Jesner v. Arab Bank

Issues 

Can foreign plaintiffs sue corporations in the United States under the Alien Tort Statute?

Oral argument: 
October 11, 2017

Under the Alien Tort Statute (“ATS”), foreign victims of torts that violate international law may sue foreign perpetrators in United States courts if the case touches and concerns the United States. The Court must now determine whether the ATS contemplates suits against foreign corporations. Jesner et al.––survivors of terrorist attacks in the Middle East and the families of such victims––allege that Arab Bank (“the Bank”), headquartered in Jordan, financed terrorist organizations through its New York branch, and should therefore be within the purview of the ATS. The Bank denies these allegations, and maintains that, because corporate liability is not a universal international norm, United States courts do not have jurisdiction over foreign corporations under the ATS. Jesner argues that denying corporate liability will eliminate a significant deterrent against terrorism financing and create international discord, while the Bank counters that corporate liability would actually hinder counterterrorism efforts and damage the United States’ alliance with Jordan. 

Questions as Framed for the Court by the Parties 

Whether the Alien Tort Statute, 28 U.S.C. § 1350, categorically forecloses corporate liability.

Facts 

Petitioners, Joseph Jesner, et al. (“Jesner”), are non-residents of the United States who were injured by terrorists in the Middle East. In re Arab Bank, PLC Alien Tort Statute Litigation, 808 F.3d 144, 147 (2d Cir. 2015 ). Respondent, Arab Bank, PLC (the “Bank”), is a global bank headquartered in Jordan, with a branch in New York. Id. Between 2004 and 2010, Jesner filed five lawsuits in the U.S. District Court for the Eastern District of New York against the Bank for financing and aiding the activities of the terrorist groups and individuals that caused Jesner’s injuries. Id. at 146–47. The district court consolidated these lawsuits with six other related suits. Id. at 150-51.

In the consolidated lawsuit, Jesner alleged that four terrorist organizations conducted multiple attacks that caused Jesner’s injuries. Id. at 149. Jesner claimed that these organizations facilitated the alleged attacks by paying the relatives of the terrorist operatives who conducted the attacks. Id. Jesner additionally stated that the funding for these payments came from bank accounts and deposits, and that the Bank, with the use of its New York branch, knowingly and intentionally helped the terrorist organizations garner the necessary funds to support the attacks. Id. at 150. Based on these facts, Jesner argued that the Bank violated the law of nations, and that the Bank is thus liable under the Anti-Terrorism Act (“ATA”), 18 U.S.C. § 2333(a), and the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350. Id. at 147. The district court severed Jesner’s ATA and ATS claims and, in 2014, a jury found the Bank liable under the ATA for providing financial support to terrorist organizations with the use of its New York branch. See Brief for Petitioners, Joseph Jesner et al. at 10.

The ATS provides that “[t]he district courts shall have original jurisdiction of any civil action 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. In May of 2013, the Bank moved to dismiss Jesner’s claims under the ATS, arguing that the Second Circuit had previously held that the ATS prohibits suits against corporations. In re Arab Bank, PLC at 148. Although the Supreme Court has never decided whether the ATS allows lawsuits against corporations, the district court dismissed Jesner’s claim based on the Bank’s argument and in reliance on the Second Circuit’s decision in Kiobel v. Royal Dutch Petroleum Co. (“Kiobel I”), aff’d on other grounds, Kiobel v. Royal Dutch Petroleum Co. (“Kiobel II”). Id.

Jesner appealed the ATS claims to the Second Circuit, arguing that the court’s decision in Kiobel II altered the application of Kiobel I. Id. Though the Second Circuit acknowledged that Kiobel II may suggest that the ATS could allow for corporate liability, it ultimately affirmed the district court’s decision and upheld its prior decision that the ATS prohibits corporate liability, regardless of the type of harm or its connection to the United States. Brief for Petitioners at 3. Jesner now appeals the Second Circuit’s decision. Id. at 15.

Analysis 

DOES THE TEXT, HISTORY, AND PURPOSE OF THE ATS SUPPORT CORPORATE LIABILITY?

