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The Second Circuit's Stunning Reversal, in Two Suits Involving the Alien Tort Claims Act: Part One in a Two-Part Series on the Decision


Tuesday, Oct. 23, 2007

Earlier this month, the U.S. Court of Appeals for the Second Circuit issued a decision that represents a stunning reversal in two of the most important tort suits concerning the violation of human rights ever to be filed in an American court.

Both Khulumani v. Barclay National Bank and Ntsebeza v. Daimler Chrysler Corp. involved class actions filed on behalf of all persons who lived under the apartheid system in South Africa. The defendants were approximately 50 international corporations and banks, and the damages sought were estimated at approximately $400 billion.

In this column, Part One in a two-part series, I will analyze the Second Circuit's decision to allow the suits to be heard by the district court, and I will argue that the "victory" the plaintiffs won has much less to it than meets the eye.

The Alien Tort Claims Act, and the Theory Behind the Two Lawsuits

I first discussed these suits in two prior columns that appeared in 2002, on July 15 and July 29. The theory behind the class actions was that corporations such as Barclay Bank, J.P. Morgan and Ford, by doing business with the apartheid-era South African government, "aided and abetted" the violation of human rights and therefore were liable under the Alien Tort Claims Act (ATCA).

Under the ATCA, jurisdiction in a U.S. federal court exists when an alien sues alleging a tort committed in violation of the law of nations or of a treaty of the United States. The tort does not necessarily have to be committed "under color of law"--that is, it need not be committed under government auspices, according to prevailing federal circuit law.

Rather, some crimes against humanity--including war crimes, torture, and slave trading-- have independent force, and individuals may be liable for them under the ATCA regardless of whether they were acting in concert with an oppressor state. (Others do not have independent force, according to relevant precedent, and thus cannot form the basis of an ATCA suit unless the "under color of law" requirement is satisfied).

The Reason U.S. District Judge Sprizzo Had Dismissed the Suit

U.S. District Judge John Sprizzo, of the U.S. District Court for the Southern District of New York, dismissed the cases on several grounds, as follows:

First, Judge Sprizzo held that the suits should be dismissed on the grounds that they raised a "political question." (The political question doctrine establishes a well-recognized exception to federal jurisdiction.) In so holding, Judge Sprizzo noted that the U.S. State Department had filed a "Letter of Interest" stating that the litigation would interfere with the government's ability to conduct foreign policy.

The story of how the State Department came to write that Letter of Interest is very interesting. In many other ATCA cases, the government of the country where the human rights violations took place stays away from the litigation because it is complicit in the crimes themselves. In sharp contrast, in these cases, the current South African government --which is, of course, comprised in part of victims of apartheid--took an active and surprising role in the litigation. For a variety of complex reasons, it argued vigorously against the suits, claiming that the question of corporate responsibility for apartheid had been fully addressed internally through the nonlegal mechanism of South Africa's Truth and Reconciliation Commission. Thus, the current South African government strongly demanded that our government put an end to the suits.

Second, Judge Sprizzo held that "aiding and abetting" human rights violations was not itself a crime against humanity and thus could not be the basis for jurisdiction under the ATCA. In doing so, Judge Sprizzo relied heavily on ideas that have been developed in the context of federal securities litigation.

More specifically, in its 1994 decision in Central Bank of Denver v. First Interstate Bank of Denver, the U.S. Supreme Court held that, absent explicit Congressional direction, the federal courts should not infer that a federal securities fraud statute implies a cause of action for aiding and abetting securities fraud, when no such cause of action is expressly described in the statute. Following the views of many conservative critics of the ATCA, Judge Sprizzo held that the Central Bank principle ought to apply in the context of human rights, as well.

The Second Circuit's Decision: A Complex Split on the Three-Judge Panel

The Second Circuit, 2-1, reversed Judge Sprizzo with regard to his dismissal of the ATCA claims. The opinion is 146 pages long; more than half consists of a powerful dissent by District Court Judge Korman, sitting by designation on the panel.

Interestingly, the two judges in the majority--Judges Katzmann and Hall--give widely divergent reasons for their votes. In this column, I will focus only on what I believe to be the key points of disagreement and agreement among the three judges; other arguments are beyond the column's scope.

Importantly, Judges Katzmann and Hall, the judges in the majority, disagreed over a major issue upon which Judges Katzmann and Korman, the dissenter, agreed. The issue has to do with the ATCA's test for aiding and abetting.

Even if the ATCA establishes liability for aiding and abetting at least some limited set of human rights violations, the question still remains how to establish that liability. There are two choices, one drawn from international human rights law, and one from federal common law.

Even If the ATCA Permits Aiding and Abetting Liability, How Can It Be Established?

The test based in international human rights law is set out in the Rome Statute of the International Criminal Court: One is guilty of aiding and abetting a crime if one renders aid to someone who commits a crime, and does so "[f]or the purpose of facilitating the commission of such a crime."

Judge Korman and Judge Katzmann agree that the Rome Statute should apply. Since they constitute a majority of the panel, that is the standard Judge Sprizzo must apply on remand.

In contrast, the common law test is less demanding (and thus, more pro-plaintiff). On the Second Circuit panel, Judge Hall was the only judge who endorsed this test. He quoted the Restatement (Second) of Torts ยง876(b), which provides that one is liable for aiding and abetting the tortious conduct of another "if he . . . knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other."

Did Two Second Circuit Judges Give the Plaintiffs a Pyrrhic Victory?

As Judge Korman slyly noted in his dissent, when Judge Sprizzo, on remand, applies the Rome Statute, it is very likely plaintiffs will not meet its comparatively demanding standard. Thus, the Second Circuit panel may have handed plaintiffs a paper victory, one that will not stand up on remand. Still, the remand does keep the case alive, providing a possible setting for a settlement.

None of the pleadings so far indicates that it was the purpose of Barclay's Bank or Ford to facilitate the violation of human rights by promoting the apartheid system. Instead, the most the plaintiffs have so far alleged, is that the corporate defendants were substantially certain that their efforts to sell products to the South African government would, in fact, have the effect of causing apartheid to survive. But substantial certainty, while good enough for the Restatement test, is not good enough for the Rome Statute's test.

If other courts follow the Second Circuit panel majority in applying the Rome Statue, the real losers may be the human rights lawyers who were hoping to expand the use of the ATCA against corporations. If the Rome Statute test for aiding and abetting is broadly adopted, few ATCA cases involving corporations may clear the summary judgment and go on to trial.

In my next column, I'll consider which side of the debate over the ATCA "aiding and abetting" test is the correct one: Which test does the ATCA actually contain, and which should it contain to fulfill its purpose?

Professor Sebok notes that readers interested in the issues raised in the South African ATCA case may also be interested in Brooklyn Law School's one-day conference entitled "Corporate Liability for Grave Breaches of International Law" on Friday, November 16, 2007, co-sponsored by The Dennis J. Block Center for the Study of International Business Law and the Brooklyn Journal of International Law, for which CLE credit is offered. - Ed.

Anthony J. Sebok, a FindLaw columnist, is a Professor at Benjamin N. Cardozo School of Law in New York City. His other columns on tort issues may be found in the archive of his columns on this site.

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