South Texas Law Review Vol.58 No.2

-

--------------------

-

SOUTH TEXAS LAW REVIEW

SOUTH TEXAS COLLEGE OF LAW HOUSTON HOUSTON, TEXAS

-

� "-- ---

------

SUBSCRIPTION PRICE

The subscription price to South Texas Law Review is $32.50 per annum (plus applicable sales tax). The price for a single symposium issue is $25.00.

CURRENT ISSUES

Single issues in the current volume, including symposium and special issues, may be purchased from the Review by contacting Jacob Hubble at (713) 646-1749.

BACK ISSUES

Complete volumes and single issues prior to the current volume are available exclusively from William S. Hein Co., Inc., 2350 North Forest Road, Getzville, NY 14068, (800) 828-7571.

South Texas Law Review is published four times each year by the students of South Texas College of Law Houston. Four issues of the Review constitute one volume.

Subscriptions to South Texas Law Review are considered to be continuous and absent receipt of notice to the contrary, it is assumed that a renewal of the subscription is desired.

Please notify the Editor in Chief of any change of address.

The Review welcomes the submission of unsolicited manuscripts. All submissions should be typed and double spaced with footnotes. Citations should conform with The Bluebook: A Uniform System of Citation (Columbia Law Review Ass'n et al. eds., 19th ed. 2010) and, where applicable, the Texas Rules of Form (12th ed. 2010).

Except as otherwise noted, South Texas Law Review is pleased to grant permission for copies of articles, notes, and book reviews to be made for classroom use, provided that (1) a proper notice of copyright is affixed to each copy; (2) the author and source are identified; (3) copies are distributed at or below cost; and (4) South Texas Law Review is notified of the use.

All communications should be addressed to: South Texas Law Review

1303 San Jacinto, Houston, Texas 77002 Telephone: (713) 646-1848 or (713) 659-8040 ext. 1665 Facsimile: (713) 646-2948 Copyright 2016, South Texas College of Law Houston All rights reserved.

11

- - -------------------------------------- ----- - ----- -

SOUTH TEXAS LAW REVIEW VOL. 58 No. 2

WINTER 2016

EDITORIAL BOARD

2016-2017 EMILy PENDLETON

Editor in Chief

BRANDON GoscH

Managing Editor

AMANDA GARZA

URVASHI MoROLIA

Executive Editor

Research Editor

COLLIN WEYAND

EMILY QUIROS

Senior Note & Comment Editor

Senior Articles Editor

JOSHUA BETHKE

OLUMIDE OLUKOYA

JACKSON GAYLE

MITCHELL POWELL

AssT. DEAN ELIZABETH A. DENNIS

PROF. VAL D. RICKS

Articles Editors

Note & Comment Editors

Faculty Advisor

Faculty Advisor

JACOB HUBBLE

PROF. SHELBY A.D. MOORE

Scholarly Publications Coordinator

Faculty Advisor

MEMBER, NATIONAL CONFERENCE OF LAW REVIEWS

lll

SOUTH TEXAS LAW REVIEW WINTER 2016

VoL. 58 No. 2

Assistant Editors ADAM BATEMAN SAMANTHA ERNST ASSISTANT EDITORS IN CHIEF

SYDENEY HUBER FANNY TURCIOS ASSISTANT MANAGING EDITORS

wALLACE

SHANNON BALDWIN

LAUREL SMITH

ASSISTANT SENIOR ARTICLES

SARAH CALLAHAN

ASSISTANT SENIOR NOTE &

EDITOR

ASSISTANT EXECUTIVE EDITORS

COMMENT EDITOR

AARON

MICHAEL BENDER

JAMES HARRIS

LANI DURIO

JOB TENNANT

HAYLEY HERVIEUX

CLAYTON TRICE

MAGGIE Lu

ASSISTANT NOTE & COMMENT

ASSISTANT RESEARCH EDITORS

EDITOR

ASSISTANT ARTICLES EDITOR

Members DANIELA BRAVO

JONATHAN HERNANDEZ

DYLAN MORGAN

ANDREW CULLIVER

EARL INGLE

KATLIN ROBINSON BRICE SHERROD

JOHN FLUD

JESSICA JUNEK

SARAH FOSTER

SEAN KocH

EMMA SHORT

BRAD ERIC FRANKLIN

VARVARA MARMARINOU

LAYTON SucHMA

WILLIAM GRUBB

MATTHEW MENTER

RYAN SWINK

The opinions expressed in the South Texas Law Review are those of the contributors and are not necessarily representative of the views of the editors of the Review or of South Texas College of Law Houston. lV

SOUTH TEXAS LAW REVIEW WINTER 2016

VoL. 58

No. 2

SOUTH TEXAS COLLEGE OF LAW HOUSTON DONALD J. GuTER, President, Dean, and Professor of Law MAXINE D. GooDMAN, Vice President, Associate Dean, and Professor of

Law

BRUCE A. McGOVERN, Vice President, Associate Dean for Academic

Administration, and Professor of Law

CATHERINE GREENE BURNETT, Vice President, Associate Dean, Professor

of Law, and Director of the Pro Bono Honors Programs

JOHN J. WORLEY, Vice President, Associate Dean for Academic Affairs,

and Professor of Law

FACULTY JAMES J. ALFINI, B.A., Columbia University; J.D., Northwestern University School of Law; Dean Emeritus and Professor of Law. JOHN H. BAUMAN, B.A., Pomona College; J.D., Stanford Law School; Professor

of Law.

JosH BLACKMAN, B.S., The Pennsylvania State University; J.D., George Mason University School of Law; Associate Professor of Law. VANESSA BROWNE-BARBOUR, B.A., Carnegie-Mellon University; J.D., Duquesne University School of Law; Professor of Law. CATHERINE GREENE BURNETT, B.A., University of Texas; J.D., University of Texas School of Law; Vice President, Associate Dean, and Professor of Law. ELAINE A. CARLSON, B.S., Southern Illinois University; M.A., McMaster University; J.D., South Texas College of Law Houston; Stanley J. Krist

Distinguished Professor of Texas Law; 2008 Distinguished Alumna and Professor of Law. RICHARD R. CARLSON, B.A., Wake Forest University; J.D., University of Georgia School of Law; Professor of Law. SANDRA J. CARNAHAN, B.A., University of Arkansas at Fayetteville; J.D., South Texas College of Law Houston; LL.M., University of Houston Law Center; Professor of Law. AMANDA HARMON CooLEY, B.A., University of North Carolina at Chapel Hill; J.D., University of North Carolina School of Law; Professor of Law. GEOFFREY S. CoRN, B.A., Hartwick College; J.D., George Washington University Law School; LL.M., The Judge Advocate General's School, United States Army; Professor of Law. SusAN WAITE CRUMP, AB., University of California at Davis; J.D., University of Houston Law Center; Professor of Law. ELIZABETH A. DENNIS, B.A., Hollins College; J.D., South Texas College of Law Houston; Assistant Dean, Director of Academic Internships, and Associate Professor of Clinical Studies.

V

W. DAVID EAST, B.A., Baylor University; J.D., Baylor University School of Law; LL.M., George Washington University Law School; Director of Transactional Practice Center and Professor of Law. MATTHEW J. FESTA, B.A. University of Notre Dame; M.P.A., Murray State University; M.A., Vanderbilt University; J.D., Vanderbilt University Law School; Professor of Law. TED L. FIELD, B.A., University of Illinois at Chicago; M.A., Northwestern University; J.D., The John Marshall Law School; Professor of Law. DEREK FINCHAM, B.A., University of Kansas; J.D., Wake Forest University School of Law; Ph.D., University of Aberdeen School of Law; Professor of Law. SHARON FINEGAN, B.A., University of Virginia; J.D., American University Washington College of Law; LL.M., Columbia Law School; Professor of Law. PAMELA E. GEORGE, B.S., University of Texas; M.L.S., University of Texas; J.D., University of Texas School of Law; Professor of Law. MAXINE D. GOODMAN, B.A., Brandeis University; J.D., University of Texas School of Law; Vice President, Associate Dean, and Professor of Law. DONALD J. GuTER, B.A., University of Colorado; J.D., Duquesne University School of Law; President, Dean, and Professor of Law. HELEN BISHOP JENKINS, B.M.E., Peabody Conservatory of Johns Hopkins Institute; M.M.E., Howard University; J.D., University of Houston Law Center; Executive Vice President Emeritus and Professor of Law. R. RANDALL KELSO, B.A., University of Chicago; J.D., University of Wisconsin Law School; Spurgeon E. Bell Distinguished Professor of Law. CHRISTOPHER S. KuLANDER, B.S., Wright State University; J.D., University of Oklahoma College of Law; Ph.D., Texas A&M University; Associate Professor of Law. JosEPH K. LEAHY, B.A., Swarthmore College; J.D. New York University School of Law; Professor of Law. KATERINA LEwINBUK, B.A., Minnesota State University; J.D., John Marshall Law School; Professor of Law. BETTY J. LUKE, B.S., Lamar University; B.S., University of Texas Medical Branch; J.D., South Texas College of Law Houston; LL.M., University of Houston Law Center; Associate Professor of Clinical Studies.

BRUCE A McGOVERN, B.A., Columbia University; J.D., Fordham University School of Law; LL.M., University of Florida College of Law; Vice President, Associate Dean, and Professor of Law. SHELBY AD. MOORE, B.A., Towson State University; J.D., University of Baltimore School of Law; LL.M., Harvard Law School; Professor of Law. RAY E. MOSES, B.A., University of Texas; J.D., University of Texas School of Law; LL.M., Northwestern University Law School; S.J.D., Southern Methodist University School of Law; Professor of Law. OLGA L. MoYA, B.A., University of Texas; J.D., University of Texas School of Law; Professor of Law. JAMES L. MussELMAN, A.A, Illinois Central College; B.S., Illinois State University; J.D., Brigham Young University; J. Reuben Clark Law School; Professor of Law. FRANCESCA ORTIZ, B.A., University of Texas; J.D., Harvard Law School; Professor of Law. PHILLIP E. PAGE, B.S., University of Tennessee; J.D., Memphis State University College of Law; LL.M., New York University School of Law; Professor of Law. VI

JAMES W. PAULSEN, B.F.A., Texas Christian University; J.D., Baylor University School of Law; LL.M., Harvard Law School; Professor of Law. AMANDA J. PETERS, B.A., Texas Tech University; J.D., Texas Tech University School of Law; Helen and Harry Hutchens Research Professor and Professor of Law. JEAN FLEMING PowERS, B.A., University of Texas; J.D., University of Houston Law Center; Professor of Law. ScoTT REMPELL, B.A., University of Michigan; J.D., American University, Washington College of Law; Professor of Law. JEFFREY L. RENSBERGER, B.A., Wabash College; J.D., Indiana University, Bloomington; Vice President for Strategic Planning and Institutional Research and Professor of Law. CHARLES W. "RocKY" RHODES, B.B.A., Baylor University; J.D., Baylor University School of Law; Vinson & Elkins Research Professor and Professor of Law. VAL D. RICKS, B.A., Brigham Young University; J.D., Brigham Young University, J. Reuben Clark Law School; Charles Weigel II Research Professor and Professor of Law. ARNOLD RocHVARG, B.A., University of Pennsylvania; J.D., George Washington University; Visiting Professor of Law. GARY S.RosIN, B.S., Texas A&M University; J.D., University of Texas School of Law; Professor of Law. NrnRI MATHIS RUTLEDGE, B.A., Spelman College; J.D., Harvard 'Law School; Professor of Law. MARKR. SIEGEL, B.S., B.A., University of Florida; J.D., Florida State University College of Law; LL.M.,Emory University School of Law; Professor of Law. ANDREW T. SOLOMON, B.A., University of Michigan; J.D., Boston University School of Law; Professor of Law. TOBIN A SPARLING, B.A., Dartmouth College; M.S., Columbia University School of Library Service; M.A., Columbia University Graduate School of Arts & Sciences; J.D., Columbia Law School; Professor of Law. MARKE. STEINER, B.A., University of Texas; J.D., University of Houston Law Center; Ph.D., University of Houston; Professor of Law. Dru Stevenson, B.A., Wheaton College; J.D., University of Connecticut School of Law; LL.M., Yale Law School; Professor of Law. CHERIE 0. TAYLOR, AB., Harvard University-Radcliffe College; J.D., University of Georgia School of Law; LL.M., Georgetown University Law Center; Professor of Law. T. GERALD TREECE, B.A., University of Houston; J.D., University of Houston Law Center; Vice President, Associate Dean, Special Counsel to the President and Dean, and W. James Kronzer, Jr. Distinguished Professor of Law. MICHAEL E. WHEELER, B.A., Arkansas Tech University; J.D., University of Arkansas at Little Rock William H. Bowen School of Law; Professor of Law. KENNETH WILLIAMS, B.A., University of San Francisco; J.D., University of Virginia School of Law; Professor of Law. JOHN J. WoRLEY, AB., University of Georgia; J.D., University of Georgia School of Law; M.A., Rice University; Vice President, Associate Dean, Director of Transactional Law Practice Certificate Program and Professor of Law. KEVIN M. YAMAMOTO, B.S., University of California at Davis; J.D., University of San Diego School of Law; LL.M., University of Florida College of Law; Professor of Law.

vu

SOUTH TEXAS COLLEGE OF LAW HOUSTON

BOARD OF DIRECTORS

EXECUTIVE COMMITTEE J. KENNETH JOHNSON '86

Chairman

GENORA KENDRICK BOYKINS '85 MICHAELS. HAYS '74

MICHAEL K. HURST '90

MICHAEL

w. MILICH '97

IMOGEN S. PAPADOPOULOS '84 GORDON QUAN '77 JEFFREY RusK '83

RANDALL 0. SORRELS '87

JAMES D. THOMPSON III '86

MEMBERS RICHARD ANDERSON '82

LARRY BAILLARGEON '74 DARRYL M. BURMAN '83

HoN. ROBERT A. ECKELS '93 STEWART

w. GAGNON '74

HoN. EvA GuzMAN '89 RANDY R. HOWRY '85 JOSEPH K. LOPEZ '78

J. GOODWILLE PIERRE '00

ANDREWSOMMERMAN '86 LIAS J. "JEFF" STEEN '87 AMY DUNN TAYLOR '82

RUTHIE NELSON WHITE '96

CHAIRMAN EMERITUS MICHAELS. HAYS '74

viii

SOUTH TEXAS COLLEGE OF LAW HOUSTON ADVISORY COUNCIL

MEMBERS

N. TERRY ADAMS, JR. HON. JEFF BOHM ASHLEY GARGOUR JAMES STUART LAWSON JAMES D. SEEGERS STACEY L. SEVEROVICH DRU STEVENSON DULCIE G. WINK JOHN J. WORLEY

lX

X

SOUTH TEXAS LAW REVIEW WINTER 2016

VOL. 58 No. 2

ARTICLES MURDER FOR LIFE INSURANCE MONEY:

PROTECTING THE CHILDREN .............. Johnny C. Chriscoe EXAMINING THE EMPIRICAL CASE FOR

DISCOVERY REFORM IN TEXAS ............... Lonny Hoffman

173 209

COMMENTS TITLE VII AND TRANSGENDER EMPLOYEES: THE TRANSITION AwAy FROM THE TRADITIONAL CONCEPTS OF SEX

DISCRIMINATION IN THE WORKPLACE .............. Lani Durio

223

THE STATUS OF THE ALIEN TORT STATUTE'S CORPORATE LIABILITY QUESTION IN A

PosT-KIOBEL WORLD ........................ . Andrew Culliver

Xl

253

xii

MURDER FOR LIFE INSURANCE MONEY: PROTECTING THE CHILDREN JOHNNY C. CHRISCOEt I. II. III.

IN TRODU CTION ...............................................................................

A CA SE ON PO IN T ...........................................................................

CURRENT STATUTES ......................................................................

A. B.

DeterrentEffect of Apprehension and Prosecution................

InsurableInterestD octrine.....................................................

1. InsurableInterests in PropertyInsurance ........................

2. InsurableInterests in Life Insurance................................

174

176 179

182 185 186 190

IV . SCENARIOS OF RISK .......................................................................

198

The Unlawful Beneficiary .......................................................

The Lawful Beneficiary...........................................................

198 200

PROPOSED PROTECTIVE MEASURES...............................................

203

A. B. V.

A. Narrowly Define the InsurableInterest Doctrine................... 204 205 B . Penalize Insurers ....................................................................

206 C . Lim it Coverage .......................................................................

V I.

CONCLU SION ..................................................................................

208

ABSTRACT

Children are being murderedfor life insuranceproceeds.

Of course, if a beneficiary murders a child for the recovery of life insurance money and if he is apprehended, he will surely face numerous legal consequences. He will not recover the insurance money, he will be prosecuted and likely sentenced to lfe imprisonment or execution, he may be sued for the wrongful death of the child and he may be prosecutedfor insurancefraud. However, all of these legal responses are triggered by the death of the child and, therefore, do not serve to protect the child from being murdered in the first instance.

On the other hand, there are legal doctrines in place that would appear to be directed towardprotecting a child from being the target of a murderous beneficiary, most notably the insurable interest doctrine.

Associate Professor, Campbell University School of Law. The author would like to t thank Megan Greene, Michael Dunn, and Johnathon Naylor for their research assistance.

173

174

1

SOUTH TEXAS LAW REVIEW

[Vol. 58:173

Pertinent to this Article, this doctrine is intended to limit the pool of potential beneficiaries to a lfe insurancepolicy to those who, out of love and affection, would never consider murdering the child for money.

However, the doctrine is often vaguely defined by the courts and loosely applied by insurancecompanies when issuing ife insurancepolicies.

This Article explains the risk lfe insurancepolicies pose to children, discusses the ineffectiveness of current legal measures to protect children in such instances, and proposes significant but necessary measures to protect childrenfrom being murderedfor ife insurancemoney.

I.

INTRODUCTION

It has served as a familiar fictional storyline for decades: a murderer kills his victim to recover, directly or indirectly, the life insurance proceeds.'

In the typical scenario, the victim is found deceased and the police eventually conclude that he was murdered. The detectives remain baffled as to both motive and potential suspects. The decedent was a faithful spouse and a respected businessperson with adoring employees, so the motive for his murder is not immediately discovered. Concluding the murder was not motivated by either love or hate, the detectives begin looking for the money.

Assuming the victim was a person with assets, he likely had a will.

Naturally, the detectives acquire the decedent's will and learn that his wife was his sole beneficiary. After determining the wife had no lover on the side but was a faithful spouse to the end, and that she already had access to everything she would receive under the will, she is eliminated as a suspect.

She had no reason to commit murder to receive that to which she already had access.

Then, the detectives think to check for life insurance policies and find that the victim had in place a policy in the amount of $1,000,000 payable to one or perhaps several beneficiaries, including the victim's spouse. Now, the spouse becomes a suspect once again. This is "new money," money to which she had no access until the death of her husband.

Perhaps they further discover that the victim's business partner and dear friend of thirty years, and also a beneficiary to the life insurance policy, needs a considerable sum of money to cover his gambling debt.

1.

See, e.g., Double Indemnity (Paramount Pictures 1944) (portraying a wife who seduces her lover, who is also her husband's insurance agent, into murdering her husband to recover the proceeds of an "accident" policy).

2016]

MURDER FOR LIFE INSURANCE MONEY

175

The discovery of the insurance policy and its beneficiaries, on occasion, quickly lead to the undoing of the murderer when the police find the murder weapon hidden in the spouse's gym locker or beneath the floorboards of the partner's office. On other occasions, the writers avoid this common ending and use the discovery of the life insurance policy as a suspenseful diversion. The viewers or readers are set to condemn the beneficiary of the policy, the motive is so strong after all, when in the waning minutes or pages the detectives discover that the decedent's old college roommate committed the murder because the victim wronged him thirty years ago.

Either way, "murder for life insurance money" is a common theme, most likely because the viewers and readers so readily follow the logic and the motive. There is little room to doubt that there are those who have dreamt of waking one morning to discover that some distant relative has passed away leaving hundreds of thousands of dollars in insurance money to be shared by all of the decedent's kin. It does not stretch the imagination any farther to suppose that, on occasion, a particularly greedy and immoral beneficiary might want to hasten his good fortune by committing murder. If the insured was paying the policy premiums, the result is a complete windfall to the beneficiary. Even if the beneficiary was paying the policy premiums, perhaps even $100 per month for a year or so, where could he find a better return on investment or a faster or more certain avenue to a get-rich-quick ending?

Whether art imitates life, life imitates art, or there is some combination of the two, the storyline is further believable because it happens in "real life." It is not at all uncommon to read a newspaper or online article detailing nonfictional instances where an insured person was murdered for life insurance proceeds.2 As horrifying as this storyline is in real life, it is even more tragic when the insured life is a child and the beneficiary murders the child for the insurance proceeds. Children, being among the most vulnerable of victims, are usually in no position to understand the position they are in, to see the danger approaching, or to defend against the threat of death. A life insurance policy, at least in certain circumstances and particularly where the potential proceeds are quite large, essentially paints a target on the child victim. The child's life becomes somewhat of a commodity because of the life insurance policy.

2.

See, e.g., Miami Man Who Killed Bride for Insurance Money Gets Life, CBS NEWS CRIMESIDER (May 14, 2014, 11:50 AM), http://www.cbsnews.com/news/miami-man-who-killedbride-for-insurance-money-gets-life/ (reporting on a man who murdered his new wife in order to collect one millions dollars in life insurance proceeds).

176

SouTH TEXAS LAW REVIEW

[Vol. 58:173

Of course the law has in place certain legal devices intended to protect the child in the first instance.3 Further, there are a variety of legal devices in place to punish the murderer after the murder has occurred.' However, the legal devices intended to protect children are, for the most part, fraught with problems that make them ineffective in some instances, and the legal devices in place to punish the murderer presume the murder itself, thus making them ineffective to protect children.' An insurance policy that provides a significant payout of money upon the death of a child unfortunately creates a tremendous incentive and opportunity for someone to commit the heinous act of murdering the child to receive the payout, and the law in its current state actually provides very little protection to a child in this scenario.

Part I of this Article sets out an unbelievable but unfortunate true story about a young person named Brian who was murdered for no other reason than the fact that a large insurance policy had been issued on his life. His story is a large inspiration behind this Article. Part II examines the legal devices currently in place to protect persons such as Brian, and discusses how and why they fail miserably on more occasions than are acceptable.

Part III discusses the particular factual scenarios under which insured children might become the target of a greedy murderer, either by circumventing the law or by actually complying with the law as it now exists. Part IV proposes a variety of new legal devices and rules that, either in substitution for the current devices or along with them, might better serve to protect children from such violent acts in the future. Finally, Part V provides a conclusion to the Article.

II. A CASE ON POINT Brian Brewington was murdered early one morning before daybreak in a small town in North Carolina.6 The motivation behind his murder was the recovery of life insurance proceeds from a policy naming Brian as the insured life.' Brian was eight years old.'

Because the circumstances surrounding his death are part of the inspiration for this Article, and because they are simultaneously incredible and horrifying, the facts of his case are set forth here in considerable detail.

3.

4.

5.

6.

Infra notes 57-67 and accompanying text.

Infra notes 47-56 and accompanying text.

Infra notes 47-67 and accompanying text.

State v. Brewington, 532 S.E.2d 496, 499 (N.C. 2000).

7.

Id.

8.

Id.

2016]

MURDER FOR LIFE INSURANCE MONEY

177

Brian lived with his great-grandmother, Frances (hereinafter "greatgrandmother"), and his uncle, Robert (hereinafter "uncle").' The uncle was engaged to be married to Vera (hereinafter "girlfriend"), so she had become familiar with Brian's home and living arrangements.'o In April of 1997, the uncle purchased two life insurance policies: one policy insured Brian's life in an amount slightly in excess of $58,000," and the other insured Brian's father, Patrick (hereinafter "father"), in the amount of $75,000.12 Both policies named the uncle as the beneficiary.' 3 To acquire the policies, the uncle forged the father's signature on the insurance applications. 4 Though the insurance agent who sold the policies to the uncle did not witness Brian's father sign the application form for the policy insuring the father or the consent form for the policy insuring Brian, the agent signed both forms on the line marked for such a witness signature. 5 In May of 1997, the uncle and his girlfriend attempted to purchase a lot and mobile home but were denied loan approval.'" Subsequently, the uncle and girlfriend concocted a plan to murder Brian so they could collect 8 on the life insurance policy,' and to murder the great-grandmother,' apparently out of necessity because Brian lived with her. The girlfriend further solicited the assistance of her friend, Henry (hereinafter "friend") to commit the murders, promising him "$200 or $300 Wednesday and about a $1,000 in three to four months."' 9 He consented to the arrangement.20 The uncle, the girlfriend, and her friend initially planned to murder Brian's father and recover the life insurance proceeds from the policy that covered him. 2 ' However, after several failed attempts at murdering Brian's father, the girlfriend suggested that they murder Brian.22 Her friend proposed that they kidnap Brian instead and hold him for ransom, but the

9.

Id. See id.

10.

I1.

Id. The policy covering Brian also included a "double indemnity" clause which provided a payout in twice the policy amount in the event death was caused by an accident.

Complaint & Demand for Jury Trial para. 40, Johnson v. Home Beneficial Life Ins. Co., No. 99CVS-3799 (Wake Cty. Super. Ct. 1999).

Brewington, 532 S.E.2d at 499.

12.

Id. 13.

Id. 14.

Complaint & Demand for Jury Trial, supra note 11, paras. 30-33.

15.

Brewington, 532 S.E.2d at 499.

16.

Id. 17.

Id. 18.

Id. 19.

See id.

20.

21.

Id. at 499, 508.

Id. at 508.

22.

178

SOUTH TEXAS LAW REVIEW

[Vol. 58:173

girlfriend explained that they would get more money if they killed Brian,23 apparently having the life insurance policy in mind.

On June 1, 1997, the uncle and girlfriend finalized their plan to murder Brian and his great-grandmother.2 4 The plan called for the uncle to rise early in the morning and go to work as usual, while the girlfriend and her friend committed the murders.25 The uncle instructed his girlfriend to "make the crime look like a robbery, remove a few items such as the TV, stab [the great-grandmother] and Brian, and set the house on fire." 26 The uncle and girlfriend later acquired a knife from an "open-air" market to use in the planned murders.2 7 Early on the morning of June 12, 1997, the girlfriend and her friend drove by Brian's home and honked the car horn to awaken the uncle. 28 They then proceeded to purchase two one-gallon containers of water, empty them, and refill them with gasoline from a local convenience store. 29 They then waited to meet with the uncle.30 Meanwhile, the uncle dressed for work and packed into his car the insurance policies and his best clothes, which he intended to wear to both Brian's and his great-grandmother's funerals. 3 ' He then left Brian's home, leaving the back door unlocked, and drove to meet his girlfriend and her friend.3 2 The uncle placed his property in his girlfriend's car and drove his own car to work.3 3 The girlfriend and her friend drove to Brian's home.34 Upon arriving at Brian's home, the girlfriend and her friend put on gloves and entered the house through the door Brian's uncle had left unlocked for them.35 They carried with them the gasoline and the knife."

They entered the bedroom where Brian and his great-grandmother were sleeping and the girlfriend told her friend to stab Brian.3 7 When the friend was not able to bring himself to stab Brian, the two poured the gasoline on the floor. Brian and his great-grandmother awoke and started screaming.39

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.

36.

37.

38.

Id. Id. at 499.

Id. Id. Id. Id. Id. See id.

Id. Id. Id. Id. Id. Id. Id. Id.

2016]

MURDER FOR LIFE INSURANCE MONEY

179

The girlfriend then stabbed Brian and her friend stabbed the greatgrandmother.4 0 Afterward, the girlfriend lit a dishcloth on a heater and ignited the gasoline on the bedroom floor.4 1 Brian and his great grandmother died during the fire.42 The uncle, his girlfriend, and her friend were all arrested and tried for murder.43 The uncle was found guilty of first-degree arson, two counts of conspiracy to commit first-degree murder, and two counts of first-degree murder.44 The jury recommended death sentences for both murders, and the court subsequently sentenced the uncle to death for each of the two murders.4 5 These legal proceedings and remedies were, of course, after Brian's death.

III. CURRENT SAFEGUARDS

A person who murders a child for the purpose of recovering the life insurance proceeds on the child's life will be subject to a variety of legal consequences that arise from criminal guilt and civil liability, assuming the murderer is apprehended and his guilt and liability are established.46 First, it is highly unlikely that the murderer will recover the life insurance proceeds on the child's life. 47 As a general rule, either by case law,48 statute,49 or through a provision of the policy itself,"o one who intentionally and feloniously murders the insured for the purpose of collecting the insurance proceeds will be disqualified from that recovery."

39.

Id. 40.

Id. 41.

Id. 42.

Id. at 518.

43.

Id. at 500.

Id. at 499.

44.

45.

Id. 46.

Much of this Article applies equally to children and adults who are insured by life insurance policies. But, because they are generally defenseless, naive to the insurance industry, and surely the most vulnerable, this Article focuses on children as insureds.

F. S. Tinio, Annotation, Killing of Insured by Beneficiary as Affecting Life Insurance or 47. its Proceeds, 27 A.L.R. 3d 794, 799 (1969 & Supp. 2016) ("The beneficiary's right to recover the proceeds, where he feloniously killed the insured, has been denied as a general rule .....

48.

See id.

49.

Id. at 798-99 ("In some jurisdictions, certain statutory provisions affect the right of the killer to the proceeds. While some statutes prohibit recovery by the beneficiary without regard to the nature of the killing, others require that the death of the insured must have been feloniously or wilfully caused, or, as still other statutes provide, that the beneficiary must have been convicted for the act." (footnotes omitted)).

50.

Id. at 799 ("The beneficiary who takes the life of the insured may also be barred from collecting the insurance proceeds pursuant to a provision in the policy to that effect.").

See, e.g., Peter Nash Swisher, The Insurable Interest Requirementfor Life Insurance:A 51.

CriticalReassessment, 53 DRAKE L. REV. 477, 488-89 (2005) ("Accordingly, it is generally held

180

SouTH TEXAS LAW REVIEW

[Vol. 58:173

Second, the murderer will likely be liable in a civil suit by the next of kin for wrongful death based on intentional tort.52 Of course, it is probably equally as likely the plaintiffs will never actually recover on the judgment in this instance. Third, at least in certain instances and under certain facts, such as where the murderer actually makes claim to the life insurance proceeds after murdering the insured child, the murderer may face a conviction for insurance fraud.53 Finally, the murderer will most certainly face a murder conviction.54 Unfortunately, all of these legal consequences of the murderer's despicable act arise after the child is murdered. Thus, while these responses might protect against the likelihood of the murderer gaining from his wrongdoing and going even further to punish him for the same, they do not protect the life of the child in the first instance." By way of example, they did not protect Brian.56 There are currently two primary legal tools in place to help safeguard the life of a child from a would-be murderer who wishes to profit from life insurance covering the child. The first is the deterrent effect of the threat of apprehension, conviction, and potential life imprisonment or execution." Of

that a beneficiary who intentionally kills the insured cannot, and should not, recover the life insurance policy benefits, and the life insurance proceeds should be paid instead to the innocent contingent beneficiary or to the estate of the deceased. This desirable legal result-that a beneficiary who unlawfully kills the insured is barred from receiving the proceeds of a life insurance policy-is based on the underlying rationale that it is contrary to state public policy, either under the common law or under a particular state's 'slayer statute,' to permit a person who has unlawfully killed another to benefit from his or her wrongdoing." (footnotes omitted)).

52.

Dan B. Dobbs, The Law of Torts § 294, at 804 (2000) ("Wrongful death statutes create a new action in favor of certain beneficiaries who suffer from another's death as a result of a tort.

States differ somewhat in measurement of the damages, but all states recognize some kind of claim. Because the statute creates a new cause of action and vests it in the survivors (or their representative), the wrongful death recovery does not go to the deceased's estate and is not subject to claims of the deceased's creditors.").

53.

See, e.g., People v. Hardy, 825 P.2d 781, 811 (Cal. 1992) (en banc) (finding the evidence was sufficient to support defendant's conviction for conspiracy to commit insurance fraud because the evidence showed that defendant, "knowing he was ineligible to collect the benefits under the policies because of his involvement with the murders, concealed that fact when applying for the benefits.").

54.

Infra notes 68-84 and accompanying text.

55.

This statement is not intended to be an argument that the legal repercussions subsequent to the murder of the insured child are without utility, but that it is unfortunate that they do not go beyond the punishment of the defendant to further safeguard the child's life.

56.

See supra notes 6-45 and accompanying text. Brian's uncle and beneficiary most certainly did not receive any of the proceeds of the insurance policy covering Brian's life, and he was convicted of first-degree murder and sentenced to death. However, Brian's life was lost before these remedies became relevant.

57.

See infra notes 65-84 and accompanying text. The murderer's actual conviction occurs after, and as a result of, the child's murder and does not serve to protect the child in the first

2016]

MURDER FOR LIFE INSURANCE MONEY

181

course, this legal tool is a general response to murder and is not focused in particular on murders committed for the purposes of collecting life insurance proceeds on children. 8 Yet, to the extent such a criminal sentence is a deterrent to murder in general, presumably it would apply in the life insurance scenario. Unfortunately, at least in certain instances, the deterrent effect supposedly created by the threat of apprehension and prosecution is no deterrent at all."

The second legal tool, which is focused primarily on protecting the life of the insured from murder, is the insurable interest doctrine. 6 0 When applied properly by insurers, the doctrine, at least theoretically, protects children by requiring that the insurer permit only one who has an insurable interest in the child's life to become a beneficiary to the child's life insurance policy in the first instance.61 When applied narrowly by the civil courts, the doctrine substantially limits the list of individuals who have the sufficient legal interest in the child's life to be deemed an insurable interest and, therefore, limits the number of individuals who might economically benefit from the child's death.6 2 In this instance, the doctrine also likely produces at least some deterrent effect in that, at least theoretically, even if the would-be murderer without an insurable interest is able to defraud an insurer into making him the beneficiary under the policy, and even if he is not apprehended and convicted, the courts will not enforce the policy. 6 3

instance. However, the threat of conviction may in some instances be sufficient to deter the would-be murderer and, therefore, protect the child's life.

See, e.g., Gregg v. Georgia, 428 U.S. 153, 183 (1976) ("The death penalty is said to 58. serve two principal social purposes: retribution and deterrence of capital crimes by prospective offenders.").

Id. at 185-86 ("Although some of the studies suggest that the death penalty may not 59. function as a significantly greater deterrent than lesser penalties, there is no convincing empirical evidence either supporting or refuting this view. We may nevertheless assume safely that there are murderers, such as those who act in passion, for whom the threat of death has little or no deterrent effect. But for many others, the death penalty undoubtedly is a significant deterrent." (footnote omitted)).

See infra notes 121-69 and accompanying text.

60.

See infra notes 131-37 and accompanying text.

61.

62.

See infra notes 141-44 and accompanying text.

Robert S. Bloink, Catalystsfor Clarification:Modern Twists on the Insurable Interest 63. in at least some Requirementfor Life Insurance, 17 Conn. Ins. L.J. 55, 62 (2010) ("While ... cases the insurable interest requirement is insufficient to eliminate the motivation of an individual with a criminal disposition to use life insurance as part of a nefarious scheme, the requirement is likely to have at least some deterrent effect by exponentially increasing the difficulty of securing a death benefit payout in the absence of an insurable interest."). Of course, this deterrent effect hinges on the would-be murderer knowing that, notwithstanding the fact the insurer permitted him to become a beneficiary while not having a legal insurable interest, the insurer will not pay the benefit upon discovering the absence of an insurable interest and he will not recover if forced into the civil courts to enforce the policy terms.

182

SOUTH TEXAS LAW REVIEW

[Vol. 58:173

Thus, the would-be murderer would be subjecting himself to considerable risk and would not benefit from his act in any event.64 Unfortunately, courts frequently fail to narrowly define the insurable interest doctrine,65 and insurers frequently fail to properly apply it.66 Even when the doctrine is narrowly defined and properly applied, a bit of planning permits a murderer to circumvent the doctrine and once again subject a child to the threat of murder. 67 A.

DeterrentEffect of Apprehension and Prosecution

Murder motivated by anger can, of course, support a finding of premeditation and a first degree murder conviction. 68 Accordingly, the convicted murderer might be subject to the potential consequences of life imprisonment or execution. 69 However, criminal law also recognizes that a murder committed in anger might occur under such circumstances that the murderer acted out of a spontaneous fit of rage and without premeditation, and therefore committed second-degree murder. 70 The law also recognizes that a person might kill another in anger, but under adequate provocation or in the "heat of passion" such that the defendant is convicted of manslaughter." In both instances, the absence of premeditation serves to reduce the severity of the crime, 72 and therefore, the punishment.

64.

See id.

65.

See infra note 199 and accompanying text.

66.

See infra notes 158-65 and accompanying text.

67.

See infra notes 173-208 and accompanying text.

68.

See, e.g., People v. Lunafelix, 214 Cal. Rptr. 33, 36 (Ct. App. 1985) ("[T]he law does not require that a first degree murderer have a 'rational' motive for killing. Anger at the way the victim talked to him or any motive, 'shallow and distorted but, to the perpetrator, genuine' may be sufficient." (citation omitted) (quoting People v. Smith, 108 Cal. Rptr. 698, 709 (Ct. App. 1973), disapprovedofon othergrounds by People v. Wetmore, 583 P.2d 1308 (Cal. 1978) (en banc))).

