In a stunning order Monday, the U.S Supreme Court essentially said it had been looking at the wrong issue in an Alien Tort Statute case called Kiobel v. Royal Dutch Petroleum. It called for new briefs that reframe Kiobel as an examination of the extraterritorial application of the ATS. Given the justices' reluctance to extend U.S. jurisdiction beyond our borders, expressed so fatefully in their 2010 ruling in Morrison v. National Austrialia Bank, the recasting of Kiobel has the potential to devastate U.S. human rights litigation based on overseas conduct.

The comparatively narrow question Kiobel originally presented to the Supreme Court was whether corporations can be held liable under the ATS, a once-obscure 1789 law that human rights advocates revived in the 1980s to address international atrocities against non-U.S. citizens. The 2nd Circuit Court of Appeals had ruled in Kiobel that corporations are immune under the ATS; three other federal appeals courts had held otherwise. The Kiobel merits briefing by Shell and the Nigerian claimants (available here) mostly addressed the corporate liability question.

But barely had Kiobel oral arguments begun last Tuesday when Justice Anthony Kennedy interrupted plaintiffs lawyer Paul Hoffman of Schonbrun DeSimone Seplow Harris Hoffman & Harrison to point out that the United States appears to be the only country in the world to "exercise universal civil jurisdiction over alleged extraterritorial human rights abuses to which the nation has no connection." (Kennedy was reading from an amicus brief Chevron filed in support of Shell.) Other justices picked up and amplified Kennedy's point. Justice Samuel Alito put the question most bluntly, asking Hoffman, "What business does a case like this" -- a suit by foreign nationals against a foreign-based corporation for its alleged complicity in state-sponsored torture and murder in Nigeria -- "have in the courts of the United States?"

In other words, as the court put it in Monday's order recasting Kiobel, "whether and under what circumstances [does] the Alien Tort Statute [allow] courts to recognize a cause of action for violations of the law occurring within the territory of a sovereign other than the United States"?

Amazingly, no federal appeals court has decided an ATS case based only an extraterritoriality analysis, even though several circuits have issued ATS rulings in the year-and-a-half since the Morrison court held that U.S. laws should not be presumed to apply outside our borders unless Congress so specifies. In the last ATS appellate decision to be issued before the Kiobel Supreme Court argument, a divided en banc 9th Circuit Court of Appeals said Morrison did not preclude claims by 10,000 Papua New Guineans who claimed Rio Tinto worked with the government to stamp out labor protests at copper and gold mines. The majority, as I reported, rejected a powerful three-judge dissent that said the history of the ATS offers no support for extending U.S. jurisdiction, particularly after Morrison: "The authority of American courts does not generally extend to all heinous wrongs committed by anyone, against anyone, anywhere in the world," the dissent said. "Ambiguous statutory language is not enough to get around Morrison's 'bright line rule.'"

In another recently decided ATS appeal, John Doe v. Exxon, Judge Brett Kavanaugh of the District of Columbia Circuit Court of Appeals broke with the majority to argue for the dismissal of an ATS case involving Exxon's alleged conduct in Indonesia. "Under the presumption against extraterritoriality, the ATS does not apply to conduct that occurred in foreign nations," Kavanaugh wrote in a dissent. "The ATS contains no textual indication that it was meant to apply to conduct in foreign countries. Moreover, the ATS's historical purpose was to avoid conflicts with foreign governments. It did so by providing redress for foreign citizens who suffered injuries within the United States or on the high seas." Kavanaugh, like the Morrison-citing appeals judges in the Rio Tinto case, was outvoted by colleagues who concluded the ATS does apply overseas.

Even though extraterritoriality wasn't squarely before the Supreme Court in Kiobel's original incarnation, many of Shell's amicus supporters raised Morrison arguments. (Here's BP's brief, for instance, and here's Germany's.) So Kiobel plaintiffs lawyer Hoffman said he wasn't surprised that the issue of extraterritoriality surfaced at last week's oral argument, though he was taken aback that the Morrison questions came so quickly. Hoffman told me he's "optimistic" that his side will be able to counter defense arguments for limiting the ATS's overseas application by pointing both to the origins of the law, which was intended to curb piracy, and its modern Supreme Court history, which assumes the statute's extraterritorial application. The Alien Tort Statute simply isn't like the federal securities laws the Morrison court was addressing, Hoffman said, since it's based on principles of international law.

Hoffman also said that he believes Justice Kennedy will be the swing vote. "It's up to us to convince him this is a law that should be here," he said. Interestingly, Hoffman noted that in the 2004 U.S. Supreme Court case that established the ATS as a powerful human rights vehicle, the United States filed a brief arguing against extraterritorial application of the law, but the court didn't address the issue. The Solicitor General supported the plaintiffs in the United States' amicus brief in Kiobel. So it will be quite a fight, in Kiobel's next iteration, to secure the Justice Department's amicus.

Kathleen Sullivan of Quinn Emanuel Urquhart & Sullivan, who argued at the Supreme Court for Shell, didn't respond to email and phone requests for comment. But here's a memo on the Supreme Court's Monday order from Mr. Morrison himself, George Conway of Wachtell, Lipton, Rosen & Katz.

(Reporting by Alison Frankel)