In Nestlé USA, Inc. v. Doe, the U.S. Supreme Court took up the question of corporate liability for human rights violations under the Alien Tort Statute (ATS) for the third time. The Court again failed to resolve the question, holding instead that application of the ATS cause of action would be impermissibly extraterritorial in this case because nearly all the defendants’ relevant conduct occurred in Ivory Coast. At first glance, this holding appears narrow, which is no doubt why it attracted the votes of eight Justices. But the decision has potentially broad implications for ATS suits against individuals and for the extraterritorial application of federal statutes in other areas. This article will briefly discuss the questions of corporate liability and limiting the ATS cause of action before exploring the Court’s extraterritoriality holding and its potentially dramatic implications.
Background
The defendants are U.S. companies that buy cocoa from Ivory Coast. The plaintiffs are individuals from Mali who were trafficked to Ivory Coast as child slaves to work on cocoa farms. Plaintiffs alleged that defendants aided and abetted their slavery by providing the farms that held them with technical and financial resources despite knowing or having reason to know that the farms were using children as slaves. Plaintiffs alleged that the defendants made all their major operational decisions from the United States.
The ATS is a jurisdictional provision that was part of the First Judiciary Act of 1789. As codified today, it gives federal district courts jurisdiction over “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.” In 1980, the Second Circuit held in Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir. 1980), that non-U.S. citizen plaintiffs could use the ATS to sue a foreign police inspector who had come to the United States to recover damages for torture that occurred abroad, reasoning that the plaintiffs were “aliens,” that torture is a tort, and that torture violates modern customary international law.
In Sosa v. Alvarez-Machain, 542 U.S. 692 (2004), the Supreme Court rejected arguments that a statutory cause of action should be required for claims under the ATS and that claims should be limited to the three violations of the law of nations that the First Congress had in mind in 1789 (violations of safe-conducts, infringement of the rights of ambassadors, and piracy). The Court recognized an implied, federal-common-law cause of action for violations of modern international law that are as generally accepted and specifically defined as the three historical paradigms, although the Court found that Alvarez-Machain’s claims of arbitrary detention did not meet that standard.
In 2010, the Second Circuit held in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010), that corporations could never be sued under the ATS because corporate liability for human rights violations did not meet the Sosa standard. The Supreme Court granted review on the corporate liability question, but after reargument the Court declined to answer the question. Instead, the Court applied the presumption against extraterritoriality to the ATS cause of action, holding that ATS claims must “touch and concern the territory of the United States . . . with sufficient force to displace the presumption against extraterritorial application” and that “mere corporate presence” in the United States is insufficient. Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108, 124-25 (2013). The Court tried again to answer the corporate liability question in Jesner v. Arab Bank, PLC, 138 S. Ct. 1386 (2018). Again, it failed, holding only that the ATS cause of action does not extend to foreign corporations. Id. at 1407.
The Nestlé case presented the Court with a third opportunity to decide the corporate liability question because the defendants were U.S. corporations not protected by Jesner. But once again, the Court disposed of the case on other grounds. Justice Thomas concluded in Part II of his opinion (joined by every member of the Court except Justice Alito) that applying the ATS cause of action would be impermissibly extraterritorial because the plaintiffs had not alleged sufficient relevant conduct in the United States. Justice Thomas went on in Part III to propose that the ATS cause of action should be limited to the three historical paradigms that the First Congress had in mind, but he was joined only by Justices Gorsuch and Kavanaugh. Justice Sotomayor (joined by Justices Breyer and Kagan), agreed with Justice Thomas about extraterritoriality but disagreed about limiting the ATS cause of action. She also reiterated her view that the ATS cause of action should extend to corporations. Justices Gorsuch and Alito agreed with Justice Sotomayor that there was no basis for limiting the ATS cause of action to natural persons (which, yes, makes five Justices on that point of law). Justice Gorsuch (joined by Justice Kavanaugh), however, would have overruled Sosa, whereas Justice Alito would not have reached the extraterritoriality question before deciding other issues he though should be preliminary.
If plaintiffs must show relevant conduct in the United States, it is hard to see how traditional ATS cases against individual defendants can continue.
Corporate Liability
The Court granted review in Nestlé to decide the corporate liability question that it left open in Kiobel and Jesner. In Jesner, the plurality and the dissent fundamentally disagreed on how the question should be framed. Justice Kennedy’s plurality opinion asked whether there was a “norm of corporate liability” under international law, whereas Justice Sotomayor’s dissent read Sosa to require an international consensus about the prohibited “substantive conduct” but not about the “forms of liability.” As I have previously explained at Just Security, Justice Sotomayor’s framing is most consistent with international law, which prohibits certain violations of human rights but leaves it to each nation to decide whether and how to provide remedies for such violations. (Full disclosure: I wrote an amicus brief on this question in Jesner and a similar brief in Nestlé.) The Trump administration reversed the position on corporate liability under the ATS that the United States had taken in Kiobel and Jesner, arguing that the Supreme Court should reject corporate liability—not on international law grounds but because the decision should be left to Congress.
