On June 17, 2021 the Supreme Court of the United States issued its ruling on Nestlé USA, Inc., v. John Doe.¹ The court’s decision was decided solely on the extraterritorial jurisdictional and procedural issues presented by Plaintiffs’ case under the Alien Tort Statute (ATS).² As seen in the Court’s opinion and multiple recent cases filed under the Trafficking Victim Protection Act (TVPA), domestic corporations continue to be vulnerable to suits for human rights violations in their supply chains through other avenues.³

In Nestle, former child laborers brought suit against domestic corporations Nestle, Inc., and Cargill, Inc. under the ATS, alleging that the companies aided and abetted child slave labor in sourcing their cocoa from the Ivory Coast notorious for such practices.⁴ In an eight-to-one decision, the Supreme Court denied the former child laborers’ claim under ATS. The Court held that “general corporate activity” on US soil that leads to the use of forced child labor in the supply chain does not overcome the presumption against extraterritoriality.

This decision did not immunize said chocolatiers from liability for forced labor in the supply chain in future litigation. While the Court rejected the case on procedural and jurisdictional grounds, concurring Justices Sonia Sotomayor, Elena Kagan, and Stephen Breyer indicated that a similar case could be brought under the TVPA.⁵ “Congress authorized victims of slavery to sue perpetrators under the TVPA,” Justice Sotomayor explained, and pointed to the continuing viability of suits under the ATS “insofar as the plaintiffs seek a domestic application.”⁶

Continuing battles

Currently, pending cases have taken the TVPA approach Justice Sotomayor suggested. One case filed in the US District Court for the District of Columbia, Coubaly v. Cargill, Inc., alleges that defendants, including US chocolate companies, committed human rights violations by “knowingly profit[ing] from the forced labor of children performing hazardous work harvesting… cocoa.”⁷ They highlight Nestle’s cost-cutting decisions to continue utilizing cocoa produced by forced child labor despite committing to reduce its prevalence in their supply chain in 2001. Plaintiffs further assert that, unlike ATS, TVPA provides a “forum for such human rights lawsuits” and “specifically provides for extraterritorial jurisdiction.”⁸

A case in the Northern District of California, John Doe v Twitter, Inc., is awaiting a ruling on defendant’s motion to dismiss, scheduled for July 2021.⁹ While this case does not involve extraterritorial forced child labor, the California court’s decision could define key TVPA terms and create precedent for future cases brought under this statute. This string of TVPA cases suggests that victims and advocates may continue to hold domestic corporations accountable for forced labor or sex trafficking in the supply chain through channels other than ATS.

Takeaways

The Supreme Court decision in Nestle does not represent the end of potential claims against US companies which use forced labor outside the US directly or through their supply chains. Rather, it limits the jurisdiction and scope of one law -- the ATS -- and leaves open alternative avenues plaintiffs can pursue.

There remain other judicial avenues for companies to be held accountable in the US court system, such as the TVPA. The ATS also remains viable for domestic torts, as the Supreme Court did not call its constitutionality into question. Regardless of which avenue plaintiffs choose, companies may still face liability.

In addition, US Government and State legislatures and regulators are addressing these very issues.  Examples of the increasing compliance requirements include the California Transparency in Supply Chain Act and SEC required corporate disclosures. The California law requires companies to share their “efforts to eradicate slavery and human trafficking” in their supply chains.¹⁰ While the Dodd-Frank Act currently requires certain limited disclosures, the SEC recently held a comment period to solicit input on national disclosure standards for Environmental, Social and Governance (ESG) issues, including forced labor.¹¹ On June 16, 2021 the House of Representatives even signaled its support for increased corporate ESG disclosures by passing the Corporate Governance Improvement and Investor Protection Act.¹² Abroad, many countries have already taken action on ESG issues in the supply chain. For example, the United Kingdom passed its Modern Slavery Act in 2015 and in June 2021, Germany followed suit with the Corporate Due Diligence in Supply Chains Act.¹³ With domestic and international ESG regulations on the rise, companies must be vigilant to stay compliant.

Investors and companies, as part of their ongoing and expanding ESG compliance programs, are requiring full compliance and investigation of supply chain partners to prevent and exclude forced labor. Despite the outcome of Nestle, the continued risk of liability and rising number of regulations suggests companies need to take a hard look at their supply chain. Proactive company behavior, such as adopting supplier codes of conduct, building in audit rights, and implementing employee training, may help organizations adapt and stay compliant in the evolving regulatory environment.

For any questions on how the recent Nestle decision or upcoming legal developments may affect your organization, please reach out to one of the key contacts listed.

^{1 See Nestle USA, Inc. v. John Doe, No. 19-416, 2021 WL 2459254 (2021).}

^{2 28 U.S.C. §1350 (2018).}

^{3 22 U.S.C. §78 (2018).}

^{4 See John Doe 1 v. Nestle, S.A., 78 F.Supp.2d 1057, 1064 (N.D. Cal. 2010).}

^{5 See Nestle USA, No. 19-416 at 9.}

^{6 Id. at 11.}

^{7 See Complaint for Plaintiff at 1, Coubaly et al. v. Cargill, Inc. et al., 1:21-CV-00386 (D.C. Cir. filed Feb. 12, 2021).}

^{8 18 U.S.C. §1596(a) (2018).}

^{9 See Complaint for Plaintiff, John Doe v. Twitter, Inc., 2021 WL 226066 (N.D. Cal. Filed Jan. 20, 2021).}

^{10 Cal. Civ. Code §1714.43 (2021).}

^{11 12 U.S.C. §53 (2018).}

^{12 H.R. 1187, 117th Cong. (2021).}

^{13 Modern Slavery Act of 2015, 69 Eliz. 2 c. 30, §1 (UK); Germany Passes Law on Tougher Oversight of Supply Chains, Reuters, (June 11, 2021 7:52 AM) https://www.reuters.com/article/us-germany-companies-supply-chains-idUSKCN2DN1AV).}