Litigation regarding the scope of the Alien Tort Statute (ATS) appears likely to reach the boiling point in the coming year.  The U.S. Supreme Court is poised this fall to grant review of a Second Circuit decision, Kiobel v. Royal Dutch Petroleum, which held that the ATS does not apply to claims against corporations.  This week, the D.C. Circuit gave signs that it may grant rehearing en banc in another ATS case, Doe VIII v. Exxon Mobil Corp., and its rehearing decision has the potential to bring a halt to virtually all ATS litigation.

The ATS is a 1789 federal statute that has been used by human rights activists in recent decades to sue multinational corporations in U.S. courts for alleged overseas human rights violations.  The ATS creates federal court jurisdiction for tort claims by aliens alleging that the defendant violated “the law of nations.”  The statute lay dormant for nearly 200 years, with most legal scholars admitting that they had little idea what the statute meant.  But the ATS has quickly become a favorite of activists seeking to challenge the overseas conduct of U.S. corporations; the suits often allege that corporate defendants ought to be held responsible (as “aiders and abetters”) for alleged atrocities committed by a foreign country’s troops while guarding facilities operated by the corporation.  While to date no federal court has imposed a judgment against a corporation in any case raising claims of that sort, scores of ATS cases are pending in courts across the country and are creating a major headache for the business community.

The news from the D.C. Circuit arises in a suit alleging that Exxon Mobil aided and abetted atrocities allegedly committed by Indonesian troops while protecting oil facilities from rebels in the troubled Aceh region.  On July 8, 2011, a D.C. Circuit panel voted 2-1 to reinstate the ATS claims against Exxon.  The panel members split on three issues: (1) whether corporations are subject to suit under the ATS (the panel majority rejected the Second Circuit’s conclusion in Kiobel that corporations are not subject to suit); (2) whether the ATS permits “aiding and abetting” liability (the majority rejected a separate Second Circuit decision in Presbyterian Church of Sudan that cut back significantly on aiding and abetting liability); and (3) whether the ATS applies to torts committed in a foreign country (the majority held that the ATS does so apply, while the Second Circuit in Kiobel stated that whether the ATS applies extraterritorially is an “open question”).  Judge Brett Kavanaugh dissented on all three issues.

On August 9, Exxon Mobil filed a petition for rehearing en banc (i.e., a hearing before all nine active judges on the D.C. Circuit).  Normally, federal appeals courts wait for several weeks before responding to a rehearing petition, to give judges an opportunity to review the petition and decide if they are interested in taking a closer look.  But in this instance, there was no delay: on August 11, the D.C. Circuit issued an order directing the plaintiffs to respond to the rehearing petition.  The quick response is a strong indication that one or more D.C. Circuit judges are paying extremely close attention to the Exxon Mobil case and are strongly considering voting to rehear the case.

As noted above, the Supreme Court is likely this fall to agree to hear the Kiobel case and decide whether corporations can be sued under the ATS, an issue that has split the circuits.  But even if the corporate community wins that issue, the volume of ATS cases would likely remain constant.  If human rights activists were barred from suing corporations, they likely would simply re-file their ATS claims against senior corporate executives in an individual capacity.

But if the D.C. Circuit grants rehearing en banc and decides the other issues in favor of Exxon Mobil, its decision could well sound the death knell for modern ATS litigation.  Indeed, Judge Kavanaugh’s dissenting opinion makes a strong argument that the Founding Fathers intended the ATS to apply only to events occurring within this country –for example, attacks on foreign ambassadors on the streets of an American city.  If the ATS were held not to apply extraterritorially, every pending ATS would be subject to dismissal.

Judge Kavanaugh’s dissenting opinion was particularly gratifying to the Washington Legal Foundation, because it adopted WLF’s arguments (contained in an amicus curiae brief) that Congress did not intend the ATS to apply extraterritorially.  As WLF’s brief explained, the ATS was intended to avoid conflicts with other nations by providing redress to foreigners who suffered wrongs in the United States.  Yet, WLF noted, ATS suits seeking redress for wrongs allegedly committed overseas are likely to create conflict with foreign countries — because it is not uncommon for a foreign country to object to American courts asserting jurisdiction over events occurring within that country.