In 1990, residents of the Ogoni region of Nigeria launched a peaceful resistance movement against the foreign oil companies operating in the region. A lawsuit claims that in response, the oil companies enlisted the aid of the Nigerian government to suppress the resistance. From 1993 through 1995, the lawsuit alleges, Nigerian military forces attacked Ogoni villages, killing, beating and raping residents and destroying and looting property.

The Ogoni plaintiffs brought their lawsuit in U.S. court under the Alien Tort Statute, accusing Royal Dutch Petroleum and Shell Transport and Trading Co. of aiding and abetting the human
rights violations.

Enacted by the first Congress in 1789, the Alien Tort Statute gives district courts jurisdiction in “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.” It wasn't until 1997 that the first Alien Tort Statute case against a corporation surfaced, but today it's difficult to find a multinational energy company that hasn't faced such a lawsuit.

So it generated controversy when in September 2010, a 2nd Circuit panel ruled 2-1 in Kiobel v. Royal Dutch Petroleum, the Ogoni people's case, that claims under the Alien Tort Statute cannot be made against corporations.

“It's an interesting statute because it lay dormant for so many years,” says Judith Archer, a partner at Fulbright & Jaworski. “In the past 20 or so years, there have been efforts to get to a variety of different defendants under it. Courts had addressed issues about state actors, what kinds of claims would arise under laws of nations today to give jurisdiction under the statute, and whether there could be aiding and abetting liability. It seems to me that given the progression of cases, this is the next logical step.”

In his September opinion in Kiobel, Judge Jose Cabranes performed a survey of international law going back to the Nuremberg trials to conclude, “No corporation has ever been subject to any form of liability (whether civil, criminal, or otherwise) under the customary international law of human rights. Rather, sources of customary international law have, on several occasions, explicitly rejected the idea of corporate liability.”

On Feb. 4, that became the appeals court's final word, as the full 2nd Circuit denied a rehearing en banc, with the vote split 5-5.

Still Standing

Even before the 2nd Circuit denied a rehearing, lower courts in the 2nd Circuit had begun citing Cabranes' opinion. On Jan. 28, the bankruptcy judge overseeing the General Motors bankruptcy case in the Southern District of New York cited Kiobel in refusing to certify claims that plaintiffs brought under the Alien Tort Statute nearly a decade ago against the company.

The claimants, victims of apartheid in South Africa, had tried to keep their claims alive in the face of Kiobel by pointing to Judge Pierre Leval's lengthy dissent in that case and the fact that the court raised the issue sua sponte and ruled on it without briefing from the plaintiffs–two points that critics of Kiobel have cited since the 2nd Circuit's September ruling.

But the bankruptcy judge ruling on the apartheid claims relied on Kiobel. “[T]hose are points for the Circuit to consider, not me; I'm bound as a lower court in the Second Circuit to abide by any Second Circuit holding,” wrote U.S. Bankruptcy Judge Robert Gerber. He disallowed the remaining claims, quoting Cabranes' opinion.

“The denial of the rehearing pretty much settles the question that this is the law of the 2nd Circuit, and I think some courts that otherwise may have been waiting to see what happened on that are going to have to fall in line and start following it,” says Russell Jackson, a partner at Skadden. “The decision itself is very clear in Kiobel: Suits against corporate entities under the Alien Tort Statute just aren't going to fly in the 2nd Circuit.”

Other Avenues

The 2nd Circuit's denial of a rehearing need not, however, sound the death knell for claims under the Alien Tort Statute.

“It's important to recognize that Kiobel still leaves plenty of avenues open for folks who would want to seek redress under the Alien Tort Statute,” says Jackson. “It just requires them either to sue governments or individuals”–the two types of entities the Kiobel court recognized as valid targets of lawsuits for violations of international law. If plaintiffs have enough evidence to pursue claims against a corporate entity, Jackson says, it shouldn't be that difficult to establish a case against an individual within that corporation, although he notes it may be a stretch of the statute's original purpose.

It could come down to the simple practicality that individuals don't have the deep pockets of corporations. Still, it remains an option in the 2nd Circuit. And in other jurisdictions, Alien Tort Statute claims against corporations are still fair game.

“I would expect that plaintiffs either suing corporations or seeking to sue them would stay away from the 2nd Circuit,” Archer says. “The case may well go to the Supreme Court because of the circuit split [with the 11th Circuit, which has upheld corporate liability], and it seems to be a significant issue I could see the Supreme Court wanting to resolve.”

Rick Herz, litigation coordinator at EarthRights International, says even with other avenues of justice available to foreign plaintiffs, they'll lose a valuable tool with the 2nd Circuit's ruling.

“Common law torts still exist,” he says, “but it could have significant ramifications on issues like choice of law and statute of limitations, and they also lose the ability to describe what happened in the most accurate light–which is to say that when, as in Kiobel, someone is summarily executed, that's not just an assault or a wrongful death. That's a grave, internationally recognized human rights violation that the defendant was complicit in.