By Neil A.F. Popović
On April 17, 2014, District Judge Shira Scheindlin, perhaps best known for her ruling on New York City’s stop-and-frisk policy, issued another decision sure to provoke strong reactions on both sides. In In re South African Apartheid Litigation, No. 02-MDL-1499 (SAS) (S.D.N.Y.), Her Honor ruled that “corporations may be held liable” under the Alien Tort Statute, 28 U.S.C. § 1350 (“ATS”). More specifically, the court held that Ford Motor Company and IBM might face liability for aiding and abetting violations of international norms by manufacturing military vehicles and computers for South African security forces during the apartheid era. What does that mean, and why does it matter?
The ATS confers federal 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.” 28 U.S.C. § 1350. In 2010, the Second Circuit Court of Appeals decided Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010), holding that the ATS does not allow claims against corporations, and dismissing claims by Nigerian nationals alleging various corporations aided and abetted human rights violations in Nigeria. The Supreme Court granted certiorari on the question of corporate liability and heard oral argument in 2012. After oral argument the Court directed the parties to submit supplemental briefing on a different question—“whether and under what circumstances the ATS allows courts to recognize a cause of action for violations of the law of nations occurring” outside the United States—and it scheduled another round of oral arguments.
The Supreme Court issued its opinion in Kiobel on April 17, 2013, affirming the Second Circuit’s judgment of dismissal “based on . . . the second question” and ruling that the “presumption against extraterritoriality applies to claims under the ATS.” 133 S. Ct. 1659, 1663 (2013). The Court held that: “all the relevant conduct took place outside the United States. And even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application.” 133 S. Ct. at 1669. The Court went on to say: “Corporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices.” Id. The Court’s opinion did not directly address the issue of corporate liability under the ATS.
The South African Apartheid case was pending in the Second Circuit when the Supreme Court issued its opinion in Kiobel. After considering post-Kiobel supplemental briefing, the court of appeals remanded the case to the district court, stating: “The opinion of the Supreme Court in Kiobel plainly bars common-law suits, like this one, alleging violations of customary international law based solely on conduct occurring abroad.” Balintulo v. Daimler AG, 727 F.3d 174, 182 (2d Cir. 2013). On remand, Judge Scheindlin dismissed the remaining foreign defendants and ordered the remaining parties—plaintiffs and the American company defendants—to brief the question whether corporations can be held liable under the ATS after Kiobel.
Deciding that question required two steps of analysis. First, the court had to consider whether the question of corporate liability remained open in light of the Second Circuit’s Kiobel decision precluding corporate liability, followed by the Supreme Court’s decision dismissing plaintiffs’ claims based on the presumption against extraterritoriality. Judge Scheindlin surveyed recent case law, including the Supreme Court’s decision in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), in which the High Court rejected ATS claims against a German company because the company lacked sufficient U.S. contacts to support personal jurisdiction, but made no reference to corporate liability. Id. at 763.
Judge Scheindlin concluded that the Supreme Court’s decisions in Kiobel and Daimler “directly undermine” the Second Circuit’s holding that corporations cannot be liable under the ATS. According to Her Honor, by “explicitly recognizing that corporate presence alone is insufficient to overcome the presumption against extraterritoriality or to permit a court to exercise personal jurisdiction over a defendant in an ATS case,” the Supreme Court implied that “corporate presence plus other factors can suffice” to overcome the presumption against extraterritoriality and justify exercising personal jurisdiction. The standards “may be difficult to meet in all but the most extraordinary cases,” but the Supreme Court’s explication that certain factors could overcome the presumption or justify personal jurisdiction would not make sense if corporations were otherwise immune from ATS liability.
Second, having determined that corporate liability remains possible notwithstanding the Second Circuit’s opinion in Kiobel, the court concluded that corporations are subject to liability under the ATS. Citing Flomo v. Firestone Natural Rubber Co., 643 F.3d 1013, 1019 (7th Cir. 2011), Judge Scheindlin distinguished between: (a) “whether the alleged conduct violates a definite and universal international norm,” which is governed by international law; and (b) who can be held liable for a violation of the norm, which is governed by federal common law. The court specifically disagreed with the Second Circuit’s opinion in Kiobel, stating that the appellate court had misread the famous footnote 20 from Sosa v. Alvarez-Machain, 542 U.S. 692, 733 n.20 (2004), in which the Supreme Court posed the question “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.” In Judge Scheindlin’s analysis, footnote 20 does not suggest that corporate or individual liability is a substantive element of international law, but rather indicates that some norms of international law may only be actionable when violated by the state, as distinguished from private actors, corporate or individual.
On the question of who can be liable, the court found it “obvious” that corporations are subject to tort liability. The court rejected proposed analogies to actions brought under Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388 (1971), because Bivens addressed liability of individual federal officers, or the Torture Victims Protection Act (“TVPA”), because the TVPA refers specifically and only to liability of “individual[s].” It did not matter to Judge Scheindlin that there may have been few past cases establishing corporate liability for violations of international norms. She flatly rejected the notion that a private actor could shield itself from liability for violation of universal norms by incorporating.
Judge Scheindlin authorized plaintiffs to move for leave to file an amended complaint against the remaining defendants, stating, “plaintiffs must make a preliminary showing that they can plausibly plead that those defendants engaged in actions that ‘touch and concern’ the United States with sufficient force to overcome the presumption against the extraterritorial reach of the ATS, and that those defendants acted not only with knowledge but with the purpose to aid and abet the South African regime’s tortious conduct . . . .” Thus, the court left the door ajar for plaintiffs to pursue corporate defendants under the ATS, but it did not make it easy for them to squeeze through. Even if plaintiffs can overcome the presumption against extraterritoriality and establish the requisite “purpose,” it remains to be seen whether the Second Circuit—and perhaps the Supreme Court—will explicitly recognize corporate liability under the ATS.
For American companies doing business overseas, the South African Apartheid decision serves as a reminder that they cannot ignore human rights violations associated with their overseas activities, lest they face potential liability in U.S. courts under the ATS. And for foreign plaintiffs seeking compensation in U.S. courts under the ATS, the decision serves as a reminder that they must be able to establish not only that the defendants’ conduct violates universally established and sufficiently precise norms of international law, but also that the conduct “touches and concerns” the United States with sufficient force to overcome the presumption against extraterritoriality, and that defendants acted “not only with knowledge but with the purpose to aid and abet” the norm-violating conduct.