Courthouse Steps Oral Argument Teleforum: Nestlé USA, Inc. v. Doe I

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Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's Practice Groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at www.fedsoc.org.

 

 

Nick Marr:  Welcome, everyone, to The Federalist Society’s teleforum conference call as this afternoon, December 1, 2020, we have a Courthouse Steps Oral Argument Teleforum on Nestlé USA, Inc. v. Doe I. I’m Nick Marr, Assistant Director of Practice Groups at The Federalist Society. As always, please note that expressions of opinion on today’s call are those of our expert.

 

      And this afternoon, we are fortunate to have with us David Rybicki. He’s a Partner at K&L Gates LLP. After David gives his opening remarks, we will then go to audience questions, so have those in mind for when we get to that portion of the call. Without much more delay, thanks for being with us here, David. The floor is yours.

 

David Rybicki:  Thanks, Nick. And thanks for the invitation to join the Courthouse Steps Teleforum today. It’s always a pleasure to be with The Federalist Society and to discuss these two companion cases that you just mentioned that were argued telephonically before the Supreme Court today, Nestlé v. Doe and Cargill v. Doe. These cases have the potential to affect the scope of corporate civil liability under U.S. law in some very profound ways, and they have the potential to change the way U.S. corporations approach a myriad of issues, including supply chain management of corporate compliance programs and the like.

 

      Before I get into the arguments that the litigants raised in the briefs and today at the oral argument, I’d like to provide a brief overview of the operative statute at issue, the Alien Tort Statute, the ATS, and also do a quick review of the body of ATS precedent that the Supreme Court has developed over the last 20 years because the various tests and holdings that the Supreme Court has made with respect to the ATS in that time period are significant for the arguments that litigants raised today.

 

      The Alien Tort Statute had been, for really almost 200 years, a very dusty and kind of remote corner of the U.S. Code. And that all changed in 1980. But it’s been around since the founding, as a matter of fact. Congress enacted the ATS as part of the Judiciary Act in 1789 because it was primarily concerned with the potential that if aliens, foreign government officials or foreign ministers or diplomats or ambassadors, or their property and persons, were violated in the states or before that, during the Articles of Confederation period, that the national government really didn’t have the means to address those violations, those tort violations. And that, at the end of the 18th century, put the young Republic at risk of war with the offended sovereign.

 

      And there were two incidents in the early Republic and before that really piqued Congress’s anxieties about this kind of risk exposure. One involved a French vigilante who assaulted a French military officer in Philadelphia in 1784. And there was also another incident in New York where a sheriff entered the Dutch ambassador’s residence to effectuate the arrest of one of his servants. And so Congress enacts the Alien Tort Statue, which allows federal courts jurisdiction to hear suits brought by noncitizens for torts that are committed in violation of the law of nations or a treaty of the United States.

 

      What that essentially meant at the end of the 18th century was that only specific offenses in violation of the law of nations, or what we would call today customary international law, would have provided a cause of action. And really, at that time, there were three main offenses. Blackstone recognizes these in his Commentaries on English Law. These are the violations of safe conducts for foreign dignitaries, number one; number two, infringement of the rights of ambassadors or other diplomats; and number three, piracy.

 

      So beyond those three substantive offenses against the law of nations, the Alien Tort Statute didn’t really have much force outside of that context. And the first ATS cases that were brought after its passage in 1789, all involved piracy cases and cases involving ships, the seizure of slaves at a port in U.S. territory, and then the seizure of a ship in U.S. territorial waters.

 

      After that, the statute goes very quiet. It was used only once in the next 167 years, as I said before, until 1980 when the Second Circuit in the Filártiga decision held that plaintiffs could actually use the ATS to allege violations of modern human rights norms. And since then, it’s really been a bonanza for litigants, law professors, human rights NGOs, and others looking to impose a wide range of liability against a wide variety of defendants.

 

      What does this mean for contemporary plaintiffs? The issues that are cued up in our companion cases, Nestlé and Cargill, today fall under two main headings, extraterritoriality and liability. The first main question that the Court is asking, the Court asked today, and asked in its previous ATS precedents, is, essentially, what does it take to overcome the presumption of extraterritoriality that applies to the ATS? And specifically in this case, whether an aiding and abetting claim that is made against a domestic U.S. corporation brought under the ATS can overcome that extraterritoriality bar when the claim is based on allegations of general corporate activity in the United States.

