Corporate Social Responsibility and the Alien Tort Statute: Supreme Court Bound

Corporate social responsibility is a much discussed topic within the world of corporate governance.  With companies having to profit maximize, the argument for engaging in socially beneficial behavior is often a hard one to make.  To the extent that socially responsible behavior results in profit maximization (doing more to avert global warming might increase the number of customers who buy the company's products), management has an incentive to engage in the behavior.  But many who give serious thought to the area view profit maximization as too cramped a basis for encouraging corporate social responsibility.

There is one law, however, that potentially encourages corporate social responsibility, whether or not consonant with profit maximization.  The Alien Tort Statute allows suits to be brought in US courts for violations "of the law of nations or a treaty of the United States.” 28 U.S.C. § 1350.  The statute has sometimes been used against US companies for allegedly aiding and abetting human rights violations by foreign governments.

The right to bring these cases against corporations has been controversial.  In general, the cases do not involve actual human rights violations by the corporations.  Instead, the arguments are usually that the corporation somehow supported or promoted the violations through various forms of assistance.  While courts have accepted that claims for aiding and abetting can be brought under the ATS, they have generally been restrictive on the types of behavior that might qualify under this standard.  Nonetheless, there has been some legal tension in this area. 

Last year, however, the Second Circuit rendered an extraordinary decision.  It held that there was no support under international law for bringing actions against corporations.  See Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010).  As a result, corporations, even if they engaged in direct violations of human rights, could not be sued under the ATS. 

Well, it turns out that not all courts agree with that position.  In John Doe v. Exxon Mobil Corp., 09-7125, July 8, 2011, the DC Circuit, in a 2-1 decision, held that corporations could in fact be sued.  There is always a possibility that the decision will be reversed by the court en banc.  But if that does not occur, the Supreme Court will likely take the case.  It is a serious split among the circuits.  Moreover, the dissent was written by Judge Kavanaugh, who's views are taken seriously by the conservative majority.  Finally, it is another opportunity, much like Morrison, for the conservative majority to potentially cut back on the use of US courts by foreign nationals, despite the existence of a statute that expressly provides the authority.