United States: Second Circuit's Rejection Of Corporate Liability Under The Alien Tort Statute Stands

Executive summary

In a short, but sharply divided decision rendered on 4 February 2011, the Second Circuit denied rehearing in banc of a 17 September 2010 panel decision in Kiobel v. Royal Dutch Petroleum holding that because corporate liability is not recognized under customary international law, federal courts do not have jurisdiction to hear cases brought against corporations under the U.S. Alien Tort Statute. By characterizing the case as one that "presents a serious issue and generates a circuit split" the dissenters clearly expressed the view that the issue is ripe for Supreme Court review. On the same day, the Kiobel panel rejected two-to-one plaintiffs' request for a panel rehearing. As a consequence, corporations will continue not to be subject to Alien Tort Statute claims in the Second Circuit.

Background

Plaintiffs, residents of the Ogoni Region of Nigeria, commenced this action in 2002 in federal court in New York, alleging that the Shell defendants were complicit in the Nigerian government's international law violations. The lawsuit was brought under the Alien Tort Statute (ATS), a 1789 U.S. statute under which plaintiffs have brought numerous claims against multinational corporations in the last two decades alleging serious violations of human rights. In 2006, the trial court dismissed certain of plaintiffs' claims, but denied defendants' motion to dismiss others. Both sides appealed the lower court's decision.

The Second Circuit's decisions

The Court's September 17 panel decision, written by Judge José Cabranes and joined by Chief Judge Dennis Jacobs, held that international law, not domestic law, governs the scope of liability for violations of customary international law under the ATS, and that the liability of corporations for violations of customary international law has not attained a discernible, much less universal, acceptance among nations of the world in their relations inter se. Because corporate liability is not recognized as a "specific, universal, and obligatory" international norm, as the Supreme Court required in its only ATS decision, the Court held that federal courts lacked subject matter jurisdiction to entertain ATS cases against corporations. Plaintiffs sought rehearing and rehearing in banc.

In an opinion dissenting from the Court's denial of rehearing in banc, Judge Lynch, joined by three others, argued that rehearing in banc should have been granted because the panel's decision conflicts with a decision of the Eleventh Circuit Court of Appeals and because "the panel majority opinion is very likely incorrect as to whether corporations may be found civilly liable under the Alien Tort Statute . . . ."

Even more interesting, though, are the opinions rendered by the Kiobel panel in rejecting a panel rehearing. Chief Judge Jacobs' opinion examines the real-world consequences of reading the concept of corporate liability into international law. Many ATS cases are commenced against foreign corporations, and many of those cases have provoked vehement protest from the defendants' home nations, impairing rather than encouraging comity among nations. Further, the Second Circuit's decision in Presbyterian Church of Sudan v. Talisman Energy Inc., unanimously affirming the district court's grant of summary judgment in Talisman Energy's favor, held that a successful ATS plaintiff must demonstrate that the defendant aided and abetted human rights abuses "with the positive intention of bringing about a violation of the Law of Nations." (Hogan Lovells represented Talisman Energy in that case). As a consequence of the Talisman Energy decision, the only viable ATS action is one in which a corporation purposefully engaged in the most heinous international crimes known to man – examples of which are virtually non-existent. Despite that reality, Chief Judge Jacobs wrote, the ability of plaintiffs to plead around Talisman means that multinational corporations still would be subject to coercive pressures to settle ATS cases "even where a plaintiff's likelihood of success on the merits is zero." Kiobel, however, appropriately offers a threshold ground for the dismissal of such actions.

Judge Leval, who dissented from the panel decision in Kiobel, dissented also from the decision denying a panel rehearing. He argues that Chief Judge Jacobs' opinion "reveals an intense, multi-faceted policy agenda" and is founded on policy concerns that are inappropriate for the judiciary to consider and that do not justify the conclusion that corporations cannot be liable for violations of customary international law. In his concurring opinion, Judge Cabranes allows that grave policy decisions may influence a legislative determination as to whether corporations should be subject to ATS liability, but he observes that it was "fidelity to the law," not those policy decisions, that drove the majority's decision.

What's next?

It remains to be seen whether the Kiobel plaintiffs will seek Supreme Court review. And even if they do seek Supreme Court review, it is by no means certain that the Supreme Court will grant certiorari, having recently declined the opportunity to address the question of corporate liability under the ATS in Talisman Energy. At least for now, the courts within the Second Circuit remain closed to ATS litigants pursuing claims against corporations

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