 

      So the first main issue is the extraterritorial application of the statute. The second issue is liability itself. And that has to do with whether the judiciary has the authority under the ATS to impose liability on domestic corporations. So those are the main two issues, extraterritoriality and liability. And these issues have been explored by the Supreme Court roughly over the last twenty years in a number of salient background cases that left open two main questions. Number one, what is the focus of the ATS, and does the general corporate liability that I just mentioned fall within it? And number two, can domestic corporations be sued? These are questions that are left open but were addressed today by the Court.

 

      The first significant precedent is Sosa v. Alvarez-Machain. It’s a 2004 case. Even though the ATS is a jurisdictional statute, the Court acknowledged in Sosa that the statute allows courts to provide a cause of action for the modest number of international law violations that I previously addressed, the Blackstone three, that pose a potential for personal liability at the time of its enactment in the 18th century; basically, again, piracy, safe conduct, and rights pertaining to ambassadors. Sosa therefore was essentially a license for federal courts to develop common law liability rules to redress these purported violations of the law of nations, which is what happened in the Filártiga decision from the Second Circuit.

 

      But in Sosa, the Court warned that federal courts have to exercise great caution before allowing the ATS claims to move forward. And it therefore created a two-prong test limiting courts’ ability to create new ATS causes of action. The first test asks whether the plaintiff can demonstrate that the alleged violation of international law is a norm that is, quote, “specific, universal, and obligatory,” like the norms against piracy and safe conduct were at the end of the 18th century, for example. That’s prong one.

 

      Prong two asks if -- it assumes that if you’ve set aside prong one, would allowing specific ATS cases to proceed be a proper exercise of judicial discretion in light of other concerns like foreign affairs concerns of the province of the political branches and the separation of powers? In the roughly fifteen years since Sosa, the Court has never recognized another cause of action under the ATS, even though Sosa declined to completely close the door to further independent judicial recognition of actionable international law norms. Sosa emphasized that the door was still ajar but subject to, quote, “vigilant doorkeeping.” So that’s Sosa 2004.

 

      The Court next addresses the ATS in 2013 in the Kiobel case, Kiobel v. Royal Dutch Petroleum Co. And it was in that case that the Court expressly held that the presumption against extraterritoriality applies to claims under the ATS. In that case, because all of the relevant conduct took place outside of the U.S., the Court did not need to determine what the ATS’s specific focus was. But the Court noted that claims brought under the statute have to, quote, “touch and concern the United States with sufficient force to displace the presumption against extraterritoriality.” And the Kiobel Court expressly held that mere corporate presence is insufficient to touch and concern the United States.

 

      The next significant case, next significant precedent, is three years later in 2016, RJR Nabisco v. European Community. It’s not an ATS case; it’s a civil RICO case. But it’s significant for our analysis today because it sets forth another two-part test involving how the Court looks to analyze the extraterritoriality, or not, of the statute. Basically, the Court in RJR looks at the claim that its civil RICO plaintiffs brought and held that civil RICO plaintiffs have to allege sufficient domestic conduct as the focus of the RICO statute to displace the presumption against extraterritoriality and has to also allege and prove a domestic injury.

 

      They set forth a two-step framework for this analysis. Step one under RJR, the Court asks whether the presumption has been rebutted; that is, basically, whether Congress has given an affirmative indication that the statute applies extraterritorially. If Congress hasn’t done that, then at step two, the Court has to ask whether the case involves a domestic application of the statute by considering the statute’s focus. And to consider the focus of the statute, the Court has to look to what the statute was essentially aimed to regulate, the person whose interests, in other words, the statute seeks to protect.

 

      In our cases, in the Nestlé and Cargill consolidated cases, the litigants essentially posed the touch and concern tests and the focus test as competing analytical frameworks, but they’re not really that at all. RJR clarifies, essentially, what touch and concern means. There’s no special extraterritorial test for the ATS, which is why RJR is relevant to our analysis, even though it’s not an ATS case.

