York dismissed four of plaintiffs’ seven claims, reasoning that the alleged corporate misconduct was not a violation of international law. In an interlocutory appeal, the Second Circuit dismissed the entire complaint on the ground that customary international law does not provide for or recognize corporate liability for violations of international law.

The Supreme Court, considering the broader question of whether the ATS applies to conduct committed outside the United States, held that the ATS only applies to conduct committed within the United States or on the high seas. Thus where, as in Kiobel, no relevant conduct occurs within the United States, a potential plaintiff cannot bring a claim under the ATS. The Court noted that a claim based upon acts occurring outside the United States may be appropriate under the ATS if the claim touches and concerns the United States with sufficient force to dispute the presumption that U.S. law does not apply internationally. Although the Court did not address the question of corporate liability directly, it did imply that corporations may be subject to claims under the ATS which satisfy the aforementioned requirements, noting that “mere corporate presence” is insufficient to dispute the presumption that the ATS does not apply to foreign-only conduct.

The Supreme Court’s decision in Kiobel decision limits plaintiffs’ ability to bring claims under the ATS for conduct occurring outside of the United States, whether against corporations or individuals. Yet while it is clear that “mere corporate presence” will not suffice, the contours of the limitation are still to be determined.

For further information, please contact John Stigi at (310) 228-3717 or Robin Achen at (213) 617-5579.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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