9th Circuit revives international law litigation claiming major cocoa producers encouraged use of child slave labor

American corporations may be sued for aiding and abetting international human rights abuses, the 9th U.S. Circuit Court of Appeals ruled Tuesday.

A three-judge panel of the court said a group of former child slaves from Africa could use the Alien Tort Statute to pursue claims against a number of American manufacturers, purchasers, processors and retail sellers of cacao they say perpetuated a system of forced child labor on the Ivory Coast.

Reversing U.S. District Judge Stephen V. Wilson for the second time in five years, the 9th Circuit said that despite recent U.S. Supreme Court rulings narrowing the scope of the 229-year-old federal tort law, plaintiffs could file litigation against the corporations because the alleged international law violations concern financial decisions made within the United States.

Wilson, a Central District of California judge, dismissed the suit in 2017 when the case was remanded back to him from the 9th Circuit.

He said the plaintiffs sought impermissible extraterritorial application of the Alien Tort Statute, describing the decision on the part of the defendants to do business in West Africa and use American funds for such activities as "ordinary business."

"There are no allegations defendants planned or directed the use of forced child labor from the U.S.," he wrote.

On appeal, lawyers for Nestlé S.A. and Cargill Incorporated Company urged the 9th Circuit to affirm, arguing financial assistance for any illegal slave labor was irrelevant to the case because existing precedent required the court to consider where the principal offenses -- not the aiding and abetting -- took place.

The 9th Circuit disagreed. Doe v. Nestlé, 2018 DJDAR 10399 (9th Cir., Oct. 23, 2018).

Nelson

"The focus of the ATS is not limited to principal offenses," wrote Senior 9th Circuit Judge Dorothy W. Nelson, citing authority from the 2nd U.S. Circuit Court of Appeals.

Moreover, the facts alleged in the plaintiffs' complaint suggested a strong American connection to slave labor, she said, writing, "[T]he allegations paint a picture of overseas slave labor that defendants perpetuated from headquarters in the United States."

Paul L. Hoffman, a partner at Schonbrun DeSimone Seplow Harris & Hoffman LLP who represents the plaintiffs, said in a phone interview Tuesday he was pleased the court was allowing his clients to pursue their case.

"This is a case that has some chance of halting child slave labor in the Ivory Coast," he said. "That would be of such importance to thousands of child slaves."

Nestlé and Cargill both deny any connection to slave labor and said they are both considering next steps.

"Forced child labor is unacceptable and has no place in our supply chain," company spokesman Joshua Morton said in an email Tuesday. "We have explicit policies against it and are working with other stakeholders to combat this global social problem."

Cargill spokeswoman April Nelson echoed similar sentiments in an email Tuesday, saying claims they worked with suppliers who used slave labor are "unsubstantiated."

Both Morton and Nelson said Wilson was right to dismiss the case twice and lamented the length of the litigation, which was first filed in 2005.

"We disagree with the 9th Circuit's decision and are assessing our appellate options," Morton said. "Regrettably, in bringing such lawsuits, the plaintiffs' class action lawyers are targeting the very organizations trying to fight forced labor."

Both spokespeople said their companies were committed to fighting forced child labor.

Theodore J. Boutrous Jr., a partner at Gibson, Dunn & Crutcher LLP, represents Nestlé. Andrew J. Pincus, a partner at Mayer Brown LLP, represents Cargill.

The corporate defendants may be inclined to pursue further appellate remedies given the implications of the precedent.

Pincus

Hoffman, who represents the plaintiffs, said the decision helps clarify which cases may proceed under the Alien Tort Statute in light of the Supreme Court's 2013 decision establishing the law does not presumptively apply to extraterritorial situations. Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108 (2013).

"It's now becoming clear ... that when companies aid and abet very serious human rights violations outside the United States, that can be a basis for liability," he said.

But whether the justices are interested in taking a potential appeal in this case is a different question. They declined such an invitation in 2016.

When the case returns to the district court, the plaintiffs will have to rewrite their complaint to meet new alien tort standards articulated by the Supreme Court in a different case last term.

Current filings of the lawsuit include allegations against international wings of Nestlé and Cargill. In April, the high court ruled foreign corporations may not be sued under the Alien Tort Statute. Jesner v. Arab Bank, PLC, 2018 DJDAR 3627 (U.S. Apr. 24, 2018).

And on Tuesday, the 9th Circuit remanded the slave labor case to allow plaintiffs to amend their complaint to remove certain defendants like Nestlé, a Swiss company, in light of Jesner.

Judge Morgan Christen joined Nelson's opinion. U.S. District Judge Edward F. Shea, visiting from Eastern Washington, concurred separately but did not articulate why he did not join the majority opinion.