Second Circuit Upholds Dismissal of Alien Tort Statute Claim Against Corporate Defendants

A federal appeals court last week dismissed claims that defendants including Royal Dutch Shell PLC aided alleged human rights abuses in Nigeria, ruling that corporations cannot be found liable under the Alien Tort Statute.  See Kiobel, et al. v. Royal Dutch Petroleum Co. et al., No. 06-cv-4800 (2d Cir., Sept. 17, 2010).

Plaintiffs asserted claims for aiding and abetting violations of the law of nations against defendants —all of which are corporations— under the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350,
a statute enacted by the first Congress as part of the Judiciary Act of 1789. The court called it a jurisdictional provision unlike any other in American law and of a kind apparently unknown to any other legal system in the world. The ATS laid largely dormant for over 170 years. Judge Friendly called it a “legal Lohengrin” since “no one seems to know whence it came.”  

Then, in the early 1980's, the statute was given new life, when courts first recognized that the ATS provides jurisdiction over (1) tort actions, (2) brought by aliens (only), (3) for violations of the law of nations (also called “customary international law,” 3) including, as a general matter, war crimes and crimes against humanity—crimes in which the perpetrator can be called “hostis humani generis, an enemy of all mankind.” Since that time, the ATS has given rise to an abundance of litigation in U.S. district courts. For most of that time, aliens brought ATS suits in U.S. courts only against notorious foreign individuals.  This case involved one of the key unresolved issues since the ATS was reinvigorated: Does the jurisdiction granted by the ATS extend to civil actions brought against corporations under the law of nations?

Plaintiffs were residents of Nigeria who claimed that Dutch, British, and Nigerian corporations engaged in oil exploration and production aided and abetted the Nigerian government in
committing violations of the law of nations. Their suit could proceed only if the ATS provides jurisdiction over tort actions brought against corporations under customary international law.  The district court dismissed the claim, and the Second Circuit reviewed de novo the dismissal for failure to state a claim, see Fed. R. Civ. P. 12(b)(6), assuming all well-pleaded, nonconclusory factual allegations in the complaint to be true.  The court noted that the substantive law that  determines jurisdiction under the ATS is neither the domestic law of the United States nor the domestic law of any other country.  By conferring subject matter jurisdiction over a limited number of offenses defined by international law, the ATS requires federal courts to look beyond rules of domestic law —however well-established they may be— to examine the specific and universally accepted rules that the nations of the world treat as binding in their dealings with one another.  The ATS thus leaves the question of the nature and scope of liability —who is liable for what— to customary international law.  Whether a defendant is liable under the ATS depends entirely upon whether that defendant is subject to liability under international law. It is inconceivable, said the court of appeals, that a defendant who is not liable under customary international law could be liable under the ATS. 

Customary international law includes only those standards, rules or customs affecting the relationship between states or between an individual and a foreign state, and used by those states for their common good and/or in dealings inter se.  The Second Circuit concluded, after exhaustive review, that 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. Quoting the Nuremberg tribunal's explanation for individual liability for violations of international law:  “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.”  Indeed, said the Second Circuit, international law has steadfastly rejected the notion of corporate liability for international crimes, and no international tribunal has ever held a corporation liable for a violation of the law of nations.

The court concluded, therefore, that insofar as plaintiffs were bringing claims under the ATS against corporations, the plaintiffs failed to allege violations of the law of nations, and plaintiffs’ claims fell outside the limited jurisdiction provided by the ATS.

The majority felt the need to address the lengthy, and surprisingly strident, dissent.  The majority observed that the responsibility of establishing a norm of customary international law lies with those wishing to invoke it, and in the absence of sources of international law endorsing (or refuting) a norm, the norm simply cannot be applied in a suit grounded on customary international law under the ATS. Thus, even if there were, as the dissent argued, an absence of sources of international law addressing corporate liability, that supposed lack of authority would actually support the majority holding.  As it happens, no corporation has ever been subject to any form of liability under the customary international law of human rights, and thus the ATS, the remedy Congress has chosen, simply does not confer jurisdiction over suits against corporations.

The majority also noted the "passion" with which the dissent disagreed with the holding, as it called the majority “illogical” on nine separate occasions, “strange,” and “internally inconsistent.”  More than 200 years ago, Chief Justice John Marshall began the practice of announcing the judgment of the Supreme Court in a single opinion. This, in turn, led to formal dissenting opinions, which can serve a valuable purpose in the law. But one of the most famous dissents in legal history was by Justice Oliver Wendell Holmes in Lochner v. New York, 198 U.S. 45 (1905), when a majority of the Court struck down a state regulation limiting the hours someone could work in a bakery. The dissent began with a different tone: "I regret sincerely that I am unable to agree with the judgment in this case and that I think it my duty to express my dissent." Id. at 65.  Not quite the approach here.