Linda Martin and Timothy Harkness are partners and David Livshiz is counsel at Freshfields Bruckhaus Deringer LLP. This post is based on their Freshfields memorandum.
One litigation trend that directors and senior management should monitor closely in 2021 is the increasing instance of claims brought by human rights activists seeking to hold companies, as well as corporate directors and senior management, accountable for human rights abuses committed by the corporation or within its supply chain. In early December, the United States Supreme Court heard arguments in Nestle USA Inc. v. John Doe 1 et al.
In that case, plaintiffs—allegedly survivors of child slavery—sued US corporations for violations of international law under the Alien Tort Statute (ATS) alleging that defendants turned a blind eye to red flags of child slavery occurring on farms from which defendants sourced supplies. In 2018, the Supreme Court held that the ATS does not provide a basis for exercising jurisdiction over foreign (i.e. non-US) corporations under the ATS, but suggested that claims against directors, officers, and employees may survive. We anticipate that the Supreme Court will reach a similar decision in Nestle with respect to US corporations. But, with companies outside the scope of the ATS, we anticipate activist plaintiffs will increasingly target corporate directors and officers for any perceived misconduct on the part of the corporation, arguing that directors and officers turned a blind eye to human rights abuses within the company’s supply chain and/or failed to investigate red flags brought to the company’s attention. Given the potential reputational and economic risks posed by such claims, we recommend that senior management take steps to mitigate the risk of their being brought. We note that in at least one case, the existence of such corporate compliance programs proved useful in obtaining dismissal of human rights claims brought by activist plaintiffs.