Alien Tort Statute Update

Two Recent Appellate Decisions Affect Alien Tort Statute Cases Against Corporations

Two recent opinions from federal courts of appeal provide further guidance to corporations facing Alien Tort Statute (ATS) liability.

Romero v. Drummond Co.

On December 29, 2008, the Eleventh Circuit issued its opinion in Romero v. Drummond Co., No. 07-14090, affirming a July 2007 jury verdict in favor of Drummond Ltd., a multinational coal mining company, and the president of its Colombian branch. This was the first case to go to trial against a corporation under the ATS. Baker Botts successfully represented the defendants at trial and on appeal.

The plaintiffs, a Colombian labor union and relatives of three union leaders who were murdered in Colombia, alleged that Drummond collaborated with paramilitaries who carried out the killings. The judge allowed the case to go to the jury on a theory that the defendants aided and abetted a “war crime” that is actionable under the ATS. After a three-week trial in Birmingham, the jury found for the defendants on all claims.

On appeal, the Eleventh Circuit affirmed its precedent that the ATS not only confers federal jurisdiction over claims against corporations but also that it permits causes of action based on a theory of aiding and abetting. The court also held that claims for “extrajudicial killing” may be brought under the ATS, as well as the Torture Victim Protection Act.

The court of appeals rejected the plaintiffs’ argument that the district court had abused its discretion by refusing to grant a continuance to allow them to present the testimony of five late-discovered witnesses. Plaintiffs claimed that these witnesses had knowledge either of meetings between Drummond officials and paramilitaries to plan the killings or of payments by Drummond to the paramilitaries. The court concluded that the district court correctly excluded the witnesses because plaintiffs had not been diligent in identifying them before the close of discovery and because Drummond had been denied the opportunity to conduct discovery about their expected testimony.

Sarei v. Rio Tinto, PLC

On December 16, 2008, the Ninth Circuit, sitting en banc, addressed a key issue for corporate defendants named in an ATS suit: whether foreign plaintiffs should be required to exhaust judicial remedies in their own country before their ATS case may be heard in a U.S. court. The court of appeals held that while exhaustion is not a requirement of the ATS, it is a “prudential principle” which should be considered by district courts. This decision could limit ATS suits against corporate defendants in some cases.

The plaintiffs in Rio Tinto are current and former residents of a small island, Bougainville, located near Papua New Guinea (PNG) that contains substantial copper and gold reserves. The defendants are two foreign corporations (British-Welsh and Australian) that are part of an international mining group with world-wide operations, including the United States. The complaint alleges that Rio Tinto worked with the PNG government in its operations since the 1960s. When residents of Bougainville revolted against what they perceived as corporate abuses by Rio Tinto in the late 1990s, the company allegedly demanded that PNG military forces stop the revolt. The clash between the military and the residents led to a decade-long civil war. The plaintiffs filed this class action in November 2000. They asserted claims for crimes against humanity, war crimes, and injury from environmental abuses, among others. Although it dismissed the claims, the district court held that the ATS did not require plaintiffs to exhaust local judicial remedies before filing suit.

While the Rio Tinto motions to dismiss were pending in the district court, the Supreme Court issued an opinion which explained that exhaustion “would certainly [be considered] in an appropriate case,” Sosa v. Alvarez-Machain, 542 U.S. 692, 733 n.21 (2004), but offered little guidance. The court of appeals here sought to provide such guidance. It held that exhaustion is an appropriate “prudential principle” for courts to consider, but not a strict requirement in every case. The key question, then, is when a court should impose such a requirement on plaintiffs. Courts must weigh two competing considerations. On the one hand, “[t]he lack of a significant U.S. ‘nexus’” suggests that an exhaustion requirement should be imposed. For example, in Rio Tinto, the “claims involve a foreign corporation’s complicity in acts on foreign soil that affected aliens.” On the other hand, however, the United States’ “historical commitment to upholding customary international law” suggests that where claims are based on violations of well-established international law norms, an exhaustion requirement should not be imposed.

The plurality opinion offered three specific pieces of guidance as courts weigh these competing principles:

• First, the defendant bears the initial burden “to plead and justify an exhaustion requirement, including the availability of local remedies.” Although the plaintiff may rebut this showing “with a demonstration of the futility of exhaustion,” the defendant retains the ultimate burden.
• Second, to “exhaust” does not mean simply to file a lawsuit but rather to “obtain a final decision of the highest court in the hierarchy of courts in the legal system at issue.”
• Third, the remedy be “available, effective and not futile.” Effectiveness is evaluated based on access to a remedy and the “ultimate utility of the remedy to the petitioner.” If the plaintiff cannot enforce a favorable judgment obtained elsewhere, the remedy is not effective.
  

The Drummond and Rio Tinto decisions are significant for corporations that do business abroad, though their conclusions pull in different directions. The Drummond court’s holding—that ATS claims may be brought against corporations and may be based on an aiding and abetting theory—leaves the Eleventh Circuit as one of the most plaintiff-friendly jurisdictions for these types of lawsuits. In contrast, the Rio Tinto decision potentially erects another hurdle for plaintiffs who may have to show that they exhausted local remedies and also provides corporate defendants with another defense in their arsenal against ATS claims.