United States: SDNY Applies Kiobel II And Holds Corporations May Be Liable Under The Alien Tort Statute

Last Updated: May 2 2014
Article by Alexandra Meise

In a mid-April decision in the In re: South African Apartheid Litigation, the Southern District of New York ("SDNY") has tackled one of the most pressing legal questions left unanswered by the Supreme Court last year in Kiobel v. Royal Dutch Petroleum ("Kiobel II"):  Can corporations be held liable under the Alien Tort Statute ("ATS") for violations of "the law of nations"?

The SDNY answered this question in the affirmative, and called upon the parties to brief the second: What acts might sufficiently "touch and concern" the United States to displace the presumption against extraterritoriality?

The plaintiffs in the Apartheid Litigation filed their suit over twelve years ago, alleging that numerous multi-national corporations had aided and abetted tortious conduct by South Africa's apartheid regime. In the time since, the case has survived multiple motions to dismiss and subsequent appeals, although now only two defendants remain: Ford Motor Company and International Business Machines ("IBM").

This latest district court ruling comes after the Second Circuit remanded the case following additional briefing in light of the Supreme Court's ruling in Kiobel II. The plaintiffs in Kiobel were Nigerian citizens who sued Royal Dutch Petroleum and other corporations alleging aiding and abetting of assorted violations of customary international law, all of which took place in Nigeria. The Second Circuit, despite having not done so on at least nine prior occasions, held in "Kiobel I" that the ATS does not confer federal jurisdiction over corporations. In so doing, the Second Circuit became the first (and thus far only) Circuit to come to this conclusion.

The Supreme Court accepted the case and originally heard argument on this question of corporate liability, but in a surprise move, the Supreme Court then requested a second round of argument on the question of whether the ATS could be used to bring claims for "extraterritorial" torts, meaning torts that took place outside the United States and involved only non-U.S. parties. The Court ultimately based its ruling on the latter question, concluding that the presumption against extraterritoriality applied and thus the ATS could not be used in this case to sue for acts that took place exclusively overseas and involved parties without U.S. ties.

In Kiobel II, the Supreme Court explained that in order to overcome the presumption against extraterritoriality, the alleged wrongful conduct would have to "touch and concern" the United States with "sufficient force" to displace the presumption, although it did not articulate what force might required in practice. Although the Court's majority did not directly address the question of corporate liability, it notably stated in dicta that "mere corporate presence" was not enough to displace the presumption against extraterritoriality.

The Supreme Court had the opportunity to address directly the question of corporate liability in the ATS case of Bauman v. Daimler AG, but instead ruled on other grounds, concluding that Daimler did not have sufficient contacts with California to justify exercise of personal jurisdiction under the state's long-arm statute.

Since Kiobel II, the Ninth Circuit has been the only Circuit to address the corporate liability question directly and it concluded "that corporations can face liability for claimant brought under the Alien Tort Statute."  In so doing, it pointed to the language in Kiobel II regarding corporate presence and concluded that the Court had "suggest[ed] in dicta that corporations may be liable under the ATS so long as [the] presumption against extraterritorial application is overcome."

Latching on to this corporate presence language from Kiobel II and the personal jurisdiction analysis from Bauman, and noting favorable subsequent Second Circuit references to the same, the SDNY in the Apartheid Litigation concluded:

The Supreme Court's opinions in Kiobel II and Daimler directly undermine the central holding of Kiobel I – that corporations cannot be held liable for claims brought under the ATS.  The opinions explicitly recognize 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, respectively.

The SDNY then explained:

The Supreme Court has now written two opinions contemplating that certain factors in combination with corporate presence could overcome the presumption against extraterritoriality or permit a court to exercise personal jursidction over a foreign corporation in an ATS case.  This language makes no sense if a corporation is immune from ATS suits as a matter of law.  The Supreme Court's opinions in Kiobel II and Daimler cannot be squared with Kiobel I's rationale.

The Apartheid court then challenged the two fundamental conclusions of the Second Circuit in Kiobel I, concluding that:

  • Federal common law determines who is a proper defendant under the ATS, not international law; and
  • Kiobel I was "outright wrong" to say that international law does not recognize corporate liability.

The Apartheid court seemed particularly troubled by the idea that corporations could avoid liability for such serious offenses. Underscoring that just because there have been few cases does not mean that "there is no norm establishing corporate liability for violations such as genocide or torture," the court quoted the Ninth Circuit case of Sarei v. Rio Tinto and noted:

[T]he implication that an actor may avoid liability merely by incorporating is inconsistent with the universal and absolute nature of the prohibitions established by international norms.

In re: South African Apartheid Litigation remains a case to watch. In granting plaintiffs' motion for an order finding corporations may be held liable under the ATS, the court invited plaintiffs to move for leave to amend their complaint against the remaining U.S. defendants in light of Kiobel's "touch and concern" requirement. But in so doing, the court warned plaintiffs that in order for their claims to survive another motion to dismiss, they

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 the knowledge but with the purpose to aid and abet the South African regime's tortious conduct as alleged in these complaints.

ATS watchers will not have to wait long for the response, however, as the court ordered that plaintiffs' motion and supporting papers be filed no later than May 15, defendants' response be filed by June 12, and plaintiffs' reply by July 26. We will continue to monitor the case as it goes forward.

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