69.

See, e.g., N.C. GEN. STAT. § 14-17(a) (2011 & Supp. 2012) ("A murder which shall be perpetrated by [any] means of ... premeditated killing . .. shall be deemed to be murder in the first degree, a Class A felony, and any person who commits such murder shall be punished with death or imprisonment in the State's prison for life without parole as the court shall determine ...

70.

See, e.g., People v. Rodriguez, 77 Cal. Rptr. 2d 676, 680 (Ct. App. 1998) ("Unpremeditated murder resulting from spontaneous rage is normally second degree murder.").

71.

See, e.g., State v. Forrest, 362 S.E.2d 252, 256 (N.C. 1987) ("[U]nder certain circumstances, one who kills another human being in the 'heat of passion,' produced by adequate provocation sufficient to negate malice, is guilty of manslaughter rather than murder." (citing State v. Robbins, 309 S.E.2d 188, 191 (N.C. 1983); State v. Jones, 261 S.E.2d 1, 6 (N.C. 1980), overruled on othergrounds by State v. McAvoy, 417 S.E.2d 489 (N.C. 1992))).

72.

See, e.g., State v. McCollum, 579 S.E.2d 467, 470 (N.C. Ct. App. 2003) ("Murder in the first degree is the unlawful killing of a human being with malice and with premeditation and deliberation. Murder in the second degree is the unlawful killing of a human being with malice but without premeditation and deliberation. Voluntary manslaughter is the unlawful killing of a human being without malice and without premeditation and deliberation. Involuntary

2016]1

MURDER FOR LIFE INSURANCE MONEY

183

However, when it can be established that the motive for murder was the recovery of the proceeds of a life insurance policy covering a child, it is difficult to escape the conclusion that premeditation was involved.7 3 The murderer must plan in such a way to become the child's life insurance beneficiary,74 or plan in some way to benefit from the person who is the child's beneficiary," and then plan to commit the murder in such a way as to avoid suspicion.76 Thus, it would seem that one who murders for the purpose of collecting life insurance proceeds would, if convicted, almost always be subject to a first-degree murder conviction based on premeditation, and life imprisonment or execution.

While the law frequently finds it convenient to engage in the legal fiction that "every one is presumed to know the law,"78 such a fiction would hardly seem necessary in this instance. Anyone who has the intellect to "game" the life insurance industry so as to benefit, directly or indirectly, from a child's life insurance policy, and to then commit premeditated murder, would likely have the intellect to understand that the potential consequences include life imprisonment or execution.79 Accordingly, it would seem that a murderer who plans and plots the murder of a child in order to gain financially through life insurance proceeds would be aware that he may ultimately face the most serious legal consequences that the law allows, life imprisonment or execution, and would therefore be deterred from committing the murder.

Without doubt, these deterrent forces work in many instances even though it is impossible to prove empirically just how effective they are.so

manslaughter is the unlawful killing of a human being without malice, without premeditation and deliberation, and without intention to kill or inflict serious bodily injury." (quoting State v.

Wilkerson, 247 S.E.2d 905, 915 (N.C. 1978))).

See, e.g., State v. White, 457 S.E.2d 841, 857 (N.C. 1995) ("[E]vidence that defendant 73. became one of the beneficiaries of an insurance policy on the victim's life days before he was killed was relevant to show her motive for murdering her stepson. This evidence tended to prove that defendant murdered the victim, at least in part, to collect the insurance proceeds from the victim's life insurance policy.").

See, e.g., supra notes 12-15 and accompanying text. In Brian's case, set forth in Part I 74. of this Article, Brian's uncle essentially defrauded the insurer into making him a beneficiary to the policy covering Brian's life.

75.

See, e.g., supra notes 16-23 and accompanying text. Brian's uncle's fiancde intended to benefit from the marriage to Brian's uncle, the uncle being the beneficiary under a life insurance policy covering Brian's life.

76.

See, e.g., supra note 41 and accompanying text. Brian's murderers set fire to the house to make it appear that Brian died from a fire.

See supra notes 68-69 and accompanying text.

77.

78.

E.g., Iterman v. Baker, 15 N.E.2d 365, 370 (Ind. 1938).

See supra notes 68-69 and accompanying text.

79.

Obviously, where the threat of prosecution successfully serves as a deterrent, the 80. would-be murderer decides against committing the crime and his aborted intentions are rarely

184

SOUTH TEXAS LA wREVIEW

[Vol. 58:173

One conclusion that can be drawn, however, is that they do not deter in all instances.

By way of example, they failed miserably in Brian's case." Perhaps those who planned and carried out Brian's murder thought they would never be apprehended, or perhaps the temptation of a payout in the thousands of dollars made the risk worth it. 2 While the psychological makeup of the criminal mind and its responsiveness to deterrents and motivation is outside the scope of this Article,83 it is clear that the threat of criminal punishment is not sufficient to protect children in all instances,

discovered. See Gregg v. Georgia, 428 U.S. 153, 184-85 (1976) ("Statistical attempts to evaluate the worth of the death penalty as a deterrent to crimes by potential offenders have occasioned a great deal of debate. The results simply have been inconclusive." (footnote omitted)).

81.

There is likely little doubt that Brian's uncle, and his conspirators, knew the risk they were taking but were not deterred in their conduct.

82.

See supra notes 11-16 and accompanying text. The dollar value of the risk taken by Brian's uncle was a life insurance payout of $58,552. The policy also contained a double indemnity clause which would provide a double payout of $117,104 if Brian's death was caused by accident. Perhaps this is the reason his murderers set fire to Brian's residence. The payout to the uncle's girlfriend presumably would have been to share with the uncle the $117,104.

Interestingly, and most alarmingly, the value of the risk taken by the girlfriend's friend to assist in the commission of the murders was only around $1,200 to $1,300. See supra notes 11-16 and accompanying text.

83.

See generally, Hummayoun Naeem et al., Pain - Pleasure Theory of Motivation, INTERDISC. J. CONTEMP. RES. Bus., June 2011, at 1489, 1489, 1493 ("The pain pleasure theory of motivation is based upon the assumption that human nature seeks pleasure and avoids pain. One is never comfortable in painful situation [sic] and in order to get rid of that painful situation, the individual puts efforts to come out and seeks pleasure. Level of efforts put to avoid pain indicates motivation level. In order to support the assumption, a scale indicating 5 different stages i.e. 20, 40, 60, 80, & 100 was developed. These stages indicate pleasure level of an individual. According to the theory, if an individual reaches the stage of 20 and gets stuck at this stage, either he will show his satisfaction or dissatisfaction. In case of satisfaction, he will not put any more effort to reach [the] next stage, he will be happy [with] whatever he has got. In case of dissatisfaction, he is going to face two situations; he will put more efforts to reach [the] next stage and may manage to reach the target stage; otherwise, his dissatisfaction would lead towards anxiety and depression.

This psychological state would further lead towards two behavior patterns; either he will go to seek medical help or his psychological disorders will get intensified which will finally lead towards abnormal behavior patterns. . . . He may develop criminal inclinations starting from snatching and stealing to high level planned robberies."); Charles R. Tittle and Ekaterina V. Botchkovar, Self-Control, Criminal Motivation and Deterrence: An Investigation Using Russian Respondents, 43 CRIMINOLOGY 307, 309 (2005) ("Self-control theory contends that all people face temptations (opportunities) for gratifying but potentially costly behavior, with the strongly self-controlled tending to resist while the weakly controlled tend to succumb. Since opportunities for misbehavior are ubiquitous, low self-control is claimed to be the main cause of all known variations, except by age, in criminal probability among individuals and socio-demographic ".(citations categories. Age variation is presumably inexplicable with social variables .... omitted)).

2016]

MURDER FOR LIFE INSURANCE MONEY

185

particularly when the murderer stands to recover thousands or even hundreds of thousands of dollars in life insurance money. 84 B.

InsurableInterest Doctrine

The second legal device in place to protect insureds, including children, from being murdered for the recovery of insurance proceeds is the insurable interest doctrine. The doctrine applies primarily to life insurance and to property insurance." Briefly stated, the doctrine provides that before a person can recover for the loss of the insured life of another or for the loss or damage to insured property, he must have an "insurable interest" in the insured life," or in the insured property."

While this Article focuses on life insurance, and particularly on life insurance covering children, it may be helpful to first examine the application of the insurable interest doctrine to property insurance. The doctrine appears to have arisen first in property insurance or, more precisely, marine insurance." Further, its application to life insurance

See, e.g., State v. Milke, 865 P.2d 779, 781-82 (Ariz. 1993) (en banc) (affirming 84. defendant's conviction for first-degree murder, where defendant conspired to kill her four-yearold son after she took out a $5,000 life insurance policy on him which named her as the beneficiary); Davidson v. State, 558 N.E.2d 1077, 1081-82 (Ind. 1990) (affirming defendant's conviction for murdering her two infant children, where defendant was the beneficiary to life insurance policies in the amounts of $5,000 on one child's life and $20,000 on the other); Wilson v. State, 764 A.2d 284, 288, 290 (Md. Ct. Spec. App. 2000) (affirming defendant's conviction for first-degree murder of his infant son, where defendant was the beneficiary of two life insurance policies on the infant, one for $50,000 and one for $100,000), rev'd, 803 A.2d 1034 (Md. 2002); Conley v. State, 1999-KA-00521-SCT (T 1, 4) (Miss. 2001) (affirming defendant's conviction for capital murder, where defendant murdered his three-year-old daughter after purchasing a $100,000 life insurance policy on her); Hill v. State, 1999-KA-01511 -SCT (T 1, 18) (Miss. 2001) (affirming defendant's conviction for murder, where defendant suffocated her infant son after taking out a $10,000 life insurance policy on him so that she would have enough money to bond her husband out ofjail); Merritt v. State, 339 So. 2d 1366, 1367 (Miss. 1976) (affirming defendant's conviction for the murder of his two-year-old daughter, where defendant was the beneficiary of a $25,000 life insurance policy on her); State v. White, 457 S.E.2d 841, 845-47 (N.C. 1995) (affirming defendant's conviction for the first-degree murder of her stepson, where defendant had been named a co-beneficiary to a $15,000 life insurance policy on her stepson just days before he was murdered); O'Bryan v. State, 591 S.W.2d 464, 467 (Tex. Crim. App. 1979) (en banc) (affirming defendant's conviction for capital murder, where defendant murdered his eight-year-old son after taking out multiple life insurance policies on him, including one for $10,000 and another for $20,000).

See infra notes 91-169 and accompanying text.

85.

See infra notes 91-113 and accompanying text.

86.

See infra notes 122-69 and accompanying text.

87.

See ROBERT E. KEETON & ALAN 1. WIDISS, INSURANCE LAW: A GUIDE TO 88.

FUNDAMENTAL PRINCIPLES, LEGAL DOCTRINES, AND COMMERCIAL PRACTICES

(1988).

§ 3.2, at 142-43

SOUTH TEXAS LAW REVIEW

186

[Vol. 58:173

appears to have been, intentionally or otherwise, patterned somewhat after its application to property insurance.89 1.

InsurableInterests in PropertyInsurance

The insurable interest doctrine, as applied to marine insurance, originated in early English statutory law through the Statute of George 11.90 The preamble of the Statute of George II declared that such insurance contracts had "been productive of many pernicious practices, -

whereby great numbers of ships, with their cargoes, have . . . been

fraudulently lost and destroyed, . . . " and whereby there was introduced "a mischievious kind of gaming or wagering, under the pretence of assuring the risque on shipping." The Statute of George II, which applied only to marine insurance, declared that "no assurance or assurances shall be made . . . interest or no interest, or

without further proof of interest than the policy, or by way of gaming or wagering, or without benefit of salvage to the assurer; and that every such assurance shall be null and void to all intents and purposes." 9 1

The wrong to be remedied and the remedy itself are found within the language of the statute. 92 insureds were acquiring marine insurance contracts covering ships and cargoes in which the insureds had no property interest.93 Thus, the insureds were effectively engaging in "a mischievious kind of gaming or wagering," 94 or essentially gambling that the ship or cargo would be lost and then recover a windfall because they received a large insurance payout for the meager cost of the contract itself but without any property loss of their own. To eliminate the mischief and harm associated with gambling, the statute made such insurance contracts "null and void." 95 However, the statute refers to another, more sinister wrong that is of greater importance to this Article. Those who purchased such insurance contracts without an insurable interest would not always rely upon fate to create the loss, but would on occasion cause the ship and cargo to be "fraudulently lost and destroyed."" The insured would recover a large insurance payout with no property loss of his own, but this time through the 89.

See id. § 3.3, at 151, 155.

90.

Id. § 3.2, at 142.

91.

Id. at 142-43 (footnote omitted) (quoting Marine Insurance Act, 1745, 19 Geo. 2 c. 37 (Gr. Brit.), repealed by Marine Insurance Act, 1906, 6 Edw. 7 c. 41, § 92, sch. 2. (U.K.)).

92.

See id.

93.

See id. at 142.

94.

Id. (quoting 19 Geo. 2 c. 37).

95.

Id. at 143 (quoting 19 Geo. 2 c. 37).

96.

Id. at 142 (quoting 19 Geo. 2 c. 37).

2016]

MURDER FOR LIFE INSURANCE MONEY

187

act of actually causing the loss to the property.9 7 The remedy, again, was to make such contracts "null and void."98 In summary, England's early insurable interest doctrine required the insured to have some economic, or insurable, interest in the property that was the subject of the insurance, or else the insured would be wrongfully gambling or wagering and may even be tempted to cause the destruction of the property itself in order to recover the insurance proceeds. 99 The insurable interest doctrine, at least theoretically, would avoid the problem with random gambling and also serve to deter the insured from destroying the property to simply recover in money what he had lost in property. 100 Though now the subject of statutes in some jurisdictions,'o in the United States the insurable interest doctrine for purposes of property insurance was largely adopted by common law.' 02 Generally consistent with the policy of England, 0 3 and the English statute,1 0 4 the courts typically state that the objectives of the doctrine are to preclude wagering,'0 o and to avoid the creation of a temptation to destroy the subject property for the recovery of the insurance proceeds.1 0 6 To accomplish the doctrine's objectives, courts require the insured to have some ownership or other interest in the property, 07 sufficient for the insured to suffer a loss by the destruction of the property.'0 o See id.

97.

Id. at 143 (quoting 19 Geo. 2 c. 37).

98.

See id. at 142-43.

99.

See id.

100.

See, e.g., Md. Code Ann., Ins. § 12-301(b) (LexisNexis 2011) ("A contract of property 101. insurance or a contract of insurance of an interest in or arising from property is enforceable only for the benefit of a person with an insurable interest in the property at the time of the loss.").

Keeton & Widiss, supra note 88, § 3.2, at 147.

102.

103.

Pritchet v. Ins. Co. of N. Am., 3 Yeates 458, 464 (Pa. 1803) ("We have adopted the policy and principles [13] which gave rise to the act of parliament, both in courts ofjustice and by commercial usage; but we are not prepared to say, that every particular provision or resolution under it, has been engrafted into our system of law.").

See supra note 91 and accompanying text.

104.

105.

See, e.g., Castle Cars, Inc. v. United States Fire Ins. Co., 273 S.E.2d 793, 794 (Va. 1981) ("The reasons for the rule are grounded in public policy. 'If ... one insures the property of another, the contract of insurance is void and carries with it temptations to crime into which we should not be led. It is against public policy."' (quoting Liverpool & London & Globe Ins. Co. v.

Bolling, 10 S.E.2d 518, 520 (Va. 1940))).

See, e.g., Delk v. Markel Am. Ins. Co., 2003 OK 88, ¶ 9, 81 P.3d 629, 635 ("The 106. distinction between wagering and insurance is now so firmly established in public perception, that the justification for the insurable interest doctrine is more readily apprehended today as the prevention of unproductive and wasteful commercial transactions, the limitation of insurance to true indemnity, and the deterrence of the fraudulent destruction of insured property." (footnotes omitted)).

Warren v. Davenport Fire Ins. Co., 31 Iowa 464, 468 (1871) ("An 'insurable interest' is 107. sui generis, and peculiar in its texture and operation. It sometimes exists where there is not any present property, orjus in re, orjus ad rem. Yet such a connection must be established between

188

SOUTH TEXAS LAW REVIEW

[Vol. 58:173

The doctrine requires not only that the insured have an insurable interest in the property, but also limits the amount of the insurance recovery to the value of the insurable interest the insured had in the property.109 Accordingly, if the insured has an interest valued at $1,000 in an item of property, he cannot recover in excess of that amount even if he insured the property at a greater amount.

Of significant importance is the fact that the doctrine does not appear to place any enforceable obligation on the insurer to ascertain whether the insured has an insurable interest in the property before issuing the policy."1o "[Ijn some contexts-including several types of property insuranceinsurers typically will only make a careful examination after a loss occurs (1) of whether the requisite interest exists or (2) of the value of an insured's interest.""' Instead, the doctrine merely makes such a policy null and void such that the insured who had no insurable interest in the property cannot recover after the property is damaged or destroyed.1 12 For this reason, the doctrine does not so much serve the intended deterrent purposes of preventing wagering or the intentional destruction of property on the frontend when the policy is issued, but rather serves as a defense the insurer might raise to avoid paying the proceeds on the back-end after the property is damaged or destroyed.1 13

&

the subject-matter insured, and the party in whose behalf the insurance has been effected, as may be sufficient for the purpose of deducing the existence of a loss to him from the occurrence of the injury to it." (citing Buck v. Chesapeake Ins. Co., 26 U.S. 151, 152 (1828))); see also Keeton Widiss, supra note 88, § 3.4, at 164 ("The basic types of property interests include: (1) Property (ownership) rights; (2) Contract rights; (3) Legal liabilities; (4) Representative relationships; and (5) Factual expectancies." (footnote omitted)).

108.

Smith v. Eagle Star Ins. Co., 370 S.W.2d 448, 450 (Tex. 1963) ("The principle may be stated generally that anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction.") (internal quotation marks omitted)); see also Keeton & Widiss, supra note 88, § 3.4, at 164 ("In general, the existence of an insurable interest in property covered by a contract of insurance is determined on the basis of whether the insured's relationship to the property is such that as a consequence of an injury to the property a loss will be sustained by the insured.").

109.

Keeton & Widiss, supra note 88, § 3.4, at 173 ("The objectives that underlie the insurable interest doctrine and the principle of indemnity include avoiding inducements to wagering, avoiding inducements to destruction of insured property, and avoiding net gain to an insured through receipt of insurance proceeds that exceed the loss suffered by the claimant." (emphasis added)).

110.

Id. § 3.3, at 162-63.

Ill. Id. at 150.

112.

See, e.g., Warren, 31 Iowa at 467 ("Upon the ground of public policy, therefore, if the assured have no interest in the thing insured the policy must be held void.").

113.

Keeton & Widiss, supra note 88, § 3.3, at 156 ("The full implementation of the public interest that produced the insurable interest doctrine may be impeded if insurers elect not to question the adequacy or existence of the required interest. Indeed, an examination of cases in which the doctrine has been asserted as a defense by insurers suggests that in many (and perhaps most) instances the motivation for an insurer to raise the lack of insurable interest is to defeat a

2016]

MURDER FOR LIFE INSURANCE MONEY

189

Accordingly, such a practice by insurers may lead to a person who wishes to insure his neighbor's property on a wager that the property might be destroyed to successfully purchase such a policy. If so, the insured effectively wagers the cost of a property insurance premium against the possibility that his neighbor's property will be destroyed." 4 If the property is destroyed by means other than at the hands of the insured, and if the insured makes a claim on the loss, the insurer might then investigate and determine that the insured had no insurable interest in property and raise its absence as a defense to paying the claim."' In this instance, the insurable interest doctrine has not prevented wagering through an insurance policy, but at least the insured will not recover from his wager. Even if the insured's lack of an insurable interest is not discovered, the insured has committed nothing more than a form of gambling that is perhaps frowned upon by public policy."' He did not cause the loss to the owner of the property and will not be civilly or criminally responsible for the loss."' In short, the insured gambled on the loss, but he did nothing to cause it.

However, such a practice by insurers may lead to a person insuring his neighbor's property and subsequently hastening the process by actually causing the destruction of his neighbor's property. If the insurer then investigates and discovers the insured had no insurable interest, it will again raise the insurable interest doctrine as a defense and defeat the insured's claim."' Further, because the insured actually caused the loss in this instance, if his actions are discovered he may be held civilly and criminally responsible for causing the loss." 9 However, even if the insured's lack of an insurable interest and his misdeeds go undiscovered, he will simply recover money to which he is not legally entitled and avoid civil and criminal liability.' 20 Of course, the true owner of the property will have to replace his property at his own expense or rely upon his own insurance coverage to replace the property. However, generally speaking, the property is replaceable and, even if it is not, it ultimately is still just property.

claim when an insurer either has some evidence or has strong suspicions of fraud, and that the existence of the fraud would be more difficult for the insurer to establish than a defense based on the lack of an insurable interest." (footnote omitted)).

ROBERT H. JERRY, II & DOUGLAS R. RICHMOND, UNDERSTANDING INSURANCE LAW § 114.

44, at 299 (4th ed. 2007); see supra notes 93-95 and accompanying text.

Id. § 40, at 294-95; see supra notes 110-13 and accompanying text.

115.

See supra note 105 and accompanying text.

116.

Cf Jacob Loshin, Insurance Law's Hapless Busybody: A Case Against the Insurable 117.

Interest Requirement, 117 YALE L.J. 474, 483 (2007).

See supra notes 110-13 and accompanying text.

118.

Loshin, supra note 117, at 483.

119.

See id.

120.

190

SOUTH TEXAS LAW REVIEW

[Vol. 58:173

While such after-the-fact investigation and enforcement does not necessarily prevent either wagering or the intentional destruction of property, only property is at stake. However, where the subject is life insurance rather than property insurance, the stakes are much higher.

2.

InsurableInterests in Life Insurance

As was the case for the insurable interest doctrine's application to property insurance, its application to life insurance was also the subject of an early English statute.121 However, the statute that addressed life insurance differed in one very important way from the statute that addressed property insurance.

The next major statutory contribution to the development of the insurable interest doctrine in England was enacted in 1774, during the reign of George III. The preamble to this statute addressed "a mischievous kind of gaming" in relation to "the making of insurances on lives, or other events, wherein the assured shall have no interest."

Nothing was said of the destruction of the subject matter of insurance, an evil that was specifically adverted to in the preamble of the marine insurance act of 1746. Apparently, the members of Parliament were not inclined to charge that no-interest life insurance had produced pernicious practices that amounted to murder. The 1774 act declared that "no insurance shall be made ... on the life or lives of any person or persons, or on any other event or events whatsoever, wherein the person or persons for whose use, benefit, or on whose account such policy or policies shall be made, shall have no interest ..

122 In England, there appears to have arisen a type of side-line business whereby individuals would purchase life insurance policies covering the lives of criminals who might face execution, thus essentially wagering that they would, in fact, be executed, as well as on the lives of the elderly. 123 Thus, while the statute that addressed insurable interests in property sought

121.

See KEETON & WIDISS, supra note 88, § 3.2(b), at 143.

122.

Id. (footnotes omitted).

123.

See Swisher, supra note 51, at 481 ("In life insurance, [wagering or] 'gaming' practices developed in the eighteenth century. Popular accounts of the period describe the practice of purchasing insurance on the lives of those being tried for capital crimes. These policies constituted naked wagers on whether the accused would ultimately be convicted and executed for the alleged offense. A related practice was the purchase of insurance on the lives of famous, elderly persons; the premium would be a function of what was known about the person's health, including any recent illnesses. Insuring a life in which one has no interest creates a temptation to bring the insured's life to an early end, but the greater concern in eighteenth-century England was the practice of wagering." (alteration in original) (quoting ROBERT H. JERRY, II, UNDERSTANDING INSURANCE LAW § 40, at 292 (3d ed. 2002))).

2016]

MURDER FOR LIFE INSURANCE MONEY

191

to avoid both "wagering" and the "pernicious practices" of intentionally causing the loss of a ship and its cargo,1 24 the statute that addressed insurable interests in life insurance perhaps focused more on the practices of the day and sought to avoid only "a mischievous kind of gaming."l 25 In the United States, similar to the doctrine's adoption for purposes of property insurance,1 2 6 the doctrine has been adopted for life insurance through common law,127 and by statute.1 28 Unlike the doctrine's application to property insurance, however, the insurable interest doctrine's application, or misapplication, to life insurance can result in very dangerous consequences for the insured's life.1 29 Many American courts today continue to state that the purpose of the insurable interest doctrine in life insurance is to avoid gaming, gambling, or wagering.' 30 Others have noted that the doctrine's purpose is also to avoid creating in the beneficiary of the policy a temptation to commit murder to

Supra note 91 and accompanying text.

124.

See supra note 123 and accompanying text.

125.

See supra notes 101-02 and accompanying text.

126.

Keeton & Widiss, supra note 88, § 3.2(e), at 147.

127.

128.

Id. 129.

See infra notes 160-67 and accompanying text.

See, e.g., N. Am. Co. for Life & Health Ins. v. Lewis, 535 F. Supp. 2d. 755, 759 (S.D. 130.

Miss. 2008) ("'Mississippi follows the general rule that in order to be entitled to proceeds from an insurance policy, the purchaser of the policy must have an insurable interest in the property or life insured.' This rule 'is based on the public policy that one should not be permitted to wager on or have a direct interest in the loss of life or property of another."' (citation omitted) (quoting Aetna Cas. & Sur. Co. v. Davidson, 715 F. Supp. 775, 776 (S.D. Miss. 1989))); Mut. Life Ins. Co. of N.Y. v. Allen, 138 Mass. 24, 27 (1884) ("The policy is a common form of what is called life insurance, and is a contract by which the insurer, in consideration of an annual payment to be made by the assured, promises to pay to her a certain sum upon the death of the person whose life is insured. To prevent this from being void, as a mere wager upon the continuance of a life in which the parties have no interest except that created by the wager itself, it is necessary that the assured should have some pecuniary interest in the continuance of the life insured."); Crosswell v.

Conn. Indem. Ass'n, 28 S.E. 200, 201 (S.C. 1897) ("It is firmly established that insurance procured by one person on the life of another, in which the party effecting the insurance has no interest, is void as a wager contract against public policy, which condemns gambling speculation upon human life.").

192

SOUTH TEXAS LAW REVIEW

[Vol. 58:173

recover from the policy. 13 1 Still others combine the purposes by equating wagering to murder. 132 It is the modem doctrine's "murder avoidance" objective that comes into sharp focus when examining the doctrine's effectiveness in safeguarding the lives of insured children.

Simply stated, the insurable interest doctrine-for purposes of life insurance-provides that a person may not be the beneficiary to a life insurance policy covering the life of another person unless he has a sufficient relationship with the insured life to constitute an insurable interest.1 33 Thus, the doctrine focuses on the relationship, or absence thereof, between the insured life and the beneficiary. 134 Accordingly, if "A" purchases a life insurance policy covering "B's" life and names himself as the beneficiary to the policy, "A," as the beneficiary, must have an insurable interest in "B," the insured life.' 35 Otherwise, the policy is invalid.'36 One interesting exception to the rule of the insurable interest doctrine applies where a person purchases a life insurance policy covering his own life. In this instance, he may name any person or entity as beneficiary with or without the beneficiary having an insurable interest in the insured's life.' 3 1 Perhaps this exception addresses the doctrine's original purpose of the avoidance of wagering,' 3 8 and recognizes the beneficiary is not

131.

See Cisna v. Sheibley, 88 111. App. 385, 389 (1899) ("'A policy obtained by a party who has no interest in the subject of insurance is a mere wager policy. But policies without interest upon lives are more pernicious and dangerous than any other class of wager policies, because temptations to tamper with life are more mischievous than incitements to pecuniary fraud."' (quoting Ruse v. Mut. Benefit Life Ins. Co., 23 N.Y. 516, 525 (1861))); Allen v. United of Omaha Life Ins. Co., 236 S.W.3d 315, 322 (Tex. App.-Fort Worth 2007, pet. denied) ("Two policies drive this rule: A practice that encourages one to take another's life should be prohibited, and no one should be permitted to wager on the life of another." (citing Torrez v. Winn-Dixie Stores, Inc., 118 S.W.3d 817, 820 (Tex. App.-Fort Worth 2003))).

132.

See, e.g., Ruse, 23 N.Y. at 526 ("[P]olicies without interest upon lives are more pernicious and dangerous than any other class of wager policies; because temptations to tamper with life are more mischievous than incitements to mere pecuniary frauds.").

133.

See JERRY & RICHMOND, supra note 114, § 43, at 293; see also cases cited supra notes 131-32.

134.

JERRY & RICHMOND, supra note 114, § 43, at 293.

135.

Though factually less likely, where "A" purchases a life insurance policy covering "B's" life and names "C" as the beneficiary, "C" must have an insurable interest in "B's" life.

However, the doctrine does not necessarily suggest that "A," as the purchaser of the policy but not its beneficiary, must also have an insurable interest in "B." 136.

JERRY & RICHMOND, supra note 114, § 41, at 278.

137.

See, e.g., Mut. Say. Life Ins. Co. v. Noah, 282 So. 2d 271, 273 (Ala. 1973) ("This rule is to the effect that a person has an unlimited insurable interest in his own life and may designate any person as his beneficiary so long as the insurance was procured or taken out by the insured and the premiums paid by him .... ).

138.

See supra note 131 and accompanying text.

2016]

MURDER FOR LIFE INSURANCE MONEY

193

gambling if he had nothing to do with the procurement of the policy.' Or, perhaps it addresses the modem purpose of the avoidance of murder and recognizes that the insured, who also purchased the policy, would not name as beneficiary a person he has reason to suspect might murder him to collect the insurance proceeds. 14 0 Where the beneficiary must have an insurable interest in the life of the insured, consistent with the doctrine's purpose of avoiding the creation of an inducement to commit murder, 14 1 an insurable interest is generally deemed to exist where the beneficiary has sufficient reason to want the life of the insured to continue to exist. 142 To that end, the doctrine generally requires either that the beneficiary have a sufficient economic or pecuniary interest in the continued life of the insured, or that the beneficiary have sufficient familial ties to the insured so that his love and affection for the insured causes the beneficiary to want the insured's life to continue. 143 Thus, the first basis that would support a finding of an insurable interest in the life of another exists where the beneficiary has a pecuniary interest in the life of the insured such that the beneficiary would suffer a financial loss upon the death of the insured. 144 By way of example, a pecuniary insurable interest may be deemed to exist where the beneficiary Crosswell v. Conn. Indem. Ass'n, 28 S.E. 200, 201 (S.C. 1897) ("[I]t is also well settled 139. that a person may insure his own life, and make the policy payable to whomsoever he chooses, even though the beneficiary has no insurable interest in his life, provided the transaction is bona fide, and not a mere cover to evade the law against wager policies."); see also Keeton & Widiss, supra note 88, § 3.5, 189 ("Sometimes decisions holding that a designation of a beneficiary without an insurable interest or an assignment to a person without an insurable interest is valid when made by the person whose life is insured have given little, if any, recognition to avoidance of inducement to murder as an objective of the insurable interest doctrine. In such cases, it frequently has been observed that the central objective of the insurable interest rule is the avoidance of wagering, and participation in the transaction by the person whose life is insured adequately protects against wagering." (footnote omitted)).

Jerry & Richmond, supra note 114, § 43, at 293 ("The person who takes out insurance 140. on her own life has the power to designate any beneficiary; it is presumed that the person will not designate a beneficiary likely to murder the insured. In virtually every state, it is not necessary that the named beneficiary have an insurable interest in the life of the insured.").

See supra note 132 and accompanying text.

141.

See JERRY & RICHMOND, supra note 114, § 43, at 294-95.

142.

See, e.g., Johnson v. Nelson, 861 N.W.2d 705, 713 (Neb. 2015) ("In Nebraska, an 143. '[i]nsurable interest, in the matter of life and health insurance, exists when the beneficiary because of relationship, either pecuniary or from ties of blood or marriage, has reason to expect some benefit from the continuance of the life of the insured."' (alteration in original) (quoting Neb. Rev. Stat. ANN. § 44-103(13)(b) (LexisNexis 2010))); Keeton & Widiss, supra note 88, § 3.5, at 179 ("The common or unifying characteristic of these two types of relationships is that in both there is a reason for the beneficiary of the life insurance to anticipate that some economic benefits either will or may result from the continuation of the assured's life, and that such benefits will be lost in the event of the assured's death-that is, there is a factual expectancy which will be curtailed by the assured's death.").

JERRY & RICHMOND, supra note 114, § 43, at 296.

144.

194

SOUTH TEXAS LA wREVIEW

[Vol. 58:173

and insured are business partners, 145 or where the insured is an employee of the beneficiary's business.1 4 6 As is the case with property insurance, 14 7 such a pecuniary interest in the insured subject discourages wagering in the sense that the beneficiary will suffer a true financial loss upon the death of the insured and, therefore, gain no windfall from his death. Presumably, such a pecuniary interest discourages the commission of homicide by the beneficiary as well.

While an insurable interest grounded in pecuniary considerations might suggest its own unique problems worthy of attention, 14 it is rare that an insured child would be in such a position as to be a pecuniary benefit to the beneficiary.1 49 Therefore, it is the second basis for an insurable interest that most directly impacts children.

The second basis for an insurable interest requires that the beneficiary have a sufficient family tie to the insured such that the love and affection the beneficiary has for the insured will cause the insured to wish the continued existence of the insured life.so This prong appears to be aimed directly at preventing insurance proceeds from becoming an incentive for murder. Accordingly, the family ties generally must be quite close.

Most jurisdictions tend to agree that an insurable interest exists between insureds and their relatives located along the vertical family tree. "' Thus, a given individual has an insurable interest in his parents and his children.' 52 On the other hand, the horizontal family tree is quite limited.

Spouses, of course, have insurable interests in each other,' 53 while

&

145.

See, e.g., N.C. Gen. Stat. § 58-58-80 (2011) ("Any partner has an insurable interest in and the right to insure the physical ability or the life, or both the physical ability and the life, of any other partner or partners who are members of the same partnership for his benefit, either alone or jointly with another partner or partners of the same partnership."); JERRY & RICHMOND, supra note 114, § 43, at 296.

146.

See, e.g., N.C. Gen. Stat. § 58-58-75 ("An employer, whether a partnership, joint venture, business trust, mutual association, corporation, any other form of business organization, or one or more individuals, or any religious, educational, or charitable corporation, institution or body, has an insurable interest in and the right to insure the physical ability or the life, or both the physical ability and the life, of an employee for the benefit of such employer."); JERRY RICHMOND, supra note 14, § 43, at 296.

147.

See supra notes 90-121 and accompanying text.

148.

For example, one business partner might decide to murder the other to not only recover the life insurance proceeds but to also avoid sharing some lucrative opportunity for the partnership.

149.

But see infra notes 187-89 and accompanying text (discussing "wait and see" beneficiaries).

150.

See supra notes 143-44 and accompanying text.

151.

Keeton & Widiss, supra note 88, § 3.5, at 181.

152.

Id. at 181-82.

153.

Id. at 181.

2016]

MURDER FOR LIFE INSURANCE MONEY

195

approaches vary in regard to siblings.' 54 However, in the absence of a pecuniary interest, the doctrine's list of acceptable beneficiaries generally stops there; uncles, aunts, and cousins, with few exceptions, are outside the reach of an insurable interest. 115 Courts vary regarding the effect of the relationship between a stepparent and stepchild. 156 Further, unlike the doctrine's application to property insurancewhere its existence is often an after-the-fact of loss consideration and defense to payment of the insurance proceeds-the insurable interest doctrine's application to life insurance has teeth that presumably prompts the insurers to make sure policies are in compliance with the doctrine on the front-end before the policy is issued. Particularly regarding children, where an insurer issues a policy that names a beneficiary who does not have an insurable interest, and where the beneficiary subsequently murders the child for the insurance proceeds, the insurer may be subject to a suit in negligence.' 5 7 For example, in an Alabama case, an aunt murdered her niece, who was a few months over two years of age, by serving her a soft drink that contained arsenic.'1 5 Before she committed the murder, the aunt applied for and acquired three life insurance policies on her niece's life naming herself as the beneficiary to all three. 1 The young girl's father subsequently sued all three insurance companies in negligence for issuing policies that made the aunt, a person with no insurable interest, the beneficiary.' 60 After discussing the importance of the insurable interest doctrine in protecting the lives of insureds,' 6' the court addressed the defendant

154.

See, e.g., id. at 182 & n.7.

Id. at 182 & n.9.

155.

See, e.g., Jerry & Richmond, supra note 114, § 43, at 295 ("As for the relationship 156. between a stepfather/stepmother and stepchild, the courts are not uniform. It would seem that whether the step-parent/step-child relationship, without more, creates an insurable interest should turn on whether the relationship is functionally equivalent to other kinds of familial relationships where the insurable interest is found. For example, one court has held that adopting parents have an insurable interest in a child after the child has been placed in the parents' home but before the adoption decree becomes final. Although this decision can be explained based on the economic interest adopting parents have both in the adoptee and in the adoption process being brought to a successful conclusion, this result can also be founded on the fact that the adopting family during the post-placement, pre-final decree period resembles, for all practical purposes, other family units." (footnotes omitted)).

