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  • Written by  Keith Gibson. http://http://product-liability.weil.com
  • Published in In the News
  • Read 7363 times

D.C. Circuit and Seventh Circuit Take Issue With Second Circuit’s Kiobel Decision Eliminating Corporate ATS Liability

Another issue that should be followed arising out of the Doe v. Exxon Mobil case – assuming the Supreme Court does not eliminate corporate ATS liability in its entirety - is clarification on the proper standard for aiding and abetting liability under the ATS.  The Second Circuit held in Khulumani v. Barclay National Bank, Ltd. and Presbyterian Church of Sudan v. Talisman Energy, that in order to establish aiding and abetting liability in an ATS claim, the plaintiff must show that the defendants (1) provided practical assistance which had a substantial effect on the perpetration of the crime, and (2) provided such assistance with the purpose of facilitating the commission of the crime.

Here at Product Liability Monitor, we have been closely following a number of cases brought against corporations under the Alien Tort Statute, 28 U.S.C. § 1350 (ATS).  In these corporate ATS cases, plaintiffs’ attorneys seek to hold deep-pocketed corporations that do business in areas with questionable or poor human rights records secondarily liable for human rights abuses perpetrated by local governments or militaries.  The Supreme Court has only taken up one ATS case, Sosa v. Alvarez-Machain, 542 U.S. 692 (2004), which did not address issues of corporate liability or secondary liability under the ATS.  Moreover, Sosa did not provide lower courts with clear guidance as to the scope of the ATS.  Companies have been anxiously awaiting for the Supreme Court to take up a corporate ATS case and define the scope and reach of the ATS with respect to corporate liability.

Most of the legal analysis in corporate ATS cases has centered around the availability of secondary liability, such as aiding and abetting liability, under the ATS.  Secondary liability was not at issue inSosa, and therefore, the Supreme Court has not addressed the issue in the context of the ATS.  Notwithstanding the Supreme Court’s warnings to federal courts not to take too expansive a view on the scope of the ATS, most courts have held that the ATS does support liability for aiding and abetting violations of international law.  Additionally, most courts assumed that corporations were proper defendants under the ATS without directly addressing the issue.

Last fall, however, the Second Circuit issued a decision in Kiobel v. Royal Dutch Petroleum, which held that the ATS was limited to suits brought against individuals and did not support jurisdiction against corporations.  The Kiobel opinion represented a potential watershed moment in ATS litigation, as it threatened to eviscerate the current tidal wave of corporate ATS suits which have significantly altered the risk calculus of companies doing business abroad, particularly those that do business in many of the resource-rich third-world countries with histories of human rights abuses.  At the time Kiobel was decided, only the Eleventh Circuit had specifically addressed the issue of whether the ATS supported jurisdiction against corporate defendants in Romero v. Drummond Co.However, unlike Kiobel, theDrummond Court provided very little analysisaround the issue of corporate liability under the ATS, holding that Eleventh Circuit law “grants jurisdiction from complaints of torture against corporate defendants,” and therefore, the ATS would support jurisdiction against corporate defendants in that Circuit.  (For our prior coverage of the Kiobel decision, please see herehere, and here).

Therefore, while Kiobel was the only case to find that the ATS does not extend jurisdiction to corporations, until recently it was the only case to provide any meaningful analysis of the issue.  Earlier this month, however, the D.C. Circuit and the Seventh Circuit each issued opinions stating that Kiobelwas wrongly decided and holding that the ATS does, in fact, support jurisdiction against corporations.  On July 8, the D.C. Circuit issued a 2-1 decision in Doe v. Exxon Mobil Corp., which analyzed and rejected all of the Kiobel majority’s bases supporting its holding that corporate defendants could not be sued under the ATS.  Writing for the majority, Judge Rogers held that the Kiobel majority overlooked the distinction between norms of conduct and rules for remedies in finding that corporate liability was not sufficiently established under international law to support ATS jurisdiction.  Judge Rogers further held that general principles of law are a standard source of international law, and the principle of corporate liability is generally accepted under domestic systems of law.  On these, and other, bases, the D.C. Circuit held that the ATS does support jurisdiction against corporate defendants and reversed the district court’s dismissal of the plaintiffs’ ATS claims.  Judge Kavanaugh filed a dissenting opinion in which he agreed with the holding of Kiobel that corporate liability is not supported by customary international law, and therefore, is not available under the ATS.

Then, on July 11, the Seventh Circuit also took issue with the Second Circuit’s Kiobeldecision in Flomo v. Firestone Natural Rubber Co. Writing for the Court, Judge Posner rejected theKiobel court’s argument that corporations have never been prosecuted for violating customary international law, which was a primary basis for its holding that international law – and therefore, the ATS – does not support corporate liability.  Judge Posner focused on the dismantling of a number of German companies that supported the Nazi regime’s atrocities - which was accomplished through the use of customary international law by the Allied Powers - as support for the Court’s finding that international law does support corporate liability.  Judge Posner also took the U.S. Chamber of Commerce to task for supporting dismissal on the grounds that ATS liability would be bad for business, arguing that immunity from ATS liability would be disadvantageous to businesses that avoided the commission of human rights violations.

The Kiobel plaintiffs have filed a cert petition, which is currently pending before the Supreme Court.  The recent decisions in Doe v. Exxon Mobil and Flomo v. Firestone may increase the likelihood that the Supreme Court grants cert in order to resolve the issue of whether the ATS supports corporate liability.  This may be a positive development for corporations, given the in-depth analysis given to the issue by the Kiobel Court.  Were the Supreme Court to agree with the reasoning in Kiobel, it would be a significant victory for corporations that do business abroad, particularly companies that do business in resource-rich countries that typically do not have good human rights records.

Another issue that should be followed arising out of the Doe v. Exxon Mobil case – assuming the Supreme Court does not eliminate corporate ATS liability in its entirety - is clarification on the proper standard for aiding and abetting liability under the ATS.  The Second Circuit held in Khulumani v. Barclay National Bank, Ltd. and Presbyterian Church of Sudan v. Talisman Energy, that in order to establish aiding and abetting liability in an ATS claim, the plaintiff must show that the defendants (1) provided practical assistance which had a substantial effect on the perpetration of the crime, and (2) provided such assistance with the purpose of facilitating the commission of the crime.  However, in Doe v. Exxon Mobil, the D.C. Circuit eliminates the “purpose” requirement listed by the Second Circuit and holds that knowing assistance is sufficient for liability.  Obviously, the elimination of any purpose or intent requirement for corporate liability would be significant to corporate risk analysis, and it is an issue that should be closely monitored as these corporate ATS cases move towards potential review by the Supreme Court.

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