Although the majority opinion in Nestlé did not address the question of corporate liability, five Justices saw no reason to distinguish between corporations and natural persons as defendants. Justice Gorsuch wrote: “The notion that corporations are immune from suit under the ATS cannot be reconciled with the statutory text and original understanding.” Justice Alito added in dissent that “corporate status does not justify special immunity.” And Justice Sotomayor (joined by Justices Breyer and Kagan) agreed (n. 4). There was no discussion in any of the Nestlé opinions of the need for a “norm of corporate liability” under international law, and one hopes that this spurious argument has finally been put to rest.
Limiting Sosa
In Part III of his opinion, Justice Thomas (joined by Justices Gorsuch and Kavanaugh) would have held “that federal courts should not recognize private rights of action for violations of international law beyond the three historical torts identified in Sosa.” In Justice Thomas’s view, “creating a cause of action to enforce international law beyond [the] three historical torts invariably gives rise to foreign-policy concerns,” warranting deference to Congress. Congress had also shown itself willing and able to address human trafficking by amending the Trafficking Victims Protection Reauthorization Act (TVPRA) to add a private right of action, he explained. With respect to torts beyond the three historical paradigms, Justice Thomas concluded, “there always is a sound reason to defer to Congress.” In Part II of his concurrence, Justice Gorsuch (joined by Justice Kavanaugh) largely echoed Justice Thomas but suggested more explicitly that the Court should overrule Sosa or, as he put it, avoid “adhering to a precedent that seized power we do not possess.”
Justice Sotomayor spent her concurring opinion, in which Justices Breyer and Kagan joined, defending Sosa against Justice Thomas’s attack, which would have overruled that decision “in all but name.” It was the First Congress’s assessment, she noted, “that diplomatic strife is best avoided by providing a federal forum to redress those law-of-nations torts that, if not remedied, could bring international opprobrium upon the United States.” “Barring some extraordinary collateral consequence that could not have been foreseen by Congress,” she continued, “federal courts should not, under the guise of judicial discretion, second-guess that legislative decision.” Although Congress could have limited the ATS to the three historical paradigms with which it was familiar, it did not do so. Instead, Congress relied on “international law [to] suppl[y] the substantive contours of actionable torts.” Justice Sotomayor concluded that to “suggest that identifying actionable torts risks upsetting the careful balance of interests struck by the lawmakers is ahistorical at best” (quotation marks and alterations omitted).
Extraterritoriality
The Justices found more room for agreement on the question of extraterritoriality, with eight Justices joining Part II of Justice Thomas’s opinion. Only Justice Alito dissented, reasoning that the extraterritoriality question should not be addressed before other questions that the Court had not considered.
The Court did not apply Kiobel’s “touch and concern” test but rather the two-step framework for the presumption against extraterritoriality subsequently articulated in RJR Nabisco, Inc. v. European Community, 136 S. Ct. 2090 (2016). Under that framework, as I have explained at length elsewhere, courts determine the geographic scope of a statutory provision by looking for a clear indication of that scope (step one) or by looking to the focus of the provision (step two).
In Kiobel, the Supreme Court found that there was no clear indication of geographic scope with respect to the ATS cause of action and did not address the focus question. In Nestlé, the parties disagreed about the focus of the ATS, but the Court found it unnecessary to resolve the focus question because it was still up to the plaintiffs to “establish that ‘the conduct relevant to the statute’s focus occurred in the United States’” (quoting RJR, 136 S. Ct. at 2101). The Court in Nestlé noted that “nearly all the conduct that [the plaintiffs] say aided and abetted forced labor—providing training, fertilizer, tools, and cash to overseas farms—occurred in Ivory Coast.” Plaintiffs had alleged that the defendants made their major operational decisions in the United States, but the Court concluded that “allegations of general corporate activity—like decisionmaking—cannot alone establish domestic application of the ATS.”
The key language from RJR on which the Nestlé decision turned is worth quoting in full:
If the statute is not extraterritorial, then at the second step we determine whether the case involves a domestic application of the statute, and we do this by looking to the statute’s “focus.” If the conduct relevant to the statute’s focus occurred in the United States, then the case involves a permissible domestic application even if other conduct occurred abroad; but if the conduct relevant to the focus occurred in a foreign country, then the case involves an impermissible extraterritorial application regardless of any other conduct that occurred in U.S. territory.
