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Article: October 2018: Supreme Court Holds Foreign Corporations Cannot Be Liable Under the Alien Tort Statute

October 01, 2018
Business Litigation Reports

On April 24, 2018, the United States Supreme Court issued its much-anticipated decision in Jesner v. Arab Bank, PLC, 138 S. Ct. 1386 (2018), conclusively holding that the Alien Tort Statute (“ATS”) does not afford a private right of action against foreign corporations. In so holding, the Court has given foreign corporations — particularly those domiciled in nations that lack meaningful civil remedies for acts amounting to violations of international law — cause for at least temporary relief.

Previously, in Kiobel v. Royal Dutch Petroleum, 569 U.S. 108 (2013), Quinn Emanuel obtained a landmark, unanimous 9-0 decision in the Supreme Court holding that the ATS does not apply extraterritorially to so-called “foreign cubed” cases, i.e., cases in which the plaintiffs, defendant, and underlying alleged conduct all occurred abroad. 569 U.S. at 124-25. In Jesner, the Supreme Court definitively resolved the question it left unresolved in Kiobel: whether corporations can ever be subjected to liability under the ATS by confirming that they cannot.

Enacted in the Judiciary Act of 1789, the ATS provides jurisdiction for aliens to bring civil actions for torts “committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. § 1350. Although the statute was rarely used prior to 1980, the ATS became a popular tool for public interest organizations seeking to bring actions on behalf of plaintiffs claiming human rights violations abroad, often at the hands of foreign governments that enjoy sovereign immunity against such suits. In Kiobel, the district court held that the ATS does not authorize suits against corporations and dismissed the plaintiffs’ claims. 569 U.S. at 114. After the Second Circuit affirmed, the Supreme Court unanimously affirmed the Second Circuit’s decision in favor of Quinn Emanuel’s client on the alternate ground that the ATS does not apply extraterritorially to “foreign cubed” cases, but it did not address whether corporations may be sued under the statute outside of “foreign cubed” factual contexts. 569 U.S. at 124-25.

In Jesner, victims of terrorist acts attributed to

Hamas sued a major Jordanian bank, Arab Bank, PLC, in the United States District Court for the Southern District of New York. Id. at 1393-94. The plaintiffs alleged that Arab Bank was complicit in Hamas’s actions by facilitating its funding by (i) clearing dollar-denominated transactions through the Clearing House Interbank Payments System (“CHIPS”); and (ii) laundering money for the Texas-based Holy Land Foundation for Relief and Development, a charity plaintiffs alleged was affiliated with Hamas. The plaintiffs further alleged that Arab Bank conducted both activities in part through its New York branch. 138 S. Ct. at 1394-95. Although the Second Circuit’s intervening decision in Kiobel barring suits against corporations was affirmed by the Supreme Court on different grounds, the Second Circuit’s holding that corporations are not amenable to suit under the ATS remained controlling precedent in that Circuit. Thus, the district court dismissed the Jesner case and the Second Circuit affirmed.

Although Jesner squarely presented the question of corporate ATS liability left unresolved in Kiobel, a five Justice majority of the Supreme Court held in an opinion by Justice Kennedy that foreign corporations cannot be subjected to liability under the ATS. The Court reached this conclusion because it found the ATS was designed to be modest and narrow in scope with the purpose of improving foreign relations, id., and that extending the ATS to provide a remedy against foreign corporations is more appropriate for Congress than the Court. Id. at 1402-03. Turning to the facts of Jesner, the Court found that it would thus “be inappropriate for courts to extend ATS liability to foreign corporations.” Id.

Although the Court still did not go as far as the Second Circuit did in Kiobel in finding that liability under the ATS was precluded for any corporations, the Jesner decision still has important ramifications:

First, the Jesner decision clearly relegates the issue of foreign corporate liability for violations of international law to Congress. Unless Congress amends the ATS explicitly to allow suits against foreign corporations, such suits will be barred. See, e.g., Kaplan v. Cent. Bank of the Islamic Republic of Iran, No. 16-7122, 2018 WL 3490072, at *1 (D.C. Cir. July 20, 2018) (affirming dismissal of ATS claims against Iranian banks alleged to have funded rocket attacks by Hezbollah); Wildhaber v. EFV, No. 17-CV-62542, 2018 WL 3069264, at *6 (S.D. Fla. June 21, 2018) (dismissing pro se plaintiff’s claims against Swiss government authorities).