See id. § 47, at 313-14.

157.

Liberty Nat'l Life Ins. Co. v. Weldon, 100 So. 2d 696, 700, 703 (Ala. 1957).

158.

Id. at 700.

159.

Id. 160.

Id. at 705 ("No principle of the law of life-insurance is at this day better settled, than 161. the doctrine, that a policy taken out by one person upon the life of another, in which he has no insurable interest, is illegal and void, as repugnant to public policy. Such contracts are aptly termed 'wager policies,' and are entitled to no higher dignity, in the eye of the law, than gambling

SOUTH TEXAS LAW REVIEW

196

[ 58:173 [Vol.

insurance companies' argument that they owed no duty in negligence to make sure the beneficiary had an insurable interest before issuing the

policy. 162 The position of the defendants seems to be that if murder results the insurance companies are, of course, sorry that the insured met with such a fate, but they have no liability if there is no insurable interest although they can treat such policies as completely void. If an early death from natural causes makes the policy unprofitable, the defendants can and do refuse to pay the beneficiary for the reason that such policies are void. In other words, the defendants seem to be of the opinion that the insurable interest rule is to protect insurance companies. We do not agree. The rule is designed to protect human life. Policies in violation of the insurable interest rule are not dangerous because they are illegal; they are illegal because they are dangerous.

As we have shown, it has long been recognized by this court and practically all courts in this country that an insured is placed in a position of extreme danger where a policy of insurance is issued on his life in favor of a beneficiary who has no insurable interest. There is no legal justification for the creation of such a risk to an insured and there is no social gain in the writing of a void policy of insurance. Where this court has found that such policies are unreasonably dangerous to the insured because of the risk of murder and for this reason has declared such policies void, it would be an anomaly to hold that insurance companies have no duty to use reasonable care not to create a situation which may prove to be a stimulus for murder.1 63 In the same case, the insurers argued that, regardless of any duty owed, the act of the aunt in murdering the niece constituted an unforeseeable and intervening cause such that their liability was severed. 6 4 The court stated: We cannot agree with the defendants in their assertion that we should hold as a matter of law that the murder of the young girl was speculations, or idle bets as to the probable duration of human life. There is no limit as to the insurable interest which a man may have in his own life; but there are forcible reasons why a mere strangershould not be permitted to speculate upon the life of one whose continued existence would bring to him no expectation of possible profit or advantage. All wagers, at common law, were not illegal, but only such as were contrary to good morals or sound policy. The statutes of this State make all contracts by way of gaming or wagering void. However this may be, wager policies, or such as are procuredby a person who has no interest in the subject of insurance, are undoubtedly most pernicious in their tendencies, because in the nature of premiums upon the clandestine taking of human lfe." (citations omitted) (quoting Helmetag's Adm'r v. Miller, 76 Ala. 183, 186 (Ala. 1884)) (internal quotation marks omitted)).

162.

Id. at 707-08.

163.

Id. at 708.

164.

Id. at 709.

2016]

MURDER FOR LIFE INSURANCE MONEY

197

not reasonably foreseeable. They created a situation of a kind which this court and others have consistently said affords temptation to a 1 65 recognizable percentage of humanity to commit murder.

It would seem, then, that the courts tendency to limit the insurable interest doctrine's acceptance of qualified beneficiaries to the closest of relatives and that the bite of a negligence action for noncompliance with the doctrine on the part of insurers would tend to deter insurers, if not murderers, from ignoring the insurable interest doctrine such that children should be relatively safe. However, such is not the case.

First, certain jurisdictions appear to take a rather reckless "wait and see" approach in deciding whether a beneficiary had an insurable interest in the life of the insured. 166 These courts do not set out a definitive list of appropriate beneficiaries but instead analyze the relationship between the insured and the beneficiary "after the fact" of the death of the insured to decide whether the beneficiary had sufficient love and affection, perhaps coupled with a vague pecuniary interest, for the insured so as to constitute an insurable interest. 16 7 Of course, where it can be established that the beneficiary murdered the insured, the analysis becomes irrelevant. 168 However, the fact that such an analysis is possible in certain jurisdictions no doubt makes insurers less prudent in the face of such a vague application of the law, lends support for insurers who argue that they were not negligent in issuing a policy naming such an individual as the beneficiary, and does little if anything to deter would-be murderers from rolling the dice on committing murder with the hope of subsequently qualifying as a beneficiary under such a nebulous standard.

Second, even in jurisdictions where the doctrine is well-defined and where insurers may be subject to negligence suits, insurers continue to fail in making sure the beneficiary has an insurable interest in the insured. Such were the facts in young Brian's murder. 16 9 It is therefore evident that criminal and civil responses currently in place to protect children from being murdered for the recovery of life insurance proceeds are not serving the purpose of, in all instances, protecting the children. Accordingly, other solutions to this horrible loss of life are necessary.

165.

166.

167.

168.

169.

Id.at711.

See infra notes 187-92 and accompanying text.

See infra notes 187-92 and accompanying text.

Tinio, supra note 47, at 802.

See supra notes 6-45 and accompanying text.

198

SOUTH TEXASLAWREVIEW

[Vol. 58:173

IV. SCENARIOS OF RISK

Before offering proposals that might better protect children from becoming the targets of murder for life insurance proceeds, it may be useful to first consider the various scenarios through which children may be most at risk and then measure proposed solutions for their effectiveness in light of these scenarios. While there may be any number of fact-specific situations in which children are placed at risk, they can be generalized into two very broad categories. The first category includes scenarios that arise where the beneficiary was an "unlawful beneficiary" in the sense that the beneficiary defrauded the insurer into issuing the policy under which he became an unlawful beneficiary, 7 0 or where the insurer acted carelessly or negligently in issuing a policy naming him as beneficiary.1 7 ' The second category includes scenarios that arise where the beneficiary was a "lawful beneficiary" in that the beneficiary had the requisite insurable interest in the insured child, but where the safety of the child was nonetheless at risk. 172 A.

The Unlawful Beneficiary

In the first category, a person without an insurable interest, and therefore one who lacks a sufficient family tie to suggest the presumptive love and affection that would protect the child, has in some manner managed to place himself in the position of beneficiary to the child's life insurance policy. One scenario that might lead to this result is the instance where the unlawful beneficiary defrauds an otherwise innocent insurer. For example, the unlawful beneficiary might manage to convince the insurer that he is, in fact, a parent or perhaps a grandparent to the child to be insured and that he, therefore, does have an insurable interest in the child.

While this first scenario is worthy of consideration when exploring ways in which to better protect children, it is a somewhat unlikely scenario for at least two reasons. First, it would take a significant amount of planning for the unlawful beneficiary to assume the identity of the child's parent or grandparent so convincingly that the insurer would be innocently deceived.

At the very least, the unlawful beneficiary would likely have to create false documents of identification. Second, assuming the subsequent murder of the child results in an investigation, the fact that the unlawful beneficiary assumed a false identity would seem to be a fact that would be easily discovered and worthy of considerable suspicion.

170.

171.

172.

See supra notes 11-15 and accompanying text.

See, e.g., Liberty Nat'l Life Ins. Co. v. Weldon, 100 So. 2d 696, 704, 707 (Ala. 1957).

See cases cited supra note 84.

2016]

MURDER FOR LIFE INSURANCE MONEY

199

A second and more likely scenario would be the instance where a fraudulent beneficiary is coupled with a negligent or at least careless insurer, as opposed to an innocent insurer as in the above scenario. For example, in one case a man successfully defrauded an insurer into believing that he was the son of the person he proposed to insure.' 73 He obtained an application from the insurer and told the insurer's representative that he would take the application to his "father" to obtain his signature.17 4 The insured life was an actual person, of course, but the man seeking to create the insurance coverage was not his son."' The representative permitted the man to take the application with him in violation of the insurer's own procedural rules. 76 The man returned with the "signed" application, naming himself as the beneficiary, and the insurer's representative further signed the application "witnessing" the "father's" signature."' The "father" was later found stabbed and beaten to death in his apartment, resulting in the allegation that the beneficiary committed the murder." 8 While this case involves an adult beneficiary and an adult insured, it illustrates how bold a person might be in defrauding an insurer and how gullible and careless an insurer might be in issuing a life insurance policy.

This scenario partially explains what happened in young Brian's case. 7 9 Brian's uncle obtained a life insurance application from the insurer and then returned the application to the insurer after fraudulently forging Brian's father's signature on the application, purporting to give the insurer permission to insure Brian's life, and after naming himself the beneficiary to the policy on the application.'s The insurer then acted carelessly, if not negligently, in at least a couple of ways. First, the circumstances under which Brian's father's signature appeared on the application suggests that the insurer never actually discussed the matter with Brian's father but rather took the uncle's "word" as true.'"' Second, apart from the forged signature, the insurer caused an insurance policy to issue, naming Brian as the insured life and Brian's uncle, who under state law did not have an insurable

173.

174.

175.

176.

177.

178.

179.

180.

181.

Bajwa v. Metro. Life Ins. Co., 804 N.E.2d 519, 523 (111. 2004).

Id. Id. Id. Id. Id. at 524.

See supra notes 6-45 and accompanying text.

See supra notes 13-14 and accompanying text.

See supra notes 14-15 and accompanying text.

200

SoUTH TEXAS LAW REVIEW

[Vol. 58:173

interest in any event, as the beneficiary.182 Thus, this second scenario is not only likely but now has a history.

The third scenario would be the instance where the unlawful beneficiary did not act fraudulently but nonetheless became a beneficiary under a policy insuring a child solely because of the negligence of the insurer. Brian's case, as well as other cases,' 83 suggests that it is not out of the realm of possibility that a person who does not have an insurable interest could become the beneficiary to a child's life insurance policy for the simple reason that insurance company personnel are not adequately trained in the insurable interest doctrine or otherwise do not appreciate its significance. Accordingly, an aunt, an uncle, or someone of even more distant relation,18 4 who does not have an insurable interest in the child might, without resort to fraud in any form, merely request and obtain such a policy from a negligent insurer.' 85 In summary, an "unlawful beneficiary" is generally the product of a fraudulent beneficiary, a negligent insurer, or both.

B.

The Lawful Beneficiary

This second category that may result in risks to children insureds includes scenarios where the beneficiary was a "lawful beneficiary" in that the beneficiary did, in fact, have a lawfully recognized insurable interest in the insured child, but where, due to various circumstances, the child continues to be at risk.

The first scenario in this category of cases involves a lawful beneficiary who actually should be deemed an unlawful beneficiary but, due to the lax approach of state law, at least initially is deemed a lawful beneficiary.' 86 For example, some jurisdictions take what can perhaps best be described as a "wait and see" approach in determining whether a beneficiary had a lawfully recognized insurable interest in the insured life."' This approach permits a distant family member such as an aunt or uncle, who otherwise would not qualify as a beneficiary to the child because the familial relationship is not sufficiently close, to establish an 182.

See supra notes 11-13 and accompanying text; see also Wharton v. Home Sec. Life Ins. Co., 173 S.E. 338, 339 (N.C. 1934) ("[I]t is very generally held that the relationship of uncle and nephew does not of itself create an insurable interest in favor of either.").

183.

See, e.g., Liberty Nat'l Life Ins. Co. v. Weldon, 100 So. 2d 696, 704-05 (Ala. 1957).

184.

Such a scenario would likely require that the unlawful beneficiary be at least related to the child because it would seem that one who attempts to purchase a policy on a child without any relation to the child would raise suspicion in even a negligent insurer.

185.

E.g., Weldon, 100 So. 2d at 705-06.

186.

See KEETON & WIDISS, supra note 88, § 3.5, at 182-83.

187.

See id.

2016]

MURDER FOR LIFE INSURANCE MONEY

201

'

insurable interest by buttressing a familial relationship with evidence of some pecuniary interest in the child.'" "For example, a woman who had supported her niece from infancy was held to have an insurable interest in the niece's life on the basis of an expectation of pecuniary benefit incident to what the court viewed as a moral obligation of the niece to the aunt."' 89 The case referenced above illustrates both the application and the problem with the "wait and see" approach.

An aunt or uncle, or some other distant relative who does not have a sufficient familial connection to the child to establish an insurable interest based upon presumptive love and affection, is nonetheless permitted to become the child's life insurance beneficiary based upon a strained contention that the relative has a pecuniary interest in the child pursuant to some vague "moral obligation."'9 0 Then, upon the death of the child, this being the "wait and see" aspect of this dangerous practice, the court apparently examines the familial and pecuniary ties to the child and makes a posthumous decision as to the existence of an insurable interest.19 Obviously, if it is discovered that the distant relative caused the death of the child, the relative will not recover the life insurance proceeds and will further suffer all the punishment the law can bring to bear.' 92 Problematically, of course, all of this occurs after the death of the child.

While a pecuniary interest can establish the existence of a sufficient insurable interest in the life of another, such an interest is generally found where the beneficiary has some realistic and continued source of income provided by the insured life sufficient to cause the beneficiary to desire that the insured life continue to exist. 93 Where the insured and the beneficiary are both adults, such a pecuniary interest may in fact exist. However, as previously discussed, the likelihood of an adult having a realistic pecuniary interest in a child is practically nonexistent.' 94 Permitting a distant relative to become a lawful beneficiary to a child's life insurance policy on the vague notion that the relative might receive future monetary compensation from the child based on some "moral obligation" simply places the child at great risk. The beneficiary, in the absence of significant love for the insured, may be tempted to commit murder to make certain the "moral obligation" is fulfilled.

Id. at 182 & n.9.

188.

189.

Id. at 182-83.

190.

Id. 191.

Id. See Tinio, supra note 47, at 802.

192.

For example, the insured and the beneficiary may be business partners or the insured 193. may be the beneficiary's employee. See supra notes 145-47 and accompanying text.

But see KEETON & WIDISS, supra note 88, § 3.5, at 183.

194.

202

SouTH TEXAS LAW REVIEW

[Vol. 58:173

Jurisdictions that take this "wait and see" approach permit those who have no insurable interest in a child to acquire an insurance policy on the front-end, subject to finding no insurable interest on the back-end when it is too late to protect the child. This practice places children at significant risk.

The second scenario involving a lawful beneficiary arises where a parent, a grandparent or, theoretically at least, a sibling, who has a lawful insurable interest in the life of the child acquires a life insurance policy on the child and is appropriately named the beneficiary under the policy. The lawful beneficiary then develops a relationship with a "significant other," perhaps a boyfriend or girlfriend who may or may not become a subsequent spouse. The "significant other," who has no blood relationship to the child and would otherwise have no insurable interest in the child, is then placed in a position to benefit from the child's death through the lawful beneficiary. Such a person might benefit from the policy directly, such as by becoming a co-beneficiary with the lawful beneficiary upon marriage to the lawful beneficiary,1 9 5 or indirectly through a less committed relationship with the lawful beneficiary.1 9 6 For example, in one case a father and mother purchased a life insurance policy on their child in the amount of $15,000, naming themselves as beneficiaries, and subsequently divorced.197 The father remarried and a short time before his four-year-old child died the father amended the life insurance policy to name his second wife as a beneficiary.1 98 The second wife was later charged with murdering the child and, on appeal, the court affirmed her conviction without discussion of whether a stepparent has an insurable interest in a stepchild.' 99 Thus, the second wife, who otherwise would have had no insurable interest in the child, placed herself in a position to benefit directly from the policy by marrying the child's father and becoming a named beneficiary.200 Brian's case was somewhat similar, at least to the extent of the involvement of a "significant other." Though Brian's uncle was not a lawful beneficiary, he did acquire a life insurance policy on Brian's life.201 Then, his girlfriend, or "significant other," placed herself in a position to benefit

195.

E.g., State v. White, 457 S.E.2d 841, 845-47 (N.C. 1995).

196.

See, e.g., Wilson v. State, 764 A.2d 284, 289-91 (Md. Ct. Spec. App. 2000), rev'd, 803 A.2d 1034 (Md. 2002).

197.

White, 457 S.E.2d at 846.

198.

Id. at 845-47.

199.

Id. at 845.

200.

See id. at 845-47.

201.

See supra note 11 and accompanying text.

2016]

MURDER FOR LIFE INSURANCE MONEY

203

indirectly from the life insurance proceeds, assisted in planning the crime, and then participated in its commission. 20 2 Though all the scenarios presented thus far can result in placing a child in danger, the third and final scenario in this category is perhaps the most gut-wrenching of all and the most difficult to prevent. In this third scenario, someone with a lawful insurable interest, usually a parent, purchases a policy on his or her child and then commits the murder for the proceeds.2 03 Of the various parties who qualify as having an insurable interest in a child's life, perhaps none better reflect the love and affection for the child upon which the insurable interest is based, than a parent. No fraud is necessary by the parent,20 4 no negligence is required by the insurer,205 and no potential lawful beneficiary raises less suspicion when attempting to insure a child's life. However, because of the relative simplicity in orchestrating this scenario, cases involving a homicidal parent may be more plentiful than cases involving fraudulent beneficiaries, 20 6 "wait and see" beneficiaries,207 or those who attempt to recover indirectly as a "significant other."2 08 In summary, the scenarios involving lawful beneficiaries pose significant risks to children for the very fact that the beneficiaries are lawful. Whether the law is lax, the beneficiary meets a "significant other," or otherwise becomes greedy and homicidal, these cases arise because the insurable interest doctrine does not contemplate these factual scenarios and does not provide protection to the child in these instances.

Since criminal law responses do not adequately deter criminal conduct in many of these cases, since the threat of a negligence suit does not always cause insurers to properly apply the insurable interest doctrine, and since the doctrine itself, even if applied properly, does not always guarantee the safety of children insureds, other protective measures must be implemented to stop these horrible murders for life insurance proceeds.

V.

PROPOSED PROTECTIVE MEASURES

Perhaps the most certain and conclusive protective measure that can be implemented to prevent the murder of children for life insurance proceeds is to simply prohibit the issuance of life insurance policies covering children.

See supra notes 16-43 and accompanying text.

202.

See cases cited supra note 84 (offering examples of parents who were charged with 203. murdering their children for the recovery of insurance proceeds).

See supra notes 174-79 and accompanying text.

204.

See supra notes 184-86 and accompanying text.

205.

See supra notes 174-79 and accompanying text.

206.

See supra notes 188-93 and accompanying text.

207.

See supra notes 198-203 and accompanying text.

208.

204

SOUTH TEXAS LA wREVIEW

[Vol. 58:173

However, because there are very good reasons why someone, typically a parent, might want to insure a child's life, a blanket prohibition to such coverage would completely frustrate otherwise good and necessary intentions. For example, certain families would surely have difficulty affording the high cost of even a simple funeral and burial for their child without the availability of life insurance coverage on the child. This fact alone justifies the continued practice of permitting life insurance on children, at least in some minimal amount.

More problematically, a mother, a father, or both may suffer from a hereditary disease and have a valid belief that their child will also develop the disease as he ages. If the hereditary disease is one that might eventually disqualify the child from purchasing life insurance himself when he gets older, his parents might opt to purchase a policy on the child when he is young and before the disease appears, so that he will have life insurance for the ultimate benefit of his own spouse and children later in life. This fact also justifies life insurance on children, and in this instance the amount of insurance might even be significant if there is a concern that the child might not later be able to increase the amount of insurance because of the hereditary disease.

Accordingly, any protective measures must be calculated to continue to permit the issuance of life insurance policies covering children while simultaneously reducing the risk that a child might be murdered for the insurance proceeds.

A.

Narrowly Define the InsurableInterest Doctrine

The first such protective measure would be to narrowly and specifically define the insurable interest doctrine, either by case law or through legislation. As it pertains to children, the insurable interest doctrine must be defined such that the only person who has an insurable interest in a child, and therefore the only person who can become the beneficiary to such a life insurance policy, is the child's parent(s) or a person who financially stands in the place of the parent(s). This approach would conclusively eliminate grandparents, siblings, and "wait and see" beneficiaries,2 09 except where they stand in the place of a parent in terms of having financial responsibility for the child. It would also advance the objective of the insurable interest doctrine as it applies to children in that, in most instances, it would limit potential beneficiaries to those who would seem to naturally harbor the presumptive love and affection for the child that justifies the doctrine in the first instance.

209.

See supra notes 188-90 and accompanying text.

2016]

MURDER FOR LIFE INSURANCE MONEY

205

. Further, a policy insuring a child should issue only after the proposed beneficiary provides birth and identification records proving that he or she is the child's parent, or after providing legal documents proving that the beneficiary financially stands in the place of the parent(s). At the very least, this approach would significantly limit the pool of potential beneficiaries and, therefore, limit the number of persons who might harm the child to recover insurance proceeds.

Admittedly, this approach does not, of itself, preclude a "significant other" from becoming involved with a parent and then harming a child,2 10 or preclude a parent from committing murder for the insurance proceeds.

Thus, other measures are necessary.

B.

Penalize Insurers

Once the insurable interest doctrine has been cleaned up and narrowly defined it must be enforced, not on the back-end by the courts but on the front-end by insurers before the policy issues. Regulatory sanctions in the form of hefty fines as well as license and certification revocations are likely necessary to prompt such enforcement.

It is no secret that life insurance agents receive commissions for the policies that they sell, so they have a strong financial incentive to sell as many policies as possible.211 It is also no secret that life insurance companies make much of their money from the premiums paid by insureds, so they, too, have a financial incentive to sell as many policies as possible.

However, agents and insurance companies are also in the unique position of being the only ones who can enforce a narrowly defined insurable interest doctrine on the front-end by refusing to sell or issue a policy in contravention of the doctrine. It is this tension between sales and child safety that makes sanctions against agents and insurers necessary.

Brian's case illustrates the problem as well as the need for this protective measure.2 12 There is little doubt that Brian's uncle knew that he might face first-degree murder charges, along with appropriate punishment, when he planned Brian's murder. Yet, this possibility did not deter his criminal conduct. On the other hand, it is highly doubtful that Brian's uncle knew he did not have an insurable interest in Brian's life when he first sought to obtain insurance on Brian's life and name himself as beneficiary.

See supra notes 198-203 and accompanying text.

210.

Cf Mark Duggan & Steven D. Levitt, Winning Isn't Everything: Corruption in Sumo 211.

Wrestling, AM. ECON. REv., Dec. 2002, at 1594, 1604 (discussing potential corruption in the sport of sumo wrestling as the result of a system that financially rewards and incentivizes match rigging).

See supra notes 6-45 and accompanying text.

212.

206

SOUTH TEXAS LAW REVIEW

[Vol. 58:173

However, there is little doubt that the insurer and its agent knew that Brian's uncle did not have a lawful insurable interest. There is also little doubt that at least the insurance company was aware that issuing such a policy might lead to a negligence action based on its negligent conduct.

Yet, in the face of this knowledge and deterrent, the agent sold the policy and the insurer issued it.213 Since the threat of criminal action does not deter the unlawful beneficiary,2 14 and since the threat of a civil action does not deter the agent or the insurer,215 perhaps it is now time to consider other sanctions against the agent and the insurer. Such sanctions might include imposing significant monetary fines against both the agent and the insurer when they violate the insurable interest doctrine and its procedures. Further, generally insurance agents must be licensed,2 1 6 and insurance companies must be certified, or permitted, to sell insurance within a particular state.217 Applicable sanctions might therefore include license and certificate revocations.

Narrowing the doctrine's application and going to greater lengths to make certain the doctrine is enforced at the front-end by insurers will help protect children. However, a parent with a lawful insurable interest will still be able to purchase a policy on a child and ultimately benefit from the child's death. Therefore, other measures are still necessary to protect children.

C.

Limit Coverage

The third and final proposal to protect insured children is to limit the amount of available coverage. This step would require legislative action limiting the amount of coverage on a child's life to some specified amount adequate to cover funeral and burial expenses. The limit would need to remain in place until the child reaches a certain age, preferably eighteen.

213.

See supra note 11 and accompanying text.

214.

See supra notes 68-84 and accompanying text.

215.

See supra notes 158-66 and accompanying text.

216.

E.g., Cal. Ins. Code § 1631 (West 2013), preempted by Rodriguez v. RWA Trucking Co., 162 Cal. Rptr. 3d 250 (Cal. Ct. App. 2013) ("Unless exempt by the provisions of this article, a person shall not solicit, negotiate, or effect contracts of insurance, or act in any of the capacities defined in Article 1 . . . unless the person holds a valid license from the commissioner authorizing the person to act in that capacity. The issuance of a certificate of authority to an insurer does not exempt an insurer from complying with this article.").

217.

E.g., N.C. Gen. Stat. § 58-7-10 (2011) ("No domestic insurance company may issue policies until upon examination of the Commissioner, his deputy or examiner, it is found to have complied with the laws of the State, and until it has obtained from the Commissioner a certificate setting forth that fact and authorizing it to issue policies. The issuing of policies in violation of this section renders the company liable to the forfeiture prescribed by law, but such policies are binding upon the company.").

2016]

MURDER FOR LIFE INSURANCE MONEY

207

However, merely limiting the amount of coverage to a sum sufficient to pay for funeral and burial expenses would not fully solve the problem.

This Article previously referenced a case in which a woman murdered a child for the relatively small sum of $15,000,218 an amount which could likely be described as a reasonable amount to pay for funeral and burial expenses in many parts of the country.

For this reason, in addition to limiting the amount of coverage, such legislation would further have to provide that the insuring agreement between the parent and the insurance company must include a provision making the funeral services provider the payee under the policy, with any overage being paid to the parent or person who financially stands in the place of the parent. If the amount of coverage is sufficiently limited, after payment to the funeral services provider there should be such a minimal amount of money left in the policy that no parent would risk a murder conviction to recover it.

With the amount of coverage limited and payment being made directly to the funeral services provider by the insurance company, the incentive to commit murder is greatly reduced. However, these steps leave the problem that arises when a parent wants to purchase life insurance on a child in a large amount out of fear that the child may later develop a hereditary disease and be rejected for life insurance coverage. The insurance limit frustrates a parent's true and legitimate desire to protect the child in the future as well as the child's future spouse and children.

However, there is certainly a method, likely again through legislative action, by which to meet the parent's praise-worthy objective without jeopardizing the safety of children. For example, a parent might be permitted to purchase a life insurance policy on his or her own life, making the child or a spouse the beneficiary, and then transfer the policy to the child such that the child becomes the named insured at some specified age.

The child, or perhaps adult at the time, could then change the beneficiary under the normal procedures for making such a change.

As another example, a parent might be permitted to purchase a policy on his or her child's life, making himself or herself the beneficiary, but limited in the amount of coverage as discussed earlier. Then, perhaps in consideration of a one-time additional and reasonable fee, the parent could also purchase an option to permit the child to increase the coverage when he or she reaches a certain age regardless of health status of the child at that time. The result would be that coverage would be limited through childhood, thus reducing the incentive to murder the child, but could be

218.

See supra notes 198-201 and accompanying text.

208

SOUTH TEXAS LAW REVIEW

[Vol. 58:173

increased when the child reaches adulthood, again regardless of any otherwise disqualifying disease that may be present at the time.

In either event, limiting the amount of available coverage and directing that payment be made directly to the funeral services provider, when coupled with narrowly defining the insurable interest doctrine, and making certain insurers are enforcing its mandates, would provide children with the protection they so badly need. These measures would effectively take the targets off the children by minimizing the incentive and opportunity to commit murder for life insurance proceeds.

V. CONCLUSION Children are being murdered for life insurance proceeds. The current legal responses to this problem are insufficient to protect children. Certain legal responses are triggered only after the death of the child and, therefore, provide no actual protection to the child, while those that appear to be directed at protecting children are ineffective at best.

Under the current status of the law, a parent, grandparent, or even older sibling can purchase a life insurance policy on a child and name himself or herself the beneficiary to the policy. Further, the amount of coverage is limited only by the ability to make the premium payments to keep the policy intact. In some jurisdictions, an aunt, uncle, or perhaps even more distant relatives can do the same upon a later showing of a pecuniary interest in the child, such as some vague moral obligation the child has to repay the relative for his generosity when the child was young.

The current status of the law is dangerous to children and new measures are necessary for their protection. The remedies to the problem proposed above will dramatically change the way life insurance covering children is sold, written and managed, and will no doubt be deemed less than desirable to some. However, the problem is real and the measures taken to protect children must be effective. They are innocent and vulnerable, and are not able to protect themselves.

EXAMINING THE EMPIRICAL CASE FOR DISCOVERY REFORM IN TEXAS LONNY HOFFMANt ...... 209 .....................................

I. INTRODUCTION II. PERVASIVE PROBLEMS WITH EXCESSIVE DISCOVERY COSTS AND ABUSE? A LOOK AT THE AVAILABLE ....... 211 ...............................

EMPIRICAL EVIDENCE

A.

B. III.

Empirical Work on Discovery Costs and .....

212 ........................

Abuse System-Wide .................. .............. 212 1. Research in the 1960s ......................213 2. Research in the 1970s and 1980s ....... 216 ..................

3. Research in the 1990s ..... 218 ....................

4. Research in the 2000s Empirical Work on Discovery Cost and 220 Abuse in Complex Cases.......................

CONCLUDING THOUGHTS-AND LOOKING AHEAD........

I.

.....

221

INTRODUCTION

Discovery reform is back on the Texas Supreme Court's agenda. In the summer of 2016, the Court tasked a subcommittee of its Rules Advisory Committee with conducting a wholesale review of the state's civil discovery rules.' The last major amendments made to the discovery rules were back in 1999.2 The initial impetus for this most recent directive from the Court seems to have been a request from a lay committee of the State Bar of Texas (the Committee on Court Rules) in March 2016, asking the Court to consider a t Law Foundation Professor of Law, University of Houston Law Center. I am grateful to Matthew Harper and George Hayek for their assistance. By way of disclosure, I serve on the Texas Supreme Court's Rules Advisory Committee that will take up proposals later this year to revise the state's discovery rules-though I am not a member of the discovery subcommittee that has been working on the initial drafts of proposed rule changes.

1. Letter from Hon. Nathan L. Hecht, Chief Justice, Tex. Supreme Court, to Charles L. "Chip" Babcock, Chair, Supreme Court Advisory Comm. 2 (Apr. 18, 2016) (on file with author) [hereinafter SCAC Letter].

Transcript of Meeting of the Supreme Court Advisory Comm. at 27033 (June 10, 2.

2016), http://www.txcourts.gov/media/1405601/SCAC-06-10-16-Transcript.pdf.

209

210

SOUTH TEXAS LAW REVIEW

[Vol. 58:209

couple of very narrow amendments to Rule 192.3, regarding a party's obligation to disclose the names of all persons with knowledge of relevant facts. However, after receiving the state bar committee's proposed revisions to Rule 192.3, the Court decided that a more wholesale review of the discovery rules was needed given that the better part of two decades had passed since the rules had been thoroughly revamped.' In April 2016, the Court charged a subcommittee of the Rules Advisory Committee to "consider whether changes should be made to modernize the rules, increase efficiency, and decrease the cost of litigation."' Beyond that general charge, the Court also specifically directed that consideration be given to the recent amendments to the Federal Rules of Civil Procedure, which went into effect in December 2015.6 In asking the committee to consider whether rule changes are needed to improve efficiency and reduce litigation costs, the Court appears to have assumed the truth of the commonly-held view that discovery costs and abuse have long been out of control across the civil docket. This assumption certainly was a catalyzing driver behind the December 2015 amendments to the federal rules,' and has been a persistent theme in prior discovery rule changes at both the state and federal level.' However, despite the frequency with which proponents of reform rely on the premise that most cases suffer from excessive discovery costs and abuse, there is little empirical support for it in research done over decades in the federal system. This important point is often lost in debates over discovery rule reform.

At the same time, while relatively little discovery takes place in the vast majority of cases, we also know that high discovery costs bedevil a very small percentage of the civil docket-and in at least some of these cases, those costs are not proportionate to the case's value. Although these likely represent less than 10% of all cases, they constitute the lion's share of discovery problems.' The persistent issues of excessive discovery costs and abuse in this small sliver of civil litigation suggest, then, that there are 3.

See id. at 26990, 27034; see also SCAC Letter, supra note 1, at 2; TEX. R. Civ. P. 192.3.

4.

Id. at 27034 ("[I]t's been 20 years .... [L]et's see what in the current rules is working and not working and whether we can improve them.").

5.

SCAC Letter, supra note 1, at 2.

6.

Id. 7.

See Memorandum from the Hon. David G. Campbell, Advisory Comm. on Civil Rules to Hon. Jeffrey S. Sutton, Chair, Comm. on Rules of Practice & Procedure at 3 (May 2, 2014), http://www.uscourts.gov/sites/default/files/fr import/CV05-2014.pdf (noting that amending the discovery rules would improve civil actions and reduce "cost and delay").

8.

See William V. Dorsaneo, IlI, The History of Texas Civil Procedure, 65 BAYLOR L. REv. 713, 802 (2013); Paul V. Niemeyer, Here We Go Again: Are the Federal Discovery Rules Really in Need ofAmendment?, 39 B.C. L. REV. 517, 519 (1998).

9.

See infra text accompanying notes 40, 49, 57, 65.

2016]

THE EMPIRICAL CASE FOR DISCO VERY REFORM

211

reform ideas that are worth pursuing if they are targeted to this narrow class of cases.

This Article is the first part of a two-part project to examine the proposed changes that are being considered to the state's discovery rules. In it, I endeavor to summarize the available empirical evidence. My animating contention is that this evidence must be understood if an informed discussion of rule reform is going to be conducted. In the second installment (to come), I will turn to the primary changes to the discovery rules that the Rules Advisory Committee and the Court are now considering.

II.

PERVASIVE PROBLEMS WITH EXCESSIVE DISCOVERY COSTS AND ABUSE? A LOOK AT THE AVAILABLE EMPIRICAL EVIDENCE

In this section, my goal is to summarize what we actually know-and we know a great deal-about discovery practices from the available empirical evidence. This knowledge should inform thinking about undertaking general discovery rule reform.

The most reliable empirical research, spanning decades, has consistently shown that there are not pervasive discovery problems in civil cases-which is to say, problems spread widely throughout the entire civil docket. There is evidence that discovery costs are high in a very small percentage of cases-that is, cases that are complex, contentious, and involve large stakes.

Note that most of the evidence comes from the study of discovery in federal cases. While there is some, limited research into discovery practices that has been done in a few individual states, there has been no systematic examination of state discovery practices. In Texas, neither the Office of Court Administration, which is the state agency responsible for keeping statistics of court information and case activity,o nor the individual county clerks (at least not in the major metropolitan areas), track discovery or motions related to discovery practice. However, there is no reason to believe that discovery would be more problematic in state, as compared to federal, court. Indeed, since a much higher percentage of state cases involve smaller amounts in controversy, it is quite likely that an exhaustive study of state practice would reveal far less discovery and, correspondingly, far fewer discovery problems in state court compared to the federal civil docket.

10. See Office of Court Administration, TEX. JUD. BRANCH, http://www.txcourts.gov/oca/ (last visited Mar. 9, 2017) (discussing the OCA's statistical collection efforts through its Judicial Information Program).

SouTH TEXAS LAW REVIEW

212

A.

[Vol. 58:209

Empirical Work on Discovery Costs andAbuse System- Wide

Concerns about controlling discovery, which correspond to similar concerns over pleading standards, have been with us for a long time; indeed, they are as old as our rules of civil procedure. For instance, in 1952 the Ninth Circuit Judicial Conference issued a report critiquing the initial promulgation of the Federal Rules of Civil Procedure in 1938, complaining of "unfounded lawsuits" resulting in "an unjustifiable increase in the volume and scope of the discovery processes."" These longstanding concerns have led federal rulemakers over the years to try to gather good information and data about discovery practices. As a result, at this point we have a lot of data to look at. And what is most notable about the data that has been gathered is that it has consistently shown there to be few discovery problems across the entire civil justice system.

1.

Research in the 1960s

The earliest comprehensive study of discovery was done back in the 1960s, when the Federal Advisory Committee for the Civil Rules asked researchers from Columbia University to study discovery costs and practices in federal cases.12 What they found, much to the surprise of early critics, was that when there was any discovery taken in a case, discovery costs were usually proportionate to the stakes." They also found clear evidence that whether there was discovery at all, and how much, was directly tied to how much the case was valued. A case where the amount in dispute was low led lawyers to conduct no discovery at all, while at the other end of the spectrum, high-dollar cases prompted lawyers to engage in the highest range of discovery they observed.' 4 The Columbia researchers also asked the lawyers they surveyed whether they thought discovery helped or interfered with reaching a just result in the case." Among the

11.

See Claim or Cause of Action: A Discussion on the Need for Amendment of Rule 8(a)(2) of the Federal Rules of Civil Procedure, 13 F.R.D. 253, 255 (1952); see also Lonny Hoffman, Rulemaking in the Age of Twombly and lqbal, 46 U.C. DAVIS L. REV. 1483, 1493 (2013) ("Most are familiar with the Supreme Court's 1957 landmark decision in Conley v. Gibson, which decreed that the primary function of pleading is to give notice of what the pleader intends to prove later in the case. What is less well known is that Conley reflected the Court's decision to choose sides in a debate that had been going on since 1938 between rulemakers and opponents over the relaxed pleading standard rulemakers had crafted in Rule 8." (citing Conley v. Gibson, 355 U.S. 41 (1957))).

