Unocal Case Focuses on Liability Standards

SAN FRANCISCO -- Arguments in the groundbreaking case over Unocal Corp.’s alleged complicity in human rights violations in Myanmar focused Tuesday on whether the oil company should be judged by the same standards as Nazi collaborators and war criminals in Rwanda and the former Yugoslavia.

Judges on the U.S. 9th Circuit Court of Appeals grilled lawyers on a key question in the case against Unocal, in which plaintiffs seek to hold the El Segundo company liable for murder, rape and forced labor allegedly committed by soldiers in the country, formerly known as Burma.

Two lawsuits, filed in 1996 by 15 Myanmar refugees, maintain that Unocal signed on to a $1.2-billion natural gas pipeline project with the commercial arm of the ruling junta knowing that human rights would be abused during the project. Unocal argues it had no control over Myanmar soldiers and shouldn’t be held liable for their actions.

In an hourlong hearing in a San Francisco courtroom, judges asked lawyers to explain how Unocal should be judged: by standards drawn from federal case law or from international war crimes tribunals. The judges are considering whether Unocal should stand trial and, if so, how jurors should decide whether the company is liable.

Unocal’s lawyer, Randy Oppenheimer, argued that the questions were moot because the plaintiffs had no right to a trial over abuses alleged to have occurred in another country.

But Judges A. Wallace Tashima and M. Margaret McKeown prodded Oppenheimer to drop that argument, pointing out that the 9th Circuit this month upheld a foreigner’s right to bring suit in the U.S. over alleged human rights abuses. That case, involving a doctor allegedly kidnapped in Mexico at the behest of U.S. drug agents, was at least the third that the 9th Circuit has approved under the Alien Tort Claims Act, which allows foreigners to sue in U.S. courts for human rights abuses abroad.

In the Myanmar pipeline case, a three-judge 9th Circuit panel ruled in September there was enough evidence for a jury to hold Unocal indirectly liable. The ruling marked the first time a company was ordered to stand trial under the alien tort law. Unocal appealed and won a hearing by the 11-judge panel.

The larger panel issued an order setting up Tuesday’s arguments by saying it was interested in hearing arguments on the question that had split the three-judge panel: How should jurors be instructed to decide whether the company is liable?

Though all three agreed the case should go to trial, Judge Stephen Reinhardt departed from the majority opinion that Unocal should be judged by an aiding-and-abetting test drawn from international law. Instead, he wrote that common domestic tort theories -- such as reckless disregard for the consequences of a business venture and shared liability for partners in a joint enterprise -- would suffice.

On Tuesday, plaintiffs’ lawyers argued that Unocal’s financing and close working relationship with the junta in Myanmar constituted liability under either U.S. or international law. But several judges expressed confusion and concern about the application of international war crimes standards, such as whether “moral support” alone could be grounds for a finding of indirect liability.

“Sometimes they get it wrong,” Judge Alex Kozinski said of international tribunals.

Kozinski pressed plaintiffs’ lawyers on vicarious liability. He asked whether he would be liable “if I’m sitting at home with the tennis shoes that were made by slave labor?”

One plaintiffs attorney, Terry Collingsworth, said the answer would be no, though he added that the question went beyond the issues presented in the Unocal suits. Unlike Kozinski’s hypothetical shoe buyer, he said, Unocal “provided logistics, material support, vehicles. They assigned the military to go out every day, and this went on for years.”

Unocal’s Oppenheimer countered that the forced labor allegedly used to help build pipeline infrastructure amounted to legal temporary conscription and wasn’t a modern variant of slavery. Some forms of conscription “are just not part of international law,” he said.

When pressed to say what standard of liability should apply if such labor were a violation, Oppenheimer said the judges should look to cases decided by U.S. courts. He pointed to a series of cases that he said concluded that a company can’t be liable for police abuse just because the company alerted local authorities to a crime. A company may be held liable only if it holds a measure of control over the police, he said.

Judge Reinhardt questioned whether cases involving the summoning of police “in the context of a democratic government where you assume the government is law-abiding” were relevant to a case involving Burmese soldiers renowned for abusing civilians.

Oppenheimer reiterated Unocal’s position that “when an investment is made when there is no ability to control ... then there is no liability.”

To that, Judge McKeown, said: “You’ve basically endorsed the blind-eye theory. You can walk all the way to the water. But then, as long as the other guy pushes you in, you’re not liable.”

The appellate court took the case under advisement. The three-judge panel deliberated for more than a year before issuing its ruling.