Monday, May 24, 2010

Sinaltrainal v Coca-Cola Company

On August 11, 2009, the Eleventh Circuit issued its opinion in Sinaltrainal v. Coca-Cola Company, upholding the Southern District of Florida's dismissal of four suits brought under the Alien Tort Statute and the Torture Victims Protection Act against The Coca-Cola Company and its Colombian subsidiary. The Colombian subsidy was the part of Coca-Cola that was allegedly suppressing the workers in violent ways. The plaintiffs alleged that the defendants collaborated with Columbian paramilitary forces to murder and torture trade union leaders in Columbia.

Sinaltrainal stands in stark contrast to the recent trend in federal courts across the country allowing ATS cases filed against multi-national corporations operating abroad to clear various threshold jurisdictional hurdles and move forward to trial. These corporate ATS cases often allege that corporations are vicariously liable, under theories of aiding and abetting and conspiracy. Although corporate defendants have prevailed in the few cases that have gone to trial, the costs associated with these suits--including litigation costs and damage to a corporation's brand and image based on the appearance of ties to alleged abuses--can be just as damaging.
Another aspect of Sinaltrainal is the Eleventh Circuit's reliance on the U.S. Supreme Court's recent decision in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), which extends the heightened pleading standards laid out in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) to all cases. To maintain their ATS claims, the plaintiffs in Sinaltrainal had to sufficiently plead that "the paramilitaries were state actors or were sufficiently connected to the Columbian government so they were acting under color of law." Slip op. at 22-23. Accordingly, the plaintiffs alleged in their complaint that it is "universally acknowledged that the regular military and the civil government authorities in Columbia tolerate the paramilitaries, allow them to operate, and often cooperate, protect and/or work in concert with them." Id. at 23. The court, however, found this allegation lacking under Iqbal and held that the plaintiffs' "conclusory allegation that the paramilitary security forces acted under color of law is not entitled to be assumed true and is insufficient to allege state-sponsored action." Id. at 23. This holding suggests that Iqbal may put the brakes on the growing trend of allowing cases based on dubious theories of vicarious corporate ATS liability to proceed to trial.

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