An Exception to Jesner: Preventing U.s. Corporations and Their Subsidiaries from Avoiding Liability for Harms Caused Abroad

• Publication year: 2020

An Exception to Jesner: Preventing U.S. Corporations and Their Subsidiaries from Avoiding Liability for Harms Caused Abroad

Luke D. Anderson

AN EXCEPTION TO JESNER: PREVENTING U.S. CORPORATIONS AND THEIR SUBSIDIARIES FROM AVOIDING LIABILITY FOR HARMS CAUSED ABROAD

Introduction

In the mid-1990s, the Union Oil Company of California (Unocal) partnered with Total S.A. and the government and military of Myanmar to extract and transport natural gas from the Yadana gas field.¹ Unocal established two wholly-owned subsidiaries in Myanmar to hold its interest in the project.² Local villagers alleged that the Myanmar military—which provided security and built structures (such as helipads) for the project—used forced labor in connection with the project.³ Other villagers claimed that the military subjected them to murder, rape, and torture to ensure compliance among conscripted workers.⁴ The villagers brought claims in the United States under the Alien Tort Statute alleging that Unocal, through its foreign subsidiaries, aided and abetted the military in the crimes in Myanmar.⁵ Following an extended journey through the courts, the Ninth Circuit Court of Appeals held that Unocal could be liable under the Alien Tort Statute and remanded the case to the district court for further proceedings.⁶ Unocal settled with the villagers in 2003.⁷

In 2018, the U.S. Supreme Court in Jesner v. Arab Bank, PLC held that no foreign corporation may be sued under the Alien Tort Statute (ATS).⁸ The Supreme Court also recently held in Kiobel v. Royal Dutch Petrol. Co. that the ATS includes a "presumption against extraterritoriality," limiting claims to those that "touch and concern" the United States.⁹ Together, these holdings greatly limit the reach of the ATS, including in the case described above.

The ATS is a jurisdictional statute providing noncitizens subject matter jurisdiction in federal district court for actions in tort alleging violations of "the

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law of nations or a treaty of the United States."¹⁰ The ATS was little used for many years following its passage in 1789.¹¹ However, following Filártiga v. Peña-Irala, decided in 1980, the number of suits involving the ATS quickly increased.¹² By the early 2000s, the Supreme Court began to limit the application of the ATS.¹³ Suits limiting the ATS include Sosa v. Alvarez-Machain, Kiobel, and most recently, Jesner.¹⁴ Following Kiobel and Jesner, the ATS includes a "presumption against extraterritorial application," and no suits may be brought against foreign corporate defendants.¹⁵ These barriers greatly limit the ability of victims of human rights violations to find justice. Critically, the barriers imposed by Kiobel and Jesner mean that any human rights violations that occur abroad will have to significantly "touch and concern" the United States for a suit to invoke proper jurisdiction—even with an American defendant—and no abuses by foreign corporations can be tried under the statute.¹⁶ This Comment argues that either the courts or Congress should create an exception under the ATS for foreign corporate subsidiaries of domestic corporations. This exception would help realize one goal the ATS was originally enacted to achieve: to find Americans (or in this case, the entities they control) liable for acts committed abroad in violation of the law of nations.¹⁷ Such an exception will help improve

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American soft power abroad and hold human rights violators liable for their wrongs.¹⁸

Part I of this Comment gives a brief overview of the history of the ATS, including the reasons for its passage and its interpretation over the first two centuries of its existence. It also discusses the recent increase in ATS cases along with the Supreme Court's recent jurisprudence. Part II examines recent ATS cases involving corporate liability and the path that led to Jesner. Part IV includes arguments for and against liability for foreign corporations in domestic courts, both from American and foreign jurisdictions. Part IV also discusses liability for international law violations in foreign states and the legal theories used to find liability. Finally, the proposed exception to the holding of Jesner is set forth in Part III, and Part IV is the conclusion.

