A Federal Court of Appeals Revives a Class Action Seeking Compensation for Slavery in America

Efforts to hold corporate America accountable for slavery got an unexpected boost last week, when the U.S. Court of Appeals for the Seventh Circuit revived a massive class action litigation that had been dismissed by a federal district court in Chicago.

As I will explain, the decision, which was authored by Judge Richard Posner, is a bit of a paradox: It offers the standard conservative analysis of the slavery claims, while also introducing an extremely liberal interpretation of state consumer fraud laws.

The Initial Complaint: Focusing on Human Rights Violations

The lawsuits, which I have described in earlier columns such as this one, are modeled after the restitution suits that were brought against the German corporations that profited during the Holocaust. The basic theories of the suits is that corporations such as CSX, Aetna, and FleetBoston Bank profited from the business of slavery. The plaintiffs have emphasized that they are not seeking damages from third parties, but from the proper defendants - the ones that, they say, committed the wrongs they allege. All of the companies they are suing were, the plaintiffs claim, in existence in some form (usually that of a corporate predecessor) hundreds of years ago.

When the suits were first filed, in 2002, the plaintiffs emphasized the human rights dimension of the injuries for which they were suing. The complaints emphasized, for example, that slavery was a violation of customary international law, regardless of the fact that it may have been legal in certain states when it occurred. The point of this strategy was to exploit the legal and moral force of the Alien Tort Claims Act (ATCA), a federal law that allows individuals to sue for civil damages if they have suffered human rights violations, such as genocide, torture or forced labor. (I have also discussed the ATCA before - for example, in this previous column.)

In 2004, the federal district court in Chicago dismissed the complaint, but gave the plaintiffs leave to amend them, and re-file them. Indeed, the plaintiffs filed an amended complaint, and in it, they shifted their focus quite a bit.

The Complaint as Amended: Focusing on Property and Personal Injury Claims

As amended, the plaintiffs' complaint dropped all references to violations of human rights, and based the claim for compensation, instead, on much more conventional legal claims for property and personal injury.

The suit now stresses that the defendants consciously acted in ways that stole property from two sets of victims: First, the slaves themselves were denied the property rights they had in the value of their own labor. Second, the descendents of those slaves--who are among today's populations of African-Americans--have been denied property that they would have inherited, were it not for the theft of that property from their forbears.

The complaints also allege both intentional and negligent infliction of emotional distress and civil rights claims arising from the denial of these property rights. Finally, the complaints allege that consumers today have been defrauded, because the defendant companies have consciously chosen, over the years, not to reveal their connection to slavery. Thus, consumers who would have boycotted the companies due to their connection to slavery and failure to pay reparations, were lulled into continuing to purchase products and services from them, instead.

Why Judge Norgle Dismissed the Claims, and Why Judge Posner Partially Disagreed

The federal district judge dismissed all these claims for essentially the same reasons he dismissed the first, human-rights-violation based set of claims. Once again, invoking a well-established doctrine of federal jurisdiction. Judge Norgle found that the suits raised a "political question" that was not justiciable by the federal courts.

The "political question" doctrine is rooted in separation-of-powers concerns; it holds that there are some questions that are not for the judiciary, but for the more representative branches of our government, to decide. Thus, while it is surely open for Congress to grant reparations for the wrongs of slavery, Judge Norgle, by invoking the "political question" doctrine, said it was wrong for the courts to try to do the same.

Judge Norgle's justiciability analysis was based, in part, on his belief that the plaintiffs would never be able to establish the amounts of damages caused to each of them by the defendants' acts, even if they could prove that the defendants did, indeed, act wrongfully by participating in the slave economy before the Civil War. Put another way, though liability might be proven, Judge Norgle felt damages could not be.

Judge Posner, writing for the Seventh Circuit, endorsed Judge Norgle's justiciability analysis, and took it one step further. He also reasoned that the plaintiffs' cases had basic standing problems that made their cases impossible to adjudicate. ("Standing," another federal jurisdiction doctrine, says that not every plaintiff is the right person or entity to sue to enforce every legal right. One reason a plaintiff can be deemed improper, due to lack of standing, is because he or she has not suffered either the correct kind of injury, or any actual injury at all.)

Judge Posner reasoned as follows: The plaintiffs - living African-Americans -- were either suing on their own behalf, or on behalf of the estates of the slaves whose property was originally stolen.

If they were suing on their own behalf, it would be difficult for them to prove that they were wronged by injuries to their forebears - except insofar as their inheritances may have been lessened. But if they were really suing for their inheritances, then to possess standing, they had to be bona fide representatives of, or claimants against, the estates of the long-deceased slaves. In addition, they had to show that their right to sue for their rightful inheritances (the ones they would have received had their forebears been properly paid for their labor) or on the estates' behalf, had not grown stale, either through the operation of statutes of limitations, or that of other equitable doctrines.