12.

(1968).

13.

14.

15.

WILLIAM A. GLASER, PRETRIAL DISCOVERY AND THE ADVERSARY SYSTEM 41-43

Id. at 56.

Id. Id. at 112.

2016]

THE EMPIRICAL CASE FOR DISCO VERY REFORM

213

lawyers surveyed, 78% said discovery helped reach a just result, 21% said it made no difference and only about 1% said they thought it hindered reaching a just result.1 6 The big take away from the Columbia study was readily summarized: "The costs of discovery do not appear to be oppressive, as a general matter, either in relation to ability to pay or to the stakes of the litigation." 1 7 2.

Research in the 1970s and 1980s

Discovery costs and practices were comprehensively studied again less than a decade later, this time by the Federal Judicial Center (FJC), which was then, and remains, the leading non-partisan organization for empirical research into the federal judiciary.'I The FJC's assignment was prompted, in large measure, by a report issued by a task force following the Pound Conference, which had been organized in 1976 by then-Chief Justice Warren Burger to discuss perceived issues with cost and delay in the civil justice system, with particular attention focused on discovery as a perceived problem.' 9 The task force report cited criticism of how the federal discovery rules were being utilized and suggested that empirical research should be undertaken.20 Thereafter, the FJC researchers conducted an extensive study and issued an exhaustive report, which was ultimately published in 1978.21 To gather data, the researchers looked at every discovery event recorded in the court files for more than 3,000 terminated cases in six judicial districts.22 Back then, discovery requests and responses were supposed to be filed with the court.23 The researchers, then, followed up their file review with a survey of the lawyers in the cases to confirm that the docketed discovery events were accurate representations of discovery requests and responses in the cases.24 Surprising the critics, the FJC's 16.

Id. FED. R. Civ. P. tit. V, references & annots.

17.

The FJC is the education and research arm of the federal judiciary. Congress created it 18. in 1967 to help the courts improve judicial administration. See The FJC and What It Does: http://www2.fjc.gov/content/about-fjcJUD. CTR., FED. Information, General %25E2%2580%2594-general-information (last updated Mar. 7, 2017, 2:33 PM).

See Lawrence E. Walsh, President, Am. Bar Ass'n, Improvements in the Judicial 19.

System: A Summary and Overview, Address at the National Conference on the Causes of Popular Dissatisfaction with the Administration of Justice, 70 F.R.D. 223, 224, 228-29 (1976).

See id. at 228-29.

20.

21.

See generally PAUL R. CONNOLLY ET AL., JUDICIAL CONTROLS AND THE CIVIL LITIGATIVE PROCESS: DISCOVERY (1978),

http://www.fjc.gov/public/pdf.nsf/lookup/jcclpdis.pdf/$file/jcclpdis.pdf (containing the 1978 FJC study).

22.

Id. at xi.

See id. at 97.

23.

24.

Id. at 95.

214

SoUTH TEXAS LAW REVIEW

[Vol. 58:209

findings were consistent with what the Columbia researchers had previously found in 1968. More than half of the cases in the study (52%) had no recorded discovery requests at all.25 There were two or fewer discovery requests in more than 70% of the cases (72.3%) and approximately 95% had ten or fewer discovery requests.2 6 In the small percentage of cases in which there was more extensive discovery being conducted, the central finding of the report was that "the judiciary's use of effective case and court management techniques can help speed the termination of civil actions without impairing the quality ofjustice." 7 The findings of the 1978 FJC study were then confirmed by an independent study in 1983 conducted by the Civil Litigation Research Project, led by a group of five academic researchers. 28 Their empirical study looked at all direct expenditures spent on processing civil disputes through litigation in five judicial districts and one state court in each district. 29 The data included over 1,600 cases and thousands of interviews.3 0 Once again, the same results were replicated: despite repeated criticisms of litigation costs as excessive, the researchers found no such evidence to support the criticisms. As the researchers put it: Discovery . . is widely thought to be a cause of delay and spiraling costs. Our data, however, suggest that relatively little discovery occurs in the ordinary lawsuit. We found no evidence of discovery in over half our cases. Rarely did the records reveal more than five separate discovery events.31 Less than half of the cases they studied found any recorded discovery events at all.32 They concluded that, contrary to the frequently voiced concerns over excessive litigation costs, "from the litigant's point of view, most ordinary litigation is cost-effective." 3 3 Similar contemporaneous studies of state court cases followed a similar pattern: no evidence was found of pervasive discovery problems with cost or abuse. The most comprehensive of the research was done by the National Center for State Courts (NCSC). 3 4 The NCSC found no

25.

Id. at 28-29.

26.

See id. at 29.

27.

Id. at 3.

28.

See David M. Trubek et al., The Costs of OrdinaryLitigation, 31 UCLA L. REv. 72, 72, 90 (1983).

29.

Id. at 75.

30.

Id. 31.

Id. at 89-90 (footnote omitted).

32.

Id. at 90.

33.

Id. at 123.

34.

See Susan Keilitz et al., Attorneys' Views of Civil Discovery, JUDGES' J., Spring 1993, at 2, 4 [hereinafter Keilitz et. al., Attorneys' Views of Civil Discovery]; Susan Keilitz et al., Is Civil

2016]1

THE EMPIRICAL CASE FOR DISCO VERY REFORM

215

discovery was requested in more than 40% of the 2,190 cases they sampled, and among the 58% that had some discovery, the median number of discovery requests was four.35 An independent researcher studying a random sample of tort, contract, and commercial cases in one Louisiana parish found that 62% of the cases in his dataset had no more than two events, while 44% had no discovery at all.3 6 Yet another researcher studied 1,400 civil cases in Iowa state court and found that only 24% had any discovery requests; 76% had none. 37 In 1998, two researchers for the FJC (who were not involved in any of the prior studies) summarized all of the empirical research of discovery practices that had been conducted to date." The central point of their paper emphasized the gulf between perception and reality: "Formal discovery actually occurs in fewer cases than uninformed observers might estimate." 9 More specifically, they summarized the empirical evidence on discovery frequency as follows: Cases involving extensive discovery are in fact relatively rare-the studies using actual file reviews uncovered very few cases involving more than ten discovery requests, perhaps 5-15% depending on the sampling method. In the 1978 FJC study, less than 5% of the case files examined recorded more than ten discovery requests; of cases with at least some discovery, 90% had no more than ten requests. 40 As for perceptions of discovery abuse, McKenna and Wiggins again pointed out that the available evidence did not support the contemporary critiques. "In the vast majority of cases," they noted, "discovery appears to be the self-executing system the rules contemplate. Most incidents of 'problem' discovery, as perceived by lawyers, do not result in any formal request for relief." 4 ' Thus, McKenna and Wiggins concluded, "If measured by formal objections, discovery motions activity or sanctions requests, discovery problems do not appear to be extreme."42

Discovery in State Trial Courts Out of Control?, ST. CT. J., Spring 1993, at 8, 9 [hereinafter Keilitz et al., Civil Discovery in State Trial Courts].

35.

Keilitz et al., Civil Discovery in State Trial Courts, supra note 34, at 10.

36.

See Dennis J. Krystek, Discovery Versus Delay in Civil District Court: A CrossSectional Pilot Study ofCivil District Court Reveals No Significant Correlation, 42 LA. B.J. 255, 257 (1994).

37.

See David S. Walker, Professionalism and Procedure: Notes on an Empirical Study, 38 DRAKE L. REV. 759, 781, 824 tbl.2 (1988).

38.

See Judith A. McKenna & Elizabeth C. Wiggins, Empirical Research on Civil Discovery, 39 B.C. L. REV. 785, 789-90 (1998).

Id. at 790.

39.

40.

Id. at 791.

Id. at 800.

41.

42.

Id.

216

3.

SOUTH TEXAS LA wREVIEW

[Vol. 58:209

Research in the 1990s

Despite the consistency of the empirical research over three decades, many lawyers and other observers (especially those familiar with higher stakes litigation involving large corporations) simply refused to believe that discovery costs were proportionate to case values. Not dissuaded by the evidence, those who managed to get their voices heard called for rulemakers and legislators to impose limits on discovery. And, although they could cite no credible evidence of a problem, both rulemakers and Congress were led to restrict discovery. The most significant changes took place in 1993.43 After the reforms were put in place, researchers tried to study discovery practices, and once again, the latest empirical research revealed that there were no system-wide problems with disproportionate discovery or discovery abuse. A good summary of the research can be found in one of the leading academic papers from this period.4 4 Professor Mullenix concluded that the 1993 amendments could not be justified based on an alleged system-wide problem with disproportionate discovery costs or abuse.4 5 Although the evidence consistently showed that no pervasive discovery problems existed, reformers continued to beat their drums through the 1990s to urge passage of even more amendments to curtail discovery further still. Once again, they paid no heed to either the prior empirical research or the new studies that were conducted. In particular, they ignored the findings of two additional, exhaustive, and non-partisan studies, both published in 1998, that again demonstrated, consistent with the prior research, that discovery costs were, in the main, quite modest and proportional to case values.

One of those studies was conducted by the RAND Institute for Civil Justice, which was studying the effects of the 1993 amendments.46 The RAND study focused on civil cases after the 1993 amendments had been enacted.47 What it found was that "lawyer work hours per litigant on discovery are zero for 38% of general civil cases and low for the majority of cases."4 8 The researchers continued: "The empirical data show that any 43.

See Linda S. Mullenix, Discovery in Disarray: The Pervasive Myth of Pervasive Discovery Abuse and the Consequencesfor Unfounded Rulemaking, 46 STAN. L. REV. 1393, 1443 (1994).

44.

See id. at 1410-43.

45.

See id at 1445.

46.

See James S. Kakalik et al., Discovery Management: Further Analysis of the Civil Justice Reform Act Evaluation Data, 39 B.C. L. REv. 613, 614-15 (1998).

47.

See id. at 616-18.

48.

Id. at 636.

THE EMPIRICAL CASE FOR DIsco VERY REFORM

2016]

217

problems that may exist with discovery are concentrated in a minority of the cases," noting further that the evidence indicates in this minority of cases, "discovery costs can be very high." 49 One last point worth making here (this will be revisited later) is that the RAND researchers also found clear evidence that one of the most effective judicial management tools is for a court to set a firm, early trial date."o They found that, as much as anything, setting a trial date and sticking to it as much as possible was correlated with lower discovery costs in cases."1 The other empirical study in that period, also from 1998, was conducted by the FJC.52 One of their primary points of focus in this study was on trying to measure the costs of discovery relative to total litigation costs, to the amount at stake in the case, and to the information needs of the case. 53 The 1998 FJC study found that under the 1993 amendments, the median reported proportion of discovery costs to stakes was 3%, and that the proportion of litigation costs attributable to problems with discovery was about 4%.54 Thus, the researchers concluded: Anecdotal information-and the occasional horror story-suggests that discovery expenses are excessive and disproportionate to the informational needs of the parties and the stakes in the case. Our research suggests, however, that for most cases, discovery costs are modest and perceived by attorneys as proportional to parties' needs and the stakes in the case.

Also notable is that the researchers found a "clear relationship" between how much discovery took place in a case and the monetary stakes of the case." "That is, as the stakes increase, the volume of discovery, and of discovery problems, also increases. To some extent, then, it appears that the amount of discovery and the frequency of problems is driven simply by the size of the case."" We will see that in a later study, in 2009, this same important finding was again documented.

Summarizing the RAND and FJC 1998 studies, Bryant Garth (then serving as Director of the American Bar Foundation), noted: The recent studies of civil discovery by the RAND Institute for Civil Justice and the Federal Judicial Center ("FJC") establish 49.

Id.

50.

51.

Id. at 676-77.

Id. at 669-70, 676.

52.

Thomas E. Willging et al., An Empirical Study of Discovery and Disclosure Practice Under the 1993 FederalRule Amendments, 39 B.C. L. Rev. 525, 525-26 (1998).

53.

Id. at 529.

54.

Id. at 531-32.

55.

Id. at 531.

Id. at 593.

56.

57.

Id.

SOUTH TEXAS LAW REVIEW

218

[Vol. 58:209

beyond any reasonable doubt that we have two very distinct worlds of civil discovery. These worlds involve different kinds of cases, financial stakes, contentiousness, complexity and-although not the subject of these studies-probably even lawyers. The ordinary cases, which represent the overwhelming number, pass through the courts relatively cheaply with few discovery problems. The high-stakes, high-conflict cases, in contrast, raise many more problems and involve much higher stakes.58 4.

Research in the 2000s

Before continuing, it is worth pausing to summarize: at this point, over four decades, the best empirical evidence established that there were no pervasive discovery problems. Yet, over this same four-decade period, reformers continued to be unwilling to acknowledge the available evidence.

So, it should come as no surprise that by the mid-to-late 2000s, calls for further reform of the federal rules were again heard, despite all of the evidence, and despite all of the prior limitations that had been imposed.

Those calls became loud enough that the Federal Advisory Committee for the Civil Rules asked the FJC to again look closely at discovery costs in civil cases and to report its findings.s" The findings were to be reported to the Federal Advisory Committee's Duke Conference in 2010.60 This was to be the most comprehensive study of federal discovery practices ever conducted.

I was an invited guest at the Duke Conference and attended all of the sessions. And I can say that it came as nothing short of a shocking thunderbolt to many people there that the conference opened with the FJC researchers reporting they found no evidence whatsoever of any pervasive concerns with disproportionate costs or discovery abuse. The researchers were very careful and went out of their way to design their study to find cases that involved as much discovery as possible. Thus, they systematically excluded from their study any cases in which discovery was unlikely to take place. The researchers also eliminated any case that was terminated less than sixty days after it had been filed-once again, to avoid the possibility that these cases would skew the results. What was left, then, 58.

Bryant G. Garth, Two Worlds of Civil Discovery: From Studies of Cost and Delay to the Markets in Legal Services and Legal Reform, 39 B.C. L. REv. 597, 597 (1998) (footnotes omitted).

http://www.fjc.gov/public.pdf.nsf/lookup/dissurvl.pdf/$file/dissurvl.pdf WILLGING, PRELIMINARY REPORT].

60.

Id.

[hereinafter

LEE

&

59.

EMERY G. LEE III & THOMAS E. WILLGING, FEDERAL JUDICIAL CENTER NATIONAL, CASE-BASED CIVIL RULES SURVEY: PRELIMINARY REPORT TO THE JUDICIAL CONFERENCE ADVISORY COMMITTEE ON CIVIL RULES 5 (2009),

2016]

THE EMPIRICAL CASE FOR DISCOVERY REFORM

219

was a study that-if anything-over-represented how much discovery takes place in a typical civil case in federal court.

The FJC reported its careful and exhaustive study in 2009. One of their key findings was that the median cost of litigation, including discovery and attorneys' fees, was $20,000 for defendants and $15,000 for plaintiffs.'

Note that these figures are medians, not means. They likely did so because the researchers were conscious that reporting an average could give a distorted picture of the actual reality, since a bunch of low-dollar cases-or, correspondingly-a bunch of high-dollar cases, can skew the results.

These figures came as a surprise to many, particularly those proponents of reform who had long assumed that litigation costs routinely careen out of control in federal civil cases. Just as significant-and perhaps just as surprising to many observers-were the findings with regard to the overall percentage of total litigation costs attributable to discovery.

Discovery costs were reported by plaintiffs' lawyers to account, at the median, for only 20% of the total litigation costs; the median figure reported by defendants' lawyers was 27%.62 Standing alone, these findings undercut the conventional wisdom, repeated in headlines and sound bites, that discovery costs are far-and-away the most significant part of total litigation costs in federal cases. And linked to these findings was, perhaps, the most important finding of all: at the median, the reported costs of discovery, including attorney's fees, amounted to just 1.6% of stakes of the case for plaintiffs and only 3.3% of the case's value for defendants." This means that in half of all civil cases, the costs of discovery amounted to even less than 1.6% of the case's value for plaintiffs and less than 3.3% of its value for defendants.

Considering discovery costs in light of a case's value is critical. A comparison of discovery costs in a $100,000 case with those incurred in a case worth $10 million or more is meaningless because the concern about discovery is not the sum of all cases being too high. The real worry is discovery costs that outstrip a case's value. 6 4

Id. at 2. The lead researchers from the FJC also summarized their study findings in a 61. later published paper as part of the Duke Conference. See generally Emery G. Lee III & Thomas E. Willging, Defining the Problem ofCost in Federal Civil Litigation, 60 DUKE L.J. 765 (2010) [hereinafter Lee & Willging, Defining the Problem ofCost in FederalCivil Litigation] (containing the Duke Conference study).

62.

Lee & Willging, Defining the Problem of Cost in Federal Civil Litigation, supra note 61, at 779-80.

63.

LEE & WILLGING, PRELIMINARY REPORT, supra note 59, at 2.

64.

Lee & Willging, Defining the Problem of Cost in Federal Civil Litigation, supra note 61, at 771-76 (explaining why empirical questions regarding discovery costs and burdens should be considered relative to the monetary stakes of a case).

220

SOUTH TEXAS LAW REVIEW

[Vol. 58:209

The FJC's study goes into even greater detail and depth and is worth reading in its entirety. But, for now, the bottom line is simply this: the FJC's exhaustive 2009 study confirmed the prior empirical research that disproportionate discovery costs are not a systemic problem.

B.

Empirical Work on Discovery Cost and Abuse in Complex Cases

While the FJC's 2009 study found no pervasive discovery problems, it was able to identify characteristics that are associated with high litigation costs. The most significant factor turns out to be high stakes, with factual complexity also highly correlated with more expense. 65 Law firm economics also have an important impact on litigation costs. When other variables are controlled, law firm size alone more than doubles litigation costs; hourly billing also tends to make costs higher. 6 These findings are consistent with the results of earlier empirical studies.

But there is something else we need to recognize. Complex, highstakes cases have more discovery than lower value cases. Whether these costs are unjustifiably high is unclear, but we do know that lowering presumptive limits on discovery or focusing on proportionality is unlikely to affect this class of cases.

Discovery expenditures are rational when the stakes are sufficiently high or the case is factually complex. These cases require more time and effort for information exchanges and settlement bargaining. Moreover, certain litigants will always hire large firms whose higher rates drive up discovery costs. None of these factors are susceptible to decrease due to procedural changes.

In summary, the data establishes that there is not a widespread problem with discovery costs. So, if we are going to engage in rule reform, we should keep that reform focused in the one place-complex caseswhere the evidence suggests reform is needed. As the two lead researchers of the FJC's 2009 empirical study have commented: Instead of pursuing sweeping, radical reforms of the pretrial discovery rules, perhaps it would be more appropriate to pursue more-focused reforms of particularly knotty issues . . .. Otherwise, we may simply find ourselves considering an endless litany of complaints about a problem that cannot be pinned down empirically and that never seems to improve regardless of what steps are taken.67

65.

Lee & Willging, Defining the Problem of Cost in Federal Civil Litigation, supra note 61, at 783-84.

66.

Id. at 784.

67.

Id. at 787.

2016]

221

THE EMPIRICAL CASE FOR DISCOVERY REFORM

It is sobering to reflect on how policy debates are often conducted with little regard for the actual facts. Over the course of his nearly forty-year tenure at Columbia University's School of Law, the much-revered proceduralist, Maurice Rosenberg, often pointed out the challenge of getting reformers and rulemakers to learn the lessons that empirical research can offer: Experience in reporting findings to procedural revisers and rulemakers teaches a sobering lesson: Persuading them to accept empirical research results will be a formidable task even if the research speaks directly to precisely defined and topical questions.

Data have great trouble piercing made-up minds. Some judges and lawyers believe there are only two kinds of research findings: those they intuitively agree with ("That's obvious!"); and those they intuitively disagree with ("That's wrong!"). Resistance to the counterintuitive is a formidable barrier to the acceptability of procedure-impact research findings.68 III.

CONCLUDING THOUGHTS-AND LOOKING AHEAD

Tinkering with the discovery rules is not some meaningless technical exercise. If, guided by misinformation and myth, we end up restricting discovery in all civil cases, the consequences to the private enforcement of our law will be great. As Professor Paul Carrington (a former reporter to the Federal Advisory Committee) once observed, "[D]iscovery is the American alternative to the administrative state." 69 In sharp contrast to what is done in other developed nations-which have invested far more heavily in administrative enforcement regimes-in the United States we have privatized enforcement of many legal norms, across many different fields of law. Enforcement by private attorneys general is backed by the power to uncover wrongdoing through discovery. As Carrington soberly reminds us: "Unless corresponding new powers are conferred on public officers, constricting discovery would diminish the disincentives for lawless behavior across a wide spectrum of forbidden conduct.""

68.

Maurice Rosenberg, The Impact of Procedure-ImpactStudies in the Administration of Justice, 51 LAW & CONTEMP. PROBS. 13, 29 (1988).

69.

Paul D. Carrington, Renovating Discovery, 49 ALA. L. REV. 51, 54 (1997).

Id. More recent work by Professors Stephen Burbank and Sean Farhang make the same 70. point in extended detail. See Stephen B. Burbank & Sean Farhang, Litigation Reform: An Institutional Approach, 162 U. PA. L. REV. 1543, 1583-1603 (2014); see also Stephen B. Burbank, Sean Farhang & Herbert M. Kritzer, Private Enforcement of Statutory and Administrative Law in the United States (and Other Common Law Countries), PENN L. LEGAL SCHOLARSHIP

REPOSITORY:

FAc.

SCHOLARSHIP 96-100

(Nov.

16,

2011), http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1346&context=faculty-schol arship.

222

SOUTH TEXAS LA wREVIEW

[Vol. 58:209

As we have seen, we already possess a great deal of information about discovery practices in civil cases. Consequently, it is incumbent on rulemakers to take the available evidence into account. In other words, this is one of those rare occasions when we do not have to proceed blindly; history can be our guide. Given what we already know, and absent any new information to the contrary, rulemakers should conclude that justification for amending the state's discovery rules cannot be reasonably based on trying to control cost and abuse for all civil cases.

The good news is that early indicators suggest rulemakers seem to be taking at least some of these lessons to heart. Implicitly acknowledging that warrant does not exist for wholesale changes, initial drafts of proposed discovery rule changes from the Supreme Court's Advisory Committee are focused on improving the rules for outlier cases-not on a dramatic overhaul that would impact all cases. The early indicators, thus, are promising.

This is not to say that I support all of the proposed changes and in a follow-on article I'll have more to say about all of the various suggested rule revisions that are being considered. Nevertheless, given how rarely state and federal rulemakers have actually taken the available evidence into account in reforming discovery rules, one cannot help but feel at least a degree of optimism at the initial direction the rules committee is taking."

71.

Rosenberg, supra note 68, at 29.

TITLE VII AND TRANSGENDER EMPLOYEES:

THE TRANSITIONAWAY FROM THE TRADITIONAL CONCEPTS OF SEX DISCRIMINATION IN THE WORKPLACE ......................................

I. INTRODUCTION II. THE TERM "TRANSGENDER" AND ITS IMPLICATIONS ......

A. B.

Defining "Transgender TransgenderHardships

..... 223 ..... 225

225 .......................... .................................

226

. .. . . . . . . . . . . . . . . . .. . . .. . . ..

III. TITLE VII-WHAT IS REQUIRED? 228 IV. THE TRADITIONAL APPROACH .........................

230 V. THE SUPREME COURT'S ASSISTANCE 235 AND THE EXPANSIVE VIEW .................................

A. B. C. D.

Price Waterhouse v. Hopkins ................. ..... 235 Oncale v. Sundowner Offshore Services ......... ......... 237 The BroadApproach to Sex Discrimination....... ....... 238 TraditionalCourts'Response to Sex Stereotyping .... 240 ....................... and Price Waterhouse ..... 243 .................

VI. DEFINING THE PROPER APPROACH 243 A. Government Shift TowardProtection ....................

B. State Law Influences ....................... ..... 245 248 ....................................

C ProperAction.. ..... 251 ................................

VII. CONCLUSION

I.

INTRODUCTION

Transgender individuals make up a minority group that faces many employment struggles, even in today's evolving push toward social tolerance and equality.' But Title VII of the Civil Rights Act of 1964, as it is currently written, does not expressly establish a protected class for transgender employees. 2 As written, Title VII leaves employers-and members of the transgender community-without much guidance as to workplace protection of the transgender class.

Some courts have adopted a non-protective position, even in the face of clear, unambiguous discriminatory actions against transgender

See Phyllis Randolph Frye, The International Bill of Gender Rights vs. The Cider 1.

House Rules: Transgenders Struggle with the Courts Over What Clothing They Are Allowed to Wear on the Job, Which Restroom They Are Allowed to Use on the Job, Their Right to Marry, and the Very Definition of their Sex, 7 WM. & MARY J. WOMEN & L. 133, 144-45 (2000).

2.

See 42 U.S.C. § 2000e-2(a) (2012).

223

224

SoUTH TEXAS LA wREVIEW

[Vol. 58:223

individuals in the workplace. These courts rely on traditional notions of statutory construction, considering first the plain and ordinary meaning of "sex" to apply to chromosomal, anatomical, or biological sex, and they further consider the ample proposed (and denied) amendments to broaden the definition of sex as evidence of Congress's unwillingness to expand "sex" to mean anything other than the traditional notions of male and female.'

However, many other courts have begun to rely on the Supreme Court's holdings in Price Waterhouse v. Hopkins and Oncale v. Sundowner Offshore Services to redefine the traditional concepts of "sex" and to protect Price discrimination.' against workplace transgender employees Waterhouse first expanded sex discrimination to include sex stereotyping. 6 Under this cause of action, it is considered sex discrimination-and it falls squarely within the protected class of "sex"-to discriminate against an employee for failing to conform to the traditional concepts of masculinity or femininity.' As a supplement, Oncale established the idea that Title VII is a remedial statute, and it not only protects the principal evils that Congress was considering when enacting the statute, but also "reasonably comparable evils" that Congress was not necessarily contemplating upon enactment. t Transgender employees who suffer from a discriminatory adverse employment action rely on these two Supreme Court cases to establish a viable cause of action under Title VII.9 Nevertheless, following Price Waterhouse and Oncale's holdings, some federal circuit courts still refuse to protect transgender employees from discrimination by their employers.io This Comment will consider the viability of Title VII claims made by transgender employees. Part II will discuss the hardships that transgender individuals face in the workplace and in society in general, and it will further consider society's evolving opinion with regard to the group. Part III

3.

See, e.g., Etsitty v. Utah Transit Auth., 502 F.3d 1215, 1222 (10th Cir. 2007); Ulane v.

E. Airlines, Inc., 742 F.2d 1081, 1087 (7th Cir. 1984); Sommers v. Budget Mktg., Inc., 667 F.2d 748, 750 (8th Cir. 1982).

4.

Etsitty, 502 F.3d at 1221-22; Ulane, 742 F.2d at 1085-87.

5.

See, e.g., Glenn v. Brumby, 633 F.3d 1312 (11th Cir. 2011); Smith v. City of Salem, 378 F.3d 566, 567-68 (6th Cir. 2004); see generally Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75, 81-82 (1998); Price Waterhouse v. Hopkins, 490 U.S. 228, 244 (1989), superseded in part by statute, Civil Rights Act of 1991, Pub. L. No. 102-166, sec. 107(b), § 706(g)(2), 105 Stat. 1071, 1075-76 (codified as amended at 42 U.S.C. § 2000e-5(g)(2)(b) (2012)).

6.

See Price Waterhouse, 490 U.S. at 250-5 1.

7.

See id.

8.

See Oncale, 523 U.S. at 79-80.

9.

See, e.g., Glenn v. Brumby, 663 F.3d 1312, 1317-18, 1318 n.5 (11th Cir. 2011); Smith v. City of Salem, 378 F.3d 566, 571 (6th Cir. 2004).

10.

See Ulane v. E. Airlines, Inc., 742 F.2d 1081, 1084-87 (7th Cir. 1984); Sommers v.

Budget Mktg., Inc., 667 F.2d 748, 750 (8th Cir. 1982).

TITLE V7AND TRANSGENDER EMPLOYEES

2016

225

will discuss the prima facie requirements necessary for a Title VII discrimination claim. Part IV will involve in-depth case studies from traditional courts-those that do not allow for transgender employee protection-and it will consider the reasoning behind this approach. Part V will discuss the Supreme Court's holdings in Price Waterhouse and Oncale, and it will further discuss the courts that rely on these cases to extend Title VII protection to transgender individuals. Part VI will discuss other governmental bodies' opinions regarding transgender employee protection, including the Equal Employment Opportunity Commission, Department of Labor, and state statutes on the issue. Part VI will additionally explain how the proper approach should be defined, and it will evaluate Congress's hopeful future decisions regarding the issue.

II.

A.

THE TERM "TRANSGENDER" AND ITS IMPLICATIONS

Defining "Transgender"

Typically, "transgender" is an umbrella term that describes an individual who identifies or associates as a member of the opposite sex or gender-either in all occasions or only in certain circumstances." Contrary to historical notions of the term, "transgender" is "an adjective rather than a noun," used to describe a number of different individuals "who [are] marginalized or oppressed due to their difference from social norms of transvestites,13 or gender[] embodiment"-including transsexuals,1 those in the transgender though, anything in between. Most specifically, community have a different psychological sex than what their biology presumes-their "physiological sex is different from [their] psychological perception or expression of [their] sex."' 4 Because of this divergence between the psychological and the biological aspects of their sex, transgender individuals are typically

II. Susan Stryker, (De)Subjugated Knowledges: An Introduction to Transgender Studies, in THE TRANSGENDER STUDIES READER 1, 4 (Susan Stryker & Stephen Whittle eds., 2006).

12. Id. ("[A] transsexual [i]s somebody who permanently changets] genitals in order to claim membership in a gender other than the one assigned at birth .... ). However, both preoperative and post-operative transgender individuals may refer to themselves as "transsexual."

Mary Kristen Kelly, (Trans)forming TraditionalInterpretations of Title VII: "Because of Sex" and the Transgender Dilemma, 17 DuKE J. GENDER L. & POL'Y 219, 221 (2010) ("The term

transsexual can also refer to individuals who live full-time as a gender that is different from the one assigned to them at birth, but who do not undergo surgical procedures to alter their physical sex.").

13.

Stryker, supra note 11, at 4 ("[A] transvestite [i]s some[one] who episodically change[s] into the clothes of the so-called 'other sex' .....

14.

Kelly, supra note 12, at 221.

226

[Vol. 58:223

SOUTH TEXAS LAW REVIEW

diagnosed with gender dysphoria,s a psychological disorder resulting from "the distress that may accompany the incongruence between one's experienced or expressed gender and one's assigned [biological or anatomical] gender."' 6 In order to treat gender dysphoria, doctors usually recommend a number of optional stages: psychological care and treatment, hormone replacement therapy, real life experience (presenting to the outside world as the desired gender), and gender confirmation surgery, each representing a possible or discretionary phase of the transition from one sex to another.' 7 The ultimate decision to undergo gender confirmation surgery lies in the hands of the transgender individual, who may elect or decline surgery.'" Although few, some insurance companies have even begun to cover the surgery, given that the policyholder has undergone all of the requisite treatment stages that doctors recommend prior to the ultimate gender reassignment.' 9 From an employment standpoint, most employment discrimination allegations from transgender individuals occur during these stages of transition, rather than based on the diagnosis of gender dysphoria alone.2 0 Often, the employee is discriminated against after informing the employer of the intention to transition in the near future or once the employee begins outwardly associating as the opposite sex through clothing and other physical changes.2 1 Most cases involve the termination of the transgender employee soon after disclosure of intention to transition or the employee's change in appearance.2 2 B.

TransgenderHardships

Outside of the employment setting, transgender individuals have been subjects of significant hate and violence, culminating from the seemingly

15.

Id. at 222. Gender dysphoria used to be referred to as Gender Identity Disorder. See AM. PSYCHIATRIC Ass'N, DIAGNOSTIC AND STATISTICAL MANUAL OF MENTAL DISORDERS (DSM-5) 451 (Am. Psychiatric Ass'n et. al. eds., 5th ed. 2013) [hereinafter DSM-5].

16.

DSM-5, supra note 15, at 451.

17. See generally The Standards of Carefor Gender Identity Disorder, HARRY BENJAMIN INT'L

GENDER

DYSPHORIA

ASSOCIATIONS

(June

15,

1998),

http://www.tc.umn.edu/-colemO01/hbigda/soc9.pdf (describing different treatment plans for gender dysphoria).

18.

See id. at 28.

19. See Finding Insurance for Transgender-Related Healthcare, HUM. RTS. CAMPAIGN, http://www.hrc.org/resources/finding-insurance-for-transgender-related-healthcare (last updated Aug. 1, 2015).

20.

See Etsitty v. Utah Transit Auth., 502 F.3d 1215, 1219 (10th Cir. 2007); Ulane v. E. Airlines, Inc., 742 F.2d 1081, 1083 (7th Cir. 1984).

21.

See Etsitty, 502 F.3d at 1219; Ulane, 742 F.2d at 1083.

22.

See EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., 100 F. Supp. 3d 594, 596 (E.D. Mich. 2015); Eure v. Sage Corp., 61 F. Supp. 3d 651, 656-57 (W.D. Tex. 2014).

2016

TITLE VII AND TRANSGENDER EMPLOYEES

227

confusing lifestyle taken by those with gender dysphoria who wish to undergo some or all stages of treatment. For example, "[m]ore than one in four trans[gender] people ha[ve] faced a bias-driven assault."2 3 Over 75% of transgender individuals seriously consider committing suicide, and at least 32% have actually attempted ending their lives.24 And while there has been a recent shift toward more social acceptance-or at the very least an increase in awareness-of transgender individuals overall, the "heightened visibility has also put more people at risk of being harassed or hurt." 25 Consider one writer's perspective: Transgender people are four times more likely than the general population to report living in extreme poverty, making less than $10,000 per year, a standing that sometimes pushes them to enter the dangerous trade of sex work. Nearly 80% of transgender people report experiencing harassment at school when they were young. As adults, some report being physically assaulted [on] trains and buses, in retail stores and restaurants. Greater awareness has not yet translated into broad acceptance .... 26 Most relevantly, however, in the employment context, transgender individuals face numerous additional concerns. According to the National Center for Transgender Equality (NCTE), "[m]ore than one in four transgender people have lost a job due to bias, and more than three-fourths have experienced some form of workplace discrimination." 27 A study conducted by The Williams Institute revealed that of 283 transgender workers in Massachusetts, 20% had lost their job due to discrimination, 39% were not hired, and 17% were denied a promotion in 201 1.28 Even in light of these prevalent adversities, "transgender[] [individuals] have no standing for equal protection claims, no right to insurance coverage or governmental medical assistance, no housing protection or access to homeless shelters, no right to continue their military service, no right to

23.

Issues:

Anti-Violence,

NAT'L

CTR.

FOR

TRANSGENDER

EQUALITY,

http://www.transequality.org/issues/anti-violence (last visited Feb. 7, 2017); see Frye, supra note 1, at 139-40.

Suicide and Self-Harm in the Transgender Community, TRANSGENDER EQUALITY 24.

NETWORK IR., http://www.teni.ie/attachments/dada519b-2ba9-47e0-af55-738866a69da4.PDF (last visited Feb. 7, 2017).

Katy Steinmetz, Why Transgender People Are Being Murdered at a Historic Rate, 25.

TIME (Aug. 17, 2015), http://time.con/3999348/transgender-murders-2015/.

26.

Id. 27.

Issues:

Employment,

NAT'L

CTR.

FOR

TRANSGENDER

EQUALITY,

http://www.transequality.org/issues/employment (last visited Feb. 7, 2017).

28.

Jody L. Herman, The Cost of Employment Discrimination Against Transgender Residents of Massachusetts, WILLIAMS INST. 1 (Apr. 2011), http://williamsinstitute.law.ucla.edu/wp-content/uploads/Herman-MA-TransEmpDiscrim-Apr2011.pdf.

228

SOUTH TEXAS LAW REVIEW

[Vol. 58:223

receive prison medical treatment," 29 and no protection under the Americans with Disabilities Act for their likely gender dysphoria diagnoses. 3 0 Still, the public-or at least certain regions nationwide-has shifted toward acceptance of this class of individuals. The Ninth Circuit Court of Appeals has extended protection under the Gender Motivated Violence Act to transgender individuals, and the First Circuit has done the same in interpreting the Equal Credit Opportunity Act. 32 For twenty years, the Employment Non-Discrimination Act (ENDA) has been proposed to Congress at every session.33 ENDA "would protect private and public employees from employment discrimination on the basis of perceived or actual sexual orientation and gender identity,"34 thereby affording Title VIIlike protection to members of the gay and transgender community.

Nevertheless, every single year Congress has declined to adopt ENDA, and the closest ENDA ever came to passing was the one time gender identity was taken out of the proposed Act entirely. 36 Thus, without any other governing statutory authority, federal courts' interpretations of the statute remain conflicted as to transgender protection under Title VII, the reigning employment discrimination statute, which does little to clarify how broad or narrow the word "sex" is to extend. So, the question remains-can employers discriminate against transgender individuals without recourse, or does the term "sex" under Title VII provide for a viable avenue of recovery for the class of historically victimized transgender people?

III. TITLE VII-WHAT IS REQUIRED? The text of Title VII provides, in relevant part, that it is "an unlawful employment practice for an employer . ..

to discriminate against any

individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or

29.

