May 1, 2014

Kiobel, One Year Later

by Lisa Rickard
President, U.S. Chamber Institute for Legal Reform

While some decisions of the U.S. Supreme Court are narrow and affect only the parties in the case — others can alter the course of American history. In either instance, even the narrowest of questions can ripple through our court system, creating “aftershock” decisions for years to come.

Case in point: The Court’s April 2013 decision in Kiobel v. Royal Dutch Petroleum, in which the Court ruled that U.S. Courts do not have jurisdiction under the Alien Tort Statute (ATS) when all conduct took place outside the United States.

The ATS, originally enacted as part of the Judiciary Act of 1789, is a federal law allowing aliens to bring civil suits in U.S. courts for international law violations. In Kiobel, the Court held that the ATS does not reach alleged misconduct that, “took place outside the United States” in most cases.

The Court’s decision made Kiobel easy to decide; the claims were brought by Nigerian nationals against British, Dutch and Nigerian corporations for allegedly aiding and abetting human rights violations committed by the Nigerian government in Nigeria, and thus had no nexus to the United States.

It was a ruling which one judge characterized as, “an earthquake that has shaken the very foundation” of the Alien Tort Statute (ATS) equaling a, “seismic shift … on the legal landscape.”

So, what kind of “aftershocks” has the decision produced in the year since it was rendered?

Over the past twelve months, lower courts have adhered to this precedent by dismissing several high-profile cases. These courts have agreed Kiobel prevents plaintiffs from bringing so called “foreign cubed” cases—those involving foreign plaintiffs suing foreign defendants for committing torts in a foreign country.

However, lower courts are still grappling at lingering question of what happens to ATS cases with a greater connection to the United States? Is a corporation’s mere presence in the United States a sufficient basis to establish ATS jurisdiction?

As Kiobel Turns One, Its Effect Remains Unclear, a paper recently released by the U.S. Chamber Institute for Legal Reform, takes an in-depth look at these questions. It finds that, thus far, rulings from the Second Circuit and a federal court in Alabama suggest plaintiffs must allege, at a minimum, that U.S. defendants took substantial steps within the United States to execute the unlawful conduct overseas; mere U.S.-based activity does not itself violate international law, and is likely insufficient.

The courts also have generally refused to distinguish between U.S. and foreign defendants in determining whether ATS claims “touch and concern” the United States, focusing instead on the location of the relevant foreign conduct. Several key cases are pending within the D.C. Circuit (against Exxon) and the Ninth Circuit (against Nestle USA), and those courts will soon have to decide what level of domestic activity could be sufficient to establish jurisdiction under the ATS.

U.S. companies may still have to continue defending ATS suits for the time being, as some courts have allowed plaintiffs an opportunity to amend their pleadings to attempt to allege a sufficient connection the U.S.

And the threshold issue of whether corporations are proper defendants in ATS suits remains unsettled. On April 17, 2014, a judge in the Southern District of New York held that the Supreme Court’s decision to affirm Kiobel on the ground that the case was an improper exercise of extraterritorial jurisdiction “directly undermine[d]” the Second Circuit’s prior holding that corporations were not proper defendants in ATS cases. (This conclusion may surprise the Supreme Court justices, none of whom even addressed the issue of corporate liability in Kiobel.) As a result, the Second Circuit likely will soon reconsider the question of corporate liability.

However, what the most telling result of Kiobel is the sound of silence. No new ATS cases have been filed against U.S. companies over the past year.

What has become clear is the aftershocks are not over and it remains to be seen the scope other courts will afford Kiobel. Plaintiff’s lawyers may simply be probing the limits to establish jurisdiction under the ATS, making the outcomes of the pending cases an important directional compass in the future of ATS litigation.

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