At this point, Posner's decision -- which was written on behalf of a panel that also included Judges Easterbook and Manion (two other great conservatives of the Seventh Circuit) -- was entirely conservative, in the sense that many conservatives have opposed the case for slavery reparations, either as a policy matter, a legal matter, or both.

However, Posner offered a last-minute respite. Judge Norgle, he decided, was wrong to dismiss the class actions entirely. The suits, which arose from numerous jurisdictions, included claims under state consumer fraud laws, including the laws of New York, California, Illinois, New Jersey and Texas. These claims, Posner concluded, were improperly dismissed - for here, the claimants were alive and well (and current consumers), and questions of facts remained as to whether they were defrauded by the defendants' alleged failure to come clean about their alleged collaboration with slavery.

How the Consumer Fraud Claims Fit Into This Slavery Reparations Case

Readers may wonder, at this point, what consumer fraud has to do with slavery compensation litigation.

The answer is revealed by Posner's citation to an infamous 2003 California Supreme Court, Kasky v. Nike, Inc. This case is famous for the tricky issue it presented about what counts as "commercial speech," which may be entitled to lesser First Amendment protection. But it also helps illustrate how activists can turn a company's efforts at hiding its past into the basis of a bona fide mass fraud claim.

In Kasky, activists sued Nike under California's consumer fraud law, based on Nike's advertisements responding to allegations that Nike manufactured sneakers in sweatshops. The activists believed that the ads were misleading, and whitewashed the truth about Nike's conduct, and they argued that the ads constituted consumer fraud because consumers who cared about sweatshops were being deceived about the "quality" of their sneakers, no less than if Nike had, for instance, advertised leather sneakers that were really made of a synthetic substitute.

Similarly, the Chicago slavery plaintiffs were arguing that consumers who bought products from defendants including Aetna and FleetBoston would care about the companies' sordid past. However, this argument is much weaker in the slavery context than in the sweatshop context. That's because, in the slavery context, there are no specific advertisements to point to, addressing the topic of slavery, and because fraud typically requires a misrepresentation (although, sometimes, an omission that renders a statement misleading can suffice). The only statements the plaintiffs in the slavery case have pointed to, are defendants' denials that they are liable in the plaintiffs' suit.

Moreover, when fraud is predicated on an omission, there must be a duty to disclose the omitted information. Here, Posner hypothesizes that a "special duty" could be established if the plaintiffs could prove the defendants may have known that some of their customers (including African-Americans such as the plaintiffs, and perhaps many others as well) would have wanted to have known that the defendants had a background in slavery, yet omitted to tell them these facts.

However, the case law Posner cites suggests that many of the state courts that have interpreted consumer fraud statutes are not inclined to impose such a broad duty to disclose upon commercial sellers.

Even assuming these courts would, indeed, impose such a duty, it is hard to see how the plaintiffs could prove proximate cause on a class-wide basis under these state statutes. Indeed, one of the cases cited by Posner, the 2002 Illinois decision in Oliveira v. Amoco Oil Co., was decertified by the Illinois Supreme Court exactly for this reason. (In the context of consumer fraud, the concept of "proximate cause" requires a close connection between plaintiffs' claimed injuries - here, the money they spent as consumers of the defendants' products and services - and the misleading omission they cite.)

Finally, there is a huge gap between the amount of damages demanded by the plaintiffs under their main theory of liability, and the amount of damages that could possibly be awarded under the consumer fraud theory. Even if punitive damages were awarded, as they often are in consumer fraud, the total award would probably be only a fraction of the suit's original damages demand.

Of course, that last point, in itself, is not a reason to dismiss the remaining consumer fraud claims. But it does illustrate how much the theory of the suit is changed, if all that is left are the consumer fraud claims.

A Thrice-Transmogrified Suit: From Human Rights Violations, to Consumer Fraud

If the case now proceeds to trial, based on Posner's understanding of the claims that validly remain, then the suit will have been transmogrified three times. When it was first filed, it was a straightforward case about the violation of human rights. When it was filed a second time, it became a case about unpaid labor and property rightfully belonging to the estates of slaves, and the lost inheritances of their descendants. Finally, in this third iteration, the case is not about the injuries suffered by slaves, or their descendants--but by angry shoppers who feel they should have been told that they were dealing with companies who allegedly collaborated with slavery, for they then would have taken their business elsewhere.

It has always been obvious that the slavery compensation litigation has always been as much about education and politics, as about the underlying legal claims that motivated the suits. It seems to me that if the plaintiffs were to win on the legal theory left standing by Posner, then the litigation's message will be deeply estranged from its original moral and political source. In a case like this, then, victory at any price may not be worth it.