There is a 213-year-old statute that lay dormant for almost two centuries but that now has the attention of more than a few general counsel. Well-known companies such as Citigroup, Ford, Coca-Cola, ChevronTexaco and Nike have all been the subject of multimillion-dollar lawsuits brought under this statute. [FOOTNOTE 1]
Although the statute is intended to provide relief for conduct committed in violation of the law of nations, recent holdings to the effect that private companies may be vicariously liable for the acts of corrupt foreign governments have been the impetus for a rash of new suits against corporations. [FOOTNOTE 2]
It is for this reason that the Alien Tort Claims Act (ATCA) is now a genuine concern for international business. HISTORY OF ATCA LITIGATION
The ATCA was passed by the first Congress as part of the Judiciary Act of 1789. It is all of 33 words, as follows: 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. 28 USC � 1350.
There the statute stood, rarely being invoked, for almost 200 years. Indeed, writing in 1980, the 2nd U.S. Circuit Court of Appeals was only able to find two instances in which jurisdiction was invoked under the ATCA. [FOOTNOTE 3]
All that changed with the Filartiga
suit in 1979. Dr. Filartiga was a longstanding opponent of the government of Paraguay. He and his daughter, Dolly Filartiga, brought suit under the ATCA, alleging that the doctor’s son, Joelito Filartiga, had been kidnapped and tortured to death on March 29, 1996, by the defendant, Pena, who at the relevant time was the inspector general of police in Asuncion, Paraguay. The Filartigas claimed that Joelito was tortured and killed in retaliation for his father’s political activities and beliefs. After the killing, Dolly Filartiga fled to the United States. When she later learned that Pena was present in the United States, she caused a summons and complaint to be served on him while he was waiting to be deported. The district court dismissed the lawsuit for lack of subject manner jurisdiction, holding that “the law of nations,” as employed in the ATCA, excluded that law which governs a state’s treatment of its own citizens. The 2nd Circuit reversed. In light of the universal condemnation of torture, the 2nd Circuit found that the act of torture committed by a state official against one held in detention violated established norms of the international law of human rights and thus the law of nations. [FOOTNOTE 4] Filartiga
was a watershed decision. It breathed life into a moribund statute and established that the ATCA could be used to bring lawsuits in federal court when the following three conditions are satisfied: (1) an alien sues (2) for a tort (3) committed in violation of the law of nations. The other important lesson from Filartiga was that the term “law of nations” was not to be interpreted in accordance with international law standards as they existed in 1789. Rather, it was appropriate to apply international law as it evolved and as it existed among the nations of the world at the time the lawsuit is brought. [FOOTNOTE 5]
In 1995, the 2nd Circuit decided another case that expanded coverage under the ATCA. Kadic v. Karadzic [FOOTNOTE 6]
was a case brought by Croat and Muslim citizens of Bosnia-Herzegovina against the president of a three-man presidency of the self-proclaimed Bosnian-Serb republic referred to as “Sprska.” As president, Karadzic possessed ultimate authority over the Bosnian-Serb military forces and the injuries perpetrated against plaintiffs were committed as part of a pattern of systematic human rights violations that was directed by Karadzic and carried out by military forces under his command. The plaintiffs asserted causes of action for genocide, rape, forced prostitution, torture, assault and battery, sex and ethnic inequality, summary execution and wrongful death. The district court dismissed the lawsuit, finding that the members of Karadzic’s faction had not acted under the color of any recognized state law because it did not constitute a recognized state. Because acts committed by nonstate actors do not violate the law of nations, according to the district court, there was no jurisdiction under the ATCA. On appeal, the 2nd Circuit disagreed. Perhaps the most significant aspect of the Kadic decision was that it made clear that the ATCA could provide a remedy even for conduct that was not carried out under color of state law. Specifically, private individuals could be held liable under the ATCA for certain violations of international law — such as genocide and violations of the law of war. In addition, other conduct, such as torture, which would not otherwise be actionable unless committed by state officials acting under color of law, is actionable under the ATCA, without regard to state action, to the extent that the acts are committed in pursuit of genocide or war crimes. [FOOTNOTE 7] VICARIOUS LIABILITY
Why should multinational corporations be concerned that a U.S. statute and U.S. courts are being used in an effort to punish the Karadzics and Penas of the world? The cause for concern is that plaintiffs’ lawyers have used these decisions as the jumping-off point for broader application of the ATCA. Indeed, according to one recent article, there are currently 18 ATCA cases pending in U.S. courts against some of the biggest names in U.S. business. [FOOTNOTE 8]
The engine driving these lawsuits is the concept of vicarious liability. Thus, plaintiffs are trying to hold corporations vicariously liable for the conduct of foreign officials. The 9th U.S. Circuit Court of Appeals’ recent decision in Doe v. Unocal Corp. [FOOTNOTE 9]
provides an illustration of how broadly the statute can be applied. In that case, Unocal was part of an international oil project in Myanmar that included the construction of a pipeline. According to the court, it was undisputed that the Unocal knew that the Myanmar military provided security and other services for the project. Plaintiffs, villagers from the rural area in which the pipeline was built, alleged that the Myanmar military had forced them, under threats of violence, to work on, and serve as porters for, the project. The plaintiffs also alleged that, in furtherance of this forced labor program, the Myanmar military subjected them to acts of murder, rape and torture. [FOOTNOTE 10]
