High court relieves foreign corporations from US liability for acts committed abroad

In a split decision closely watched in California, the U.S. Supreme Court on Tuesday ruled that foreign corporations cannot be held liable for torts committed abroad under an 18th century statute that in recent decades became a legal tool against terrorists.

The 5-4 opinion, written by Justice Anthony M. Kennedy, affirmed the 2nd U.S. District Court of Appeal's dismissal of a lawsuit against a Jordan-based bank accused of financing terrorist attacks in the Middle East.

Jeffrey L. Fisher, co-director of Stanford Law School's Supreme Court Litigation Clinic, represented the petitioners before the high court, which heard oral argument last October. Jesner et al., v. Arab Bank PLC, 2018 DJDAR 3627.

"We are deeply disappointed with the decision. That's all I can say," Fisher wrote in an email Tuesday.

Former U.S. Solicitor General Paul D. Clement, a partner with Kirkland & Ellis LLP in Washington, D.C., represented Arab Bank.

The plaintiffs and petitioners were injured in the attacks or are family members and estate representatives of those killed. They sued Arab Bank in federal court in the Eastern District of New York under the Alien Tort Statute, but a district court judge determined in 2013 that the statute doesn't apply to corporations.

Joshua C. McDaniel, an associate at Horvitz & Levy LLP, said the opinion "makes sense" based on the court's prior ruling in Sosa v. Alvarez-Machain, 542 U.S. 692 (2004), which limited courts to recognizing causes of action only for violations of international law norms that are "specific, universal, and obligatory."

"There still are other classes of individuals who can be sued in court, but there are still hurdles and roadblocks for the defendants to overcome in those cases as well," McDaniel said.

Peter S. Margulies, who filed an amicus brief in the case on behalf of U.S. Senators Lindsay Graham and Sheldon Whitehouse, said the opinion is disappointing.

"I think it's shortsighted because I believe Congress clearly intended there to be an accountability for both individuals committing terrorist acts and for corporations that assist in those acts," said Margulies, who is a professor at Roger Williams University School of Law in Rhode Island.

"I don't think the court adequately considered the entire spirit of Congress' framework of accountably, and instead, I think the court got unduly concerned about the risks of liability here," he added.

Kristin A. Linsley, a partner at Gibson, Dunn & Crutcher LLP in San Francisco, said the opinion makes it clear Congress can enact new laws to address the issue.

"In fact, the court went out of its way to emphasize that," Linsley said.

Linsley wrote an amicus brief for Coca-Cola Co. and Archer Daniels Midland Co. in a previous case before the U.S. Supreme Court that left open the question of corporate liability under the Alien Tort Statute. Kiobel v. Royal Dutch Petroleum, 133 S.Ct. 1659 (2013).

Kiobel is what guided U.S. District Judge Brian M. Cogan's decision in Jesner, which said that because the U.S. Supreme Court affirmed the 2nd Circuit's Kiobel decision on other grounds, the 2nd Circuit's holding on corporate liability under the Alien Tort Statute "remains intact."

"The court was really clear that it would create international friction," she said.

McDaniel agreed and noted that many amicus briefs addressed that, including one from the Kingdom of Jordan.

Neal Kumar Katyal, an attorney with Hogan Lovells US LLP in Washington, D.C., filed the brief for Jordan, which said the petitioners' jurisdiction request would undermine its relationship with the U.S., "threaten Jordan's economy, and offend its sovereignty."

U.S. Deputy Solicitor General Edwin S. Kneedler filed a similar amicus brief that said the U.S. has "a substantial interest" in the applicability of the Alien Tort Statute because it can affect foreign and commercial relations.