Doe v. Nestle, S.A.

• Decision Date: 23 October 2018
• Docket Number: No. 17-55435,17-55435
• Citation: 906 F.3d 1120
• Parties: John DOE, I; John Doe, II; John Doe, III; John Doe, IV; John Doe, V; and John Doe, VI, each individually and on behalf of proposed class members, Plaintiffs-Appellants, v. NESTLE, S.A.; Nestle USA, Inc.; Nestle Ivory Coast; Cargill Incorporated Company; Cargill Cocoa; Cargill West Africa, S. A.; Archer Daniels Midland Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

906 F.3d 1120

John DOE, I; John Doe, II; John Doe, III; John Doe, IV; John Doe, V; and John Doe, VI, each individually and on behalf of proposed class members, Plaintiffs-Appellants,

v.NESTLE, S.A.; Nestle USA, Inc.; Nestle Ivory Coast; Cargill Incorporated Company; Cargill Cocoa; Cargill West Africa, S. A.; Archer Daniels Midland Company, Defendants-Appellees.

No. 17-55435

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 7, 2018 Pasadena, California

Filed October 23, 2018

Paul L. Hoffman (argued), John Washington, and Catherine Sweetser, Schonbrun Seplow Harris & Hoffman LLP, Los Angeles, California; Terrence P. Collingsworth, International Human Rights Advocates, Washington, D.C.; for Plaintiffs-Appellants.

Theodore J. Boutrous, Jr. (argued), Abbey Hudson, Matthew A. Hoffman, and Perlette Michèle Jura, Gibson Dunn & Crutcher LLP, Los Angeles, California; Christopher B. Leach and Theodore B. Olson, Gibson Dunn & Crutcher LLP, Washington, D.C.; Colleen Sinzdak, David M. Foster, Craig A. Hoover, and Neal Kumar Katyal, Hogan Lovells US LLP, Washington, D.C.; for Defendant-Appellee Nestlé USA, Inc.

Andrew John Pincus (argued) and Kevin S. Ranlett, Mayer Brown LLP, Washington, D.C.; Lee H. Rubin, Mayer Brown LLP, Mayer Brown LLP, Palo Alto, California; for Defendant-Appellee Cargill Incorporated.

Marc B. Robertson and Richard A. Stamp, Washington Legal Foundation, Washington, D.C., for Amicus Curiae Washington Legal Foundation.

Before: Dorothy W. Nelson and Morgan Christen, Circuit Judges, and Edward F. Shea,^* District Judge.

Concurrence by Judge Shea

OVERVIEW

D.W. NELSON, Circuit Judge:

Plaintiffs-Appellants ("Plaintiffs"), former child slaves who were forced to work on cocoa farms in the Ivory Coast, filed a class action lawsuit against Defendants-Appellees Nestle, SA, Nestle USA, Nestle Ivory Coast, Archer Daniels Midland Co. ("ADM"),¹ Cargill Incorporated Company, and Cargill West Africa, SA ("Defendants"). In their Second Amended Complaint, plaintiffs alleged claims for aiding and abetting slave labor that took place in the United States under the Alien Tort Statute, 28 U.S.C. § 1350 ("ATS"). The district court dismissed the claims below based on its conclusion that plaintiffs sought an impermissible extraterritorial application of the ATS. We reverse and remand. In light of an intervening change in controlling law, we think it unnecessary to consider the other issues this case presents at this juncture.

BACKGROUND

I. Factual Background

We discussed much of the factual background of this case in Doe I v. Nestle USA, Inc ., 766 F.3d 1013 (9th Cir. 2014) ("Nestle I "). Child slavery on cocoa farms in the Ivory Coast, where seventy percent of the world’s cocoa is produced, is a pervasive humanitarian tragedy.

Plaintiffs are former child slaves who were kidnapped and forced to work on cocoa farms in the Ivory Coast for up to fourteen hours a day without pay. While being forced to work on the cocoa farms, plaintiffs witnessed the beating and torture of other child slaves who attempted to escape.

Defendants are large manufacturers, purchasers, processors, and retail sellers of cocoa beans. Several of them are foreign corporations that are not subject to suit under the ATS. Jesner v. Arab Bank , ––– U.S. ––––, 138 S.Ct. 1386, 1407, 200 L.Ed.2d 612 (2018). The effect of Jesner in tandem with plaintiffs' habit of describing defendants en masse presents a challenge we address below. For now, we describe the case as plaintiffs present it. We take their plausible allegations as true and draw all reasonable inferences in their favor. See Nestle I , 766 F.3d at 1018.

Because of their economic leverage over the cocoa market, defendants effectively control cocoa production in the Ivory Coast. Defendant Nestle, USA is headquartered in Virginia and coordinates the major operations of its parent corporation, Nestle, SA, selling Nestle-brand products in the United States. Every major operational decision regarding Nestle's United States market is made in or approved in the United States. Defendant Cargill, Inc. is headquartered in Minneapolis. The business is centralized in Minneapolis and decisions about buying and selling commodities are made at its Minneapolis headquarters.

