2011 International Law Update, Volume 17, Number 3 (July - September)

2011 International Law Update, Volume 17, Number 3 (July - September)

Legal Analyses published by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com. 

ALIEN TORT STATUTE

District of Columbia Circuit finds that claims under Alien Tort Statute can be asserted against corporations while claims under Torture Victims Protection Act can only be asserted against natural person

Defendant, Exxon Mobile Corporation entered into a contract with the Indonesian government to employ members of its military to serve as security for Exxon’s natural gas facility in Aceh. The military had committed human rights abuses in the past. Despite Exxon’s knowledge of this, it employed the military, though performance of the security contract would lead to human rights violations by Indonesian soldiers against the residents of Aceh. The abuses that occurred included genocide, extrajudicial killing, torture, crimes against humanity, sexual violence and kidnapping.

The Plaintiffs are fifteen Indonesian villagers from the Aceh territory. Some of the Plaintiffs filed claims under the Alien Tort Statute (“ATS”) and the Torture Victim Protection Act (“TVPA”). The Plaintiffs claim that decisions made by Exxon in the United States and at its Aceh plant caused grave violations of the law of nations. Though the acts were actually committed by the Indonesian military, their actions could be attributed to Exxon because they were committed by a unit dedicated only to Exxon’s Aceh facility.

In 2001, Exxon moved to dismiss the complaint. After receiving advisement from the Office of the Legal Adviser of the Department of State, the district court dismissed the Plaintiffs statutory claims under the ATS and TVPA. Plaintiffs now appeal.

The United States Court of Appeals for the District of Columbia Circuit reverses in part and affirms in part. First, the Court addresses the Plaintiffs claims under the ATS. The Plaintiffs assert a claim of aiding and abetting under the ATS. The Court notes that it has been well established in case law that the ATS allows for an aiding and abetting claim. “Ample authority supports the conclusion that the First Congress considered aiding and abetting itself to be a violation of the law of nations. All three branches of government had addressed the subject and were in accord.” 654 F.3d 29. “These authorities and sources confirm that aiding and abetting liability is clearly established in the law of nations and consequently such liability is available under the ATS.” 654 F.3d 32.

Moreover, the Court addresses the issue of extraterritoriality, which has not yet been decided by a circuit court of appeals. However, the Court notes that the actual issue is whether common law causes of action that federal court recognize in ATS lawsuits may extend to harm to aliens occurring in foreign countries.

Dissenters state that they “would dismiss plaintiffs’ ATS claims because the ATS does not apply to claims against corporations. In cases such as this where no U.S. treaty is involved, claims under the ATS are defined and limited by customary international law, and customary international law does not extend liability to corporations.” 654 F.3d 81.

By analyzing the history of the Act, the Court finds that “two modern developments convince us that it is entirely appropriate to permit appellants to proceed with their aiding and abetting claims even though much of the conduct relating to the international law violations alleged in their complaint occurred in Indonesia. First, modern ATS litigation has primarily focused on atrocities committed in foreign countries, and Congress in enacting the TVPA expressly endorsed federal courts’ exercise of jurisdiction over such lawsuits. . . . Second, although the United States argued in [Sosa v. Alvarez–Machain, 542 U.S. 692 (2004)] that the ATS in no way applies to alleged torts, such as the one at issue in Sosa—arbitrary detention, that occur outside of the United States, no Justice indicated agreement with the United States’ position” 654 F.3d 26 (internal citations omitted).

Dissenters stated that they “would dismiss the ATS claims because the torts alleged here occurred in Indonesia and the ATS does not extend to conduct that occurred in foreign lands.” 654 F.3d 74.

However, due to Congress’s ratification of ATS lawsuits that involved foreign conduct and the Supreme Courts’ failure to disapprove of the lawsuits, the Court concludes that extraterritoriality does not prevent the Plaintiffs from seeking relief for the aiding and abetting claims against Exxon.

With regard to the intent required to prove aiding and abetting liability under the ATS, the Court holds that knowledge that these acts assist the commission of the offense is the appropriate mens rea and the actus reus consists of practical assistance, encouragement, or moral support which has a substantial effect on the perpetration of the crime. To determine this, the Court finds that “customary international law” is established by the International Criminal Tribunals of Yugoslavia and Rwanda.

Though Exxon attempts to argue corporate immunity, the Court holds that corporate immunity would be inconsistent with the text of the ATS. “The law of the United States has been uniform since its founding that corporations can be held liable for the torts committed by their agents. . . . Given that the law of every jurisdiction in the United States and of every civilized nation, and the law of numerous international treaties, provide that corporations are responsible for their torts, it would create a bizarre anomaly to immunize corporations from liability for the conduct of their agents in lawsuits brought for shockingly egregious violations of universally recognized principles of international law.” 654 F.3d 57 (internal citation omitted).

Furthermore, regarding the claims asserted under the TVPA, the Court holds that the language of the statute indicates that it was not intended to apply to corporations. The statute uses the word “individual” instead of “person,” which has been long held to include corporations; the same is not true of the word “individual.” The Plaintiffs attempt to argue that an aiding and abetting claim may be asserted against Exxon under TVPA; however, the Court disagrees. “[T]here is no basis in the statutory text for permitting vicarious corporate liability. The authorities that appellants cite, indicating that Congress can provide for aiding and abetting liability absent direct liability, do not support the inference that Congress so provided in the TVPA. Appellants point to no other provision in the TVPA that colorably provides for such liability. Even assuming arguendo that aiding and abetting liability is available under the TVPA, the court’s precedent would limit such liability to natural persons.” 654 F.3d 58. Therefore, the TVPA claim must be dismissed.

Citation: Doe VIII v. Exxon Mobil Corp., 654 F.3d 11 (D.C. Cir. 2011).

ANTITRUST

Seventh Circuit reverses the district court’s denial of a motion to dismiss a complaint alleging anticompetitive activities occurring outside the United States pursuant to the Foreign Trade Antitrust Improvements Act

Two groups of plaintiffs filed class action suits against a number of defendants. Group one includes individuals who purchased potash in the United States directly from the defendants. The second group includes individuals who purchased potash products indirectly from the defendants. The Defendants are seven companies whose principal mining operations are located in Canada, Russia, and Belarus. They include Agrium Inc., Potash Corporation of Saskatchewan Inc. (“PCS”), The Mosaic Company, JSC Uralkali, JSC Silvinit, JSC Belarusian Potash Company (“BPC”), and JSC International Potash Company (“IPC”). Agrium, PCS, and Mosaic operate potash mines in the Canadian province of Saskatchewan. These three companies own Canpotex Ltd., a Canadian corporation that is named as a coconspirator but not as a defendant. Canpotex is a joint export marketing and distribution company tasked with coordinating the offshore sales of the potash supply of each of its three stakeholders.

The complaint alleges that the Defendants accounted for about 71% of the world’s potash supply. From 2003 to 2008, potash prices in the United States increased by 600% for no apparent reason. The Plaintiffs allege that the prices increased because the Defendants jointly agreed to restrict output and increase prices of potash. The potash industry is an oligopoly made up of high market concentration. The Plaintiffs also allege that the industry is marked by a high degree of cooperation, which provides the defendants with opportunities to conspire and share information, particularly for the three Defendants involved with Canpotex. All of the anticompetitive activity alleged in the complaint is said to have occurred outside of the United States. The Defendants moved to dismiss the Sherman Act claim for lack of subject matter jurisdiction under the Foreign Trade Antitrust Improvements Act (“FTAIA”). The district court denied the motion and the Defendants appeal.

The United States Court of Appeals for the Seventh Circuit reverses the district court’s decision and dismisses this suit pursuant to the FTAIA. The Sherman looks to determine whether the challenged anticompetitive conduct stems from an independent decision or from an agreement, tacit or express. The Court finds that the FTAIA limits the applicability of the Sherman Act. The Sherman Act does not regulate the competitive conditions of other nations’ economies. It can reach outside the borders of the United States, but only when the conduct has an effect on American commerce. However, the FTAIA makes it clear that the Sherman Act does not prevent American exporters from entering into business arrangements as long as it only adversely affects foreign markets.

