A Response to Justine Nolan by Odette Murray, David Kinley and Chip Pitts

We are grateful to Justine Nolan for her thoughtful comments on the article, and in particular for highlighting two recent circuit court cases – Flomo v Firestone Natural Rubber Co in the Seventh Circuit and Doe VIII v Exxon Mobil Corporation in the DC Circuit – which affirm that corporations can be liable under the Alien Tort Statute (‘ATS’), contrary to the position of the Second Circuit majority in Kiobel v Royal Dutch Petroleum.

The judgment in Exxon (split 2-1) is particularly striking in its criticism of the majority opinion in Kiobel, not least because the Exxon judgment operates as a kind of Kiobel rehearing, in that the Exxon plaintiffs relied on a number of amicus briefs that were filed in support of the petition for rehearing en banc in Kiobel, which the Second Circuit had denied.  The Exxon majority opinion, authored by Judge Rogers, begins by recognizing that ‘corporate liability differs fundamentally from the conduct-governing norms at issue in Sosa’.[1] Whereas ‘Sosa instructs us that the substantive content of the common law cause of action that courts recognize in ATS cases must have its source in customary international law…federal courts must determine the nature of any remedy in
lawsuits alleging violations of the law of nations by reference to federal common law’.[2] The Court then proceeds to establish that ‘corporate liability is consistent with the purpose of the ATS, with the understanding of agency law in 1789 and the present, and with sources of international law.’[3] On the question of domestic law the Court finds that ‘the law of the United States has been uniform since its founding that corporations can be held liable for the torts committed by their agents.’[4] Further, looking to general principles of law as a source of international law– a source overlooked by the Kiobel majority – the Court refers to amici briefs which state that ‘corporate liability is a universal feature of the world’s legal systems and that no domestic jurisdiction exempts legal persons from liability.’[5] Thus, the Court concludes that corporations can be liable under the ATS as a matter of federal common law and that corporate liability is consistent with various international law sources (Nuremburg jurisprudence, treaty practice and general principles of law), contrary to the analysis of the Second Circuit in Kiobel which ‘conflates the norms of conduct at issue in Sosa and the rules for any remedy to be found in federal common law’ and which, ‘even on its own terms…misinterprets the import of footnote 20 in Sosa and is unduly circumscribed in examining the sources of customary international law.’[6]

Similarly, in Flomo v Firestone Natural Rubber Co, in a unanimous opinion authored by Judge Posner, the Seventh Circuit sought to “underscore the distinction between a principle of law, which is a matter of substance, and the means of enforcing it, which is a matter of procedure or remedy.”[7] The Court holds that the issue of corporate liability under the ATS is one of remedy, to be determined by domestic law.

The Exxon and Flomo judgments also consider a number of other important issues in ATS jurisprudence, including the dismissal of the defendants’ arguments against the extraterritorial application of the ATS, and, in Exxon, the identification of the correct mens rea standard for aiding and abetting under customary international law.  On this latter issue, the Exxon Court considers the Rome Statute and judgments of the ICTY, ICTR and Nuremburg tribunals to determine that the correct mens rea standard under customary international law is ‘knowledge’ and not ‘purpose’ as earlier held by the Second Circuit in Presbyterian Church of Sudan v Talisman.[8]

Both judgments display an admirable scepticism of the degree of clarity to be obtained from footnote 20 of the Sosa opinion.  In Exxon, the Court notes that ‘Sosa neither addressed the question presented by Exxon’s claim of corporate immunity, nor provided precise guidance on which body of law a court must draw to answer questions ancillary to the cause of action itself, such as corporate
liability.’[9] In Flomo, the Court notes that ‘the issue of corporate liability under the [ATS] seems to
have been left open in an enigmatic footnote in Sosa (but since it’s a Supreme Court footnote, the parties haggle over its meaning, albeit to no avail).’[10] This approach stands in stark contrast to the
majority in Kiobel, who primarily rely on a misreading of footnote 20 to justify their misguided recourse to customary international law on the question of corporate liability.

While honest about the interpretative limits of footnote 20 of Sosa, these judgments also highlight, as identified by Nolan, that the unfortunate and unnecessary issue of corporate liability under the ATS erroneously raised by Kiobel could linger with corrosive effect until ultimately corrected by the Supreme Court.  With the grant of certiorari (as expected) in Kiobel on 17 October 2011, the Supreme Court now has an opportunity to address the circuit split on the issue of corporate liability under the ATS – a circuit split that continues to widen, with the recent decision of the Ninth Circuit in Sarei v Rio Tinto on 25 October 2011 coming down on the side of corporate liability for human rights
violations (as it had previously done in Unocal).  The Supreme Court will hopefully resolve the corporate liability issue as every circuit court since Kiobel has resolved it: a common sense result favouring liability for human rights violations, and against immunity.

[1] Doe VIII v Exxon Mobil Corporation (DC Cir, 8 July 2011) slip op, page 53 (Rogers J).