Frye, supra note 1, at 145-46 (footnotes omitted).

30.

Americans with Disabilities Act of 1990, 42 U.S.C. § 12211 (b)(1) (2012) ("Under this chapter, the term 'disability' shall not include-(1) transvestism, transsexualism, pedophilia, exhibitionism, voyeurism, [or] gender identity disorders . . . ." (emphasis added)).

31.

Schwenk v. Hartford, 204 F.3d 1187, 1200 (9th Cir. 2000).

32.

See Rosa v. Park W. Bank & Tr. Co., 214 F.3d 213, 214-16 (1st Cir. 2000).

33.

Seth Althauser & Sarah Greenberg, FAQ: The Employment Non-Discrimination Act: What You Need to Know, CTR. FOR AM. PROGRESS (July 19, 2011, 9:00 AM), https://www.americanprogress.org/issues/1gbt/news/2011/07/19/9988/faq-the-employment-nondiscrimination-act/#rl ("A version of the bill has been introduced in every session of Congress since [1994] except for the 109th Congress, which ran from January 2005 to January 2007.").

34.

Id. 35.

Id. 36.

Id.

2016

TITLE VIIAND TRANSGENDER EMPLOYEES

229

national origin."" Although drafted to eliminate workplace discrimination, Title VII only prohibits discrimination against individuals that fall squarely within one of the above five enumerated classifications." The statute "does not command that any person be hired simply because . . he is a member of a minority group," but it does aim to eliminate subjective barriers to employment opportunities when such barriers are used as a means to invidiously discriminate against a protected employee. 39 There are two possible avenues that an employee can take in order to establish a Title VII discrimination claim: pretext or mixed-motive.40 Under the pretext framework, in order to prove intentional discrimination, a plaintiff-or employee-initially must show each of the following: "(1) she is a member of a protected class, (2) she was qualified for the position, (3) she suffered an adverse employment action, and (4) others similarly situated [but outside of the protected class] were more favorably treated." 4 1 Under the mixed-motive framework, the plaintiff must show that (1) the prohibited factor or considerations (membership within a protected class) was a motiving factor in the employer's decision, and (2) the employee suffered an adverse employment action such as termination, difference in treatment, transfer, or demotion. 42 Thus, the first hurdle for transgender individuals complaining of employment discrimination-regardless of which applicable framework option is taken-necessarily involves the question of whether one's transgender status constitutes a protected class under Title VII. This is the crux of court confusion on the issue.

Transgender employees who sue under Title VII often allege two theories, contending each independent theory is sufficient to establish their membership within a protected class under Title VII. The first theory is one of fluid definition: transgender individuals are protected from gender discrimination based on the idea that "sex" includes transgender within its definition, or more specifically, discriminating against someone because they are "transgender" is literally discrimination based on "sex," which Title VII prohibits. 43 The second theory is based on "sex stereotyping"

37.

Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(a)(1) (2012) (emphasis added).

38.

See id.

39.

McDonnell Douglas Corp. v. Green, 411 U.S. 792, 800-01 (1973) (citation omitted).

40.

Eric Rosoff, Disparate Treatment of Disparate Treatment: Harmonizing Title VII Pretext and Mixed-Motive Jury Instruction Causation Standards in Light of Staub v. Memorial Hospital, 35 CARDOZO L. REv. 2079, 2080-81 (2014).

41.

Willis v. Coca Cola Enters., 445 F.3d 413, 420 (5th Cir. 2006).

See Price Waterhouse v. Hopkins, 490 U.S. 228, 251-52 (1989), superseded in part by 42. statute, Civil Rights Act of 1991, Pub. L. No. 102-166, sec. 107(b), § 706(g)(2), 105 Stat. 1071, 1075-76 (codified as amended at 42 U.S.C. § 2000e-5(g)(2)(b) (2012)).

43.

See Etsitty v. Utah Transit Auth., 502 F.3d 1215, 1221-22 (10th Cir. 2007).

230

SOUTH TEXAS LA wREVIEW

[Vol. 58:223

under the United States Supreme Court's holding in Price Waterhouse.44 Under this theory, the protected class would be the traditional, biological sex that a plaintiff was assigned at birth. A transgender employee may allege a cause of action under either theory or both, but the difficulty arises under the first requisite element of a discrimination cause of action: the employee must show transgender individuals are a protected class because "transgender" falls within the direct meaning of "sex" or that the protected class of "sex" applies because the discrimination was based on a failure to conform to the traditional norms of biological sex.45 Further complicating things for the transgender working community, circuits disagree under both avenues. The class "sex" was added only one day before the House passed Title VII, and the scarce legislative history of the term's addition indicates only that "sex" was added to protect women from workplace favoritism toward men.46 Specifically, "sex" was inserted into Title VII's reach at the last minute by a congressman who sought "to scuttle adoption of the Civil Rights Act" in total.4 7 He hoped that, in a time of male-focused workplaces, the addition of "sex" would deter congressmen from voting to pass Title VII entirely.48 Moreover, Congress did not-and has not-defined the term "sex." 49 Thus, neither the word "sex" within the statute, the statutory definition, nor the legislative history behind the term indicates protection for transgender individuals, and many courts struggle to find the appropriate balance between effectuating the intention behind the non-discrimination statute, protecting a group of people, and ensuring congressional intent is given effect."

TV. THE TRADITIONAL APPROACH

Since the passing of Title VII in 1964, a number of federal circuit courts have considered the issue of whether or not transgender individuals are protected under the statute. Many of them apply a traditional approach-in which, based on the plain meaning of "sex" and the

44.

See Price Waterhouse, 490 U.S. at 250-52; see also Etsitty, 502 F.3d at 1222-24.

45.

See Price Waterhouse, 490 U.S. at 242; Etsitty, 502 F.3d at 1220-23.

46.

Ulane v. E. Airlines, Inc., 742 F.2d 1081, 1085 (7th Cir. 1984); see Francis J. Vaas, Title VII. Legislative History, 7 B.C. INDUS. & COM. L. REV. 431, 439-43 (1966).

47.

Ulane, 742 F.2d at 1085.

48.

See id.

49.

See Civil Rights Act of 1964, 42 U.S.C. § 2000e(k) (2012) (stating that the term "because of sex" includes pregnancy and complications that arise as a result of childbirth but failing to define the term "sex").

50.

See Etsitty v. Utah Transit Auth., 502 F.3d 1215, 1222 (10th Cir. 2007); Ulane, 742 F.2d at 1084-87.

2016

TITLE VIIAND TRANSGENDER EMPLOYEES

231

legislative history behind Title VII, transgender individuals are not afforded protection."

The United States Court of Appeals for the Eighth Circuit first addressed the transgender question in 1982, in Sommers v. Budget Marketing.5 2 There, Audra Sommers (previously Timothy Cornish), a male to female preoperative transgender employee, was terminated two days after she was hired." Her employer, Budget Marketing, realized that she was a transgender individual, and cited Ms. Sommers's "misrepresentation" that she was female on her employment application as the reason for termination.54 Further, the company alleged that Sommers's employment would result in a disruptive work environment, as "a number of female employees indicated they would quit if Sommers were permitted to use the restroom facilities assigned to female personnel.""

Ms. Sommers sued under Title VII, alleging discrimination against her based on her preoperative transgender status-that is, because she was a "female with the anatomical body of a male."" Necessarily, Sommers desired an expansive reading of Title VII to protect transgender employees." However, the court looked to congressional intent behind the term "sex," explaining that although transgender individuals face a sensitive personal dilemma, Congress, by prohibiting sex discrimination, did not intend to define sex as anything other than biological sex." Sex, ordinarily considered, does not include "a person's sex according to the psychological makeup" of a Title VII plaintiff.59 Moreover, the court further examined congressional intent, recognizing that sex was added to Title VII in 1964 without any legislative hearings on the issue and only slight debate among Congressmen. 6 0 The court considered three proposed (and denied) amendments, initiated subsequent to the passing of Title VII, which sought to expand "sex" to include "sexual preference."' Although Sommers's claim did not deal with sexual preference, the court relied on these denials as evidence of congressional intent, holding that "the fact that the proposals were defeated

See Etsitty, 502 F.3d at 1220-22; Ulane, 742 F.2d at 1084-87; Sommers v. Budget 51.

Mktg., Inc., 667 F.2d 748, 750 (8th Cir. 1982).

See Sommers, 667 F.2d at 750.

52.

53.

Id. at 748.

Id. 54.

55.

Id. at 748-49.

56.

Id. at 749.

57.

Id. 58.

Id. 59.

Id. 60.

Id. at 750.

61.

Id.

232

SOUTH TEXAS LAW REVIEW

[ 58:223 [Vol.

indicates that the word 'sex' in Title VII is to be given its traditional definition, rather than an expansive interpretation."62 In sum, the court held that one's transgender or transsexual status does not fall under the protections of Title VII.6 3 Two years later, in 1984, the Seventh Circuit Court of Appeals considered the same issue in Ulane v. Eastern Airlines.64 There, an Eastern Airlines male to female transgender pilot was fired when she returned to work after her gender confirmation surgery.6 5 While the court made it clear that it does not "condone discrimination in any form," it also was "constrained to hold that Title VII does not protect transsexuals." 66 The court's reasoning, like that in Sommers, relied heavily on Congress's intention, not simply the moral ideals of society or members of the medical or transgender community. 67 Particularly, as a well-established rule of statutory interpretation, "words should be given their ordinary, common meaning," and the Ulane court looked to such ordinary, common meaning of "sex." 68 [The] plain meaning[] implies that it is unlawful to discriminate against women because they are women and against men because they are men. The words of Title VII do not outlaw discrimination against a person who has sexual identity disorder [now gender dysphoria], i.e., a person born with a male body who believes himself to be female, or a person born with a female body who believes herself to be male; a prohibition against discrimination based on an individual's sex is not synonymous with a prohibition against discrimination based on an individual's sexual identity disorder or discontent with the sex into which they were born. 69 After holding that the plain and ordinary meaning of "sex" does not encompass one's transgender status, the court, like the Sommers court, looked heavily toward legislative history.7 0 The Ulane court relied on Congress's silence as an indication of its intention: "Had Congress intended more [in its definition of sex], surely the legislative history would have at least mentioned its intended broad coverage of homosexuals, transvestites, or transsexuals, and would no doubt have sparked an interesting debate"

62.

63.

64.

65.

66.

67.

68.

69.

70.

Id. Id. Ulane v. E. Airlines, Inc., 742 F.2d 1081, 1084 (7th Cir. 1984).

Id. at 1082-83.

Id. at 1084.

Id. at 1084-85.

Id. at 1085.

Id. Id.

2016

TITLE VIIAND TRANSGENDER EMPLOYEES

233

amongst 1964 lawmakers. 7' Yet, no such debate or comments to the addition of "sex" exist.

Additionally, the Ulane court considered Congress's continual refusal to expand the word sex through numerous proposed amendments to include sexual orientation within Title VII's definition of "sex." 72 The court noted that "even after [other] courts have specifically held that Title VII does not protect transsexuals from discrimination," Congress continued to deny expansive amendments to Title VII.73 This refusal, the court reasoned, further indicated that Congress had a "narrow view of sex in mind" when it passed Title VII of the Civil Rights Act.74 Lastly, the court warned of legislating from the judiciary, mentioning that sexual identity could be added one day, but on Congress's time and under Congress's terms. 5 Although "some may define 'sex' in such a way as to mean an individual's 'sexual identity' the Ulane court reiterated that its responsibility is to ascertain Congress's intention when Congress added the word "sex" into the statute." Relying on this intention, the court refused to extend protection to transgender individuals under Title VII.n A number of other federal circuit and district courts agree with the Ulane and Sommers lines of reasoning, assenting that sex does not mean transgender.7 8 In 2007, in Etsitty v. Utah Transit Authority, Krystal Etsitty, a male to female transgender employee, was terminated after informing her employer of her intention to transition from male to female. 79 Although Utah Transit Authority hired Krystal as a male (who used the men's restroom), she soon after informed Utah Transit Authority that she was transsexual and "would begin to appear more as a female at work" and eventually undergo gender confirmation surgery.8 0 Although her employer expressed support for the transition, several employees were not comfortable with the change-specifically they feared Krystal's intention to use the women's restroom while still donning male

71.

Id. 72.

Id. at 1085-86.

73.

Id. at 1086 (emphasis added).

74.

Id. 75.

Id. 76.

Id. at 1084 (emphasis added).

77.

Id. at 1086-87.

78.

See Etsitty v. Utah Transit Auth., 502 F.3d 1215, 1220-22 (10th Cir. 2007); EEOC v.

R.G. & G.R. Harris Funeral Homes, Inc., 100 F. Supp. 3d 594, 598 (E.D. Mich. 2015); Johnston v.

Univ. of Pittsburgh of the Commonwealth Sys. of Higher Educ., 97 F. Supp. 3d 657, 676 (W.D. Pa. 2015); Eure v. Sage Corp., 61 F. Supp. 3d 651, 662 (W.D. Tex. 2014); Oiler v. Winn-Dixie La., Inc., No. Civ.A. 00-3114, 2002 WL 31098541, *3-6 (E.D. La. Sept. 16, 2002).

Etsitty, 502 F.3d at 1218-19.

79.

Id. at 1219.

80.

234

SOUTH TEXAS LAW REVIEW

[Vol. 58:223

genitalia."1 She was ultimately terminated because the Utah Transit Authority feared liability would arise from Krystal's restroom use, and she subsequently filed suit under Title VII alleging sex discrimination.82 She argued that "discrimination based on an individual's identity as a transsexual is literally discrimination because of sex and that transsexuals are therefore a protected class under Title VII."8 3 The court did not agree with her contention.8 4 The Tenth Circuit Court of Appeals, in the most recent federal appellate court decision regarding the issue, agreed with Ulane and Sommers and held that transgender individuals are not members of an expressly protected class under Title VII.8 ' Although "[s]cientific research may someday cause a shift in the plain meaning of the term 'sex' so that it extends beyond the two starkly defined categories of male and female," as the word is defined now, "discrimination against a transsexual because she is a transsexual is not 'discrimination because of sex"' under Title VII.86 The majority of federal courts that have looked at this issue have reached the same conclusion-that the term transgender does not fall within the definition of "sex" under Title VII. 87 Consistently, these courts look to the well-established process of statutory interpretation. The "first step in interpreting a statute is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case."8 Courts then consider the legislative intent behind the term or phrase Congress selected in an effort to ascertain what Congress intended for the applicable word or phrase to mean. 8 9 Most courts rely on the idea that sex's ordinary and plain meaning refers to the state of being male or the state of being female, not the state of falling somewhere in between the two or the state of someone with gender dysphoria.90 These courts do not find the term "sex" to be ambiguous, yet they still consider the legislative history behind Title VII. 91 Specifically, ENDA has been proposed to Congress almost every year for twenty-two years, and not once has Congress adopted this statute to protect a broadened

81.

82.

83.

84.

85.

86.

87.

88.

89.

90.

91.

Id. Id. Id. at 1221.

See id.

Id. Id. at 1222.

Id. at 1221.

Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997).

See Ulane v. E. Airlines, Inc., 742 F.2d 1081, 1085 (7th Cir. 1984).

See, e.g., Etsitty, 502 F.3d at 1222; id.

Etsitty, 502 F.3d at 1221-22; Ulane, 742 F.2d at 1085.

2016

TITLE VJAND TRANSGENDER EMPLOYEES

235

group of individuals under "sex." 9 2 For ten years, ENDA has expressly included sexual or gender identity within the realm of its proposed protection, but every single proposal has been denied by Congress.93 The bill "narrowly failed by a vote of 49-50" in the Senate in 1995, and "[a] 2007 version passed in the House 235-184 but did not come up for a vote in the Senate." 94 Both of these two opportunities were the closest Congress came to adopting ENDA, and "[b]oth of these [proposed] bills included sexual orientation but not gender identity." 9' Thus, under the traditional approach, which relies on a plain meaning analysis and congressional intent behind the addition of "sex," many courts have chosen not to extend protection to transgender individuals under Title VII. V.

THE SUPREME COURT'S ASSISTANCE AND THE EXPANSIVE VIEW

While many courts do apply the traditional approach as described above, many others do not. Notably, every court that refuses the traditional approach relies on one or two of the United States Supreme Court cases discussed below; however, neither of these cases specifically address transgender individuals, but instead provide an arguable viable framework for transgender employees who seek protection under Title VII. 96 A.

Price Waterhouse v. Hopkins

In 1989, the Supreme Court established a new avenue of recovery for employees discriminated against on the basis of "sex." 97 In Price Waterhouse v. Hopkins, Ann Hopkins applied for a promotion at her accounting firm.9 8 She was not selected for the promotion to partnership, even in the face of her "outstanding performance," and even after her employer stated that "[n]one of the other partnership candidates . . . had a comparable record in terms of successfully securing major contracts for the partnership."9 9 She was praised as "an outstanding professional" with a "strong character" who was "extremely competent, intelligent," "strong and

Althauser, supra note 33.

92.

93.

Id. 94.

Id. 95.

Id. (emphasis added).

See Glenn v. Brumby, 633 F.3d 1312, 1316-17 (11th Cir. 2011); Etsitty v. Utah Transit 96.

Auth., 502 F.3d 1215, 1222-24 (10th Cir. 2007); Smith v. City of Salem, 378 F.3d 566, 573-75 (6th Cir. 2004).

97.

Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), superseded in partby statute, Civil Rights Act of 1991, Pub. L. No. 102-166, sec. 107(b), § 706(g)(2), 105 Stat. 1071, 1075-76 (codified as amended at 42 U.S.C. § 2000e-5(g)(2)(b) (2012)).

98.

Id. at 233.

99.

Id. at 233-34 (alteration in original).

236

SOUTH TEXAS LAW REVIEW

[Vol. 58:223

forthright.""oo However, some partners did not favor her personality. 0 1 Some described her as "macho" and "overcompensated for being a woman."l0 2 Another told Hopkins she should "take 'a course [in] charm school."" 03 Yet another explained to Hopkins that she could increase her future chances for partnership if she walked, talked, and dressed more femininely, wore make-up and jewelry, and styled her hair.' 04 The Supreme Court looked at the proscription of "sex" discrimination under Title VI-the idea that it is a violation of the statute to make an adverse employment decision against an employee "because of' sex-and held that "sex" includes "gender."' In doing so, the Court established the avenue of liability or cause of action of sex stereotyping.' 06 As for the legal relevance of sex stereotyping, we are beyond the day when an employer could evaluate employees by assuming or insisting that they matched the stereotype associated with their group, for "'I[i]n forbidding employers to discriminate against individuals because of their sex, Congress intended to strike at the entire spectrum of disparate treatment of men and women resulting from 07 sex stereotypes."'1

That is, straight from the reasoning of the United States Supreme Court, it is a violation of Title VII, and it falls under the protected class of "sex" to discriminate against an individual for failing to conform to the traditional notions of masculinity or femininity. Because Ann Hopkins was considered too aggressive, or did not fall exactly within the partners' perceived ideals of femininity in the workplace, she was denied a partnership.'

She was, under the reasoning of sex stereotyping, discriminated against because she did not conform to the traditional notions of femininity. While it is not clear if the Supreme Court intended for this holding to be expansive, transgender employees rely on this same reasoning: if it is actionable discrimination against a woman, like Ann Hopkins, to engage in an adverse employment action against her because she chooses not to wear dresses or makeup, then it follows that it is also discrimination against a man because he does wear makeup and dresses.' 09

100.

Id. at 234.

101.

Id. at 235.

102.

Id. 103.

Id 104.

Id. 105.

Id. at 239-40.

106.

See id. at 251.

107.

Id. (alteration in original) (quoting L.A. Dep't of Water & Power v. Manhart, 435 U.S. 702, 707 n.13 (1978)).

108.

See id. at 251-52.

109.

Smith v. City of Salem, 378 F.3d 566, 574 (6th Cir. 2004).

2016

TITLE VII AND TRANSGENDER EMPLOYEES

237

This reasoning can be easily tailored to include transgender employee protection.

Oncale v. Sundowner Offshore Services

B.

In 1998, the Supreme Court provided an additional argument for transgender employees under Title VII in a case involving male-on-male sexual harassment.'i The employee, Joseph Oncale, was working on an oil platform for Sundowner in the Gulf of Mexico with an eight-man crew."'

He was, on a number of occasions, sexually harassed and assaulted by two other crewmembers in front of the entire group." 2 After the employer refused to take action, Oncale quit, citing sexual harassment and his fear of being raped as motivation to leave." 3 Sundowner argued that Title VII's prohibition of sex discrimination does not apply to a male discriminated against by another male, but rather only male-on-female or female-on-male discrimination was covered under the statute.1' The Court rejected this proposition, holding that the statutory language states nothing that would exclude same-sex harassment claims from Title VII's protection."' With regards to legislative history, the Court acknowledged that Congress likely was considering only male-on-female, or opposite sex sexual harassment when it banned this type of behavior under Title VII, but that understanding alone is not dispositive of its protection for something broader: As some courts have observed, male-on-male sexual harassment in the workplace was assuredly not the principal evil Congress was concerned with when it enacted Title VII. But statutory prohibitions often go beyond the principal evil to cover reasonably comparable evils, and it is ultimately the provisions of our laws rather than the 6 principal concerns of our legislators by which we are governed."'

The Court held that same-sex sexual harassment is a reasonably comparable evil to what Congress was intending to eliminate, and that "sexual harassment must extend to sexual harassment of any kind.""' Many courts, in considering whether transgender employees are protected under Title VII, rely on this "reasonably comparable evils" principle to extend sex

110.

See Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75 (1998).

111.

Id. at 77.

Id.

112.

113.

114.

115.

Id. See id. at 80.

Id. at 79.

116.

Id. at79.

117.

Id. at 79-80.

238

SOUTH TEXAS LAW REVIEW

[Vol. 58:223

discrimination to transgender individuals."' Although Congress likely was not considering transgender individuals when it chose to protect citizens from sex discrimination in 1964, discrimination toward transgender employees is a reasonably comparable evil to what Congress was intending.

Based on this holding, courts began to interpret Title VII as a broad and expansive statute.

C.

The BroadApproach to Sex Discrimination

In 2004, the United States Court of Appeals for the Sixth Circuit adopted a protective stance for transgender employees in Smith v. City of Salem.119 There, Jimmy Smith, a biologically male firefighter with the City of Salem, was diagnosed with gender dysphoria.120 Soon thereafter, he began "'expressing a more feminine appearance on a full-time basis'including at work." 21 Smith's co-workers taunted him with multiple comments about his appearance, claiming he was not "masculine enough," and, in an effort to put an end to the teasing, Smith informed his employer of his diagnosis and his intention to ultimately receive gender confirmation surgery.' 22 His employer then forced Smith to undergo three psychological evaluations and further plotted a "witch hunt" to get Smith to eventually quit or be fired for insubordination.123 The Sixth Circuit Court relied on the sex-stereotyping theory under Price Waterhouse.'24 The Court explained that gender is different than sex, in that gender is a social and psychological concept, while sex is biological.125 Setting aside this distinction, the court held that each of them are fevertheless covered under the plain meaning of "sex" under Title VII.' 26 The court reasoned that "[j]ust as a woman can ground an action on a claim that men discriminated against her because she did not meet stereotyped expectations of femininity, a man can ground a claim on evidence that other men discriminated against him because he did not meet stereotypical expectations of masculinity."'2 7 Because Smith, a biological male, was discriminated against for failing to conform to the typical attire

118.

See, e.g., id.

119.

See Smith v. City of Salem, 378 F.3d 566, 567-68 (6th Cir. 2004).

120.

Id. at 568.

121.

Id. 122.

Id. 123.

Id. at 569.

124.

Id. at 571.

125.

Id. at 572.

126.

Id. 127.

Id. at 574 (quoting Higgins v. New Balance Athletic Shoe, Inc., 194 F.3d 252, 261 n.4 (1st Cit. 1999)) (internal quotation marks omitted).

2016

TITLE VI7AND TRANSGENDER EMPLOYEES

239

and associations of most biological males, the City of Salem engaged in sex-stereotyping discrimination in violation of Title VII.1 28 Similarly, in 2011, in Glenn v. Brumby, the United States Court of Appeals for the Eleventh Circuit considered the same issue.' 29 There, Glenn Morrison (now Vandiver Elizabeth Glenn), a biological male, was hired as an editor in the Georgia General Assembly's Office of Legislative Counsel.' When she informed her employer of her intention to undergo a transition from male to female-and began presenting as a female at work-her employer informed her that her decisions were "inappropriate" and "unnatural."' 3 ' Specifically, her boss Sewell Brumby told her to leave the office, reasoning that "it[] [was] unsettling [for him] to think of someone dressed in women's clothing with male sexual organs inside that clothing."' 3 2 Glenn was later terminated by Brumby based on the idea that the transition "would be disruptive" to the working environment.' 33 He mentioned that some co-workers would "view it as a moral issue," and the transition would make others uncomfortable.'34 Although Glenn did not sue under Title VII, the court did an analysis of the same under a separate discrimination statute, 42 U.S.C. § 1983, as well as the Equal Protection Clause of the Fourteenth Amendment.'" The court noted that, under Price Waterhouse, "Title VII bar[s] not just discrimination because of biological sex, but also gender stereotypingfailing to act and appear according to expectations defined by gender."' 36 Transgender individuals, the court reasoned, are defined as transgender "precisely because of the perception that his or her behavior transgresses gender stereotypes," and that "[t]he very acts that define transgender people as transgender are those that contradict stereotypes of gender-appropriate appearance and behavior.""' The court, as a result of its reliance on Price Waterhouse, held that "a government agent violates the Equal Protection Clause's prohibition of sex-based discrimination when he or she fires a transgender . .. employee because of his or her gender non-conformity."' 3 8

128.

See id at 575.

Glenn v. Brumby, 633 F.3d 1312 (11th Cir. 2011).

129.

Id. at 1314.

130.

131.

Id. Id. 132.

133.

Id. 134.

Id. 135.

Id. at 1315.

136.

Id. at 1316.

Id. (quoting Ilona M. Turner, Sex Stereotyping Per Se: Transgender Employees and 137.

Title VII, 95 CAL. L. REv. 561, 563 (2007)) (internal quotation marks omitted).

138.

Id. at 1320.

SOUTH TEXAS LAW REVIEW

240

D.

[Vol. 58:223

TraditionalCourts'Response to Sex Stereotyping and Price Waterhouse

While the sex-stereotyping claim seems relatively clear from the above-cited cases, courts still refuse to extend protection to transgender individuals, even under Price Waterhouse reasoning. These courts find a fundamental difference between one who displays a few traits that are not common to their traditional gender and one who fully and completely transforms into another gender. Relying on that distinction, these courts question Price Waterhouse's reach as applied to transgender employees.

For example, in Oiler v. Winn-Dixie Louisiana, Peter Oiler, who worked as a male truck driver, informed his employer that he was a transgender individual and dressed as a woman a few nights a month after work.13 9 Although Oiler never presented as female at work, and never informed his employer of any future intention to do so, he was terminated a few days later.140 Oiler sued, alleging that transgender is a protected class under Title VII.1" His claim was bifurcated: (1) the term "transgender" on its face falls squarely within the definition of "sex," and (2) Winn-Dixie's actions constitute unlawful sex stereotyping under Price Waterhouse.142 But the court disagreed with Oiler regarding his first allegation.1 43 Relying on Ulane and Sommers, it held that the ordinary and common meaning of "sex" does not include those with gender identity disorder or gender dysphoria and is not synonymous with sexual or gender identity.1 44 Without his second allegation-sex stereotyping under Price Waterhouse-the inquiry would have ended there: "transgender" is not a protected class because it does not fall within the traditional notions of "male" and "female." 45 Without an applicable, enumerated protected class under the statute, the court held that Oiler failed to state a viable Title VII cause of action.1 46

When the court shifted to evaluate Oiler's second contention involving sex stereotyping, it recognized that the Supreme Court established a possible avenue of recovery for transgender employees who are terminated

139.

Oiler v. Winn-Dixie La., Inc., No. Civ.A. 00-3114, 2002 WL 31098541, at *1 (E.D. La. Sept. 16, 2002).

Id. at *1-2.

140.

141.

Id. at *3.

142.

143.

144.

145.

146.

Id. Id. at *3-4.

See id.

See id. at *3.

Id. at *6.

2016

TITLE VII AND TRANSGENDER EMPLOYEES

241

for failing to exhibit the "traits normally valued" in a particular gender. 147 The court ultimately held that no sex stereotyping occurred in Oiler's case,1 48 but its reasoning is worth studying. The court recognized what it believed to be a considerable flaw in Price Waterhouse's logic as applied to transgender employees: there is a difference between exhibiting some characteristics that are considered "masculine" while remaining completely and outwardly a female-like Ms. Hopkins in Price Waterhouse-and engaging in an entire gender transformation and becoming a new gender entirely, like Oiler was attempting to accomplish.1 4 9 Plaintiff was not discharged because he did not act sufficiently masculine or because he exhibited traits normally valued in a female employee, but disparaged in a male employee. Rather, the plaintiff disguised himself as a person of a different sex and presented himself as a female for stress relief and to express his gender identity....

Plaintiff's actions are not akin to the behavior of plaintiff in Price Waterhouse. The plaintiff in that case may not have behaved as the partners thought a woman should have, but she never pretended to be a man or adopted a masculine persona.s0 Assuming, without conceding, that Price Waterhouse's holding applied to cases involving transgender individuals, the court was clear in determining that it certainly did not apply to Oiler's claims."' To the court, Oiler's claims were clearly distinct from Ms. Hopkins: "This is not just a matter of an employee of one sex exhibiting characteristics associated with the opposite sex. This is a matter of a person of one sex assuming the role of a person of the opposite sex."' 52 These factual distinctions, coupled with Congress's consistent rejections of proposals to include transgender individuals and the complete lack of legislative history regarding the term, led to the court's final holding that "sex" under Title VII does not include "sexual identity or gender identity disorders."' 3 Other courts have come to the same conclusion as Oiler. In Eure v.

Sage Corporation, Loretta Eure, "who was assigned female at birth and presents as male," worked as a truck driver for the defendant employer.15 4 Her managers and directors made numerous comments to Eure, including

147.

148.

149.

150.

151.

152.

153.

154.

Id. at *5.

Id. at *6.

Id. at *5-6.

Id. Id. Id. at *6.

Id. Eure v. Sage Corp., 61 F. Supp. 3d 651, 655 (W.D. Tex. 2014).

242

SOUTH TEXAS LAW REVIEW

[Vol. 58:223

"[w]hat is that and who hired that?"' Eure was dismissed soon thereafter." 6 She sued under Title VII, alleging sex discrimination.'

Remaining true to the traditional approach, the court held that transgender is not a protected class: "[D]iscrimination against a transsexual because she is a transsexual is not 'discrimination because of sex.' Therefore, transsexuals are not a protected class under Title VII and [a plaintiff] cannot satisfy her prima facie burden on the basis of her status as a transsexual.""ss With regard to Eure's second claim that Sage's actions constituted unlawful sex stereotyping under Price Waterhouse, the court likewise found for the employer.' 9 Like Oiler, the court acknowledged that Price Waterhouse could be a viable means of recovery for transgender employees, but its reach did not extend to the facts at issue in Eure's claim: All of the testimony that Eure has presented related to [the Director's] . .. alleged discrimination in terms specifically related to Eure's status as a transgender person, not in terms related to her conformance with gender stereotypes.... [A]lthough Price Waterhouse provides a vehicle for transgender persons to seek recovery under Title VII, neither the Supreme Court nor the Fifth Circuit have held that discrimination based on transgender status is per se gender stereotyping actionable under Title VII.' 60 Simply put, under the court's reasoning, Eure "failed to present evidence showing that the discrimination was motivated by her failure to act as a stereotypical woman would." 6 ' Rather, her discrimination was based solely on her status as a transgender individual-a membership that is not protected under Title VII.1 62

The Oiler and Eure cases illuminate the breadth of the traditional approach, even in light of Price Waterhouse and the increased effort to protect transgender employees. While the traditional approach seems oppressive, the courts urge that their decisions are less about morality and more about statutory interpretation: Defendant's rationale for plaintiffs discharge may strike many as morally wrong. However, the function of this Court is not to raise the social conscience of defendant's upper level management, but to

155.

Id. at 656. The statement was made by Sage's National Project Director. Id. She additionally told Eure's regional director that the company "did not hire 'cross genders."' Id. 156.

Id. 157.

Id. at 657.

158.

Id. at 661 (alteration in original) (quoting Etsitty v. Utah Transit Auth., 502 F.3d 1215, 1222 (10th Cir. 2007)) (internal quotation marks omitted).

159.

Id. at 662.

160.

Id. 161.

Id. 162.

Id. at 662-63.

2016

TITLE VIIAND TRANSGENDER EMPLOYEES

243

construe the law in accordance with proper statutory construction and judicial precedent. The Court is constrained by the framework of the remedial statute enacted by Congress and it cannot, therefore, afford the luxury of making a moral judgment. 163 The reality is, while the Supreme Court has indicated an ability to protect individuals from sex stereotyping, it has not addressed specifically a transgender issue under Title VII. This, coupled with Congress's refusal to amend Title VII to add this class of people, and the history behind the word "sex" within Title VII's terms, indicates that sex was never meant to apply to more than just the traditional concepts of male and female. So, the dilemma remains: are courts to comply with a broadening definition of sex and expand Price Waterhouse to protect transgender individuals, or are they to look toward congressional intent and legislative history to limit their holdings to only those that are expressly protected by the terms of Title

VII? VI. DEFINING THE PROPER APPROACH Without specific Supreme Court analysis on transgender protection under Title VII, courts are issuing divergent holdings, either under the traditional approach, the broad approach, or some hybrid of the two. This, together with Congress's silence and inaction, are leading other organizations and entities to issue their opinions on the convoluted subject matter in question.

A.

Government Shift Toward Protection

Many different sectors of government have supplied courts and society with additional opinions on the debate. The judgment with the biggest ability to influence modem courts addressing employment issues is that of the Equal Employment Opportunity Commission (EEOC). 16 4 While its determinations are not binding on any court, the EEOC is charged with "enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person's race, color, religion, 163.

Oiler v. Winn-Dixie La., Inc., No. Civ.A. 00-3114, 2002 WL 31098541, at *6 (E.D. La. Sept. 16, 2002).

COMMISSION, EMP. OPPORTUNITY U.S. EQUAL See Overview, 164. https://www.eeoc.gov/eeoc/ (last visited Feb. 7, 2017) ("The EEOC has the authority to investigate charges of discrimination against employers who are covered by the law. Our role in an investigation is to fairly and accurately assess the allegations in the charge and then make a finding. If we find that discrimination has occurred, we will try to settle the charge. If we aren't successful, we have the authority to file a lawsuit to protect the rights of individuals and the interests of the public. We do not, however, file lawsuits in all cases where we find discrimination.").

244

SOUTH TEXAS LAW REVIEW

[Vol. 58:223

sex[,] . . . national origin, age[,] . . . disability or genetic information."' 65 Notably, the EEOC's website expressly defines "sex" discrimination as "including pregnancy, gender identity, and sexual orientation." 66 The EEOC established this inclusive definition of "sex" when it considered Macy v. Holder, a charge of employment discrimination brought

by Mia Macy, a transgender female police detective in Arizona, who relocated to San Francisco while still presenting outwardly as a male.' 6 7 She applied for a job in the Walnut Creek crime laboratory, operated by the local Bureau of Alcohol, Tobacco, Firearms and Explosives, and she was told by the Director of Walnut Creek that "she would be able to have the position assuming no problems arose during her background check." 68 Throughout her conversations with Walnut Creek, she was still presenting as male.16 9 Once the company assigned to perform the background check contacted Mia, she informed the applicable personnel that "she was in the process of transitioning from male to female, and she requested that [the company] inform the Director of the Walnut Creek lab" of the future change.1 70 Five days later, Mia was informed that she did not receive the position due to "federal budget reductions," but she later discovered that, in fact, another individual had been hired for the position. '" Mia then filed a complaint with the EEOC, alleging sex discrimination. 172 Adopting the broad approach, and holding that transgender employees are in fact protected under Title VII, the EEOC held that "transgender" falls under the literal definition of "sex" under Title VII because Price Waterhouse held that "sex" includes and encompasses gender. 3 Title VII states that . . . it is unlawful for a covered employer to "fail or refuse to hire or to discharge any individual, or otherwise to discriminate with respect to his compensation, terms, conditions, or privileges of employment". . . "because ofsuch individual's . .. sex."

As used in Title VII, the term "sex" "encompasses both sex-that is, the biological differences between men and women-and gender."' 74 This inclusion, claims the EEOC, is important because "[i]f Title VII proscribed only discrimination on the basis of biological sex, the only

165.

Id. 166.

Id. (emphasis added).

167.

Macy v. Holder, EEOC DOC 0120120821 (E.E.O.C.), 2012 WL 1435995, at *1 (Apr. 20, 2012).

168.

Id. 169.

Id. 170.

Id. 171.

Id. at *1-2.

172.

Id. at *2.

173.

Id. at *5-12.

174.

Id. at *5.

