The Alien Tort Claims Act

Yahoo!, the global Internet company, was accused by the families of jailed Chinese dissidents of abetting in the torture of pro-democracy activists by releasing data that allowed China's government to identify, arrest, and imprison the activists. Unocal, a California oil company, has been confronted with charges in a U.S. court of being complicit in the alleged forced labor, rape, and murder of Burmese citizens ' actually committed by the Burmese military government. Chiquita has been sued ' in a U.S. court ' in a case where it admitted paying money to paramilitary groups in Colombia to protect its workers. These companies are not alone. Similar accusations based on the actions of corrupt or repressive foreign regimes have been levied in U.S. courts against many other multinational corporations, including Coca-Cola, Exxon-Mobil, Firestone, and Royal Dutch/Shell.

In recent years, companies doing business in countries where human rights or environmental violations have occurred have found themselves dragged into U.S. courts as defendants in lawsuits brought by foreign plaintiffs to account for violations ' often committed by others, including foreign governments. Although some of these cases are well-known, the legal foundation for the claims is not. An obscure piece of legislation passed more than 200 years ago was raised in the case against Yahoo! and many others like it. Unfortunately, this strategy is only becoming more relevant. Although the statute was initially interpreted to provide redress in limited situations involving foreigners, including to provide comfort to reluctant foreign diplomats traveling to the United States in the post-Revolutionary period, it has more recently been used by U.S. Plaintiff's lawyers as a popular way of hauling multinational corporations into U.S. courts for torts actually committed by others where the companies did business.

The Alien Tort Claims Act

Passed in 1789, the Alien Tort Claims Act (“ATCA”) provides that “district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. ' 1350.

Courts hearing cases brought under ATCA have read the statute to grant U.S. courts jurisdiction over tortious acts that occur anywhere in the world, provided that the act violates international law. This principle has expanded and been consistently applied in recent years. See, e.g., Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir. 1980).

Early Developments in ATCA's Application and Scope

Because of its narrow and obscure initial intent, the statute was dormant for many years. But with a series of decisions ' pursued by U.S. tort lawyers and human rights organizations ' beginning in 1980, a body of case law has now developed that allows foreign plaintiffs to sue corporations in the United States for international law violations. In 1980, the case of Filartiga v. Pena-Irala established that U.S. courts have jurisdiction over non-criminal abuses that occur outside its borders and gave ATCA its resurgence. However, Filartiga was a suit brought against an individual. It was not until 1993 that a plaintiff attempted to use ATCA to impose liability on a corporate defendant. In Aguinda v. Texaco, the plaintiff argued that environmental pollution from three decades of oil exploitation by Texaco violated the rights of Ecuadorian villagers. Although that case was never decided by an American court since jurisdiction was subsequently transferred to Ecuador, it marked the first time a corporation was sued for violations under ATCA. Finally, in 2004, in the case of Sosa v. Alvarez-Machain, the United States Supreme Court delivered an opinion on the current permissible scope of ATCA claims and limited its jurisdictional application to the most serious human rights abuses, classified as violations of the law of nations. Notably, the Court did not decide whether corporations could be held liable under ATCA.

Modern Trend? ATCA Cases Against Companies Proceeding to Trial

Given the framework that has been established by Aguinda, Sosa, and other ATCA cases brought against multinational corporations, corporate defendants might believe they have little to worry about. This would be a mistake. While it is true that most cases have failed on procedural or substantive legal grounds to proceed to trial, attempts by the federal government to narrowly limit ATCA's application have largely failed and there has been no definitive ruling on the exact nature or extent ' if any ' of corporate liability under the ATCA. As such, this remains an evolving and unclear area of law. Furthermore, adding to the growing concern about ATCA's application to the corporate world are two recent cases where courts found that such procedural and substantive legal obstacles were surpassed and allowed the claims to reach the jury.

Estate of Rodriquez v. Drummond Co.

Filed in 2002, the case was brought against Drummond, an international mining company, based on allegations that its management in Colombia hired paramilitary and military forces in 2001 to kill three labor leaders who worked at the company's coal mine. The court rejected Drummond's motions to dismiss and summary judgment motion and allowed the plaintiffs to present the case to the jury. This marked the first time a foreign plaintiff successfully brought an ATCA claim against a corporate defendant through to trial. However, on July 26, 2007, after only four hours of deliberation, a federal jury returned a verdict in favor of Drummond, finding it was not complicit in the murders.

