Earlier, the Supreme Court closed the door on most lawsuits by foreigners alleging nebulous violations of “human rights” or international norms by multinational corporations. (It did that in dismissing a lawsuit by Nigerians against Shell oil companies.) GMU law professor Michael Greve observes that before the Supreme Court ruling, the Alien Tort Statute [ATS] had “become a playpen for a cabal of … plaintiffs’ lawyers.”
If the Supreme Court had adopted their expansive view of the ATS (like the ability to sue over vague “customary international law” rules not contained in any treaty ratified by the U.S.), he notes, that would create the potential for foreign employees working overseas to sue corporations and company managers in the U.S.
Foreigners might do this over run-of-the-mill workplace discrimination and harassment claims that should be resolved elsewhere. They would sue here, rather than in their home country, because the U.S. is more favorable to trial lawyers and plaintiffs in certain respects, like permitting punitive damages, which are forbidden in much of the world, and in permitting class action lawsuits.
The U.S. also more broadly permits corporate liability for the unauthorized acts of corporate employees than do the laws of most countries. That could encourage certain foreigners to try to sue in America rather than in their home country, even though the evidence and witnesses in their case are located thousands of miles away in their home country, making a suit here inefficient and at times unfair. (And even though foreign countries often have administrative tribunals that take the place of civil lawsuits in remedying workplace disputes, meaning that lawsuits brought by foreigners in the U.S. could be duplicative and unfair.)
On the other hand, foreign law is often more hostile to employers than U.S. law on issues such as the burden of proving employee incompetence or misconduct (Italy, for example, requires clear proof that an employee is not just inept, but also willfully negligent, before the employee can be terminated, as Matthew Melchiorre has discussed at Openmarket.org).
Trial lawyers argue that corporate racial discrimination violates human-rights treaties like the International Convention on the Elimination of All Forms of Racial Discrimination.
The federal appeals courts had split over whether foreigners can sue corporations for the wrongdoing of corporate employees under the ATS, with the D.C. Circuit saying they can, and the Second Circuit saying they cannot.
Here are some additional reactions to the Supreme Court’s decision last Wednesday: Julian Ku/Opinio Juris (“this means that the ATS wars over corporate liability are almost over”) and more (discussing death of “universal civil jurisdiction” idea, and speculating that the narrower rationale for rejecting the lawsuit contained in the four justice concurrence by the generally pro-trial-lawyer liberal justices was an unsuccessful attempt to pick up potential swing vote Anthony Kennedy, who joined the five-justice majority opinion authored by Chief Justice Roberts); Roger Alford (ATS “as we know it is dead… [Kiobel] has destroyed an entire cottage industry”; transnational state-court torts and choice of law likely to rise in importance as replacement); Ilya Shapiro, Cato Institute; Eugene Kontorovich (academics scoffed when “foreign-cubed” ATS lawsuits were called into question, yet all nine justices have now rejected them).