The Importance of Cargill v. Doe and Holding for Domestic Corporate Liability

November 11, 2020 by Digital Editor

By: Jennifer Couch

Cases such as Daimler AG v. Bauman and Jesner v. Arab Bank show us the devastating impact foreign corporations can have on world affairs. Instead of trying to alleviate any such impact, American courts seem content with washing their hands of corporate liability for violations of international law. At least this is what the Jesner opinion implies, with Kennedy creating an expansive, troubling rule that prohibits any liability for foreign corporate defendants under the Alien Tort Statute (ATS). The ATS gives the federal courts jurisdiction to hear lawsuits filed by non-U.S. citizens for torts committed in violation of international law. Although the Supreme Court decided to bar foreign corporate liability under the ATS, the Court lacks a definitive opinion on domestic corporate liability in private actions. The Supreme Court will decide this issue in the upcoming Cargill case, with important consequences for corporate accountability not just within the US but worldwide.

Kennedy’s Jesner rule goes against the First Congress’ intent in drafting the ATS, which was to “avoid foreign entanglements by ensuring the availability of a federal forum where the failure to provide one might cause another nation to hold the United States responsible for an injury to a foreign citizen.”[1] The Jesner rule nevertheless bars any and all foreign corporate liability. Really, not holding foreign corporate defendants liable would have dire consequences on U.S. foreign relations. In Jesner, the Court decided not to hold a prominent Jordanian corporation liable for financing and facilitated activities of organizations that committed attacks that took place in Israel, the West Bank, and the Gaza Strip. As discussed in the opinion, the uncertainty over the ultimate outcome in the case had caused significant diplomatic tensions with Jordan. The Court’s absolving of the Jordanian corporation helped to repair that diplomatic relationship.

While this reason may have made sense in Jesner, consider a hypothetical where the defendant, unlike Jordan (the defendant’s country in Jesner), is not a close U.S. ally. Instead, the offending country is one that has weak ties to America, such as Russia. If a prominent Russian corporation uses New York financial institutions to fund terrorism in Canada, one of our closest allies, the Court would face a different sort of political pressure. If a lot of Canadian citizens are murdered or hurt, Trudeau would demand answers from the U.S., the only country that has the necessary resources and capabilities to discover all the evidence for the case. The Court would be more reluctant to figuratively pat an indignant Trudeau on the back and say, “Sorry, but we are not going to rule to hold that Russian corporation liable.” If America ends up choosing this route, the decision will cause its own set of foreign entanglements, the exact outcome the First Congress meant to avoid when they drafted the ATS, because foreign governments will take issue with the lack of accountability for American corporations’ violations of international law. The U.S. would be seen abroad as a safe haven for some of the most insidious corporations. A different set of facts involving a more sympathetic defendant would have led to a completely different kind of political pressure on the Court.

To prevent further damages to foreign relations, the Supreme Court should enforce domestic corporate liability in the current pending Cargill Inc. v. Doe I case. One ramification of rejecting domestic corporate liability is many more corporations will start to use child labor outside the U.S., and the U.S. will become a safe haven for some of the most insidious corporations. This would amount to a violation of international human rights standards. Additionally, ethical corporations will be penalized by more expensive labor within the U.S., leading to more expensive domestically produced products. The result is that ethical corporations will be less competitive in the market. At this point, the U.S. would be creating all the incentives for corporations to use child labor in third world countries, because it would not hold any corporation liable under the ATS. Lastly, other foreign nations may look to the U.S. as an advocate of cheap labor, and be emboldened to use it as well, creating more demand for child slavery around the world.

Instead of creating this troubling scenario, the U.S. should follow in the steps of foreign nations who already established domestic corporate liability in their jurisdictions. Sotomayor’s dissent in Jesner cited that more than 40 countries that provide corporate criminal liability, and countries such as England, France, the Netherlands, and Canada have provisions creating corporate civil liability for international law violations. For example, Sotomayor described how the U.K. “took it as axiomatic that litigants could invoke the ATS for claims against U.S. corporations in connection with their foreign operation.” These four nations, that have the laws most analogous to the U.S., will expect us to similarly hold domestic corporations accountable.

In light of all the foreign affair consequences that will occur if the Supreme Court bars domestic corporate liability under the ATS, the Court should enforce this liability in the upcoming Cargill case. The facts of the Cargill demonstrate the real-world actions at stake. The case describes the horrific conditions under which children are forced to pick cocoa beans. The foreign image of the U.S. will suffer greatly if the Court in Cargill decides against greater corporate liability as it did in Jesner.  To avoid this undesirable outcome, and to prevent overturning and negating the purpose of the ATS, the Court should side with the Cargill respondents on domestic corporate liability.

[1] Sosa v. Alvarez-Machain, 542 U. S. 692, 714 (2004).

Jennifer was born in Busan, South Korea, but came to the United States at ten months old. After moving from California, to Washington, to Texas, her family finally settled to New York when she was three years old. Jennifer studied political science and psychology at the City College of New York, and then worked as an immigration paralegal for two years. Currently, she is interested in doing transactional work. She is involved in APALSA, RISE, and Business Law Scholars. In her free time, she likes to bake and practice yoga.