Alien Tort Statute Update

Supreme Court, SDNY Issue Alien Tort Statute Decisions With Important Implications For Multinational Corporations

U.S. Supreme Court Refuses To Decide Case Addressing Corporate Liability Under The Alien Tort Statute

On June 29, 2010, the U.S. Supreme Court refused to hear a challenge to the applicability of the Alien Tort Statute (“ATS”) to corporations. The ATS provides federal jurisdiction for violations of international law. Because international law generally can be violated only by a state actor, the ATS generally requires a showing of state action. Plaintiffs under the ATS generally assert that corporate defendants like Pfizer acted in concert with state actors. In Pfizer v. Abdullahi, Nigerian plaintiffs accused the nation’s largest drug manufacturer with violating international law by failing to obtain informed consent for the participation of children in a clinical trial in Nigeria. The plaintiffs based their claim of state action on allegations that the Nigerian government provided a letter to the FDA requesting the trial, arranged for Pfizer’s accommodation in Nigeria, and otherwise “facilitated” the testing. Lower courts have been inconsistent in defining the level of state activity required to support an ATS claim, and Pfizer provided the U.S. Supreme Court with an opportunity to clarify, the level of state/corporate cooperation necessary for liability under the ATS. The Solicitor General, however, recently asked the Court not to hear the case.

The U.S. Supreme Court last addressed the contours of the ATS over six years ago in Sosa v. Alvarez-Machain, urging that the statute be applied sparingly. Despite this admonition, lower federal courts have permitted many cases against multi-national corporations to proceed using widely varying standards of state action. The U.S. Supreme Court’s refusal to provide any guidance as to what level of foreign state participation in overseas operations leaves corporations with substantial uncertainty as to how to avoid ATS liability, and encourages plaintiffs’ counsel—which include sophisticated public interest law firms and well-funded interest groups—to file still more ATS cases, making ever more inventive and tenuous allegations of cooperation between multinational corporations and foreign governments.

For more background about the Abdullahi case, please read this update.