 

      The final and perhaps most significant precedent for today’s case is Jesner v. Arab Bank, a 2018 case with a number of concurring opinions and fractured holdings, but one in which five justices, Kennedy, Roberts, Thomas, Alito, and Gorsuch, agreed that foreign corporations were not subjected to ATS liability. The petitioners in that case were relatives of the victims of terrorist attacks in Israel, the West Bank, and elsewhere. And they sued a Jordanian-based bank, Arab Bank, claiming that it facilitated the terrorist acts by using its corresponding account in the United States to process dollar-denominated transactions to launder money, etc., etc.

 

      And Jesner is especially significant, as I said, because the Court declined to extend ATS liability to foreign corporations, stating that there is no specific universal and obligatory international law norm of corporate liability holding, which has obvious import for our consolidated cases.

 

      In Justice Kennedy’s plurality opinion, he stated that Congress was in a better position to consider if the public interest would be served by imposing new forms of substantive legal liability against foreign corporations. And Justice Kennedy found that the separation of powers concerns militated against creating that liability because obviously its foreign corporations are subjected to ATS jurisdiction. There are obvious U.S. foreign policy and foreign affairs consequences to that kind of decision. The Nation of Jordan in that case actually submitted a brief stating that the suit against Arab Bank was a grave affront to Jordan’s sovereignty.

 

      Jesner is also significant insofar as that Justices Kennedy, Roberts, and Thomas all agreed in a concurring opinion that all corporations, not just foreign corporations, should be exempt from ATS jurisdiction in applying the Sosa two-part test. And Justice Alito in a separate concurrence said that based on separation of powers concerns, the judiciary should not create new causes of action.

 

      So those are the precedents that animate the arguments that we heard today. Briefly, the facts involve plaintiffs and respondents today who are citizens of Mali and allege that they were, as children, trafficked by labor traffickers who sold them to cocoa farms in the country of Côte d’Ivoire, forcing them to work there. All of their injuries ended at the latest in 2001. The plaintiffs didn’t sue the labor traffickers or the farmers and instead alleged that both Nestlé USA and Cargill aided and abetted the human rights abuses that they suffered by purchasing cocoa from the farms despite knowing, or at least recklessly not knowing — they should have known, essentially — about the widespread use of child labor in those West African countries.

 

      Essentially, the petitioners, Nestlé and Cargill, state that the allegations do not amount to a domestic application of the ATS and therefore cannot be permitted under the statute. And their argument, essentially, is that the ATS’s focus is on the location of the alleged tortious conduct that violates international law and that general principles of extraterritoriality support that domestic injury requirement. They argue that the Court should, in this case, draw a bright-line domestic injury rule. And that’s particularly significant in the contest of an aiding and abetting allegations which, by their nature, must focus on the principle underlying conduct, the principle underlying the tort.

 

      Essentially, petitioners argue that there’s really no minimum context in the United States sufficient to pre-ATS jurisdiction. The only allegations that the plaintiffs make are that the companies do business in the U.S., and they have a corporate presence here and made high-level corporate decisions here, not that they knew that the specific farms from which their cocoa originated hosted child labor. The claims don’t even actually allege that cocoa was purchased from those specific farms.

 

      And we can go into the issue of the pleading issues involved in the case later. But essentially the nature of the allegations, the aiding and abetting liability that plaintiffs allege, would basically apply to any U.S. based corporation that has a supply chain with any international links, given the facts of this case, which essentially amount to nothing more than generalized corporate presence in the United States.

 

      So the first issue, extraterritoriality, the petitioners say that there’s no domestic application of the ATS because all of the tortious injury that plaintiffs allegedly suffered happened abroad. The second issue, as I said earlier, liability, is one that petitioners say should not exist under the ATS for domestic corporations. And they point to Jesner, which has strong precedent in this vein because the Court already observed in that case that there’s no specific universal norm against international corporate liability for foreign corporations. And essentially petitioners import the same separation of powers and foreign affairs policy arguments from that case to say that those arguments should apply and do apply with equal force to domestic U.S. corporations. So Jesner’s rationale applies equally to those domestic corporation.

 

      And had Congress wished to extent ATS liability to domestic corporations, it could have done so. Congress is familiar with the ATS and has actually legislated an ATS cause of action in a statute called the Torture Victim Protection Act in which Congress did not create a cause of action for corporate liability. And petitioners argue that Jesner and Congress’s action in the TVPA legislation should really be dispositive here and that creating a cause of action should be left to them.