There were no allegations that Unocal engaged in this conduct directly. Rather, the theory was that Unocal should be liable for the acts of the Myanmar military. The district court granted summary judgment in favor of Unocal but the 9th Circuit reversed. One might think that the court would have determined the vicarious liability issue on the basis of California tort law. The fact that it did not is the most significant aspect of the decision. According to the 9th Circuit, in different ATCA cases, different courts have applied international law, the law of the state where the underlying events occur or the law of the forum state. [FOOTNOTE 11]
The 9th Circuit held that, under the facts of this particular case, it would apply a standard under “international law.” For purposes of ascertaining the standard for aiding and abetting under international law as it pertains to the ATCA, the court looked to recent decisions by the International Criminal Tribunal for the former Yugoslavia and the International Criminal Tribunal for Rwanda. At the end of its analysis, the 9th Circuit announced the following standard for aiding and abetting under the ATCA: “knowing practical assistance or encouragement that has a substantial effect on the perpetration of the crime.” In denying summary judgment for Unocal, the court said that there was an issue of fact whether this standard had been met by Unocal’s providing the Myanmar military with photos to show what facilities they needed secured and meeting with them to inform them of the next day’s activities. One might have believed that this broad an interpretation would be the outer limits of the statute, but that may not be the case. THE SOUTH AFRICA CASE
In June 2002, a case was filed that will likely test the outer limits of vicarious liability under the ATCA. The plaintiffs in this multibillion-dollar class action lawsuit are black South Africans whose rights were alleged to have been violated by South Africa’s former apartheid regime. The defendants include UBS, Credit Suisse and Citicorp. As in other ATCA lawsuits, the plaintiffs alleged that they suffered gravely from acts ranging from torture to death-squad attacks. More recently, similar cases have been filed against other defendants, making this a real cause for concern. What makes these suits different, however, is that there is no allegation that the banks themselves took part in crimes against humanity (as in Kadic) or even that they specifically aided and abetted such conduct (as in Unocal). Rather, it is contended that, between 1985 and 1993, the South African government was running short of cash because of the United Nations sanctions and because other banks and companies were withdrawing their investments in South Africa. Thus, plaintiffs allege, by providing funds to the South African government during this period, the defendant banks perpetuated the apartheid system because, were it not for the loans, that government would not have survived for as long as it did. For almost 200 years the ATCA seemed to have little vitality. Although Filartiga
breathed life into the statute, it is the South Africa cases that have the potential to make the ATCA into a Frankenstein monster. The threat is real because, under the theory of the South Africa cases, liability can be based on nothing more than what businesses would consider normal investment and lending activity. If the plaintiffs in the South Africa cases succeed, as one writer has predicted, “[I]t will send a message to any bank that has historically made loans to repressive regimes, and any corporation that has invested in a country with problematic human rights records, that they may be liable for aiding and abetting through their investment and lending activity.” [FOOTNOTE 12]
Moreover, these cases are such that plaintiffs might be able to “win” simply by getting beyond the motion to dismiss phase. That is, because discovery might lead to embarrassing public disclosures, companies might be compelled to settle if they are unable to dispose of the case quickly. OBSERVATIONS
From a substantive viewpoint, is there really cause for concern? After all, the language of the ATCA specifically premises liability on the commission of a tort and it is hornbook tort law that there can be no liability unless there is some duty to act, a duty that is difficult to ascribe to a party that merely invests or lends money. Nevertheless, when one sees decisions like the 9th Circuit’s decision in Unocal
, which does not subscribe neatly to such a simplistic analysis, one cannot be certain where the courts may go. What can a company do to limit its exposure? In a developing fluid area of law, that type of advice is not simple. One step, of course, is legislative efforts to clarify the statute. The business community can certainly make the case that fear of ATCA liability will have a chilling effect on investment activity in certain areas of the world that obviously need it most. Indeed, the United States Council for International Business has already begun discussions with the government concerning the proliferation of these ATCA suits. [FOOTNOTE 13]
A second step to consider if one is named as a defendant in an ATCA lawsuit is to seek the intervention of the U.S. government. For example, villagers in the province of Aceh, Indonesia sued ExxonMobil under the ATCA in district court for the District of Columbia. They alleged that Indonesian security forces acting to protect ExxonMobil’s interests violated their human rights. At ExxonMobil’s request, the state department wrote to the judge and explained that the lawsuit could potentially disrupt the ongoing and extensive United States efforts to secure Indonesia’s cooperation in the fight against international terrorist activity. Of course, one cannot be certain that the government will choose to present a position in a particular case. In sum, this is an area of law that is in flux. Although the number of cases being brought under the ATCA is increasing, to date, no judgment has been entered against a company on the basis of indirect liability. Furthermore, while the law has been evolving at the district court and circuit court levels, the Supreme Court has yet to address the issue. Further chapters in this story may well be written by Congress or the Supreme Court. Lawrence W. Newman and David Zaslowsky are partners at Baker & McKenzie and can be reached at email@example.com and firstname.lastname@example.org, respectively. They are the authors of “Litigating International Commercial Disputes” (West Group 1996) and represented Eastman Kodak in the case referred to herein.
FN1 Dalecki, K. “U.S. Firms Battle Human Rights Lawsuits,” Kiplinger Business Forecast, Sept. 5, 2002.