Yesterday’s decision in Jesner v. Arab Bank, PLC, the U.S. Supreme Court’s third major decision involving the Alien Tort Statute (ATS), continues a trend of reining in human rights activists’ efforts to police private businesses’ overseas conduct through ATS litigation. The Court held that foreign corporations may not be sued under the ATS for their overseas conduct. But as with past Supreme Court ATS decisions, the justices once again failed to shut the door entirely on human rights activists: the ruling said nothing about the many ATS claims pending against American corporations. It thereby ensured that U.S. companies will continue to face such claims for the foreseeable future.
While Jesner suggests that five justices likely would rule that the federal courts should not recognize an ATS cause of action against American corporations for their overseas activities, several federal appeals courts have exhibited little willingness to limit the scope of ATS liability unless directly ordered to do so by the Supreme Court.
The Rise and Fall (and Rise and Fall) of ATS Litigation
The ATS is a 1789 law that grants jurisdiction to federal courts to hear tort claims by aliens alleging violations of “the law of nations.” The law lay dormant for two centuries, primarily because litigants assumed that the number of torts to which the law applied was extremely narrow—perhaps limited only to claims by foreign ambassadors that they had been assaulted in this country.
But in 1980, the U.S. Court of Appeals for the Second Circuit held in Filartiga v. Pena-Irala that the ATS applied to a wide array of alleged human rights violations. In the decades that followed, activists sued U.S. corporations under the ATS for an increasing variety of overseas activities, from operating facilities that allegedly polluted the environment to administering medications without first providing informed consent to giving financial support to oppressive foreign governments.
The Supreme Court’s 2004 decision in Sosa v. Alvarez-Machain cut back considerably on the scope of ATS litigation. Sosa stated that the ATS does not actually create any private rights of action for torts alleging violations of “the law of nations.” Rather, it simply grants federal courts jurisdiction to hear common-law tort claims filed by aliens alleging violation of their rights under customary international law. Sosa explained that in 1789 the common law was assumed to recognize three such claims: violations of safe conducts, infringement of the rights of ambassadors, and piracy.
The Court did not decide whether federal common law ought to recognize any causes of action beyond the three recognized in 1789. It stated that federal courts were entitled to consider recognizing additional causes of action but stated that they should exercise “great caution” in doing so—particularly because it is generally up to Congress, not the courts to make such decisions.
Sosa established the following minimum prerequisite: “federal courts should not recognize private claims under federal common law for violations of any international law norm with less definite content and acceptance among civilized nations than the [three] historical paradigms familiar when [the ATS] was adopted.” Even if such norms exist, Sosa cautioned, a court should not recognize a federal-common-law right of action if it determines that doing so would be an improper exercise of judicial discretion—for example, if it determines that recognizing a cause of action would create the very sorts of tensions with foreign governments that the ATS was designed to ameliorate.
Sosa overturned a Ninth Circuit decision that had permitted a Mexican doctor employed by drug cartels to sue individuals who participated in his abduction in Mexico and his transportation to the United States to stand trial for abetting the murder of a DEA agent.
Lower Courts Largely Ignored Sosa
Most federal appeals courts largely ignored Sosa’s strong words of caution. Instead, they interpreted Sosa as sanctioning business as usual. The number of ATS suits filed against corporations for violating human rights in foreign countries (or, more frequently, for aiding and abetting such violations by others) increased in the years following Sosa. Federal appeals courts overwhelmingly ruled that such suits were actionable and interpreted Sosa as having endorsed recognition of the sorts of claims that had been filed in the two decades prior to the decision.
Kiobel: The ATS Does Not Apply Extraterritorially
The Supreme Court’s 2013 decision in Kiobel v. Royal Dutch Petroleum Co. was far more successful in cutting back on adventuresome ATS litigation. As Kiobel noted, the Court has long held that federal laws will be construed to have only domestic application unless Congress has clearly expressed a contrary intent, and the ATS does not express any such intent. Indeed, Kiobel concluded, Congress adopted the ATS based on concern over incidents that had occurred within the United States, including an attack on a foreign ambassador on the streets of Philadelphia. Congress was concerned that unless it authorized such officials to seek civil redress in federal courts, foreign governments might take offense.
