Fulbright Briefing: 9th Circuit Weighs in on Corporate Liability and Exhaustion Under the Alien Tort Statute

 

A recent Ninth Circuit decision reiterated that corporations may be held liable under the Alien Tort Statute ("ATS") and clarified that the availability of relief under the ATS may rely on exhaustion of local remedies. On October 25, 2011, a divided eleven member en banc panel of the Ninth Circuit decided Sarei v. Rio Tinto [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law], affirming, without discussion, that corporations may be held liable under the ATS for violations of international norms, such as genocide and war crimes. The court further recognized that alien plaintiffs may be required to exhaust local remedies before seeking redress under the ATS.

The ATS provides that "[t]he district courts shall have original 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." 28 U.S.C. § 1350. Although the ATS was originally thought to cover only violations such as the law of safe passage, infringement of the rights of ambassadors and piracy, federal courts have recently seen an increase in the number of ATS cases. Plaintiffs in those cases have asserted claims against multinational corporations under the theory that the corporations aided and abetted human rights violations through their cooperation with governments alleged to have engaged in such violations.

In Sosa v. Alvarez-Machain, 542 U.S. 692 (2004), the Supreme Court stated that a requirement that an alien plaintiff exhaust local remedies before invoking the jurisdiction of U.S. "would certainly [be considered] in an appropriate case." The Ninth Circuit determined that Sarei v. Rio Tinto, a case involving a foreign corporation's alleged complicity in acts on foreign soil that affected aliens, constituted an appropriate case to impose an exhaustion requirement. Plaintiffs in Sarei, residents of Bougainville, Papau New Guinea ("PNG"), are seeking to hold Rio Tinto liable for actions taken by the PNG government, purportedly at Rio Tinto's behest, which resulted in the deaths of 15,000 local residents from a blockade of medical supplies, the bombing of civilian targets, and other acts, some of which purportedly utilized Rio Tinto helicopters and vehicles.

In Sarei, the Ninth Circuit determined that in ATS cases where the U.S. "nexus" is weak, courts should consider requiring exhaustion of local remedies, particularly with respect to matters that are not of "universal concern." Under the Sarei exhaustion framework, the defendant bears the burden to plead and justify an exhaustion requirement, including the availability of local remedies. To the extent that the plaintiff does not plead that local remedies were unavailable, ineffective, or futile, rebuttal of the defendant's argument requires plaintiff prove that it sought remedies in the foreign jurisdiction, namely, that it obtained a final decision of the highest court in the hierarchy of courts in the legal system at issue.

The Ninth Circuit's decision in Sarei follows those of the Seventh, Eleventh, and D.C. Circuits in holding that corporations may be liable under the ATS and rejects the Second Circuit's decision to the contrary. Only the Ninth Circuit has required exhaustion of remedies. The circuit split regarding corporate liability under the ATS should be resolved soon. On October 17, 2011, the United States Supreme Court granted a certiorari petition to review the Second Circuit decision in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010), finding the ATS inapplicable to corporations. (For a more detailed discussion of the Second Circuit's decision in Kiobel, click here.) A decision from the Supreme Court is expected by June 2012.

View Fulbright's Briefing online.

This article was prepared by Judith A. Archer (jarcher@fulbright.com or 212 318 3342), Sarah E. O'Connell (soconnell@fulbright.com or 212 318 3093) and Todd R. Hambidge (thambidge@fulbright.com or 212 318 3333) from Fulbright's Litigation Practice Group.

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