Corporate Social Responsibility and the Law : Foley Hoag LLP

Last week, the Ninth Circuit Court of Appeals reversed and remanded a lower court's decision to dismiss Bauman v. DaimlerChrysler Corp. The case involves allegations by residents of Argentina stating that one of DaimlerChrysler's subsidiaries, Mercedes-Benz Argentina, collaborated with state security forces to kidnap, detain, torture and/or kill plaintiffs or their relatives during Argentina's "Dirty War."  Plaintiffs have asserted claims under both the Alien Tort Statute ("ATS") and the Torture Victims Protection Act.

The District Court for the Northern District of California had held that plaintiffs could not properly assert personal jurisdiction over defendant DaimlerChrysler AG (now known as Daimler AG). Bauman v. DaimlerChrysler AG, 2005 WL 3157472 (N.D. Cal. 2005), Bauman II, 2007 WL 486389 (N.D. Cal. 2007). Plaintiffs sought to assert jurisdiction over DaimlerChrysler AG through its wholly-owned U.S.-based subsidiary Mercedes-Benz USA, LLC.

The Ninth Circuit's decision that personal jurisdiction is proper in this case (assuming all plaintiffs' allegations are true) relied upon a traditional minimum contacts analysis. The decision does not address questions of subject matter jurisdiction and the validity of specific claims under the ATS.  Nor does it address the question of whether corporations are proper defendants under the ATS.

That said, in addressing whether California has an interest in adjudicating the suit, the Court observed that "California partakes in 'the shared interest of the several States in furthering fundamental substantive social policies.'" (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980). Continuing on, the Court stated that

as the [plaintiffs'] claims are predicated upon the ATS and TVPA, that policy is providing a forum to redress violations of international law by defendants who have enough connections with the United States to be brought to trial on our shores, even though the injury is to aliens and occurs outside our borders...American federal courts, be they in California or any other state, have a strong interest in adjudicating and redressing international human rights abuses.

As American courts continue to evaluate the ultimate impact of Kiobel v. Royal Dutch Petroleum, 621 F.3d 111 (2d Cir. 2010) (in which the Second Circuit found that corporations are not proper defendants under the ATS), the Ninth Circuit's decision in Bauman is a reminder of the divisions between the appellate courts on the nature and import of the policy considerations at issue in these cases.

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Foley Hoag recently issued commentary on the Guiding Principles on Business and Human Rights. As noted in an earlier post, an advance copy of the Guiding Principles was released in March by the U.N. Special Representative for Business and Human Rights, John Ruggie. The Principles will be considered by the U.N. Human Rights Council at its June 2011 session.

As noted in our commentary (a copy of which is available here)

The Principles are not binding international law. Nevertheless, they are the most authoritative international statement to date regarding the responsibilities of business with respect to human rights. It is likely that they will begin to influence national law and policy in jurisdictions including the United States and Europe.

The immediate value of the Principles is the guidance they provide to companies seeking to understand and manage the human rights impacts of their operations. The Principles set forth the central components of human rights due diligence and suggest that all companies should undertake such due diligence efforts with regard to their operations. We believe that human rights due diligence can help companies avoid and mitigate adverse human rights impacts which, in turn, can reduce legal, reputational, and operational risks.

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Earlier this week, a coalition of companies, investors, and organized labor announced a major new initiative in support of sustainable business practices. The Investor-Business Roundtable for a Sustainable Economy was launched during the 2011 Ceres Conference. Founding signatories include CalPERS and CalSTRS, the AFL-CIO, Levi Strauss & Co., Pacific Gas & Electric, SAP, Jones Lang LaSalle, Generation Investment Management, and the Skoll Foundation.

Participants in the Roundtable have agreed to leverage their position as "industry leaders and key market influencers to accelerate adoption of sustainability approaches and solutions across [their] networks, including employees, customers, supply chains, media and marketing." (.pdf) Individual commitments made by the founding signatories include:

• Levi Strauss & Co. announced new "terms of engagement" for its supply chain under which the company "will require contract factories to help make employees’ lives better by supporting programs for their workers that align with the UN Millennium Development goals."
• CalPERS, the largest pension fund in the United States, announced that it would integrate environmental, social, and governance factors into its investment decision-making across all asset classes.
• SAP, one of the largest business software companies in the world, announced that it will release new energy management solutions in the next quarter to assist companies in implementing energy saving initiatives. SAP estimates that its 170,000 customers emit 1/6th of the world's manmade greenhouse gas emissions.

In addition to the nine founding signatories, Ceres has said that it intends to engage more organizations in future Roundtable meetings. The Roundtable has its origins in a meeting hosted by Ceres and CalPERS in December 2010 which brought together companies, investors, and labor groups to discuss global sustainability challenges. The launch of the Roundtable highlighted the 21st Century Corporation: The Ceres Roadmap to Sustainability, a report and framework announced last year that is intended to help companies imbed sustainability into all aspects of their operations.  

Also this week, CalPERS and CalSTRs announced that they will join a group of more than twenty other investors in sending letters to all companies in the Russell 1000 index requesting that management teams and boards of directors address sustainability challenges in all aspects of company operations, including supply chains. The Russell 1000 tracks the largest 1000 U.S. securities.

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