Supreme Court Rejects Human Rights Lawsuit Against U.S. Corporations, But Leaves Door Open For Future Claims

• Published date: 11 October 2021
• Subject Matter: Corporate/Commercial Law, Consumer Protection, Government, Public Sector, Corporate and Company Law, Human Rights, Dodd-Frank, Consumer Protection Act
• Law Firm: Beveridge & Diamond
• Author: Lauren A. Hopkins, Megan L. Morgan, Alan J. Sachs and Elizabeth Johnson (Summer Associate)

On June 17, the U.S. Supreme Court held that U.S. corporations are not liable for alleged abuses against non-U.S. citizens in foreign countries merely because general operational decisions made in the United States contributed to the tortious overseas conduct. Nestlé USA, Inc. v. Doe I, 593 U.S. __ (2021). At the same time, however, the Court signaled that non-citizens can sue U.S. corporations for violations of international law in principle, even if questions remain about the actual scope of claims that courts may recognize going forward. Meanwhile, as U.S. consumers and investors intensify their own demands for responsible sourcing, sustainability, and transparency in global product and commodity supply chains, the Court's decision may lead to more pressure on lawmakers, regulators, and corporate boards and officers to advance initiatives that independently address these concerns.

Key Takeaways

• Although U.S. corporations are subject to ATS liability in theory, the scope of the ATS has been curtailed Domestic corporations are not liable under the Alien Tort Statute (ATS) for international law violations in their supply chain, if the only link between the alleged harms and U.S. conduct is "general corporate activity." This means that ATS jurisdiction will not arise solely from the fact that a company's major operational decisions are made in the United States. The Court did not identify examples of the kinds of U.S corporate conduct that might be sufficient to support ATS claims While the Court rejected plaintiffs' claims in this case, five justices signaled that U.S. corporations are not immune to liability under the ATS in principle. The court did not decide whether a cause of action for "aiding and abetting of forced labor" may be brought under the ATS.
• There is potential for a push for supply-chain due diligence legislation. With this precedent, U.S consumers, advocacy groups, and other stakeholders may push harder for Congress, regulators, and industry to take stronger action. In September 2001, for example, the Harkin-Engel Protocol established voluntary industry standards designed to reduce the use of child labor in cocoa production. Although it has been extended and reaffirmed repeatedly over the last two decades, the protocol's limited impacts have been widely acknowledged as calls for more enforceable standards have increased. Other countries, such as the UK, Australia, France, the Netherlands, and, in this past month Germany and Norway,...