Supreme Court Rules Against Corporate Liability Under TPVA

The U.S. Supreme Court has recently ruled that companies can't be held liable in the United States under the Torture Victim Protection Act for charges of human rights abuses conducted overseas.

Since its enactment in 1992, plaintiffs' lawyers and human rights activists have invoked the TPVA on dozens of occasions against corporations, arguing that the word “individual” in the language of the act includes organizational and corporate defendants. Under the TVPA, liability is established against an “individual, who under actual or apparent authority, or color of law, of any foreign nation,” subjects another to torture or extrajudicial killing.

With its unanimous decision on Mohamad v. Palestinian Authority handed down last month, the Supreme Court clarified that the “ordinary meaning” of the word “individual” and its context in the TVPA demonstrate that Congress intended the TVPA to apply only to “natural persons,” meaning that it can't be used to pursue corporate defendants.

The case stems from a lawsuit filed by the family of Azzam Rahim, a U.S. citizen who was tortured and killed overseas while in the custody of Palestinian Authority intelligence officers. Rahim's relatives brought a lawsuit in the United States under the TVPA against the Palestinian Authority and the Palestine Liberation Organization, arguing that the word “individual” in the TVPA extends to “non-sovereign organizations.”

The U.S. District Court for the District of Columbia ruled that the TVPA's language limiting liability to “individuals” necessarily applied to natural persons only and granted the respondents' motion to dismiss. The U.S. Court of Appeals for the DC Circuit affirmed. The plaintiffs appealed to the Supreme Court, and lost.

“We decline to read ‘individual' so unnaturally,” the Court's opinion stated. “The ordinary meaning of the word, fortified by its statutory context, persuades us that the Act authorizes suit against natural persons alone.”

Legal experts say the decision eliminates an avenue of frivolous lawsuits that did little to protect against human rights abuses by companies. “By and large, American corporations care deeply about behaving properly, not just because of legal liability but because they want to do the right thing,” says David Rivkin, a partner with law firm Baker & Hostetler. The Supreme Court's decision in Mohamad effectively eliminates “largely meritless litigation,” he says.

Steve Cottreau, a partner with law firm Clifford Chance, agrees. “Everybody realizes the inherent wrong in torture, so to brand a company as a violator of the Torture Victim Protection Act is a scurrilous accusation,” says Cottreau. The decision effectively takes away plaintiffs' ability to inflict unwarranted reputational damage on corporate defendants, he says.

KBR, a global engineering, construction, and services company, had reiterated that concern in an amicus brief filed in February on behalf of the respondent. “Even successful litigation cannot, as a practical matter, fully clear the name of a company that has been accused of serious wrongs in court and has suffered years of adverse publicity as the case winds its way through the legal system,” the brief stated.

KBR additionally argued that such reputational risks would discourage U.S. firms from doing business in the developing countries, where weak or ineffective governance often is the norm. “Due in part to political instability, alleged conduct within developing nations has been at the heart of most litigation against corporations under both the ATS and the TVPA,” the brief stated.

“Everybody realizes the inherent wrong in torture, so to brand a company as a violator of the Torture Victim Protection Act is a scurrilous accusation.”

—Steve Cottreau,

Partner,

Clifford Chance

The Court's ruling in Mohamad has resolved a circuit split in which the Fourth, Ninth, and D.C. Circuits had limited TVPA liability to natural persons, while the Eleventh Circuit had recognized corporate liability under the TVPA.

Alexandra Meise Bay, an associate with law firm Foley Hoag, reminds companies that the decision “doesn't completely eliminate potential liability,” because individual corporate officers, directors, and employees still face liability.

Kiobel Still Looms

Nor does the Mohamad decision completely shield companies from liability in the United States for charges of human rights abuses abroad. The Supreme Court is still considering a different case, Kiobel v. Royal Dutch Petroleum, which looks at whether or not plaintiffs can bring cases in the United States against companies for abuses abroad under the centuries-old Alien Tort Statute. “Until the Supreme Court issues its ruling in Kiobel, corporations still remain potentially liable under the ATS,” Meise Bay says.

