Opinion ID: 3066204
Heading Depth: 3
Heading Rank: 3

Heading: Extraterritorial ATS Claims

Text: The defendants’ final argument contends that the plaintiffs’ ATS claim seeks an extraterritorial application of federal law that is barred by the Supreme Court’s recent decision in Kiobel II, 133 S. Ct. at 1669. We decline to resolve the extraterritoriality issue, and instead remand to allow the plaintiffs to amend their complaint in light of Kiobel II. The Supreme Court’s decision in Kiobel II is concerned with the application of the presumption against extraterritoriality to ATS claims. The presumption against extraterritoriality is a canon of statutory construction, and embodies the default assumption that legislation of Congress is only meant to apply within the territory of the United States. Morrison v. Nat’l Austl. Bank Ltd., 130 S. Ct. 2869, 2877 (2010). Under this canon of construction, a statute should be construed to reach only conduct within the United States unless Congress affirmatively states that the statute applies to conduct abroad. Id. (quoting EEOC v. Arabian Am. Oil Co. (Aramco), 499 U.S. 244, 248 (1991)). The presumption is meant to provide “a stable background against which Congress can legislate with predictable effects,” Morrison, 130 S. Ct. at 2881, and also “protect against unintended clashes between our laws and those of other nations which could result in international discord,” Aramco, 499 U.S. at 248. Since the presumption against extraterritoriality is a canon of statutory construction, it has no direct application to ATS claims, which, as discussed above, are claims created by federal common law, not statutory claims created by the ATS itself. Kiobel II, 133 S. Ct. at 1664. In Kiobel II, however, DOE V. NESTLE USA, INC. 29 the Supreme Court explained that the prudential concerns about judicial interference in foreign policy are particularly strong in ATS litigation, and concluded that “the principles underlying the presumption against extraterritoriality thus constrain courts exercising their power under the ATS.” Id. The Court also concluded that nothing in the text, history, and purpose of the ATS rebutted the presumption of extraterritoriality. Id. at 1669. Turning to the specific claims asserted by the Kiobel II plaintiffs, the Court observed that “all the relevant conduct took place outside the United States,” and that the defendants were foreign corporations whose only connection to the United States lay in their presence in this country. Id. The Court held that these claims were therefore barred, reasoning that they sought relief for violations of international law occurring outside the United States, and did not “touch and concern the territory of the United States . . . with sufficient force to displace the presumption against extraterritorial application.” Id. Kiobel II’s holding makes clear that the general principles underlying the presumption against extraterritoriality apply to ATS claims, but it leaves important questions about extraterritorial ATS claims unresolved. See id. (Kennedy, J., concurring) (“The opinion for the Court is careful to leave open a number of significant questions regarding the reach and interpretation of the Alien Tort Statute.”). In particular, Kiobel II articulates a new “touch and concern” test for determining when it is permissible for an ATS claim to seek the extraterritorial application of federal law. Id. But the opinion does not explain the nature of this test, except to say that it is not met when an ATS plaintiff asserts a cause of action against a foreign corporation based solely on foreign 30 DOE V. NESTLE USA, INC. conduct. Id. (Alito, J., concurring) (observing that the Court’s formulation of the touch and concern test “obviously leaves much unanswered”); see also Tymoshenko v. Firtash, 2013 WL 4564646, at  (S.D.N.Y. Aug. 28, 2013) (“[T]he Court failed to provide guidance regarding what is necessary to satisfy the ‘touch and concern’ standard.”). The defendants argue that the touch and concern test is substantially the same as the “focus” test set out in Morrison v. National Australia Bank Ltd., 130 S. Ct. at 2884. Morrison’s focus test is a tool of statutory interpretation. It is used to determine when statutes without extraterritorial application can be applied to a course of conduct that occurred both domestically and abroad. Id. Under this test, courts first determine the “focus of congressional concern” for a statute, and allow the statute to be applied to a course of conduct if the events coming within the statute’s focus occurred domestically. Id. (internal quotation marks omitted). In Morrison, for example, the Court reasoned that the focus of the Exchange Act is the purchase and sale of securities, and therefore held that it applies only to “transactions in securities listed on domestic exchanges, and domestic transactions in other securities.” Id. The Court then held that the anti-fraud provisions of the Exchange Act did not apply to a foreign sale of securities that were listed on an Australian exchange. Id. at 2888. Morrison may be informative precedent for discerning the content of the touch and concern standard, but the opinion in Kiobel II did not incorporate Morrison’s focus test. Kiobel II did not explicitly adopt Morrison’s focus test, and chose to use the phrase “touch and concern” rather than the term “focus” when articulating the legal standard it did adopt. Moreover, the assertion that Kiobel II meant to direct lower DOE V. NESTLE USA, INC. 31 courts to apply the familiar Morrison focus test is belied by the concurring opinions, which note that the standard in Kiobel II leaves “much unanswered.” Kiobel II, 133 S. Ct. at 1669 (Alito, J., concurring); see also id. (Kennedy, J., concurring). Additionally, since the focus test turns on discerning Congress’s intent when passing a statute, it cannot sensibly be applied to ATS claims, which are common law claims based on international legal norms. Rather than attempt to apply the amorphous touch and concern test on the record currently before us, we conclude that the plaintiffs should have the opportunity to amend their complaint in light of Kiobel II. It is common practice to allow plaintiffs to amend their pleadings to accommodate changes in the law, unless it is clear that amendment would be futile. Moss, 572 F.3d at 972 (“Having initiated the present lawsuit without the benefit of the Court’s latest pronouncements on pleadings, Plaintiffs deserve a chance to supplement their complaint . . .”). Here, the plaintiffs seek to amend their complaint to allege that some of the activity underlying their ATS claim took place in the United States. On the record before us, we are unable to conclude that amendment would be futile, because unlike the claims at issue in Kiobel II, the plaintiffs contend that part of the conduct underlying their claims occurred within the United States. See Kiobel II, 133 S. Ct. at 1669. Moreover, it would be imprudent to attempt to apply and refine the touch and concern test where the pleadings before us make no attempt to explain what portion of the conduct underlying the plaintiffs claims took place within the United States. We therefore decline to determine, at present, whether the plaintiffs’ ATS claim is barred by the Supreme Court’s 32 DOE V. NESTLE USA, INC. holding in Kiobel II, and remand this case to allow the plaintiffs to amend their complaint.