By John Townsend Rich, Goodwin Procter LLP, Washington, D.C.
The Second Circuit has just issued an important decision in favor of a corporate defendant in a long-running Alien Tort Statute case against a Canadian company. Presbyterian Church of Sudan v. Talisman Energy, Inc., ___ F.3d ___, No. 07-0016-cv, 2009 WL 3151804 (2d Cir. Oct. 2, 2009).
Background and History of the Case
Talisman owned, through several layers of subsidiaries, a company that held a 25 percent share in another company (the Greater Nile Petroleum Operating Company (GNPOC)) that was responsible for exploring and developing oil resources in the southern Sudan. Needless to say, security problems were substantial. The Sudanese military, which was responsible for security around the facility, committed abuses in the area which plaintiffs claimed amounted to genocide, war crimes, and crimes against humanity.
In 2001, plaintiffs sued Talisman-apparently the only company suable in the United States-and the Sudan, in the U.S. District Court for the Southern District of New York, alleging, among other things, aiding and abetting and conspiracy. Talisman, represented by Joseph Cyr of Lovells, defended vigorously, but was handed a number of early setbacks. In an early and often-cited pre-Sosa decision, the late Judge Schwartz denied Talisman's motion to dismiss, recognizing both corporate liability and aiding and abetting liability, Presbyterian Church of Sudan v. Talisman Energy, Inc. , 244 F. Supp. 2d 289 (S.D.N.Y. 2003), and also denied Talisman's motion to dismiss for lack of personal jurisdiction, No. 01-cv-9882, 2004 WL 1920978 (S.D.N.Y. 2004). After Judge Schwartz's death, Judge Cote denied a post-Sosa motion for judgment on the pleadings, reaffirming Judge Schwartz's rulings on corporate liability and secondary liability. 374 F. Supp. 2d 331 (S.D.N.Y. 2005). In 2006, however, Judge Cote granted Talisman's motion for summary judgment. 453 F. Supp. 2d 633 (S.D.N.Y. Sep. 12, 2006). Judge Cote rejected the Unocal standard for aiding and abetting-"knowing practical assistance or encouragement that has a substantial effect on the perpetration of the crime"-and adopted a test that required not only substantial assistance and knowledge (of the specific violation) but also "the intent to assist that violation" (loosely described as "purpose"). The district court granted Rule 54(b) certification to permit an appeal of the summary judgment rulings (the rest of case, against Sudan, had been referred to a magistrate judge), and the plaintiffs appealed to the Second Circuit.
On appeal, the case brought forth extensive amicus curiae participation. Appellants' brief was supported by amicus briefs filed by Earthrights International, the Center for Constitutional Rights, the International Labor Rights Foundation, a group of eight international law professors, certain religious entities, and a group of victims. Talisman's brief was supported by amicus briefs by the United States; the Government of Canada; the U.S. Chamber of Commerce; the National Foreign Trade Council, the Petroleum Ass'n of America, and the U.S. Council for International Business; the Canadian Chamber of Commerce and three other Canadian business interests; the Washington Legal Foundation; five professors of international law and federal jurisdiction; and (separately) two British professors of international law. The case was argued on January 12, 2009, by Marc Gottridge of Lovells, in tandem with Kiobel, a case against Royal Dutch Petroleum arising from the military government's execution of Ken Saro Wiwa and others in Nigeria.
The Second Circuit Decision
In a unanimous decision (by Chief Judge Jacobs, joined by Judges Leval and Cabranes), the Second Circuit affirmed the granting of summary judgment for Talisman. The court ruled, contrary to arguments of many plaintiffs' counsel, that the standard for aiding and abetting liability should come from international law, not domestic law, and agreed with Judge Cote that the standard required purpose, not just knowledge, adopting as the law of the Second Circuit the rule proposed by Judge Katzman's concurrence in Khulumani v. Barclay National Bank PLC Ltd., 504 F.3d 254 (2d Cir. 2007) (per curiam ), affirmed by an equally-divided Supreme Court pursuant to 28 U.S.C. § 2109 sub nom. American Isuzu Motors, Inc., v. Ntsebeza, 128 S. Ct. 2424 (2008).Applying the purpose rule, the court addressed the four kinds of "substantial assistance" that Talisman allegedly provided: (1) upgrading airstrips that were also used by the military, (2) "designating" additional areas for oil exploration, (3) paying royalties to the government, and (4) giving general logistical support to the Sudanese military. In each case, the court ruled that plaintiffs' evidence of unlawful purpose was insufficient. Some significant features of the court's discussion are the following:
• "Benign and constructive purposes" for infrastructure such as airports that will also be used by the military weigh against a finding of improper purpose.• Publicly denying knowledge of governmental abuses is not "substantial assistance."• That senior company officials protest or express concern about military abuses cuts against a finding of improper purpose.• Resource development companies have a legitimate need to build roads or airstrips with the intention that the military be accommodated, when the company must rely on the military for security (and particularly when the security needs are great). Such help provides no basis for an inference of improper purpose.• Payment of royalties to a government that commits abuses by itself provides no basis for an inference of improper purpose.• Providing free fuel to military forces that commit abuses does not, by itself, provide evidence of improper purpose.• Supporting the creation of a buffer zone around a facility that requires forced displacement of people, when such a buffer zone is a reasonable security precaution, does not show unlawful purpose.
