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Author: Marco Simons

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Is there a constitutional right to corporate separateness?

(Marco Simons is Legal Director of EarthRights International.  He is a graduate of Yale Law School, where he received the Robert L. Bernstein Fellowship in International Human Rights.)

Although it’s gone largely unnoticed amid the blockbuster campaign finance and affirmative action cases, what could be one of the most significant cases of this Supreme Court term will be argued tomorrow – DaimlerChrysler v. Bauman. This happens to be an Alien Tort Statute (ATS) case arising out of Daimler’s alleged participation in targeting labor activists during the Dirty War in Argentina, but the issue in the case is far broader than the ATS. The Supreme Court is considering whether there is personal jurisdiction over Daimler, a German corporation, and Daimler is essentially arguing that it has a constitutional right to be treated separate from its subsidiaries. (One of the few institutions to notice Bauman is the Vanderbilt Law Review, which hosted a roundtable on the case.)

The Ninth Circuit held that the contacts of Daimler’s US subsidiary could be attributed to the parent for personal jurisdiction purposes, because, functionally speaking, they were essentially acting as a single business – the subsidiary was performing acts on behalf of the parent, which the parent would have had to do if the subsidiary did not exist. Daimler argues that this is a violation of due process, because the Constitution requires that it be treated separately from its subsidiary.

My organization, EarthRights International (ERI), submitted an amicus brief on the side of the Bauman plaintiffs, arguing that the Constitution does not enshrine any right to corporate separateness. Indeed, it’s difficult to see how it could – when both Due Process clauses were adopted, it was illegal in all states for one corporation to own another. How can a corporation have a constitutional right to be treated separately from its subsidiaries when subsidiaries did not exist when the constitutional provisions at issue were adopted?

It’s important to note that this case is not about what the “best” rule would be. Due to the interplay of the Federal Rules of Civil Procedure and the California long-arm statute, personal jurisdiction here extends to the limits of constitutional due process, and has not in any way been restricted by Congress. Back in 1925, under a different statutory regime, Justice Brandeis wrote for the Court in Cannon Manufacturing Co. v. Cudahy Packing Co. that a parent corporation’s presence in a state could not be established through the presence of a subsidiary – but he stated that this was due to the absence of statutory authority, not because the Constitution forbids it:

No question of the constitutional powers of the State, or of the federal Government, is directly presented. The claim that jurisdiction exists is not rested upon the provisions of any state statute or upon any local practice dealing with the subject. . . . Congress has not provided that a corporation of one State shall be amenable to suit in the federal court for another State in which the plaintiff resides, whenever it employs a subsidiary corporation as the instrumentality for doing business therein.

This situation has now changed, however, because – in California – Congress has effectively provided that anyone is amenable to suit in federal court whenever the Constitution permits exercise of jurisdiction. And in many other contexts, the Court has already determined that it’s okay to attribute the business of subsidiaries to the parent corporation.

In some ways Bauman is a followup to Kiobel v. Royal Dutch Petroleum, in which the Court decided earlier this year that claims under the ATS could not proceed where the only connection to the United States was the “mere presence” of a foreign multinational corporate defendant. (See ERI’s recent publication about Kiobel, Out of Bounds.) But Bauman has much more far-reaching implications. The Court is faced with the decision of whether to constitutionalize relatively recent innovations in corporate law, and hold that simply because state laws now allow corporations to own other corporations, due process forbids a more functional approach to jurisdictional contacts with the forum.

In other contexts, including tax law, the Court has declined to hold that corporations must be treated separately from their subsidiaries. Changing that in Bauman could have significant implications for a number of areas of the law where corporate separateness is not the rule, and add a new constitutional right that is uniquely available to corporations. Previously, questions of whether to credit separateness between parent and subsidiary corporations have generally been thought of as issues of state law, not the Constitution. After all, corporations can only exist when state law allows them to.

A ruling in favor of Daimler could also have the effect of further incentivizing offshoring of U.S. corporations. A U.S. corporation, headquartered here, is always subject to U.S. jurisdiction for its acts. But if that corporation changes its nationality, and its U.S. operations are now that of a subsidiary, the parent corporation – and, by extension, the rest of the corporation’s global operations – would become insulated from any scrutiny by U.S. courts.

