Alien Tort Statute Update

SG Urges Supreme Court Not To Address Corporate Liability Under Alien Tort Statute

The Alien Tort Statute (“ATS”) permits an “alien” to bring suit in U.S. federal court for a violation of international law occurring anywhere in the world. In the past decade, plaintiffs have filed ATS suits against dozens of U.S. multi-national corporations (“MNCs”), alleging that those companies committed human rights violations, or assisted state actors in doing so. For example, MNCs have been sued under the ATS for allegedly providing assistance (by providing goods like computers and vehicles) to South Africa’s apartheid regime, and (by building infrastructure projects like roads and paying oil royalties) to the government of Sudan. In 2004, the Supreme Court urged caution and restraint in recognizing new causes of action under the ATS, but plaintiffs lawyers continue to test the boundaries of the statute against corporations.

The ATS generally requires a showing of state action, and MNCs have argued that the statute does not apply to corporate acts. The Second Circuit, and particularly the District Court for the Southern District of New York, have led the way in rejecting this argument and permitting ATS suits against corporations. In Pfizer v. Abdullahi, the Supreme Court has the opportunity to limit, or at least clarify, the scope of corporate liability under the ATS. The Solicitor General, however, recently asked the Court not to hear the case.

In Pfizer, Nigerian plaintiffs sought damages stemming from a clinical trial of antibiotic medication conducted during an outbreak of bacterial meningitis in that country. Plaintiffs alleged that Pfizer committed a human rights violation by failing to obtain informed consent for the testing. The Second Circuit held that the plaintiffs had alleged sufficient state action to make out a violation of the law of nations by alleging 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. It also held, in the alternative, that even if there were no state action, Pfizer could be found liable for violation of a jus cogens norm. A jus cogens norm is one so fundamental (such as the prohibitions on genocide and slavery) that it may be violated not only by a state actor, but by private individuals as well.

The Pfizer case thus poses the issue of corporate liability — and the confusion in the courts surrounding that issue — starkly. First, in cases where a corporation’s liability is based on alleged complicity with a state actor, courts have been inconsistent with regard to the level of state participation required. Both the Ninth Circuit and the Eleventh Circuit have held that, to establish state action in connection with corporate activity under the ATS, the plaintiff must show that the state actor participated in or at least knew of the specific acts alleged to violate the law of nations. For example, in Romero v. Drummond Co., the Eleventh Circuit held that allegations of a “symbiotic relationship” between Colombian paramilitaries and that country’s government were insufficient to establish state action in connection with the alleged murder of union leaders, where there was no suggestion that the government participated in, or was aware of, the murders themselves. In Pfizer, by contrast, the plaintiffs alleged no participation by the Nigerian government in the testing, nor did they even allege that the government was aware of Pfizer’s efforts to obtain consent. Nevertheless, the Second Circuit held that the barest trace of involvement by the Nigerian government in the chain of events resulting in the alleged violation was sufficient to support an ATS claim.

Second, the Pfizer decision raises the question of what jus cogens violations a corporation may be liable for in the absence of state action. The Sixth, Ninth, Tenth and Eleventh Circuits all have held that these violations are limited to an extraordinarily narrow class of actions, including war crimes, genocide, piracy and slave trade. As Judge Wesley pointed out in his Second Circuit dissent, the Pfizer court’s expansion of this category to include unconsented clinical trials “overlook[s] the fact that this purported norm in no way resembles those few norms enforceable against private entities.”

The Pfizer case provides the Supreme Court with an opportunity to bring some clarity to this area of the law. It poses two questions critical to corporations facing potential liability under the ATS:

1. Whether the ATS extends to a private actor based on alleged state action where there is no allegation that the government knew of or participated in the specific acts by a private actor that are alleged to violate international law; and
   
2. Whether, absent state action, failure to obain informed consent for clinical trials can be a jus cogens violation in view of the “high bar” the Supreme Court has set for recognizing new causes of action under the statute.

A determination of these issues by the Supreme Court would likely provide much-needed clarity to companies operating around the world.

The Solicitor General, however, has urged the Court not to take the case, arguing that the first question presented concerns “only the adequacy of [the plaintiffs’] specific allegations of state involvement,” and that the second “was not even implicitly decided by the court of appeals” (which treated the case as alleging state action). In these circumstances, the SG asserted, the proper course for the Supreme Court is to remand the case for further development.

It remains to be seen whether the Supreme Court will grant certiorari and decide the issues presented in Pfizer, but the Solicitor General’s views are often thought to be highly persuasive. But should the Court hear the case, its decision could limit the use of the ATS against MNCs, and at a minimum would provide much needed clarity. Should the Court agree to hear the case, it likely would do so next year.