Panic at the Chamber of Commerce
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Panic at the Chamber of Commerce

February 2012

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The Tort Heard Round the World February 2012

Just behind the White House at the grand headquarters of the U.S. Chamber of Commerce, Chevron's struggle in Ecuador has been met with alarm. The chamber's Institute for Legal Reform has made the growing threat of transnational litigation a centerpiece of its work, issuing reports on the subject and highlighting recent cases at its annual summit.

The October 2011 event featured two separate panels on the issue - one called, with some candor, "Trends We Don't Want To Continue." It's no accident that the overheated rhetoric at these panels echoed public statements by Chevron's lawyers at Gibson, Dunn & Crutcher. A chamber report titled "Confronting the New Breed of Transnational Litigation: Abusive Foreign Judgments" was written by William E. Thomson, a partner in Gibson Dunn's Los Angeles office.

The chamber is especially concerned about suits brought in U.S. courts under the Alien Tort Statute (ATS) (28 U.S.C. § 1350), a law enacted in 1789 and used subsequently by U.S. plaintiffs attorneys in alleging human rights violations by multinationals in their overseas operations. "This is a statute that has been absolutely perverted, where a district court has become a world court," says Lisa Blatt, a prominent Supreme Court advocate and a partner at Arnold & Porter in Washington, D.C.

A 2010 report to the chamber written by Jonathan C. Drimmer - an ATS authority who was then at Steptoe & Johnson - estimated that about 150 such cases had recently been filed against corporations. The defendants come from all industries, ranging from financial services to transportation. The plaintiffs, typically, are jointly represented by class action firms and human rights groups, including EarthRights International in Washington, D.C., and the Center for Constitutional Rights in New York. Many of these lawsuits have been dismissed, but some have gone to trial, with occasional wins for the plaintiffs. Other cases have settled.

Last fall alien torts issues took on added urgency when the U.S. Supreme Court agreed to hear a case this term on the question of whether corporations can be held liable under the statute (Kiobel v. Royal Dutch Shell Petroleum Co., pending as No. 10-1491). The 2002 suit, filed by Nigerian plaintiffs in New York federal court, concerns allegations that Shell Oil and its related companies aided and abetted the Nigerian government in violating the plaintiffs' human rights.

In 2010, the Second Circuit U.S. Court of Appeals threw out Kiobel, ruling 21 that the plaintiffs could not sue Shell under the ATS, citing precedents suggesting that customary international law does not recognize corporate liability (Kiobel, 621 F.3d 111 (2d Cir. 2010)).

Other appellate courts have seen the issue differently. The D.C. Circuit held last summer that a lawsuit accusing Exxon Mobil of human rights abuses in Indonesia could proceed in federal court (Doe v. Exxon Mobil Corp., 654 F.3d 11 (D.C. Cir. 2011)). And in October, an en banc panel of the Ninth Circuit reached a similar conclusion in a case concerning mining operations in Papua New Guinea (Sarei v. Rio Tinto PLC, 2011 WL 5041927 (9th Cir.)).

Oral arguments in Kiobel will take place this winter, and the Supreme Court is expected to rule by June. But lawyers on both sides agree that even a ruling favorable to corporate defendants won't stem the increase in transnational litigation.

"An adverse ruling would certainly affect the contours of litigation," says Paul L. Hoffman, counsel for the plaintiffs in Kiobel and a partner at Venice-based Schonbrun DeSimone Seplow Harris Hoffman & Harrison. "But I don't think it would stop such litigation, either in U.S. courts or in foreign courts. Lawsuits will continue in some other form as long as the abuses continue."

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