2016

TITLE VII AND TRANSGENDER EMPLOYEES

245

prohibited gender-based disparate treatment would be when an employer prefers a man over a woman, or vice versa." 7 5 According to the EEOC, this would be in contravention of the statute: the Supreme Court has already held that "sex" under Title VII includes gender and "the term 'gender' encompasses not only a person's biological sex but also the cultural and social aspects associated with masculinity and femininity"-a clear reference to those who are biologically one gender and culturally or socially another.17 6

Other governmental entities have reached similar rationales. The Department of Labor has issued a federal compliance program that prohibits federal employers and contractors from discriminating against employees on the basis of gender identity or sexual orientation.17 7 In fact, it is now unlawful for "a [federal] contractol to discriminate against any employee or applicant for employment because of sex," which includes "gender identity; transgender status; and sex stereotyping."17 President Obama even issued an Executive Order addressing the topic, writing that discrimination based on sexual orientation and gender identity is expressly prohibited in federal government employment.1 79

But other government action indicates the opposite, furthering the confusion among the courts. The Americans with Disabilities Act, which was drafted to obviate disability discrimination does not protect transgender individuals either. Actually, the statute expressly and unambiguously undertakes the contrary: "Under this chapter, the term 'disability' shall not include-(1) transvestism, transsexualism, pedophilia, exhibitionism, voyeurism, gender identity disorders not resulting from physical impairments, or other sexual behavior disorders."'8 0 We see divergence among the government regarding transgender protection, leaving courts unsure if protection is warranted.

B.

State Law Influences

Since there is not a federal statute that expressly requires protection of transgender employees, states are free to address the issue within their own employment statute structures. But only twenty states have enacted 175.

176.

177.

Id. at *6.

Id. Executive Order I1246: Regulations Prohibiting Discrimination Based on Sexual

Orientationand Gender Identity, U.S. DEP'T LABOR: OFF. FED. CONT. COMPLIANCE PROGRAMS,

https://www.dol.gov/ofccp/LGBT.html (last visited Feb. 7, 2017).

41 C.F.R. § 60-20.2(a) (2016).

178.

Exec. Order No. 13,672, 79 Fed. Reg. 141 (July 21, 2014).

179.

Americans with Disabilities Act of 1990, 42 U.S.C. § 12211(b)(1) (2012) (emphasis 180. added).

246

SoUTH TEXAS LA wREVIEW

[Vol. 58:223

legislation that prohibits employment discrimination against individuals based on gender identity and sexual orientation.' 8 1 Others protect only sexual orientation discrimination, while the majority protects neither gender identity nor sexual orientation.1 82 Most notably, still some states prohibit local communities from enacting laws against gender identity discrimination.' 83 In fact, over 50% of transgender individuals live in states without statutes protecting the terms and conditions of their employment.1 84 Even the states that do extend protection to transgender employees do so in very different ways than that of the EEOC. Where the EEOC finds that the definition of "sex" within Title VII clearly and unambiguously encompasses "gender identity" in addition to the traditional concepts of male and female, its approach may not be so straightforward. In fact, of the states that do afford protection for geilder identity, most of them do so under the umbrella of an entirely separate protected class.' 85 That is, rather than simply holding that "transgender" falls under sex's definition as is, or adding gender identity within the enumerated definition of "sex" in the statute, states are adding a sixth or seventh protected class to facilitate protection to this group.' While this is in contravention of the EEOC's reasoning, as Title VII is currently written, it does not expressly protect transgender individuals, and as a result, state statutes are not required to protect this class of people either.

181.

Non-Discrimination Laws, TRANSGENDER L. CTR., https://www.lgbtmap.org/equalitymaps/nondiscriminationlaws (last visited Feb. 7, 2017); see State by State Guide to Laws that ProhibitDiscriminationAgainst Transgender People, NAT'L CTR. FOR LESBIAN RTS. 3 (2010), http://www.1gbtagingcenter.org/resources/pdfs/StateLawsThatProhibitDiscriminationAgainstTran sPeople.pdf (stating that only California, Colorado, Illinois, Iowa, Maine, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia prohibit discrimination against individuals based on their gender identity); see also Equality Maps, TRANSGENDER L. CTR., http://transgenderlawcenter.org/equalitymap (last visited Feb. 7, 2017).

182.

See Non-DiscriminationLaws, supra note 181.

183.

See id.

184.

See id. The following image also comes from Non-Discrimination Laws, supra note 181.

185. See State Employment-Related Discrimination Statutes, NAT'L CONF. ST. LEGISLATURES (July 2015), http://www.ncsl.org/documents/employ/Discrimination-Chart2015.pdf.

186.

See id.

2016

TITLE VIIAND TRANSGENDER EMPLOYEES

I>

247

N

N 0'

Emp rn....nt non i cnmiatx on .ntation an ml r of

~

1 ±

lwcwe.. us' <0 tates+EXC,1

Entploymeni non~disoriminatioa law covers only sexualci n kn thoughL r bzwoff p~oteolions (see not&j (2 states) No employment rtoivdiscriminafon law covefirto sexual otentation or qender tently, thouot fetters law offers some proteotons (see rote) (28 states) itin~ passaca Of entotcement of

pr M on laws IL.'tate al ha~ or law i imi%

Consider Texas's transgender employment estimations and statistics: 79% of transgender employees in Texas report some form of employment discrimination, yet 73% of the Texas public supports Lesbian-GayBisexual-Transgender (LGBT) protection in the workplace. 18 7 Still, Texas retains no employment statute guaranteeing discrimination-free employment to transgender individuals.' Increased public acceptance has 187.

Christy Mallory & Brad Sears, Employment Discrimination Based on Sexual Orientation and Gender Identity in Texas, WILLIAMS INST. 2 (Apr. 2015), http://williamsinstitute.law.ucla.edu/wp-content/uploads/TX-Nondiscrimination-May2015.pdf.http://williamsinstitute.law.ucla.edu/wp-content/uploads/TX-Nondiscrimination-May2015.pdf.

188.

Id. at 5.

248

SOUTH TEXAS LAW REVIEW

[Vol. 58:223

not yet transformed into statutory protection in most states. But without a federal statute mandating enforcement of transgender anti-discrimination laws, states are only obligated to protect membership within protected classes that fall squarely within one of the five enumerated classifications of Title VII: sex, race, color, national origin, and religion.' 89 C.

ProperAction

This confusion as to how "sex" is defined is not productive for court dockets, and it does not effectuate the equality-based purpose of federal employment statutes. Nevertheless, there remain two approaches to the transgender employment discrimination issue under Title VII, both of which retain vitality and logical reasoning.

On one hand, the more traditional and conservative courts look to the legislative history behind Congress's decision to add "sex" as a protected class under Title VII. These courts consider the large number of amendments, each proposing to expand "sex" to include gender identity and/or sexual orientation, and each entirely denied by Congress. These courts rely on those congressional rejections as evidence of congressional intent,19 0 and they fall back on the primary judiciary function of interpreting legislative intent, not making moral decisions about who should or should not be protected. In fact, neither the term "transgender" nor the words "gender identity" are found anywhere within Title VII, and the legislative history behind the addition of the term indicates that Congress certainly was not considering "gender identity" or "sexual orientation" in 1964 when the statute passed.1 91 Even after courts began holding that transgender employees are not protected under Title VII, Congress still rejected proposed amendments attempting to include this class under Title VII's reach.' 92 To the contrary, more liberal courts have adopted a broader meaning to the word "sex" and to Title VII in general. These courts rely on strong public policy reasoning and Supreme Court-as opposed to congressional-assistance. Price Waterhouse v. Hopkins allows for a cause of action for a Title VII plaintiff when they suffer from an adverse 189.

See 42 U.S.C. § 2000e-2(a) (2012).

190.

Notably, there have been many proposed amendments that Congress did adopt, further emphasizing the importance of the rejected amendments proposing for "gender identity" to be included within the definition of sex. See generally The Law, EQUAL EMP. OPPORTUNITY COMMISSION, https://www.eeoc.gov/eeoc/history/35thlthelaw/ (last visited Feb. 7, 2017) (listing and describing a series of congressional amendments to Title VII).

191.

Id. 192.

See supra Part IV (discussing relevant case law addressing Title VII's legislative history).

2016

TITLE VII AND TRANSGENDER EMPLOYEES

249

employment decision based on their failure to conform to the traditional notions of male or female.1 93 Oncale v. Sundowner Offshore Services encompasses the idea that Title VII is a remedial statute, and it can expand to accommodate more than the "principal evils" that Congress was considering at the time.' 94 Thus, to these courts, the fact that Congress likely was not considering transgender individuals when it included "sex" under Title VII is irrelevant-the statue is broad enough to expand with modern day discrimination.

Both approaches present sound concerns and rationales. To many, it seems that Price Waterhouse has solved the confusion-that the sexstereotyping cause of action is in essence a ratification of transgender employee protection.' 95 Courts that have followed Price Waterhouse, and addressed it directly with regard to transgender plaintiffs, rely on strong policy that "conversion" or "transition" within a protected class is still protected under the umbrella of that class: Imagine that an employee is fired because she converts from Christianity to Judaism. Imagine too that her employee testifies that he harbors no bias toward either Christians or Jews but only "converts." That would be a clear case of discrimination "because of religion." No court would take seriously the notion that "converts" are not covered by the statute. Discrimination "because of religion" easily encompasses discrimination because of change of religion.' 96 And while Price Waterhouse has certainty made it easier-or even possible-for transgender individuals to file a discrimination lawsuit, this case has not resolved the underlying problem. It does not define "sex" nor does it in any way expressly include transgender individuals under Title VII. Courts that remain attached to their traditional and conservative concerns are able to "poke holes" in the reasoning of Price Waterhouse because that case did not deal with a transgender individual.1 97 Even under a sex-stereotyping claim, some courts require transgender employees to show specific examples of sex stereotyping, rather than just discrimination based

See Price Waterhouse v. Hopkins, 490 U.S. 228, 251 (1989), superseded in part by 193. statute, Civil Rights Act of 1991, Pub. L. No. 102-166, sec. 107(b), § 706(g)(2), 105 Stat. 1071, 1075-76 (codified as amended at 42 U.S.C. § 2000e-5(g)(2)(b) (2012)).

194.

Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75, 79-80 (1998).

195.

See, e.g., Glenn v. Brumby, 663 F.3d 1312, 1317 (11th Cir. 2011); Macy v. Holder, EEOC DOC 0120120821 (E.E.O.C.), 2012 WL 1435995, at *5 (Apr. 20, 2012).

Schroer v. Billington, 577 F. Supp. 2d 293, 306 (D.D.C. 2008).

196.

Kelly, supra note 12, at 230 ("Courts have found other ways to poke holes in 197. transgender plaintiffs' sex stereotyping claims. In order to bring successful sex stereotyping claims, transgender plaintiffs have had to present specific, direct evidence that employers took adverse employment actions against them because of gender stereotypes, and not because of their transgender status per se.").

250

SouTH TEXAS LA wREVIEW

[Vol. 58:223

on their status as a transgender individual.' 9 8 This enables courts to circumvent Price Waterhouse's holding as applied to transgender employees and avoid the obstacle of sex-stereotyping claims regarding gender identity.

In fact, although Price Waterhouse has in essence opened the door for courts to begin discussing the transgender employee debate, it has also caused more confusion among the courts. The much more effective and possibly the only way to mandate uniform protection of transgender individuals in the workplace, is for Congress to expressly and unambiguously extend this protection.

This approach is far from a novel concept. Other unprotected employees faced the same issues after Title VII's adoption. For example, individuals over forty who were terminated as a result of their age were left without a viable discrimination cause of action. To address this concern and protect a new class of people, Congress adopted the Age Discrimination in Employment Act in 1967 (ADEA).' 99 Americans with disabilities who faced workplace discrimination were left without a remedy as well, until Congress issued appropriate legislation for the class in 1990 under the Americans with Disabilities Act (ADA). 2 00 Congress even amended the definition of "sex" under Title VII to include pregnant employees when it drafted the Pregnancy Discrimination Act of 1978.201 The reality is, Congress has simply not undertaken such an action with regard to transgender employees at this time. The legislature's silence may not be indicative of its intention, but it certainly leaves courts-that have a duty to interpret congressional intent-without any guidance, even in the wake of Price Waterhouse's holding.

Only Congress or the United States Supreme Court can close this divergence amongst the states and circuits by (1) adding the term "gender identity" within the meaning of sex under Title VII, (2) adding "gender identity" as an additional protected class under Title VII, or (3) holding in Supreme Court fashion that transgender individuals are protected under statutory interpretation of Title VII as written. Saving these potential solutions, Congress is likewise free to draft a separate statute-as it did with the ADEA and ADA-that ensures protection for a new class of people that were not contemplated by Title VII and its drafters.

198.

Id.; see Schroer, 577 F. Supp. 2d at 304-05 ("Schroer's case indeed rests on direct evidence, and compelling evidence, that the Library's hiring decision was infected by sex stereotypes." (emphasis added)).

199.

See The Law, supra note 190.

200.

See id.

201.

Id.

2016

TITLE VIIAND TRANSGENDER EMPLOYEES

251

Until then, courts will continue to struggle with the contradictions surrounding the issue: the EEOC holds "transgender" means "sex," the Supreme Court addresses sex stereotyping but not in terms of a transgender employee, Congress has consistently refused to expand Title VII to include gender identity, and states lack any uniformity on the issue. The best way to ensure that this class of traditionally discriminated against individuals are protected is to mandate an applicable and unambiguous statutory safeguard.

VII. CONCLUSION

Courts have struggled with the term "sex" under Title VII since the statute's inception. Although the term is not defined, courts are conflicted as to whether the term should be interpreted narrowly, so as to protect only the two starkly defined categories of male and female, or broadly, in order to protect groups of individuals that Congress likely did not specifically intend to protect, such as those found within the transgender community.

Under the Supreme Court's holdings in Price Waterhouse v. Hopkins and Oncale v. Sundowner Offshore Services, transgender individuals do maintain somewhat of a viable avenue of recovery under a theory of sexstereotyping discrimination. But because neither Congress nor the Supreme Court has expressly or unambiguously considered the issue of whether transgender employees are protected under the federal discrimination statute, courts are finding loopholes out of the application of Price Waterhouse based on minor factual distinctions and requiring that transgender plaintiffs point to specific examples of stereotyping to support the cause of action.

The best solution to this growing judicial divergence is for Congress to speak on the matter. In fact, Congress is free to expressly exclude this class of individuals from protection, just as it did within the text of the Americans with Disabilities Act. Congress is likewise free to adopt a proposed amendment to Title VII, including the ENDA, which has been proposed at every session for over twenty years. Congress may find that the issue is better left for a new statute altogether. Just as it did when it passed the Age Discrimination in Employment Act, Congress may enact a statute that solely deals with gender identity discrimination. Until it speaks, though, courts will continue to struggle with the competing concerns of statutory interpretation, protection to those who need it, and shaky congressional intention. This class will continue to wonder if it is afforded any remedy in the wake of clear discriminatory action by employers. It is

252

SOUTH TEXAS LAW REVIEW

[Vol. 58:223

high time for our legislative body to speak, to clarify, and to guide our courts systems in order to provide necessary and uniform authority.

Lani Durio

THE STATUS OF THE ALIEN TORT STATUTE'S CORPORATE LIABILITY QUESTION IN A POST-KIOBEL WORLD ..... 254 ......................................

I. INTRODUCTION II. LAYING THE FOUNDATION: A PRE-KIOBEL 256 ....................................

OVERVIEW OF THE ATS

HistoricalDevelopments: 1789 to 2013 ...................... 256 ..... 258 ....

A Textural Look at the ATS................

Nature of the Claimsfor Violations of ......... 259 Customary InternationalLaw.............

III. DISSECTING THE ATS's NEW GUARD: KIOBEL V. ROYAL DUTCH ..... 263 ..............................

PETROLEUM CO. .............. 263 A. Revisiting Kiobel I & II.................

B. DistillingKiobel II's PrincipalRules and Questions............. 266 C. Alternative Perspectivesfrom the Kiobel II Concurrences.... 268 1. Justice Alito's Concurrence:Closing the Gap.................. 268 2. Justice Breyer's Concurrence:A New Approach ............. 269 3. Takeawaysfrom the Kiobel II Concurrences.................... 270 IV. THE DEVELOPING POST-KIOBEL II CIRCUIT SPLIT: 271 ....................................

A SPECTRUM ANALYSIS A. Where the CorporateLiability Door Remains Open .............. 271 1. The Ninth Circuit and Doe v. Nestle USA, Inc................. 271 2. The Fourth Circuit and Al Shimari v.

273 CACI Premier Technology, Inc...................

B. Where the CorporateLiability Door Appears Closed ............ 277 1. The Second Circuit: Balintulo v. Daimler AG.................. 277 2. The Eleventh Circuit: Cardona v. ........ 279 Chiquita Brands Int'l, Inc...............

C. The Four CircuitSpectrum and Kiobel II............................... 281 A. B. C.

V. INFLUENCES ON THE CORPORATION AND PROSPECTS FOR THE ATS...............................

A. B. VI.

285

How the Rounded Kiobel II Rule Will Impact the Corporate ................ 285 Entity....................... at the Kiobel II's Long Term Viability and a Glimpse ..... 287 ...................

Future.............

CONCLUSION

.............................................

288

253

254

SOUTH TEXAS LA wREVIEW

[Vol. 58:253

Abstract This Comment aims to provide a comprehensive discussion of the current interpretive quagmire that is the Alien Tort Statute's corporate liability question. More importantly, it aims to provide the corporate client with a better understanding of the status of A TS liability, as well as the developments currently ongoing, and the possible directions for which to ultimately prepare in handling the A TS. This Comment accomplishes this by using several instrumental cases to identify the varying interpretationsfrom majority, concurring, and dissenting opinions. Ultimately, through the discussion of these varying approaches, both the immediate and long-term future of the ATS is hypothesized.

I.

INTRODUCTION

The prevalent method historically used by the world's plaintiffs to hold corporations liable for violations of customary international law is in a state of turmoil.' The source-varying interpretations of 28 U.S.C. § 1350, better known as the Alien Tort Statute (ATS). 2 Functionally, the ATS provides U.S. district courts with original jurisdiction over aliens' tort claims that are imbedded in well-settled violations of customary international law.3 But the extensive reach of the ATS has sparked many questions regarding its application. For one, does the jurisdictional grant of the ATS extend to claims brought against corporate defendants? If so, which corporations? Is mere incorporation in one of the fifty United States a determinative factor, or will a significant American presence suffice?

These sorts of questions present many logistical and legal complications for courts, plaintiffs, and corporate defendants alike. The focus of this Comment is directed for the latter-corporations.

The modern corporation is a transnational entity that often operates with more influence and effect than many large nations. 4 It is common for I . See Eric Posner, The United States Can't Be the World's Courthouse, SLATE (Apr.24,2013,2:56PM),http://www.slate.com/articles/news-and-politics/view-from-chicago/2013 /04/the supreme courtandthealientort statute ending human rights suits.html. For a more complete discussion of customary international law, see infra Part II.C. 2.

Alien Tort Claims Act (ATCA), 28 U.S.C. § 1350 (2006).

3.

Id. 4.

For example, based on statistics from 2011, General Electric's annual revenue of $151.63 billion beats the total gross domestic product of New Zealand. Meanwhile, Exxon Mobil's annual revenue of $354.67 billion would make it the 30th largest country in the world measured by gross domestic product, placing it ahead of Thailand, the Czech Republic, Pakistan, Peru, and Hungary. See Vincent Trivett, 25 US Mega Corporations: Where They Rank If They Were Countries, BUS. INSIDER (June 27, 2011, 11:27 AM), http://www.businessinsider.com/25corporations-bigger-tan-countries-2011-6?op= 1.

CORPORATE LIABILITY IN A POST-KIOBEL WORLD

2016]

255

the largest of corporations to have a substantial physical presence in locations across the globe, be that directly or through subsidiaries. Even those of a smaller scale now conduct substantial business on the world's interconnected market. 6 Now, imagine a law that is interpreted to place civil tort liability on corporations for doing business with a foreign government that, in some relation to that business, violates customary international law.

Imagine that this same law could then be interpreted to hold that an American corporation making six-figure payments to a leftist terrorist organization in exchange for more advantageous business prospects is out of its jurisdictional reach. This interpretive dichotomy represents the spectrum of the ATS. The dilemma is rooted in two intertwined questions: (1) does the ATS extend to corporations; and (2) does the presumption against extraterritorial application of U.S. law signify a total restriction on the use of foreign conduct to support an ATS claim? The cause of this dilemma--one landmark Supreme Court decision purportedly addressing these questions.

For corporations, civil liability through the ATS is highly unpredictable and has potentially catastrophic results. This Comment aims to provide an objective and comprehensive overview of the ATS's corporate liability issue, chiefly for the benefit of corporate defendants making preparations for the ATS. Part II will begin by laying the foundation on which the rest of the Comment is built. This will include sections focused on the tumultuous history of the ATS, a breakdown of the Statute's text, and a discussion of the particular claims commonly asserted by foreign plaintiffs. Part III will introduce, analyze, and encapsulate the epicenter from which all current ATS analyses begin-with the recent Supreme Court decision Kiobel v. Royal Dutch Petroleum Co.' Part IV will provide case studies from four different U.S. Circuits, each offering four

5.

See,

e.g., ExxonMobil Singapore Jobs and Careers, ExxONMOBIL:

SINGAPORE,

http://local.exxonmobil.com/AP-English/careers.aspx (last visited Feb. 6, 2017) ("ExxonMobil is present in over 200 countries and territories around the globe . . . from Singapore, to Chad on the African continent, to Sweden in Northern Europe, to Houston in the United States . . . .").

6.

See, e.g., Patrick Delehanty, Issue Brief Number 11: Small Businesses Key Players in International Trade, U.S. SMALL Bus. ADMIN. OFF. ADVOC. 1-2 (Dec. 1, 2015), https://www.sba.gov/sites/default/files/advocacy/Issue-Brief-ll -Small-Biz-Key-PlayersInternational-Trade.pdf ("[S]mall businesses play an important role internationally as they make up a steady 97 percent of all U.S. identified exporters and account for a significant and growing share of export value []. Since 2006, the value of exports coming from small businesses has grown from 28.9 percent to 33.6 percent, and the number of small business exporters is up 24.3 percent []. Further, small business export value grew 35.5 percent faster than the large business share, and the number of small exporters outpaced large ones by 20.9 percent [].").

133 S. Ct. 1659 (2013). Throughout this Comment, Kiobel will be referred to as Kiobel 7.

II. See infra, Part lIl.A, for a more complete discussion of the Kiobel II naming rationale. See also infra, note 58, for a discussion of the KiobelI and I naming discrepancy.

256

SOUTH TEXAS LA wREVIEW

[Vol. 58:253

different interpretations of the corporate liability question and Kiobel I. This discussion will effectively map out a growing circuit split stretching from the business hubs of New York to Atlanta, and from Charlotte to San Francisco.8 Part IV will end by examining which circuits are interpreting and applying Kiobel II with maximum accuracy, and discuss the ramifications that each interpretation has on the corporate entity's potential liability via the ATS. Part V will begin by exploring how the broader Kiobel H fallout affects corporations, and then discuss the intermediate and long-term viability of the current situation. Part V will conclude by positing which of the interpretations is the most viable approach for the long term.

ATS liability should be of paramount importance to the corporate client. Due to the heavily damaging public relations image shaped by the facts of these cases, the attenuated nature of ATS claims, the large pool of plaintiffs usually bringing suit, the duration and complexity of the litigation can prove to be a daunting challenge that dissuades corporations from taking on these cases in federal court.9 These considerations should be kept in mind throughout the duration of the Kiobel I rule and response, as they will ultimately be some of the major factors affecting corporations outside of the legal ambiguity across the circuits. But first, there must be adequate foundation for the complex discussion of corporate ATS liability.

II.

LAYING THE FOUNDATION: A PRE-KiOBEL OVERVIEW OF THE ATS

A. HistoricalDevelopments: 1789 to 2013

Drafted as the Alien Tort Claims Act, the ATS was enacted by the First Congress as part of the Judiciary Act of 1789.0 The ATS was virtually non-existent from the date of its enactment to 1980-utilized in only two cases during that span." However, in the landmark decision, Filartigav.

Pena-Irala,the Court of Appeals for the Second Circuit breathed new life 8.

See, e.g., Court Website Links, U.S. COURTS, http://www.uscourts.gov/about-federalcourts/federal-courts-public/court-website-links (last visited Feb. 6, 2017) (providing a map of each circuit's geographic area of jurisdiction).

9.

See Lawrence Hurley, US CorporationsAre Using a Supreme Court Ruling to Fend Off Human Rights Abuse Lawsuits, BUS. INSIDER (Dec. 12, 2014, 2:21 AM), http://www.businessinsider.com/r-us-corporations-winning-fight-over-human-rights-lawsuits2014-12 (providing an example of negative press associated with ATS cases); see also infra Part V.A (specifically addressing these matters).

10.

See, e.g., Sosa v. Alvarez-Machain, 542 U.S. 692, 718 (2004); Alison Bensimon, CorporateLiability Under the Alien Tort Statute: Can CorporationsHave Their Cake and Eat It Too?, 10 LoY. U. CHI. INT'L L. REv. 199, 201 (2013).

11.

See Gary Clyde Hufbauer & Nicholas K. Mitrokostas, InternationalImplications of the Alien Tort Statute, 16 ST. THOMAS L. REV. 607, 609 (2004) (citing Adra v. Clift, 195 F. Supp. 857 (D. Md. 1961); Bolchos v. Darrel, 3 F. Cas. 810 (D.S.C. 1795) (No. 1607)).

2016]

CORPORATE LIABILITY INA POsT-KIOBEL WORLD

257

into the ATS by construing it to allow a U.S. court to maintain jurisdiction over the tort claims of two Paraguayan citizens suing a Paraguayan police officer allegedly responsible for torturing and killing their son.1 2 Though Filartiga had opened the door for modem ATS cases, it took thirty-four more years for an ATS case to reach the U.S. Supreme Court. Finally, in Sosa v. Alvarez-Machain, the nation's highest Court issued its stance.' 3 Factually, Sosa was a rather odd and controversial case. Operating under the belief that the respondent, Humberto Alvarez-Machain, 14 was involved in the capture, torture, and murder of Agent Enrique CamarenaSalazar," the U.S. Drug Enforcement Agency (DEA) tasked several Mexican nationals to capture Alvarez-Machain and bring him to the United States.1 6 These men, one of whom was Jose Francisco Sosa, abducted Alvarez-Machain from his home in Mexico, held him overnight in a Mexican motel, and then flew him by private jet to El Paso, Texas, where he was exchanged and arrested by U.S. federal officers." Alvarez-Machain

12.

See Filartiga v. Pena-Irala, 630 F.2d 876, 878 (2d Cir.. 1980). Factually, Paraguayan citizens seeking permanent political asylum in the United States brought civil action in U.S. federal court against another citizen of Paraguay temporarily in the United States on a visitor's visa. Id. The foreign plaintiffs sued on the basis of wrongfully causing the death of their son by means of torture. Id. The district court dismissed the action for want of jurisdiction; however, the Court of Appeals for the Second Circuit reversed. Id. at 878, 880.

13.

See Sosa v. Alvarez-Machain, 542 U.S. 692, 695 (2004).

Id. Alvarez-Machain was a physician in Mexico. The DEA alleged that he was present 14. at the location of Agent Camarena-Salazar's torturing, and that Alvarez-Machain took actions to prolong Agent Camarena-Salazar's life in order to extend his interrogation and torture. Id. at 697.

15.

Id at 695-97.

16.

Id at 697-98. Alvarez-Machain was facing indictment by a federal grand jury in the United States, however, the Mexican government declined to extradite Alvarez-Machain. Id. 17.

Id In order to prevent distraction based on Alvarez-Machain's abduction, it should be noted that custody taken in this manner does not prevent U.S. courts from asserting jurisdiction over a defendant. Alvarez-Machain made such a "lack of proper jurisdiction" argument, successfully, at both the district court and circuit court levels; however, the Supreme Court rejected his contention. See generally United States v. Alvarez-Machain, 504 U.S. 655, 669-70 (1992) ("We conclude, however, that respondent's abduction was not in violation of the Extradition Treaty between the United States and Mexico, and therefore the rule of Ker v. Illinois is fully applicable to this case. The fact of respondent's forcible abduction does not therefore prohibit his trial in a court in the United States for violations of the criminal laws of the United States.").

In fact, U.S. courts have repeatedly upheld the so-called Ker-Frisbiedoctrine, which is analogous to the common law theory of male captus, bene detentus (translated "bad capture, good keep"). See, e.g., Frisbie v. Collins, 342 U.S. 519, 522 (1952); Ker v. Illinois, 119 U.S. 436, 444 (1886); see also Aaron Schwabach and S.A. Patchett, Doctrine or Dictum: The Ker-Frisbie Doctrine and Official Abductions which Breach International Law, 25 U. MIAMI INTER-AM. L. REV. 19, 21 (1993) (identifying support for the analogy between the Ker-Frisbie doctrine and male captus, bene detentus). Practically speaking, Ker-Frisbiestands for the proposition that the jurisdiction of U.S. courts is in no way limited by the manner in which a defendant is brought within the jurisdiction. See Frisbie, 342 U.S. at 522; Ker, 119 U.S. at 444; Schwaback, supra note 17, at 21. There is a limited exception to Ker-Frisbie, called the Toscanino Exception. See United

258

SOUTH TEXAS LAW REVIEW

[ 58:253 [Vol.

was ultimately acquitted.18 Alvarez-Machain returned to Mexico and then brought suit in U.S. federal court against one of his Mexican captors (Sosa), the DEA, and the United States.' 9 Alvarez-Machain sought damages from the United States under the Federal Tort Claims Act, 2 0 and tort damages from Sosa through the ATS's jurisdictional grant for violations of customary international law. 2 1 In Sosa, the Supreme Court opined that the ATS "was intended to have practical effect the moment it became law" and that "[t]he jurisdictional grant is best read as having been enacted on the understanding that the common law would provide a cause of action for the modest number of international law violations with a potential for personal liability at the time." 2 2 Therefore, the Supreme Court issued confirmation on two matters: first, the ATS would provide the federal judiciary with jurisdiction; and second, federal common law would provide the causes of action applicable in ATS cases.23 Despite the Supreme Court's decision in Sosa, circuits from coast to coast continued to struggle to find consistency in ATS cases. 24 Varying interpretations developed once again, with ATS corporate liability as the 25 most notable area of discrepancy among the circuits. It would be yet another decade before the Supreme Court revisited the specific issue of corporate ATS liability. 26

B.

A Textural Look at the ATS

The actual text of the ATS provides that "[t]he 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 v. Toscanino, 500 F.2d 267 (2d Cir. 1974). However, Toscanino only overrides Ker-Frisbie when the manner in which a defendant is haled into U.S. jurisdiction "shocks the conscience"considered by U.S. courts to be more than mere kidnapping. Id. at 273.

18.

Sosa, 542 U.S. at 698.

19.

Id. at 698.

20.

Federal Tort Claims Act (FTCA), 28 U.S.C. §1346(b) (2006 & Supp. 2016).

21.

Sosa, 542 U.S. at 697-98.

22.

Id. at 724 (emphasis added).

23.

See id at 724-25.

24.

See generally Rachel Paul, InterpretingLiability Under the Alien Tort Statute, 67 U. MIAMI L. REV. 705, 719-25 (2013) (discussing the circuit split as it existed before Kiobel 1).

25.

See generally id.

26.

See Kiobel v. Royal Dutch Petrol. Co. (Kiobel II), 133 S. Ct. 1659, 1663 (2013) ("The Second Circuit dismissed the entire complaint, reasoning that the law of nations does not recognize corporate liability. We granted certiorari to consider that question." (citations omitted)); see also Tracy Bishop Holton, Cause ofAction to Recover Civil Damages Pursuantto the Law of Nations and/or Customary International Law, in 21 CAUSES OF ACTION 327, 342-43 (Clark

Kimball et al. eds., 2d ed. 2003) (providing an extensive overview of the ATS).

2016]

CORPORATE LIABILITY IN A PosT-KIOBEL WORLD

259

States." 27 Though it is only one sentence in length, there is much to unpack in the language of the ATS itself. The starting point of the ATS is that it is available to aliens only, and not U.S. citizens.28 Therefore, every ATS case will involve a foreign plaintiff.

The most important point, however, is that the ATS does not provide a cause of action; rather, it solely provides originaljurisdiction to federal district courts. 2 9 Therefore, the commonly used phrase "ATS liability" is inaccurate. To be legally accurate, consider this relationship to exist in the following manner: there is no such thing as ATS liability; instead, there is tort liability derived from established norms of customary international law-as opposed to domestic U.S. law-which is levied by U.S. federal courts operating under their jurisdiction pursuant to the ATS. 30 This is a key distinction that must be fully understood because the phrase, ATS liability, is commonly used in practice and occasionally in this Comment to concisely reference this complex relationship between the ATS and the tortious conduct alleged.

Though the ATS only provides jurisdiction, it is not silent on the types of claims available for use under its jurisdictional grant. As the language of the Statute clearly indicates, the ATS only applies to civil tort actions.

Therefore, to break this down in the simplest of forms, only civil liability can be imposed under the ATS's jurisdiction. It may not be used to assess any criminal liability. 3 2 Furthermore, the last and most expansive component of ATS claims is the nature of the torts themselves-the claims must be rooted in violations of customary international law.33 This element requires close examination.

C.

Nature of the Claimsfor Violations of Customary InternationalLaw

The ATS requires that the alleged tort action be rooted in a "violation of the law of nations [better known as customary international law] or a treaty of the United States." 34 Considering that customary international law is usually not a prevalent topic in every lawyer's proverbial roundhouse, discussion of the development and meaning of this form of law should prove important to this Comment. As is the case in all forms of legal 27.

Alien Tort Claims Act (ATCA), 28 U.S.C. § 1350 (2006).

28.

See id 29.

See id; Sosa v. Alvarez-Machain, 542 U.S. 692, 713-14 (2004).

See Sosa, 542 U.S. at 724-25.

30.

31.

ATCA § 1350.

32.

Cf id See id The text of the ATS uses the term "law of nations." Id However, "customary 33. international law" is a more commonly used term today and will be used in this Comment.

34.

Id.

[Vol. 58:253

SOUTH TEXAS LA wREVIEW

260

research, when analyzing customary international law, source identification is an important first step. Opinions from the International Court of Justice (ICJ) and other international tribunals, international conventions, international customs, general principles of law recognized by civilized nations, judicial decisions, and scholarly works are all prevalent producers of what is or could develop into customary international law. 35 Federal courts often look to these sources when considering whether the violation alleged by the plaintiff is sufficient to support a claim under the ATS.36 The greater collection of these sources is what comprises customary international law, and some of these sources help define customary international law. The ICJ, for example, defines customary international law as "evidence of a general practice accepted as law." 3 7 Another source defines it as "international obligations arising from established state practice, as opposed to obligations arising from formal written international treaties." One scholar describes customary international law through two factors: (1) the general practices of nations; and (2) the practices accepted as laws by the nations, or opinio juris sive necessitatis.3 9 For the sake of simplicity and purposes of this Comment, customary international law can be described by analogy. If compared to a domestic law counterpart, the relationship would be as follows: if treaty law were viewed analogously to statutory law, customary international law would be comparable to the common law.

One of the biggest questions that victimized plaintiffs and corporate defendants face proactively, and courts face retroactively, is what constitutes "a tort only, committed in violation of the laws of nations or a treaty of the United States[?]"40 Luckily, U.S. legislative history, and judicial precedent analyzing such, has shed adequate light on this subject.

At the time the ATS was drafted, there were three widely-accepted violations of customary international law: "[1] violations of safe conducts; 35.

Doe v. Nestle USA, Inc., 766 F.3d 1013, 1019-20 (9th Cir. 2014).

36.

See, e.g., id. at 1020 (looking to the Rome Statute of the International Criminal Court (ICC), the post-World War II International Military Tribunal at Nuremberg, Germany, the ad hoc International Criminal Tribunals for Rwanda (ICTR) and the former Yugoslavia (ICTY), and the Special Court for Sierra Leone (SCSL) as "authoritative sources of customary international law").

37.

U.N. Charter art. 38, 1 1.

38.

Customary International Law, LEGAL INFO. INST.: WEX, https://www.law.cornell.edu/wex/customaryinternational_law (last visited Feb. 6, 2017).

39.

YORAM

DINSTEIN,

THE

CONDUCT

OF

HOSTILITIES

UNDER

THE

LAW

OF

INTERNATIONAL ARMED CONFLICT 16 (3d ed. 2016). Professor Dinstein further explains the opinion juris component by citation to the ICJ's North Sea Continental Shelf Judgment of 1969, stating that it is "a belief that this practice is rendered obligatory by the existence of a rule of law requiring it." See id. (quoting North Sea Cont'l Shelf (Fed. Republic of Ger./Den.; Fed. Republic of Ger./Neth.), Judgment, 1969 1.C.J. 3, 44 (Feb. 20)) (internal quotation marks omitted).

40.

Alien Tort Claims Act (ATCA), 28 U.S.C. § 1350 (2006) (emphasis added).