 

      If the judiciary, on the other hand, were to create a cause of action essentially reactivating a pre-Erie style of federal common law, if they were to create a new cause of action that would impermissibly intrude on the field of foreign affairs, which is the province of the political branches, not the judiciary. The petitioners observe that were the Court to rule as they’ve asked, this wouldn’t by any means end ATS liability. It would simply require the plaintiffs to sue the actual tortfeasors, the labor traffickers and cocoa farmers in West Africa where the farms are located. That, in a nutshell, is the petitioners’ case.

 

      The respondents argue in contrast that there are obvious and clear international norms prohibiting child slavery, forced labor, and trafficking which meet the historical paradigm standard set forth in Sosa step one. Their brief is, however, pretty short on evidence to support that claim. But it was noteworthy at the oral argument today that Neal Katyal, who argued on behalf of Nestlé and Cargill, essentially conceded that child slavery was an international norm under Sosa step one. So in many ways, that issue that was briefed quite extensively, it was mooted at the oral argument today.

 

      The respondents, plaintiffs Does, also argue that the separation of powers concerns and the potential for foreign policy complications are entirely speculative under Sosa step two, and the Court needn’t worry itself about those issues because the issues that pertain to foreign corporations just simply aren’t present in the domestic context.

 

      Chief Justice Roberts actually asked both Mr. Katyal and Curtis Gannon who argued for the United States at this morning’s oral argument why it is that the Court should be concerned about those prudential matters because you’re dealing with U.S. corporations being sued in the United States for violations of international law. So the Chief Justice asked why should it be that foreign sovereigns would be troubled by a proceeding like that.

 

      And I think both the government and petitioners responded well, pointing out that essentially, if you’re allowed to sue a domestic corporation, and on the facts of this case, Nestlé USA, the wholly owned subsidiary of a Swiss parent, you still have foreign implications. And you’re essentially allowing litigants end run around Jesner, who can now say, “Well, I’m not going to sue the foreign corporation. I’ll just sue the wholly owned U.S. subsidiary.” So there’s a surrogacy issue there that is still present if litigants are allowed to sue U.S. corporations, although under Jesner they can’t sue the foreign parent.

 

      The respondents also argued that creating a forum for foreign nationals to seek redress of alleged violations of customary international law against U.S. corporations in U.S. court actually advances U.S. foreign policy, and so there is no friction there between what the political branches could do in legislating. The courts, according to respondents, have role in resolving the international disputes. And the first Congress in the early Republic realized this and, according to respondents, decided to give courts a role in the resolution of these diplomatic conflicts.

 

      The petitioners hit also on the extraterritoriality issue and the liability issues that I mentioned at the beginning of the call. As I said with respect to the extraterritoriality question and the focus of the statute, I think that the petitioners’ brief is rather thin on evidence from the time of the passage of the ATS that Congress actually intended the statute to apply to violations of customary international law by U.S. citizens anywhere in the world.

 

      The cases that we know concern Congress all involve conduct in the United States, and the cases that the Does point to don’t really refute that. There’s one case that’s mainly a piracy case, and then other cases involving slave ships or the East India Company which the plaintiffs use to argue that not only extraterritoriality was envisioned but that corporate liability was a norm at the time of the passage of the ATS, which also is, I think, a difficult argument to make on the evidence.

 

      There’s also the issue of two statutes, one of which I previously mentioned, the TVPA, the Torture Victim Protection Act, in which Congress expressly created a new cause of action under the ATS but did not allow suits against corporations. In a subsequent enactment, the Trafficking Victims Protection Reauthorization Act, the TVPRA, Congress did expressly allow for extraterritorial application of the TVPRA and did, in fact, allow suits against corporate entities under certain circumstances.

 

      And today’s oral argument was significant in this respect because petitioners essentially conceded that had the TVPRA been enacted at the time that they filed their complaint back in 2004, they would have never used the ATS in the first instance. And so I found that to be significant because at least it indicated to me an implicit admission that they’re trying to fit the square peg into the round hole through the ATS.