The Court observed that providing a U.S. judicial forum for tort claims arising within the territory of a foreign country might create diplomatic tensions with that country—a result inconsistent with the purposes Congress had in mind when it adopted the ATS. Accordingly, Kiobel held, ATS jurisdiction is limited to claims arising from events occurring within the United States.
While Kiobel has led to dismissal of a great many ATS lawsuits (the vast majority of which involve overseas activities), activists have persisted in claiming that overseas human-rights violations have sufficient connection with the United States to permit ATS claims to proceed. For example, they routinely claim that a corporate defendant’s “policy” of aiding and abetting overseas human-rights violation emanated from offices located within the United States.
Jesner: No ATS Claims Against Foreign Corporations
Throughout the past decade, the federal appeals courts have been split on whether claims against corporations are ever actionable under the ATS. Disagreeing with every other circuit, the Second Circuit ruled in 2010 that such claims not actionable. It reasoned that corporate liability for violations of customary international law is not widely accepted among nations. Based on that 2010 ruling, the Second Circuit last year dismissed the Jesner claims filed against a large Jordanian bank with a branch office in New York. The plaintiffs claimed that some bank officials were complicit in financing Middle East terrorist activities. Yesterday’s decision affirmed the Second Circuit, albeit on narrower grounds: its blanket exemption from ATS liability was limited to foreign corporations.
Justice Kennedy’s plurality opinion focused primarily on the diplomatic tensions likely to arise from recognizing ATS claims against foreign corporations. Indeed, he noted that this very lawsuit had created a diplomatic rift with Jordan, normally a strong U.S. ally. Justice Kennedy reasoned that any decision to permit a category of ATS suits that could foreseeably create diplomatic tensions ought to be made by Congress, not the courts. He thus saw no need to address the first prerequisite for an actionable ATS claim established by Sosa—namely, whether the asserted claim alleged violations of an international law norm whose content and acceptance among civilized nations equaled that of the three common-law claims recognized in 1789.
Justices Alito and Gorsuch wrote separate opinions, concurring in part and concurring in the judgment. Their opinions expressed even more restrictive views regarding when it is permissible for courts to recognize federal common-law causes of action under the ATS. Indeed, the opinions strongly hinted that they were inclined to overrule Sosa and to hold that the ATS does not authorize recognition of any causes of action beyond the three recognized in 1789. Justice Thomas joined the plurality opinion in full but added a concurring opinion expressing support for the views of Justices Alito and Gorsuch.
The Take-Away from Jesner
The Question Presented in Jesner was not limited to foreign corporations; Petitioners sought review of the Second Circuit’s categorical ban on all corporate liability. One can reasonably surmise that the Court’s decision to limit its holding to foreign corporations was a reflection of Justice Kennedy’s hesitation regarding the issue. It was his compromise position in Kiobel (in which he joined the majority decision but then wrote a separate concurrence) that has led to some confusion regarding when overseas activities can be deemed to have a sufficient connection to the United States to render them actionable under the ATS.
Unfortunately, the limited nature of the Jesner decision ensures more years of litigation over the scope of the ATS. Language in the plurality and concurring opinions can be read as suggesting that the bar on corporate liability should apply to domestic as well as foreign corporations. But human rights activists can be expected to contest that suggestion in all ATS cases outside of the Second Circuit. And several federal appeals courts—particularly the Ninth Circuit—have shown no hesitation in bucking the Supreme Court’s lead in ATS cases. It would not be surprising if the issue of ATS liability of domestic corporations were to come before the Supreme Court again in the near future.
Also published at Forbes.com on WLF’s contributor page.