Jesner contends that the ATS’s text, history and purpose show that it allows for corporate liability. Brief for Petitioners, Joseph Jesner et al. at 17. Jesner first argues that the Court should look to the statute’s text to determine its application, as the Court has done to inform other merits questions under the ATS, such as its extraterritorial application. Reply Brief for Petitioners, Joseph Jesner et al. at 3–4. Jesner maintains that the word “tort” in the ATS’s text includes the rule that corporations may be held liable for their agents’ acts. Brief for Petitioners at 18. Because of this, Jesner asserts that the Court should presume that statutes providing for tort liability, including the ATS, include corporate liability, absent contrary language. Id. at 19. In addition, Jesner argues that there is a presumption that Congress acts purposely in creating statutory language, and that this presumption applies to the fact that the ATS limits the types of plaintiffs allowed but does not limit the types of defendants. Id. at 20–21. Jesner asserts that in similar statutes where Congress has specified a type of plaintiff but not a type of defendant, courts presume that Congress intended to allow both individual and corporate liability. Id. Finally, Jesner argues that Congress’ purpose in enacting the ATS was to impose liability for tortious violations of the law of nations, and that nothing in the ATS’s history indicates that Congress did not intend to include corporate liability. Id. at 22.

In response, the Bank argues that because the ATS is a jurisdictional statute, the Court should not look solely to the ATS’s text to determine if corporate liability is allowed. See Brief for Respondent, Arab Bank, PLC at 18–19. To support its argument, the Bank points to the Court’s decision in Sosa v. Alvarez-Machain et al. (“Sosa”), in which the Court stated that the ATS is a jurisdictional statute that creates no new causes of action, and that consequently any plaintiff bringing a case under the ATS must identify an external source for the cause of action. Id. at 20. The Bank maintains that Congress enacted the ATS to include only select tort claims grounded in the rights between nations or states, including “violations of safe conducts, infringement of rights of ambassadors, and piracy.” Id. at 19. The Bank further argues that an additional statute, the Torture Victim Protection Act (“TVPA”), also shows that Congress intended to bar corporate defendants from all causes of action under the ATS, as the TVPA is the sole congressional statute explicitly providing a cause of action under the ATS, and is limited to individual defendants. Id. at 33–35.

HOW SHOULD SOSA’S TWO-STEP FRAMEWORK BE APPLIED TO THE ATS?

Jesner argues that Sosa’s two-step framework for determining whether a cause of action exists under the ATS does not preclude corporate liability under the statute. Brief for Petitioners at 26–27. Under Sosa’s first step, a plaintiff must identify a “specific, universal, and obligatory” international norm which is comparable to the original set of tort claims which the ATS was enacted to address. See Reply Brief for Petitioners at 2. Jesner maintains that the Second Circuit misinterpreted the footnote accompanying this step as requiring a plaintiff suing a corporation to identify a norm of corporate liability for the international law violated. Brief for Petitioners at 28. Jesner counters that the footnote does not require plaintiffs to identify a norm of corporate liability, but rather requires plaintiffs to ensure that the international law violated does not only apply to state actors, but also allows for individuals and corporations to be held liable. Id. at 28–30. Jesner further contends that because most international norms identify the prohibited wrongs but not the necessary type of wrongdoer, any actor who violates the norm can be held liable for a violation, absent indication to the contrary. Id. at 30–31.

Jesner also argues that once a plaintiff has identified an appropriate norm for Sosa’s first step, Kiobel II gives the Court the power to use common-law discretion to define a cause of action under the ATS. Id. at 26–27. Jesner looks to state common law, comparable legislation, and international law as guideposts for the Court’s exercise of this discretion, and argues that none of the guideposts mandate that the Court depart from the presumption of corporate liability for tortious conduct when considering claims under the ATS. Reply Brief for Petitioners at 10–12. Jesner instead asserts that most state common law recognizes corporate liability because there would be no possible redress for the torts of employees if the corporation were not held liable. Brief for Petitioners at 35–36. Jesner further contends that comparable legislation most often permits corporate liability. Id. at 37. In fact, Jesner asserts that the Court has only refused to recognize corporate liability for comparable legislation when: 1) the Court was evaluating a judicially inferred right of action, for which there was no recorded statute, e.g., in Bivens v. Six Unknown Named Agents (“Bivens”); and 2) the recorded statute at issue expressly limited liability to individuals, e.g., the TVPA. Id. at 37–42. In addition, Jesner argues that corporations are subject to liability worldwide under most nations’ domestic tort doctrines which inform the general principles of international law, under many international treaties that require parties to pass laws establishing corporate liability for illegal actions, and in a growing number of international tribunals that hold corporations criminally accountable for violating the law of nations. Id. at 42–44, 46.

The Bank, in response to Jesner’s first Sosa argument, states that international law norms primarily address relations between nations, and that while there are international law norms that attach to individuals, none impose duties on corporations. Brief for Respondent at 23. The Bank argues that Sosa mandates that plaintiffs identify a “specific, universal, and obligatory norm” of corporate liability under international law, and that there is nothing resembling this type of norm for corporations. Id. at 18, 22. Further, the Bank asserts that there is also no universal agreement on what constitutes terrorism, nor is there a universal norm against terrorism or terrorism financing. Id. at 5657. The Bank argues that because Congress has not enacted a statute allowing for corporate liability under the ATS, for this case to proceed, the Court would need to infer a new cause of action. Id. at 33. The Bank further contends that even if an international norm of corporate liability existed, such inferences are disfavored and should not be adopted here. See id. at 37.

