In Spate of New ATS Decisions, Courts Are Divided About Meaning of Kiobel's "Touch and Concern" Standard

During the last several weeks, four different federal courts have issued decisions in high-profile and long-running ATS suits against U.S. corporations, all addressing whether the conduct of the defendants in the United States satisfies the amorphous “touch and concern” standard enunciated by the majority in the Supreme Court’s Kiobel decision. In brief: the Eleventh Circuit affirmed dismissal of the suit against Drummond Corporation relating to its actions in Colombia; Judge Edward Davila of the Northern District of California dismissed a suit against Cisco Systems relating to its sale of network security software to the Chinese government; Judge Lamberth of the DC District Court allowed plaintiffs to amend their complaint against ExxonMobil relating to the oil company’s actions in Indonesia in order to try to meet the “touch and concern” standard; and the Ninth Circuit issued a lengthy opinion explaining in greater detail the reasoning behind its cursory order last December permitting plaintiffs to amend their complaint against Nestle USA, Archer Daniels Midland, and Cargill relating to their alleged facilitation of child labor in the Cote d’Ivoire. It is clear from these decisions that the courts remain uncertain about what domestic conduct is necessary to “touch and concern” the territory of the United States and whether the conduct of corporate defendants inside the United States must itself violate the law of nations. In particular, there already appears to be a circuit split between the 9^th and 11^th circuits regarding whether the Supreme Court intended lower courts to apply to ATS cases the “focus” test in Morrison v. Australian National Bank, where the Supreme Court concluded that, in considering whether conduct that occurs both inside and outside the United States violates a statute without extraterritorial application, the courts should determine whether the conduct that is the “focus of congressional concern” occurred inside or outside the United States.  I discuss the decisions in more detail below. Baloco v. Drummond Company On September 23,^, the Eleventh Circuit issued a lengthy decision in the long-running ATS litigation against the Alabama-based Drummond Company, relating to payments Drummond allegedly made to paramilitary groups that committed murders in Colombia. The district court had dismissed all of the claims against Drummond in 2012 (prior to Kiobel).   On appeal, the Eleventh Circuit asked the parties to consider the impact of Kiobel. Based on that briefing, the appellate panel (in a decision written by district court judge Orinda Evans, sitting by designation) concluded that even if there was some “relevant conduct” by Drummond executives that touched and concerned the United States, it did not do so with sufficient force to overcome the presumption against extraterritoriality. Applying the Supreme Court’s test in Morrison, the court held that the “transaction that is the focus of the statute at issue” were the murders that occurred in Colombia: “Plaintiffs’ claims are not focused within the United States.” The Court declined to remand the case to allow the plaintiffs to amend their complaint: “Further amendment of the complaint would be futile because it would not allege conduct focused in the United States to a degree necessary to overcome the presumption against extraterritoriality.   A remand would also needlessly extend this litigation.” Doe v. Nestle On September 4, in the nine-year-old ATS suit against Nestle, Cargill, and Archer Daniels Midland for allegedly aiding and abetting cocoa farmers who relied on child slave labor in the Ivory Coast, a panel of the Ninth Circuit issued an opinion withdrawing its brief order of December 2013 allowing plaintiffs to amend their complaint and replacing it with a much longer opinion explaining its reasoning in detail. The panel presumably did so in order to avoid a rehearing en banc. The panel opinion addresses corporate liability, extraterritoriality, and the intent requirement for aiding and abetting liability. Two judges (Nelson and Wardlaw) seem inclined to conclude that the plaintiffs will be able to state a claim under the ATS, even after Kiobel; Judge Rawlinson, while agreeing to allow the plaintiffs to amend their complaint, strongly doubts the plaintiffs will be able to do so. With respect to extraterritoriality, the panel rejects the more restrictive “focus” test in Morrison, concluding that the Supreme Court in Kiobel “did not explicitly adopt Morrison’s focus test, and chose to use the phrase ‘touch and concern’ rather than the term ‘focus’ when articulating the legal standard it did adopt."  Judge Rawlinson dissents vehemently on this point:

I do not agree with the majority that the Supreme Court “did not incorporate Morrison’s focus test.” Majority Opinion, p. 30. Why else would the Supreme Court direct us to Morrison precisely when it was discussing claims that allegedly “touch and concern” the United States? Kiobel, 133 S. Ct. at 1669.In any event, at a minimum, the Supreme Court has made clear that not any old domestic contact will do. Rather, the Supreme Court has colorfully informed us that the burden of showing sufficient domestic contact is substantial. See Morrison, 561 U.S. at 266 (“[T]he presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case . . . .”) (emphasis in the original).

 With respect to aiding and abetting, the panel declines to decide whether the mens rea standard should be “knowledge” or “specific intent” (the standard adopted by the Second Circuit in Talisman), concluding that the defendants’ conduct met even the higher standard because their desire for increased profits “support the inference that the defendants acted with the purpose to facilitate child slavery.” Judge Rawlinson dissents strongly on this point as well, accusing the majority of “[p]iling inference upon inference” to conclude that the defendants’ goal of making profits equated with an intent to enslave children. She would have adopted the Talisman specific intent standard and would not have concluded that the defendants acted with specific intent to facilitate child slavery.

 Doe v. Cisco Systems

 On September 5, Judge Edward Davila of the Northern District of California dismissed the ATS lawsuit brought against Cisco Systems in 2011 for providing netowkr securuty software that the Chinese government allegedly used to commit human rights violations against members of the Falun Gong. (A similar ATS suit against Cisco was dismissed earlier this year by a federal judge in Maryland, for lack of personal jurisdiction and other reasons, as I explained here.) After Kiobel, Judge Davila permitted the plaintiffs to amend their complaint. The plaintiffs then alleged that Cisco officials inside the United States knew that the Chinese government would use Cisco’s software to commit human rights abuses.   Nonetheless, the court found that “Plaintiffs have not shown that the alleged human rights abuses committed against them in China, including torture and forced conversion, were planned, directed, or committed in the United States or directed against the United States.” Although not clear that he would adopt the standard in the Alito/Thomas concurrence in Kiobel, Judge Davila concluded that “The domestic conduct of the Defendants is not, as set forth by Justices Alito and Thomas, ‘sufficient to violate an international law norm.’” Doe v. ExxonMobil On September 23, Judge Lamberth issued a lengthy decision in the 13-year-old ExxonMobil lawsuit, in which plaintiffs alleged that ExxonMobil aided and abetted human rights violations by the Indonesian military in Aceh, Indonesia. The DC Circuit had remanded the case to Judge Lamberth for reconsideration in light of Kiobel. Judge Lamberth’s decision reads like a final examination answer in a Foreign Relations litigation course: he examines and dismisses ExxonMobil’s arguments on act of state; forum non conveniens; exhaustion of local remedies; international comity; political question; and foreign affairs preemption. With respect to Kiobel, Judge Lamberth allows the plaintiffs to amend their complaint to allege additional facts to meet the touch and concern standard. “If plaintiffs have sufficiently alleged conduct within the United States that is actionable under the ATS, their ATS claims are not defeated on the basis of the presumption against extraterritoriality.” Judge Lamberth does not address what level of conduct inside the United States would be “actionable” under the ATS or whether that conduct must itself violate an international law norm.