In recent years, foreign citizens are increasingly using US courts to target international companies in lawsuits which claim that the company acted in concert with foreign governments, or rogue elements within a foreign country, to commit torture, rape, murder, genocide or a host of other human rights violations. Several Fortune 500 companies have been placed in the crosshairs of these lawsuits, and a broad array of industries, including the chemical, pharmaceutical, financial services, energy and agriculture sectors, have been affected. The costs of defending against these lawsuits can be expensive, and the reputational harm to a company can be severe.
The genesis of such lawsuits is a onesentence statute, first enacted in 1789, commonly known as the Alien Tort Claims Act (ATCA). The ATCA provides foreign individuals with jurisdiction to bring tort claims against defendants who have violated the “law of nations.” How a violation of the “law of nations” is defined has been the subject of much judicial debate, leading to inconsistent standards and, unfortunately, only more lawsuits. The courts have allowed several of these lawsuits to proceed, even as the allegations become more and more attenuated.
Despite the chilling specter raised by ATCA lawsuits, some comfort can be taken in the fact that, to date, there have been only a few judgments entered against international companies and no US company has had a judgment entered against it in an ATCA proceeding. Indeed, defendants have been relatively successful in obtaining dispositive rulings from the courts. There are, however, companies that have paid significant settlements in ATCA cases, and judgments have been entered against non-US, non-corporate citizens as high as almost US $2 billion.1 Given the possibility of large settlements or judgments and the continuing legal uncertainty, there are no signs that the filing of ATCA actions will slow. With careful attention to issues of corporate responsibility and compliance, however, it may be possible to lessen or eliminate a company’s exposure to the ATCA.
Overview of ATCA
The ATCA was enacted in 1789 by the First Congress. The statute states: “The district courts shall have 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.”2 The ATCA provides foreign individuals with the ability to file a complaint in US federal court for injuries sustained from a “violation of the law of nations” anywhere in the world. Though the ATCA sat dormant for nearly 200 years after its enactment, it is believed that the only claims originally meant to be covered by the ATCA were (1) offenses against ambassadors, (2) violations of safe conduct and (3) individual actions relating to piracy.3 Beginning in 1980, however, the ATCA was revived, leading to hundreds of lawsuits being filed against a multitude of defendants for conduct occurring in far-away locales.
The ATCA Awakens
The ATCA provides US courts with jurisdiction to hear claims brought by foreign citizens even though such claims may not involve any US defendant. In 1979, for example, a family from Paraguay filed a lawsuit in the US District Court for the Eastern District of New York against a Paraguayan police official alleging that the official kidnapped, tortured and murdered one of the family members.4 The case had no connection to the United States because it involved conduct that occurred in Paraguay by a non-US citizen against other non-US citizens. The defendant moved to dismiss the complaint, arguing that there was no subject matter jurisdiction over the lawsuit.5 The trial court granted the motion to dismiss, but the US Court of Appeals for the Second Circuit reversed, holding that “official torture is now prohibited by the law of nations” and, thus, fell within the ATCA’s jurisdictional grant.6
Following the Second Circuit’s decision, the number of claims filed throughout the 1980s in US courts by non-US citizens against foreign governments and officials exploded. Rarely did any of these lawsuits result in monetary damages, and rarely in these early actions were any companies named because the litigation dealt primarily with some form of state action. That landscape changed in the late 1990s when US companies began to feel the brunt of the ATCA.
In 1996, an oil company was sued in a class action lawsuit by Burmese citizens who alleged that the defendant was aware of, and supported, slave labor, murder, rape and forced relocation by the Burmese military during the construction of an oil pipeline.7 The district court granted motions to dismiss and for summary judgment.8 The Ninth Circuit, however, reversed the lower court, holding that, while some crimes require state action for liability to attach pursuant to the ATCA (such as rape, torture and execution), state action is not required for crimes such as slave trading or genocide.9 The opinion allowed the lawsuit to proceed.10 The company ultimately settled the litigation and, while the exact amount was confidential, the settlement amount was reported to have been approximately US $60 million.11
Modern Expansion of ATCA Claims
The Supreme Court’s Sosa Decision
In 2004, the ATCA reached the Supreme Court when the Court heard Sosa v. Alvarez-Machain. The Sosa case began when the US Drug Enforcement Agency (DEA) approved the use of Mexican nationals to abduct a Mexican physician to stand trial in the United States for the torture and murder of a DEA agent.12 The physician was acquitted of the charges and then sued the abductor, several DEA agents, the United States, and others alleging, inter alia, claims under ATCA.13 The district court granted the physician’s motion for summary judgment on his ATCA claim, and this was upheld by the US Court of Appeals for the Ninth Circuit.14 The Supreme Court granted certiorari to “clarify the scope” of the ATCA and reversed summary judgment.15
