Background on Lawsuit
In a 8-1 decision issued last week, the U.S. Supreme Court seemingly brought an end to a 15-year lawsuit brought against Nestlé and Cargill by Malian citizens who claim to have been enslaved as children on the companies’ cocoa plantations located in the Ivory Coast. Specifically, the plaintiffs alleged that Nestlé and Cargill knew the cocoa plantations used child labor, and aided and abetted the human rights abuses that they and other child laborers endured by providing financial and operational support to the plantation farmers.
The plaintiffs brought their claims under the Alien Tort Statute (ATS)—an 18th century law that allows non-U.S. citizens to file a lawsuit in federal court for torts committed in violation of international law. The lawsuit was initially filed in federal court in California, but was dismissed on grounds that the alleged injuries lacked a sufficient nexus to the U.S. because they occurred overseas, and because the only domestic conduct alleged by the plaintiffs amounted to general corporate activity. The Ninth Circuit reversed the district court’s dismissal of the lawsuit and allowed it to go forward, finding that plaintiffs sufficiently pleaded a domestic application of the ATS because Nestlé’s and Cargill’s “major operational decisions” originated in the United States. The companies then appealed to the Supreme Court, which agreed to hear the case in July 2020.
The Supreme Court’s Decision
In a brief opinion delivered by Justice Clarence Thomas, the Court explained that although the ATS does not apply extraterritorially (i.e., to conduct that occurred abroad), it may be applied in cases involving overseas conduct if the conduct relevant to the statute’s “focus” occurred in the United States. The Court noted that while the parties disagree on what conduct is actually relevant to the “focus” of the ATS, this issue is moot here because nearly all of the conduct that plaintiffs allege aided and abetted forced labor occurred abroad in the Ivory Coast. The Court further explained that while Nestlé and Cargill made financing and operational decisions in the U.S., such activity is common to most corporations and is insufficient to support a domestic application of the ATS. Eight of the nine Justices joined in this part of the opinion.
Apart from the issue of extraterritoriality, Justice Thomas (in a section of his opinion joined by Justices Gorsuch and Kavanaugh) wrote that a private right of action under the ATS has historically been reserved for three specific violations of international law: (1) violation of safe conducts; (2) infringement of the rights of ambassadors; and (3) piracy. Justice Thomas reasoned that because none of these violations were alleged or at issue in plaintiffs’ lawsuit, they do not have a private right to sue under the ATS and the Court cannot create a cause of action that would allow them to do so—a job that belongs to Congress, not the courts.
Implications of Supreme Court Decision for Corporations
The Supreme Court’s decision in the Nestlé/Cargill case is a victory for the chocolate companies. But a question that remains unanswered is whether domestic corporations like Nestlé and Cargill can be held liable under the ATS at all—the very question upon which the Court initially granted cert. to hear the case. Companies with global supply chains that rely on third party business partners should therefore continue to monitor and oversee compliance with applicable laws and regulations, including those which prohibit human rights abuses. This is especially true in light of the increasing litigation brought by activist groups against large corporations, and recent Congressional bills that broadly require companies to disclose certain Environmental, Social and Governance (ESG) metrics—two developments that signal a push to hold companies accountable for labor abuses and other violations of law committed by their supply chain partners.