The Case That Won’t Die: U.S. Court Revives South Africa Apartheid Alien Tort Statute Lawsuit

by Julian Ku

So maybe the use of the Alien Tort Statute against corporations for overseas activities isn’t fully dead. Yesterday, the U.S. District Court for the Southern District of New York has revived In re South Africa Apartheid Litigation, a twelve-year-old litigation that just won’t die. A copy of the opinion can be found here.

Most of the opinion deals with whether a corporation may be sued under the Alien Tort Statute, an issue most thought was settled within the Second Circuit (the federal appeals circuit that includes New York). As a lower court within that circuit, the district court should have been bound to follow that court’s 2010 opinion Kiobel v. Royal Dutch Shell, which held that corporations cannot be sued under the ATS.  The lower court judge, Shira Scheindlin, decided that since the Supreme Court had ended up dismissing the Kiobel plaintiffs on other grounds (e.g. extraterritoriality), the Court had sub silentio reversed the original Kiobel decision’s ruling on corporate liability.  That is quite a stretch, and appears based almost solely on the Supreme Court’s reference to “mere corporate presence” as being insufficient to overcome the statutory presumption against extraterritoriality.  This language, and the Supreme Court’s decision not to otherwise mention the corporate liability issue, was enough for Judge Scheindlin to revisit the corporate liability issue.  I don’t really buy this sub silentio interpretation of Kiobel, but to give credit where credit is due, this argument was previewed in our Kiobel insta-symposium by Jordan Wells, a third year law student.  Let’s just say Judge Scheindlin really went out of her way to re-open this question.  

My views on the corporate liability issue haven’t changed since I published my full length attack on it back in 2010.  In my view, the Supreme Court’s decision in Mohamad v. Palestinian Authority, finding that the Torture Victim Protection Act does not allow torture claims against corporate defendants, provides an unappreciated boost to the policy rationale for limiting these kinds of lawsuits to natural persons.  But other circuits, and apparently Judge Scheindlin, refuse to agree with me (I know, I know, it’s hard to believe, but it’s true).

Putting aside the corporate liability issue, it is perhaps more surprising that Judge Scheindlin did not simply dismiss all of the defendants on Kiobel extraterritoriality grounds.  The Second Circuit appeals panel in this case held that all of the defendants (U.S. and foreign) should be dismissed because all of the alleged relevant conduct occurred in South Africa.  The U.S. corporate defendants (Ford and IBM) did not overcome the Kiobel presumption because the complaints only allege vicarious liability as parent corporations to their South African subsidiaries.   Yet Judge Scheindlin only dismissed the foreign defendants and will allow the plaintiffs to re-file their complaints against the US defendants to overcome the new Kiobel extraterritoriality presumption.  This means that she is willing to explore in greater detail the Kiobel requirement that plaintiffs’ claims “touch and concern” the territory of the U.S. with sufficient force to displace the presumption against extraterritoriality.  Will knowledge by the US parent of the subsidiaries’ activities in South Africa be enough? Will receiving profits from the subsidiaries be enough? I assume that is the best the plaintiffs will be able to plead is knowledge by the U.S. parent.

I assume this is going back to the appeals panel in this case, and we should expect some rather testy reactions. Judge Jose Cabranes (the author of the appeals court panel decision) and Judge Scheindlin have recently tangled over a local NY case against aggressive police tactics resulting in the controversial removal of Judge Scheindlin from that case (Judge Cabranes was one of three judges involved in that removal order).  This latest Scheindlin order seems a double-insult at Judge Cabranes.  It “reverses” his earlier Kiobel decision on corporate liability (from a lower court no less!), and then it ignores his subsequent opinion holding that all defendants should be dismissed via a motion for judgment on the pleadings.   A little tension brewing at 40 Foley Square, perhaps?

http://opiniojuris.org/2014/04/18/case-wont-die-u-s-court-revives-south-africa-apartheid-ats-lawsuit/

6 Responses

  1. Response…In my view, the Supreme Court’s decision in Mohamad v. Palestinian Authority, finding that the Torture Victim Protection Act does not allow torture claims against corporate defendants, provides an unappreciated boost to the policy rationale for limiting these kinds of lawsuits to natural persons.
     
    The 1998 War Crimes Act is enabling legislation for the Geneva and Hague Conventions and makes a long list of war crimes Class A felonies and federal crimes, whether they are committed inside or outside the United States by US nationals.  http://www.law.cornell.edu/uscode/text/18/2441
    I don’t see any reason why pillaging of public and private property during an armed conflict in violation of Article 28 of the Hague Convention of 1907 wouldn’t apply to US based corporations that either aid or abet, launder the proceeds, or transfer titles to stolen property. These war crimes are all extraditable offenses under post-Nuremberg era treaties or executive agreements. So why wouldn’t criminal and civil remedies, asset freezes, and forfeiture of proceeds under the Racketeering and Corrupt Organizations statute (which also has explicit extraterritorial reach) be appropriate? For example, the UN fact finding mission to Palestine on the impact of Israeli settlements and the Special Rapporteur on human rights in Palestine cited the culpability of transnational corporations and other businesses in the illegal settlement enterprise, including US-based Remax.

  2. I read the linked district court opinion and it seems quite well-reasoned.  While the blog post author is not in favor of ATS corp liability, the arguments in favor of same – as expressed by the SDNY court – are persuasive. 

  3. But the Cir. decision in Kiobel was patently absolutely in error on that point in view of the unavoidable fact that 20 U.S. Supreme Court cases had already recognized that companies and corporations can have duties and rights under international law!  see, e.g., http://ssrn.com/abstract=2173474  and see http://ssrn.com/abstract=1701992  (international law has never been merely state-to-state and there have always been other actors with formal participatory roles, such as nations, peoples, belligerents, tribes, free cities, etc.).  Manifestly absurd rulings cannot lawfully bind any court.

  4. Julian,
    The Second Circuit dismissed Kiobel because of a purported lack of subject matter jurisdiction (given that, in its view, the ATS  does not authorize suits against corporations).   Most commentators believe that the Supreme Court dismissed Kiobel on the merits .   Since jurisdiction is constitutionally prior to the merits, how can the Second Circuit’s decision still be good law? This post contains a good discussion of this point: http://www.concurringopinions.com/archives/2013/05/after-kiobel-extraterritoriality-is-not-a-question-of-subject-matter-jurisdiction-under-the-alien-tort-statute-and-neither-is-corporate-liability.html

  5. Milan: and it cannot be “good law” given the 20 Supreme Court cases recognizing corporate and company duties and rights under international law.

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