That the court devoted almost the entire analysis of plaintiffs' evidence to a search for evidence of purpose demonstrates the significance of requiring purpose rather than mere knowledge. In cases that have rejected purpose, such as the decision earlier this year in the South Africa Apartheid Litigation, 617 F. Supp. 2d 228 (S.D.N.Y. Apr. 8, 2009) (Scheindlin, J.), appeal docketed sub nom. Balintulo v. Daimler AG, No. 09-2778-cv (2d Cir.), the important issue has been what constitutes "substantial assistance." Assuming that Talisman Energy stands, such cases in the Second Circuit would have to be re-litigated under the purpose requirement as well.
The Court cautioned that improper purpose may be inferred from surrounding circumstances, and plaintiffs are likely to seek such inferences in other cases. Accordingly, companies should pay attention to surrounding circumstances and act accordingly. Two examples from the court opinion are protesting or expressing concern about military abuses and assisting internally displaced persons by stockpiling and distributing relief supplies.
Significant Issues Left Undecided or Neglected
While the Talisman Energy decision raises the bar for plaintiffs in ATS aiding and abetting cases, the court declined the opportunity to preclude such suits entirely or to limit them more significantly:
• Talisman and a number of the amici-including the Chamber-had argued vigorously that aiding and abetting is not actionable under the ATS at all, whether the mens rea standard is knowledge or purpose. They relied principally on the Supreme Court's statements in Central Bank of Denver that there is no federal common law of aiding and abetting. Rather than addressing this substantial argument, the court appeared to treat it as decided by the per curiam opinion in Khulumani-a debatable proposition.• Talisman and several amici -including the Chamber-argued that ATS actions did not lie against corporations because customary international law does not impose obligations on corporations (an argument that plaintiffs' counsel regularly mischaracterize as a claim of "immunity" for corporations). The Court, in its footnote 12, stated that it did not need to decide that question. That is an important footnote for corporations, because plaintiffs have consistently argued, and some district courts have agreed, that the Second Circuit had implicitly rejected this argument in prior decisions that did not discuss it. Plaintiffs will no longer be able to make that argument.• Talisman and several amici, particularly the Canadian amici , argued against the ATS being applied extraterritorially to the actions of a non-U.S. corporation abroad that allegedly injured non-U.S.-citizens, partly on grounds of comity. The court did not expressly address any of the variations of that issue, although it brushed up against it when it said: "[I]f ATS liability could be established by knowledge of [military] abuses coupled only with such commercial activities as resource development, the statue would act as a vehicle for private parties to impose embargos or international sanctions through civil actions in United States courts," adding, "Such measure are not the province of private parties but are, instead, properly reserved to governments and multinational organizations."• Talisman argued that, whatever the law of aiding and abetting or corporate liability, it could not be liable because it was a parent corporation several tiers removed from a Dutch company that owned only a 25 percent share of the Mauritius company that operated the facilities in question. The court found it unnecessary to address those arguments.
Conclusion
If the Talisman Energy decision stands, there will be a conflict in the circuits on the purpose versus knowledge issue with the Eleventh Circuit and, to the extent that Unocal is still good law in the Ninth Circuit, with that circuit. Whether the Supreme Court, if it were to grant certiorari in this case, would address the issues that the Second Circuit left undecided is anybody's guess. As matters stand, ATS law is still evolving on fundamental issues at a very slow pace. Dismissals on the pleadings have become rarer after Sosa, and four ATS cases thus far have gone to trial (Esmore Correctional Services Corp ., the first Drummond Co. case, Bowoto v. Chevron Corp., and WorldTel Bangladesh Holding Ltd.). While all but the last resulted in verdicts for defendant on the ATS or Torture Victim Protection Act claims, these suits are likely to continue posing substantial risks and expense for corporations that can be sued in the United States and have operations in trouble spots abroad.
Mr. Rich and others at Goodwin Procter LLP wrote the amicus brief for the Chamber in this case.