Bowoto v. Chevron

The most recent ATCA case to proceed to trial involved Chevron. Nigerian villagers accused the oil company of cooperating with the Nigerian government in 1998 in ending the villagers' protest on Chevron's oil platform. The villagers had been protesting the company's environmental record in the local area. Chevron believed that its workers were being held hostage and requested the assistance of the Nigerian military. Two protesters were killed and various others injured in the incident. Chevron argued that it had no control over the tactics used by the Nigerian officials, that its actions to quell the protest were reasonable, and that the injuries to the villagers were the responsibility of the Nigerian government.

The court allowed the case to reach the jury. On Dec. 1, 2008, after one month of trial proceedings, a federal jury in California handed Chevron a complete victory. The jury found that the Nigerian government, and not Chevron, was responsible for the violent end to the protest.

Although the corporate defendants were victorious in both Drummond and Chevron, the fact that these two cases have withstood motions to dismiss is significant. Allowing an ATCA case to reach discovery and then trial means that certain facts ' some perhaps damaging ' about the company's foreign operations are likely to come to light. Other corporate liability cases brought under ATCA are pending and may survive procedural and other hurdles to get to trial. In fact, one case involving Royal Dutch/Shell is set for trial in federal court in New York in February. Some of these cases are likely to be determined later this year and will have further implications for multinational corporations doing business under the kind of circumstances that led to cases like Drummond and Chevron.

Potential Implications for Companies Under ATCA

The growing popularity of using ATCA to subject companies to jurisdiction in the United States and hold them liable for events occurring abroad has serious implications. Multinational corporations should not ignore the obvious trend of foreign claimants bringing ATCA cases to force companies to account for alleged human rights and other abuses. First, based on the most recent cases of Drummond and Chevron, courts may be seeing these types of cases as more viable and, as a result, might allow more cases to proceed to trial. Second, even though no case has resulted in liability against a corporate defendant under ATCA, simply being named a defendant in such a suit has substantial negative effects on a company's public image. For instance, in the case of Yahoo!, the company faced significant public relations difficulties in defending itself against claims that it had assisted the Chinese government's efforts in obtaining evidence sufficient to jail two dissidents. Therefore, even though a company might not be legally liable, it might still suffer from what some consider moral liability. Finally, there are potentially significant financial implications as well. In the case involving Chevron, although it was eventually cleared of any wrongdoing, the company had to endure the cost of litigating a case that stretched on for ten years. Even for those companies that choose to settle the claims, the price of settlement can be substantial. While these settlements are generally undisclosed, some reports put settlement figures of ATCA claims in the millions of dollars.

The good news is that no company ' whether through trial or at some earlier stage ' has yet to lose an ATCA case. Indeed, despite the growing number of ATCA cases brought against multinational companies since 1993, only two have survived to proceed to trial. Most of the cases have been dismissed, mainly on substantive legal grounds. Only a few have settled. And although others remain pending, there is now a precedent with Drummond and Chevron that has provided a basis on which corporate defendants can make their case. This seemingly good news, however, is not a foolproof safeguard and multinational corporations must still consider taking steps to protect themselves against potential litigation under ATCA and to minimize the effects of an ATCA suit should one be brought.

Guidelines to Protecting Your Company

Given the growth of ATCA cases and possibility of being held to account in a U.S. court, a corporation doing business in a foreign country with a volatile environment must become aware of the potential for litigation in the United States against it, the consequences of such liability, and attempt to limit its exposure to such suits. Below are some steps to consider taking.

• Create and advance corporate human rights policies and practices.
• Consider the human rights and environmental records of countries in which you conduct business operations.
• Become familiar with international law and ensure conduct is in accordance with those requirements.
• Become aware of the foreign government's laws and customs.
• Implement a system by which oversight and reporting of alleged violations are maintained.
• Become familiar with local tensions and prepare employees and supervisors for potential consequences.
• Scrutinize the background and reputation of potential collaborators, contractors, and partners and closely monitor activities of any third parties you engage for business.
• Evaluate whether your relationship with the foreign government and its entities should be limited.
• Invest in the foreign country through social responsibility, corporate charitable giving, and other ventures.

Michael C. Lynch is a partner in the litigation practice group at Kelley Drye & Warren LLP. His practice covers international and domestic complex commercial litigation. Lystra Batchoo is an associate at the firm.

