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SCOTUS Finally Faces Issue of Corporate Liability Under Alien Tort Statute

The U.S. Supreme Court on Wednesday appeared ready to reckon with a question that global businesses and human rights groups want answered.

After sidestepping the issue four years ago, the U.S. Supreme Court on Wednesday appeared ready to reckon with a question that global businesses and human rights groups want answered: whether corporations can be held liable in U.S. courts for overseas misdeeds under the Alien Tort Statute.

Conservative justices seemed wary of corporate liability, voicing concern about a glut of worldwide tort cases and judicial interference with diplomatic relationships between the U.S. and other nations. But the lawyer arguing in favor of corporate liability seemed to gain some traction by telling the justices, more than once, that other federal laws could be deployed to block meritless lawsuits against companies.

“I’m concerned about the foreign entanglement issue,” Chief Justice John Roberts Jr. said during the hourlong argument in Jesner v. Arab Bank.

“Some ATS cases do not involve foreign relations at all,” Stanford Law School professor Jeffrey Fisher told the court. “There are many other doctrines readily available to courts to directly and effectively deal with those issues,” such as the extraterritoriality presumption that U.S laws do not apply outside the country. “The court does not need to worry that there is going to be a flood of lawsuits against banks,” he added later. 

Kirkland & Ellis partner Paul Clement, representing the Arab Bank, said, “Under the ATS, we would say no corporation is liable.” The reason, he said, is that “nothing approaching a specific universal obligatory norm under international law that imposes obligations directly on corporations.”

The outcome was not “crystal clear” from the arguments, said Katherine Gallagher, senior attorney at the Center for Constitutional Rights which has litigated human rights cases under the statute. But she added, “We are unlikely to end up in a situation where the court does not address corporate liability head-on.”

The case originated with five separate lawsuits filed between 2004 and 2010 against the Jordan-based bank, claiming that the institution “provided a range of financial services to terrorists and terrorist front groups posing as charities.” The roughly 6,000 plaintiffs were non-United States citizens injured in Israel by the Palestinian uprising known as the Second Intifada.

The plaintiffs claim that the bank’s activities, some of which passed through its New York branch, violated the Alien Tort Statute, enacted in 1789. The law gave federal courts jurisdiction over “any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.”

The statute was mostly dormant for two centuries, but human rights groups began using it as a way to redress claims of abuse overseas. The U.S. Chamber of Commerce and other business groups filed a brief in the Jesner case alerting the court that more than 150 lawsuits have been filed against corporations under the act in the last 20 years. “These lawsuits have maligned business activities in more than 60 countries as alleged human-rights abuses actionable in U.S. courts.”

But in the brief authored by Jonathan Hacker of O’Melveny & Myers, the business organizations distanced themselves from the bank and did not side with either party. “Respondent is accused of facilitating terrorism, which amici will not defend,” the brief stated.

Fisher wrote in his brief that the statute was enacted to “ensure federal courts were able to impose liability upon enemies of all mankind.” Clement countered that “The notion that a 1789 jurisdictional statute authorizes this extraordinary effort to recover from a foreign bank for foreign injuries … beggars all belief.”

In the 2013 case Kiobel v. Royal Dutch Petroleum Co., the Supreme Court avoided the issue of corporate liability, instead ruling that the law did not cover conduct that took place outside the United States. The Kiobel case arose from the U.S. Court of Appeals for the Second Circuit, which had ruled against corporate liability. When the Jesner case came through the Second Circuit, the court invoked its own Kiobel ruling in ruling against the plaintiffs, setting the stage for the high court arguments Wednesday.

Contributing Author

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