The Court applies the FTAIA’s requirements to the Plaintiff’s complaint, finding that it bars this suit. “The flaw in the district court’s reasoning is that it essentially conflates the ‘import commerce’ exception and the “direct effects” exception. If foreign anticompetitive conduct can ‘involve’ U.S. import commerce even if it is directed entirely at markets overseas, then the ‘direct effects’ exception is effectively rendered meaningless. Under the district court’s reading of the statute, a foreign company that does any import business in the United States would violate the Sherman Act whenever it entered into a joint‑selling arrangement overseas regardless of its impact on the American market. This would produce the very interference with foreign economic activity that the FTAIA seeks to prevent.” 657 F.3d 660‑61.

“The import‑commerce exception captures foreign anticompetitive conduct (thus bringing it back within the Sherman Act’s reach) if the overseas anticompetitive conduct actually ‘involves’ the U.S. import market. The direct‑effects exception captures foreign anticompetitive conduct that has a direct, substantial, and reasonably foreseeable effect on U.S. domestic or import commerce regardless of whether the overseas anticompetitive conduct actually ‘involves’ the U.S. import market.” “ Contrary to what the district court seemed to think, it is not enough that the defendants are engaged in the U.S. import market, though that may be relevant to the analysis. Rather, the import trade or commerce exception requires that the defendants’ foreign anticompetitive conduct target U.S. import goods or services.” 657 F.3d 661 (internal citation omitted).

The Court states that the complaint offers very little information concerning the relationship between the Defendants’ alleged overseas anticompetitive conduct and the American domestic market for potash. “The problem with these generalized allegations is the absence of specific factual content to support the asserted proposition that prices in China, India, and Brazil serve as a benchmark for prices in the United States and that this benchmark, if it exists, has a strong enough relationship with the domestic potash market to raise a plausible inference that the defendants’ foreign anticompetitive conduct has a direct, substantial, and reasonably foreseeable effect on domestic or import commerce. That is, the complaint only generally alludes to a link between the cartelized prices in these three foreign markets and American potash prices.” 657 F.3d 662.

These general allegations are not enough to permit an inference that the increase in potash prices in another country due to the Defendants’ anticompetitive behavior had anything to do with the increased prices in the United States. The Court states that without something more, the Plaintiffs’ complaint fails to satisfy the direct and substantial effect test of the FTAIA. The complaint relied too heavily on chain‑of‑events allegations that the Court finds to be too cryptic and unreliable. Therefore, the Court holds that the complaint does not contain sufficient factual content to plead a plausible direct, substantial, and reasonably foreseeable connection between the alleged foreign anticompetitive activity and the domestic potash market.

Citation: Minn–chem v. Agrium Inc., 657 F.3d 650 (7th Cir. 2011).

ARBITRATION ENFORCEMENT

Eleventh Circuit affirms a motion to compel arbitration based on the New York Convention, so long as the agreement concerns subject matter capable of settlement by arbitration

Plaintiff Harold Leonel Pineda Lindo, a citizen and resident of Nicaragua, began employment with NCL Ltd., a Bermudan corporation with its principal place of business in Miami, Florida. In December 2008, Lindo claims that he injured his back while on board one of NCL’s vessels while acting within the scope of his employment, later requiring surgery for his injury. Lindo’s employment contract with NCL was governed by a collective bargaining agreement. The contract also states that all personal injury and Jones Act claims would be resolved by binding arbitration pursuant to the United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards. The contract stated that the place of arbitration would be the place of the employee’s citizenship, unless arbitration is unavailable under the Convention in that country, in which case it shall take place in Nassau, Bahamas. The choice of law would be that of the flag state of the vessel (Bahamas).

Lindo challenged having arbitration, arguing that the claim would arise under Bahamian negligence law, not the Jones Act. Lindo then filed a lawsuit in Florida state court. NCL moved to compel arbitration and removal to federal court. Lindo amended his complaint to allege a single count of Jones Act negligence. The district court granted NCL’s motion to compel arbitration and dismissed Lindo’s amended complaint. Lindo appealed.

The United States Court of Appeals for the Eleventh Circuit affirmed the district court's order to compel arbitration of Lindo’s Jones Act negligence claim. The Court began by evaluating the New York Convention. This Convention recognizes written arbitration agreements concerning subject matter capable of settlement by arbitration. Both Nicaragua and the Bahamas are signatories to the Convention. Both parties agree that the Convention applies to Lindo’s contract.

After reviewing the Convention and Supreme Court and circuit court precedent, the Court concludes that the district court properly enforced Lindo’s arbitration agreement and rules that the Jones Act claims must be arbitrated in a foreign forum (Nicaragua) under Bahamian law. The Court notes that there is a strong presumption in favor of freely negotiated contractual choice of law and forum selection provisions. The presumption applies greatly with regard to international commerce. “Indeed, the Convention provides that contracting states ‘shall recognize’ written agreements wherein parties agree to submit any and all disputes to settlement by arbitration. New York Convention, art. II(1). This Circuit has stated, in agreement with other circuits, that ‘a court conducts a very limited inquiry’ when ‘deciding a motion to compel arbitration under the Convention Act.’ Bautista v. Star Cruises, 396 F.3d 1294 (11th Cir. 2005) (quotation marks omitted).” 652 F.3d 1275.

Next, the Court evaluates whether a null‑and‑void defense would apply to the arbitration agreement, thereby making it inoperable. “In Bautista, this Court held that an arbitration agreement is null and void under Article II(3) of the Convention only where it is obtained through those limited situations, ‘such as fraud, mistake, duress, and waiver,’ constituting ‘standard breach‑of‑contract defenses’ that ‘can be applied neutrally on an international scale.’ 396 F.3d at 1302 (quotation marks omitted). Lindo’s Contract incorporates a union‑negotiated CBA, and there is no claim—much less any showing—of fraud, mistake, duress, or waiver. To the extent Lindo relies on Article II, his claim fails.” 652 F.3d 1276.

“Lindo argued that the arbitration provision is unconscionable, maintaining that he signed the Contract on a “take‑it‑or‑leave‑the‑ship” basis. However, this was the same argument asserted by the plaintiff seamen in Bautista. . . . This Court expressly rejected that argument, concluding that an unconscionability defense was not available under Article II of the Convention.” 652 F.3d 1276.

Another defense to arbitration enforcement is one based the public policy of the United States under Article V of the Convention. The Court states that this defense does not apply because Article V only applies at the arbitral award‑enforcement stage, not at the arbitration‑enforcement stage at issue here. “Article V expressly provides, ‘Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that ... [t]he recognition or enforcement of the award would be contrary to the public policy of that country.’ New York Convention, art. V(2) (emphasis added). Yet, Article V has no application in the interlocutory procedural posture of this case, where NCL seeks to enforce arbitration at the outset of the dispute.” 652 F.3d 1280.

Lastly, the Court denies Lindo’s arguments against the enforcement of the arbitration agreement, stating that “Lindo’s challenge to his arbitration agreement fails because (1) Bahamian law itself recognizes negligence actions; and (2) even if, as Lindo claims, U.S. law under the Jones Act has a more relaxed causation standard for negligence claims than Bahamian law, these were precisely the same arguments lodged (and rejected [by this Court]) in [Lipcon v. Underwriters at Lloyd’s, London, 148 F.3d 1285 (11th Cir.1998)].” 652 F.3d 1283.

In Lipcon, the Court held “that the choice‑of‑law and forum‑selection clauses were enforceable and ordered the matter to be heard in English courts under English law, since we will declare unenforceable choice clauses only when the remedies available in the chosen forum are so inadequate that enforcement would be fundamentally unfair.” 652 F.3d 1283 (internal citation omitted).

“In Lindo’s case, the arbitration clause, if anything, is fundamentally fair for several reasons. For starters, the clause is part of a union‑negotiated collective bargaining agreement. The fact that the Jones Act claim was expressly referenced in that CBA is clear indication that this type of claim was expressly considered during the negotiation process. Lindo cannot obtain the advantages of his union‑negotiated Contract, while rejecting what he now perceives as its disadvantages. This union‑negotiated agreement is enforceable and valid even if it waives Lindo’s U.S. statutory claim under the Jones Act.” 652 F.3d 1284.

