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Clifford Chance

Clifford Chance

Business & Human Rights Insights

Testing the US Trafficking Victims Protection Act: Doe v. Apple

A lawsuit against tech company purchasers of cobalt sourced from mines that allegedly used child labor was dismissed, but litigation risk regarding human rights violations in supply chains remains.

Background

In 2019, sixteen alleged victims of child labor in the Democratic Republic of Congo ("DRC") sued Apple, Alphabet (Google's parent), Dell, Microsoft, and Tesla, claiming that they had suffered horrific injuries through violations of the US Trafficking Victims Protection Act ("TVPA"), which imposes criminal and civil liability for knowingly financially benefitting from "forced labor." The plaintiffs did not allege that any of the Defendants owned or operated the mines in which they were injured. Rather, the plaintiffs alleged that these companies' use of cobalt in their products constituted participation in a "venture" with cobalt mining companies and intermediaries comprising the "global cobalt supply chain." Alleging that cobalt production "has soared . . . to meet the demand . . . caused by the tech boom led by Defendants," they sought damages from the purchasers in the chain.

The Decision

This November 2021 decision of the US District Court for the District of Columbia is significant – although issued by a trial court and yet to be tested on appeal – as it holds that mere participation as a purchaser in the global cobalt supply chain is insufficient to support a TVPA claim. However, companies must still consider their cross-border supply chain risk as plaintiffs continue to test the boundaries of the TVPA and other potential bases for liability for alleged human rights violations in US courts.

The District Court dismissed the case against each of the defendants on three grounds. First, the Court held that the plaintiffs did not have standing to sue because the injuries plaintiffs sustained while working in cobalt mines were not "traceable" to the defendants and therefore would not be redressable through a suit against them. Noting that the plaintiffs did not allege or "reasonably impl[y]" that the defendants "directly oversaw or controlled Plaintiffs, their supervisors, or employers," the Court held that a purchaser's marginal impact on demand could not directly cause the plaintiffs' injuries. The Court did not rule out the possibility for liability within any particular layer of the supply chain, but did describe Apple and the other defendants' positions as fifth in the chain of cobalt purchasers, without more, as insufficient.

Second, the Court held that mere participation in the cobalt market could not provide a cause of action for a violation of the TVPA. The TVPA provides a civil cause of action for victims of forced labor against whoever 1) knowingly benefits from 2) participation in a venture which that person 3) knew or should have known has 4) engaged in forced labor. 18 U.S.C. § 1595. The Court held that "a global supply chain is not a 'venture,'" striking a blow against an especially broad theory of liability under the TVPA. The Court observed that the common meaning of "venture" involves some sort of "commercial enterprise," and the plaintiffs failed to allege with specificity any such enterprise or agreement.

Separately, the Court also took the position that the plaintiffs' allegations failed the fourth prong of the TVPA analysis. According to the Court, neither child labor nor working out of economic necessity, without more, constitute "forced labor" under the TVPA, which defines "forced labor" to involve the compulsion of labor through "serious harm" or "threat" of "serious harm."

Third, and in disagreement with other federal courts, the Court held that (although a "close call") the TVPA's civil remedy provisions do not apply extraterritorially, meaning that they cannot be used to sue for conduct that occurred abroad. Although the TVPA's criminal provisions expressly apply extraterritorially, the Court rejected the argument that the civil remedy provision – which provides a civil cause of action to victims of the statute's criminal provisions – applies extraterritorially as well.

Other federal courts, including the Fifth Circuit Court of Appeals, have accepted that the TVPA's civil remedy provisions apply extraterritorially. See Adhikari v. Kellogg Brown & Root, Inc., 845 F.3d 184, 200 (5th Cir. 2017); Adhikari v. Daoud & Partners, 697 F.3d 674, 682 (S.D. Texas 2009). This disagreement sets up a clear opportunity for further litigation on the issue.

Implications

The plaintiffs are appealing the District Court's decision, and that process will take several months. Regardless of the outcome, TVPA litigation is growing in the United States – TVPA lawsuits have tripled over the last five years – and creative arguments and variations in the rulings among the courts are certain to pose risks to companies participating in global supply markets.