2016]

CORPORATE LIABILITY IN A POsT-KIOBEL WORLD

261

[2] infringement of the rights of ambassadors; and [3] piracy.'A The First Congress chose not to explicitly list these as the sole causes of actions to be considered under the ATS; nonetheless, latter courts have looked to these historical violations as a baseline for answering the ATS's cause of action 42 question. Therefore, this must be, and has been, interpreted to mean that the First Congress intended that the ATS would change along with international legal norms.43 Subsequent Congresses have also chosen to refrain from enumerating exactly what constitutes a viable claim under customary international law.4 In sum, the relationship is just as the Supreme Court stated in Sosa-the ATS merely exists to provide jurisdiction, and customary international law is left to provide the cause of action.45 Nevertheless, the judiciary has categorically determined that the lack of a concrete list of violations does not mean that every customary international law norm can stand as a viable platform for an ATS claim.46 Again, as noted by the Supreme Court in Sosa, "courts should require any claim based on the present-day law of nations to rest on a norm of international character accepted by the civilized world and defined with a specificity comparable to the features of the 18th-century paradigms we have recognized." 47 Essentially, a modern ATS claim can invoke the rights of today's "specific, universal, and obligatory" customary international law and is not limited to the historical paradigms that came before it. 48 On the other hand, the limitation incorporated into this standard is that the customary international law norm being invoked must enjoy an analogous level of universal acceptance among civilized nations as the original threepiracy, violations of safe conducts, and infringement of the rights of ambassadors-that existed at the time the ATS was enacted in 1789.49 Because the ATS has experienced most of its development since 1980, there is still significant ambiguity regarding what the federal judiciary considers modem norms equivalent to those in 1789. Several norms have been tested in federal court and are widely considered to be accepted norms

E.g., Kiobel v. Royal Dutch Petrol. Co. (Kiobel ll), 133 S. Ct 1659, 1661 (2013); Sosa 41. v. Alvarez-Machain, 542 U.S. 692, 715 (2004).

42.

See Sosa, 542 U.S. at 719-20.

43.

See id.

44.

See id.

45.

See id. at 724.

See id at 731-34; see also Filartiga v. Pena-frala, 630 F.2d 876, 888 (2d Cir. 1980); 46.

Tel-Oren v. Libyan Arab Republic, 726 F.2d 774, 781 (D.C. Cir. 1984) (per curiam).

47.

Sosa, 542 U.S. at 725.

See id. at 748-49 (Scalia, J., dissenting).

48.

49.

Doe v. Nestle USA, Inc., 766 F.3d 1013, 1019 (9th Cir. 2014) (citing Sosa, 542 U.S. at 724).

262

SOUTH TEXAS LA wREVIEW

[Vol. 58:253

of customary international law on which an ATS claim may be based.

Those norms are as follows: torture,so crimes against humanity,' child slave labor,52 genocide, slavery,54 war crimes, 5 and supporting terrorism.56 There are also several theories that have been tried and categorically dismissed as insufficient for purposes of the ATS. The more notable of these, for the purposes of corporate liability, are defoliant manufacture and 57 5 use, and short-term illegal detention. These two lists are by no means inclusive of all norms that could or could not be used to support an ATS claim. However, both do include those that have been traditionally used against corporate entities.

A more concerning consideration for corporations, however, is the chiefly used avenue of aiding and abetting in any one of these norms. As

50.

See Al Shimari v. CACI Premier Tech., Inc., 758 F.3d 516, 520 (4th Cir. 2014) ("[Plaintiffs' claims were] against an American corporation for the torture and mistreatment of foreign nationals at the Abu Ghraib prison in Iraq.").

51.

See Mastafa v. Chevron Corp., 770 F.3d 170, 180-81 (2d Cir. 2014) ("[P]laintiffs have satisfied their burden of asserting some causes of action grounded in actions recognized as violations of customary international law." (citing Presbyterian Church of Sudan v. Talisman Energy, Inc., 582 F.3d 244, 256 (2d Cir. 2009))).

52.

See Nestle, 766 F.3d at 1029 (Rawlinson, J., concurring in part and dissenting in part) ("We all agree that the practice of engaging in child slave labor is reprehensible, indefensible, and morally abhorrent. Indeed, if that were the issue we were called upon to decide, this would be an easy case.").

53.

Mastafa, 770 F.3d at 180-81 ("Plaintiffs' complaint asserts . . . genocide . . . . We

conclude that plaintiffs have satisfied their burden of asserting some causes of action grounded in actions recognized as violations of customary international law.").

54.

See Nestle, 766 F.3d at 1022 ("[Tlhe norm against slavery is universal and thus may be asserted. . . .").

55.

Mastafa, 770 F.3d. at 180-81 ("Plaintiffs' complaint asserts ...

war crimes . . . . We

.

conclude that plaintiffs have satisfied their burden of asserting some causes of action grounded in actions recognized as violations of customary international law.").

56.

Nestle, 766 F.3d at 1019 ("Under contemporary international law, federal courts have permitted plaintiffs to pursue ATS claims based on a broad range of misconduct, including . . supporting terrorism."). In addition to the cited case law, secondary sources have offered comprehensive discussions over the particular claims that may be asserted. See, e.g., Morgen Morrissette, Fighting "Today's Pirates": Kiobel and the Future ofA TS Claims, A.B.A. (June 24, 2013), http://apps.americanbar.org/litigation/committees/civil/articles/062413-fighting-todayspirates-kiobel-future-ats-claims.html ("In the years following Sosa, courts did define some of today's pirates: slave traders, torturers acting under color of law, and those who commit genocide, murder, rape, and arbitrary detention of citizens during times of conflict.").

57.

Viet. Ass'n for Victims of Agent Orange v. Dow Chem. Co., 517 F.3d 104, 123 (2d Cir. 2008) ("We hold that Plaintiffs' claim that 'defendants manufactur[ed] and suppl[ied] a[n] herbicide laced with poison' and used as a defoliant fails to satisfy the standard set forth by the Supreme Court in Sosa for recognition of a tort in violation of international law and is, therefore, not cognizable under the ATS." (alterations in original)).

58.

Sosa v. Alvarez-Machain, 542 U.S. 692, 738 (2004) ("It is enough to hold that a single illegal detention of less than a day, followed by the transfer of custody to lawful authorities and a prompt arraignment, violates no norm of customary international law so well defined as to support the creation of a federal remedy.").

2016]

CORPORATE LIABILITY IN A POsT-KIOBEL WORLD

263

referenced by the original Kiobel district court, "where a cause of action for violation of an international norm is viable under the ATS, claims for aiding and abetting that violation are viable as well." 59 This standing basis for liability has proven to be the more likely asserted against corporate defendants, as it is a factual rarity that corporations take direct part in clear, universal violations of customary international law. 60 The federal courts' recognition of aiding and abetting is a significant consideration that corporations should consider on the proactive side of avoiding ATS-based lawsuits.

With the laying of groundwork now complete, a discussion on the more recent developments involving the ATS's corporate liability question can be reached. The behemoth of these developments is the Supreme Court's decision in Kiobel II. Kiobel II changed the analysis applicable to all subsequent ATS cases. However, bear in mind that Kiobel II did not explicitly remove any of the foundation that has already been discussed.

Instead, it could be said that in some manner Kiobel I paved over what already existed and required plaintiffs to penetrate a new layer of restrictions before finding success in corporate ATS cases.

III.

DISSECTING THE ATS's NEW GUARD: KIOBEL V. ROYAL DUTCH

PETROLEUMCO.

A. Revisiting Kiobel I & 1161

Since April 2013, Kiobel v. Royal Dutch Petroleum Co. has stood as the controlling authority over ATS cases. Arising from within the Second Circuit, the original Kiobel case reintroduced the question of whether the ATS granted federal courts jurisdiction to hear cases alleging violations of customary international law by corporate defendants.62 At the intermediate appellate level, the Court of Appeals for the Second Circuit held that such claims were barred.6 3 However, the Supreme Court took the issue up on certiorari, and ultimately offered an alternative approach binding the

Kiobel v. Royal Dutch Petrol. Co., 456 F. Supp. 2d 457, 463-64 (S.D.N.Y. 2006), affd 59. in part, rev'd in part, 621 F.3d 111 (2d Cir. 2010), affd, 133 S. Ct. 1659 (2013).

60.

See Kiobel v. Royal Dutch Petrol. Co. (Kiobell), 621 F.3d 111, 157-58 (2d Cir. 2010), affd, 133 S. Ct. 1659 (2013).

Both Kiobel I and Kiobel refer to Kiobel v. Royal Dutch Petroleum Co. (Kiobel 1), 621 61.

F.3d 111 (2d Cir. 2010), affd, 133 S. Ct. 1659 (2013), before the Supreme Court's request for supplemental briefs. Kiobel II refers to the Court's opinion addressing the supplemental issue and to the subsequent opinion they rendered based on extraterritorial application. Kiobel v. Royal Dutch Petrol. Co. (Kiobel 11), 133 S. Ct. 1659 (2013).

62.

Kiobell, 621 F.3d at 145.

63.

Id at 120.

264

SOUTH TEXAS LA wREVIEW

[Vol. 58:253

corporate liability question to the presumption against extraterritorial application.

Factually, Kiobel is akin to almost all other ATS cases. The petitioners, former residents of the Nigerian Ogoniland,64 now living in the United States,6 5 filed multiple ATS claims against Royal Dutch Petroleum Co., Shell Transport & Trading Company, p.l.c., and Shell Petroleum Development Company of Nigeria, Ltd. (SPDC), 66 for actions they believed constituted the aiding and abetting of violations of customary international law.67 According to the petitioners, SPDC procured the Nigerian government to quell environmental impact demonstrations held by Ogoni residents in dispute of SPDC's business practices.6 8 SPDC's request eventually resulted in a host of atrocities committed by soldiers of the Nigerian government-namely, the rape, murder, and abuse of many Ogoni people, along with the destruction and looting of several Ogoni villages. 69 Furthermore, the Ogoni petitioners alleged that SPDC aided the Nigerian government in these actions by providing food, facilities, transportation, and compensation to those directly responsible for conducting these attacks. 70 The only notable connection to the United States was the defendants' listings on the New York Stock Exchange and affiliations with a New York City public relations office. 7 ' This final fact of seemingly obvious irrelevance proved to be of supreme importance in Kiobel I. When first taken up on certiorari, it was thought that the Supreme Court's impending Kiobel decision would remedy the deep circuit split on

64.

The Ogoniland is a kingdom covering close to 1,000 square kilometers in Rivers State, southern Nigeria. See Disasters & Conflicts: About Ogoniland, U.N. ENV'T PROGRAMME, http://web.unep.org/disastersandconflicts/where-we-work/nigeria/what-we-do/about-ogoniland (last visited Feb. 6, 2017). The Ogoniland is situated in the Niger Delta region, which contains the third largest mangrove ecosystem in the world. Id. The Ogoniland has a population of roughly 832,000, most of whom are farmers and fishermen. Id 65.

Kiobel II, 133 S. Ct. at 1663 (noting that petitioners are now legal residents of the United States and were granted political asylum).

66.

"Royal Dutch Shell plc, incorporated on February 5, 2002, explores for crude oil and natural gas across the world, both in conventional fields and from sources, such as tight rock, shale and coal formations. The Company works to develop new crude oil and natural gas supplies from various fields. The Company's segments include Integrated Gas, Upstream, Downstream and Corporate."

Profile: Royal Dutch Shell PLC (RDSa), REUTERS, http://www.reuters.com/finance/stocks/companyProfile?symbol=RDSa (last visited Apr. 10, 2017).

67.

Kiobel I, 133 S. Ct at 1662.

68.

Id. 69.

Id. 70.

Id. at 1662-63.

71.

Id at 1677.

2016]

CORPORATE LIABILITY IN A PosT-KIOBEL WORLD

265

the corporate ATS liability issue.7 2 But after the conclusion of oral arguments in early 2012, to the surprise of many, the Supreme Court requested supplemental briefs on a second, vague issue-"[w]hether and under what circumstances the [ATS] ... allows courts to recognize a cause of action for violations of the law of nations occurring within the territory of a sovereign other than the United States." 7 3 Then, after reviewing the supplemental issue, the Supreme Court decided to punt the corporate liability question and reached a decision in Kiobel I based on the issue addressed in the requested supplemental briefs-the presumption against extraterritorial application. 74 The presumption against extraterritoriality is not mentioned in the text of the ATS itself, and furthermore, had never been applied to the ATS in judicial precedent prior to Kiobel J.75 The presumption is a judicial canon of statutory interpretation providing that "[w]hen a statute gives no clear indication of an extraterritorial application, it has none." 76 It is commonly used in determining whether a congressional act regulating conduct applies outside of the sovereign territory of the United States.77 The presumption against extraterritorial application has typically been a merits question, and not a jurisdictional question; but in Kiobel H, the Supreme Court nonetheless applied the presumption to the ATS, stating, The ATS, on the other hand, is "strictly jurisdictional." It does not directly regulate conduct or afford relief. It instead allows federal courts to recognize certain causes of action based on sufficiently definite norms of international law. But we think the principles underlying the canon of interpretation similarly constrain courts considering causes of action that may be brought under the ATS.7 8 Therefore, in applying the presumption against extraterritorial application to the plaintiffs' claims in Kiobel HI, the Court concluded that all "relevant conduct" took place outside of the United States. Most notably, 72.

See, e.g., Lyle Denniston, Kiobel: Made Simple, SCOTUSBLOG (July 6, 2012, 6:22 AM), http://www.scotusblog.com/2012/07/kiobel-made-simple/. Specifically, Denniston points out that in Sosa, the Supreme Court included a footnote that identified this most important, undecided issue about the ATS. Id. He then points out that the Supreme Court took Kiobel I up on certiorari "with the aim of settling whether corporations could be the targets of ATS claims." Id. Kiobel v. Royal Dutch Petrol. Co., 565 U.S. 1244 (2012) (requesting supplemental 73. briefs on March 5, 2012); see also Kiobel ll, 133 S. Ct. at 1662-63.

KiobelII, 133 S. Ct. at 1665-69.

74.

75.

See Paul L. Hoffman, Kiobel v. Royal Dutch Petroleum Co.: First Impressions, 52 COLUM. J. TRANSNAT'L L. 28, 29 (2013).

Kiobel 11, 133 S. Ct. at 1664 (quoting Morrison v. Nat'l Austl. Bank Ltd., 561 U.S. 247, 76.

248 (2010)).

Id (citing EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 246 (1991)).

77.

78.

Id (citation omitted).

79.

Id at 1669.

266

SOUTH TEXAS LAW REVIEW

[Vol. 58:253

the Court further indicated that even when claims do "touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application." 80 The Supreme Court resolved Kiobel HI without a single word addressing the question of corporate ATS liability. Furthermore, the growing questions regarding the presumption against extraterritoriality as it pertains to the ATS became the single most significant obstruction impeding resolution of the original and still at-large corporate liability question. To fully understand this dilemma that Kiobel I has imposed, further analyses of the majority holding and concurrences are necessary.

B.

DistillingKiobel II's PrincipalRules and Questions

Kiobel I introduced a new hurdle-the presumption against extraterritorial application-which requires rebuttal before the issue of corporate liability can be reached. But considering that Kiobel II was the first meeting between the ATS and the presumption against extraterritoriality, there is still significant ambiguity on what blueprint plaintiffs are to follow to satisfy the presumption's burden. The starting point for rebutting the presumption is contained in just two brief sentences of Kiobel H: "On these facts, all the relevant conduct took place outside the United States. And even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application." 8 ' Several principal rules can be extracted after careful dissection of the Court's language in these two sentences.

The first of these rules is that where all relevant conduct occurs wholly outside of the United States, the presumption will be the most difficult to rebut. Think of this as the initial filter sifting out claims that stand no chance of being within the ATS's jurisdictional reach. But there is a more precarious question rooted within this rule--does the relevant conduct qualifier stand as an absolute bar or a virtually insurmountable barrier? The likely answer lies within the policy of the presumption itself. The Court notes in Kiobel II that the presumption "serves to protect against unintended clashes between [U.S.] laws and those of other nations which could result in international discord." 8 2 Furthermore, the Court notes that "the danger of unwarranted judicial interference in the conduct of foreign policy is 80.

Id. This sentence from Kiobel II is the source of the "touch and concern" test referenced throughout this Comment and by most courts addressing the ATS. See id.

81.

Id (emphasis added).

82.

Id at 1664 (citing Arabian Am. Oil, 499 U.S. at 248) (internal quotation marks omitted).

2016]

CORPORATE LIABILITY INA POsT-KIOBEL WORLD

267

magnified in the context of the ATS, because the question is not what Congress has done but instead what courts may do." 83 Taking this into account, it is likely that where all relevant conduct occurs outside of the United States, the judiciary will fall back to safe ground by denying jurisdiction entirely. Therefore, even though the Supreme Court has indicated the intention for courts to decide these cases on an individual basis, it is almost inconceivable that an ATS case will remain sustainable where no relevant conduct occurred within the borders of the United States or its territories. Still, questions regarding relevant conduct remain unanswered. For example, what is considered relevant conduct? Is it the relevant conduct, or the claim tied to that conduct, that is used to rebut the presumption?

The second more equivocal rule is sourced in this sentence of the key phrase from Kiobel II: "[E]ven where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application." 8 4 Thus, the Supreme Court clearly illustrates that to have a chance at rebutting the presumption against extraterritorial application, the claim itself must touch and concern the territory of the United States with a force sufficient to displace the presumption. Two questions must be addressed to define the touch and concern standard. First, what is the threshold required to be a "sufficient force"? And second, which of the plaintiffs' alleged facts may be considered in building a claim that exists as a sufficient force?

The Court does not provide a bright line answer to these particular questions, but it does give some baseline insight in the following line from Kiobel HI: "Corporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices."8 This sentence is applicable to both of the questions posed by the touch and concern standard. In addressing the first question, this sentence understandably proposes that a sufficient force is at least greater than mere corporate presence in the United States. Regarding the second question, the Supreme Court's simple mention of corporate presence indicates that it can be considered as one of the factors in a larger compilation used to build the requisite sufficient force needed to rebut the presumption. Considering that mere corporate citizenship is hardly a significant fact, it is likely that the Court meant that all of the plaintiffs alleged facts could be used to build a sufficient force. Unfortunately, possibly because of Kiobel II's factual lack of conduct occurring within United States territory, the Supreme Court 83.

84.

85.

Id. Id Id. at 1669.

SOUTH TEXAS LA wREVIEW

268

[Vol. 58:253

declined to comment further on when exactly a sufficient force is attained or what additional factors may be considered in creating a sufficient force.

C.

Alternative Perspectivesfrom the Kiobel II Concurrences

In addition to the Kiobel II majority opinion, two of the three concurring opinions are of importance. These two concurrences provide opposite ends to a spectrum of potential future relevance on the presumption against extraterritoriality issue as it pertains to the ATS corporate liability question. 86 Additionally, these two concurrences supplement the Kiobel II majority by providing a glimpse into the mind of the Court. As is indicated above, the majority left much to be answered about the presumption against extraterritoriality." The concurrences offer alternative approaches that serve to narrow the majority's rule and clarify how Kiobel H should be interpreted and applied.

1.

Justice Alito's Concurrence:Closing the Gap

The first concurrence, authored by Justice Alito and joined by Justice Thomas, calls for a stricter application of the touch and concern test.88 In doing so, it also implicitly confirms that the Kiobel II majority's position was that any of the plaintiffs' allegations in the claim can be used to build a sufficient force to touch and concern the United States and rebut the presumption against extraterritoriality. Justice Alito's proposal, on the other hand, can be encapsulated in one key sentence of the concurrence: "[A] putative ATS cause of action will fall within the scope of the presumption against extraterritoriality-and will therefore be barred-unless the domestic conduct is sufficient to violate an international law norm that satisfies Sosa's requirements of definiteness and acceptance among civilized nations." 89 Therefore, Justice Alito declares that it is not enough that the conduct alleged in plaintiffs complaint touch and concern the United States; rather, his concurrence's proposal demands that the domestic conduct-that conduct occurring within the confines of United States borders-on its own constitutes a violation of customary international law. 90

86.

Particular attention should be placed on these concurring opinions, as subsequent circuit court opinions will appear more in line with either of these two concurrences.

87.

See supra Part II.C. 88.

See Kiobel ll, 133 S. Ct. at 1669-70 (Alito, J., concurring) ("I write separately to set out the broader standard .... ).

89.

Id. at 1670 (emphasis added).

90.

Id. at 1669-70.

2016]

CORPORATE LIABILITY INA PosT-KIOBEL WORLD

269

Justice Breyer's Concurrence:A New Approach

2.

Justice Breyer also concurs with the Kiobel l majority in judgment but not in reasoning. 91 Instead, Justice Breyer opts to offer a contrary approach, to which Justices Ginsburg, Sotomayor, and Kagan notably join him. 9 2 Justice Breyer's proposal appears to be more relaxed than both Justice Alito's and the majority's, and would likely allow for more instances in which ATS claims would remain viable.

Chiefly, Justice Breyer's approach would not implicate the presumption against extraterritoriality in ATS cases. 9 3 Instead, the proposal would grant jurisdiction to federal courts for ATS claims in three situations: (1) the alleged tort occurs on American soil, (2) the defendant is an American national, or (3) the defendant's conduct substantially and adversely affects an important American national interest, and that includes a distinct interest in preventing the United States from becoming a safe harbor (free of civil as well as criminal liability) for a torturer or other common enemy of mankind.94 The first situation is somewhat unsurprising, as a customary international law violation on U.S. soil would likely invoke criminal liability as well. The second situation is more notable and could develop into a cause for concern for corporations. Justice Breyer leaves a question as to whether he intended his second situation to extend to corporate citizenship. 95 Though considering that Kiobel II arose as the case addressing corporate ATS liability, and with the defendant in this case being Royal Dutch Shell and its subsidiaries, it is not difficult to infer which direction Breyer's second situation leans.

In one respect, Breyer's third situation encapsulates the foundational policy purpose for applying the presumption against extraterritoriality. The chief difference between this approach and the majority's approach is that Breyer's approach allots the judiciary more authority in determining what "substantially and adversely affects an important American national interest." 9 6 Under either interpretation, the judiciary would still be restricted from having the near plenary access that was enjoyed before Kiobel II.

91.

92.

Id. at 1670 (Breyer, J., concurring).

Id.

93.

Id. at 1671.

94. Id. Cf id. at 1678. Justice Breyer does, however, state that "it would be farfetched to 95. believe, based solely upon the defendants' minimal and indirect American presence, that this legal action helps to vindicate a distinct American interest, such as in not providing a safe harbor for an 'enemy of all mankind."' Id. 96. Id. at 1671.

270

SOUTH TEXAS LAW REVIEW

[Vol. 58:253

Furthermore, Justice Breyer directly attacks the majority's application of the presumption against extraterritoriality on the basis that their own logic is flawed, principally with respect to piracy taking place on the high seas. 9 7 The Kiobel II majority placed particular emphasis on the supposed fact that piracy is an action taking place on the high seas and therefore not in the territory of another sovereign.98 This then plays a crucial role in their decision to apply the presumption against extraterritoriality, as the majority's rationale here is that there cannot be congressional intent for extraterritorial application of the ATS if one of the actions on which it was based does not occur on foreign soil.99 Justice Breyer rejects this theory entirely, stating that "a ship is like land, in that it falls within the jurisdiction of the nation whose flag it flies." 00 Therefore, Justice Breyer's argument is that the deck of a ship in international waters is the sovereign soil of a nation-a fact that lends support to the congressional intent for extraterritorial application.

Takeawaysfrom the Kiobel II Concurrences

3.

Although the Alito and Breyer concurrences pose two diverging and interesting approaches, there are multiple criticisms to each. For one, does Justice Alito's approach not gut the ATS entirely? The situation demanded by this approach would essentially provide courts with jurisdiction through domestic criminal and civil liability measures. Furthermore, with regard to Justice Breyer's approach, does the U.S. citizenship prong extend to the corporation-an often transnational entity that operates with an extensively greater influence internationally than the ordinary citizen? 1 Despite all of Kiobel I s confusion and diverging ideas, two things are abundantly clear: (1) to sustain a successful ATS claim, the presumption against extraterritorial application must first be rebutted; and (2) the Kiobel II fallout has left the judiciary with more questions than answers. The white elephant of these questions remains the same as it was before Kiobel I: what is the status for the corporate liability question? As the next part of

97.

98.

Id at 1672-73.

Id. at 1667 (majority opinion).

99. Id at 1664-69.

100.

Id at 1672 (Breyer, J., concurring) (citing McCulloch v. Sociedad Nacional de Marineros de Honduras, 372 U.S. 10, 20-21 (1963)).

101.

See id at 1678 (indicating that a foreign corporation's mere U.S. presence is insufficient on its own to satisfy Breyer's approach). Though by implication, this statement must mean that corporate citizenship is a consideration.

2016]

CORPORATE LIABILITY INA POsT-KIOBEL WORLD

271

this Comment will more specifically point out, the circuits have once again developed a deep split on the issue of corporate liability.102 IV. THE DEVELOPING POST-KIOBEL H1 CIRCUIT SPLIT: A SPECTRUM ANALYSIS

A.

Where the CorporateLiability Door Remains Open

The Supreme Court's opinion in Kiobel I disregarded the pivotal issue of corporate ATS liability presented initially by Kiobel I. Still, it is obvious that the Supreme Court used the presumption against extraterritorial application for the principle purpose of bridling the growing ATS. But if the presumption was also chosen by the Court as a means of answering the corporate liability question, it has proven to be the "craven watchdog" that they so emphatically tried to avoid. In both the Fourth and Ninth Circuits, the appellate courts have specifically taken up the issue of corporate ATS liability and either refused to strike it down or kept it alive despite clear efforts to act in accordance with Kiobel I. The Ninth Circuit and Doe v. Nestle USA, Inc.

1.

Currently, the Ninth Circuit maintains that corporations are still subject to ATS claims, conditioned on the notion that claimants can satisfy the corporate liability analysis set forth by that court in Sarei v. Rio Tinto, and can rebut the presumption against extraterritoriality stemming from Kiobel I's touch and concern test.1 0 3 The principal case addressing corporate ATS liability in the Ninth Circuit is Doe v. Nestle USA, Inc.10 4 The pertinent facts of Nestle are as follows. Nestle originates in the Ivory Coast, a West African coastal nation known for both its dominance of the world's cocoa market,' and its rampant humanitarian disaster of ongoing child-slave labor.1 0 6 The Nestle plaintiffs, themselves victims of child-slave labor, alleged that "[t]hey were forced to work on Ivorian cocoa plantations for up to fourteen hours per day six days a week, given only scraps of food to eat, and whipped and beaten by overseers."l 0 7 They also

102.

See Ursula Tracy Doyle, The Evidence of Things Not Seen: Divining Balance Factors

from Kiobel's "Touch and Concern" Test, 66 HASTINGS L.J. 443, 455-63 (2015) (providing an extensive list and discussion of many of the cases addressing the developing issues of corporate liability and the presumption against extraterritorial application following Kiobel II).

103.

See Doe v. Nestle USA, Inc., 766 F.3d 1013, 1022, 28-29 (9th Cir. 2014).

See id. at 1013.

104.

105.

Id at 1017.

106.

Id 107.

Id.

272

SOUTH TEXAS LA wREVIEW

[Vol. 58:253

alleged that they were locked up at night to prevent escape, and that one of them witnessed guards cut open the feet of children that made escape attempts.108 The Nestle defendant, Nestle USA, Inc.,' 09 was the dominant player in the cocoa market acting as the principal buyer and seller of Ivorian cocoa."o While Nestle purportedly did not own any cocoa farms in the Ivory Coast, they purchased directly from Ivorian farms and contributed financial assistance to them for the purpose of farm growth and quality-control enhancement."' Furthermore, Nestle or their representatives visited the Ivorian plantations multiple times a year and were aware of the child slave labor issue in the Ivory Coast; however, they continued to do business there for the "unilateral goal of finding the cheapest sources of cocoa.'12 The Nestle plaintiffs' ATS claims were based on the underlying customary international law norm against "aiding and abetting slave labor."1' 3 The district court in California granted Nestle's motion to dismiss, indicating that corporations could not be sued under the ATS.114 The Ninth Circuit disagreed, and left open the corporate liability door by turning to its norm-by-norm analysis laid forth in their earlier en banc decision in Sarei.1 15 The Sarei corporate liability analysis is a bifurcated, norm-by-norm approach that examines (1) whether the customary international law norm asserted applies to all actors (states, individuals, and groups);"l 6 and (2) 108.

Id 109.

See generally Profile: Nestle SA (NSRGY.PK), REUTERS, http://www.reuters.com/finance/stocks/companyProfile?symbol=NSRGY.PK (last visited Feb. 6, 2017) ("Nestle S.A., incorporated on July 19, 1905, is a nutrition, health and wellness company... . The Company's product categories include powered [sic] and liquid beverages; water; milk products and ice cream; nutrition and health science; confectionery, and petcare [sic]. The Company's other business activities include the operations of Nestle Professional, Nespresso, Nestle Health Science and Nestle Skin Health. It operates in approximately 190 countries around the world. The Company has sales in various countries, including the United States, Greater China Region, Brazil, Germany, the United Kingdom, Mexico, Philippines, Italy, Canada, France, Spain and Switzerland, among others. The Company offers over 2,000 brands of products around the world.").

110.

Nestle, 766 F.3d at 1017.

111.

Id 112.

Id. It is worth noting that the Nestle court did point out that Nestle has also lobbied against Congressional attempts to curb child slave labor by requiring manufacturers to certify and label their product "slave free." Id. 113.

Id. at 1018, 1020.

114.

Id at 1018.

115.

Id at 1021-22; Sarei v. Rio Tinto, PLC, 671 F.3d 736, 747-48, 760-61 (9th Cir. 2011) (en banc), vacated on othergrounds, 133 S. Ct 1995 (2013).

116.

Nestle, 766 F.3d at 1021 ("[T]he applicability of the norms turns on the 'specific identity of the victims rather than the identity of the perpetrators."' (quoting Sarei v. Rio Tinto, PLC, 671 F.3d 736, # (9th Cir. 2011) (en banc), vacated on other grounds, 133 S. Ct 1995

2016]

CORPORA TE LIABILITY IN A POsT-KIOBEL WORLD

273

whether the identity of the victims correlates with the customary international law's standard, intended application.117 Additionally, the Sarei approach comprises of the third, overarching principle, that (3) ATS liability does not hinge on precedent from international law-meaning that U.S. courts remain free to find corporate liability in areas where the international community has not done so before.'" Applying this standard in Nestle, the court found that the prohibition on slavery may be used against corporate defendants.11 9 Notably missing in Nestle, however, is the issue of extraterritorial application, which the court purposely dodged by remanding the matter to the district court, stating, "[w]e decline to resolve the extraterritoriality issue, and instead remand to allow the plaintiffs to amend their complaint in light of Kiobel H."l20 That being said, there is a clear implicit indication that the Ninth Circuit did make an effort to comport with the Supreme Court's touch and concern decision in Kiobel II by allowing the plaintiffs to amend their complaint to incorporate activities that the plaintiffs alleged took place in the United States.121 In sum, the Ninth Circuit's approach to corporate ATS liability is as follows: (1) there is no categorical rule on corporate immunity or liability; (2) liability does not hinge on international precedent; (3) a basis for action is rooted in norms that are "universal and absolute" or applicable to "all actors"; and (4) the plaintiffs allegations must rebut the presumption against extraterritorial application set forth in Kiobel H1.122 Clearly, corporate liability via the ATS is very much alive in the Ninth Circuit.

2.

The Fourth Circuitand Al Shimari v. CACI Premier Technology, Inc.

The Fourth Circuit has also found that Kiobel II does not bar the ATS from applicability to corporate defendants. However, unlike the Ninth

(2013))). This specifically indicates that the customary international law norms are subject to all actors-including corporations-and therefore the ATS is as well. Id. 117.

See id 118.

Id. at 1021-22 ("In Sarei we also explained that a norm could form the basis for an ATS claim against a corporation even in the absence of a decision from an international tribunal enforcing that norm against a corporation.").

119.

Id. at 1022 (citing United States v. Flick (The Flick Case), Case No. 5, 6 Trials of War Criminals Before the Nuremberg Military Tribunals (T.W.C.) 1194, 1202 (Nuremberg Military Trib. IV 1947) (finding a private, non-state actor liable for slavery offenses in a case from the Post-World War II Nuremberg Trials). Also, the Ninth Circuit noted that "it would be contrary to both the categorical nature of the prohibition on slavery and the moral imperative underlying that prohibition to conclude that incorporation leads to legal absolution for acts of enslavement." Id 120.

Id. at 1027.

121.

See id. at 1028.

122.

Id. at 1022, 1027.

274

SOUTH TEXASLAW REVIEW

[Vol. 58:253

Circuit and its reliance on old circuit precedent, the Fourth Circuit's approach seems to stay well within the bounds of Kiobel I. The principal case in the Fourth Circuit is Al Shimari v. CACI Premier Technology., Inc., a factual gem for an ATS case that the court of appeals found to satisfy Kiobel IIs touch and concern test and address the corporate liability

matter. 123 Al Shimari stems from the actions of American civilian contractors, employed by CACI Premier Technology, Inc. (CACI), 12 4 who conducted interrogations of detainees at the Abu Ghraib prison near Baghdad, Iraq.1 2 5 The plaintiffs, four Iraqi nationals that were held and interrogated at Abu Ghraib, filed suit in U.S. federal court through the ATS alleging that CACI employees "instigated, directed, participated in, encouraged, and aided and abetted conduct towards detainees that clearly violated the Geneva Conventions, the Army Field Manual, and the laws of the United States." 26

Specifically, the plaintiffs cited their mistreatment as being subjected to the following grossly egregious actions: "'repeatedly beaten,' 'shot in the leg,' 'repeatedly shot in the head with a taser gun,' 'subjected to mock execution,' 'threatened with unleashed dogs,' 'stripped naked,' 'kept in a cage,' 'beaten on [the] genitals with a stick,' 'forcibly subjected to sexual 27 acts,' and 'forced to watch the rape[] [of] a female detainee."'"

The actions that took place within the United States' borders are particularly notable in Al Shimari and become instrumental in the plaintiffs' ability to satisfy the Kiobel II "touch and concern" analysis. 12 8 During the 2003 Iraq War, the United States offset a shortage of military interrogators by hiring civilian contractors to interrogate detainees at Abu Ghraib.12 9 These civilian interrogators were provided exclusively by CACI during that time.1 3 0 CACI was a Delaware corporation with its principal place of

123.

Al Shimari v. CACI Premier Tech., Inc., 758 F.3d 516, 520 (4th Cir. 2014).

124.

Profile: CACI International Inc (CA CI. N), REUTERS, http://www.reuters.com/finance/stocks/companyProfile?symbol=CACI.N (last visited Feb. 6, 2017) ("CACI International Inc (CACI) [parent company], incorporated on October 8, 1985, is a simulation technology company. The Company provides information solutions and services. The Company operates through two segments: domestic operations and international operations. The Company serves clients in the United States federal government and commercial markets, primarily throughout North America and internationally on behalf of the United States customers, as well as in the United Kingdom and the Netherlands. The Company's primary customers are agencies and departments of the United States government.").

125.

Al Shimari, 758 F.3d at 521.

126.

Id at 521-22.

127.

Id. at 521.

128.

See id. at 528-29.

129.

Id. at 521.

130.

Id.

2016]

CORPORATE LIABILITY IN A POST-KIOBEL WORLD

275

business and headquarters located in Arlington, Virginia.13 ' CACI's contract with the U.S. government was sourced through a contracting officer at the Department of the Interior in Arizona-not the Department of Defense.1 3 2 Additionally, CACI received $19 million as payment for its services through the Department of Interior accounting offices based in Colorado. 13 3 Following a lengthy journey through the federal court system, the district court dismissed the plaintiffs' ATS claims for a failure to touch and concern the United States, concluding that "[b]ased on the decision in Kiobel [Hl], . . . the court 'lack[ed] ATS jurisdiction over Plaintiffs claims because the acts giving rise to their tort claims occurred exclusively in Iraq, a foreign sovereign."" 3 4 The Fourth Circuit then reviewed the case on appeal.1 35 The Fourth Circuit's opinion addressed jurisdiction over ATS claims and whether the ATS provides a cause of action for conduct occurring outside of the United States. 136 The specific issue was not one of corporate liability; nonetheless, the defendant was a corporation, the court's discussion paid notice to the defendant's corporate character throughout, never indicated a bar on corporate ATS claims, and used CACI's corporate character as one factor in concluding that the ATS is applicable.1 37 Furthermore, the court acknowledged the corporate character of CACI when it framed the primarily question in the case: "[W]e consider whether a federal district court has subject matter jurisdiction to consider certain civil claims seeking damages against an American corporation for the torture and mistreatment of foreign nationals at the Abu Ghraib prison in Iraq."' 3 8 In drawing factual comparisons between CACI's situation in Al Shimari, and Royal Dutch Shell's in Kiobel H, the Fourth Circuit noted several factual parallels and discrepancies.' 39 In both Kiobel II and Al 131.

Id. 132.

Id at 522.

133.

Id. 134.

Id. at 524.

135.

Id. at 520.

136.

Id 137.