“Lastly, Lindo’s position would effectively eviscerate the mutually binding nature of the Convention. Lindo maintains that his arbitration agreement is void as against public policy because he cannot assert his U.S. statutory rights under Bahamian law. By this logic, courts in other nations could likewise refuse to recognize valid, mutually agreed‑upon arbitration provisions if they contemplated the application of American law, in derogation of home‑based statutory remedies. Yet if every country refused to recognize arbitration agreements that contemplate the application of foreign law, the multilateral commitment of the Convention would be defeated.” 652 F.3d 1284.

Citation: Lindo v. NCL (Bahamas), 652 F.3d 1257 (11th Cir. 2011).

CORPORATE LIABILITY

Seventh Circuit affirms a grant of summary judgment, finding that corporations may be held liable under the Alien Tort Statute, but plaintiffs must create a triable issue of whether the defendant violated customary international law

Twenty‑three Liberian children filed suit against Firestone Natural Rubber Company for violation of international child labor laws under the Alien Tort Statute (“ATS”). Firestone operates an 118,000‑acre rubber plantation in Liberia through a subsidiary. The Plaintiffs charged Firestone with utilizing hazardous child labor on the plantation in violation of customary international law. The district court granted summary judgment in favor of Firestone and other defendants, but the Plaintiffs have appealed the judgment.

The United States Court of Appeals for the Seventh Circuit affirms the district court’s decision. The Court considers two issues: whether a corporation can be liable under the ATS, and if so, whether the evidence presented by the Plaintiffs created a triable issue to determine if the Defendant violated customary international law. The Court first determines “what is customary international law?” This question presents two problems for the Court: a problem of notice and a problem of legitimacy. The Court finds that these problems had not been adequately addressed by the seminal Supreme Court case of Sosa v. Alvarez‑Machain, 542 U.S. 692 (2004). Instead, the Court states that the precedent set a mood of caution.

Turning to the issue of corporate liability under the ATS, the Court states that Sosa left the issue open for interpretation. In analyzing previous case law in other federal courts, the Court finds that a corporation had not been held liable for violating customary international law. “We have to consider why corporations have rarely been prosecuted criminally or civilly for violating customary international law; maybe there’s a compelling reason. But it seems not; it seems rather that the paucity of cases reflects a desire to keep liability, whether personal or institutional, for such violations within tight bounds by confining it to abhorrent conduct—the kind of conduct that invites criminal sanctions.” [Slip op. 8]

The Court states that it is difficult to find a corporation criminally responsible (particularly because it cannot be imprisoned) or civilly responsible (because some business activity that society wishes to deter does not inflict a monetizable harm). However, corporate tort liability is common all around the world. The Court uses a hypothetically to rationalize the application of the ATS to corporations:

“If a corporation has used slave labor at the direction of its board of directors, then whether the board members should be prosecuted as criminal violators of customary international law—or also or instead be forced to pay damages, compensatory and perhaps punitive as well, to the slave laborers—or, again also or instead, whether the corporation should be prosecuted criminally and/or subjected to tort liability—all these would be remedial questions for the tribunal, in this case our federal judiciary, to answer in light of its experience with particular remedies and its immersion in the nation’s legal culture, rather than questions the answers to which could be found in customary international law.” [Slip op. 12]

The Court then looks to the purpose of strict liability in the United States, which is used to encourage corporations to deter its employees from committing torts. “The theory attenuates when the employees include local residents of Third World countries, such as the Liberian rubber farmers employed on Firestone’s plantation. American corporations that have branches in backward or disordered countries may be incapable of preventing abuses of workers in those countries.” [Slip op. 14] However, the Court determines that corporations can be held liable under the ATS, after analyzing several federal court decisions.

Next, the Court addresses whether Firestone’s treatment as alleged by the Plaintiffs violated any customary international law, which includes the questions of what is the applicable customary international law and did the working conditions violate it. The Court evaluates the United Nations Convention on the Rights of the Child, the International Labour Organizations Minimum Age Convention, and the International Labour Organization Worst Forms of Child Labour Convention to determine the customary international law. Adopting the law of the third convention, the Court mentions that the worst form of child labor is work, which, by its nature or the circumstances in which it is carried out, is likely to harm the health, safety, or morals of children. Though the definition was vague, the convention includes several recommendations that clarify it and creates an international legal norm. The Court finds that though the working conditions at the Firestone plantation are bad, the Plaintiffs failed to present any evidence that would create a triable issue of whether the conditions are “that bad.”

Furthermore, Firestone does not employ children directly. Instead, the Plaintiffs argue that the laborers’ quotas are too high for them to complete on their own and this creates an incentive for them to employ their children for help. Therefore, the Court finds that the Plaintiffs are challenging the quotas and the Court must determine whether they violate customary international law. However, the Plaintiffs have not provided enough evidence to make this determination. Therefore, the Court affirmed the district courts grant of summary judgment in favor of Firestone.

Citation: Flomo v. Firestone Natural Rubber Co. LLC, 643 F.3d 1013 (7th Cir. 2011).

FAILURE TO STATE A CLAIM

Eleventh Circuit reversed the district court’s partial denial of a motion to dismiss claims that fail to assert a claim of relief under the Alien Tort Statute against the former President and Defense Secretary of Bolivia

Plaintiffs are relatives of Bolivian citizens killed in 2003 during a time of civil unrest and political upheaval. During this time, military and police forces were confronted by large numbers of protestors who were upset by the swift change in government. The protestors began blockades that obstructed major highways and prevented travelers from moving throughout the country. The protestors also threatened access to gas and water in the capital of Bolivia, La Paz. After two or so months, the police and military were able to restore order, but many people were killed an injured during the process. The President, Gonzalo Daniel Sánchez de Lozada Sánchez Bustamante, and defense secretary, José Carlos Sánchez Berzaín, then resigned and left the country.

The Plaintiffs, who are Bolivian citizens and residents, filed suit against the Defendants under the Alien Tort Statute (“ATS”) in the federal district court, asserting violations of international law by committing extrajudicial killings, perpetrating crimes against humanity, and violating rights of life, liberty, security of person, and freedom of assembly and association. Though the Plaintiffs do not allege that the Defendants actually committed the killings or injured anyone, they do believe that the Defendants are to be held personally responsible for the acts of the military and police.

The Defendants moved to dismiss by asserting that the complaint raised a political question, they were immune from the suit under common law and the Foreign Sovereign Immunities Act, and the Plaintiffs failed to state a claim under the ATS, or Florida and Maryland law. The district court granted in part and denied in part the motion. The Defendants now seek an appeal of the political question issue and the failure to state a claim issue.

The United States Court of Appeals for the Eleventh Circuit reverses and remands, concluding that the Plaintiffs failed to state a plausible claim for relief against the Defendants under the ATS. First, the Court looks to the applicability of the ATS in a context such as this. “The ATS is no license for judicial innovation. Just the opposite, the federal courts must act as vigilant doorkeepers and exercise great caution when deciding either to recognize new causes of action under the ATS or to broaden existing causes of action.” 654 F.3d 1152. With regard to violations of international law, the Court states that the specific offense must be based on present day and widely accepted interpretations of international law. Therefore, high levels of generality will not suffice. “To determine whether the applicable international law is sufficiently definite, we look to the context of the case before us and ask whether established international law had already defined defendants’ conduct as wrongful in that specific context.” 654 F.3d 1152.

“We do not look at these ATS cases from a moral perspective, but from a legal one. We do not decide what constitutes desirable government practices. We know and worry about the foreign policy implications of civil actions in federal courts against the leaders (even the former ones) of nations. And we accept that we must exercise particular caution when considering a claim that a former head of state acted unlawfully in governing his country’s own citizens.” 654 F.3d 1152.

Since the Court notes that the Supreme Court instructs federal courts to exercise extreme caution when deciding ATS claims, the Court then proceeds to determine the requirements for properly stating a claim for relief under the ATS. There are three requirements: the plaintiff must be an alien, must be suing for a tort, and the tort must have been committed in violation of the law of nations. In order to avoid dismissal, the complaint must contain sufficient factual matter that states a claim to relief that is plausible on its face. The Court notes that stating the claim requires pleading factual content that allows the court to draw a reasonable inference that the defendant is liable for the misconduct alleged; however, when a complaint pleads facts that are merely consistent with a defendant’s liability, then it stops short of the line between possibility and plausibility of entitlement to relief.

