Supreme Court Roundup (October Term 2022)
July 26, 2023
During its 2022 Term, which ended four weeks ago, the Supreme Court decided five cases with important implications for transnational litigation. The questions included whether the Foreign Sovereign Immunities Act (FSIA) applies to criminal proceedings; the standard for aiding and abetting under the Anti-Terrorism Act (ATA); whether states may exercise general personal jurisdiction over foreign corporations based on their registration to do business in the state; the use of civil RICO to help enforce foreign arbitral awards; and the extraterritorial application of the Lanham Act. More information on each of the Court’s decisions may be found on our Supreme Court page. Here, we briefly review each of the decisions, highlighting their relevance for transnational cases.
Turkiye Halk Bankasi A.S. v. United States
In Turkiye Halk Bankasi A.S. v. United States (Halkbank), the question was whether the FSIA applies to criminal proceedings. Writing for a seven-Justice majority, Justice Kavanaugh held that the FSIA does not apply to criminal proceedings based on language in the statute suggesting that Congress had only civil actions in mind. The Court remanded the case to the Second Circuit to reconsider Halkbank’s claim of common law immunity. Justice Gorsuch, joined by Justice Alito, wrote a partial dissent that faulted the majority for providing too little guidance to lower courts.
As Ingrid noted shortly after the decision, one of the important issues that the Supreme Court left open is how much deference to give the executive branch’s determination that Halkbank is not immune. Bill also weighed in, counseling Justice Gorsuch not to worry about the remand. In his view, Halkbank is not entitled to immunity under federal common law, but the prosecution must nevertheless be dismissed on extraterritoriality grounds.
Twitter, Inc. v. Taamneh
In Twitter, Inc. v. Taamneh, the Supreme Court narrowly construed the ATA’s aiding and abetting provision. Writing for a unanimous Court, Justice Thomas held that the provision requires conscious and culpable participation in an act of international terrorism. Creating social media platforms was not culpable participation, the Court concluded, even if terrorists used them for terrible ends.
In a companion case, Gonzalez v. Google, LLC, the Supreme Court ducked the question of whether Section 230 of the Communications Decency Act immunizes interactive computer services that make targeted recommendations, holding instead that the complaint had to be dismissed because its aiding and abetting claims did not meet the standard articulated in Taamneh. Writing at TLB, David Sloss suggested that Congress should pass a new statute that is specifically designed to address the liability of social media companies for aiding and abetting acts of international terrorism.
Mallory v. Norfolk Southern Railway
In Mallory v. Norfolk Southern Railway, the Supreme Court held that Pennsylvania’s corporate registration statute did not violate the defendant railway’s due process rights, even though it required the railway to consent to general (or all-purpose) jurisdiction. A majority of five Justices narrowly agreed that the case was controlled by an early twentieth-century case that the Court had never explicitly overruled, though Justices Gorsuch, Jackson, and Alito offered different explanations for why the result in the case makes sense. Notably, however, they all agreed that the question of personal jurisdiction over a defendant physically located within a state is not controlled by the Court’s pathmarking personal jurisdiction decision, International Shoe Co. v. Washington (1945).
Writing for the four dissenting Justices, Justice Barrett argued that International Shoe did control and that the International Shoe framework, as developed by the Supreme Court over the last 70 years, shows that Pennsylvania’s registration statute does violate the due process rights of Norfolk Southern Railway and similarly situated defendants. Holding otherwise, she warned, would allow states to evade limits on general jurisdiction that the Court has recently articulated in cases like Daimler AG v. Bauman (2014).
Maggie explained how the decision may allow states to reassert general jurisdiction over foreign corporations, as well as what the case might presage for personal jurisdiction doctrine more broadly. Linda Silberman expressed “shock” at the decision and worried that the Court got the due process question wrong. Zach provided a counterpoint, arguing that states were unlikely to rush to adopt similar statutes. The effect of Mallory, he reasoned, will depend on local politics more than judicial doctrine. Finally, Maggie prepared an explanatory Throwback Thursday post on Insurance Corp. of Ireland v. Compagnie des Bauxites (1982), the case on which Justice Jackson’s concurrence largely relied.
Yegiazaryan v. Smagin
In Yegiazaryan v. Smagin, the Supreme Court held that racketeering activity to avoid paying a U.S. judgment confirming a foreign arbitral award against a U.S. resident constituted a domestic injury for purposes of RICO’s private right of action, even though the judgment creditor lives in Russia and both parties are Russian nationals. Writing for a majority of six, Justice Sotomayor declined to state a bright-line rule for locating injuries to intangible property, instead emphasizing the need for a “contextual approach.” Justice Alito dissented, joined in full by Justice Thomas and in part by Justice Gorsuch, accusing the majority of providing insufficient guidance to the lower courts.
Maggie found the decision pleasantly surprising in several respects, including its openness to transnational litigation, its invocation of positive comity concerns, and its embrace of contextual balancing. Bill, on the other hand, worried that the Court’s contextual approach could be manipulated by lower court judges less open to transnational cases. He also noted that the Smagin decision provides a powerful new tool—civil RICO—to help enforce foreign arbitral award and judgments.
Abitron Austria GmbH v. Hetronic International Inc.
Finally, in Abitron Austria GmbH v. Hetronic International Inc., a closely divided Supreme Court held that the Lanham Act (the federal trademark statute) does not apply extraterritorially and that a domestic application of the statute requires use of the trademark in domestic commerce. Reversing their roles in Smagin, Justice Alito wrote for a majority of five, while Justice Sotomayor wrote a concurring opinion that was essentially a dissent.
From an intellectual property perspective, Linda Silberman and Rochelle Dreyfuss observe that the Abitrondecision creates more questions than it answers, and it remains to be seen how courts will apply the holding to sales through intermediaries or to U.S. customers online. Tim Holbrook and Anshu Garg similarly predict confusion in the lower courts about how Abitron’s “use in commerce” test should be applied and over how to calculate damages.
For Bill, Abitron’s main significance is Justice Alito’s reformulation of the presumption against extraterritoriality to require conduct in the United States even when the focus of a statutory provision is not conduct. Justice Sotomayor, by contrast, would have found the application of a statute to be domestic if its focus was found in the United States regardless of whether conduct relevant to the focus occurred here as well. Bill faults Justice Jackson for missing this important dimension of the case when she chose to join Justice Alito’s opinion in full rather than to concur only in the judgment.
Paul Stephan applauds the Court for reaching sensible outcomes in Abitron and Smagin. But highlighting the tensions between the two decisions on questions of extraterritoriality, he concludes that “the opinions leave lawyers knowing less about an important area of the law than they did before [these decisions] were handed down.”
Conclusion
The Supreme Court’s next Term, which begins October 2, promises to bring more cases with transnational implications. John has already written about Great Lakes Insurance SE, Petitioner v. Raiders Retreat Realty Co., LLC, in which the Court will address the enforceability of choice-of-law clauses under federal admiralty law, here, here, and here. Bill thinks a grant of cert is likely in Blenheim Capital Holdings Ltd. v. Lockheed Martin Corp. to address a circuit split over whether military purchases fall within the FSIA’s commercial activities exception. We will have more coverage of these cases and others as the October 2023 Term approaches.