On Monday, July 11, for the second time in four days, a U.S. appellate court issued a decision stating that corporations are proper defendants in cases involving claims under the Alien Tort Statute (“ATS”). The Seventh Circuit Court of Appeals dismissed plaintiffs’ claims in Flomo v. Firestone, but held that “corporate liability is possible” under the ATS.

In a decision written by Circuit Judge Richard Posner, the Court observed that appellate courts in the Eleventh, District of Columbia, Second, Fifth, and Ninth Circuits have all held, or assumed, that corporations can be liable under the ATS. The Court then noted that the “outlier” decision on the question of corporate liability is Kiobel v. Royal Dutch Petroleum, and found that “the factual premise of the majority opinion in the Kiobel case is incorrect."  The Second Circuit's decision held that because corporations have never been prosecuted, civilly or criminally, for violating customary international law, there can’t be a principle of customary international law that binds a corporation. The Court disagreed with this premise, citing the dissolution of German corporations after World War II under the authority of customary international law.

After stating that Kiobel’s factual premise was incorrect, the Court then observed:

And suppose no corporation had ever been punished for violating customary international law. There is always a first time for litigation to enforce a norm; there has to be.

Ultimately, the Court found “[i]nternational law imposes substantive obligations and the individual nations decide how to enforce them.” Finding that corporate civil liability is proper in U.S. courts, the Court stated that corporate liability for violations of customary international law is “limited to cases in which the violations are directed, encouraged, or condoned at the corporate defendant’s decisionmaking level.”

The case involved allegations that children at the Firestone Natural Rubber Company’s rubber plantation in Liberia worked in such hazardous conditions that the work violated customary international law. The Court upheld the dismissal of plaintiffs' claims, finding that the conditions under which the children were alleged to have worked did not provide “an adequate basis for inferring a violation of customary international law.”

While the dismissal of plaintiffs’ claims was upheld, this decision, and the D.C. Circuit’s decision in Doe v. Exxon Mobil, represent two significant victories for those seeking to hold corporations liable under the ATS. As one of the plaintiffs’ lawyers, Terry Collingsworth, observed after the announcement of the Flomo decision, “We won the war, but lost the battle.”