WASHINGTON (Reuters) - Once again showing keen interest in whether multinational corporations can be sued in U.S. courts for alleged human rights abuses abroad, the U.S. Supreme Court agreed on Monday to hear Daimler AG’s (DAIGn.DE) appeal involving its alleged conduct in Argentina in the 1970s.
Both cases were on hold for a major human rights case that the court decided last week.
In that unanimous decision, the high court limited the ability of human rights plaintiffs to invoke the 1789 Alien Tort Statute when suing companies over alleged collusion with violent foreign governments.
In the Daimler case, workers or relatives of workers at an Argentina-based plant operated by Mercedes-Benz, a wholly owned subsidiary of Daimler, sued over its alleged conduct.
They claimed the company had punished plant workers viewed by managers as union agitators and that it had worked alongside the Argentinian military and police forces.
Both the Daimler and Rio Tinto cases feature Alien Tort Statute claims, and both companies are likely to benefit from last week’s decision. But the Daimler case allows the court to examine other issues that were left open. Both companies deny the allegations against them.
The court held in Kiobel v. Royal Dutch Shell last week that a federal court in New York could not hear claims made by 12 Nigerians who accused Anglo-Dutch oil company Royal Dutch Shell Plc (RDSa.L) of complicity in a crackdown on protesters in Nigeria from 1992 to 1995.
The ruling is expected to make it harder for plaintiffs to bring human rights claims against corporations in U.S. courts if the activity took place overseas.
The legal question in the Daimler case is different. It focuses on whether a U.S. court has the authority to hear a case against a foreign corporation “solely on the fact that an indirect corporate subsidiary performs services on behalf of the defendant” in the state where the federal lawsuit was filed, which in this instance was California.
The plaintiffs said California was a suitable place to file the lawsuit because Mercedes-Benz USA, an indirect subsidiary of Daimler, distributes Daimler cars to dealerships in the state.
A federal judge in the Northern District of California said the relationship between Daimler and the subsidiary was not sufficient.
The San Francisco-based 9th U.S. Circuit Court of Appeals disagreed, outlining in its decision the ways in which the companies worked together on such issues as signage, prices and vehicle servicing standards.
Because the subsidiary’s activities “were sufficiently important” to Daimler, and Daimler also had “the right to substantially control” the other company’s activities, the appeals court concluded that there were “pervasive contacts.”
The Rio Tinto case, which involves allegations by human rights plaintiffs in Papua New Guinea, will now return to the same appeals court. The judges will revisit the claims in light of the Supreme Court’s guidance.
Arguments and a decision in the Daimler case are due in the court’s next term, which starts in October and ends in June 2014.
The cases are Rio Tinto v. Sarei, U.S. Supreme Court, No. 11-649 and Daimler AG v. Bauman, U.S. Supreme Court, No. 11-965.
Reporting by Lawrence Hurley; Editing by Howard Goller, Gerald E. McCormick, Lisa Von Ahn and Jeffrey Benkoe