Corporate Liability and the Alien Tort Statute: Highlights from the Oral Arguments in Jesner v. Arab Bank

by Foley Hoag LLP - Corporate Social Responsibility
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On Wednesday, October 11, the U.S. Supreme Court heard oral arguments in Jesner v. Arab Bank. The case may once and for all determine whether companies are appropriate defendants in cases filed pursuant to the Alien Tort Statute (“ATS”).

In granting plaintiffs’ petition for a writ of certiorari, the Supreme Court agreed to review the following question:

This case presents the question this Court granted certiorari to resolve, but ultimately left undecided, in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (2013): Whether the Alien Tort Statute, 28 U.S.C. § 1350, categorically forecloses corporate liability.

A preliminary transcript of Wednesday’s arguments is available here. I had the opportunity to attend the arguments and the discussion was lively, if not particularly illuminating as to how the Court will ultimately seek to address the question at issue.

Background

Plaintiffs filed their petition after the Second Circuit Court of Appeals upheld the dismissal of claims in five consolidated cases against Arab Bank, PLC. Plaintiffs in each of the cases alleged that they, or their family members, had been harmed in attacks by terrorist organizations that had received financing, in part, as a result of accounts and transfers arranged by the bank.

In upholding the dismissal of plaintiffs’ ATS claims, the Second Circuit had relied upon its 2010 decision in Kiobel v. Royal Dutch Petroleum (“Kiobel I”) in finding that the law of the Circuit still holds that plaintiffs cannot bring claims against corporations pursuant to the ATS. In its December 2015 decision, the Second Circuit found that the Supreme Court’s 2013 decision in Kiobel v. Royal Dutch Petroleum (“Kiobel II“) had not overruled the Circuit on this issue, as the Supreme Court’s decision was ultimately focused on the issue of extraterritoriality and did not reach the question of corporate liability.

Oral Arguments

Petitioners Argue that a Categorical Rule Against Corporate Liability is Not the Answer to the Court’s Concerns about the ATS

Throughout the arguments, several Justices expressed concerns about the foreign relations concerns that can arise in the context of ATS cases. Petitioners’ counsel, Jeffrey Fisher, repeatedly noted these concerns can be addressed without adopting a rule precluding corporate liability. Mr. Fisher noted that “there are many other doctrines readily available to courts to directly and effectively deal with those issues,” citing the presumption against extraterritoriality, and exhaustion of remedies as examples. Citing the impact of the Supreme Court’s decision in Kiobel II, petitioners observed that what remains is a “very very small universe of ATS cases, a manageable universe of cases” — one which does not require further limitation through the imposition of a bar on corporate liability.

This argument was echoed by counsel for the United States, Brian Fletcher, which is appearing in the case as amicus curiae supporting neither party. Mr. Fletcher stated that, in the government’s view, a determination that a “company can never be a defendant in an Alien Tort Statute case” as a “categorical rule is wrong.”

Throughout the argument, there was certainly a sense that significant concerns exist regarding the facts at issue in the case itself. As Justice Kagan noted, there are “plenty of things to gripe about in this case” and Justice Alito’s questions revealed significant concerns about the extraterritorial nature of the conduct at issue. Notably, Mr. Fletcher, in presenting the views of the United States, stated clearly that the government believes that facts in the case, to the extent that they are known, are not sufficient to overcome the presumption against extraterritoriality. At this time, advocates for corporate liability may hope that, to the extent the Court does answer the question on which it granted certiorari, it does so in a way that upholds corporate liability while leaving it to the lower court to address other concerns.

Corporate Liability and the Question of “What is a Norm?”

Counsel for Arab Bank, Paul Clement, argued vehemently that there is no “specific, universal, obligatory norm under international law that imposes obligations directly on corporations.” The “specific, universal, obligatory” standard has been central to ATS jurisprudence since the Supreme Court’s 2004 decision in Sosa v. Alvarez-Machain, which held that, in order for conduct to be sufficient to support a claim under the ATS, it must violate well-defined and universal international law norms, such as the norms against slavery and genocide.

The views of each Justice as to whether corporate liability is a matter of conduct or a matter of remedy will clearly be central to the final opinion in the case. In Sosa’s famous footnote 20, the Court left open the question of “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.” Recognizing that the Court is likely to be split on the questions left unaddressed in Sosa, the views of Justice Kennedy are likely to be crucial to the outcome of the case.

During the arguments, Justice Kennedy questioned whether the imposition of liability “impose[s] a norm in the sense that it tells corporations what they must do, how they must run their business.” The question, notably the only question Justice Kennedy asked during the arguments, is undoubtedly concerning to advocates for corporate liability. Court observers will remember that Justice Kennedy has already indicated uncertainty about the scope of the ATS. In a short concurrence in Kiobel II, he noted that the Court’s opinion left “open a number of significant questions regarding the reach and interpretation of the Alien Tort Statute.”

Mr. Fisher sought to address Justice Kennedy’s concern in part by highlighting recent decisions in which the Court has found corporate liability to be “remedial,” including United States v. BormesMr. Fisher also noted that “[w]hat the Court has said time and again is that part of the corporate bargain is that you get privileges and opportunities, but you also have burdens of being held liable in tort actions.”

Justice Kagan’s Difficult Hypothetical

Justice and counsel for both parties spent time addressing the original purpose of the ATS, specifically the intent of the First Congress to provide a measure of accountability to foreign nations when their citizens are harmed. One of the questions raised during the arguments was, as Justice Kagan put it, “why would the foreign government care that the perpetrator was a corporation rather than an individual?”

In addressing this question, Justice Kagan asked whether respondent’s position was that there should be no corporate liability under the ATS in a instance in which an American corporation employed foreign slave labor in the United States. Such a fact scenario limits any concerns about extraterritoriality and raises the question of whether or not the United States is going to provide the victims in such an scenario with the ability to seek compensation. Mr. Clement, in addressing the question, stated that plaintiffs would be able to sue individuals at the company, but not the company itself. He noted that “in your hypothetical, you’re going to find plenty of deep-pocketed defendants.” Justice Kagan seemed unmoved by this argument, questioning “why on earth would you draw a distinction” between corporate and individual liability in such a case.

Looking Ahead

This case has been watched closely both by corporate attorneys and by plaintiffs’ advocates seeking to hold companies liable for complicity in human rights abuses. With a decision expected by mid-2018, at this time, it is clear that there are deep divisions within the Court regarding the fundamental questions at issue in ATS litigation.

The final opinion of the Court is likely to be fragmented, with the potential for multiple Justices to write their own concurrences or dissents. Ultimately, one can only hope that a few of the fundamental questions at issue in these cases will finally be addressed.

[View source.]

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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