 

      And the admission also implicitly shows that one of the petitioners’ arguments is correct, namely that if Congress chooses through legislation to create new causes of action or statutes that allow extraterritorial application and jurisdiction over corporations, Congress knows how to do that, and can do that, and has done that with respect to the subject matter, victim trafficking and such. So I thought that was a really remarkable statement at the oral argument today. So in a nutshell, those are the briefs.

 

      I’ll just conclude with this. There’s a very telling paragraph in the one of the Doe’s briefs which I think says a lot. Essentially, they argue that as a practical matter, they don’t have the ability to sue the cocoa farmers in courts in the Côte d’Ivoire. As a practical matter, they just can’t do that. And it’s not even clear that if they could do that, that is, sue the farmers in Côte d Ivoire courts, that they could satisfy any judgement.

 

      And respondents note that the farmers have profited far less from the system of child slavery than the companies have, and that essentially only civil tort claims brought against the corporations which profit from and maintain a system of child labor exploitation offers the possibility of real compensation to the Does. And so really, there’s an admission there, I think, of an ends justifying the means argument.

 

      It’s not an appeal to the legal tests that the Supreme Court set forth in Sosa or RJR. It’s essentially saying, “Look, we have, as a practical matter, limited options in African courts, and we’re going after the U.S. corporation which has the deepest pockets and can actually satisfy a judgement here.” I thought that was a significant admission, even if it’s only an implicit admission, that there are other policy choices that the Does are asking the Court to essentially implement, ones that I think you could argue are better left to the political branches.

 

      So in a nutshell, those are the arguments. There were a number of briefs from amici, seven for petitioners Nestlé and Cargill and something like twenty for Does, raising all manner of variations on the arguments that I’ve been talking about for the last few minutes. And I’m happy to address those as well or address any questions about the oral argument that happened this morning.

 

      All the justices asked questions in theses new telephonic arguments. The Chief begins, and essentially there’s a round-robin situation in which each justice is given the floor to ask questions. And so it was a hot bench. Justice Thomas was asking questions, contrary to past practices, more frequently than he does. And so it was a very active oral argument, and a lot of these issues were explored, predictably through hypos, most frequently from Justice Breyer, as his past practice has been, I think. So it was a lively argument that explored a lot of these issues which have, as I said at the outset, real significance for how U.S. corporations with an international reach operate and will operate going forward if they’re exposed to ATS liability.

 

      So Nick, that’s all I have for my comments. I’m happy to take any questions.

 

Nick Marr:  Great. Thanks very much, David. And we’ll go to our first question now.

 

Caller 1:  Yeah. It sounded like Neal got kind of pounded by Kagan and even Thomas and even Alito on this question of slavery. In other words, either kidnapping kids, the corporation is kidnapping kids, or slavery directly. And I think Thomas even asked, “Isn’t there a norm of suing of -- corporations not being able to engage in slavery?” Do you think that the hot button issue that this is, I mean, just about the worst think you could think of, might overwhelm what seemed to be pretty lucid arguments on the intent of the statute?

 

David Rybicki:  Yeah, I noticed that. Justice Thomas’s first question out of the box was essentially is slavery different and if it’s substantively a different kind of offense under customary international law such that it would be more amenable to aiding and abetting liability. There’s been a lot of academic commentary on that issue recently. I think it was Justice Kagan mentioned one of the amicus briefs in an article written by Professor Hathaway which essentially says, “Look, there’s always been corporate liability under the law of nations. And slavery was an offense against the law of nations that was inherently promoted by corporate entities for centuries.”

 

      I don’t really think that’s going to win out because you’ve got a number of votes for the Jesner proposition that there is just no Sosa step one paradigmatic liability under international law for corporations. There’s just no specific universal obligatory norm of corporate liability. And I don’t think that it should matter that the issue is slavery. It’s obviously a very emotionally freighted issue. I don’t think it should matter at the end of the day that that’s the issue.

 

      You have those votes in Jesner. You have Justice Kavanaugh as a judge on the circuit in the Exxon case essentially saying that there’s no international norm for corporate liability. And not only that, you’re dealing with not only corporate liability in this case, you are dealing at one remove with secondary aiding and abetting liability of the original alleged corporate liability. And so I think it’s a really heavy lift to argue that there is an international law norm.