By following this reasoning, the Court then goes on to identify conclusory allegations in the Complaint, since they are not entitled to an assumption of truth. The Court determines that the Plaintiffs base their claims on several conclusory allegations similar to ones the Supreme Court ruled to be insufficient in Ashcroft v. Iqbal, 556 U.S. 662 (2009). The Court then considers the factual allegations made in the Complaint to determine whether they plausibly establish entitlement to relief.

“Plaintiffs allege no facts showing that the deaths in this case met the minimal requirement for extrajudicial killing—that is, that plaintiffs’ decedents’ deaths were “deliberate” in the sense of being undertaken with studied consideration and purpose. On the contrary: even reading the well‑pleaded allegations of fact in the Complaint in plaintiffs’ favor, each of the plaintiffs’ decedents’ deaths could plausibly have been the result of precipitate shootings during an ongoing civil uprising.” 654 F.3d 1155. “Plaintiffs have not pleaded facts sufficient to show that anyone—especially these defendants, in their capacity as high‑level officials—committed extrajudicial killings within the meaning of established international law.” 654 F.3d 1155.

“Nevertheless, especially given the mass demonstrations, as well as the threat to the capital city and to public safety, we cannot conclude that the scale of this loss of life and of these injuries is sufficiently widespread—or that wrongs were sufficiently systematic, as opposed to isolated events (even if a series of them)—to amount definitely to a crime against humanity under already established international law.” 654 F.3d 1156.

“Allowing plaintiffs’ claims to go forward would substantially broaden, in fact, the kinds of circumstances from which claims may properly be brought under the ATS. As we understand the established international law that can give rise to federal jurisdiction under the ATS, crimes against humanity exhibit especially wicked conduct that is carried out in an extensive, organized, and deliberate way, and that is plainly unjustified. It is this kind of hateful conduct that might make someone a common enemy of all mankind. But given international law as it is now established, the conduct described in the bare factual allegations of the Complaint is not sufficient to be a crime against humanity under the ATS.” 654 F.3d 1156.

The Court finds that the Plaintiffs alleged facts that give rise to the possibility that the Defendants acted unlawfully, but it is not enough for a plausible claim. Therefore, the Court holds that the Complaint does not state a plausible claim that the Defendants violated international law and the claims must be dismissed.

Citation: Mamani v. Berzain, 654 F.3d 1148 (11th Cir. 2011).

FIRST SALE DOCTRINE

Second Circuit affirms the district court’s holding that the first sale doctrine does not apply to copies of publications manufactured outside of the United States

Plaintiff John Wiley & Sons, a publisher of academic, scientific, and educational journals and books, sells its publications domestically and internationally. For sales in foreign countries, the Plaintiff uses its subsidiary John Wiley & Sons (Asia) Pte Ltd. The written content is generally similar in the books intended for domestic markets and in the books intended for international markets, though the design and package may differ. The foreign editions are demarcated with a symbol signifying that the book may only be sold a specific country or geographic region. The Defendant Supap Kirtsaeng moved to the United States from Thailand in 1997 to attend Cornell University. He later moved to California to pursue a doctoral degree.

Allegedly, between 2007 and 2008, Kirtsaeng’s friends and family shipped the Defendant foreign editions of textbooks printed abroad by Wiley Asia. Kirtsaeng then sold these books on eBay.com He would then repay his family and friends for the cost of acquiring and shipping the books and keep the profits for himself as he subsidized his education. On September 8, 2008, Wiley filed suit against Kirtsaeng in the United States District Court of the Southern District of New York claiming copyright infringement. Kirtsaeng attempted to assert a defense of the first sale doctrine, but the district court prohibited him from doing so and rejected the applicability of the doctrine to foreign editions of textbooks not manufactured pursuant to U.S. Copyright Act. Kirtsaeng was found liable for copyright infringement and then appealed, claiming that the district court erred in holding that the first sale doctrine was not an available defense.

 The United States Court of Appeals for the Second Circuit affirms the district court’s holding that the first sale doctrine does not apply to foreign books or copies manufactured outside of the United States. This claim is a matter of first impression for this Court. The Court begins by interpreting the first sale doctrine, which states that the owner of a lawfully acquired copy of a work may sell or otherwise dispose of the copy without the authority of the copyright owner. However, § 602(a) of the Copyright Act gives copyright holders broad control over the circumstance in which their copyrighted work may be imported into the United States. The Court cited a recent Supreme Court opinion in Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir.2008), that states that the first sale doctrine does not apply to items manufactured outside of the United States unless they were previously imported and sold in the United States with the copyright holder’s permission.

The Court then begins is statutory interpretation of the first sale doctrine by using a textual analysis of the phrase “lawfully made under this title.” The Court focuses on the words “made” and “under.” However, it finds that the relevant text is simply unclear. “[L]awfully made under this title” could plausibly be interpreted to mean any number of things, including: (1) “manufactured in the United States,” (2) “any work made that is subject to protection under this title,” or (3) “lawfully made under this title had this title been applicable.” 654 F.3d 220.

Since the textual analysis did not prove particularly helpful, the Court then decides to adopt an interpretation that best comports with the § 602(a) and the Supreme Court decision in Quality King Distributors, Inc. v. L’anza Research International, Inc., 523 U.S. 135 (1998). By analyzing both, the Court concluded that the best interpretation of § 109(a) is where it only applies to copies manufactured domestically. “In adopting this view, we are comforted by the fact that our interpretation of § 109(a) is one that the Justices appear to have had in mind when deciding Quality King. There, the Court reasoned, admittedly in dicta, that § 602(a)(1) had a broader scope than § 109(a) because, at least in part, § 602(a)(1) applies to a category of copies that are neither piratical nor lawfully made under this title. That category encompasses copies that were lawfully made not under the United States Copyright Act, but instead, under the law of some other country.” 654 F.3d 221 (internal citation omitted).

“Applying these principles to the facts of this case, we conclude that the District Court correctly decided that Kirtsaeng could not avail himself of the first sale doctrine codified by § 109(a) since all the books in question were manufactured outside of the United States. In sum, we hold that the phrase ‘lawfully made under this Title’ in § 109(a) refers specifically and exclusively to copies that are made in territories in which the Copyright Act is law, and not to foreign‑manufactured works. . . . We freely acknowledge that this is a particularly difficult question of statutory construction in light of the ambiguous language of § 109(a), but our holding is supported by the structure of Title 17 as well as the Supreme Court’s opinion in Quality King.” 654 F.3d 222.        

Citation: John Wiley & Sons Inc. v. Kirtsaeng, 654 F.3d 210 (2d Cir. 2011).

FOREIGN NONCOMMERCIAL ACTIVITY

Third Circuit affirms the constitutionality of a conviction and sentence given for noncommercial illicit sexual conduct committed in Germany under the § 2423(c) of the Prosecutorial Remedies and Other Tools to End the Exploitation of Children Today Act

Thomas Pendleton, United States citizen, boarded a plane from New York to Hamburg, Germany. Six months later, he sexually molested a fifteen‑year‑old boy. Pendleton was arrested and convicted of engaging in sexual acts with a person incapable of resisting. After serving nineteen months in a German prison, Pendleton returned to the United States, where he was arrested and indicted for engaging in noncommercial illicit sexual conduct in a foreign place in violation of § 2423(c) of the Prosecutorial Remedies and Other Tools to End the Exploitation of Children Today Act (the PROTECT Act). Pendleton moved to dismiss the indictment, challenging Congress’ authority to regulate noncommercial activity outside of the United States under the Foreign Commerce Clause. The district court denied his motion, holding that § 2423(c) was a valid exercise of Congress’ power to regulate channels of foreign commerce.

After a two‑day jury trial, Pendleton was convicted of engaging in illicit sexual conduct in Germany in violation of § 2423(c), and was sentenced to thirty years in prison. Pendleton appealed the district court’s judgment of sentence and seeks reversal because the noncommercial prong of § 2423(c) is facially unconstitutional.