In response to Jesner’s argument about Sosa’s second step, the Bank emphasizes the importance of the presumption against judicially created private rights of action. See id. at 22. In evaluating the aforementioned guideposts identified by Jesner, the Bank argues that comparable legislation and international law demonstrate that liability under the ATS should not be extended to corporations. See id. at 22–24. The Bank asserts that because the legislation most analogous to this issue is the TVPA, which limits liability to individuals, it is illogical to impute to Congress an intention to expand liability simply because corporate liability is the norm for violations of domestic law. Id. at 36. The Bank also argues that this issue is analogous to cases like Bivens, in which the Courts declined to infer a cause of action because there was no equivalent legislation. Id. at 32, 37–38. The Bank asserts that although international treaties create obligations on states to create and implement corporate regulations in their domestic law, those treaties do not impose obligations on the corporations themselves. Id. at 30. Finally, the Bank contends that though some international tribunals have imposed criminal accountability on corporations, there is nothing to show any consensus about civil liability for corporations under international law. Id. at 24–27.

SHOULD THE COURT DECIDE THE CASE ON ALTERNATIVE GROUNDS?

Jesner argues that the Court should refrain from considering the Bank’s arguments beyond corporate liability, and should remand those arguments to the lower courts. See Reply Brief for Petitioners at 18. Because the district court dismissed Jesner’s ATS claims solely on the ground that the ATS bars corporate liability, and because the Second Circuit affirmed the decision on that basis, Jesner maintains that corporate liability is the only ground on which the Court can rule. Id. Jesner also asserts that if the Court holds that the ATS permits corporate liability, the Court should remand for consideration of any of the Bank’s other arguments for dismissal. Id.

The Bank, in contrast, argues that if the Court does not affirm the Second Circuit’s judgment on corporate liability grounds, it can affirm the judgment on the ground that the case does not sufficiently “touch and concern” the United States. See Brief for Respondent at 51–52. The Bank contends that the demonstration of such contacts is necessary to overcome the presumption against application of the ATS beyond the United States’ borders, as is outlined by Kiobel II. See id. The Bank further argues that the ATS is not explicitly extraterritorial, and therefore can only be applied domestically if the pertinent actions occurred in the United States. Id. at 53. The Bank argues that in this case, as in Kiobel II, all conduct relevant to the ATS took place outside of the United States, and that the plaintiffs and defendants were all foreign to the United States. Id. at 51–52. The Bank argues that both elements that produce a tort—a wrongful action and a resulting injury—occurred abroad. Id. at 54.

Discussion 

WOULD CORPORATE LIABILITY FOR TERRORISM FINANCING BE AN EFFECTIVE DETERRENT?

According to Jesner, often the only way to deter terrorism financing is through corporate liability. Reply Brief for Petitioners, Joseph Jesner et al. at 7–8. In their brief in support of Jesner, U.S. Senators Sheldon Whitehouse and Lindsey Graham contend that money is necessary for terrorist organizations to operate because their ability to compensate the families of terrorist operatives, such as suicide bombers, is a powerful incentive for recruitment. Brief of Amici Curiae United States Senators Sheldon Whitehouse and Lindsey Graham (“U.S. Senators”), in Support of Petitioner at 12. Consequently, the Senators reason that controlling the terrorist organizations’ funding would severely impede their ability to recruit and retain members.  Id. at 11–12. Because corporations play a significant role in terrorist financing, the Senators argue that holding corporations beyond the courts’ reach and limiting liability to natural persons would create holes in the counterterrorism efforts of the United States. Id. at 15. As former U.S. counterterrorism and national security officials argue, in support of Jesner, such a distinction would effectively make a sizeable portion of the terrorist financing network immune from the law, as terrorists could simply incorporate themselves to avoid liability. Brief of Amici Curiae Former U.S. Counterterrorism and National Security Officials (“Counterterrorism Officials”), in Support of Petitioner at 24–25. Furthermore, these officials specifically state that civil liability is an especially effective deterrent. Id. at 21. In support of this argument, the officials contend that not only can plaintiffs more easily prevail than in criminal suits–––for instance, there is a lower burden of proof and no requirement for a unanimous jury–––but civil suits’ potential for high damages would further deter corporations from engaging in terrorism financing. Id. at 21–22.

