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July 18, 2011 11:21 AM

The Global Lawyer: Corporate Alien Tort Rouses from Its Deathbed

Posted by Michael D. Goldhaber

In the past week, Judge Richard Posner of the U.S. Court of Appeals for the Seventh Circuit and Judge Judith Rogers of the D.C. Circuit both lined up behind corporate liability for human rights violations under the U.S. Alien Tort Statute. Posner provokes, but it is Rogers who sets the agenda for U.S. human rights litigation over the next five years.

The "corporate alien tort" was snuffed out in the Second Circuit in Kiobel v. Royal Dutch Petroleum last year. Plaintiffs filed a U.S. Supreme Court cert petition in June, after the Second Circuit deadlocked
5 to 5 in declining to grant an en banc rehearing.

On July 11, in Flomo v. Firestone, Judge Posner affirmed the dismissal of claims by Liberian rubber tappers that Firestone had encouraged child labor on its vast rubber plantation in West Africa, reasoning that the alleged conduct did not violate a norm established with specificity under international law. Posner raised the possibility that the child laborers were better off than other Liberian children, but also eviscerated the U.S. Chamber of Commerce for arguing that alien tort liability is bad for business, observing that this is both irrelevant and not obviously true, as alien tort immunity could disadvantage corporations that respect human rights.

With characteristic self-confidence, Posner dispensed with the fussy footnote debates and careful but conflicting layers of analysis that encrust the Alien Tort Statute. Writing barely a month after oral argument, Posner summarily rejected the central premise of Kiobel--that corporations have never been prosecuted for violating customary international law. On the contrary, Posner wrote, the allied powers had invoked customary international law to dissolve German corporations that supported the Nazi war effort. In any event, Posner suggested in a loose series of musings, to make corporations immune from universal norms would be anomalous and unjustified. Firestone may hate this reasoning, but with the lower court's dismissal upheld, it has nothing to appeal from.

Doe v. Exxon, however, is very much alive. On July 8, Judge Rogers reinstated claims by Indonesian villagers that Exxon is liable for incidents of torture, killing, and arbitrary detention allegedly committed by security forces dedicated to an Exxon facility in the rebellious province of Aceh. Rogers is systematic where Posner is epigrammatic. She reviews just about every argument the human rights camp has made for two years--and accepts all of them.

Rogers rejects Kiobel for multiple reasons. First, she regards the question of corporate liability as a "technical accoutrement," rather than a norm of conduct that must be grounded in international law. In any event she agrees with Posner's view that the administrative dismantling of the Nazi chemical-maker IG Farben (effectively, a "corporate death penalty") should be regarded as a precedent for corporate liability. She also notes that the principle of corporate liability is generally accepted under domestic systems of law, and general principles of law are a standard source of customary international law, despite being overlooked by Kiobel.

On the question of aiding and abetting, Rogers diverges sharply from the Second Circuit's controversial ruling of 2009 in Presbyterian Church of Sudan v. Talisman Energy. Rogers argues that the Second Circuit misapprehended the test for aiding and abetting under customary international law. For the D.C. Circuit, it is enough that a corporation abets a wrongful act knowingly--and not purposefully. Arguably, the purpose test embraced by Talisman was just as fatal to the corporate alien tort as Kiobel.

Last but not least, Rogers revived the plaintiffs' state common law claims, rejecting the district judge's general rule against standing for nonresident aliens. Unfortunately for plaintiffs, Rogers found that the governing law is Indonesian, which lacks punitive damages.

Commentators immediately noted that the deepening of the circuit split on corporate liability strengthens the case for granting cert in Kiobel. It has been less widely noted that Doe v. Exxon creates a new circuit split on aiding and abetting. (Whether Exxon will first seek en banc review is not yet known.) Doe v. Exxon would make a superior vehicle for Supreme Court review, because it presents both questions, and it is not easily dismissed on technical grounds.  One could easily imagine a Supreme Court opinion that rejects the Second Circuit position in Kiobel (why needlessly feed the "Supreme Court is pro-business" meme?), while embracing the equally deadly conclusions of Talisman. On the other hand, Posner in Firestone reminds us that judges can surprise, and law can be intellectually pure.

In the likelier scenario that the Supreme Court hears Kiobel, Judge Rogers may offer a glimpse of the future. If the corporate alien tort lives, then litigation will focus on aiding and abetting. If the corporate alien tort dies, then state law will be the next battleground for human rights.

The Doe v. Exxon plaintiffs, for their part, say they're ready for trial. Yet Exxon might seek dismissal on grounds of foreign affairs preemption or lack of complete diversity jurisdiction, before a judge who has a record of dismissing the case. Firestone shows that corporate human rights claims are hard to kill categorically, but also hard to win. The only certainty is more appellate litigation.

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