On Tuesday, the U.S. Supreme Court decided Jesner v. Arab Bank, a case raising the question whether corporations can be sued for human rights violations, including acts of terrorism, under the Alien Tort Statute (ATS). For a preview of the arguments in the case, see here.
Justice Kennedy delivered the judgment of the Court, writing a broad and rambling opinion that might have foreclosed ATS liability for all corporations. But only Chief Justice Roberts and Justice Thomas joined Kennedy’s opinion in full. Justice Alito and Justice Gorsuch joined only those parts of the opinion that were limited to foreign corporations, and their separate concurring opinions emphasized the differences between ATS suits against foreign defendants and those against U.S. defendants. The four other Justices would have permitted ATS suits against both U.S. and foreign corporations, with Justice Sotomayor writing a devastating dissent on their behalf. So while the Supreme Court dismissed the plaintiffs’ claims against Arab Bank, the question of corporate liability in suits against U.S. corporations remains to be decided.
The ATS gives federal district courts jurisdiction over “any civil action by an alien for a tort only, in violation of the law of nations or a treaty of the United States.” The First Congress passed the ATS in 1789 with the eighteenth century law of nations in mind. But in Sosa v. Alvarez-Machain (2004), the Supreme Court held that federal courts could recognize causes of action under the ATS for violations of modern human rights law that are as generally accepted and specifically defined as the eighteenth century paradigms (infringement of the rights of ambassadors, violations of safe-conducts, and piracy). In Kiobel v. Royal Dutch Petroleum Co. (2013), the Supreme Court applied the presumption against extraterritoriality to ATS causes of action, holding that plaintiffs could only bring suits that “touch and concern” the United States. The plaintiffs in Jesner alleged that Arab Bank, a foreign corporation, had financed terrorist attacks in Israel by funneling money through its New York branch. The Second Circuit dismissed the claims under circuit precedent holding that only natural persons and not corporations can be sued under the ATS.
Framing the International Law Question
Writing only for three in Part II.A, Justice Kennedy seemed to accept the Second Circuit’s framing of the corporate liability question as whether there was a “norm of corporate liability under currently prevailing international law” that would meet the Sosa standard (p. 15). As Justice Sotomayor pointed out in dissent, however, this framing of the question “fundamentally misconceives how international law works” (p. 2). (I should disclose that I wrote the amicus brief of International Law Scholars in Jesner, on which Justice Sotomayor relied in this part of her opinion.)
The dissent correctly observed: “Although international law determines what substantive conduct violates the law of nations, it leaves the specific rules of how to enforce international-law norms and remedy their violations to states, which may act to impose liability collectively through treaties or independently via their domestic legal systems” (p. 3). Thus, Sosa’s requirement of a generally accepted and specifically defined norm of international law refers to norms of “substantive conduct,” not “forms of liability” (pp. 3-4). Because of this distinction, the plurality’s reliance on jurisdictional limits found in the charters of international criminal tribunals (pp. 14-15) was also misplaced, the dissent explained, because it “confuses the substance of international law with how it has been enforced in particular contexts” (p. 8). In other words, limits on jurisdiction are not limits on substantive law. Assuming that the international law prohibition against terrorist financing met the Sosa standard—a question the dissent would have remanded to the Second Circuit to resolve in the first instance—“nothing in international law suggests a corporation may not violate it” (p. 7).
Perhaps because of the power of the dissent, Justices Alito and Gorsuch did not join the part of Justice Kennedy’s opinion claiming that “there is a distinction in international law between corporations and natural persons” (p. 17). And even Justice Kennedy seemed to back away from his own argument in the end, concluding that “the Court need not resolve . . . whether international law imposes liability on corporations” (p. 17-18). This makes Justice Kennedy’s mistaken approach to international law nothing more than dictum in a plurality opinion.
Limiting the Holding to Foreign Corporations
The only analytical parts of Justice Kennedy’s opinion that commanded a majority of the Supreme Court were those invoking separation of powers concerns against creating new causes of action (pp. 18-19) and foreign relations difficulties (pp. 25-27). Significantly each of these parts was expressly limited to suits against foreign corporations. The first concluded with the observation that “absent further action from Congress it would be inappropriate for courts to extend ATS liability to foreign corporations” (p. 19). The second said even more explicitly: “the Court holds that foreign corporations may not be defendants in suits brought under the ATS” (p. 27).
The reasons for this limitation to foreign corporations may be found in the concurring opinions written by Justices Alito and Gorsuch. Justice Alito emphasized the foreign relations implications of suits against foreign corporations: “Creating causes of action under the Alien Tort Statute against foreign corporate defendants would precipitate exactly the sort of diplomatic strife that the law was enacted to prevent” (p. 1). In a footnote, Justice Alito expressly stated, “Because this case involves a foreign corporation, we have no need to reach the question whether an alien may sue a United States corporation under the ATS” (p. 3). He could not have been clearer.
As he telegraphed at oral argument that he might, Justice Gorsuch interpreted the ATS “to require a domestic defendant” (p. 6). Here, Justice Gorsuch largely followed the approach of A.J. Bellia and Brad Clark, which I have previously criticized. But of course, this approach to the ATS does not preclude suits against U.S. corporations for violating the law of nations. Justice Gorsuch explained: “It is one thing for courts to assume the task of creating new causes of action to ensure our citizens abide by the law of nations and avoid reprisals against this country. It is altogether another thing for courts to punish foreign parties for conduct that could not be attributed to the United States and thereby risk reprisals against this country” (p. 13). ATS suits against U.S. corporations clearly fall into the former category.
After the Supreme Court’s 2013 decision in Kiobel, my colleague Anupam Chander observed that the impact of that decision would be to free foreign corporations, but not U.S. corporations, from the risk of being sued under the ATS. In a sense, Jesner simply makes this point explicit.
I do not want to be overly sanguine about the prospects for corporate liability in ATS suits against U.S. corporations. Justice Gorsuch wrote that Sosa’s decision to give the ATS continuing relevance by permitting a limited class of human rights claims to proceed was a mistake (pp. 2-5). Justice Alito agreed (p. 3). And even Justice Kennedy strangely suggested that “there is an argument that a proper application of Sosa would preclude courts from ever recognizing any new causes of action under the ATS” (p. 19)—a position that the majority in Sosa (including Justice Kennedy) expressly rejected. ATS suits against U.S. corporations also face a host of other obstacles, from the fact that such corporations often operate abroad through foreign subsidiaries to the standard for aiding and abetting liability. My point is simply that Jesner does not settle the question of corporate liability for U.S. corporations, and such cases constitute the bulk of litigation against corporations under the ATS.