Conversely, in support of the Bank, the Union of Arab Banks (“Union”) argues that extending ATS liability to corporations would hinder counterterrorism efforts. Brief of Amicus Curiae Union of Arab Banks, in Support of Respondent at 17. First, the Union argues that this policy would force terrorism financing underground, rather than eliminate it. Id. at 14–15. Second, the Union states that the banks would need to limit their activities, and possibly disconnect from the Middle East entirely, to avoid the risk of corporate liability. Id. at 15, 19. Consequently, the Union contends that because bank regulations and independent efforts help combat terrorism, by establishing corporate liability, the international community would lose a valuable partner in the fight against terrorism. Id. at 17. Moreover, the Institute of International Bankers (“the Institute”) argues in support of the Bank that imposing corporate liability puts a heavy burden on banks to monitor for any possible connection to foreign terrorism. Brief of Amicus Curiae Institute of International Bankers, in Support of Respondent at 24. Because banks are already intensely regulated, the Institute asserts that adding even more restrictions would be both onerous and redundant. See id. at 25.

WHAT WOULD BE THE IMPACT OF CORPORATE LIABILITY ON FOREIGN POLICY AND INTERNATIONAL RELATIONS?

In support of Jesner, Senators Whitehouse and Graham maintain that United States counterterrorism strategies and foreign policy broadly depend on reciprocity. Brief of U.S. Senators at 20. Former United States counterterrorism and national security officials agree, elaborating that corporate immunity in the United States could result in other nations limiting their attempts to combat terrorism financing. Brief of Counterterrorism Officials at 31. Additionally, financial regulation scholars and former government officials argue that the interconnectedness of the global market makes international cooperation necessary to combat terrorism financing successfully. Brief of Amici Curiae Financial Regulation Scholars and Former Government Officials, in Support of Petitioner at 13. Ultimately, according to Jesner, eliminating corporate liability could create international conflict and undercut counterterrorism efforts. Brief for Petitioners, Joseph Jesner et al. at 25.

The Bank and its supporters disagree. In support of the Bank, former state department officials contend that allowing corporate liability in this context would offend Jordan’s sovereignty and consequently damage the United States’ relationship with this important ally. Brief of Amici Curiae Former State Department Officials (“State Officials”), in Support of Respondent at 17. The Kingdom of Jordan agrees, writing in support of the Bank that Jordan nationals should be held accountable in Jordan and that extending United States jurisdiction here would unjustifiably interfere with Jordan’s right to regulate its own businesses and citizens. Brief of Amicus Curiae Hashemite Kingdom of Jordan (“Jordan”), in Support of Respondent at 6. Furthermore, Jordan argues, applying United States corporate liability to a Jordanian business would hurt Jordan’s economy. Id. at 7. The Bank explains that it is the largest financial institution in the Palestinian territories, and, as it is a crucial stabilizing force, any sanctions against it would have a dramatic impact on both Jordan and the regional economy. Brief for Respondent, Arab Bank, PLC at 4–5, 51. Jordan asserts that it has collaborated with the United States on counterterrorism efforts and other issues in the Middle East, but that this lawsuit undermines its alliance with the United States. Brief of Jordan at 9. The Bank states that Congress intended the ATS to help “avoid[] diplomatic friction,” but that holding corporations liable under this statute would instead exacerbate international discord. Brief for Respondent at 4.

HOW WOULD CORPORATE LIABILITY AFFECT CORPORATIONS?

According to Earthrights International (“Earthrights”), in support of Jesner, corporate personhood is a tenet of United States law, and, as such, corporations have constitutional rights, including the right to sue and be sued. Brief of Amicus Curiae Earthrights International, in Support of Petitioner at 21. Corporate liability, Earthrights continues, is necessary for an equitable tort system, as the corporate form protects shareholders from liability. Id. at 25–27.  However, if the corporation itself also cannot be sued, then corporations would essentially be immune from lawsuits, even for egregious human rights violations. Id. Earthrights states that, in seeking to curb corporate ATS liability, Arab Bank attempts to avoid the responsibilities of corporate personhood while enjoying its benefits. Id. at 26.

In a brief supporting neither party, the Chamber of Commerce of the United States of America and other organizations counter that corporate ATS liability is unfair to foreign corporations. Brief of Amici Curiae Chamber of Commerce of the United States of America et al., in Support of Neither Party at 29. The Chamber of Commerce argues that such lawsuits inflict serious injuries on businesses, with consequent reputational harms driving down the corporation’s stock price and costing even an innocent corporation millions in litigation expenses. Id. at 29–30. Allowing corporate liability, the Chamber of Commerce contends, encourages greedy plaintiffs to bring meritless cases against hapless foreign corporations with strong financial resources in order to force settlements. Id.

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