Supreme Court Restricts Broad Application of Alien Tort Statute for Domestic Corporations

Defining the Alien Tort Statute

The ATS is a 1789 law enacted to give federal district courts jurisdiction to hear claims “by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. §1350. The Court identified two fundamental purposes of the ATS: 1) to advance the interest in international relations to promote global peace and 2) to create an appropriate U.S. venue for international human rights violations. It enables the accountability of American citizens who violate international laws. However, the ATS alone does not allow a foreign person to sue for any claim. The Court’s decision clarifies that enforcement of ATS must rely on legislative and executive remedies, absent an independent cause of action.

Background

In 2013, three victims of child slavery (collectively “John Doe”) in the Ivory Coast brought a suit against Nestlé USA Inc. (Nestlé). The plaintiffs filed their claim under the ATS alleging Nestlé aided and abetted child slavery by assisting Ivorian farmers. John Doe’s pleading contained allegations of forced labor on Ivorian cocoa plantations subject to extremely cruel conditions. Nestlé maintains its supply of cocoa from the Ivory Coast by forming buyer/seller relationships with the local farms. To maintain Nestlé’s relationships, the company was alleged to provide financial and technical assistance to the Ivorian farms. The financial assistance includes advance payments and cash grants, while the technical assistance includes equipment and technical agricultural labor training.

John Doe initially filed a proposed class action in the United States District Court for the Central District of California on December 2, 2013. The Central District of California granted Nestlé’s motion to dismiss, concluding that the ATS does not permit claims against corporations. Moreover, the district court held that even if the ATS permitted a claim, the plaintiffs failed to establish a prima facie case against Nestlé for aiding and abetting slave labor.

The Ninth Circuit’s Decision

The Ninth Circuit reversed the District Court and held that the aiding and abetting allegations come within the ATS’s focus on torts committed in violation of the law of nations. The court held that the domestic conduct alleged by John Doe was sufficient to survive the motion to dismiss the ATS proceeding. In the Ninth Circuit’s view, the ATS is not limited to “principal offenses.” Instead, the panel held that the ATS addresses conduct constituting “aiding and abetting another’s violation of the law of nations.” Thus, the panel reasoned, the test was whether the alleged domestic conduct was relevant to the alleged claim. Applying this test, the court found that the alleged conduct “paint[ed] a picture of overseas slave labor overseas slave labor that defendants perpetuated from headquarters in the United States.” Doe v. Nestlé, S.A., 906 F.3d 1120, 1126 (9th Cir. 2018). The Ninth Circuit, considering Jesner v. Arab Bank, 138 S. Ct. 1386, 200 L. Ed. 2d 612 (2018), remanded to allow the plaintiff’s leave to amend, to specify how Nestlé’s aiding and abetting conduct perpetuated the slave labor conditions.

The Supreme Court’s Decision

The Supreme Court granted certiorari on these limited facts to answer two questions: (i) can a domestic corporation be held liable for aiding and abetting claims brought under the ATS, and (ii) whether the judiciary has the authority under the Alien Tort Statute to impose liability on domestic corporations.

Based on the allegations of conduct of Nestlé entirely in the United States, Justice Thomas (in the portion of his opinion joined by seven other Justices) rejected John Doe’s attempt to overcome extraterritoriality based on generic “operational decisions.” Actions like decision-making, occurring domestically and without any foreign conduct, “cannot alone establish domestic application” of the ATS. Given the limited operational role of Nestlé, there was not a sufficient connection between the cause of action and domestic conduct. In reaching that conclusion, the court cited prior precedent that “mere corporate presence” is generally insufficient to overcome the extraterritoriality bar.

In a further portion of his opinion joined by Justices Gorsuch and Kavanaugh, Justice Thomas opined that federal courts lack the “institutional capacity” to consider the necessary relevant factors that affect foreign policy in crafting new causes of action. For that reason, they would only recognize the common-law causes of actions presently available under the ATS as “violation of safe-conducts, infringement of the rights of ambassadors, and piracy.”

While eight Justices concurred in the reversal of the Ninth Circuit based on the lack of domestic activity central to an ATS action, the decision revealed open questions on definitively limiting the common-law theories available under the ATS. Justice Sotomayor, joined by Justices Kagan and Breyer, would have left the door open for courts in appropriate cases to create additional ATS common-law torts. Justice Gorsuch, joined by Justice Kavanaugh, would have firmly closed the door on further common-law torts altogether. Only Justice Alito dissented from the judgment, expressing the view that the Court should only have answered the questions on which certiorari was granted—namely, that domestic as well as foreign corporations are subject to the ATS—and remanded the case for further proceedings. (A total of five Justices in various opinions concurred that corporations indeed are subject to the ATS.)

Conclusion

The Supreme Court’s decision addressed only the generic conduct of decision-making in the United States, as alleged by John Doe. Several of the opinions nonetheless reinforce a series of appellate court rulings that general domestic activity, absent foreign conduct, is an insufficient basis for liability under the ATS. A number of the Justices expressed inclinations toward a bright-line rule that federal courts must defer to Congress, and not engage in manufacturing causes of action for violations of international law beyond the three historical torts.

We would like to thank summer law clerk Derrick Anderson II for his contribution to this alert.