Supreme Court Rejects Human Rights Lawsuit Against U.S. Corporations, But Leaves Door Open For Future Claims

On June 17, the U.S. Supreme Court held that U.S. corporations are not liable for alleged abuses against non-U.S. citizens in foreign countries merely because general operational decisions made in the United States contributed to the tortious overseas conduct. Nestlé USA, Inc. v. Doe I, 593 U.S. __ (2021)At the same time, however, the Court signaled that non-citizens can sue U.S. corporations for violations of international law in principle, even if questions remain about the actual scope of claims that courts may recognize going forward. Meanwhile, as U.S. consumers and investors intensify their own demands for responsible sourcing, sustainability, and transparency in global product and commodity supply chains, the Court’s decision may lead to more pressure on lawmakers, regulators, and corporate boards and officers to advance initiatives that independently address these concerns. 

Key Takeaways

  • Although U.S. corporations are subject to ATS liability in theory, the scope of the ATS has been curtailed. Domestic corporations are not liable under the Alien Tort Statute (ATS) for international law violations in their supply chain, if the only link between the alleged harms and U.S. conduct is “general corporate activity.” This means that ATS jurisdiction will not arise solely from the fact that a company’s major operational decisions are made in the United States. The Court did not identify examples of the kinds of U.S. corporate conduct that might be sufficient to support ATS claims. While the Court rejected plaintiffs’ claims in this case, five justices signaled that U.S. corporations are not immune to liability under the ATS in principle. The court did not decide whether a cause of action for “aiding and abetting of forced labor” may be brought under the ATS. 

  • There is potential for a push for supply-chain due diligence legislation. With this precedent, U.S. consumers, advocacy groups, and other stakeholders may push harder for Congress, regulators, and industry to take stronger action. In September 2001, for example, the Harkin-Engel Protocol established voluntary industry standards designed to reduce the use of child labor in cocoa production.  Although it has been extended and reaffirmed repeatedly over the last two decades, the protocol’s limited impacts have been widely acknowledged as calls for more enforceable standards have increased.  Other countries, such as the UK, Australia, France, the Netherlands, and, in this past month, Germany and Norway, have enacted anti-slavery or supply chain due diligence legislation in order to address this issue.  Additionally, the European Union is poised to introduce similar legislation at the EU-level.  As principles of racial and environmental justice draw greater levels of American consumer attention, U.S. corporations may face expanded public pressures to demonstrate that forced labor of any kind was not employed in their supply chains.

  • There may be a shift in the legal mechanisms in which similar lawsuits are filed. The plaintiffs in this case have reinitiated suit against Nestlé and Cargill under the Trafficking Victims Protection Reauthorization Act. Given the Court’s reticence to apply the ATS to modern cases, plaintiffs alleging international torts may change legal tactics when suing U.S. citizens and corporations. Other plaintiffs have utilized state consumer protection acts to bring consumer class actions against manufacturers, including Nestlé, for failing to disclose that their products were made with forced labor. As companies face increased pressure to publish on their sustainability and human rights practices, companies should carefully consider their disclosures to protect against false marketing claims.   

Background and Analysis

Longstanding concerns over the use of forced child labor and trafficking in West African cocoa production have heightened in recent years. In 2005, six individuals from Mali sued Nestlé, Cargill, and others under the ATS, alleging that, as cocoa buyers, the companies had aided and abetted their slavery in violation of international law. While the defendant U.S. corporations did not own or directly operate the Ivory Coast cocoa plantations where plaintiffs allege they were enslaved, according to the plaintiffs the corporations exercised a high degree of control over the global cocoa industry, and provided the plantations in question with technical and financial resources despite knowing (or having reason to know) that the plantations were using child slave labor.

The ATS, passed by the first U.S. Congress in 1789, provides federal courts with jurisdiction to hear claims against U.S. persons “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. The ATS does not list any torts that fall within its purview, however, leaving courts to identify the causes of action for which U.S. citizens can be held accountable under international law. In a 2013 decision, the Supreme Court held that the ATS does not apply to foreign corporations but left open the question of whether it could apply to domestic corporations. Kiobel v. Royal Dutch Petroleum Co, 569 U.S. 108 (2013).

General Corporate Activity in the United States Is Not Sufficient to Support ATS Jurisdiction

In Nestlé, the Malian plaintiffs accused Nestlé and Cargill of “aiding and abetting forced labor overseas” through interactions with farms in the Ivory Coast where the plaintiffs alleged they were enslaved. Although neither Nestlé nor Cargill owned or operated the West African farms, the U.S companies bought their cocoa and also provided the farms with technical and financial resources—such as training, fertilizer, tools, and cash—in exchange for the exclusive right to purchase cocoa.  All such activity that allegedly “aided and abetted forced labor” took place overseas. With respect to domestic conduct, plaintiffs pled generally that “every major operational decision” made by each company was made in or approved in the U.S.  The majority opinion, written by Justice Thomas, held that such broad allegations of “general corporate activity” were insufficient for the court to find ATS liability.  Citing Kiobel, the Court emphasized that the “mere corporate presence” of a defendant in the United States is not enough to support domestic application of the ATS. According to the Court, “making ‘operational decisions’ is an activity common to most corporations,” therefore this sort of allegation does “not draw a sufficient connection between the cause of action . . . and domestic conduct.” The Court left open what level of domestic conduct would be sufficient to support an ATS claim.

A Majority of Justices Agree U.S. Corporations Can Be Subject to ATS Jurisdiction

While the majority opinion did not expressly address whether domestic corporations can be sued under the ATS, five justices, including Justices Gorsuch and Alito, agreed that the ATS applies to domestic corporations in principle.

Justices Disagree on Whether Courts Can Recognize Claims Under International Law Beyond “Three Historical Torts”

The justices split on the issue of whether the Court has the power to create a new cause of action like “aiding and abetting forced labor overseas.” According to Justice Thomas, joined by Justices Gorsuch and Kavanaugh, the ATS is a jurisdictional statute that provides courts extremely limited authority to create new private rights of action. While Thomas acknowledged precedent holding that courts can recognize new ATS claims based on a “specific, universal, and obligatory” international law norm, he argued that authority is so limited there will essentially never be a basis for courts to do so beyond three historical torts: violation of safe conducts, infringement of the rights of ambassadors, and piracy.

According to Justice Sotomayor’s concurrence, joined by Justices Breyer and Kagan, the Court does have the power to create causes of action under the ATS in the future. Justice Sotomayor relied on the legislative history of the ATS to support the argument that the judiciary has the power to impose liability on those who violate international law. She emphasized that the domestic and international landscape has changed in the past two centuries, opining that “today’s torturers, slave traders, and perpetrators of genocide are . . . an enemy of all mankind” similar to “the pirates of the 18th century.” As Justices Alito, Barrett, and Roberts abstained from addressing this issue, the full Court’s opinion on this question remains unsettled.

Beveridge & Diamond’s Product Stewardship, Global Supply Chains and Corporate Sustainability practices advise companies on all aspects of sustainable supply chain and product stewardship management, including responsible sourcing, human rights due diligence and disclosure, product compliance, and reuse and recycling. We help the legal, corporate, communications, and environmental, health, & safety teams at large and small companies to identify, understand, and comply with the complex regulatory requirements impacting the hyper-competitive and evolving consumer goods market. For more information, please contact the authors.