By Robert B. Fitzpatrick, Esq.
Robert B. Fitzpatrick, PLLC
I. Introduction
On April 17, 2013, the Supreme Court handed down its decision in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659, 185 L. Ed. 2d 671 (U.S. 2013), finding that the federal court did not have subject matter jurisdiction over the matter, as the Alien Tort Statute (the “ATS”) under which the human rights claims were brought possesses a presumption against extraterritoriality, and all of the relevant events in the case occurred in Nigeria. Some have opined that the Court’s decision is the “last breath” of the Alien Tort Statute. This article will summarize the various opinions in Kiobel, subsequent developments, and then address whether litigation under the ATS is or is not now futile.
II. The Alien Tort Statute
The first Congress of the United States, sitting in Philadelphia, passed the Judiciary Act of 1789 which contained, in section 9, a single sentence that constitutes the ATS. That single sentence reads 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 U.S.C § 1350 (2011).
For decades and decades thereafter, there was virtually no litigation under this statute. Then, thirty three years ago, the Second Circuit issued an opinion in Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir. 1980), which breathed life into the somnambulant statute. Thereafter, a spate of ATS cases were filed, most of them involving torture or genocide committed overseas, with the claims being filed in federal district courts by aliens who had sought refuge in the United States from a nation-state allegedly engaged in violations of customary international law.
In 2004, in Sosa v. Alvarez-Machain, the Supreme Court addressed the statute, holding that such claims could not proceed if the customary law norm under which the claim was brought had “less definite content and acceptance among civilized nations than the historical paradigms familiar when [the ATS] was enacted.” 542 U.S. 692, 732 (U.S. 2004).
III. The Kiobel Litigation
Between 1992 and 1995, several Nigerian nationals granted asylum in the United States sued, among other defendants, a Dutch corporation, Royal Dutch Petroleum, alleging that it had aided and abetted violations by the Nigerian government of customary international law, to wit, torture of individuals protesting environmental damage by the oil companies in the Niger River delta. Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 117 (2d Cir. 2010). Eventually, the Kiobel litigation resulted in a Second Circuit opinion, holding that, under customary international law, a corporation may not be sued for violations of international norms. Id. at 145. Thereafter, the Supreme Court granted certiorari to review that question. 132 S. Ct. 472 (U.S. 2011).
IV. Kiobel I
After extensive briefing, including 37 amicus briefs, the Court heard oral argument on the corporate responsibility issue in the 2011-2012 term. See Kiobel v. Royal Dutch Petroleum, SCOTUSBlog, http://www.scotusblog.com/case-files/cases/kiobel-v-royal-dutch-petroleum/ (last visited July 23, 2013). A week after oral argument, the Court issued an order directing that the parties brief whether the statute could be applied extraterritorially to conduct occurring exclusively outside the United States. Id.; 132 S. Ct. 1738 (U.S. 2012). The Court set the case for reargument during the October 2012 term. 132 S. Ct. at 1738.
V. Kiobel II
Again, after extensive briefing, including some seventy amicus briefs, and after oral argument, the Court issued a unanimous holding that the federal district court lacked subject matter jurisdiction over the controversy. Kiobel, 133 S. Ct. at 1663. The Chief Justice issued an opinion for five Justices (Scalia, Thomas, Kennedy, and Alito joined) in which he stated that while the presumption against the extraterritorial application of the statute had not been overcome in this case, that the presumption could be overcome if the facts sufficiently “touch[ed] and concern[ed] the territory of the United States”. Id. at 1669. Justices Thomas and Alito filed a concurrence in which they questioned whether the Chief Justice’s “touch and concern” standard satisfied the “definiteness and acceptance among civilized nations” requirement articulated in Sosa. Id. at 1670 (Alito, J., concurring).
Justices Breyer, Ginsburg, Kagan, and Sotomayor issued a concurring opinion in which they articulated at least three circumstances under which conduct occurring outside the United States might still be actionable in federal court: “(1) the alleged tort occurs on American soil, (2) the defendant is an American national, or (3) the defendant’s conduct substantially and adversely affects an important American national interest, and that includes a distinct interest in preventing the United States from becoming a safe harbor (free of civil as well as criminal liability) for a torturer or other common enemy of mankind.” Id. at 1671 (Breyer, J., concurring).
Justice Kennedy also issued a one-paragraph concurrence, in which he praised the majority for its cautious approach in declining to answer the myriad questions arising out of the application of the ATS. Id. at 1669 (Kennedy, J., concurring). Indeed, the Kiobel opinion leaves unanswered many important questions in international human rights litigation, and raises new ones, including: What is the significance of the Court’s use of the phrase “displace the presumption,” rather than the usual “rebut the presumption?”. Is corporate liability permitted under the ATS? If so, does the presumption against extraterritoriality apply even if the corporation operates in, is domiciled in, and is headquartered in the U.S.?