 

      You can always -- if you’re looking at child labor or whatever it may be, you can always find odds and ends, the Canadian Supreme Court said this or the Lebanon Tribunal said that, but I think with substantiation like that, it just shows that there’s no universal international norm with respect to corporate liability. And so if you take the slavery part out, I think the Court’s going to come back to that.

 

      I just have a hard time seeing how after Jesner they can say no foreign corporate liability but okay to U.S. domestic corporate liability. There’s a number of, I think, policy arguments that would just militate against the Court saying that U.S. corporations should be subjected to that kind of discriminatory conduct under the statute, especially after they’d found that foreign corporations aren’t on the hook.

 

Caller 1:  Thank you.

 

Nick Marr:  Okay, next questioner.

 

Bob Fitzpatrick:  Hi. Bob Fitzpatrick here in D.C. I’m curious as to whether this case or the politics of a new administration coming into power is going to have any influence on supply chain issues in general. I know there was that Uyghur legislation that is being heavily lobbied after the overwhelming vote in the House. And years ago, there was a big push on the garment industry after the fire in Bangladesh, which my, for whatever it’s worth, observation is doesn’t seem to go anywhere.

 

      What do you see -- I guess the question is what do you see in terms of the future impact that this sort of litigation and the political climate might have on supply chain issues for major corporations that get their garments, shoes, etc., partially overseas? Sorry for the long question.

 

David Rybicki:  It’s a fantastic question and I think one that, as you note, really has application to any U.S. corporation with a supply that reaches outside of the United States. And Justice Breyer actually, in one of his many hypos today, essentially asked your question, which was, “If I’m doing business with other countries which may use child labor, which is a practice that is pretty widespread in many parts of the world, especially in Asia and Africa, is it enough to say that I should have known about those practices? Or even if it’s alleged that the company does know but is using international agents or international suppliers, does that put the company on the hook in the event that domestic corporations can be sued under the ATS?”

 

      So I think I would be a total sea change, and I think it would be a real watershed moment if corporations had to start considering that kind of risk analysis if this case were decided in a certain way. I don’t think the case is going to come out that way, like I said, because I just don’t see the votes there after Jesner for how you can make a principal distinction between domestic corporations and foreign corporations.

 

      But the issue, even if there’s no ATS liability, is very live, as you note. Human trafficking has been one of the few things that there’s bipartisan agreement on in the Congress and one of the few things that has been able to move relatively quickly.

 

      I think the trends towards essentially kind of human rights type due diligence and supply chain management, third party risk management, auditing procurements and procurement vendor management, these are the kinds of issues that are going to -- I think they’re going to make it in various forms into legislation just like the TVPRA a few years ago and will become increasingly part of the reality of the compliance and due diligence landscape that corporations have to face in addition to a number -- myriad other issues, sanctions, export controls, FTPA, antibribery, money laundering.

 

      Human rights and supply chain compliance are, I think, already very much ensconced in that world. And if this case comes out with liability on the -- enabling liability for domestic corporations, this is just going to supercharge that trend.

 

Bob Fitzpatrick:  Thank you. Very thoughtful answer. I appreciate it.

 

David Rybicki:  Thank you.

 

Nick Marr:  David, we don’t have any questions in the queue right now, so I’ll give you a chance for any closing remarks. If we happen to get a question, we can go to it. But otherwise, we’ll close it out.

 

David Rybicki:  Great. And Nick, thanks again to you and to The Federalist Society for this opportunity. It was a lot of fun. And like I said, I think these cases are significant in a lot of ways and have potentially really important ramifications for U.S. corporations and how they operate abroad with respect to supply chains and the kind of human rights related due diligence issues that I was just talking about. So we’ll see in a few months if the Court decides to very radically expand the scope of liability under the ATS. Thanks very much.

 

Nick Marr:  Thank you. And on behalf of The Federalist Society, I want to thank you, David Rybicki, for the benefit of your valuable time and expertise today, to the audience for calling in, and thanks for your great questions. As always, we welcome your feedback by email at [email protected]. Keep an eye on your emails and our website for announcements about upcoming teleforum calls. Thank you all for joining us today. We are adjourned. 

 

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Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s Practice Groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at www.fedsoc.org.