Nestlé v Doe: United States Supreme Court overturns Nestlé's liability for child slavery in cocoa supply chains, insufficient 'domestic conduct' to invoke the Alien Tort Statute
Nestle USA, Inc. v. Doe et al., No. 19-416, 593 U.S. _(2021) (Nestle)
Summary
On 17 June 2021, the United States Supreme Court reversed a Ninth Circuit decision which held Nestlé liable for aiding and abetting child slavery under the Alien Tort Statute (ATS). The alleged forced labour in Ivory Coast could not be sufficiently linked to Nestlé's conduct in the United States, a nexus required to invoke the jurisdiction of federal courts under the ATS.
Aside from their primary finding, the Court debated the judicial ability to create a new cause of action under the ATS, deliberating the remit of common law in present day America. The Court also discussed corporate liability under the ATS. While not binding, five Justices concurred that immunity provided by a corporate veil should not extend to the ATS, despite foreign policy concerns. The case was heard in conjunction with Cargill, a privately held food corporation also registered in the United States.
Factual Background
Côte d’Ivoire, or Ivory Coast, is a West African country responsible for the world's largest production of cocoa beans.[1] Nestlé (the Petitioner) does not own or operate any cocoa farms in Ivory Coast, however the food giant buys, processes and sells cocoa from certain Ivory Coast farms. Nestlé also provides resources and financial funding to the farms in exchange for an exclusive supply of cocoa. This support includes 'training, fertilizer, tools, and cash'.[2]
Six Malian individuals (the Respondents) alleged they were trafficked into the Ivory Coast as child slaves to produce cocoa, including on some of the farms Nestlé have been affiliated with. The Respondents argued that Nestlé 'knew or should have known' the Ivory Coast farms were exploiting child slavery, specifying that Nestlé ought to have leveraged their economic advantage to eradicate forced labour in their supply chain entirely.[3]
The Respondents sought relief under the ATS, legislation originally drafted to enable United States Courts to 'hear claims brought by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.'[4] It was alleged Nestlé's actions 'aided and abetted slavery abroad'.[5] This 'tort' has not been provided for under the ATS previously, indicating that the Respondents were seeking a judicially granted private right of action to recover damages from the Petitioner.
The Respondents alleged that 'every major operational decision' of the Petitioner originated in the United States.[6] The Ninth Circuit reversed the District Court's initial dismissal of the claims, finding that the domestic conduct alleged by the Respondents fell within the remit of the ATS.
Supreme Court Ruling
On appeal, the majority (8-1) of the Supreme Court confirmed that the ATS could not be applied extraterritorially. Further, it was found the Respondents had not displaced the domestic presumption of the ATS. The general corporate activity of the Petitioner in the United States did not provide a sufficient domestic link to the 'tort', denying the Respondents' standing under the ATS.
Extraterritorial application of the ATS
The Supreme Court applied a 'two-step framework' from RJR Nabisco, Inc. v European Community 579 U.S. _(2016) (Nabisco) to determine whether the ATS could be applied to a foreign tort:
A legislative presumption
The Court reiterated the general presumption that United States legislation is only domestic in its application. To discharge this presumption, the Court asked 'whether the statute gives a clear, affirmative indication' that rebuts the presumption'.[7] In this case, the Court had already decided the ATS was domestic in application only: Kiobel v. Royal Dutch Petroleum Co. 569 U.S. 108 (2013) (Kiobel).
Conduct occurred in the United States
As the Court found the ATS does not apply internationally, the Respondents were required to demonstrate that the relevant conduct occurred domestically: Nabisco.
The conduct alleged by the Respondents was 'aiding and abetting' forced labour in Côte d'Ivoire. The majority of the Court stated that 'nearly all the conduct that they [the Respondents] say aided and abetted forced labor … occurred in Ivory Coast.'[8] The Court again relied on Kiobel to find that the 'generic allegations' of the Respondents did not 'draw a sufficient connection between the cause of action' and 'domestic conduct'.[9]
As the Respondents could not allege 'more domestic conduct than general corporate activity',[10] the case was reversed by the Supreme Court, who determined that they lacked jurisdiction. Only Justice Alito dissented, reasoning that the Court should have remanded the case before reaching this conclusion.