I. Alien Tort Statute Background

The Alien Tort Statute, passed as part of the Judiciary Act of 1789, gives U.S. district courts "original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States."¹⁹ The ATS is jurisdictional and does not create an independent cause of action.²⁰ However, "[t]he jurisdictional grant is best read as having been enacted on the understanding that the common law would provide a cause of action."²¹ When the ATS was passed, Congress was "probably" focused on three offenses: "violation of safe conducts, infringement of the rights of ambassadors, and piracy[,]" which were offenses addressed by the common law of England.²² As such, the ATS was little used for most of the nineteenth and twentieth centuries.²³ More recently, additional "clear and unambiguous" violations of international law have been recognized as protected by the ATS.²⁴ The "recognition . . . that certain acts constituting crimes against humanity are in violation of basic precepts of international law" led to an increase in ATS cases.²⁵

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The "modern line of cases" began in 1980 with Filártiga.²⁶ In Filártiga, the Second Circuit Court of Appeals found there was jurisdiction under the ATS in a case seeking damages for alleged torture.²⁷

The Supreme Court in Sosa considered whether the ATS can support suits based on causes of action beyond those considered when the statute was passed.²⁸ The Court noted that "[f]or two centuries [the Supreme Court has] affirmed that the domestic law of the United States recognizes the law of nations."²⁹ Additionally, the First Congress "assumed that federal courts could properly identify some international norms as enforceable in the exercise of § 1350 [ATS] jurisdiction."³⁰ The only congressional response to federal courts' exercise of this judicial power was to explicitly affirm jurisdiction in cases of torture through the passage of the Torture Victim Protection Act of 1991 (TVPA), published as a note to the ATS.³¹ Additionally, legislative history of the TVPA "includes the remark that § 1350 should 'remain intact to permit suits based on other norms that already exist or may ripen in the future into rules of customary international law.'"³² Furthermore, "Congress has not in any relevant way amended § 1350 or limited civil common law power by another statute."³³

Since Sosa, new claims under the ATS are evaluated under the standard that they must be based on norms "accepted by the civilized world and defined with a specificity comparable to the features of the 18th-century paradigms" recognized at the time the ATS was passed.³⁴ Explaining the level of specificity required, the Court has held that any new causes of action must be "violations of international law norms that are 'specific, universal, and obligatory.'"³⁵

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In recent years, the Court has limited the ATS. Perhaps the most notable case before Jesner is Kiobel v. Royal Dutch Petrol. Co.³⁶ In 2013, the Court ruled on Kiobel, in which Nigerian nationals sued foreign corporations, alleging the corporations aided and abetted the Nigerian government's commission of crimes against the law of nations in Nigeria.³⁷ In Kiobel, the Court held that any claims under the ATS must "touch and concern the territory of the United States . . . with sufficient force to displace the presumption against extraterritorial application."³⁸ The presumption against extraterritoriality is that "[w]hen a statute gives no clear indication of an extraterritorial application, it has none."³⁹ In Kiobel, the Court held that the case could not be maintained when "all the relevant conduct took place outside the United States,"⁴⁰ and that "mere corporate presence" in the United States is insufficient to rebut the presumption against extraterritoriality.⁴¹

The Court did not, in Kiobel, consider whether the ATS provides jurisdiction for a suit against a corporation.⁴² It is notable that Kiobel does not bar suits by a foreign national against foreign corporations.⁴³ The Court instead reached its holding by requiring that there must be some relevant conduct within the United States.⁴⁴

The Court did take this step in Jesner.⁴⁵ In 2018, the Court barred all suits by a foreign national against a foreign corporation under the ATS.⁴⁶ This, in effect, bars suits against foreign subsidiary corporations of U.S. domestic corporations, unless there is a case for veil-piercing,⁴⁷ and the suit is brought

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directly against the domestic corporation.⁴⁸ Suits of this type have been largely unsuccessful.⁴⁹

II. Corporate Liability and the Alien Tort Statute

A. Cases Pre-Jesner

Recently, the courts of appeals have split over whether a corporation is a suitable defendant in an Alien Tort Statute lawsuit.⁵⁰ "[T]he Courts of Appeals for the Seventh, Ninth, and District of Columbia Circuits . . . held that corporations can be subject to suit under the ATS."⁵¹ Conversely, the Second Circuit held that the ATS does not apply to corporations at all, but only to natural persons.⁵²

The Ninth Circuit allowed a suit against a corporation to proceed in Doe v. Unocal Corp.⁵³ The plaintiff in Doe alleged that the subsidiary of a domestic corporation aided and abetted human rights abuses in connection with an oil

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project in Myanmar.⁵⁴ The Ninth Circuit did not consider that Unocal was not amenable to suit because of its status as a corporation.⁵⁵ Many more cases involving plaintiffs suing corporations, which comprised "[the] majority of the ATS claims filed," followed the decision of the Ninth Circuit, although most were settled or failed on other grounds.⁵⁶

Flomo v. Firestone Nat. Rubber Co. was brought...