(Bloomberg) -- The U.S. Supreme Court ruled that victims of overseas atrocities can’t use a centuries-old law to sue foreign corporations for complicity, blunting what once was a favorite legal tool for human-rights advocates.
The 5-4 ruling on Tuesday, which divided the court along ideological lines, marks the second time in five years the high court has cut the reach of the 1789 Alien Tort Statute.
The latest ruling throws out a suit stemming from terrorist attacks in Israel and the Palestinian territories. Victims and family members accused Jordan-based Arab Bank Plc of using its New York branch to distribute millions of dollars to terrorists and their families.
"Courts are not well suited to make the required policy judgments that are implicated by corporate liability in cases like this one," Justice Anthony Kennedy wrote in the court’s lead opinion.
Multinational companies have faced dozens of suits accusing them of playing a role in human rights violations, environmental wrongdoing and labor abuses. Exxon Mobil Corp., Coca-Cola Co., Pfizer Inc., Unocal Corp., Chevron Corp., Daimler AG and Ford Motor Co. have all been sued under the Alien Tort Statute.
The decision didn’t preclude the possibility of suits against U.S.-based corporations. In a concurring opinion, Justice Samuel Alito suggested that those companies could be sued in U.S. court even without the Alien Tort Statute.
The high court said in 2013 that the Alien Tort Statute generally doesn’t apply to conduct beyond U.S. borders. Lower courts then dismissed 70 percent of the 40 cases that had been pending, according to the victims’ lawyer in the Arab Bank case.
The law, enacted in part because of an attack on a French diplomat in Philadelphia, contains only 33 words. It reads: “The district courts shall have original 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.”
Arab Bank contended that language doesn’t cover corporations because there’s no consensus around the world that they can be found liable under international law. The victims pointed to the general principle in U.S. law that corporations can be held liable for wrongdoing.
The company said in a statement that it “is pleased with the court’s decision, which ends this litigation and affirms the bank’s belief that there is no basis to hold corporations liable under international law.”
Justices Sonia Sotomayor, Ruth Bader Ginsburg, Stephen Breyer and Elena Kagan dissented.
Writing for the group, Sotomayor said the ruling lets companies benefit from their corporate status “without having to shoulder attendant fundamental responsibilities.”
“The unique power that corporations wield can be used both for good and for bad,” Sotomayor wrote. “Just as corporations can increase the capacity for production, so, too, some can increase the capacity for suffering.”
Chief Justice John Roberts and Justices Alito, Clarence Thomas and Neil Gorsuch joined Kennedy in the majority. Alito and Gorsuch wrote separately to say they didn’t agree with all of Kennedy’s reasoning.
Gorsuch pointed to what he called “more fundamental reasons” for throwing out the lawsuit. He said courts over the years had overstepped their authority by allowing Alien Tort Statute suits to go forward.
“We should refuse invitations to create new forms of legal liability,” Gorsuch wrote. “And we should not meddle in disputes between foreign citizens over international norms.”
The Supreme Court considered the corporate liability question in the 2013 case but didn’t rule on the issue at the time. Most federal appeals courts to consider the issue had said the law allows suits against corporations, as well as individuals. The exception was the New York-based appeals court that threw out the Arab Bank case.
The case is Jesner v. Arab Bank, 16-499.
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