In two recent decisions, the United States Courts of Appeals for the District of Columbia Circuit and the Seventh Circuit each split with the Second Circuit's 2010 decision in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010), that corporations cannot be liable under the Alien Tort Statute ("ATS"), 28 U.S.C. § 1350. As we reported, the Second Circuit in Kiobel held that the scope of liability under the ATS does not extend to corporations because imposing liability on corporations for violations of the law of nations has not achieved a sufficiently "specific, universal, and obligatory" character so as to be considered a norm of customary international law. However, in Flomo v. Firestone Natural Rubber Co., No. 10-3675, 2011 WL 2675924 (7th Cir. July 11, 2011), and Doe VIII v. Exxon Mobil Corp., Nos. 09-7125, 09-7127, 09-7134, 09-7135, 2011 WL 2652384 (D.C. Cir. July 8, 2011), the D.C. and Seventh Circuits each concluded that the Second Circuit's decision in Kiobel relied on factual inaccuracies and ignored the distinction between norms of conduct and remedies. The decisions deepen the circuit split on the question of corporate liability under the ATS, creating a likelihood that the conflict will be resolved by the United States Supreme Court.
Plaintiffs in Flomo were a group of children from
Liberia, where defendant Firestone Natural Rubber Company
("Firestone") operated a 118,000-acre rubber plantation
through a subsidiary. Plaintiffs claimed that Firestone utilized
hazardous child labor on the plantation and sued Firestone under
the ATS. The ATS confers federal jurisdiction over tort actions
brought by aliens for violations of the law of nations, or
"customary international law." Although Firestone did not
employ children at the plantation, plaintiffs had argued that the
production quotas that Firestone set for its employees were so high
that employees were forced to enlist their children to help them.
Firestone countered that corporations have never been prosecuted
for violations of customary international law and that there is
therefore no principle of customary international law that binds
them.
Plaintiffs in Exxon were a group of villagers from the
Aceh province of Indonesia, where defendant Exxon Mobile
Corporation ("Exxon") and several of its subsidiaries
operated a natural gas extraction and processing facility.
Plaintiffs claimed, among other things, that Exxon's security
forces were comprised of Indonesian soldiers who committed
genocide, extrajudicial killing, torture, crimes against humanity,
sexual violence and kidnapping against Aceh residents in violation
of the ATS. Plaintiffs argued that the soldiers' actions were
attributable to Exxon because Exxon had the authority to control
and direct the soldiers' actions. As Firestone argued in
Flomo, Exxon claimed that as a corporation it was immune
from liability under the ATS.
The Seventh Circuit in Flomo (Posner, J.) rejected the
Second Circuit's holding in Kiobel that corporations
cannot be liable under the ATS. The Court noted that the Second
Circuit's premise in Kiobel that corporations have
never been criminally or civilly prosecuted for violating customary
international law was factually incorrect. The Court noted, for
example, that the allied powers dissolved German corporations that
had assisted the Nazi war effort at the end of the Second World War
and that they did so on the authority of customary international
law. The Court also noted that there was no compelling explanation
as to why corporations have rarely been civilly or criminally
prosecuted other than a desire to confine corporate liability to
"abhorrent conduct" and that, even if no corporation had
ever been punished for violating customary international law, there
always has to be a first time for litigation to enforce a norm. The
Court also observed that international law only imposes substantive
obligations, and that it is up to individual nations to decide how
to enforce them.
The D.C. Circuit in Exxon likewise rejected
Kiobel's holding that corporations are immune from
liability under the ATS. The Court (Rogers, J.) analyzed the
historical context of the ATS and concluded that corporate
liability under the ATS is consistent with the text, purpose, and
history of the statute. Like the Seventh Circuit in Flomo,
the D.C. Circuit faulted Kiobel for failing to distinguish
between norms of conduct (which are determined by international
law) and rules of remedy (which are determined by federal common
law). The Court also concluded that, if anything, international law
lends support to a recognition of corporate liability for
violations of customary international law. The Court noted, for
example, that the "corporate death penalty" for
corporations that assisted the Nazi war effort was as much an
application of customary international law as the sentences imposed
on individuals by the Nuremberg tribunals.
The holdings in Flomo and Exxon also are in
accord with the Eleventh Circuit's holding in Romero v. Drummond Co., 552 F.3d 1303
(11th Cir. 2008), that the ATS grants jurisdiction over corporate
defendants and similar holdings by federal district courts in
Maryland and Virginia. Thus, Kiobel increasingly appears
to be an outlier among ATS cases ruling on corporate liability. The
issue may face Supreme Court review in the near future. Plaintiffs
in Kiobel recently filed a petition for writ of
certiorari, and the Supreme Court will decide whether to review the
case in the coming weeks.
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