VI. Commentary
a. The “Touch and Concern” Framework
In the wake of Kiobel, several commentators and bloggers have opined that Kiobel represents the demise of ATS litigation involving conduct occurring outside the United States. See, e.g., Phil Berkowitz et al., The Final Breaths of the Alien Tort Statute, Littler Mendelson P.C., Apr. 19, 2013, http://www.littler.com/publication-press/publication/final-breaths-alien-tort-statute (last visited July 23, 2013); James E. Berger & Charlene Sun, International Litigation Update: Developments Concerning the Alien Tort Statute and Personal Jurisdiction King & Spalding Client Alert, May 16, 2013, http://www.kslaw.com/imageserver/KSPublic/library/publication/ca051613.pdf (last visited July 23, 2013). Their principal argument has been that the majority’s strong presumption against extraterritoriality means that ATS plaintiffs, traditionally foreign nationals bringing cases against U.S. corporations for human rights violations overseas, face a nearly insurmountable hurdle in establishing that the entity that allegedly caused their injuries sufficiently touches and concerns the territory of the United States. Kiobel demonstrates that it is insufficient to merely show that a corporation, such as Shell, has some operations in the United States. These commentators believe that many ATS plaintiffs will be unable to show sufficient contacts with the U.S. in post-Kiobel litigation, and their claims will accordingly fail.
Other commentators believe that Kiobel does not represent the “final breath” of that ATS. Chief Justice Roberts’ touch and concern language, according to one commentator, “has provided fodder for another decade or more of litigation and created more business for litigators, [as] [c]ompanies and victims’ advocates will battle over when claims touch and concern the U.S. with sufficient force.” Katie Redford, Door Still Open for Human Rights Claims After Kiobel, SCOTUSBlog (Apr. 17, 2013 6:48 p.m.), http://www.scotusblog.com/2013/04/commentary-door-still-open-for-human-rights-claims-after-kiobel/ (last visited July 23, 2013). Another scholar explained that ATS suits like Doe v. Exxon – brought by fifteen Indonesian villagers tortured by Indonesian soldiers allegedly hired by Exxon – could possibly survive under this post-Kiobel framework, as Exxon has extensive operations in the United States, employs tens of thousands of Americans, is headquartered in the U.S., and sends many thousands of barrels of oil from Indonesia to the U.S. every year. Oona Hathaway, The Door Remains Open to “Foreign Squared” Cases, SCOTUSBlog (Apr. 18, 2013 4:27 p.m.), http://www.scotusblog.com/?p=162617 (last visited July 23, 2013).
b. DaimlerChrysler Corp. v. Bauman
In fact, the question of whether ATS claims sufficiently “touch and concern the territory of the United States” could be further articulated next term, when the Supreme Court hears DaimlerChrysler Corp. v. Bauman. See 133 S.Ct. 1995, 185 L. Ed. 2d 865 (U.S., 2013). In Bauman, twenty-two Argentinian nationals sued Daimler in California federal court for human rights violations allegedly undertaken by the company’s Argentinian subsidiary in collaboration with the government during Argentina’s “Dirty War” in the 1970s and 80s. See Bauman v. DaimlerChrysler AG, No. 04-00194, 2007 U.S. Dist. LEXIS 13116 (N.D. Cal. Feb. 12, 2007). In 2011, the Ninth Circuit held that Daimler had sufficient contacts with the state to justify the exercise of personal jurisdiction. See Bauman v. DaimlerChrysler Corp., 644 F.3d 909, 911 (9th Cir. 2011). Applying a two-pronged agency theory, the court reasoned that MBUSA, Daimler’s U.S. subsidiary, was Daimler’s agent because MBUSA was distributing vehicles in California, a “critical aspect” of Daimler business, and because Daimler controlled “nearly all aspects” of MBUSA’s operations. Id. at 922-24.