I am most interested to see the approach of the Court’s self-identified originalists to this question. There can be no question that the original intent of the due process clause was not to afford some right to maintain distinctions between parents and subsidiaries, concepts which did not exist at the time. Will the originalists disregard their approach to the Constitution when it comes to protecting the interests of foreign multinational corporations?

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After Kiobel, extraterritoriality is not a question of subject matter jurisdiction under the Alien Tort Statute – and neither is corporate liability

(Marco Simons is Legal Director of EarthRights International.  He is a graduate of Yale Law School, where he received the Robert L. Bernstein Fellowship in International Human Rights.)

The Supreme Court issued its decision in Kiobel v. Royal Dutch Petroleum a few weeks ago, and it has raised more questions than it has answered. Commentators and scholars have puzzled over what the Court did and what it means – all we really know is that the Court did not expressly rule on whether corporations could be sued for human rights abuses under the Alien Tort Statute (ATS) (the original question certified), and only began to elaborate under what circumstances an ATS suit could be brought for injuries arising in a foreign country (the question certified for reargument).

As to the extraterritoriality question, the Court held that some sort of presumption against extraterritoriality applied to ATS claims. Unlike the usual application of such presumptions, however, the Court did not suggest that this meant that no claims arising in foreign countries could be heard. Instead, the Court’s five-justice majority said that claims needed to be assessed on the basis of the extent to which they “touch and concern” the United States, and that where the only connection to the U.S. is the “mere corporate presence” of a foreign multinational, that is insufficient to allow an ATS claim to proceed.

This raises an interesting question of how this presumption is being applied. As the Supreme Court ruled in Sosa v. Alvarez-Machain, the ATS is a purely jurisdictional statute – claims under the statute come from federal common law. Ordinarily, the presumption against extraterritoriality does not apply to jurisdictional provisions; it only applies to substantive provisions. So Kiobel did not decide that the ATS is not an extraterritorial statute – it decided that the presumption against extraterritoriality applies to claims brought under the ATS. Read More

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Sidestepping corporate liability, Supreme Court shifts focus of Kiobel case to extraterritoriality

(Marco Simons is Legal Director of EarthRights International.  He is a graduate of Yale Law School, where he received the Robert L. Bernstein Fellowship in International Human Rights.)

Last week I blogged about the Kiobel v. Royal Dutch Petroleum case, in which the Supreme Court was considering whether corporations could be sued for complicity in serious human rights abuses under the Alien Tort Statute (ATS). I noted that some scholars and amici were urging the Supreme Court to decide the case on other grounds; namely, that the ATS was limited to suits against U.S. citizens.

On Monday the Supreme Court issued a rare reargument order in Kiobel, directing the parties to re-brief and argue next Term the question of “[w]hether and under what circumstances” the ATS allows suits for abuses “occurring within the territory of a sovereign other than the United States.”
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Is the Alien Tort Statute Really Limited to Suits Against U.S. Citizens?

(Marco Simons is Legal Director of EarthRights, International.  He is a graduate of Yale Law School, where he received the Robert L. Bernstein Fellowship in International Human Rights.)

The Supreme Court will hear argument in Kiobel v. Royal Dutch Petroleum Tuesday, to determine whether corporations can be sued for serious human rights abuses under the Alien Tort Statute (ATS), 28 USC 1350. But some scholars are urging the court to decide the case on other grounds.

There is a set of conservative legal scholars who intensely dislike the ATS and especially its modern use in international human rights cases. This dislike is somewhat mystifying – what the ATS essentially does is allow cases to be brought in federal court, rather than state court, where they implicate torts against aliens in violation of serious international law violations, such as torture or genocide. Would it really be better to hear cases against Paraguayan torturers or Rwandan genocidaires in state court?

Led by Curtis Bradley, Anthony Bellia, and Bradford Clark, this group of scholars argued strenuously that the ATS did not allow cases under modern human rights law at all. After this position was thoroughly repudiated by the Supreme Court in Sosa v. Alvarez-Machain, they have trotted out new arguments. The latest, from Bellia & Clark, is that the ATS only allows suits by aliens against U.S. citizens; it’s started to get some traction, as four Ninth Circuit judges adopted a version of this argument in their dissent in the Sarei v. Rio Tinto case decided in October.

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