Wisconsin Court Says Anti-Forced Labor Law's Civil Provision Doesn't Extend Outside US
A Wisconsin federal court on Dec. 1 dismissed a case from a former prisoner at the Nunan Chishan Prison in China against Milwaukee Electric Tool and its parent company, Techtronic Industries, for allegedly importing goods made with forced labor. Judge Brett Ludwig of the U.S. District Court for the Eastern District of Wisconsin held that the civil remedy of the Trafficking Victims Protection Act (TVPA), which is the statute the prisoner sued under, doesn't apply to conduct occurring outside the U.S. (Xu Lun v. Milwaukee Electric Tool Corp., E.D. Wis. # 24-803).
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
Ludwig also held that the Wisconsin court didn't have personal jurisdiction over Techtronic, which is based in Hong Kong, since the company lacks sufficient contacts with the state of Wisconsin.
The suit was brought last year by the former detainee, going by the pseudonym "Xu Lun" in litigation (see 2407030060). Lun claimed the companies violated the TVPA, which allows for civil suits against parties that knowingly benefit from taking part in a venture that the party "knew or should have known was engaged in forced labor." Lun said he was forced to make work gloves bearing Milwaukee Tool's logo in Chishan Prison while being subjected to "long hours and poor conditions" with no pay and threats and punishments for refusing to work or not meeting production quotas.
Ludwig dismissed the case after finding the TVPA's civil remedy doesn't apply to conduct that occurred outside the U.S., despite the fact that the statute applies to extraterritorial conduct for criminal cases brought by the U.S.
Central to the court's holding was the Supreme Court's ruling in RJR Nabisco v. European Community, which acknowledged that "federal law is presumed to apply only domestically" and established a two-prong test for assessing whether a statute applies to extraterritorial conduct. First, courts must "find whether the statute gives a clear, affirmative indication that it applies extraterritorially." If no indication is found, courts must look to the statute's "focus" to find whether the case involves a "permissible domestic application of the statute."
The judge first said there's no clear indication the civil remedy provision of the TVPA applies extraterritorially. While in 2008 Congress amended the statute to allow for criminal cases to extend to "conduct occurring outside the United States," no such change was made for civil cases. The lack of any clear indication that Congress extended the civil remedy provision to conduct outside the U.S. means Lun failed to overcome the presumption that U.S. laws don't apply extraterritorially, the court said. Ludwig parsed through a slew of "out-of-circuit decisions" that came to opposite conclusions, finding that they are "inconsistent with RJR Nabisco."
Turning to the second step of the analysis, the judge then held that TVPA's "focus" doesn't involve a "permissible domestic application of the statute," since Lun's complaint doesn't allege a "domestic violation of the TVPA." Ludwig first said it's clear from the statute's text that the underlying "focus" of the civil remedy provision is to "prohibit the use of forced labor," adding that it's "undisputed that Xu Lun's allegations of forced labor occurred in China."
Lun argued that the case is a domestic application of the statute, since it contests Milwaukee Tool's benefit from the use of forced labor, and that "any benefit incurred by Milwaukee Tool was incurred here in Wisconsin." Ludwig rejected this argument, finding that the court can't "individually analyze the subsections" of the TVPA "in a vacuum." The "logical conclusion" here is that the "focus of a claim for a violation" of the TVPA "is where the forced labor occurred," the court said.
Prior to interpreting the TVPA, Ludwig first held that the court doesn't have personal jurisdiction over Techtronic. The judge said the court doesn't have "general" personal jurisdiction over the company, which looks to the company's place of incorporation and principal place of business, since both Techtronic's place of incorporation and its principal place of business are in Hong Kong.
Regarding whether the court had "specific" personal jurisdiction over Techtronic, which flows from a party's contacts with a given state, Ludwig held that Techtronic didn't have "constitutionally sufficient contacts" with Wisconsin. Lun failed to identify "any basis to conclude that Techtronic Industries has any contacts with Wisconsin," aside from the company's relationship with its subsidiary Milwaukee Tool. "It is unclear how the mere presence of a subsidiary could satisfy" the requirement that the defendant "purposefully availed" themselves "of the privilege of conducting activities within the forum state."
Lun also sought to assert personal jurisdiction over Techtronic under Rule 4(k)(2), which lets a court exercise personal jurisdiction over a foreign defendant that has sufficient contacts with the U.S. as a whole, but "whose contacts are so scattered among the various states that no individual state would have a basis to assert jurisdiction." The judge said this claim also fell short, since Techtronic's contacts with the U.S. as a whole aren't "sufficiently related" to the underlying TVPA claim.
Even assuming the issues with specific personal jurisdiction were satisfied under the Rule 4(k)(2) claim, Ludwig held that there's no jurisdiction, since none of the alleged TVPA allegations occurred in the U.S.