Mastafa v. Chevron Corp.

770 F.3d 170

Saadya MASTAFA, Kafia Ismail, Batul Nur, Afaf Rasool, Zahra Rasool, Plaintiffs–Appellants,

v.CHEVRON CORPORATION, Banque Nationale de Paris Paribas, Defendants–Appellees.

No. 10–5258–cv.

United States Court of Appeals, Second Circuit.

Submitted: May 28, 2014.

Decided: Oct. 23, 2014.

John T. Murray, Murray & Murray Co., L.P.A., Sandusky, OH, for Plaintiffs–Appellants.

Meir Feder, Thomas E. Lynch, Jones Day, New York, NY; Gregory G. Katsas, Michael A. Carvin, Jones Day, Washington, D.C., for Defendant–Appellee Chevron Corp.

Robert S. Bennett, Ellen Kennedy, Hogan Lovells U.S. LLP, Washington, D.C.; Jennifer L. Spaziano, Skadden, Arps, Slate, Meagher & Flom LLP, Washington, D.C., for Defendant–Appellee Banque Nationale de Paris Paribas.

Terrence Patrick Collingsworth, Conrad & Scherer, LLP, Washington, D.C., for amicus curiae Human Rights Watch and Labor Organizations.

Before: CABRANES, STRAUB, and LIVINGSTON, Circuit Judges.

JOSÉ A. CABRANES, Circuit Judge:

The question presented is whether the United States District Court for the Southern District of New York (Jed S. Rakoff, Judge ) properly dismissed the complaint of five Iraqi nationals who claim that they and their family members were tortured, imprisoned, and in some cases executed, by the Saddam Hussein regime. Plaintiffs filed suit in July 2010 against defendants Chevron Corp. and Banque Nationale de Paris Paribas (“BNP”) (jointly, “defendants”), alleging that defendants illicitly diverted money to the Saddam Hussein regime—then subject to economic sanctions—in violation of customary international law. Plaintiffs contend on appeal that such harms are cognizable under the Alien Tort Statute of 1789 (“ATS”), 28 U.S.C. § 1350, which establishes district court jurisdiction “of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States,” as well as the Torture Victim Protection Act of 1991 (“TVPA”), 28 U.S.C. § 1350 note, and New York common law. The District Court entered judgment on November 30, 2010, dismissing plaintiffs' complaint with prejudice under Federal Rules of Civil Procedure 12(b)(1) and (6).

The parties agree, and we hold, that the Supreme Court's decision in Mohamad v. Palestinian Authority, ––– U.S. ––––, 132 S.Ct. 1702, 182 L.Ed.2d 720 (2012), indisputably forecloses plaintiffs' claims brought under the TVPA. We also conclude, in a question of first impression for this Court, that we do not have jurisdiction over plaintiffs' ATS claims pursuant to the Supreme Court's decision in Kiobel v. Royal Dutch Petroleum Co., ––– U.S. ––––, 133 S.Ct. 1659, 185 L.Ed.2d 671 (2013), and our holding in Presbyterian Church of Sudan v. Talisman Energy, Inc., 582 F.3d 244 (2d Cir.2009). Accordingly, we AFFIRM the judgment of the District Court.

BACKGROUND

I. The Complaint

Plaintiffs in this action are Iraqi women who were the victims of torture by agents of the Saddam Hussein regime or whose husbands were the victims of such torture. Two plaintiffs are Kurdish women currently living in Iraq, and the remaining three plaintiffs were citizens of Iraq at the time of the alleged torture but are now either citizens or permanent residents of the United States.¹ Plaintiffs filed the instant case on July 26, 2010, seeking, inter alia, compensatory and punitive damages on their own behalf and as a putative class action on behalf of those similarly situated. They claim that the defendant corporations aided and abetted the abuses of the Saddam Hussein regime by paying the regime kickbacks and other unlawful payments, which enabled the regime to survive and perpetrate the abuses suffered by plaintiffs or their husbands.

The allegations against defendants stem from the United Nations' Oil for Food Programme (“OFP”). The OFP “permitted the export of oil from Iraq in exchange for food, medicine, and other basic civilian necessities” by allowing the purchase of Iraqi oil to proceed through an escrow account, into which purchasers submitted payments and from which providers of civilian necessities received payment. Mastafa v. Chevron Corp., 759 F.Supp.2d 297, 298–99 (S.D.N.Y.2010). Plaintiffs allege that the Saddam Hussein regime—then subject to United Nations economic sanctions—misused the OFP in order to “[e]licit income outside the United Nation[s'] oversight and fund its regime.... [and] to fund its campaign of human rights abuses against its people.” Compl. ¶¶ 33–34.

