Earlier this month, in In re South African Apartheid Litigation, District Court Judge Shira A. Scheindlin in the Southern District of New York held that corporations may be held liable for human rights abuses under the Alien Tort Statute (ATS), allowing the plaintiffs to continue their case against two US corporations – Ford and IBM – for their role in the human rights abuses carried out during the Apartheid-era in South Africa.
Most people thought this question was settled, and that corporations obviously could be sued for gross human rights abuses. So why is Judge Scheindlin’s decision significant?
To recap, in September 2010, the Second Circuit became the first (and only) federal appeals court to find corporations immune from liability for human rights abuses under the ATS in Kiobel v. Royal Dutch Petroleum/Shell (Kiobel I). The decision created a “circuit split” – a divergence between decisions in different federal appeals courts – that sent the corporate liability issue to the Supreme Court. The Supreme Court, however, changed the question, and eventually dismissed the case in Kiobel II on the grounds that the case against Shell did not “touch and concern” the United States with “sufficient force” to overcome the presumption against extraterritoriality.
I’ve argued elsewhere that, by deciding the question on this ground, the Court effectively overruled the Second Circuit’s decision on corporate liability. Although it did not specifically rule on the question of corporate liability, it at least implicitly acknowledged corporate liability by discussing “mere corporate presence.”
Outside the Second Circuit, the one thing courts have actually gotten right after Kiobel II is the fact that corporations are not immune from liability under the ATS. Most have assumed it, but the Ninth Circuit expressly said so in Doe v. Nestle, overturning the only decision other than Kiobel I that granted corporations immunity.
But things are less clear in the Second Circuit.
In Balintulo v. Daimler AG, the decision that sent the Apartheid case back to Judge Scheindlin, the Second Circuit indicated that it thinks its Kiobel I decision is still valid. The Balintulo opinion was authored by Judge José Cabranes – the same judge who authored the Second Circuit Kiobel I decision. As we’ve explained elsewhere, the question before the Second Circuit wasn’t actually the application of Kiobel II, but in its opinion, the Second Circuit suggested that the Supreme Court’s holding “provides a sufficient ground for dismissing all of the remaining claims[.]” But Judge Cabranes went further, adding in a footnote that the law of the Second Circuit includes the principle “that corporations are not proper defendants under the ATS[.]”
Six months later, in an unrelated case, Chowdhury v. Worldtel Bangladesh Holding, Ltd, the Second Circuit reversed the judgment against Worldtel for torture under the ATS after concluding that all of the relevant conduct occurred in Bangladesh. This was simply applying the Supreme Court’s decision in Kiobel II.
But Judge Cabranes authored the Chowdhury opinion, too, and once again included a footnote stating that the claims would also “encounter a second obstacle” since corporate liability “is not currently actionable under the ATS.” Another judge, Judge Pooler, however, expressly noted in her concurring opinion that the footnote was “dicta” – i.e., a mere statement of opinion without any legal weight – and that other circuits have determined that the Supreme Court “established definitively the possibility of corporate liability under the ATS.”
When the Apartheid case was sent back to Judge Scheindlin, she dismissed the ATS claims against the foreign corporations on the basis of the Kiobel II “touch and concern” test, but refused to immediately dismiss the ATS claims against the US corporations, instead ordering briefing on the question of corporate liability. In her decision last week, Judge Scheindlin called the Second Circuit’s Kiobel I holding a “stark outlier” and concluded that corporations may be held liable under the ATS.
The decision is significant because it squarely rejects Judge Cabranes’s Kiobel I holding and virtually ensures the Second Circuit will have to directly take on the question of corporate liability again. And, because the same panel of judges is expected to hear the eventual appeal of Judge Scheindlin’s holding, Judge Cabranes will once again be on the front lines of deciding this issue. It’s no secret where he stands on this, but the other judges on the panel may soon have to decide where they stand as well. Will the Second Circuit follow a decision that has been rejected by all other courts and severely undermined by the Supreme Court, or finally recognize that corporations have an obligation to respect fundamental human rights, just like everyone else?