In reversing, the Court did not limit ATCA claims to only those actions contemplated when the statute was first enacted. Instead, it held that “judicial power should be exercised on the understanding that the door is still ajar subject to vigilant doorkeeping, and thus open to a narrow class of international norms today.”16 While the arrest and detention of the physician at issue in Sosa did not violate an “international norm,”17 the Sosa opinion did not articulate a specific framework for how lower courts should decide which international acts give rise to a valid claim under the ATCA.18 Since 2004, the Supreme Court has not provided further clarity as to how ATCA should be interpreted.19
The Khulumani Decision and the Dawn of Aiding and Abetting Liability
After Sosa, the number of ATCA complaints filed against US companies increased. For example, a tire and rubber company was sued for the treatment of Liberian workers in 2005.20 In 2005, two major food companies and others were sued under the ATCA for allegedly trafficking children to grow and harvest cocoa beans in the Ivory Coast.21 And in 2006, a food company, a chemical company and others were sued for the use of a pesticide in West Africa that allegedly caused sterility in workers.22 Plaintiffs’ lawyers also became more adept at using the ATCA to file massive class actions and individual claims.23
Then, in 2007, the US Court of Appeals for the Second Circuit issued its Khulumani decision holding that the ATCA may apply to claims of aiding and abetting liability. In Khulamani, South African citizens filed 10 separate lawsuits, which were consolidated before the Judicial Panel on Multidistrict Litigation, against approximately 50 named corporate defendants and more than 100 corporate “John Doe” defendants.24 Plaintiffs claimed that the defendants “actively and willingly collaborated with the government of South Africa in maintaining a repressive, racially based system known as ‘apartheid,’ which restricted the majority black African population in all areas of life while providing benefits for the minority white population.”25 The defendants, however, were not sued for directly violating human rights during apartheid, but for knowing about the human rights violations and continuing to facilitate such violations by doing business in South Africa. The defendants moved to dismiss these “aiding and abetting” claims asserted under the ATCA, and the District Court granted the motion.26 In a fractured decision, the Second Circuit reversed, stating that “the district court erred in holding that aiding and abetting violations of customary international law cannot provide a basis for ATCA jurisdiction. We hold that in this Circuit, a plaintiff may plead a theory of aiding and abetting liability under the ATCA.”27 Despite stating that an aiding and abetting liability claim could be asserted under the ATCA, the Second Circuit reportedly set forth no “standard to apply or even a decision concerning the source of law from which [a court] should derive a standard.”28
Based on Khulamani, the plaintiffs’ bar has claimed that a company can be sued if it was simply aware of human rights violations being committed by, for example, a foreign government, but had no direct involvement whatsoever in committing the abuse. One lower court has attempted to define an aiding and abetting liability standard by looking at various international norms, ultimately concluding: “[T]here are no applicable international legal materials requiring a finding of specific intent before imposing liability for aiding and abetting a violation of customary international law. As a result . . . customary international law requires that an aider and abettor know that its actions will substantially assist the perpetrator in the commission of a crime or tort in violation of the law of nations.”29 Further underscoring the uncertainty surrounding ATCA claims, another court has evaluated the international norms for aiding and abetting liability and stated that those principles are unclear.30
The “Bright Spot” In ATCA Jurisprudence
While the courts have allowed ATCA lawsuits to proceed on varying legal theories, the good news is that very few judgments have been entered against foreign companies, no court has entered a judgment against a US company to date,31 and many cases ultimately have been resolved in favor of the defendants. Also, Plaintiffs often have difficulty proving their case, and even presenting the necessary witnesses from foreign countries to testify as to the claimed conduct of the defendants on foreign soil. As one example, an Alabama-based mining company was sued by a group of Columbian citizens alleging that the mining company’s Columbian subsidiary paid a paramilitary group to murder and torture certain union leaders who represented employees of the company.32 The case proceeded to trial after the trial court denied motions to dismiss and for summary judgment. At trial, the plaintiffs were unable to produce the testimony of various witnesses, including former members of the paramilitary group who allegedly had first-hand knowledge of the mining company’s actions.33 The jury returned a defense verdict.34
The number of cases brought under the ATCA that have reached the trial stage have been few. In those cases that did not result in settlement, defendants often have had success in defeating ATCA claims on procedural and prudential grounds (in addition to arguments that the alleged conduct did not violate an international norm). One such defense that has been raised successfully is the doctrine of forum non conveniens. For example, a group of Turkish citizens filed an ATCA lawsuit against a US beverage manufacturer alleging that a Turkish company in which the US company held a 40 percent joint venture interest was complicit with Turkish police who violently attacked the plaintiffs during a labor dispute in Instanbul, Turkey.35 The US company moved to dismiss the complaint on, among other reasons, forum non conveniens grounds.36