Although the case primarily concerns the standard for establishing personal jurisdiction, some have noted that the Bauman case could provide an opportunity for the Court to either cite Kiobel in dismissing the case, or expand upon its reasoning in Kiobel by requiring a certain level of contact between the U.S. and the corporate defendant. John Bellinger, Reflections on Kiobel, Lawfare (Apr. 22, 2013 8:52 p.m.), http://www.lawfareblog.com/2013/04/reflections-on-kiobel/ (last visited July 23, 2013); Xander Meise Bay, The ATS’s Second Act: The Supreme Court Looks to Address the Unanswered Questions of Kiobel, Corporate Responsibility and the Law, (Apr. 23, 2013), http://www.csrandthelaw.com/2013/04/the-atss-second-act-the-supreme-court-looks-to-address-the-unanswered-questions-of-kiobel/ (last visited July 23, 2013).
c. The Future of Non-ATS Human Rights Litigation
Regarding the future of non-ATS human rights cases, one commentator remarked that, “[w]hen U.S. federal courthouse doors close, other doors open for the litigation of transnational cases.” Donald Childress, An ATS Answer with Many Questions (and the Possibility of a Brave New World of Transnational Litigation), SCOTUSBlog (Apr. 18, 2013 5:03 p.m.), http://www.scotusblog.com/?p=162624 (last visited July 23, 2013). Some human rights cases now precluded by the Kiobel decision could move to foreign courts, while others may move to U.S. state courts. Suing U.S. corporations in courts in the nations where the violations took place could prove ineffective, however, as the judiciaries of countries such as Nigeria lack the safeguards, objectivity, and robust enforcement capabilities that U.S. courts possess.
As for state courts, assuming plaintiffs can effectively “plead around” removal to federal court, where Kiobel and forum non conveniens defenses could prove insurmountable, they may be able to bring cases under state law in state courts. Donald E. Childress III, The Alien Tort Statute, Federalism, and the Next Wave of International Law Litigation, 100 Geo. L.J. 709, 741 (2012), available at http://ssrn.com/abstract=1815413 (last visited July 23, 2013). As Rich Samp noted, “States are largely free to craft their tort law without interference from the federal government, so plaintiffs’ lawyers barred from raising overseas human rights claims in federal court under the ATS may well decide to file their lawsuits in state courts instead.” Rich Samp, Supreme Court Observation: Kiobel v. Royal Dutch Petroleum & the Future of Alien Tort Litigation, Forbes (Apr. 18, 2013 10:51 a.m.), http://www.forbes.com/sites/wlf/2013/04/18/supreme-court-observations-kiobel-v-royal-dutch-petroleum-the-future-of-alien-tort-litigation/ (last visited July 23, 2013). Although there are few, if any, current examples of this state law-state court approach, such cases will undoubtedly arise in the next few years.
VII. Conclusion
In short, Kiobel unquestionably limited the possibilities for plaintiffs’ lawyers seeking to bring international human rights claims against American corporations. But Kiobel did not close down all avenues of potential litigation, and we can anticipate that creative lawyers will construct ways to pursue such cases in both federal and state courts, as well as in hospitable fora overseas, in the near future.
Left lingering, meanwhile, is the question of what Congress will do with the now-limited extraterritorial application of the ATS. In his concurrence, Justice Kennedy noted that Congress eased the judiciary’s task when, in 1991, it expressly defined the extraterritorial application of the Torture Victims Protection Act. Kiobel, 133 S. Ct. at 1669. Surely Congress can do the same here. Human rights advocates and multinational corporations will no doubt be advocating for and against such a change in the coming months.
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United States of America - An International Primer on Good Cause Dismissals
By Donald C. Dowling, Jr.
White & Case LLP
New York City
In dismissing staff anywhere in the world (except perhaps in the U.S., which subscribes to employment-at-will), “step one”—always—is determining whether the employer will fire the particular targeted worker for good cause. Where an employer can demonstrate good cause, a dismissal becomes much cheaper. Indeed, in some places (in so-called “lifetime employment” jurisdictions like Germany, Japan, Korea, Iraq, Romania and Russia), the dismissal becomes possible, because these jurisdictions prohibit most no-cause dismissals.
Where a dismissal is for demonstrable good cause, most countries offer employers broad freedom to fire without much or any notice or severance pay. But this principle is far narrower than it sounds because “good cause” is substantially less than a good business reason. After all, employers always have good business reasons for firing employees—no rational employer fires staff whom business needs weigh in favor of retaining. So “good cause” under law necessarily means more than merely a good business reason. Good cause usually means the employer can prove the targeted employee willfully committed some material misconduct.
Each jurisdiction has its own local notion of which specific acts of employee misconduct constitute good enough cause to justify a no-severance-pay summary dismissal. And, of course, each case turns on its facts. But we might make a simple generalization: Good cause tends to mean egregious misconduct. Few jurisdictions’ notions of good cause reach poor performance, imperfect attendance, bad attitude or mismatched skill set. Even jurisdictions like Korea that recognize poor performance as cause for dismissal tend to accept only well-documented, outrageously bad performance over a sustained period, and proof burdens get exceptionally high. Justifications for dismissal external to the targeted employee himself—business downturn, internal restructuring, sale of business assets—might offer economic justification for a dismissal, but economic necessity is a separate issue usually quite distinct from good cause.