Second, Jesner suggests without deciding that, as the Second Circuit had held in Kiobel, international human rights norms apply solely to natural persons and not to corporations. See Jesner, 138 S. Ct. at 1402 (noting that the “international community” has yet to universally accept corporate liability for acts of its employees); Kiobel, 621 F.3d 111, 119 (2d Cir. 2010) (“From the beginning, however, the principle of individual liability for violations of international law has been limited to natural persons—not ‘juridical’ persons such as corporations—because the moral responsibility for a crime so heinous and unbounded as to rise to the level of an ‘international crime’ has rested solely with the individual men and women who have perpetrated it.”); see also The Nurnberg Trial 1946 (United States v. Goering), 6 F.R.D. 69, 110 (1947) (“Crimes against international law are committed by men, not by abstract entities, and only by punishing individuals who commit such crimes can the provisions of international law be enforced.”) (quoted in Jesner, 138 S. Ct. at 1402 and Kiobel, 621 F.3d at 119). Federal courts may now see an uptick in ATS litigation against corporate officers and directors in lieu of actions against the corporations themselves.

Third, human rights litigation against foreign corporations may shift to more hospitable fora, including the United Kingdom or the European Union. Similarly, advocates may attempt to allege claims under state law. See, e.g., Seth Davis & Christopher A. Whytock, State Remedies for Human Rights, 98 B.U. L. Rev. 397, 483 (2018). Human rights advocates may also shift their focus to United States citizens who can sue foreign corporations under other federal laws, such as the Anti-Terrorism Act, 18 U.S.C. § 2333(a) (providing that any United States national injured by act of international terrorism can sue for treble damages in federal court).

Fourth, Jesner may prompt courts to eschew claims involving foreign policy concerns in other contexts. For example, a dissenting judge in the Ninth Circuit recently relied on Jesner to argue that courts should not imply a civil damages remedy under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971) against a U.S. Border Patrol agent who allegedly shot and killed a Mexican youth on Mexican soil. Rodriguez v. Swartz, No. 15-16410, 2018 WL 3733428, at *21 (9th Cir. Aug. 7, 2018) (Smith, J., dissenting); see also City of Oakland v. BP P.L.C., No. C 17-06011 WHA, 2018 WL 3109726, at *7 (N.D. Cal. June 25, 2018) (quoting Jesner’s caution that “[t]he political branches, not the Judiciary, have the responsibility and institutional capacity to weigh foreign-policy concerns” in dismissing public nuisance claims against petroleum companies based on global warming); City of New York v. BP P.L.C., No. 18 CIV. 182 (JFK), 2018 WL 3475470, at *2 (S.D.N.Y. July 19, 2018) (similar).

Finally, courts may rely on Jesner to construe the ATS and other federal statutes conservatively to avoid improperly creating or extending judicially-created private rights of action. See, e.g., Nahl v. Jaoude, No. 15 CIV. 9755 (LGS), 2018 WL 2994391, at *5 (S.D.N.Y. June 14, 2018) (dismissing ATS claims based on alleged money laundering for Hezbollah because money laundering is not a violation of international law and citing Jesner for principle that “federal courts must exercise ‘great caution’ before recognizing new forms of liability under the ATS”); see also Kirtman v. Helbig, No. 4:16-CV-2839-AMQ, 2018 WL 3611344, at *5 (D.S.C. July 27, 2018) (rejecting Bivens cause of action based on alleged retaliation against prisoner for exercise of First Amendment rights, relying in part on Supreme Court’s “‘general reluctance to extend judicially created private rights of action’” as noted in Jesner).

Jesner thus has not only eliminated ATS claims against foreign corporations but it has also signaled a reduced role for ATS litigation in U.S. federal courts more generally.