Symposium: It’s just a tort case

Richard Herz is a senior litigation attorney at EarthRights International. ERI filed an amicus brief in support of the plaintiffs in Jesner v. Arab Bank, PLC.

Corporate legal personhood is a bedrock tenet of our law (and every other nation’s). Corporations have been given rights, including constitutional rights. And corporations can sue on their own behalf and be sued, including for torts. So there ought to be little question that corporations can be sued when they commit or abet the very worst kinds of torts: violations of universally recognized human rights, like terrorism or genocide.

Yet that is the question presented in Jesner v. Arab Bank, PLC. The case arises under the Alien Tort Statute, which gives federal courts jurisdiction to hear claims by aliens for torts committed in violation of international law. Nothing about the ATS suggests that it requires some special rule of corporate immunity. Every federal appellate court to have considered the question agrees that corporations may be sued under the ATS – except one. In Kiobel v. Royal Dutch Petroleum Co. (“Kiobel I”), a sharply divided panel of the U.S. Court of Appeals for the 2nd Circuit held that victims of human rights abuses cannot sue corporations under the ATS – no matter how horrific the abuse or extensive the corporation’s participation. In Jesner, the 2nd Circuit followed Kiobel I. That decision is wrong and would enshrine an illogical and harmful double standard.

In Kiobel I, the 2nd Circuit held that international law determines whether corporations can be sued and, limiting its analysis to international criminal law (and specifically, the jurisdictional limitations of international criminal tribunals), that international law does not provide for corporate liability. In an earlier post, Beth Van Schaack demonstrated that the 2nd Circuit drew the wrong lessons from Nuremberg; the Allies recognized that corporations can violate international law. But the 2nd Circuit’s errors ran deeper. It never should have looked to international law at all, and if it did, it never should have looked to the jurisprudence of international criminal tribunals.

Federal common-law rules apply to this question. Under the Supreme Court’s 2004 decision in Sosa v. Alvarez-Machain, the ATS is “only jurisdictional.” The statute’s text provides that jurisdiction requires only a “violation” of international law. So the injury to the plaintiff must be barred by the law of nations, but there need not be an international-law cause of action for that violation. The court held in Sosa that once jurisdiction is established, an ATS cause of action is provided by federal common law. As a result, questions regarding the scope of liability must be determined according to federal common law.

But even if courts looked to international law to determine corporate liability, international law itself leaves the question of how international norms will be enforced to domestic law. This principle has been recognized since the drafting of the ATS. Faithful adherence to it is especially warranted in the context of private civil liability, for which international law typically does not provide a forum, and in the case of corporations, which are created by domestic law.

Therefore, in assessing whether corporations can be held liable, courts look to well-established federal or traditional common-law rules. Liability rules drawn from common-law principles may be informed by rules found in international law, but Sosa’s threshold test for identifying jurisdiction-conferring norms of international law does not apply to the rules for allocating liability. And the applicable rule must give effect to Congress’ purposes in enacting the ATS.

Corporate liability has been a feature of the common law since the United States was founded. International law turns to domestic law to recognize corporate legal personality and, in the form of general principles accepted by all of the world’s legal systems, also recognizes such liability directly.

The corporate immunity Arab Bank seeks makes little sense. First, as a district judge ruled in 1984 in a seminal modern-day ATS case, Filártiga v. Peña-Irala, liability rules under the ATS must reflect the universal condemnation of the underlying violations A holding that the corporate liability that applies to ordinary torts does not apply to genocide, terrorism or crimes against humanity would turn this principle on its head.

Second, tort law’s twin aims – compensation and deterrence – cannot be achieved without holding corporations liable. When a corporation is involved in abuse, the corporation, not its agents, reaps the profits. As Judge Richard Posner recognized in Flomo v. Firestone Nat. Rubber Co., LLC, in 2011, there is no reason to believe that the agents have the wherewithal to provide redress. And because, as Posner noted, it is sometimes in a corporation’s interests to violate international law, a rule that only a corporation’s agents are potentially liable would under-deter abuse. Kiobel I rewards those few corporations that choose to profit from atrocity and penalizes corporations that respect fundamental rights, forcing them to compete on an uneven playing field. Worst of all, it denies redress to those harmed. In short, Kiobel I would immunize corporations in the last situation in which they should be given a free pass.

Third, Congress passed the ATS in part because it preferred claims involving international law to be heard in federal rather than state court. The First United States Congress would not have wanted a foreign claimant, who could sue a corporation if he filed his claim in state court, to be barred from federal court.

Fourth, the ability to sue a corporation is inherent in the notion of limited shareholder liability: Plaintiffs may sue the corporation because limited liability ordinarily immunizes the shareholders. If corporations were not legal persons that could be sued, they could not be considered legal persons separate from their shareholders. So if corporations cannot be sued, the shareholders would be liable. To conclude that neither corporations nor their shareholders could be sued, the Supreme Court would have to find an affirmative rule of corporate immunity. Neither federal common law nor international law creates any such immunity.

Arab Bank wants the benefits of corporate personhood, while evading the responsibilities. But it cannot pick and choose only the aspects of corporate personality that it likes, as the Supreme Court held in 1946 in Schenley Distillers Corp. v. United States.

Perhaps recognizing that asking for a special immunity for corporations is a heavy lift, Arab Bank suggested, in opposing certiorari, that it would raise other issues, including the claim that it cannot be held liable even if it knowingly aided and abetted terrorism. According to Arab Bank, the plaintiffs must prove that the bank had the purpose to help murder innocents. The bank is wrong, essentially for the same reason that its corporate-immunity argument fails: Common-law principles should provide the standard for aiding-and-abetting liability. Whether a defendant is liable for abetting a violation of a universally recognized human right is not part of the threshold jurisdictional question of whether the plaintiff has suffered a violation of that right. Instead, it is a liability question and accordingly is one of federal common law.

Under ordinary, longstanding common-law principles, a defendant who knowingly provides substantial assistance to the primary tortfeasor is liable. And even if international law controlled, it has, since Nuremberg, applied the same knowledge standard as the common law. A party that willingly assists terrorism or genocide cannot absolve itself by claiming it lacked the principal’s purpose. “I knew I was abetting mass murder, but didn’t care if the murders were committed” is not a defense.