Italy offers a representative concept of good cause. According to employment lawyers in Rome, an Italian employer can fire an employee for good cause (giusta causa) only when the employee’s act of “misconduct”
“makes the continuation of the employment relationship impossible.” Examples of just cause are theft, riot and insubordination. [Italian] case law shows a series of sharply contrasting precedents which make it extremely difficult in practice for an employer to [invoke good cause as grounds to fire an employee] with speed and certainty. (Lauro Sovani & Asociati Law Firm, Employment in Italy in a Nutshell (2013), at 26(a) (available at: www.lauro-sovani.it)).
Outside the U.S., the standard for good cause happens to be closely analogous to a similar concept under domestic U.S. law: the willful misconduct standard under U.S. state unemployment compensation systems. According to a Pennsylvania decision, Unemployment Compensation Review Board v. Vereen (29 Pa. Commw. 252 (1977)):
As a general principle[,] in order to deny unemployment compensation benefits to an employee, his…action must involve a wanton or willful disregard of the employer’s interest, a deliberate violation of the employer’s rules, a disregard of standards of behavior which the employer has the right to expect of his employees, or negligence in such degree or recurrence as to manifest culpability, wrongful intent, or evil design, or show an intentional and substantial disregard of the employer’s interests or of the employee’s duties and obligations to the employer.
Speaking broadly, where an outside-U.S. employee commits an act of willful misconduct that, if committed stateside, would be egregious enough to defeat a U.S. state unemployment benefits claim, then we might expect a foreign labor court to uphold a firing for good cause. The corollary, though, is that where an overseas employee misbehaves in an innocuous enough way that his actions, if committed stateside, would not offer a defense to his state unemployment benefits claim, then a foreign labor court will not likely uphold a firing as for good cause. Embezzling money, vandalizing equipment, bribing officials, attacking co-workers, shooting up a workplace—all are grounds for good-cause dismissal. But short of serious crime, the issue becomes murky.
A common conundrum in good cause analysis is the employer that thinks it has a legal justification to fire an employee who broke a posted work rule, a human resources policy or code of conduct provision. Imagine, for example, an overseas salesman who “entertains” clients at a strip club, dropping hundreds of expense-account dollars on stripper “tips.” Imagine this employer can make a strong case that these acts violated a standing employer work rule, HR policy or code of conduct provision on business entertainment, use of expense accounts, bribery/improper payments or sexual harassment. Can the employer fire this executive for good cause? Perhaps not. By anyone’s definition, intentionally breaking a work rule is willful misconduct. But overseas, the analysis becomes more nuanced. Being able to prove someone broke a posted rule/policy/code is not necessarily good cause, particularly if the infraction is innocuous or the rule is a technicality. Countries as far-flung as Costa Rica, the Czech Republic, Indonesia, Malawi, Peru, Philippines, Russia, Saudi Arabia, Ukraine, Vietnam and others list dischargeable infractions right in their labor codes. (See, e.g., Saudi Arabia Labour Regulation, Royal Decree No. M/51 of 23rd Sha’ban 1426 Hejra (9/27/05), at art. 80 (listing 9 infractions justifying good-cause dismissals)). We might call these “statutory list” jurisdictions. In them, an employer has no grounds to fire a rule-breaker unless the breached rule happens to parallel one of the grounds for dismissal on the country’s statutory list. The statutory lists in these countries might not include an infraction that fits this particular employee’s misdeeds.
As another example of how these statutory lists work in practice, imagine a manufacturing multinational that posts on its intranet a globally-applicable work rule instructing factory workers to shut down their machines at the end of their shifts, and saying that violators are subject to dismissal for a first offense. Imagine that excellent business reasons support this rule: safety, plant security, machine maintenance, power conservation. And imagine that all workers in the company’s factories worldwide have signed acknowledgements agreeing to comply with this particular rule. Having globally implemented the rule and having collected these employee acknowledgements, American headquarters may assume it can fire, for good cause, any worker who intentionally clocks out and leaves his machine running. But this assumption is wrong. In what we are calling “statutory list” jurisdictions, firing someone for breaking this rule will not likely be for good cause because “leaving machine running” will not likely appear on countries’ lists of statutory dismissal grounds.
Work rules. This said, an employer overseas is usually well advised to articulate comprehensive rules that set out grounds for good-cause dismissal, particularly in countries like Bahrain, Colombia, France, Japan, Korea, Oman and Russia that affirmatively require written work rules. An employer’s argument that a misdeed amounts to good cause is always stronger where the infraction violates a posted work rule that purports to subject violators to dismissal.
