November 28, 2021

Volume XI, Number 332

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International Plaintiffs’ Suit Jammed for Lack of Jurisdiction: District Court Precludes Plaintiffs’ Claims for Overseas Harms

Courts exist to adjudicate claimed harms. However, not every court can hear every claim. A recent D.C. district court decision in Jam v. Int’l Fin. Corp. emphasizes how difficult it can be for international plaintiffs to bring U.S. lawsuits for torts occurring abroad. The key holding in Jam – similar to other recent cases – is that just because a corporation makes general decisions about financing or operations in the United States does not mean every plaintiff can sue them in this country for harms occurring abroad. These cases’ holdings indicate that U.S. courts are limiting plaintiffs’ ability to bring suits for tortious activity abroad. As a result, many tort cases focused on international harms likely can be dismissed when the case’s only nexus to the United States is general corporate decision making.

Some facts about the case. In Jam, farmers and fishermen in Gujarat, India, sued the International Finance Corporation (IFC) in D.C. federal court for harms caused by the construction of Tata Mundra, a coal-fired power plant in India. The IFC is an international development bank headquartered in the United States that finances private-sector development projects in developing countries. Relevant here, in 2008, the IFC loaned $450 million to an Indian company called Coastal Gujarat Power Limited to help finance the construction of the power plant. The loan agreement required Coastal Gujarat to comply with an environmental and social action plan to protect the area surrounding the plant from environmental damage. However, according to the plaintiffs, the company did not comply with the plan, and the plant’s pollution contaminated the surrounding air, land, and water. Plaintiffs brought several tort claims against the IFC for damages from the pollution, claiming that they inadequately supervised the company’s implementation of the environmental and social action plan.

The district court initially dismissed the case for lack of subject-matter jurisdiction because the D.C. Circuit had held that international organizations (IOs) like the IFC enjoyed virtually absolute immunity from being sued in the United States. The International Organizations Immunities Act (IOIA) – a federal statute – grants IOs the “same immunity from suit . . . as is enjoyed by foreign governments.” When the IOIA was passed, foreign governments enjoyed virtually unlimited immunity from suit in the United States, and the district court applied that absolute immunity to the IFC. The district court’s decision was affirmed by the D.C. Court of Appeals, but reversed by the U.S. Supreme Court.

In the Supreme Court’s interpretation, the IOIA gives IOs the level of immunity currently enjoyed by foreign governments rather than the level enjoyed when the act was passed. Foreign countries’ immunity is currently limited by the Foreign Sovereign Immunities Act (FSIA), which was passed after the IOIA. The FSIA contains several exceptions to the absolute immunity previously enjoyed by foreign countries. One, relevant to this case, is the commercial activity exception, which allows plaintiffs to bring claims against foreign governments if they are “based upon a commercial activity carried on in the United States by the foreign state.” The Supreme Court held that the commercial exception could apply to the IFC because IOs are subject to the level of immunity currently provided by the FSIA. However, the court indicated that IOs could negotiate for broader immunity by agreement, such as by including a provision for broader immunity in their charter. The Supreme Court remanded the case to determine if the commercial exception applied.

On remand, the district court held that the commercial activity exception did not apply. Since the court held that the core of the lawsuit was tortious activity abroad, the suit was not “based on” commercial activity in the United States. The district court dismissed the complaint because the wrongful conduct occurred in India and led to injuries in India. The core of plaintiff’s complaint was based on the IFC’s failure to ensure that the plant was safely constructed and operated in India rather than on the IFC’s approval of the loan in the United States. In determining what constitutes the core of a complaint, the court articulated that the “point of contact” or place of injury in a tort case, usually controls whether the conduct was carried on in the United States. This analysis will make it more difficult to bring U.S. claims for tortious activity occurring abroad.

The decision is not an outlier. While Jam is FSIA-focused, its reasoning is similar to a recent Supreme Court decision in Nestle USA, Inc. v. Doe et al., which limited the extraterritorial reach of the Alien Tort Statute (ATS). The ATS gives international plaintiffs the ability to bring federal lawsuits for torts that violate international law. In Nestle, the Supreme Court dismissed a suit against two U.S. companies for aiding and abetting the use of child slavery on cocoa farms in the Ivory Coast. The companies’ liability allegedly stemmed from their purchase of cocoa from farms in the Ivory Coast and provision to the farms of technical and financial resources in exchange for the exclusive right to buy cocoa.

The Supreme Court first stated that the ATS does not apply to conduct that occurred outside of the United States. The Supreme Court then held that the presence of the defendants in the United States and the fact that they engaged in general corporate activity and decision-making domestically were not enough to establish that the tort occurred domestically. Since the main conduct of supporting the cocoa farms occurred in the Ivory Coast, the Supreme Court reversed the Ninth Circuit’s holding that the plaintiffs had pleaded a domestic application of the ATS.

Meera Gorjala is a summer associate in Schiff Hardin’s Chicago office who contributed to this article.

© 2021 Schiff Hardin LLPNational Law Review, Volume XI, Number 218
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About this Author

J. Michael Showalter, Litigator, Schiff Hardin LLP
Associate

Mike Showalter is a litigator whose practice is focused on resolving complex disputes. Mr. Showalter's past clients span diverse industries including manufacturing, mining, power generation and transmission, oil and gas, the financial and insurance sectors, and process outsourcing.

Mr. Showalter's practice has focused on distilling complicated technical information into a format where it can be understood by decision makers. He has worked with experts in fields including medicine, economics, history, physical sciences, industrial hygiene, toxicology, environmental engineering and...

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