Continuing with its remote hearings by telephone, with the “live” broadcasts of the audio portion, the Supreme Court on Tuesday will look into child slavery in Africa and into a federal tax dispute that has its origins back in the Civil War era.  The broadcasts are expected to be available online at C-SPAN.org/supreme court

First hearing, starting at 10 a.m.:

Nestle USA v. Doe 1, Cargill, Inc., v. Doe 1 

Background:  A law as old as the nation, enacted in the first Congress in 1789, has had a modern revival over the past half-century, providing a potential remedy in U.S. courts for human rights abuses in foreign countries.  In more recent years, however, the Supreme Court has been repeatedly narrowing its scope.  A new attempt to do so is now before the Justices in a case involving claims of child slavery in the cocoa bean fields in an African nation, the Ivory Coast.  The targets of those claims are two major U.S.-based companies that produce chocolate products.

The law at issue, called the Alien Tort Statute, does not create any specific rights itself, but it does establish the federal courts in this country as a potential forum for foreign individuals to claim violations of international law or of U.S. treaties and to seek remedies.   The entire text of the law reads: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.”

Originally, the law dealt only with disputes arising in diplomatic dealings between nations, and some crimes, such as piracy.  Beginning in the middle of the 20^th Century, however, a new international focus on human rights violations set the stage for an expansion of the law’s reach.  The law had a particular attraction because those who survived overseas atrocities, or their families, usually had no remedies in their home countries.  The law also was found to be useful when those who carried out such abuses came to live in the U.S., exposing them to ATS lawsuits.

The move to expand the ATS began to succeed in 1976, when a federal appeals court ruled that family members of a young man who had been tortured and killed while in police custody in Paraguay could sue one of the perpetrators, who had been found living in the U.S.  A variety of lawsuits followed, leading the Supreme Court in 2004 to specify two steps that such a legal claim had to follow: first, the type of legal claim made had to be specific, widely recognized, and carry obligations under international law, and, second, the claim had to be appropriate for resolution by a court of law.

From time to time, since then, the Court has told U.S. judges to use caution in recognizing new types of claims that could be pursued under the law.  But beyond that cautionary note, the Court has several times actually narrowed the ATS significantly.

In a decision in 2012, it ruled that the law was not intended to have broad reach beyond U.S. borders, so the claims had to have a strong foundation of evidence from inside this country.  It is not enough, it stressed, that a company sued for something that happened abroad merely had its headquarters in the U.S.

Then, in a ruling in 2018, the Court said that foreign-based corporations could not be sued at all under the ATS.  It hinted in that ruling that it was skeptical, as a general proposition, that international law imposed binding legal obligations on business firms operating as corporations.  It left open, though, the question of whether U.S.-based corporations were immune to ATS claims.

That is exactly the issue that the Justices have now agreed to decide.

The question arises in lawsuits filed by former children who worked in cocoa bean farming in the Ivory Coast; they claimed that they were enslaved by those who ran the farms, and that two major corporations based in the U.S. – Nestle USA Inc. and Cargill Inc. – “aided and abetted” the enslavement because they bought beans from those farms and provided technical assistance to their managers.

Lower federal courts ruled that domestic corporations could be sued for allegedly violating international law against slavery, and that aiding-and-abetting slavery could be claimed.  The two companies appealed to the Supreme Court.  At the request of the Court for the U.S. government’s views, the Trump Administration urged the Justices to settle both issues.

Questions before the Court:  Can U.S-based corporations be sued for overseas human rights abuses, under the Alien Tort Statute and, if so, is aiding and abetting such abuses covered by the law?

Significance:  Although the international legal community strongly condemns slavery in any form, and although that adds a strong desire that there be a legal remedy for it, the trend that the Supreme Court has been following in recent years makes this a difficult case for the lawyers representing the Africans to win a case in U.S. courts.

As noted, that trend has followed three main paths: excluding altogether some categories of businesses that are targets for human rights abuse claims, expressing skepticism about recognizing new legal bases for liability for such abuses, and tightening the requirement that abuses must have a direct link to conduct that occurred inside the U.S.

While each of those approaches has narrowed the ATS, the Court has simultaneously shown a general skepticism about recognizing new constitutional claims even under purely domestic U.S. law.

Added to those factors is the Court’s increasing insistence that laws written to deal with legal wrongs that occur inside the U.S. should not apply overseas, unless Congress has made it very clear that it intended such a reach.

Thus, the chances are strong that American courts will increasingly have less to do with enforcing the old 1789 law, and that human rights abuses will have to be dealt with, more often, by persuading Congress or international legal bodies to strengthen their methods for dealing with atrocities that occur outside the U.S.

Second hearing, starting at about 11 a.m.: 

CIC Services v. Internal Revenue Service 

America’s federal income tax system traces its origins to 1862, when President Lincoln, coping with the rising cost of the Civil War, persuaded Congress to adopt the first income tax, which lasted only ten years. (Up until then, the main source of revenue to fund the federal government were tariffs on imported goods.) The forerunner of the Internal Revenue Service was set up at that time to devise rules for collecting the tax.

In 1867, Congress passed the first version of a law that would help keep the income tax revenue flowing in.  Under that law (now known as the “Anti-Injunction Act”), Americans cannot sue to stop regulations on tax collection; they have to pay first, then sue for a refund on the theory that the rules were illegal.

The law’s bar to lawsuits does not block the federal courts from deciding all types of tax cases, but only those that seek to challenge the actual collection of a tax.  The idea, founded in Lincoln’s need for money on an ongoing basis to pay for the Civil War, is that collection itself must not be interrupted by a court case.

That is not true of most other regulatory rules or regulations issued by federal agencies.  Under a 1946 law (the Administrative Procedure Act), people and organizations are free to challenge most agency rules before obeying them, so they don’t have to violate a regulation in order to test its validity.  Such lawsuits are very common.

The differing treatment for tax collection is under review again in the Supreme Court.  The case grows out of worries in Congress in the early 2000s that large sums of tax revenue were being lost because otherwise taxable funds were being put into so-called “shelters,” insulated from taxation.

Congress gave the IRS power to gather information about tax shelters.  IRS then wrote a guidance document that imposed extensive reporting requirements for financial transactions that potentially could be diverting taxable funds.  Heavy penalties were added for violations, and among those penalties was itself a form of a tax.

At the center of this case is a financial services company, CIC Services, which provides professional advice to business firms that set up their own internal operations to insure themselves, rather than obtaining insurance from outside companies.  Fearing that the kinds of transactions its clients were carrying out might require CIC to obey the IRS reporting requirements, CIC sued to challenge them.

IRS defended itself in court by arguing that the suit was barred by the Anti-Injunction Act, because it was an attempt to stop IRS from collecting the tax that would serve as a penalty for disobeying the reporting rules.  CIC countered that it was not challenging that penalty, but only the reporting regulations.   Lower courts sided with the IRS, concluding that CIC’s challenge, if successful, would stop IRS from collecting the penalty tax.  CIC took the issue to the Supreme Court, noting that lower courts are split on how to interpret the old Act.

The significance of the case is largely limited to the tax field, since the outcome will primarily affect the power of the IRS to insulate its tax rules from court challenge, simply by making the penalty for violation a form of tax.  The outcome, though, might be broader, clarifying the interaction between the Anti-Injunction Act and the Administrative Procedure Act that normally permits pre-enforcement lawsuits against federal agency action.

On Wednesday, the Court will hold a hearing on only one case.