Sometimes local law prohibits employers from dismissing for cause even workers who commit infractions that do appear on a country’s statutory list of for-cause dismissible infractions. For example, probably every country on Earth recognizes theft as grounds for a good-cause firing, but labor courts abroad often excuse proven theft of small change and cheap goods. German Civil Code § 626 includes “theft” as grounds for dismissal without any express de minimus exception, but in 2009 Germany’s highest labor court held otherwise in its widely publicized Emmely case involving an employee (known across Germany both as “Barbara E.” and “Emmely”) who had pocketed a handful of employer coupons worth €1.30. (See, e.g., Justus Leicht, “Germany’s Highest Labour Judge Defends Sacking Workers for Next to Nothing,” Axis of Logic website (www.axisoflogic.com), Jan. 12, 2010). As another example, many countries impose laws expressly banning workplace harassment, but many court cases in those countries often hold dismissal too severe a punishment for proven harassers. Canadian courts apply a “proportionality” test that makes every dismissal a fact question; a Canadian employer firing someone for proven theft or harassment might not have good cause if dismissal is disproportionate to the employee’s specific misdeed. (See, e.g., McKinley v. BC Tel., [2001] 2 SCR 161 (Sup. Ct. of Canada); Kidd v. Hudson’s Bay Co., [2003] O.J. No. 1474; Varsity Plymouth Chrysler v. Pomerleau, [2002] A.J. No. 929.).
All this said, though, employers overseas sometimes do have demonstrable good cause justifying a dismissal. At that point the question becomes: What does demonstrating good cause mean for an employer? The answer differs depending on whether the employer is in a so-called “lifetime employment” jurisdiction like Germany, Iraq, Japan, Korea, Romania, Russia. In lifetime employment jurisdictions, no-cause firings are flatly illegal, so the only legal way to fire someone who refuses to leave is for the employer to demonstrate good cause (or economic necessity, discussed below). No good cause means no dismissal. Indeed, in these lifetime employment jurisdictions, statutory severance pay tends not to come into play, and in countries like Japan does not even exist: A worker either gets fired for good cause and gets no severance pay or else that worker is the victim of a wrongful dismissal and so is entitled to a court award of reinstatement and back pay—but no severance pay.
Outside lifetime employment jurisdictions, good cause for dismissal is not necessary to fire anyone, but being able to prove good cause makes a big difference. In the words of Argentine lawyers explaining the rule in Argentina (a typical no-lifetime-employment jurisdiction), the “general principle in force [is] private sector employers can freely dismiss their employees without just cause by paying severance [pay] based on the salary and seniority of the employee.” (Alejo Baca Castex & Alejandro López Tilli, “Discriminatory Dismissal in Argentina,” 22 IBA Employment & Ind. Rel. Law no. 1, at 51 (Mar. 2012) (emphasis added)). Employers in these jurisdictions can usually fire staff unilaterally without good cause, but subject to separation pay liability—notice pay, severance pay and the payments due in any dismissal such as final paycheck, proportional accrued vacation, proportional bonus, proportional “thirteenth month pay” and other accrued benefits. Further, having good cause tends not to excuse obligations under statutory dismissal procedures like dismissal communication requirements, grievance resolution procedures and notice to employee representatives and government labor agencies. Indeed, because countries impose these procedures to probe employer grounds for dismissal, countries have a policy reason to enforce their procedural requirements even where an employer obviously has good cause. For example, in a highly publicized 2008 case, Parisian rogue trader Jérôme Kerviel singlehandedly lost his bank employer, Société Générale, US$7.2 billion in unauthorized trades. Even though French police arrested and incarcerated Kerviel, French dismissal procedure laws blocked a quick firing. In a front-page article, the Wall Street Journal chronicled why French dismissal procedures forced Société Générale to retain Kerviel on its “headcount” for over a month (“French Twist,” Wall St. J., Feb. 1, 2008 at A-1.).
Having said all this about good cause dismissals around the world, in real life it may only be the exceptional situation where an employer invokes good cause for dismissal to fire an employee who, in turn, goes on to sue in court, challenging the grounds for dismissal. In practice, employers everywhere, particularly in “lifetime employment” jurisdictions, often negotiate an agreed separation with a release of claims—that is, a resignation and waiver in exchange for a cash payout. Employers and employees negotiate these settlements against the backdrop of the issues we just discussed. Some jurisdictions confer a special legal status on mutually agreed separations, such as the French rupture conventionnelle and the Turkish ikale, letting employees resign while retaining eligibility for unemployment benefits.