Creating a new cause of action?
In addition to the primary finding, the Court also discussed their power (or lack thereof) to create a new cause of action under the ATS, something the Respondents were seeking to achieve.Following from their binding judgment, Justice Thomas, with whom Justices Gorsuch and Kavanagh agreed, proposed that ATS precedents such as Jesner v Arab Bank Plc No. 16-499, 584 U.S. _(2018) (Jesner) and Sosa v Alvarez-Machain, 542 U.S. 692 (2004) (Sosa) intimate 'that judicial creation of a cause of action is an extraordinary act that places great stress on the separation of powers'.[11] Thomas also stated that judicial creation of causes of action 'invariably gives rise to foreign-policy concerns' (through an unfettered extent of common law-created liability), concluding that 'there is always a sound reason to defer to Congress.'[12]
Justice Sotomayor (along with Justices Kagan and Breyer) dissented on this point, stating that (quoting Jesner) 'closing the courthouse doors … "gives rise to foreign-policy concerns" just as "invariably" … as leaving them open.'[13] It would be remiss not to include the following quote, which summarises Justice Sotomayor's contention
'On more than one occasion (and in no uncertain terms), foreign powers expressed their displeasure with the United States’ failure to provide redress for law-of-nations violations against their citizens.'[14]Sotomayor states that foreign nations may take 'umbrage at the United States' refusal to provide redress'[15] if they completely dismissed their judicial ability to create a cause of action under the ATS. The Court left this issue undecided with a 3-3 split.
Commentary
Nestlé is not the first case to bring corporate liability under the ATS to the fore of judicial thought. The statute was left largely dormant until as recently as 1980, with cases such as Filártiga v. Peña-Irala (where the tort's connection to the United States was that the perpetrator later lived in New York)[16] expanding its remit. Since Sosa in 2004, the Supreme Court has slowly begun reducing the scope of the ATS.
In Kiobel, the Court restricted the jurisdiction of the ATS on the reasoning it would be unlikely that First Congress (drafters of the ATS) would envision the United States to be a 'uniquely hospitable forum for the enforcement of international laws.'[17] In minimising the scope of the ATS, Kiobel required the alleged conduct to 'touch and concern the territory of the United States… with sufficient force' in order to overcome the domestic presumption of the ATS.[18] As Nestle demonstrates, the test has now been reduced to the requirement of 'conduct' in the United States, decreasing the scope of potential action.
The Court also did not rule on whether the ATS should apply to United States corporations, despite granting certiorari to do so. However, five Justices expressed support for Justice Gorsuch's contention that 'the notion that corporations are immune from suit under the ATS cannot be reconciled with the statutory text and original understanding'.[19] While not binding, Nestle does provides some clarity as to the Court's views on corporate liability under the ATS.
Despite Nestle narrowing the remit of standing, the threshold for demonstrating a sufficient connection to the United States under the ATS remains unclear. It appears that issues such as foreign policy and diplomacy will have a continuing role to play in shaping the application of the ATS, a stroke of historical legislation that faces an ever-growing contemporary debate.
[1] 'Cote d'Ivoire', The World Factbook (Web Page, 27 July 2021) https://www.cia.gov/the-world-factbook/countries/cote-divoire/#economy.
[2] Nestle, 1.
[3] Ibid.
[4] 28 USC § 1350 (2018).
[5] Nestle, 1.
[6] Ibid, 5.
[7] Ibid, 2.
[8] Ibid, 4.
[9] Ibid, 5.
[10] Ibid.
[11] Ibid, 7.
[12] Ibid.
[13] Ibid, 9 (Sotomayor J).
[14] Ibid, 4.
[15] Ibid, 9.
[16] 630 F 2d 876 (2d Cir. 1980).
[17] Kiobel, 12 (Roberts J).
[18] Ibid, 1 (Alito J).
[19] Nestle, 1 (Gorsuch J).