The United States Court of Appeals for the Third Circuit affirmed the district court’s finding. This matter is one of first impression for this Court. The Court notes that when evaluating whether a statute is facially unconstitutional, a court must find that no set of circumstances exists under which the Act would be valid, i.e., that the law is unconstitutional in all of its applications. By looking to both the Interstate Commerce Clause and the Foreign Commerce Clause, the Court finds that Congress has the authority to keep the channels of interstate commerce free from immoral and injurious uses. “Unlike Congressional authority to regulate activities affecting interstate commerce under the third category in Lopez, Congress’s authority to regulate the channels of commerce is not confined to regulations with an economic purpose or impact.” 658 F.3d 308.

“Just as [Sex Offender Registration and Notification Act (“SORNA”)]’s ‘failure to report’ provision was intended to prevent convicted sex offenders from ‘us[ing] the channels of interstate commerce in evading a State’s reach,’ Carr v. United States, 130 S. Ct. 2229, 2238 (2010), Congress enacted § 2423(c) to close ‘significant loopholes in the law that persons who travel to foreign countries seeking sex with children are currently using to their advantage in order to avoid prosecution,’ H.R. Rep. No. 107–525, at 3 (summarizing the purpose of adopting language similar to § 2423(c) in the Sex Tourism Prohibition Improvement Act).” 658 F.3d 310. Specifically, Congress found that American citizens were using the channels of foreign commerce to travel to other countries where poverty and lax enforcement would allow them to commit crimes of child sexual abuse without prosecution.

“Section 2423(c) was enacted to close the enforcement gap and to send a message to those who go to foreign countries to exploit children that no one can abuse a child with impunity. Thus, as it did with SORNA, Congress enacted § 2423(c) to regulate persons who use the channels of commerce to circumvent local laws that criminalize child abuse and molestation. And just as Congress may cast a wide net to stop sex offenders from traveling in interstate commerce to evade state registration requirements, so too may it attempt to prevent sex tourists from using the channels of foreign commerce to abuse children.” 658 F.3d 311.

Therefore, since the jurisdictional element in § 2423(c) has an explicit connection to the channels of foreign commerce, the Court holds that it is a valid exercise of Congress’ power under the Foreign Commerce Clause.

Citation: U.S. v. Pendleton, 658 F.3d 299 (3d Cir. 2011).

FOREIGN SOVEREIGN IMMUNITY

Second Circuit affirms the dismissal of a petition seeking the turnover of China’s assets held within the United States due to the immunity granted by the Foreign Sovereign Immunity Act

On November 11, 1990, thirteen‑year‑old Kale Ryan Walters was killed on a hunting trip when his Chinese‑manufactured rifle malfunctioned and discharged. In 1993, Kale’s parents sued China and entities controlled by the sovereign in the United States District Court for the Western District of Missouri for products liability, negligence, and breach of warranty. After being served, China claimed sovereign immunity and entered no appearance. The district court, determining that it had jurisdiction over China under the Foreign Sovereign Immunity Act (“FSIA”), entered a default judgment against China in the amount of $10 million.

The Walters spent ten years attempting to collect the judgment. They were unable to obtain an order of attachment and execution because they could not identify any property belonging to China that fell within one of the FSIA exceptions. The Walters even attempted to execute the judgment against two Chinese giant pandas on loan to the National Zoo in Washington, D.C. In 2006, the District of Missouri extended the judgment for another ten years. In 2009, the Walters then registered their judgment in the United States District Court for the Southern District of New York. They served New York branches of China’s banks, forbidding the transfer of any of China’s assets held by the Banks outside of the United States, and demanding documents relating to such assets. The Banks moved to vacate the restraining notices on the ground of China’s immunity. The district court granted the Banks’ motion, holding that the FSIA’s exceptions to sovereign immunity did not apply to China’s assets outside the United States.

In November 24, 2009, the Walters filed and served the Banks and China with a petition for issuance of a turnover order. The Chinese Ministry of Justice rejected the service of the petition and the Banks moved to dismiss the petition. The district court granted the motion to dismiss the petition with prejudice regarding the turnover of assets held outside the United States and those held inside the United States but not falling within the scope of FSIA. The district court dismissed the petition seeking turnover of assets inside the United States falling within the scope of the FSIA without prejudice. The Walters filed this appeal.

The United States Court of Appeals for the Second Circuit affirmed the district court’s dismissal. Reviewing the lower court’s decision de novo, the Court found that the FSIA grants immunity from attachment and execution of property of a foreign state. There are several exceptions to this immunity, two of which apply in this case: where the foreign state has waived immunity and where the property is or was used for commercial activity upon which the claim is based. The Court notes that immunity from jurisdiction does not imply immunity from attachment of property. In addition, a plaintiff who prevails against a sovereign can generally execute the judgment only upon assets with respect to which the foreign state has waived immunity or that the state used for the commercial activity upon which the claim was based. “While all property of an agency or instrumentality engaged in commercial activity under § 1610(b) is potentially subject to attachment or execution, attachment or execution of property of the foreign state itself is strictly limited to those assets that are themselves used for commercial activity.” 651 F.3d 290.

The Court then analyzes the Banks’ standing to raise execution immunity. The Court states that other circuit courts have held that when a judgment creditor seeks to enforce a judgment rendered against a foreign state by attaching or executing upon its property, a district court may apply the FSIA’s execution immunity provisions regardless of whether the foreign sovereign enters an appearance. In line with the other courts, this Court finds that the district court properly dismissed the Banks by use of the FSIA execution immunity despite the fact that China did not appear in the action. “We therefore conclude that, where a judgment creditor seeks to enforce a judgment against an undisputed foreign sovereign by collecting against what are undisputed sovereign assets, a court may apply the immunity protections of the FSIA even if the sovereign does not appear in the action.” 651 F.3d 293‑94.

The Walters argue that China waived its execution immunity by failing to appear during this proceeding and using the assets for commercial activity; therefore, the Banks cannot assert it. “[T]he existence of subject‑matter jurisdiction alone does not entitle petitioners to execute upon sovereign assets. In [First City, Texas–Houston, N.A. v. Rafidain Bank, 281 F.3d 48 (2d Cir. 2002)], we held that subject‑matter jurisdiction, once established through the applicability of an exception to jurisdictional immunity under § 1605, continues through post‑judgment enforcement proceedings, including discovery of assets that might be subject to attachment or execution. We did not, however, hold that a waiver of jurisdictional immunity reaches beyond the discovery of such assets to waive the execution immunity that might attach to the property itself.” 651 F.3d 295. “A mere failure to appear is not a sufficiently affirmative act to indicate intentional relinquishment of immunity, particularly not in this case where China has consistently maintained its jurisdictional and execution immunity in diplomatic communications.” 651 F.3d 296.

Furthermore, the Court finds that dismissal was proper because the petitioners did not specifically identify the accounts to be attached. “Here, petitioners have not identified the specific accounts or funds held by the Banks upon which they seek to execute judgment, much less have they shown that such specified assets fall within one of § 1610’s exceptions to immunity. Section 1610(a) states that only sovereign property that is in fact “used for a commercial activity in the United States” may be subject to execution.” 651 F.3d 297.

Citation: Walters v. Indus., 651 F.3d 280 (2d Cir. 2011).

FORUM NON CONVENIENS

Fourth Circuit affirms the district court’s dismissal for forum non conveniens, asserting that foreign forum is proper when the plaintiffs are citizens of and the defendant is incorporated in that nation

In 2008, Chinese officials learned of widespread reports that infants in China were becoming ill and dying after drinking infant formula contaminated with melamine, which is unfit for human consumption. One of the companies that produce the formula in China is Sheng Yuan, a subsidiary of Synutra (an Illinois company). Synutra issued a press release apologizing for the harm its product caused to the affected children and families in China. The Chinese government created a fund to compensate the children and families affected by the contaminated baby formula. By accepting the compensation, the families waived their right to sue. Over 95% of the injured infants’ families accepted the compensation, but the remainder elected to bring civil suits in China. Some of the lawsuits were accepted and the Chinese courts stymied others.

