Key Takeaways 

• In its just-issued opinion in Nestle USA, Inc. v. Doe, No. 19-416, slip op. (2021), the Supreme Court reaffirmed its holding from Kiobel v. Royal Dutch Petroleum Co., 569 U. S. 108 (2013), that the Alien Tort Statute does not apply extraterritorially.

• Allegations that “financing decisions” that took place in the United States related to Ivory Coast cocoa farms that allegedly used child labor were insufficient to make plaintiffs claims domestic; these were just allegations of “general corporate activity” not sufficiently related to the actual wrongdoing alleged.
• The Court did not resolve the question on which it originally granted certiorari, which was whether Alien Tort Statute exempts corporations from suit altogether.

On June 17, 2021, the United States Supreme Court issued a much-anticipated decision on the extent to which corporations can be held liable under the Alien Tort Statute (“ATS”) for actions alleged to have aided and abetted child slavery abroad.¹ As we explained in a prior OnPoint, this important case addressed the question of whether the presumption against extraterritoriality of U.S. laws could be overcome where a U.S. corporation was alleged to have overseen its foreign operations from its U.S. headquarters, but the wrongful acts were alleged to have been committed (and the injuries sustained) abroad. In an opinion joined in its relevant parts by eight justices, Justice Clarence Thomas concluded that such “general corporate activity” was insufficient domestic conduct to justify application of the ATS.²  

Citing the Court’s prior decision in Kiobel v. Royal Dutch Petroleum Co., Justice Thomas explained that U.S. statutes only apply extraterritoriality where there is a clear, affirmative indication” that Congress intended them to do so.³ The ATS does not expressly “regulate conduct” at all, much less “evince a ‘clear indication of extraterritoriality.”⁴ Rather, it merely provides federal courts with jurisdiction to hear claims brought “by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.”⁵ Thus, the ATS does not apply extraterritorially, and plaintiffs would have to show that “the conduct relevant to the statute’s focus occurred in the United States.”⁶

Putting aside the dispute as to what the ATS’s “focus” was, the Court observed that “[n]early all the conduct that [plaintiffs] say aided and abetted forced labor—providing training, fertilizer, tools, and cash to overseas farms—occurred in [the] Ivory Coast.”⁷ Although the Ninth Circuit had relied on the plaintiffs’ allegations that “major operational decisions” were made in the United States, the Court dismissed this as “allegations of general corporate activity” without a sufficient connection to the actual wrongdoing alleged.⁸ As the Court put it:

Because making “operational decisions” is an activity common to most corporations, generic allegations of this sort do not draw a sufficient connection between the cause of action respondents seek—aiding and abetting forced labor overseas—and domestic conduct. “[T]he presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case.”⁹

Thus, the Court reversed the Ninth Circuit’s judgment that the plaintiffs had sufficiently pleaded a domestic cause of action, and remanded the case.

Importantly, the majority opinion did not resolve the question on which the Court had granted certiorari, namely, whether the ATS exempts corporations from suit altogether.¹⁰ Justice Neil Gorsuch addressed this issue in a concurrence joined by Justice Samuel Alito, concluding that “[t]he notion that corporations are immune from suit under the ATS cannot be reconciled with the statutory text and original understanding.”¹¹ Justice Sonia Sotomayor agreed with this conclusion in her own concurrence, adding that “four other justices” agreed.¹² Thus, though the Nestle decision put to rest fears that corporate America could be subjected to ATS liability for purely extraterritorial harms, the concurring opinions of four justices leave open the specter that American corporations can be held accountable for ATS claims with more substantial basis in the United States.  

Footnotes

1)  Nestle USA, Inc. v. Doe, No. 19-416, slip op. (2021).
2) Id. at 5.   
3) Id. at 3 (citing Kiobel v. Royal Dutch Petroleum Co., 569 U. S. 108 (2013)). 
4) Id. 
5) Id. (quoting 28 U. S. C. §1350). 
6) Id. at 4.
7) Id. 
8) Id. at 5.
9) Id. (quoting Morrison v. National Australia Bank Ltd., 561 U. S. 247, 266 (2010) (emphasis in Morison)).
10) Nestle USA, Inc. v. Doe, No. 19-416 (Gorsuch, J., concurring) at 1.
11) Id.
12) Nestle USA, Inc. v. Doe, No. 19-416 (Sotomayor, J., concurring) at 8 n.4.