Recap of Recent Oral Argument Before SCOTUS: Nat’l Assoc. of Mfr. v. Dep’t of Defense and Jesner v. Arab Bank, PLC


Last week, the U.S. Supreme Court heard oral argument in two significant cases: Nat’l Assoc. of Mfr. v. Dep’t of Defense and Jesner v. Arab Bank, PLC.

In National Association of Manufacturers, the Court is being asked to determine which court is authorized to review the recent redefinition of “Waters of the United States” promulgated by the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps of Engineers). The relevant statute is 33 U.S.C. § 1369(b)(1) and (2), and it is notorious for its complex provisions. If jurisdiction lies in the federal district courts, then many lawsuits are likely to be filed in courts throughout the country, creating uncertainty and stretching out the effective date of the new rule. If jurisdiction is limited to the courts of appeal, this should reduce the cost of litigation, but may be contrary to other provisions of the Clean Water Act (CWA).

The CWA was enacted in 1972, and the advocates seem to agree that the legislative history is unhelpful on this point. Counsel for the petitioners, arguing that jurisdiction properly lies with the federal district courts, asked this question at the outset:

“Had Congress meant the courts of appeals to review all national or definitional rules, it would have said so, as it did in the Clean Air Act, instead of listing a handful of particular EPA actions down to the statutory subsection (in Section 1369).”

The Chief Justice noted that “if you are correct and these actions are brought in the district courts, each of the district courts will have to review the entire administrative record…having dozens of district courts engaged in the same activity and then it would have to be done all over again when you get to the court of appeals.”

Justice Sotomayor noted that, in this case, “we would have a rule being constantly challenged and never truly finalized.”

In response, counsel for the petitioners stated that several recent important recent CWA cases decided by the Court began in the district courts where the issues were first seriously reviewed. Asked to explain Congress’ intention in creating such complex review provisions, counsel conceded that “I cannot explain that and I have never heard anyone explain that to me…perhaps this jurisdictional provision, like many others, just was not carefully thought out.” And, “if someone can come up with an explanation of this that makes sense, I’m very happy to hear it.”

The Court asked for a cogent definition of “effluent limitation,” which has seemingly always been a source of confusion as applied by the agency and the courts. Counsel’s description of the cost of this confusion is illuminating: “[Time] is better spent on litigating the merits of the rule versus litigating where to sue”, and “my clients have had dozens of cases where they’ve spent millions of dollars litigating about where to litigate.” Government counsel, arguing that this litigation belongs in the courts of appeal, stated that that this definitional change could be viewed as an effluent limitation and therefore clearly within the jurisdiction given the courts of appeal.

Justice Breyer was troubled by this: “Your view.. .makes sense, because maybe all rules should be reviewed in the court of appeals, but that isn’t what [the CWA] says… I am rather stuck with that”. Government counsel emphasized the practical implications of this issue—the administrative record could be as large as 350,000 pages (thousands of comments were filed).

Obviously, the court is facing a real challenge in sorting through this knotty jurisdictional issue.

In Jesner v. Arab Bank, the Court is revisiting the issue of corporate liability under the Alien Tort Statute (ATS). In this case, an appeal from the Second Circuit, the non-citizen plaintiffs are seeking damages resulting from terrorists acts committed against them in Israel in the period of 1995-2005, which they claim were financed by the Arab Bank that is chartered by and regulated by Jordan. In 2010, in Kiobel v. Royal Dutch Petroleum, the Second Circuit dismissed a claim filed in the US federal courts by non-citizen plaintiffs under the ATS based on allegation of environmental crimes and civil rights violations that occurred overseas. The court held that the ATS did not apply because the Law of Nations did not apply to corporations.

The Supreme Court reviewed this decision and held, in a 2013 ruling reported at 133 S. Ct. 1659, that the plaintiffs did not overcome the presumption against the extraterritorial application of U.S. laws, especially when it was not clear that the corporate actions complained of did not “touch and concern” the United States. Accordingly, the Court did not reach the fundamental questions decided by the Second Circuit, and that federal courts “lack jurisdiction over ATS lawsuits based solely on extraterritorial conduct that did not touch and concern the territory of the United States.”

Before the Supreme Court, the plaintiffs note that the Bank is involved in financial transactions in New York City, so there is some connection to the United States. However, counsel for the bank argued that the plaintiffs must allege a violation of the Law of Nations and not merely US banking regulations. While there are at least six international commercial treaties that impose civil liability on corporations, the United States is not a signatory to any of them. Counsel for the United States, who was not appearing in favor of either party, told the court that the law should not be interpreted to automatically bar corporate liability. Indeed, the courts should carefully define those violations of the Law of Nations that can give rise to a remedy in the U.S. federal courts.