There seemed to be discouragement from the Chinese courts and governments with regard to filing civil lawsuits against the various companies responsible for the contamination; however, a few of the suits were accepted. The Plaintiffs in this case decided to file their lawsuit in the United Stated District Court in Maryland, rather than China. Synutra moved to dismiss the complaint based on forum non conveniens, contending that China is a more convenient forum for the Plaintiff’s claims. The district court granted the motion, finding that China was an available forum, given that the president of Synutra affirmed that the company would not contest service of process if the suit were filed in China. In addition, the court found that China would be an adequate forum, despite some conflicting evidence that the Chinese courts were reluctant to accept lawsuits of this nature. Lastly, the court weighed the public and private interests and found that they favored China as a more appropriate forum. The Plaintiffs appealed.

The United States Court of Appeals for the Fourth Circuit affirms the district court’s dismissal of this action based on forum non conveniens. The Plaintiffs argued that the district court abused its discretion by relieving the Defendant of its burden to show an adequate alternative forum. However, the Court disagrees finding that the court properly allocated the burden of proof. The Court reviewed the district court’s language and analysis, finding that the court required the Defendant to prove that China was a more convenient forum to hear this dispute.   

The Court then found that the district court was correct in evaluating the adequacy of China’s courts. “[W]e observe that Plaintiffs do not dispute their eligibility to receive compensation from the Fund in China. Thus, Plaintiffs are essentially arguing that China is an inadequate forum because they cannot obtain in China a judicial remedy in lieu of the Fund. But, the forum non conveniens doctrine does not limit adequate alternative remedies to judicial ones. . . . [T]he Fund alone supports our conclusion that the district court did not abuse its discretion in deeming China an adequate forum.” 656 F.3d 250‑51.

However, the Plaintiffs argued that the district court erred in deeming the Fund an adequate remedy. The Court discredits this argument by finding that the Plaintiffs are merely arguing that “adequate alternatives” were limited to judicial remedies only. “Because a judicial remedy is not required, it is immaterial that Plaintiffs must waive their right to sue if they elect compensation from the Fund. . . . Thus, the structure of the Fund as a settlement is not dispositive; it is enough that the Fund is available to compensate Plaintiffs for their losses. Therefore, we reject Plaintiffs’ argument.” 656 F.3d 251‑52.

Lastly, the Plaintiffs argued that the Court erred when weighing the relevant private and public interest factor. They state that the district court should have focused on where the faulty decisions were made (in Maryland), instead of on where the injuries occurred (in China). However, the Court disagrees because the doctrine of forum non conveniens is concerned with convenience, not simply where the wrongful conduct occurred.

“In this case, the most relevant private interest factors are the relative ease of access to sources of proof and availability of compulsory process to obtain the attendance of witnesses. The pertinent public interest factors are the local interest in having localized controversies decided at home; the avoidance of complex comparative law issues; and the unfairness of burdening citizens in an unrelated forum with jury duty. Thus, the locus of alleged wrongful conduct is just one of several private and public interest factors that should be weighed to determine whether the alternative forum is more convenient.” 656 F.3d 252 (internal quotation marks omitted).

Citation: Tang v. Synutra Int’l, 656 F.3d 242 (4th Cir. 2011).

JURISDICTION

Eleventh Circuit affirms district court’s finding that a shipwrecked vessel owned by Spain was subject to immunity from arrest under the Foreign Sovereign Immunities Act though vessel is not in possession of the sovereign

Odyssey Marine Exploration is a deep‑ocean exploration shipwreck recovery business. In 2007, during its Amsterdam Project, the company discovered the remains of a 19th Century Spanish vessel in international waters 100 miles west of the Straits of Gibraltar. Odyssey ultimately discovered and recovered several hundred thousand coins and artifacts from the vast shipwreck. On April 9, 2007, Odyssey then filed a verified admiralty complaint against “The Unidentified Shipwrecked Vessel” in the Middle District of Florida, listing a possessory and ownership claim. Odyssey then filed a motion for an order directing the clerk to issue a warrant of arrest in rem against the shipwrecked vessel. After Odyssey published a notice of arrest, Spain filed a verified claim to the vessel and its contents and cargo, and a motion for a more definite statement and for disclosure of other information identifying the vessel. Spain also sought an order to dismiss the complaint, vacate the arrest, and terminate Odyssey’s appointment as substitute custodian.

The district court denied Spain’s motions, but directed Odyssey to disclose certain information relating to the vessel’s possible identity. Odyssey stated that the site of the vessel might be related to the to the Spanish vessel Nuestra Senora de las Mercedes y las Animas. Spain then claimed that the Mercedes was a Spanish Royal Navy Frigate that exploded and sank in 1804 during combat and was therefore subject to sovereign immunity from all claims of arrest in the United States pursuant to Foreign Sovereign Immunities Act (“FSIA”). Accordingly, Spain filed a motion to dismiss for lack of subject matter jurisdiction. The magistrate judge found that the vessel was the Mercedes and the property of Spain, and concluded that under FSIA, it did not have jurisdiction to adjudicate the possessory claims. The district court adopted the magistrate’s finding and dismissed Odyssey’s complaint for lack of subject matter jurisdiction, vacated the arrest and ordered the return of the vessel’s contents to Spain. Odyssey appeals.

The United States Court of Appeals for the Eleventh Circuit affirms the district court’s finding that the court did not possess subject matter jurisdiction over the matter. The Court notes that although the federal courts have exclusive power to adjudicate in rem suits against a vessel, that power is dependent on the court’s jurisdiction over the vessel. However, if the vessel at issue is the property of a foreign state, the federal courts only have jurisdiction to arrest the vessel if authorized by the FSIA. Therefore, the Court analyzes whether the vessel is the property of Spain and, if so, whether it has jurisdiction over the vessel under FSIA.

The Court looks to the historical context of the Mercedes and determines that the vessel found by Odyssey is in fact the Mercedes, thereby belonging to Spain. “In this historical context, the entirety of the record evidence supports the district court’s conclusion that the res is the Mercedes. The res was found within the zone Spain had plotted as the likeliest area of the Mercedes’ demise, and no other naval vessels matching the Mercedes’ type sank within that zone during the same time period. The site, essentially a scattered debris field, is consistent with a vessel that exploded at the surface.” 657 F.3d 1173‑74.

The Court goes on to determine whether the FSIA applies to the arrest of the Mercedes. Section 1609 of the FSIA states that the property of a foreign nation is immune from arrest if the property is located in the United States. “The Mercedes is Spain’s sovereign property that is within the United States. While the Mercedes itself is not within the United States, that alone does not defeat the court’s ability to obtain jurisdiction over it. A court may have either actual or constructive possession over the res. . . . Odyssey has deposited parts of the Mercedes with the district court, constructively bringing the shipwreck within the court’s territorial jurisdiction. Because this is an in rem action based on the arrest of sovereign property, § 1609 provides the Mercedes with presumptive immunity from arrest.” 657 F.3d 1175.

Further, the Court finds that the exceptions of the FSIA do not apply to the Mercedes. Though the Plaintiff does not invoke any of the applicable exceptions to the presumptive immunity found under the FSIA, the Court addresses its arguments that the Mercedes is not immune due its engagement in commercial activity. The Court found that the Mercedes was not acting as an ordinary private person in the marketplace; instead, it was a Spanish Navy vessel. “Although the Mercedes did transport private cargo of Spanish citizens for a charge, the transport was of a sovereign nature. According to Spanish naval historians, providing protection and safe passage to property of Spanish citizens was a military function of the Spanish Navy, especially in times of war or threatened war. . . . Therefore, the Mercedes was acting like a sovereign by transporting specie during a time of threatened war.” 657 F.3d 1177.

Lastly, Odyssey argues that the Mercedes is not immune from arrest because the FSIA only applies when sovereign property is in the sovereign’s possession, and Spain was not in possession of the vessel. However, the Court rules that the FSIA does not include any possession requirements. “An examination of the FSIA reveals no possession requirement exists in any part of the statute. When Congress determined the exact degree and character of subject matter jurisdiction over the property of foreign sovereigns under the FSIA, it did not provide an exception to immunity for property not in a foreign sovereign’s possession.” 657 F.3d 1179 (internal citation omitted). Therefore, the Court holds that the FSIA applies whether the property is in the possession of the sovereign at the time of the arrest or not.