See id at 520-21, 527-28. The court does phrase the issue of jurisdiction over the corporation early in its opinion. Id. at 520 ("[W]e consider whether a federal district court has subject matter jurisdiction to consider certain civil claims seeking damages against an American corporation for the torture and mistreatment of foreign nationals at the Abu Ghraib prison in Iraq."). Despite this acknowledgement, the court focused primarily on extraterritoriality and passed the jurisdictional matter on remand order. Id. at 520-21 ("We direct that the district court undertake factual development of the record and analyze its subject matter jurisdiction in light of our decision in Taylor and the principles expressed in this opinion."). All said, there is a strong inference from the opinion: if corporate matters and locales are considered as factors in the touch and concern test, then the corporation is subject to federal jurisdiction via the ATS. Id. at 527-28.

138.

Id at 520.

139.

See id. at 526-28.

276

SOUTH TEXAS LA wREVIEW

[Vol. 58:253

Shimari, the customary international law violation underlying the plaintiffs' ATS claims occurred wholly outside of the United States. 14 0 However, the Al Shimari court did not interpret this fact as a pure bar on the plaintiffs' claims; instead, the court indicated that in Kiobel II, the Supreme Court broadly used the word "claims" instead of tortious conduct when referencing the touch and concern component of the presumption against extraterritoriality.1 4 1 In the Fourth Circuit's opinion, this, along with the contrast of Justice Alito's concurring opinion advocating for a stricter application than the majority on the conduct considered in a touch and concern analysis, stood as evidence that the Kiobel l majority intended the touch and concern test to be based on a more comprehensive examination including all facts. 14 2 In their own words, the Fourth Circuit considered the touch and concern language as "guidance" that must "be explained in greater detail in future Supreme Court decisions."1 4 3 Applying that guidance, the court concluded that the ATS claims' connection to the United States, combined with CACI's conduct in the United States, satisfied the touch and concern component and rebutted the presumption against extraterritoriality.1 4 4 Specifically, they based their conclusion on these facts: (1) CACI's status as a United States corporation; (2) the United States citizenship of CACI's employees, upon whose conduct the ATS claims are based; (3) the facts in the record showing that CACI's contract to perform interrogation services in Iraq was issued in the United States by the United States Department of the Interior, and that the contract required CACI's employees to obtain security clearances from the United States Department of Defense; (4) the allegations that CACI's managers in the United States gave tacit approval to the acts of torture committed by CACI employees at the Abu Ghraib prison, attempted to "cover up" the misconduct, and "implicitly, if not expressly, encouraged" it; and (5) the expressed intent of Congress, through enactment of the TVPA and 18 U.S.C. § 2340A, to provide aliens access to United States courts and to hold citizens of the United States accountable for acts of torture committed abroad. 145

140.

141.

142.

143.

144.

145.

Id at 527.

Id Id. Id at 529.

Id. at 529-30.

Id. at 530-31.

2016]

CORPORATE LIABILITY INA PosT-KIOBEL WORLD

277

The Fourth Circuit found the district court's granting of dismissal to be in error, and reinstated the plaintiffs' claims. 14 6 As is indicated by the opinions from Nestle and Al Shimari, corporate liability via the ATS is still alive in the post-Kiobel II world. That being said, the Nestle court never reached the question of extraterritorial application, and Al Shimari stands as a case of rare factual occurrence.

Therefore, Kiobel I s presumption against extraterritorial application raised the bar on which ATS claims ultimately prove fruitful.

B.

Where the CorporateLiability DoorAppears Closed

Those circuits that have shut the door on the ATS provide further insight on how Kiobel IIs impact is shaping the corporate liability question.

In each of the following cases, appellate courts rejected plaintiffs' ATS claims because the supposed relevant conduct forming the basis of their claims occurred outside of the territory of the United States. Notice each court's ignorance of the corporate defendants' citizenship and domestic contacts. It appears that these circuits are moving towards an approach that is more restrictive as to what conduct can be used to build a sufficient force to rebut the presumption against extraterritorial application.

1.

The Second Circuit: Balintulo v. Daimler AG

The Second Circuit, from which Kiobel II arose, has carefully maintained its position that "corporate liability is not recognized as a 'specific, universal, and obligatory' norm . . it is not a rule of customary international law that we may apply under the ATS."l47 Specifically regarding Kiobel Iis touch and concern analysis, the Second Circuit has adopted an interpretation more in line with Justice Alito's Kiobel II concurrence. 14 8 Furthermore, regarding the available factors in the touch and concern analysis, the Second Circuit extended its ban on corporate

See id. at 531. Though the central court's discussion of jurisdiction was the prevalent 146. takeaway in Al Shimari, notable dicta also suggests that the Fourth Circuit interpreted the Supreme Court's understanding on torture to be a "norm that is 'specific, universal, and obligatory[,]' and therefore, a customary international law norm sufficient to match the standard required for an ATS tort claim. Id at 525.

147.

Kiobel v. Royal Dutch Petrol. Co. (Kiobel 1), 621 F.3d 111, 145 (2d Cir. 2010), aff'd, 133 S. Ct. 1659 (2013).

Compare Balintulo v. Daimler AG, 727 F.3d 174, 189-91 (2d Cir. 2013) (adopting a 148. strict approach), with Kiobel v. Royal Dutch Petrol. Co. (Kiobel Il), 133 S. Ct. 1659, 1670 (2013) (Alito, J., concurring) (advocating for a strict approach).

278

SOUTH TEXAS LA wREVIEW

[Vol. 58:253

liability by expressly prohibiting corporate citizenship as a consideration and relevant factor. 14 9 First, it is worth noting that Balintulo involved multiple cases dating back as far as 2002, and the case lineage addressed many diverse and substantial issues along its tumultuous path through the court system.150 As to the facts of the ATS case, the Balintulo plaintiffs alleged that the South African subsidiaries of Daimler AG' 5 '-and two American corporations, Ford Motor Company,152 and IBM Corporation 53-aided and abetted violations of customary international law committed by the former apartheid government of the Republic of South Africa.1 5 4 Specifically, the plaintiffs cited the sale of vehicles and computer technology to the South African government, which they claimed facilitated the apartheid regime's countless "race-based depredations and injustices, including rape, torture, and extrajudicial killings." 5 5 The Second Circuit's interpretation and application of Kiobel I represents a stark contrast from the Fourth and Ninth Circuits in Al Shimari 149.

Balintulo, 727 F.3d at 185; see Mastafa v. Chevron Corp., 770 F.3d. 170, 188-89 (2d Cir. 2014) ("We disagree with the contention [referencing the Fourth Circuit's decision in Al Shimari] that a defendant's U.S. citizenship has any relevance to the jurisdictional analysis. The Supreme Court made clear in Kiobel [Il] that the full 'focus' of the ATS was on conduct.").

150.

See Balintulo, 727 F.3d at 182-85.

151.

Profile: Daimler AG (DAIGn.DE), REUTERS, http://www.reuters.com/finance/stocks/companyProfile?symbol=DAIGn.DE (last visited Feb. 6, 2017) ("Daimler AG (Daimler), incorporated on July 31, 1998, is an automotive engineering company. The Company is engaged in the development, production and distribution of cars, trucks and vans in Germany, and the management of the Daimler Group. Daimler's segments include Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans, Daimler Buses and Daimler Financial Services.").

152.

Profile: Ford Motor Co (F.N), REUTERS, http://www.reuters.com/finance/stocks/companyProfile?symbol=F.N (last visited Feb. 6, 2017) ("Ford Motor Company (Ford), incorporated on July 9, 1919, is a global automotive and mobility company. The Company's principal business includes designing, manufacturing, marketing, financing and servicing a line of Ford cars, trucks, sports utility vehicles (SUVs), and electrified vehicles, as well as Lincoln luxury vehicles. The Company operates in two sectors: Automotive and Financial Services. The Automotive sector includes North America, South America, Europe, Middle East & Africa, and Asia Pacific segments. Its Financial Services sector includes Ford Credit and Other Financial Services segments. Its vehicle brands include Ford, Ford-Lincoln and Lincoln. The Other Financial Services segment includes holding companies, real estate, and the financing of some Volvo vehicles in Europe. The Company has over 70 plants across the world.

Through its wholly owned subsidiary Ford Motor Credit Company LLC (Ford Credit), it provides automotive financing products to and through automotive dealers throughout the world.").

153.

Profile: International Business Machines Corp (IBM), REUTERS, http://www.reuters.com/finance/stocks/companyProfile?symbol=IBM (last visited Feb. 6, 2017) ("International Business Machines Corporation (IBM), incorporated on June 16, 1911, is a technology company. The Company operates through five segments: Global Technology Services (GTS), Global Business Services (GBS), Software, Systems Hardware and Global Financing.").

154.

Balintulo, 727 F.3d at 179-80.

155.

Id. at 180.

2016]

CORPORATE LIABILITY IN A POsT-KIOBEL WORLD

279

and Nestle. The Balintulo plaintiffs interpreted Kiobel II not to preclude ATS suits based on foreign conduct where the defendant is an American national, or where the defendant's conduct implicated significant American interest.1 56 However, the Second Circuit read the plaintiffs' argument as a disjunctive test: allowing ATS claims to satisfy extraterritoriality concerns (1) when the conduct touches and concerns the United States with sufficient force, or, in the alternative, (2) when the defendant is an American national or corporation with American citizenship.' 5 7 The court specifies that this approach is inconsistent with Kiobel II (and in fact similar to Justice Breyer's concurring opinion), and furthermore declared that the "Supreme Court expressly held that claims under the ATS cannot be brought for violations of the law of nations occurring within the territory of a sovereign other than the United States." 15 8 In summary, the Second Circuit's position on corporate ATS liability can be encapsulated in one short sentence: "[I]f all the relevant conduct occurred abroad, that is simply the end of the matter under Kiobel [Il]."l59 2.

The Eleventh Circuit: Cardona v. Chiquita Brands Int'l, Inc.

Lastly, the Eleventh Circuit has adopted an approach similar to that of the Second Circuit's Balintulo opinion in Cardona v. Chiquita Brands International, Inc.1 60 Cardona and Balintulo stand at one far end of the spectrum-near complete disallowance of ATS claims where the defendant is a corporation. However, interestingly, the Cardonacourt chose to dispose of the case solely through the avenue provided by Kiobel II-the presumption against extraterritorial application. 6 1 Factually, the Cardona plaintiffs were four-thousand-plus Colombian citizens that filed ATS claims against Chiquita Brands International, Inc. and Chiquita Fresh North LLC (collectively Chiquita),1 6 2 alleging that

Id. at 189.

156.

157.

Id Id. (quoting Kiobel v. Royal Dutch Petrol. Co. (Kiobel 11), 133 S. Ct. 1659, 1662, 158.

1668-69 (2013)); see id. at 189 n.23 ("Nothing about this historical context suggests that Congress also intended federal common law under the ATS to provide a cause of action for conduct occurring in the territory of another sovereign." (quoting Kiobel ll, 133 S. Ct. at 1668-69) (internal quotation marks omitted)).

Balintulo, 727 F.3d at 190.

159.

160.

See Cardona v. Chiquita Brands Int'l, Inc., 760 F.3d 1185, 1188-92 (11th Cir. 2014).

Seeid.at1189-91.

161.

162.

Id at 1187; Company Profile: Chiquita Brands International Inc, BLOOMBERG, (last http://www.bloomberg.com/profiles/companies/CQB:US-chiquita-brands-international-inc visited Feb. 6, 2017) ("Chiquita Brands International, Inc. markets, produces, and distributes fresh bananas and other fresh produce. The Company also distributes and markets fresh-cut fruit and other branded fruit products.").

280

SOUTH TEXAS LA wREVIEW

[Vol. 58:253

Chiquita participated in the torture, personal injury, kidnapping, and murder of Colombian and American citizens by supplying and funding the Fuerzas Armadas Revolucionarias de Colombia (FARC).1 6 3 Specifically, from at least 1989 to 1997, Chiquita knowingly and intentionally made secret payments to FARC, ranging from $20,000 to $100,000 in cash per month. 164 Additionally, Chiquita supplied FARC guerillas with weapons and ammunition and made efforts to conceal their support of FARC.165 These actions eventually caught the attention of the U.S. Department of Justice; and in March 2007, pursuant to a guilty plea for violating U.S. antiterrorism laws, Chiquita agreed to pay the U.S. government $25 million in fines for their support of FARC.1 66 The Eleventh Circuit, like the Second, applied a strict reading of Kiobel I and dismissed the plaintiffs' ATS claims because the allegations against Chiquita took place outside of the United States.1 6 7 Specifically, the court stated, "[t]here is no allegation that any torture occurred on U.S. territory, or that any other act constituting a tort in terms of the ATS touched or concerned the territory of the United States with any force."l 68 When the court addressed corporate citizenship in the presumption against extraterritorial application context, the court noted that simply being a U.S. corporation is insufficient to keep extraterritorial torts alive.169 For support, the Eleventh Circuit cited the Supreme Court's statement on corporate citizenship from Kiobel II: "Corporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices." 170 Cardona also included a dissenting opinion of note, which offers an interpretation of Kiobel H1 similar to that of the Al Shimari court.17 1 Circuit Judge Beverly Martin proclaimed the following:

163.

See Cardona, 760 F.3d at 1187; Julin v. Chiquita Brands Int'l, Inc. (In re Chiquita Brands Int'l, Inc. Alien Tort Statute & S'holder Derivative Litig.), 690 F. Supp. 2d 1296, 1303 (S.D. Fla. 2010). See generally Who Are the Farc?, BBC NEWS (Nov. 24, 2016), http://www.bbc.com/news/world-latin-america-36605769 ("The [FARC] are Colombia's largest rebel group. They were founded in 1964 as the armed wing of the Communist Party and follow a Marxist-Leninist ideology.").

164.

In re Chiquita Brands Int'l, 690 F. Supp. 2d at 1302.

165.

Id at 1302-03.

166.

See id. at 1303 (pleading guilty for assisting the Autodefensas Unidas de Colombia (AUC) and afterward admitting to their support of FARC as well).

167.

Cardona,760 F.3d at 1189-92.

168.

Id. at 1191.

169.

Id at 1188-89.

170.

Id. at 1189 (citing Kiobel v. Royal Dutch Petrol. Co. (KiobellII), 133 S. Ct. 1659, 1669 (2013)). Compare Kiobel II, 133 S. Ct. at 1669 (involving a corporation that was not a U.S. corporation), with Cardona, 760 F.3d at 189 (involving Chiquita, a U.S. corporation).

171.

See Cardona, 760 F.3d at 1192-95 (Martin, J., dissenting).

2016]

CORPORATE LIABILITY IN A POST-KIOBEL WORLD

281

The Kiobel [II] opinion offers little assistance about what kinds of domestic connections would be necessary to overcome the presumption against extraterritoriality. But I see this case as one which does just that, for at least two reasons. First, the primary defendant in this case is Chiquita Brands International (Chiquita), a corporation headquartered and incorporated within the territory of the United States. Second, these plaintiffs are not seeking to hold Chiquita liable for conduct that took place on foreign soil. Rather, they allege that Chiquita participated in a campaign of torture and murder in Colombia by reviewing, approving, and concealing a scheme of payments and weapons shipments to Colombian terrorist organizations, all from their corporate offices in the territory of the United States. For these reasons, I believe that we have jurisdiction to consider the plaintiffs' claims.1 72 An interesting twist to Cardona is that the plaintiffs did not seek to hold Chiquita liable via the ATS for their actions in Colombia.173 Instead, they alleged that the conduct that occurred in the United States-the corporate officers' review, approval, and concealment of payments and weapons trading with FARC-was enough when combined with the fact that it was known that FARC would then commit various war crimes and extrajudicial killings with these resources.174 It remains uncertain whether the Cardonacourt would have offered a different stance had the plaintiffs rooted their ATS claim in the underlying norm of aiding and abetting. Still, the closed-door approach taken in Balintulo, and especially in Cardona, exists as a near opposite to the approaches taken in Al Shimari and Nestle. The circuit split over corporate liability through the ATS is troubling on its own. However, what is even more concerning is that corporations across the United States are forced to deal with this extreme variance in U.S. law. As is further discussed below, the ramifications of this are quite substantial for a corporation. 75 The Four CircuitSpectrum and Kiobel II

C.

Considering the relatively short time that has elapsed since the Supreme Court's issuance of Kiobel II, it would be both superfluous and illadvised to take a firm position on which circuit has developed the correct interpretation. Various factors are at play in this situation, such as the number of applicable cases before each of the courts, the type of facts alleged in the cases, and the potential for out-of-court settlements, to name a 172.

173.

174.

175.

Id. at 1192.

Id. at 1194.

Id. (emphasis added).

See infra Part V.A.

282

SOUTH TEXAS LA wREVIEW

[Vol. 58:253

few. That being said, considering the cases discussed in this Comment, there is enough information regarding the stances of these circuits to take a position as to which of them are currently more closely aligned to Kiobel II on the key points. Furthermore, for the purposes of this Comment and the assistance it attempts to provide for corporate defendants, it is of supreme importance to facilitate discussion that could further inform corporations of their risk of liability in certain geographic areas.

The Ninth Circuit's holding in Nestle presents the more far-fetched application of Kiobel .176 The Sarei corporate liability analysis is less restrictive than that of Kiobel IIs because it fails to effectively restrict courts from assessing liability for claims based on norms that are not necessarily universally accepted. 177 Specifically, the Sarei approach allows a court to find a corporation liable under an ATS claim despite a lack of international precedent for doing so, provided that the norm is 'universal and absolute,' or. . . 'applicable to all actors."'178 Though not necessarily an alarming rule, it is not a Kiobel II compliant approach. Though Kiobel II raises no requirement that an international precedent exists to bring a claim, it is afortiorithat a norm equivalent to the likes of piracy would be litigated in at least one international jurisdiction. Corporations finding themselves on the defensive end of an ATS claim in the Ninth Circuit should understandably fear the circuit's ability to apply ATS liability with greaterthan-KiobelII freedom.

Additionally, there is slight cause for concern that the Nestle court's decision passed on addressing the presumption against extraterritorial application and remanding that issue to the district court. With the insight of the standards demanded in other circuits, it is highly unlikely that the Nestle plaintiffs could have overcome the presumption against extraterritoriality.

Still, the decision to decline discussion of the presumption is troubling.

Though merely speculative, it is possible that the Ninth Circuit was looking to prolong its decision on the presumption against extraterritorial application component to the ATS. In light of current upheaval developing just a few years after Kiobel II, it is not unrealistic to hypothesize that the Ninth Circuit may envision that the issue of corporate ATS liability could find its way back to the Supreme Court. In any event, as is stressed below, the Ninth Circuit's lack of definitiveness translates into additional litigation costs for corporations and therefore incentivizes settlement options. 179

176.

177.

178.

179.

See generally Doe v. Nestle USA, Inc., 766 F.3d 1013 (9th Cir. 2014).

See id. at 1022.

Id. (emphasis added).

See infra Part V.A.

2016]

CORPORATE LIABILITY INA POsT-KIOBEL WORLD

283

Like the Nestle court, the Balintulo court also missed the mark, but for

a different reason-by limiting the relevant conduct for satisfying the touch and concern test.180 It is admittedly both too difficult to tell, and unfair to assume, the exact position that the Second Circuit now takes, as the facts of Balintulo are the weakest of those discussed in this Comment. That being said, in Kiobel II, the Supreme Court issued no blanket prohibition on the plaintiffs' allegations being based on customary international law violations that occurred outside of the United States. In Balintulo, the Second Circuit did just that, stating, "the ATS cannot be brought for violations of the law of nations occurring within the territory of a sovereign other than the United States."

Furthermore, the position of the Second Circuit is difficult to identify because of a change of course found in a more recent opinion. In Licci ex rel. Licci v. Lebanese CanadianBank, SAL, plaintiffs who brought an ATS claim successfully overcame the presumption against extraterritorial application.1 82 Factually, the case was quite rich and clearly gave the Second Circuit something to work with in hashing out an effective rule. The plaintiffs alleged that the defendant, Lebanese Canadian Bank,' 8 3 facilitated 180.

See Balintulo v. Daimler AG, 727 F.3d 174, 189 (2d Cir. 2013).

181.

Id. at 189 (citing Kiobel v. Royal Dutch Petrol. Co. (Kiobel fl), 133 S. Ct. 1659, 166869 (2013)); see id. at 189 n.23 ("Nothing about this historical context suggests that Congress also intended federal common law under the ATS to provide a cause of action for conduct occurring in the territory of another sovereign." (quoting Kiobel ll, 133 S. Ct. at 1668-69) (internal quotation marks omitted)).

182.

See Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 834 F.3d 201, 219 (2d Cir. 2016), petitionfor cert. filed, 85 U.S.L.W. 3302 (U.S. Dec. 19, 2016) (No. 16-778) ("We conclude that Plaintiffs' complaint alleges conduct by LCB that touched and concerned the United States, and that the same conduct, upon preliminary examination, states a claim for aiding and abetting Hezbollah's violation of the law of nations, with sufficient force to displace the presumption against extraterritoriality. Accordingly, Plaintiffs have surpassed the jurisdictional hurdle set forth in Kiobel II.").

183.

Lebanese Canadian Bank S.A.L. is now defunct. See Banks: Company Overview of Lebanese Canadian Bank S.A.L., BLOOMBERG, (last http://www.bloomberg.com/research/stocks/private/snapshot.aspprivcapld=27132566 visited Feb. 6, 2017). However, Lebanese Canadian Bank S.A.L. provide[d] banking products and services in Lebanon and Canada... . Lebanese Canadian Bank S.A.L. was formerly known as The Royal Bank of Canada (Middle East) S.A.L. and changed its name to

Lebanese Canadian Bank S.A.L. in September 1988. The company was founded in 1960 and is headquartered in Beirut, Lebanon. It ha[d] branches in Saint Charles, Dora, Hamra, Jal El Dib, Hazmieh, Moussaitbeh, Verdun, Achrafieh, Elyssar, Sin El Fil, Chyah, Jbeil, Jounieh, Hamra, Raouch6, Furn El Chebbak, Airport Road, Tarik el Jdideh, Bourj Hammoud, Dbayeh, Badaro, Zouk Mosbeh, Kfarchima, Mansourieh, Sidon, Nabatieh, Tyre, Tripoli, Kfarsaroun, Batroun, Halba, Chtaura, Zahleh, Hermel, and Labw6, Lebanon, as well as a representative office in Montreal, Canada.

Id.

284

SOUTH TEXAS LAW REVIEW

[Vol. 58:253

Hezbollah rocket attacks on Israeli territory by allowing for wire transfers through a New York bank on Hezbollah's behalf.18 4 The plaintiffs presented that the bank knew that these money transfers would benefit Hezbollah-a U.S. government identified terrorist organization-and intentionally continued with the provision of banking services. 85 The Second Circuit used the opportunity to clarify its approach regarding the presumption against exterritorial application question, and applied a clear and seemingly refreshed two-step analysis: (1) plaintiffs must present conduct in their pleadings that touches and concerns the United States with a sufficient force to displace the presumption against extraterritorial application; and (2) plaintiffs must show that the pleaded conduct states a claim for a customary international law violation, or aiding and abetting of such a violation.' 8 6 This approach seems to be broader than that eluded to in Balintulo, yet similar to that of Al Shimari and Circuit Judge Martin's dissent in Cardona, as the court allowed for consideration of domestic conduct that supported the customary international law violation.18 However, the Second Circuit retained a closed door on corporate ATS liability, holding that corporations are not proper defendants in ATS cases because of the Second Circuit's earlier decision in Kiobel: Nevertheless, Kiobel I forecloses Plaintiffs' claims against [Lebanese Canadian Bank] LCB. In Kiobel I, we established that the law of nations, while imposing civil liability on individuals for torts that qualify under the ATS, immunizes corporations from liability.

Specifically, Kiobel I held that "insofar as plaintiffs bring claims under the ATS against corporations, plaintiffs fail to allege violations of the law of nations, and plaintiffs' claims fall outside the limited jurisdiction provided by the ATS." Neither party disputes that LCB is a corporation. Accordingly, we cannot exercise subject matter jurisdiction over Plaintiffs' ATS claims pursuant to that statute.' 88 The approach taken by the Cardonacourt from the Eleventh Circuit is also flawed, for it applied a strict reading of Kiobel I to a set of allegations 184.

Licci, 834 F.3d at 206.

185.

Id. at 206-07.

See id at 215; see also Sarah A. Altschuller, Alien Tort Case Development: Plaintifft 186.

Overcome Presumption Against Extraterritoriality,but Still No CorporateLiability in the Second Circuit, FOLEY HOAG LLP (Sept. 7, 2016), http://www.csrandthelaw.con/2016/09/07/alien-tortcase-development-plaintiffs-overcome-presumption-against-extraterritoriality-but-still-nocorporate-liability-in-the-second-circuit/.

187.

See Licci, 834 F.3d at 217 ("Plaintiffs here have alleged that LCB engaged in 'numerous New York-based payments and "financing arrangements" conducted exclusively through a New York bank account.' As in Mastafa, we find these allegations to be both specific and domestic." (citation omitted)).

Id. at 219 (citing Kiobel v. Royal Dutch Petrol. Co. (Kiobel 1), 621 F.3d 11l, 120 (2d 188.

Cir. 2010), aff'd, 133 S. Ct. 1659 (2013)).

2016]

CORPORATE LIABILITY INA POsT-KIOBEL WORLD

285

nowhere similar in nature. The Cardonaplaintiffs were not alleging that the mere corporate citizenship of Chiquita was enough to grant ATS jurisdiction.1 89 Instead, plaintiffs' alleged that the conduct that occurred in the borders of the United States at the offices of a U.S. corporation was enough to create a sufficient force, especially when combined with the effects their conduct furthered on foreign soil. 190 The Eleventh Circuit held too close to the letter of Kiobel II, without considering the context of the vast difference in facts and allegations between the Kiobel I plaintiffs and the plaintiffs in its own courtroom.' 91 That being said, Circuit Judge Martin's dissenting opinion presents a discussion more compliant with Kiobel II's rationale, and draws many similarities to the interpretation applied by the Fourth Circuit in Al Shimari.192 The Al Shimari court provided both the most comprehensive and accurate application of the Kiobel H1 standard, perhaps because of the unique opportunity it had in hearing the plaintiffs' allegations against CACI. The chief differentiation between Al Shimari and the approach of the other circuits is that the Al Shimari court considered the entirety of the claim when examining whether sufficient force existed. 193 This is the correct interpretation, as outside of the purposeful usage of the word "claim," the Supreme Court chose not to offer any limitations on what could be considered in building a sufficient force.' 9 4 Furthermore, by implication of his argument, Justice Alito's concurrence is an indication that the Kiobel II majority allowed for consideration of a broader range of conduct than merely the international conduct.1 95 V.

A.

INFLUENCES ON THE CORPORATION AND PROSPECTS FOR THE ATS

How the Rounded Kiobel II Rule Will Impact the CorporateEntity

The current status of the Kiobel II fallout has the potential to significantly impact corporations in a variety of ways. Depending on the reach of a company's business, or the topical or geographic area in which that business is conducted, a heightened level of risk mitigation should be observed. Ultimately, it is the responsibly of in-house corporate attorneys to

189.

190.

191.

192.

193.

194.

195.

See Cardona v. Chiquita Brands Int'l, Inc., 760 F.3d 1185, 1189 (11th Cir. 2014).

Id. at 1192 (Martin, J., dissenting).

See id at 1188 (majority opinion).

See id. at 1194 (Martin, J., dissenting).

See Al Shimari v. CACI Premier Tech., Inc., 758 F.3d 516, 527 (4th Cir. 2014).

See Kiobel v. Royal Dutch Petrol. Co. (Kiobell II), 133 S. Ct 1659, 1669 (2013).

Cf id. at 1669-70 (Alito, J., concurring).

286

SOUTH TEXAS LAW REVIEW

[Vol. 58:253

identify risks and provide further insight and mitigation measures to corporate decision makers.

First and foremost, the discrepancies in the interpretations of corporate ATS liability make litigation preparation difficult for corporations. The current situation promotes unhealthy forum shopping, and when paired with the number of federal courts that have jurisdiction over the average corporation, varying results can be expected in every ATS claim. This has the potential to make every ATS case a novel one, and carry-over defense tactics will be less useful for corporate defendants. Additionally, varying ATS interpretations also promote settlement options over lengthy and expensive court battles.' 9 6 The effects of bad press are yet another consideration, as the community in which a corporation operates may often be the lifeblood of those operations.' 9 7 Furthermore, it is not so unrealistic to imagine that, for niche companies like CACI, the ambiguous status of ATS liability could lend to strategic placement of business.

The current status of corporate ATS liability also forces corporations to heavily consider the geographic locations and geopolitical situations in which they conduct their business. While it seems likely that ethical business practices will shield a corporation from ultimate liability, mere interaction in the wrong location, or with the wrong government, may end in successful but costly court battles. Consider the situations of Royal Dutch Shell in Kiobel, and Daimler AG, Ford, and IBM in Cardona. These corporations in large measure did nothing more than engage in business with the government of the country in which their business was currently operating. Yet in both cases, the ultimate cost of the business was substantially increased by litigation and public relations pitfalls.' 9 8 This is not to suggest that all settlements are based on the ATS claim. Nonetheless, the 196. scenario on which the claim is founded often results in a settlement. Press Release, Manhattan U.S. Attorney Announces $102 Million Settlement of Civil Forfeiture and Money Laundering Claims Against Lebanese Canadian Bank, U.S. DEP'T JUST. (June 23, 2013), https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-102-million-settlementcivil-forfeiture-and-money; Elena Keates, After Decades of Death and Destruction, Shell Pays Just $83 Million for Recent Oil Spills, GREENPEACE (Jan. 11, 2015), http://www.greenpeace.org/usa/shell-oil-settlement-ogoniland/; Shell Agrees $84m Deal Over Niger Delta Oil Spill, BBC NEWS (Jan. 7, 2015), http://www.bbc.com/news/world-30699787; Shell Settles Nigeria Deaths Case, BBC NEWS, http://news.bbc.co.uk/2/hi/africa/8090493.stm (last updated June 9, 2009, 9:43 PM).

Cf Hurley, supra note 9 (providing an example of negative press associated with ATS 197. cases).

198.

Julian Ku, The Case That Won't Die: U.S. Court Revives South Africa ApartheidAlien Tort Statute Lawsuit, OPINIO JURIS (Apr. 18, 2014, 12:01 AM), http://opiniojuris.org/2014/04/18/case-wont-die-u-s-court-revives-south-africa-apartheid-atslawsuit/ ("So maybe the use of the Alien Tort Statute against corporations for overseas activities isn't fully dead. Yesterday, the U.S. District Court for the Southern District of New York has revived In re South Africa ApartheidLitigation, a twelve-year-old litigation that just won't die.").

2016]

CORPORATE LIABILITY IN A PosT-KIOBEL WORLD

287

The bottom line is that in-house corporate legal teams should be making their companies' decision makers aware of why and where these claims arise, and the ramifications of getting involved in an ATS lawsuit.

This means staying well versed in the developments of the ATS moving forward, especially in the jurisdictions in which their employer conducts business. Until the Supreme Court issues more clarification on the specific question of corporate ATS liability, corporations should prepare themselves for the most ATS-conducive jurisdictions.

B.

Kiobel II's Long Term Viability and a Glimpse at the Future

The viability of Kiobel I's ability to handle the ATS's corporate liability question in the long term is in serious jeopardy. As has been indicated by this Comment, until the Supreme Court issues greater detail on the method of handling ATS cases, varying interpretations and methods will continue to develop. And while each of the circuits shape their own technique of handling corporate ATS cases, it is more likely that neither of their approaches will be the one ultimately adopted when this issue reenters the Supreme Court.

In the immediate term, it is likely that the circuits will continue to develop and hone their own approaches. With regard to the touch and concern component of the rebuttal to the presumption against extraterritorial application, the prevailing view seems to be moving towards a wholesome consideration of all of the plaintiffs' allegations. This is now being applied in the Fourth, the Second, and to a degree the Ninth Circuit,' 99 and it is the more Kiobel H1-compliant approach. Furthermore, it is the more prudent of those proffered thus far.

The subsequent and more divisive question regarding whether the ATS even applies to the corporation will continue to be a multiplicitous quagmire. What is certain is that courts will continue to develop multiple approaches here as well. The first group will continue to reserve that corporations should be held to the standard that any other defendant would be held to under ATS jurisdiction. 200 Other courts, like those in the Second Circuit, will hold that corporations are not the proper defendants and dismiss corporate ATS cases because they view corporate defendants as a norm (and not merely as a defendant) not enjoying the universal recognition

199.

See generally Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 834 F.3d 201, 21319 (2d Cir. 2016), petitionfor cert. filed, 85 U.S.L.W. 3302 (U.S. Dec. 19, 2016) (No. 16-778); Doe v. Nestle USA, Inc., 766 F.3d 1013, 1027 (9th Cir. 2014); Al Shimari v. CACI Premier Tech., Inc., 758 F.3d 516, 527 (4th Cir. 2014).

200.

See generally Nestle, 766 F.3d at 1021.

288

SOUTH TEXAS LA wREVIEW

[Vol. 58:253

of the original violations from 1789.201 Lastly, some courts may continue to use a tight interpretation of Kiobel H1's presumption against extraterritoriality, and reject ATS cases on the basis that the sufficient force standard is nearly unattainable.20 2 It is, hopefully, unlikely that the Supreme Court continues to allow for this divergence amongst the circuits. When the right case does come to the Court's attention, perhaps they will issue a new and more effective stance.203 Looking back to the composition of the Kiobel H majority, it is possible that the Court will step back from their use of the presumption against extraterritorial application entirely. In Kiobel H's plurality opinion,204 Justice Breyer's concurrence carried the weight of four Justices.2 05 The composition of the Court has since changed with the death of famed Justice Antonin Scalia, and it is still unclear how closely new Supreme Court Justice Neil Gorsuch will align with Scalia's texturalist and originalist views. Considering this, a variation of Justice Breyer's concurrence is probably the best guess at where the future of the ATS lies.

VI. CONCLUSION

The turmoil surrounding the ATS is highly complex, deeply troubling, and difficult to prepare for. The burning corporate liability question,

201.

See supra note 41 and accompanying text detailing the three widely-accepted violations of customary international law: 1) violations of safe conducts; 2) infringement of the rights of ambassadors; and 3) piracy. See generally Kiobel v. Royal Dutch Petrol. Co. (Kiobel 1), 621 F.3d 111, 120 (2d Cir. 2010), af'd, 133 S. Ct. 1659 (2013).

See generally Cardona v. Chiquita Brands Int'l, Inc., 760 F.3d 1185, 1189-91 (11th Cir. 202.

2014).

203.

Since the writing of this Comment and the date of its publication, the Supreme Court granted a petition for a writ for certiorari in Jesner v. Arab Bank, PLC, No. 16-499, 2017 WL 1199472, at *1 (U.S. Apr. 3, 2017). In that case, the Second Circuit declined to conclude that Kiobel II overruled their holding in Kiobel I (in which corporate defendants are per se insufficient for purposes of supporting an ATS claim)-despite a lengthy discussion on how Kiobel II had "cast a shadow on Kiobel I in several ways." See In re Arab Bank, PLC Alien Tort Statute Litigation, 808 F.3d 144, 153-58 (2d Cir. 2015), cert. granted, Jesner v. Arab Bank, PLC, No. 16499, 2017 WL 1199472, at *1 (U.S. Apr. 3, 2017).

The styling of the petitioner's question indicates that the outcome of this case should finally answer the corporate liability question: "This case presents the question this Court granted certiorari to resolve, but ultimately left undecided, in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (2013): Whether the Alien Tort Statute, 28 U.S.C. § 1350, categorically forecloses corporate liability." Petition for a Writ of Certiorari at i, Jesner, No. 16-499, 2017 WL 1199472.

Kiobel II was unanimous in judgment but not in reasoning. Justice Kennedy wrote his 204. own concurrence, Justice Breyer wrote another joined by three justices, and Justice Alito wrote a third joined by Justice Thomas. See Kiobel v. Royal Dutch Petrol. Co. (Kiobel II), 133 S. Ct. 1659, 1669-78 (2013) (Kennedy, J., Breyer, J., Alito, J., concurring).

Id. at 1670 (Breyer, J., concurring).

205.

2016]

CORPORATE LIABILITY IN A POsT-KIOBEL WORLD

289

specifically, has merited the most confusion. Kiobel II was supposed to douse this flame, but it has proven to be more of a propellant.

The circuits are tumultuously attempting to make sense of the ATS rule for corporate liability. Addressing the questions raised at the beginning of this Comment proves fruitless under current ATS precedent. Does the ATS extend to corporations? It depends on which circuit the plaintiffs file suit in. Is Kiobel II's presumption against extraterritorial application of U.S. law a pure restriction on foreign conduct supporting an ATS claim?

Possibly in some jurisdictions, but maybe not in others. Some circuits have opted for a strict bar approach to corporate liability; others have kept that door open while embracing Kiobel IH's presumption against extraterritorial application. Neither approach seems viable in the long term. It is becoming abundantly clear that for many reasons-be it the multiplicitous interpretations or the lack of a prudent one-a new, synthesized rule is needed.

Eventually the Supreme Court will rehear the corporate liability question and issue clarification. When that day comes, it seems possible that the Court will do away with the presumption against extraterritorial application entirely within the context of the ATS, and instead perhaps address the issue head on. However, until that day comes, corporations must remain vigilant in proactively addressing, and possibly even avoiding, the situations that give rise to ATS cases.

Andrew Culliver