Yahoo!, the global Internet company, was accused by the families of jailed Chinese dissidents of abetting in the torture of pro-democracy activists by releasing data that allowed China's government to identify, arrest, and imprison the activists. Unocal, a California oil company, has been confronted with charges in a U.S. court of being complicit in the alleged forced labor, rape, and murder of Burmese citizens ' actually committed by the Burmese military government. Chiquita has been sued ' in a U.S. court ' in a case where it admitted paying money to paramilitary groups in Colombia to protect its workers. These companies are not alone. Similar accusations based on the actions of corrupt or repressive foreign regimes have been levied in U.S. courts against many other multinational corporations, including Coca-Cola, Exxon-Mobil, Firestone, and Royal Dutch/Shell.

In recent years, companies doing business in countries where human rights or environmental violations have occurred have found themselves dragged into U.S. courts as defendants in lawsuits brought by foreign plaintiffs to account for violations ' often committed by others, including foreign governments. Although some of these cases are well-known, the legal foundation for the claims is not. An obscure piece of legislation passed more than 200 years ago was raised in the case against Yahoo! and many others like it. Unfortunately, this strategy is only becoming more relevant. Although the statute was initially interpreted to provide redress in limited situations involving foreigners, including to provide comfort to reluctant foreign diplomats traveling to the United States in the post-Revolutionary period, it has more recently been used by U.S. Plaintiff's lawyers as a popular way of hauling multinational corporations into U.S. courts for torts actually committed by others where the companies did business.

The Alien Tort Claims Act

Passed in 1789, the Alien Tort Claims Act (“ATCA”) provides that “district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. ' 1350.

Courts hearing cases brought under ATCA have read the statute to grant U.S. courts jurisdiction over tortious acts that occur anywhere in the world, provided that the act violates international law. This principle has expanded and been consistently applied in recent years. See, e.g., Filartiga v. Pena-Irala , 630 F.2d 876 (2d Cir. 1980).

Early Developments in ATCA's Application and Scope

Because of its narrow and obscure initial intent, the statute was dormant for many years. But with a series of decisions ' pursued by U.S. tort lawyers and human rights organizations ' beginning in 1980, a body of case law has now developed that allows foreign plaintiffs to sue corporations in the United States for international law violations. In 1980, the case of Filartiga v. Pena-Irala established that U.S. courts have jurisdiction over non-criminal abuses that occur outside its borders and gave ATCA its resurgence. However, Filartiga was a suit brought against an individual. It was not until 1993 that a plaintiff attempted to use ATCA to impose liability on a corporate defendant. In Aguinda v. Texaco, the plaintiff argued that environmental pollution from three decades of oil exploitation by Texaco violated the rights of Ecuadorian villagers. Although that case was never decided by an American court since jurisdiction was subsequently transferred to Ecuador, it marked the first time a corporation was sued for violations under ATCA. Finally, in 2004, in the case of Sosa v. Alvarez-Machain, the United States Supreme Court delivered an opinion on the current permissible scope of ATCA claims and limited its jurisdictional application to the most serious human rights abuses, classified as violations of the law of nations. Notably, the Court did not decide whether corporations could be held liable under ATCA.

Modern Trend? ATCA Cases Against Companies Proceeding to Trial

Given the framework that has been established by Aguinda, Sosa, and other ATCA cases brought against multinational corporations, corporate defendants might believe they have little to worry about. This would be a mistake. While it is true that most cases have failed on procedural or substantive legal grounds to proceed to trial, attempts by the federal government to narrowly limit ATCA's application have largely failed and there has been no definitive ruling on the exact nature or extent ' if any ' of corporate liability under the ATCA. As such, this remains an evolving and unclear area of law. Furthermore, adding to the growing concern about ATCA's application to the corporate world are two recent cases where courts found that such procedural and substantive legal obstacles were surpassed and allowed the claims to reach the jury.

Estate of Rodriquez v. Drummond Co.

Filed in 2002, the case was brought against Drummond, an international mining company, based on allegations that its management in Colombia hired paramilitary and military forces in 2001 to kill three labor leaders who worked at the company's coal mine. The court rejected Drummond's motions to dismiss and summary judgment motion and allowed the plaintiffs to present the case to the jury. This marked the first time a foreign plaintiff successfully brought an ATCA claim against a corporate defendant through to trial. However, on July 26, 2007, after only four hours of deliberation, a federal jury returned a verdict in favor of Drummond, finding it was not complicit in the murders.

