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April 5, 2012 6:44 PM

The Global Lawyer: The Perils of State Human Rights Litigation

Posted by Michael D. Goldhaber

"Your honor, we do not urge a rule of corporate impunity here," Kathleen Sullivan of Quinn Emanuel Urquhart & Sullivan told the U.S. Supreme Court at oral argument in Kiobel v. Royal Dutch Petroleum. Although Shell's counsel are asking the Court to affirm the Second Circuit's conclusion in Kiobel that corporations can't be held liable under the the Alien Tort Statute, they stress that corporations can still be sued under state law. What they don't stress is that, when those state claims arrive, the defense will try to eviscerate them. 

An exquisitely timed conference was held at UC Irvine School of Law on March 2, three days after Supreme Court arguments in Kiobel, to assess the prospects of human rights litigation under state law. I began the conference with enthusiasm, because I've begun to worry that alien tort litigation will be recalled as an intellectually fascinating blind alley. Unfortunately for plaintiffs, and for anyone who believes in corporate accountability, I left feeling that the future of state human rights litigation is shaky.

Kiobel got woollier the next business day after the conference, when the Justices ordered new briefing and argument on the extraterritorial reach of the ATS. But it remains a good bet that state law will loom large in a post-Kiobel world. If the Supreme Court rules in Kiobel that corporations are immune under the ATS, plaintiffs will still sue corporate officers, but will struggle to establish intent.If Kiobel holds only that the ATS lacks extraterritorial effect, plaintiffs will still sue corporations, but will struggle to link U.S. conduct to the alleged harm. Either way, alien tort plaintiffs will often be driven to state law.

Human rights plaintiffs in the United States have always invoked the federal alien tort statute side by side with state common law claims for tort (for instance, pleading battery alongside torture) and the occasional Gumby-like state statute (the California consumer protection act or Connecticut's unfair competition act). The 2004 agreement with Unocal, which stands as plaintiffs' high-water mark, settled on the eve of a state trial. Pfizer's Nigerian case settled last year on the strength of its state claims, even after the Second Circuit ruling in Kiobel blocked its federal claims.

State law has its advantages for plaintiffs. There is no need to plead with specificity, or to show violation of a universal norm. Defendants can't rely on the doctrine of exhaustion, or question the existence of secondary liability. But the list of obstacles is longer:

—Foreign affairs preemption. If Kiobel kills the corporate alien tort, Exxon v. Doe is queued up as the first case to be argued under state law, and the likeliest battleground is foreign affairs preemption. The defense may claim that the federal power to regulate foreign affairs preempts state law affecting foreign affairs (in this case, undermining U.S. deference to Indonesia's handling of its rebellion in Aceh). This argument has succeeded in Saleh v. Titan and Movsesian v. Versicherung, but plaintiffs will vigorously argue that both cases (implicating torture in Iraq and Armenian cultural theft) are factually distinct. Ultimately, this could provide an occasion for the Supreme Court to revisit its 1968 ruling in Zschernig v. Miller, which found preemption in the absence of a conflict with any particular treaty.

—Personal jurisdiction. Plaintiffs will lose the benefit of the federal long arm statute, which allows aggregation of the defendants' conduct nationally. They often must rely instead on the standard enunciated last year by the Supreme Court in Goodyear v. Brown. Some believe that Goodyear didn't change the law, but the new catch-phrase, "essentially at home in the forum," could in practice be a boon to defendants.

—Forum non conveniens. Plaintiffs will lose the benefit of the presumption established in Wiwa v. Shell, that the federal courts have a strong interest in protecting human rights. Historically, many global environmental claims have been thrown out of court on this ground, including Aguinda v. Chevron. In light of that experience, defendants may be more leery of trying their luck abroad.

—Choice of law. The defense will argue strategically that their cases are governed by short foreign time limits. But in some states, plaintiffs can invoke the doctrine of equitable tolling. The defense will also argue that their cases are governed by strict foreign damage limits. (For instance, Exxon has succeeded in foreclosing punitive damages by tracking the Aceh case under Indonesian law). However, this will not knock out the embarrassing underlying claims, which may retain considerable settlement value. Moreover—in an extraordinary and little-noticed development—several Latin American legislatures have neutralized this stratagem by passing a Model Law on International Jurisdiction and Applicable Law to Tort Liability, which makes U.S. damage standards applicable in Latin American court under certain circumstances. That's how the Ecuadorian judgment against Chevron was able to reach $18 billion.

—Extraterritoriality. Finally there's the argument that never seems to lose. If a statute is involved, defendants may simply cite the presumption against extraterritoriality revived in Morrison v. National Australia Bank. Otherwise, they may argue that extraterritoriality is limited by the due process and commerce clauses and basic principles of federalism. Sooner or later, this argument will surely come to state court.

On each of these issues, plaintiffs may be penalized by the discomfort felt by many state judges with global affairs. On the other hand, judges don't come any worldlier than Victoria Chaney, who presided over Dole's defense of Nicaraguan claims in California Superior Court. And in many cases, state law will be adjudicated in federal court.

Whether under state or federal law, most human rights claims will be dismissed on threshold grounds (most commonly jurisdiction or forum non conveniens). Courts can get the balance wrong, but at least some claims will survive. And so long as the possibility for litigation remains, it will deter questionable conduct by corporations overseas.

The real danger is that state law human rights claims will be scrapped categorically on constitutional grounds—either because they are preempted by the foreign affairs power or because courts curtail the extraterritorial reach of the common law. Courts should pause before dealing such a grave setback to the movement to hold corporations accountable for human rights offenses. 

Corporations may deny that they seek human rights impunity, but if their lawyers get their way in the courts, that could be the net effect. As Beth Stephens of Rutgers School of Law puts it, we risk creating a Dr. Seuss world, where corporations get to say: "You can't sue me here. You can't sue me there. You can't sue me anywhere."

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