Defendants operate with the unilateral goal of finding the cheapest source of cocoa in the Ivory Coast. Not content to rely on market forces to keep costs low, defendants have taken steps to perpetuate a system built on child slavery to depress labor costs. To maintain their supply of cocoa, defendants have exclusive buyer/seller relationships with Ivory Coast farmers, and provide those farmers with financial support, such as advance payments and personal spending money. 19 Malian child slaves were rescued from a farm with whom Cargill has an exclusive buyer/seller relationship. Defendants also provide tools, equipment, and technical support to farmers, including training in farming techniques and farm maintenance. In connection with providing this training and support, defendants visit their supplier farms several times per year.

Defendants were well aware that child slave labor is a pervasive problem in the Ivory Coast. Nonetheless, defendants continued to provide financial support and technical farming aid, even though they knew their acts would assist farmers who were using forced child labor, and knew their assistance would facilitate child slavery. Indeed, the gravamen of the complaint is that defendants depended on—and orchestrated—a slave-based supply chain.

II. Procedural History

Plaintiffs began this lawsuit over a decade ago, and we had occasion to consider it once before in Nestle I . On remand after Nestle I , defendants moved to dismiss the operative complaint and the district court granted the motion. In its order, the district concluded that the complaint seeks an impermissible extraterritorial application of the ATS because defendants engaged domestically only in ordinary business conduct. The district court did not decide whether plaintiffs stated a claim for aiding and abetting child slavery.

Plaintiffs timely appealed.

STANDARD OF REVIEW

We review a dismissal for lack of jurisdiction de novo. Corrie v. Caterpillar, Inc. , 503 F.3d 974, 979 (9th Cir. 2007) (citing Arakaki v. Lingle , 477 F.3d 1048, 1056 (9th Cir. 2007) ). "A dismissal for failure to state a claim is reviewed de novo. All factual allegations in the complaint are accepted as true, and the pleadings construed in the light most favorable to the nonmoving party." Nestle I , 766 F.3d at 1018 (quoting Abagninin v. AMVAC Chem. Corp. , 545 F.3d 733, 737 (9th Cir. 2008) (internal citations omitted) ).

DISCUSSION

The legal landscape has shifted since we last considered this case, including during the pendency of this appeal. The Supreme Court's decisions in Jesner and RJR Nabisco, Inc. v. European Community , ––– U.S. ––––, 136 S.Ct. 2090, 195 L.Ed.2d 476 (2016), require us to revisit parts of Nestle I .

I. Corporate Liability Post-Jesner

In Nestle I , we held that corporations are liable for aiding and abetting slavery after applying three principles from our en banc decision in Sarei v. Rio Tinto, PLC , 671 F.3d 736, 746 (9th Cir. 2011) (en banc), vacated on other grounds by Rio Tinto PLC v. Sarei , 569 U.S. 945, 133 S.Ct. 1995, 185 L.Ed.2d 863 (2013). Nestle I , 766 F.3d at 1022. Our court in Sarei adopted a norm-specific analysis that determines " ‘whether international law extends the scope of liability for a violation of a given norm to the perpetrator being sued.’ " Sarei , 671 F.3d at 760 (quoting Sosa v. Alvarez-Machain , 542 U.S. 692, 732 n.20, 124 S.Ct. 2739, 159 L.Ed.2d 718 (2004) ). "First, the analysis proceeds norm-by-norm; there is no categorical rule of corporate immunity or liability." Nestle I , 766 F.3d at 1022 (citing Sarei , 671 F.3d at 747–48 ). Under the second principle, "corporate liability under an ATS claim does not depend on the existence of international precedent enforcing legal norms against corporations." Id. (citing Sarei , 671 F.3d at 760–61 ). "Third, norms that are ‘universal and absolute,’ or applicable to ‘all actors,’ can provide the basis for an ATS claim against a corporation." Id. (citing Sarei , 671 F.3d at 764–65 ). We reaffirmed these principles in Nestle I and held that since the prohibition of slavery is "universal," it is applicable to all actors, including corporations. Id. at 1022.

As we have noted, the Supreme Court in Jesner held that foreign corporations cannot be sued under the ATS. Jesner , 138 S.Ct. at 1407. Jesner thus abrogates Nestle I insofar as it applies to foreign corporations. But Jesner did not eliminate all corporate liability under the ATS, and we therefore continue to follow Nestle I 's holding as applied to domestic corporations. See Miller v. Gammie , 335 F.3d 889, 893 (9th Cir. 2003) (en banc).

II. Extraterritorial ATS Claim

In Kiobel v. Royal Dutch Petroleum Co. (Kiobel II ) , the Supreme Court held that the ATS does not have extraterritorial reach after applying a canon of statutory interpretation known as the presumption against extraterritorial application, which counsels that "[w]hen a statute gives no clear indication of an extraterritorial application, it has none." 569 U.S. 108, 115, 133 S.Ct. 1659, 185 L.Ed.2d 671 (2013) (citing Morrison v. National Australia Bank Ltd. , 561 U.S. 247, 248, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010) ). The Court acknowledged that the canon is not directly on point given that the ATS "does not directly regulate conduct or afford relief." Id. But given the foreign policy concerns the ATS poses, the Court stated that "the principles underlying the canon of interpretation similarly constrain courts considering causes of action that may be brought under the ATS." Id.

The Court in Kiobel II left the door open to the extraterritorial application of the ATS for claims made under the statute which "touch and concern the territory of the United States ... with sufficient force to...