Bowoto v. Chevron

The most recent ATCA case to proceed to trial involved Chevron. Nigerian villagers accused the oil company of cooperating with the Nigerian government in 1998 in ending the villagers' protest on Chevron's oil platform. The villagers had been protesting the company's environmental record in the local area. Chevron believed that its workers were being held hostage and requested the assistance of the Nigerian military. Two protesters were killed and various others injured in the incident. Chevron argued that it had no control over the tactics used by the Nigerian officials, that its actions to quell the protest were reasonable, and that the injuries to the villagers were the responsibility of the Nigerian government.

The court allowed the case to reach the jury. On Dec. 1, 2008, after one month of trial proceedings, a federal jury in California handed Chevron a complete victory. The jury found that the Nigerian government, and not Chevron, was responsible for the violent end to the protest.

Although the corporate defendants were victorious in both Drummond and Chevron, the fact that these two cases have withstood motions to dismiss is significant. Allowing an ATCA case to reach discovery and then trial means that certain facts ' some perhaps damaging ' about the company's foreign operations are likely to come to light. Other corporate liability cases brought under ATCA are pending and may survive procedural and other hurdles to get to trial. In fact, one case involving Royal Dutch/Shell is set for trial in federal court in New York in February. Some of these cases are likely to be determined later this year and will have further implications for multinational corporations doing business under the kind of circumstances that led to cases like Drummond and Chevron.

Potential Implications for Companies Under ATCA

The growing popularity of using ATCA to subject companies to jurisdiction in the United States and hold them liable for events occurring abroad has serious implications. Multinational corporations should not ignore the obvious trend of foreign claimants bringing ATCA cases to force companies to account for alleged human rights and other abuses. First, based on the most recent cases of Drummond and Chevron, courts may be seeing these types of cases as more viable and, as a result, might allow more cases to proceed to trial. Second, even though no case has resulted in liability against a corporate defendant under ATCA, simply being named a defendant in such a suit has substantial negative effects on a company's public image. For instance, in the case of Yahoo!, the company faced significant public relations difficulties in defending itself against claims that it had assisted the Chinese government's efforts in obtaining evidence sufficient to jail two dissidents. Therefore, even though a company might not be legally liable, it might still suffer from what some consider moral liability. Finally, there are potentially significant financial implications as well. In the case involving Chevron, although it was eventually cleared of any wrongdoing, the company had to endure the cost of litigating a case that stretched on for ten years. Even for those companies that choose to settle the claims, the price of settlement can be substantial. While these settlements are generally undisclosed, some reports put settlement figures of ATCA claims in the millions of dollars.

The good news is that no company ' whether through trial or at some earlier stage ' has yet to lose an ATCA case. Indeed, despite the growing number of ATCA cases brought against multinational companies since 1993, only two have survived to proceed to trial. Most of the cases have been dismissed, mainly on substantive legal grounds. Only a few have settled. And although others remain pending, there is now a precedent with Drummond and Chevron that has provided a basis on which corporate defendants can make their case. This seemingly good news, however, is not a foolproof safeguard and multinational corporations must still consider taking steps to protect themselves against potential litigation under ATCA and to minimize the effects of an ATCA suit should one be brought.

Guidelines to Protecting Your Company

Given the growth of ATCA cases and possibility of being held to account in a U.S. court, a corporation doing business in a foreign country with a volatile environment must become aware of the potential for litigation in the United States against it, the consequences of such liability, and attempt to limit its exposure to such suits. Below are some steps to consider taking.

• Create and advance corporate human rights policies and practices.
• Consider the human rights and environmental records of countries in which you conduct business operations.
• Become familiar with international law and ensure conduct is in accordance with those requirements.
• Become aware of the foreign government's laws and customs.
• Implement a system by which oversight and reporting of alleged violations are maintained.
• Become familiar with local tensions and prepare employees and supervisors for potential consequences.
• Scrutinize the background and reputation of potential collaborators, contractors, and partners and closely monitor activities of any third parties you engage for business.
• Evaluate whether your relationship with the foreign government and its entities should be limited.
• Invest in the foreign country through social responsibility, corporate charitable giving, and other ventures.

Michael C. Lynch is a partner in the litigation practice group at Kelley Drye & Warren LLP. His practice covers international and domestic complex commercial litigation. Lystra Batchoo is an associate at the firm.