Citation: Odyssey Marine Exploration Inc. v. the Unidentified Shipwrecked Vessel, 657 F.3d 1159 (11th Cir. 2011).

MENS REA

Fourth Circuit affirms districts court’s dismissal of an aiding and abetting claim arising from Saddam Hussein’s attacks against the Kurds for failure to state a claim under the Alien Tort Statute

In the 1980s, the Republic of Iraq was involved in a long‑term conflict with Iran. The governments of several countries overtly condemned Iraq’s use of mustard gas against Iran. However, Iraq, under the regime of Saddam Hussein, launched chemical weapon attacks against the Kurds in northern Iraq, accusing them of collaborating with Iran. An international coalition of governments, known as the Australia Group, imposed licensing restrictions on the exports of chemicals used to make chemical weapons, including mustard gas. Defendant, Alcolac, began selling thiodiglycol (“TDG”) under the trade name Kromfax. Though TDG could be used to manufacture several products, Alcolac is aware that it could be used to manufacture mustard gas.

The U.S. State Department and the U.S. Customs Service warned Alcolac that TDG was subject to export restrictions. Yet, in 1987, Alcolac filled orders for 120 tons of Kromfax from a German company. This order was eventually shipped to Iran. Later in 1987 and 1988, Alcolac also delivered four shipments of Kromfax to a company in New York, though the Defendant knew this company was a shell corporation used to purchase the product for shipment to Europe and ship it elsewhere. These shipments eventually reached Iraq and were used to manufacture mustard gas used to attack the Kurds. This resulted in the death of thousands of Kurds, and many others were maimed or suffered from physical and psychological trauma.

 While Alcolac pleaded guilty to violating the Export Administration Act for the sale to the Germany company, it was not prosecuted for its sales to the New York company. Plaintiffs, individuals of Kurdish descent that were either victims of the mustard gas attacks or family members of deceased victims, asserted claims against Alcolac under the Alien Tort Statute (“ATS”). The district court granted Alcolac’s motion to dismiss the Complaint, finding that the Plaintiffs did not sufficiently plead facts to support a reasonable inference that Alcolac provided TDG to Iraq with the purpose of facilitating genocide against the Kurds.

The United States Court of Appeals for the Fourth Circuit affirms the district court’s dismissal of the Plaintiff’s Complaint. The Court concludes that the ATS imposes liability for aiding and abetting violations of international law, but only if the conduct is purposeful; it found that the Plaintiffs have failed to plead facts sufficient to support the intent element of their ATS claims. The Plaintiffs argue that Alcolac aided and abetted Iraq in committing the crimes against the Kurds, but Alcolac asserts that the claim is not recognized by international law. The Court agrees with the Plaintiffs, finding that it has become well‑settled law in several federal courts that an aiding and abetting claim is covered under the ATS.

The Court then turns to Alcolac’s contention that the Plaintiffs failed to allege facts that support the proper intent required to satisfy the elements of the aiding and abetting claim. “We are persuaded by the Second Circuit’s Talisman analysis and adopt it as the law of this circuit. In that regard, we agree that Sosa guides courts to international law to determine the standard for imposing accessorial liability, given Sosa’s command that courts limit liability to violations of international law with definite content and acceptance among civilized nations equivalent to the historical paradigms familiar when the ATS was enacted.” 658 F.3d 398 (internal quotations omitted).

To determine the proper standard, the Court looked to the Rome Statute of the International Criminal Court. The Rome Statute of the International Criminal Court imposes aiding and abetting liability on one who aids and abets the commission of a crime only if he does so “for the purpose of facilitating the commission of such a crime.” 658 F.3d 397. “While we agree with the premise that the Rome Statute does not constitute customary international law, we find that its status as a treaty cuts in favor of accepting its mens rea standard as authoritative for purposes of ATS aiding and abetting liability.” “Although the D.C. Circuit is correct that the Rome Statute is not binding on the United States, Doe VIII, 2011 WL 2652384, at *18, this does not lessen its import as an international treaty and, thus, a primary source of the law of nations. Granting the Rome Statute preference over customary international law to resolve the issue before us is particularly appropriate given the latter’s elusive characteristics.” 658 F.3d 399‑400.

“We conclude that adopting the specific intent mens rea standard for accessorial liability explicitly embodied in the Rome Statute hews as closely as possible to the Sosa limits of requiring any claim based on the present‑day law of nations to rest on a norm of international character accepted by the civilized world and defined with a specificity comparable to the features of the 18th‑century paradigms the Supreme Court has recognized.” 658 F.3d 400‑01 (internal quotations omitted).

Although we acknowledge that aiding and abetting liability has been imposed in international tribunals for knowing conduct . . . we find that no consensus exists for imposing liability on those who knowingly (but not purposefully) aid and abet a violation of international law. As a result, we agree with the Second Circuit that a purpose standard alone has gained the requisite acceptance among civilized nations for application in an action under the ATS.” 658 F.3d 401 (internal citations omitted) (internal quotations omitted).

“In sum, keeping in mind the Supreme Court’s admonitions in Sosa that we should exercise ‘great caution’ before recognizing causes of action for violations of international law, and that liability should attach only for violations of those international norms that obtain universal acceptance, 542 U.S. at 728, we hold that for liability to attach under the ATS for aiding and abetting a violation of international law, a defendant must provide substantial assistance with the purpose of facilitating the alleged violation.” 658 F.3d 401.

Citation: Aziz v. Alcolac, 658 F.3d 388 (4th Cir. 2011).

PREEMPTION

Fourth Circuit reverses and orders dismissal of a complaint filed by Abu Ghraib prisoners against contractors, finding that the claims were preempted due to U.S. military’s federal interest

In response to the September 11th attacks on the United States, a multinational force, including the United States and Great Britain, invaded Iraq in March 2003 to depose Saddam Hussein and rid Iraq of weapons of mass destruction. After no weapons were found and Hussein was deposed, the war in Iraq continued. During the course of the war, the U.S. military seized and detained Iraqi citizens suspected of being enemy combatants and some were imprisoned at Abu Ghraib prison. There was a severe shortage of military intelligence personnel, which prompted the U.S. government to contract with private corporations to provide civilian interrogators and interpreters. The contractors included Defendants CACI Premier Technology, Inc., a subsidiary of CACI International, Inc. They were required to comply with Department of Defense interrogation policies and procedure whenever they conducted intelligence interrogations, detainee debriefings, and tactical questioning of people in custody.

The President signed an order in 2002 stating that the Third Geneva Convention did not apply to the conflict with al‑Qaeda and the Taliban and that the detainees were not entitled to the protection afforded prisoners of war by the convention. However, the order did require that the detainees be treated humanely and in a manner consistent with the Geneva Conventions. The Secretary approved a list of techniques for interrogations, but rescinded his approval of some, leaving confusion as to which techniques were approved. The record reflected that there was an ongoing policy not to engage in torture, but the definition of torture was a subject of continued debate.

The Plaintiffs, four Iraqi citizens, were detained by the U.S. military in Abu Ghraib prison from 2003 to 2008. They allege that they were interrogated in dangerous and unauthorized stress positions, subjected to sexual assault, repeated beatings, deprivation of food, water and sleep, forced witnessing of the rape of another prisoner, and imprisoned under conditions of sensory deprivation. They allege that the Defendants CACI committed the abuse and covered it up in conspiracy with U.S. military personnel.

The district court granted CACI’s motion to stay discovery, but denied its motion to dismiss based on the political question doctrine, federal preemption, and derivative sovereign immunity. CACI appeals.

The United States Court of Appeals for the Fourth Circuit reverses and remands with instructions to dismiss the case. For the preemption issue, the Court concludes that the plaintiffs’ tort claims are preempted based on the uniquely federal interest involve in the case. The Court uses Boyle v. United Technologies Corp., 487 U.S. 500 (1998), to support its reasoning. In Boyle, the Supreme Court determined that the contractor should not be held liable for implementing the government’s design and that entertaining the plaintiff’s tort case would undermine the unique federal interests in national defense. If state tort liability were permitted, the federal interests would be have been adversely affected.

