Biomah Flomo, et al. v. Firestone Natural Rubber Co., No. 10-3675 (7th Cir. July 2011), addresses the issue of corporate liability under the Alien Tort Statute, 28 U.S.C. § 1350 – an issue that has split the Circuits.  More interesting for our purposes, the decision rules on issues of international litigation practice that apply more generally to the litigation or dispute resolution of international business controversies. (Frankly, even if the decision had no relevancy, reading yet another dazzling display of judicial erudition in the panel’s decision authored by Judge Posner would be worth a detour in any event.)

At issue in the case are claims by 23 Liberian children against a Firestone subsidiary, who allegedly utilized hazardous child labor on its plantation, in violation of customary international law. Firestone did not actually employ children; rather, the allegations went, Firestone set such high daily production quotas for its employees (poor Liberian agricultural workers) that, given that the pay is relatively good by local standards, there is an incentive for the employee to “dragoon their wives or children into helping them, at no monetary cost”.

The Seventh Circuit affirmed the District Court’s dismissal of the complaint, but on an analysis different from that used by the District Court:

First, the Court of Appeals felt it needed to address the issue of whether the ATS covers corporate conduct, on which we have posted before. The Seventh Circuit joins the Eleventh and D.C. Circuits and splits with the Second in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010), to find no preclusion of corporate liability under the ATS. The Seventh Circuit says, among other things, that the “factual premise of the majority opinion in the Kiobel case is incorrect” – the example given is the allied powers dissolution of German corporations after the Second World War, which was done on the authority of “customary international law”. But the Seventh Circuit went further to say that, even supposing “no corporation had ever been punished for violating customary international law”, “[t]here is always a first time for litigation to enforce a norm; there has to be”. For example, says the Court, there “were no multinational prosecutions for aggression and crimes against humanity before the Nuremberg Tribunal was created”. The Court of Appeals also explains, “And if precedent for imposing liability for a violation of customary international law by an entity that does not breathe is wanted, we point to in rem judgments against pirate ships”.

Second, even though “corporate liability is possible” under the ATS, the Court of Appeals could not find adequate justification for imposing that liability on Firestone even assuming the truth of the allegations of the complaint. The Court repeated the fact that Firestone did not actually employ children.

Third, the Court rejected the argument that “plaintiffs must exhaust their legal remedies in the nation in which the alleged violation of customary international law occurred”, stating that the “implications of the argument border on the ridiculous” (asks the Court, imagine having to sue in Nazi Germany complaining about genocide before being able to sue under the ATS in the U.S.).

Fourth, the Court rejected the argument that the ATS should not be given extraterritorial application – limiting the ATS to those acts committed in the U.S. or on the high seas.   The statute had never been given that interpretation, says the Circuit.