Kiobel Insta-Symposium: Settlement, Discovery and Kiobel

by Milan Markovic

[Milan Markovic is an Associate Professor of Law at Texas Wesleyan University School of Law.]

When the Supreme Court originally granted certiorari in Kiobel, many feared that it would bar ATS suits against corporations entirely.  The Supreme Court’s actual decision bars ATS claims that do not “touch and concern” United States territory.  I tend to agree with Marty Lederman that there are at least three categories of ATS cases that might survive Kiobel, but even if Kiobel requires substantial conduct on U.S. territory, the decision should not alter the playing field between ATS plaintiffs and defendants in a meaningful way.

Because of the high profile nature of ATS cases, few, if any, corporate defendants wish to be drawn into protracted litigation concerning their complicity in human rights violations.  They are especially motivated to avoid expensive and potentially embarrassing discovery.  Many defendants will consider settling if they cannot prevail on a motion to dismiss.  Corporate defendants have prevailed in many ATS cases, but as the U.S. Chamber of Commerce’s press release in response to Kiobel intimates, they have generally incurred substantial costs to do so.

ATS complaints post-Kiobel are likely to focus on actions that are undertaken in the United States.  Without the benefit of discovery, however, plaintiffs cannot know the full extent of a defendant’s activities.  For example, a plaintiff may be able to allege that serious human rights violations in a foreign country were financed from the United States.  This in and of itself might not be sufficient to rebut the presumption against extraterritoriality, but further discovery might reveal other activities of the kind referenced in Roger Alford’s post.   It is not clear whether Kiobel was dismissed under F.R.C.P. 12(b)(1) or 12(b)(6), but under either standard, plaintiffs will not be required to demonstrate without discovery that the conduct on U.S. territory was of sufficient force to displace the presumption against extraterritoriality.   Under the former, ATS plaintiffs will most likely have to plead a prima facie case of a substantial nexus with U.S. territory and will be generally entitled to limited jurisdictional discovery whereas under the latter they must state only a plausible claim of such a nexus.

Kiobel would be a Pyrrhic victory if, to dismiss ATS claims, corporate defendants must have their officers and directors sit for depositions to determine to what extent they contributed to human rights violations abroad.  Some of these individuals might be located in the United States but also have formal or informal roles in the entities that are most connected to the alleged violations committed abroad.  It is not uncommon for there to be a great deal of overlap among the boards and management teams of a multinational corporation’s subsidiaries.

After the Supreme Court applied the presumption against extraterritoriality in Morrison, plaintiffs filed more cases against foreign defendants under the Exchange Act.  While Kiobel will change how ATS claims are pleaded and may make it more difficult for plaintiffs to ultimately prevail, the decision hardly bars ATS plaintiffs from pursuing claims against corporations that are “merely present” in the United States, and the prospect of even limited discovery regarding whether ATS claims “touch and concern” the United States will lead a substantial number of corporate defendants to prefer settlement to further litigation.

http://opiniojuris.org/2013/04/24/kiobel-insta-symposium-settlement-discovery-and-kiobel/

3 Responses

  1. I think you’re being rather optimistic, I don’t see any reason why the defendants in future cases couldn’t get summary dismissal before full discovery.

  2. The Supreme Court has severely restricted (if not outright prohibited) this sort of discovery bootstrapping. The complaint itself must state specific facts that establish jurisdiction and the cause of action. Bell Atlantic Corp. v. Twombly, 550 US 5; Ashcroft v. Iqbal, 556 US 662.
    Jurisdiction is (constitutionally) prior to merits. Any discovery to establish jurisdiction must be strictly limited to that issue.

  3. In ATS cases,  even limited discovery regarding subject matter jurisdiction (i.e. whether there is a substantial nexus between the international law violation and U.S. territory) is going to partly overlap with the merits and could prove embarrassing and burdensome.  In addition, Twombly does not require plaintiffs to definitively “establish” jurisdiction or a cause of action, only plead “enough facts to state a claim to relief that is plausible on its face.”  
     

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