“In this case, that uniquely federal interest was especially important in view of the recognized shortage of military personnel and the need for assistance in interrogating detainees at Abu Ghraib prison. Not only would potential tort liability against such contractors affect military costs and efficiencies and contractors’ availability, it would also present the possibility that military commanders could be hauled into civilian courts for the purpose of evaluating and differentiating between military and contractor decisions.” 658 F.3d 418.

“The nature of the conflict in this case is somewhat different from that in Boyle—a sharp example of discrete conflict in which satisfying both state and federal duties (i.e., by designing a helicopter hatch that opens both inward and outward) was impossible. In the context of the combatant activities exception, the relevant question is not so much whether the substance of the federal duty is inconsistent with a hypothetical duty imposed by the state or foreign sovereign. Rather, it is the imposition per se of the state or foreign tort law that conflicts with the [Federal Tort Claims Act]’s policy of eliminating tort concepts from the battlefield. The very purposes of tort law are in conflict with the pursuit of warfare. Thus, the instant case presents us with a more general conflict preemption, to coin a term, ‘battle‑field preemption’: the federal government occupies the field when it comes to warfare, and its interest in combat is always ‘precisely contrary’ to the imposition of a non‑federal tort duty.” 658 F.3d 419.

One judge dissents, stating that the Court does not have jurisdiction over the appeal and preemption would not relieve CACI of its potential liability. “No federal interest implicates the torture and abuse of detainees. To the contrary, the repeated declarations of our executives, echoed by the Congress, expressly disavow such practices.” 658 F.3d 430.

Since this case involves misconduct in connection with the military task of interrogation in a war zone military prison by contractors working closely with the U.S. military, the Court holds that the tort claims arising out the contractors’ engagement in wartime combatant activities are preempted.

“What we hold is that conduct carried out during war and the effects of that conduct are, for the most part, not properly the subject of judicial evaluation. The Commander in Chief and the military under him have adopted policies, regulations, and manuals and have issued orders and directives for military conduct, and they have established facilities and procedures for addressing violations and disobedience.” 658 F.3d 420.

Citation: Shimari v. Caci Int’l, 658 F.3d 413 (4th Cir. 2011).

SOVEREIGN IMMUNITY

Second Circuit reverses district court’s attachment of Argentina’s funds held by its central bank in the United States, finding that the bank benefits from immunity under the Foreign Sovereign Immunity Act

In 2001, the President of Argentina declared a temporary moratorium on any principal and interest payments on any money borrowed from foreign creditors more than $80 billion. In 2001, Argentina’s economy had deteriorated, causing it to transfer about $20 billion held in the Federal Reserve Bank of New York (“FRBNY”) and buy Argentine pesos to defend the value of the peso. Due to the failing economy, Argentina defaulted on its payments to the Plaintiffs, EM Ltd. and NML Capital, Ltd., which are beneficial owners of the debt instruments owned by the country. As of the date of the default, Argentina has not made any payments on the principal or debt instruments on which the Republic defaulted.

Instead of entering into new debt agreements with the Republic, the Plaintiffs decided to seek recovery of the debt through litigation in the United States federal courts. They received a judgments in the about of $2.4 billion in the United States District Court for the Southern District Court of New York. The Plaintiffs sought to attach and restrain the FRBNY funds in a Banco Central de la República Argentina (“BCRA”) account at the FRBNY. BCRA serves as the central bank for Argentina, acts as its financial agent, and regulates Argentina’s banking system and financial sector. From 2001 to 2005, Argentina made daily transactions from FRBNY to the, causing the majority of its U.S. dollar‑denominated foreign exchange reserves to be held outside of the United States and out of the jurisdiction of the District Court. By the time Plaintiffs moved to attach the funds in the FRBNY account in 2005, the BCRA only maintained about $105 million in the account.

In 2005, Plaintiffs sought ex parte orders of pre‑judgment attachment and post‑judgment restraint over certain BCRA assets, including the FRBNY funds. The district court granted the attachment and restraining orders, but on cross‑motions to confirm and vacate the attachments and restraints, another district court judge vacated the notices, finding that the FRBNY funds were immune from attachment and execution under the Foreign Sovereign Immunity Act (“FSIA”), 28 U.S.C. § 1602 et seq. The Plaintiffs appealed and the United States Court of Appeals for the Second Circuit affirmed the district court’s order to vacate the attachment and restraining notices.

Later in 2006, the Plaintiffs commenced an action for declaratory judgment that the BCRA, instead of the Republic of Argentina, was liable for the debts owed by the Republic. The Plaintiffs also amended their previous orders of attachment and restraint under this new theory of liability. The district court then granted the orders attaching and restraining the FRBNY funds. Now, the Republic and BCRA appeal from that order.

The United States Court of Appeals for the Second Circuit reverses the district court’s orders and vacates the motions to attach the FRBNY funds. The Court states that under FSIA, the property of a foreign state is immune from attachment, unless it is subject to one of the FSIA exceptions. One such exception states that the property is immune if the property is that of a central bank or monetary authority held for its own account. 28 U.S.C. § 1611(b)(I). Though the district court believed this exception only applied if the central bank was independent of the sovereign, the Court holds that the plain language of the statute immunizes the central bank regardless of the bank’s relationship with the foreign state.

“We hold that the plain language, history, and structure of § 1611(b)(1) immunizes property of a foreign central bank or monetary authority held for its own account without regard to whether the bank or authority is independent from its parent state pursuant to [First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (1983) (“ Bancec ”)]. If foreign central bank property is immune from attachment under § 1611(b)(1), the fact that “a relationship of principal and agent [has been] created” between the foreign state and its central bank under Bancec is irrelevant, see Bancec, 462 U.S. at 629. . . . [F]oreign central banks are not treated as generic agencies and instrumentalities of a foreign state under the FSIA; they are given special protections befitting the particular sovereign interest in preventing the attachment and execution of central bank property. Plaintiffs cannot evade this statutory requirement by using Bancec to turn assets that would otherwise be considered property of a central bank held for its own account into property of the Republic that is not entitled to immunity.” 652 F.3d 187‑88.

After a statutory analysis of the FSIA, the Court concludes that the statute immunizes foreign central bank property held for its own account regardless of its independent nature. “There is no indication in the text, history, or structure of the FSIA that Congress intended to make the immunity of a central bank’s property contingent on the independence of the central bank. The statute makes no reference to the independence or autonomy of a central bank or monetary authority. Moreover, the history of the FSIA and of the independence of central banks suggests that Congress understood the property of a foreign central bank to be deserving of immunity regardless of that bank’s independence.” 652 F.3d 190.

Further, the Court adopts a test for determining whether a central bank’s property is held for its own account. The test states that “property of a central bank is immune from attachment if the central bank uses such property for central banking functions as such functions are normally understood, irrespective of their commercial nature,” as proposed by a central banking law practitioner, Ernest T. Patrikis, in Foreign Central Bank Property: Immunity from Attachment in the United States, 1982 U. Ill. L. Rev. 265, 277 (1982). Also, according to the test, “if an activity is to be regarded as commercial, as distinguished from a central bank activity, it should be an activity of the foreign central bank not generally regarded as a central banking activity.” Id. at 277‑78. The Court states that there is a presumption of immunity from attachment if funds are held in an account in the name of the central bank, but the presumption can be rebutted if the funds are shown not to be used for central banking functions. By applying this test, the Court finds that “[t]he record clearly establishes that the accumulation of foreign exchange reserves to facilitate the regulation of the peso and the custody of cash reserves of commercial banks pursuant to central bank regulations are paradigmatic central banking functions.” 652 F.3d 195.

Lastly, the Court determines that though the Republic waived immunity under FSIA for itself, and any of its revenues, assets or property, such waiver did not apply to the instrumentalities of the Republic of the BCRA in particular. “[A]lthough the Republic’s waiver of immunity from attachment is worded broadly [in its debt instruments], it does not appear to clearly and unambiguously waive BCRA’s immunity from attachment, as it must do in order to be effective.” 652 F.3d 196 (internal citation omitted). Therefore, the FRBNY funds are immune from attachment and execution.

Citation: Capital v. Banco Cent. De La República Argentina, 652 F.3d 172 (2d Cir. 2011).