In granting the motion to dismiss, the trial court held that, even though the ATCA vests jurisdiction over certain claims in US courts, a court must still apply the traditional forum non conveniens test articulated in Gulf Oil Corp. v. Gilbert, 330 US 501 (1947).37 The court then determined that the plaintiffs’ choice of forum was entitled to no deference because — given the injuries suffered were at the hands of Turkish police, committed in Turkey and related to a Turkish entity that was not wholly owned by the US company — the choice of the US was an exercise in forum shopping because “it was a jurisdiction associated primarily with defendants’ residence, and one that in significant respects posed inconveniences . . . more severe than those [the plaintiffs] would encounter in litigating in their chosen forum.”38 The court also held that the other forum non conveniens factors (e.g., ease of access to witnesses and evidence, enforceability of judgment) “all weigh[ed] strongly in favor of litigating the parties’ dispute in Turkey.”39
Defendants also have successfully used principals of international comity and the political question doctrine. In one case, a group of Indonesian plaintiffs alleged that the defendants contracted with the Indonesian army to provide security for a pipeline and then aided and abetted the human rights violations committed by the soldiers, including torture, “sexual violence” and genocide.40 The US State Department submitted a letter to the court in which it stated that permitting the lawsuit to proceed would endanger US foreign policy with Indonesia and that Indonesia objected to extra-territorial jurisdiction being asserted against its military.41 The court agreed, holding that adjudicating the plaintiffs’ claims for genocide and crimes against humanity would interfere impermissibly with Indonesia’s sovereignty and US foreign policy.42
Similarly, a Russian plaintiff filed an ATCA lawsuit against an automobile manufacturer and its German subsidiary claiming that Nazis abducted her from Russia and forced her to work at the defendants’ German factory during World War II.43 The court dismissed the complaint because, among other reasons, the asserted claims were nonjusticiable political questions and barred by principles of international comity because (1) the US government considers World War II claims as falling within the ambit of government-togovernment negotiations and (2) the German government has asserted that foreign citizens may not prosecute direct claims for war-time forced labor against private companies.44
More recently, defendants successfully have used common pleading standards to obtain dismissal of ATCA lawsuits. In one recent case, an American company and its Columbian subsidiary were sued by Columbian citizens alleging that the companies aided and abetted paramilitary forces in the systematic intimidation, kidnapping, detention, torture and murder of union members.45 The district court granted a motion to dismiss on the grounds that the plaintiffs failed to adequately plead a conspiracy between the defendants and the Columbian paramilitary group.46 In affirming the trial court, the court of appeals first stated that, for a valid claim under the ATCA, the plaintiffs had to allege that the defendants or their agents conspired with state actors, or those acting under color of law, in carrying out the injurious conduct.47 Citing the US Supreme Court’s heightened pleading rules announced in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), and Bell Atlantic Corporation v. Twombly, 550 U.S. 544 (2007), the court then held that the “plaintiffs’ ‘formulaic recitation,’ . . . that the paramilitary forces were in a symbiotic relationship and were assisted by the Colombian government, absent any factual allegations to support this legal conclusion, is insufficient to . . . support an allegation of state action that is plausible on its face.”48 The Sinaltrainal decision hopefully represents a new era in ATCA jurisprudence, where courts will be critical of a complaint’s allegations before permitting the case to proceed beyond the pleading stage.49
Avoiding or Minimizing ATCA Exposure
The costs associated with defending against ATCA claims can be exceedingly high. Given the inherent factual and legal difficulties, ATCA cases can last for years if not decades,50 meaning that a company faces skyrocketing legal fees to defend itself in the litigation. Furthermore, the potential reputational costs associated with a company merely being accused of human rights violations cannot be understated. There are, however, steps a company can take to minimize its chance of being the target of an ATCA lawsuit.
For example, companies conducting business with foreign governments, should attempt to limit exposure to “aiding and abetting liability” claims by including contractual language that expressly defines the duties of each party, puts in place limitations on liability, and, where appropriate, states that the company has no authority to direct, supervise or otherwise control any actions of any foreign government employee. Similar to many contracts with the US government, companies should attempt to include language in contracts with foreign governments mandating that all parties shall comply with all applicable domestic and international laws. These same contractual provisions should be included in agreements with contractors that companies hire. Companies also should investigate for possible governmental affiliations of its contractors and any history of human rights violations tied to the contractor.
In addition, companies should implement appropriate codes of conduct, provide training for their employees and install programs to ensure compliance and to prevent problems before they occur. Once a possible violation is made known, it is critical to initiate prompt investigations (either internally or through outside counsel) and take appropriate disciplinary action if a company employee commits an improper act.
The use of the ATCA to file lawsuits against international companies has risen steadily over the last few decades and shows no signs of slowing down. ATCA jurisprudence is uncertain and contradictory, which provides companies with a difficult landscape in which to navigate. The reputational harm, time and defense costs associated with these claims can be considerable. By taking the appropriate preventive measures and thinking critically about corporate compliance and responsibility issues, the more likely it is that a federal court will limit or dismiss an action, and corporate exposure to ATCA claims or liability can be minimized most effectively.