Extraterritoriality Becomes Focus of Kiobel Supreme Court; Are We Headed for Morrison II?

 We have posted on the fascinating development of the law concerning the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350.   The issues raised there are important in their own right and are at the center of many issues faced by the international litigator. 

It started with the Second Circuit’s decision in Kiobel, et al. v. Royal Dutch Petroleum Co., et al., 06-4800-cv, 06-4876-cv (2d Cir. 9/17/10), which we discussed here, among other places.   In that case the U.S. Court of Appeals for the Second Circuit majority (Cabranes, Jacobs, JJ.) presented an exhaustive discussion of the history of the ATS, more modern analyzes including the sources of law underpinning the Nuremberg trials and other modern treaties, and the entire subject of corporate liability for alleged violations of human rights in the international, extraterritorial context.  The Second Circuit held that the ATS did not create a cause of action against corporations.  Other Circuits split on the issue. See our posting on “Supreme Court Agrees To Resolve Deep Circuit Split and Decide If Alient Tort Statute Permits Actions Against Corporations“. 

When the Supreme Court granted certiorari review, the questions to be determined were:

1. Whether the issue of corporate civil tort liability under the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350, is a merits question, as it has been treated by all courts prior to the decision below, or an issue of subject matter jurisdiction, as the court of appeals held for the first time.

2. Whether corporations are immune from tort liability for violations of the law of nations such as torture, extrajudicial executions or genocide, as the court of appeals decisions provides, or if corporations may be sued in the same manner as any other private party defendant under the ATS for such egregious violations, as the Eleventh Circuit has explicitly held.

The Court, having heard argument, has expanded the question presented by its Order of March 5, 2012. Now says the High Court:

THIS CASE IS RESTORED TO THE CALENDAR FOR REARGUMENT. THE PARTIES ARE DIRECTED TO FILE SUPPLEMENTAL BRIEFS ADDRESSING THE FOLLOWING QUESTION: ‘WHETHER AND UNDER WHAT CIRCUMSTANCES THE ALIEN TORT STATUTE, 28 U.S.C. §1350, ALLOWS COURTS TO RECOGNIZE A CAUSE OF ACTION FOR VIOLATIONS OF THE LAW OF NATIONS OCCURRING WITHIN THE TERRITORY OF A SOVEREIGN OTHER THAN THE UNITED STATES.’”

This shift in focus dovetails with the concern over extraterritorial reach of federal laws — the most significant example of which is the Court’s decision in Morrison v. National Australia Bank, No. 08-1191 (S. Ct. June 2010), which held that Section 10(b) of the Securities Exchange Act of 1934 did not provide a private cause of action in “foreign-cubed” cases—cases where foreign plaintiffs sue foreign defendants for misconduct in connection with securities traded on foreign exchanges (hence “foreign cubed”). The Court rejected over 40 years of lower-court jurisprudence – which focused on where “conduct” and “effects” occurred or would be felt to determine the reach of Rule 10b-5. Instead the Supreme Court held that Section 10(b) reaches frauds only where “the purchase or sale is made in the United States, or involves a security listed on a domestic exchange” (slip op. at 21).

It remains to be seen whether the Court will analyze the issues similarly.  The ATS, to state the obvious, is a statute specifically directed at non-U.S. persons and entities.   Will the Court interpret the jurisdictional presumptions emanating from Congress in the same way as it did with respect to the federal securities laws, which have as their main focus domestic activity?

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