The misuse occurred when the Iraqi regime began imposing illegal “surcharges” of 10 to 30 cents per barrel on oil being lawfully sold by Iraq pursuant to the OFP. The complaint alleges that this surcharge was known to all “contracting customers” of the Saddam Hussein regime, including Chevron—which is alleged to have knowingly paid the illegal surcharge on 9,533,690 barrels of oil. Id. ¶¶ 37–41. The complaint alleges that Chevron “acted as a financer to many ... oil contracts,” id. ¶ 58, and that, in doing so, Chevron “made surcharge payments, facilitated surcharge payments and participated in surcharge payments in order to purchase oil from Iraq through the [OFP],” id. ¶ 72. Chevron allegedly “paid $20 million in [illicit] surcharge payments ... through third parties,” and “knew that the premiums it paid to the third party were passed through to the Saddam Hussein regime as a requirement to purchase oil.” Id. ¶¶ 83–84.

With respect to BNP, the complaint alleges that, pursuant to a Banking Agreement between BNP and the United Nations, BNP was the sole escrow bank for the OFP and was responsible for policing financial transactions associated with it. Under the Banking Agreement, one of BNP's roles as escrow agent for the United Nations was to ensure that financial transactions were in compliance with the United Nations Security Council resolutions that had created the program. Plaintiffs assert that, notwithstanding this obligation under the Banking Agreement, “BNP knew that the true nature of the financial transactions included illicit payments to the [Saddam Hussein] Regime and failed to disclose or interrupt the payments.” Id. ¶ 107. Plaintiffs further allegethat “[s]ome of the surcharges were paid by BNP through customer accounts,” id. ¶ 70, and that in at least one transaction, BNP “hid the identity of oil financiers as participants in an oil transaction” in violation of the Banking Agreement, id. ¶ 125.

There is no allegation by plaintiffs that Chevron or BNP, or their employees, directly engaged in the human rights abuses allegedly committed by the Saddam Hussein regime. Rather, plaintiffs allege that “[t]hese surcharge payments financed the torture” and other atrocities inflicted on them or their husbands, which required considerable funding. Id. ¶ 45. Plaintiffs contend that, through these alleged exploitations of the OFP, Chevron and BNP aided and abetted the Saddam Hussein regime's abuses, and that their claims are therefore actionable under the ATS and the TVPA.

II. Procedural History

On November 30, 2010, the District Court entered judgment dismissing plaintiffs' complaint with prejudice. The dismissal was based on the District Court's conclusions that (1) the ATS claims were barred by the Second Circuit's opinion in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir.2010), which held that the ATS does not confer jurisdiction for claims alleging violations of the “law of nations” (that is, customary international law ²) against corporate defendants; (2) plaintiffs had failed adequately to plead negligence under state law, and other state law claims were time-barred; and (3) there were various pleading deficiencies in their TVPA claim.

Plaintiffs timely appealed, and filed their initial briefs in this appeal between April and July 2011. Plaintiffs initially asserted a number of arguments, including that the ATS and TVPA allowed for corporate liability, that claims could be brought against alleged “aiders and abettors” under the TVPA, and that they had met other pleading requirements necessary to state a claim under the TVPA.

After the Supreme Court granted certiorari in Kiobel, ––– U.S. ––––, 132 S.Ct. 472, 181 L.Ed.2d 292 (2011), plaintiffs here moved on October 21, 2011, to stay the appeal pending the Supreme Court's adjudication of the case. We granted the motion on October 25, 2011.

Following oral argument in Kiobel, the Supreme Court, on March 5, 2012, ordered supplemental briefing and reargument on “[w]hether and under what circumstances the Alien Tort Statute ... allows courts to recognize a cause of action for violations of the law of nations occurring within the territory of a sovereign other than the United States.” ––– U.S. ––––, 132 S.Ct. 1738, 182 L.Ed.2d 270 (2012) (internal quotation marks omitted). In April 2013, the Supreme Court issued its decision in Kiobel, ––– U.S. ––––, 133 S.Ct. 1659, 185 L.Ed.2d 671 (2013), holding that “the presumption against extraterritoriality applies to claims under the ATS ... and case[s] seeking relief for violations of the law of nations occurring outside the United States [are] barred.” Id. at 1669. It did not address, much less question or modify, the holding on corporate liability under the ATS that had formed the central conclusion in the Second Circuit's Kiobel opinion.

Additionally, during the pendency of the stay here, the Supreme Court decided another case with direct relevance to this action. In Mohamad v. Palestinian Authority, ––– U.S. ––––, 132 S.Ct. 1702, 182 L.Ed.2d 720 (2012), the Court held that the TVPA “authorizes liability solely against natural persons,” id. at 1708, and “does not impose liability against organizations,” including corporations, id. at 1705.

On March 28, 2014, we vacated the stay of this appeal, and ordered supplemental letter briefs from the parties on the effect, if any, of the Supreme Court's decisions in Kiobel and Mohamad.

The supplemental briefing having been completed, we now conclude that the District Court...