In RJR, the language about “conduct relevant to the statute’s focus” was dictum (as I have explained in greater detail at pp. 49-50 here). When the Court in RJR came to apply the second step of the analysis to RICO’s private right of action, the Court made no mention of the need for conduct in the United States, holding simply that the provision “requires a civil RICO plaintiff to allege and prove a domestic injury to business or property and does not allow recovery for foreign injuries.” RJR, 136 S. Ct. at 2111. Similarly, in Morrison v. National Australia Bank, Ltd., 561 U.S. 247 (2010), the Supreme Court found the location of the conduct irrelevant in applying the presumption against extraterritorially, adopting a “transactional test” for the geographic scope of Section 10(b) of the Securities Exchange Act that turns entirely on the location of the transaction. Id. at 269-70. Based on these decisions, the Restatement (Fourth) of Foreign Relations Law rejected a separate requirement of conduct in the United States when the focus of the statutory provision is on something other than conduct as it was in RJR and Morrison, providing simply: “If whatever is the focus of the provision occurred in the United States, then application of the provision is considered domestic and is permitted” (§ 404 cmt. c).
Nestlé’s reliance on RJR’s dictum has potentially broad implications both for ATS cases and for the Court’s approach to extraterritoriality more generally. With respect to ATS cases, if plaintiffs must show relevant conduct in the United States, it is hard to see how traditional ATS cases against individual defendants can continue. The Second Circuit’s seminal decision in Filartiga, for example, involved torture by a Paraguayan police inspector in Paraguay. The connection to the United States was the fact that the inspector later came to the United States. That fact might have been sufficient to satisfy Kiobel’s “touch and concern” test. See, e.g., Jane W. v. Thomas, 354 F. Supp. 3d 630, 639 (E.D. Pa. 2018) (finding residence sufficient to satisfy “touch and concern” test). But it seems unlikely to satisfy Nestlé’s requirement of relevant conduct in the United States.
Of course, many cases against individual defendants are now covered by the Torture Victim Protection Act (TVPA), which provides an express statutory cause of action against natural persons for torture and extrajudicial killing under color of foreign law. Claims for torture and extrajudicial killing may therefore continue under the TVPA, subject to federal common law rules governing foreign official immunity. But the TVPA does not cover other well-established human rights violations like genocide and war crimes. Genocide and war crimes do sometimes involve torture and killing, but the TVPA’s color-of-foreign-law requirement would nonetheless preclude those suits against non-state actors. The TVPA also does not cover piracy. Almost everyone seems to agree that piracy was within the First Congress’s contemplation when it passed the ATS, but piracy does not involve conduct in the United States and so would not be actionable under Nestlé. It seems odd that Justices Breyer, Sotomayor, and Kagan would join the majority’s extraterritoriality analysis without some consideration of its implications for ATS claims against individuals.
Beyond the human rights context, adding a requirement of relevant conduct in the United States is likely to disturb the law concerning extraterritoriality in other areas—and in ways that might concern other members of the majority too. For example, Morrison rejected the Second Circuit’s conduct and effects tests for securities fraud claims, finding those tests to be “unpredictable and inconsistent,” in favor of a more easily administrable test that turns on the location of the transaction. Lower courts have expressly held that Morrison’s transactional test does not require conduct in the United States. See Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 69 (2d Cir. 2012). Nestlé upsets that understanding by suggesting that conduct relevant to the transaction must also occur in the United States. Lower courts will now have to consider not only whether a separate conduct requirement applies to securities fraud claims but also what kind of conduct is relevant to the transaction and how much conduct is required, making the application of Section 10(b) in transnational cases unpredictable and inconsistent once again. Nestlé will not unsettle every established test for geographic scope, because some tests are based on clear indications of congressional intent (e.g. Title VII of the 1964 Civil Rights Act) and others were fixed before the presumption against extraterritoriality was reborn in 1991 (e.g. the effects test for antitrust law). But Nestlé is likely to make life more complicated for the lower courts considering questions of extraterritoriality than the Justices anticipated. Indeed, if the Justices had anticipated these downstream effects, they would have presumably provided some guidance to avoid them.
Conclusion
Nestlé certainly does not mean the end of human rights litigation in U.S. courts. Cases against individual defendants may continue under the TVPA, the TVPRA, and similar statutes granting express causes of action. But Nestlé does seem to mark the end of the Filartiga line of ATS cases against individual defendants whose relevant conduct occurs outside the United States. It also appears to limit the ATS cause of action to claims against U.S. corporations based on conduct in the United States that goes beyond making decisions about how to conduct operations abroad. There may be cases that fit that description, but they are likely to be few and far between.