The case stems from a lawsuit filed by the families of seven Nigerians over accusations that Royal Dutch Petroleum, Shell Transport and Trading Co., and their subsidiary Shell Petroleum Development Co. of Nigeria aided the Nigerian government in violently suppressing protests against oil exploration in the area.

Unlike the TVPA, which limits liability to torture and extrajudicial killing, the ATS extends to violations of the “law of nations or a treaty of the United States,” meaning it can extend more broadly to human rights violations. But whereas only foreign plaintiffs may use the ATS as a legal remedy, the TVPA is available to both U.S. and foreign plaintiffs.

On March 5, following oral argument in Kiobel (held the same day as oral argument in Mohamad) the Court ordered re-argument to address the question of whether U.S. courts have the authority to enforce liability in the U.S. for violations beyond its borders in such cases.

SUPREME COURT DECISION

The excerpt below from Mohamad v. Palestinian Authority explains the U.S. Supreme Court's Decision in the case.

The TVPA imposes liability on individuals for certain acts of torture and extrajudicial killing. The Act provides:

“An individual who, under actual or apparent authority, or color of law, of any foreign nation—

(1) subjects an individual to torture shall, in a civil action, be liable for damages to that individual; or

(2) subjects an individual to extrajudicial killing shall, in a civil action, be liable for damages to the individual's legal representative, or to any person who may be a claimant in an action for wrongful death.”

The Act defines “torture” and “extrajudicial killing,” §3, and imposes a statute of limitations and an exhaustion requirement, §§2(b), (c). It does not define “individual.”

Petitioners concede that foreign states may not be sued under the Act—namely, that the Act does not create an exception to the Foreign Sovereign Immunities Act of1976, 28 U. S. C. §1602 et seq., which renders foreign sovereigns largely immune from suits in U. S. courts. They argue, however, that the TVPA does not similarly restrict liability against other juridical entities. In petitioners' view, by permitting suit against “[a]n individual,” the TVPA contemplates liability against natural persons and non-sovereign organizations (a category that, petitioners assert, includes respondents). We decline to read “individual” so unnaturally. The ordinary meaning of the word, fortified by its statutory context, persuades us that the Act authorizes suit against natural persons alone.

Source: Mohamad v. Palestinian Authority.

Because the language in the ATS does not necessarily limit liability to “individuals,” the Court hinted that its decision in Mohamad unlikely will affect its ruling in Kiobel. Specifically, the Court's opinion in Mohamad noted that “regardless of whether corporate entities can be held liable in a federal common-law action brought under [the ATS], the statute “offers no comparative value.”

The court may have tipped its hand, however, that it will rule against extending liability under ATS to corporations, say legal experts. To hold oral argument regarding whether corporate liability exists and then order re-argument potentially on the broader ground whether liability exists at all for torts that happen outside the U.S.—a legal concept known as “extraterritorial reach”—is a “very strong indication that the Court is going to cut back on the scope of the Alien Tort Statute,” says Cottreau.

Rivkin puts it a little more bluntly: “The Supreme Court is about to castrate ATS.”

Meise Bay adds that if the Court were to find that ATS does not apply extra-territorially, “that does not mean that potential plaintiffs will be left without any avenue of redress.” The possibility of litigating in foreign jurisdictions and suing for standard tort—as opposed to violations of international law—may still be an option, she says.

Until the Supreme Court rules on Kiobel, however, business groups remain concerned about the liability of operating in developing nations, where human rights violations are more common. In an amicus brief filed earlier this year, the United States Council for International Business, together with several other business groups, urged the Court to provide clarity for those companies doing business in foreign markets, often in unstable political and economic climates.

“American companies and courts should not be looked to as a solution for redress for the crimes of others simply because they happen to be in the wrong place at the wrong time,” says Jonathan Huneke, vice president of communications and public affairs for the USCIB.

The Supreme Court's 2004 decision in Sosa v. Alvarez-Machain is the only prior case to address ATS. In that decision, the Court limited the reach of ATS claims by holding that ATS is jurisdictional in scope. The Court found ATS does not allow for a wholesale incorporation of customary international law norms into federal common law.

“In the end,” says Huneke, “we want the Court to provide clarity in an area of the law that has been anything but clear, and resolve some of the ambiguities raised in its earlier Sosa decision.”