Next test of corporations’ liability?
on Feb 5, 2011 at 8:42 am
The Second Circuit Court has set the stage for another major case on corporations and the law to move on to the Supreme Court — a case raising a core question about U.S. courts’ authority to hear claims that foreign companies engaged in human rights abuses. In a closely-followed case, Kiobel, et al., v. Royal Dutch Petroleum, et al. (Circuit docket 06-4800), the Court ruled in September that corporations may not be sued under the Alien Tort Statute, enacted in 1789 by the first Congress. On Friday, a divided panel denied rehearing and the en banc Court — splitting 5-5 — refused to rehear the case. (UPDATE: Lawyers involved plan to file a cert. petition with the Supreme Court, with timing yet to be determined.)
Although the Alien Tort law has been on the books since the Founding era, it has been revived in a wave of lawsuits against foreign individuals that began with a Second Circuit ruling in 1980, and expanded to corporations for the first time in 1997. Despite that development, the underlying issue of corporations’ liabillity — or not — under the law has remained an open question.Â
The Supreme Court first got involved in 2004, in Sosa v. Alvarez-Machain. In that ruling, in an international abduction case, the Court recognized authority for American courts to rule on ATS cases, but cautioned the lower courts to keep them within strict bounds. The specific claim in that case was not allowed to go forward, however.
Last October, the Court refused to hear a case testing whether corporations could be sued under the law. That case, Talisman Energy v. Presbyterian Church of Sudan (09-1418), and a cross-appeal, Presbyterian Church of Sudan v. Talisman Energy (09-1262), grew out of claims by Sudanese individuals of atrocities at the hands of the Sudanese military to support oil exploration efforts in that country.  Those cases, too, originated in the Second Circuit, but in that case the appeals court simply assumed, without deciding, that corporations could be held liable under ATS.
The Second Circuit, of course, has now answered that question directly, in the Kiobel case. Like the Sudan cases, this new lawsuit involves claims by Nigerians of government suppression of resistance to oil exploration in their country. The lawsuit contended that Royal Dutch Petroleum Co., a Netherlands firm, and Shell Transport and Trading Co., a British firm, and a local Shell subsidiary, enlisted the Nigerian government and its military forces to put down the resistance movement., resulting in wanton killing, raping, beating and looting and destruction property.
The outcome produced a spirited debate within the three-judge panel that rejected corporate liability, and within the en banc Court as it denied reconsideration. The 5-5 split in the en banc Court, as well as the basic nature of the question involved, are likely to give the Justices more reason to hear the case, despite a general reluctance to get drawn deeply into ATS disputes.
Judge Jose A. Cabranes, the author of the panel ruling, wrote that the principle of individual liability for violations of international law has been limited to natural persons, not “juridical” persons such as corporations. “The moral responsibility for a crime so heinous and unbounded as to rise to the level of an ‘international crime’ has rested solely with the individual men and women who have perpetrated it.”
Quoting the prceedings of the Nurnberg Nazi war crimes trial, the panel opinion said that “crimes against international law are committed by men, not by abstract entities. ” As new international tribunals have been set up since World War II to try human rights violations, the panel noted, the law of human rights “has remained focused not on abstract entities but on the individual men and women who have committed international crimes universally recognized by the nations of the world.”
Customary international law, which sets the norms for liability under the ATS, Judge Cabranes wrote, “has steadfastly rejected the notion of corporate liability for international crimes, and no internaitonal tribunal has ever held a corporation liable for a violation of the law of nations.”
The opinion was joined by Chief Judge Dennis Jacobs. Circuit Judge Pierre Leval dissented on that basis of the holding, joining only in the dismissal of the Nigerians’ lawsuit.
Since that panel ruling, Judge Jacobs has emerged as a strong defender of the ruling, taking on Judge Leval in sharp exchanges as the panel denied rehearing.
The Nigerian individuals in the case are represented by Paul L. Hoffman, a Venice, CA, attorney who also represented the Sudanese involved in last Term’s cases.
(NOTE TO READERS: The blog thanks Howard Bashman of How Appealing blog for his continuing coverage of the Kiobel litigation.)
