SCOTUS Votes 9-0 that Corporations Cannot Be Sued Under ATS for Extraterritorial Acts Without U.S. Interest At Stake

by Julian Ku

[Apologies for all the random short posts, I think what make blogging interesting, sometimes, is that one can think out loud online.  Dangerous, I know, but fun too!]

Here is one quick take:  As Deborah noted below, the Supreme Court voted 9-0 that the Kiobel plaintiffs should be dismissed because their claims against a foreign corporation for actions in a foreign jurisdiction did not belong within the jurisdictional ambit of the ATS.

Five justices (including the sometimes squishy Justice Kennedy) voted to apply the presumption against extraterritoriality, an interpretive rule, to the ATS.  Although the language is a little mushy here and there, the court’s opinion makes very clear that the rule announced in Morrison v. National Australia Bank applies to the ATS.  In Morrison, the Court held that there is a broad presumption that congressional statutes are not meant to regulate extraterritorial activity unless there is a clear statement in the statutory text.  This presumption cannot be overcome simply because there is some minimal connection to the U.S, like being listed on the U.S. stock exchange or even doing business here.  The exact contours of this rule are a little fuzzy, for instance, it is somewhat uncertain what the rule would be if the defendant was a U.S. corporation, but it seems clear to me that most of the corporate ATS defendants will win dismissals from their ATS lawsuits after this decision.  Almost all of them are being sued for foreign conduct, and often through actions of foreign subsidiaries, and rarely with any action by the corporate actors based in the U.S.

It is also worth noting that the four justices who did not join the opinion, nevertheless would have voted to dismiss the case against Shell anyway because of the lack of a territorial nexus or connection to the national interest of the U.S. While the concurrers would have included preventing the U.S. from being a safe harbor for war criminals within the U.S. national interest, they would not have found that punishing corporations for their complicity with war crimes and torture abroad was enough to satisfy their test.

So this means that the ATS wars over corporate liability are almost over. I say almost because under the majority opinion, U.S. corporations might still be sued for domestic conduct and, perhaps, for foreign conduct if that conduct was also deeply connected with domestic acts.  This seems unlikely in most ATS cases, and it is worth noting that the severity of the crime that the corporation was alleged to have committed does not change the analysis, even under the Breyer concurrence.  A theory that the ATS can be justified in universal civil jurisdiction cases has been rejected, 9-0.

Bottom line: Corporate general counsels!  Rest easy, your long, transnational ATS nightmare is over!

5 Responses

  1. Based on my first reading of the opinions, I agree with Julian that the door remains open for extraterritorial ATS claims against U.S. corporations. Thinking out loud: By carefully noting that “mere corporate presence” does not suffice for an ATS claim to go forward, Part IV of the majority’s opinion implies that something more than “mere corporate presence” might suffice. This implication is reinforced by Justice Kennedy’s one-paragraph concurrence, which serves primarily to emphasize that other ATS cases involving the presumption against extraterritoriality may arise that are not covered by the Court’s reasoning and holding. It doesn’t take much reading between the lines to conclude that the limiting language of Part IV was necessary to get Kennedy (and thus a bare majority of the Court) to adopt Chief Justice Roberts’ reasoning.

    The question, then, is what presence more than “mere corporate presence” is sufficient. Justice Breyer’s opinion concurring in the Court’s judgment (but disagreeing with the majority’s reasoning), joined by Justices Ginsburg, Sotomayor and Kagan, suggests that at the very least, a defendant’s corporate presence that would provide a sufficient basis for general jurisdiction would also be a sufficient basis for an ATS claim against that defendant. Justice Breyer agrees with the majority that the “mere corporate presence” of the defendants in Kiobel—an investor relations office in New York City owned by a separate but affiliated company—was an insufficient basis for plaintiffs’ ATS claims to go forward. But the four-justice concurrence also would allow ATS claims arising out of extraterritorial conduct to proceed against a U.S. defendant, which would presumably require there to be general jurisdiction over the defendant. Under Goodyear v. Brown, “[a] court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State”—for example, when they are incorporated or have their principal place of business in the U.S. forum state.

    Justices Alito’s concurring opinion, joined by Justice Thomas, quite clearly does not share this view (their analysis would turn primarily on the place of the relevant conduct). But the majority opinion, especially in light of Part IV, does not seem to preclude the possibility of ATS claims against U.S. defendants. In short, the door still seems to be open to ATS claims against defendants subject to general jurisdiction in U.S. courts—or at least the door to this does not seem to be closed.

  2. Chris, for what it’s worth, my reading of the opinion is that the sort of mere corporate presence sufficient to create personal jurisdiction under the minimum contacts rule is not sufficient to overcome the presumption against extraterritoriality. Similarly, tag jurisdiction over natural persons would not be enough. Remember, there had to be personal jurisdiction over the defendant corporations in Kiobel. Its holding must mean that, if the mere connection of the defendant to the US is sufficient, there must at least be some greater contact than personal jurisdiction minimal contacts. Regarding corporations, then, there would be three separate inquiries: 1) Personal jurisdiction: Is the defendant  present or does it have minimal contacts with the US?; 2) Subject matter jurisdiction under the ATS: Is the relationship of the defendant with the US sufficiently close such as to make the claim touch and concern the territory of the US with sufficient force to displace the presumption against extraterritorial application?; 3) cause of action under federal law: Does the federal common law cause of action bind corporations?

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