A recent U.S. Court of Appeals for the Second Circuit ruling is an important decision for corporations with foreign operations. In 2011, the U.S. Court of Appeals for the Second Circuit, in Kiobel v. Royal Dutch Petroleum Co., 642 F.3d 591 (2nd Cir. 2011), held that the Alien Tort Statute (ATS) does not regulate corporate conduct because customary international law does not recognize corporate liability, and therefore the litigation against the defendant could not proceed in the federal courts on the basis of the ATS. The defendant was alleged to have violated environmental human rights in the Nigeria. That ruling was very controversial, and an appeal was made to the U.S. Supreme Court, which upheld that ruling, but on different grounds. The Court held that the ATS is subject to a presumption against the extraterritorial application of domestic statutes, and that presumption had not been overcome by the plaintiffs. Other circuit have issued rulings which disagreed with the Second Circuit, but the original Kiobel decision is still the law of the circuit.
Recently, a controversy involving the Arab Bank, which is headquartered in Jordan, created an opportunity to revisit this Second Circuit precedent. In In Re: Arab Bank, PLC Alien Tort Statute Litigation, Arab Bank is alleged to have distributed funds to terrorists, and a lawsuit seeking damages was filed under the ATS, arguing that the bank had a presence in the U.S. The Second Circuit upheld the lower court’s dismissal of the lawsuit on the basis of the 2011 Kiobel ruling (Kiobel I), and a request for rehearing en banc was made by an active judge in the Second Circuit. On May 9, 2016, the Court of Appeals, in a 4 to 3 vote, decided against rehearing the Arab Bank decision, with the majority holding that there was no need to do so since this matter could easily be disposed of by the trial court on the basis of the Supreme Court’s 2013 ruling. Circuit Judge Poole dissented from the denial for rehearing because the initial decision “was wrong” and “every circuit to address the matter agrees that it is wrong.”
Circuit Judge Pooler, joined by Judges Chin and Carney, dissent from the denial of rehearing en banc. Judge Pooler contends, in part, that “this circuit yet again misses an opportunity to correct the panel’s majority opinion in Kiobel…, an opinion which is almost certainly incorrect but continues to maintain a needless circuit split with every other circuit to address the...
