U.S. corporations can be held liable for human rights abuses abroad, Ninth Circuit rules.

In a case of first impression, a three-judge panel of the Ninth Circuit recently ruled that domestic corporations can be sued in U.S. courts for aiding and abetting human rights abuses in foreign countries. The decision was hailed as a victory by human rights and corporate-responsibility advocates, who said it vastly expands the potential liability of international corporations and could force them to change the way they conduct business in countries with tyrannical governments. (Doe v. Unocal Corp., 248 F.3d 915 (9th Cir. 2002).)

The ruling came in years-long litigation over whether Unocal Corp., a California-based natural gas drilling company, knew of and ignored reports that soldiers in the Myanmar military--which had been hired to guard the company's construction of a gas pipeline in that country (formerly known as Burma)--engaged in a campaign of intimidation and violence to force people who lived near the construction site to work on the project.

The plaintiffs are Myanmar villagers who claim that men were beaten into compliance or dragged from their homes; women were raped in the presence of their families; whole villages were told to relocate, forcing residents to abandon farms that sustained them; and villagers who grew too sick to work on the pipeline were summarily executed. Unocal officials knew about these abuses, the plaintiffs claim, but did nothing to stop them.

"We were very pleased with the panel's decision," said Terry Collingsworth, executive director of the Washington, D.C.based International Labor Rights Fund, which represents some of the villagers. "It's the first time an appellate court has ruled that a domestic corporation can be held liable for human rights violations abroad," he said.

In a statement issued after the court's decision, Unocal strongly denied the allegations, saying the villagers' claims "have no basis in law or fact" and were filed for "political--not legal--purposes." At press time, the company had petitioned the court for a rehearing.

The six-year-old case has followed a tortuous procedural path through the justice system. In 1996, two groups of villagers filed separate lawsuits against Unocal in federal court, alleging violations of the Alien Tort Claims Act (ATCA), an 18th-century federal statute allowing foreigners to sue U.S. citizens for abuses committed abroad. Although the two cases have not been consolidated, they have proceeded together, and Collingsworth said plaintiff counsel in both are cooperating.

In 2000, a federal district court judge granted Unocal's motion to dismiss the plaintiffs' federal claims, finding that the company's conduct did not meet an "active participation" standard adopted during the Nuremberg war crimes trials for atrocities committed by German companies in forced-labor camps run by Nazis.

The plaintiffs simultaneously appealed that decision and filed state claims based on vicarious liability theories. In July, Los Angeles County Superior Court Judge Victoria Chaney denied a motion to dismiss the state claims; a February trial date has been set. Two months after Chaney's decision, the Ninth Circuit issued its ruling, finding that the district court had erred in applying the "active participation" standard to the plaintiffs' claims. Instead, the appellate court said, recent decisions by the international criminal tribunals for the former Yugoslavia and for Rwanda were more appropriate than those by the Nuremberg court to ascertain "the current standard for aiding and abetting under international law as it pertains to the ATCA."

To succeed, the Ninth Circuit found, the plaintiffs would need to show that Unocal knew or had reason to know of the alleged offenses and provided "practical assistance or encouragement [that had] a substantial effect on the perpetration of the crime." Evidence gathered by the plaintiffs met this standard, the court said.

"The military, while forcing villagers to work ...,committed numerous acts of violence; and ... Unocal knew or should have known that the military did commit, was committing, and would continue to commit these tortious acts," the court said. "Moreover, Unocal knew or should reasonably have known that its conduct--including the payments and the instructions where to provide security and build infrastructure-would assist or encourage the Myanmar military to subject plaintiffs to these acts of violence.... Thus, because Unocal knew that acts of violence would probably be committed, it became liable as an aider and abettor when such acts of violence--specifically, murder and rape--were in fact committed."

If the plaintiffs are successful, damages would be substantial, said Richard Herz, litigation director for Earthrights International, a human rights advocacy group based in Washington, D.C., that represents some of the villagers.

"We are talking about a lot of money. We haven't asked for a specific amount, but any award would certainly be in the millions or tens of millions of dollars. That would include compensatory and punitive damages," Herz said.

A trial date has not yet been set in the federal case, but Collingsworth said it did not matter much which suit went to trial first because "essentially, the theories in the two cases are the same. As a practical matter, if we prevail in state court it is extremely unlikely that we would not have res judicata applied in the federal action."

Several similar cases are pending against other U.S. corporations--including Chevron Oil Corp., Exxon Mobil Corp., and Coca-Cola Co.--and others may soon follow, Collingsworth said.

Even so, the Ninth Circuit ruling is not likely to usher in a wave of similar suits, said Seattle lawyer Jeffrey Needle, but the litigation is worth watching.

"Corporations who engage in this behavior are lacking the most basic principles of corporate citizenship. They need to be held accountable, and this court said they can be. It's a fabulous decision for human rights--just fabulous," Needle said.