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Thursday, April 18, 2013

The Kiobel Territorial Nexus Test: I Know It When I Don’t See It

Yesterday’s Kiobel opinion has forced me to take a time-out from my series on post-Kiobel corporate liability to actually talk about the opinion.  As Howard began explaining moments ago, the majority opinion invoked the presumption against extraterritorial application, relying on Morrison v. Australian National Bank (a securities case involving the Exchange Act).  I have long felt that despite the factual similarities (a foreign plaintiff suing a foreign defendant for foreign conduct), relying on Morrison would likely produce a frustratingly vague opinion.  And guess what . . .

The Morrison court found in 2010 that the Exchange Act’s explicit focus is the domestic securities markets.  It thus held that the act applies only to domestic securities transactions; this is the beloved transaction test.  Having clearly articulated a line, the Court explained that the Morrison facts crossed it.  But Kiobel articulates no such line; it provides no real analogue to Morrison’s transaction test.  

In fairness, the opinion provides something, a “sufficient force” test:  the conduct must touch and concern the territory of the U.S. with sufficient force to displace the presumption against extraterritoriality. But it’s plainly a stop-gap measure:  it appears in the penultimate paragraph, and the Court doesn’t even bother applying it to the facts.  I think we can tell why.  Egads.

It may be fair to say that Kiobel takes Justice Potter Stewart’s definition of obscenity and turns it on its head:  rather than “I know it when I see it,” Kiobel gives us “I know it when I don’t see it.”  It tells us that the Kiobel facts do not satisfy the territorial nexus -- I guess they don’t touch and concern U.S. territory with sufficient force -- but unlike Morrison, provides almost no guidance on which facts would.  Justice Kennedy, in concurring, finds this “the proper disposition” because it “leaves open a number of significant questions.”  That’s an understatement.  Justice Kennedy, we’ll recall, seemingly did not wish to leave open such questions in Morrison, signing on to Justice Scalia’s opinion.  

So the next generation of ATS litigation (such as it may be, given that most current and prospective ATS cases will probably fail the sufficient force test) will likely focus to a large extent on the territorial nexus question.  As for predictability, that stated aim of the presumption against extraterritorial application?  Oh well.

Posted by Andy Spalding on April 18, 2013 at 11:45 AM | Permalink

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Comments

If perhaps you and your readers are interested, there's a "Kiobel Insta-Symposium" taking place at Opinio Juris, with about half a dozen posts to date.

Posted by: Patrick S. O'Donnell | Apr 18, 2013 12:47:24 PM

Very well put, Andy. Another frustratingly opaque ATS decision that almost seems designed to keep legal scholars fully employed for decades.

Posted by: Rob Knowles | Apr 18, 2013 2:30:48 PM

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