Monday, March 16, 2020
Panel Affirms Dismissal of Action Against Oil Company Based Upon Kickbacks Which Plaintiffs Claim Funded Attacks in Israel Causing Them Injuries
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals has affirmed the dismissal of a complaint brought by 18 U.S. citizens and 289 foreign nationals alleging that Chevron caused them injuries by paying $20 million in kickbacks, from 2000 through 2002, in order to buy oil from Iraq, with the money going into a slush fund of former Iraqi President Saddam Hussein from which terrorist attacks were funded.
The plaintiffs allege that “[d]ue, in part, to Chevron’s substantial assistance, Saddam Hussein had the means to finance and direct over twenty separate acts of violent terrorist attacks inflicting death, disfigurement, and lasting psychological trauma and pain upon plaintiffs…then living in Israel.”
Chevron admitted in a 2007 action brought against it by the Securities and Exchange Commission that it paid $20 million in illegal “surcharges.” To settle the SEC’s action, it paid $25 million in disgorged profits, as well as a $2 million civil penalty.
The illegality stemmed from the payments circumventing a United Nations effort which the U.S. supported. The U.N. had imposed a nearly total blockade on trade with Iraq in 1990 based on international crimes committed by that nation, under Hussein, but in light of the devasting financial effect this action had on the populace, an Oil-for-Food Program was set-up in 1996 authorizing limited sales of oil by Iraq, with proceeds to go into an escrow account that the U.N. would monitor.
Use of Fund
Only purchases benefitting the populace could be made from that fund, the U.N. mandated. Payments made by Chevron did not go into that fund, however, instead allegedly winding up in the coffers of Hussein—who forbade sales of Iraqi oil to those who did not fork over moneys in addition to the ostensible sale price.
(Hussein was executed by Iraq in 2006 after his regime was overthrown in 2003, with U.S. backing).
The fact that Chevron acted unlawfully, District Court Judge James Donato of the Northern District of California held on Aug. 14, 2018, in an order affirmed by the Ninth Circuit on Thursday, was not enough to support an action by individuals for damages.
The 18 U.S. citizens sued in that action under the Anti-Terrorism Act (“ATA”) while the foreign nationals proceeded under the Alien Tort Statute (“ATS”). Donato dismissed the ATA claims with prejudice, while granting leave to amend the ATS claims; yet, those suing under the ATS opted not to amend, and the entire action was dismissed.
No Direct Payments
A problem for the plaintiffs suing under the ATA, Donato pointed out, is that they do not allege that they provided kickbacks directly to the Hussein regime but, rather, tell of payments for the oil—with a “surcharge”—to third parties. The judge wrote:
“The kickbacks were then swept into a serpentine and often illegal flow of funds through businesses, banks, government institutions and terrorist groups throughout the Middle East….Plaintiffs offer no facts indicating that Chevron’s money somehow retained its identity and cohesiveness as it traveled through the hands of these many intermediaries. It is certainly true that plaintiffs need not trace Chevron’s dollars to the terrorists that harmed them with the precision of accountants, but they must allege more than that Chevron contributed fluids to an evil empire…That is all plaintiffs have done, and holding Chevron liable under the ATA only for doing business, albeit illegally, with a rogue state would extend the scope of the statute far beyond Congress’s mandate.”
Agreeing, a three-judge Ninth Circuit panel said that Chevron’s purchases from a third party “do not constitute acts of international terrorism” as defined by statute.
“The mere fact that oil purchases allegedly included kickbacks that violated United Nations-imposed sanctions did not make the purchases terrorist acts,” the opinion says, declaring that the plaintiffs “failed to plausibly allege that their injuries” were proximately caused by Chevron’s kickbacks.
Aiding and Abetting
The Ninth Circuit panel—comprised of Circuit Judges Consuelo Callahan and Johnnie B. Rawlinson, joined by District Court Judge Stephen J. Murphy of the Eastern District of Michigan, sitting by designation—also agreed with Donato that the citizen-plaintiffs had not adequately pled that Chevron aided and abetted the terrorists, explaining:
“There is no allegation that Chevron had any relation to the terrorist organization that executed the attacks in Israel. At most, Chevron had a contractual relationship with a third party that sold Iraqi crude oil on the open market. Chevron’s actions, as pleaded, did not amount to providing substantial assistance to the foreign terrorist organization that perpetrated the Israel attacks.”
The opinion goes on to say:
“Appellants’ allegations at most indicate that Chevron knew that a portion of its purchase price of Iraqi crude oil would be remitted to Iraq as a kickback. But they fail to allege any facts that indicate that Chevron knew its kickbacks would be used to provide financial support to the terrorist organization perpetrating the terrorist activity in Israel.”
The failure to set forth facts pointing to such knowledge, the opinion says, defeats the foreign nationals’ claims under the ATS which includes a mens rea element.
The complaint seeks to tie Chevron’s illegal payments to the funding of suicide missions, stating:
“With great fanfare, Saddam Hussein offered the suicide bombers’ family members payments amounting to $25,000, often presenting them with a giant check during a televised ceremony. These publicized payments—drawn, in part, from Chevron’s kickback payments—played a vital role in recruiting and influencing young Palestinians to ‘honorably’ sacrifice themselves with their family’s blessing.”
The case is Brill v. Chevron Corp., 18-16862.
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