Three companies cannot be held liable in the United States for racial discrimination and violence in apartheid-era South Africa now that the U.S. Supreme Court has limited the use of the Alien Tort Statute, a federal appeals court has ruled.

A unanimous panel of the U.S. Court of Appeals for the Second Circuit ruled Wednesday in Balintulo v. Daimler AG, 09-2778-cv, that U.S. courts have no jurisdiction over the lawsuit because all of the alleged wrongs took place in South Africa. Judge Jose Cabranes (See Profile) wrote the opinion, joined by judges Peter Hall (See Profile) and Debra Ann Livingston (See Profile).

The class action, first filed in 2002, seeks damages from auto makers Daimler AG and Ford Motor Co. and from computer maker IBM Corp. It claims the companies sold cars and computers to the repressive apartheid government, making them liable for racially based human rights abuses committed against black South Africans by that government, including rape, torture and extrajudicial killings.

They brought their suit under the Alien Tort Statute, a 1789 law giving U.S. courts jurisdiction over suits brought by aliens over violations of international law or U.S. treaties. The law was rarely invoked until the 1980s, when it was revived as a way for plaintiffs to bring suits over foreign human rights abuses in U.S. courts.

Southern District Judge Shira Scheindlin refused to dismiss the case in 2009 (NYLJ, April 9, 2009). The defendants sought an appeal to the Second Circuit. Normally, an order from a district court cannot be appealed until a final judgment is entered, but appeals courts may immediately review earlier orders under certain circumstances. The defendants argued that the Alien Tort Statute did not allow for liability against corporations for acts committed outside the U.S. They also argued that allowing the suit to continue threatened U.S. foreign policy interests because the government of South Africa did not believe the claims should be litigated in the U.S. (The South African government reversed that position in 2009, soon after the Second Circuit heard arguments on preliminary issues in the case.)

The suit remained in limbo until earlier this year, when the Supreme Court ruled in Kiobel v. Royal Dutch Petroleum, 133 S. Ct. 1659, 1668–69, that the Alien Tort Statute does not give U.S. courts jurisdiction over controversies arising from actions that occurred entirely outside the U.S. (NYLJ, April 18, 2013).

Following that ruling, the circuit asked the parties for additional briefing. The defendants asked for a writ of mandamus compelling judgment in their favor. The plaintiffs argued that their claims could go on despite Kiobel.

In Wednesday's ruling, Cabranes refused to grant a writ of mandamus, saying that extraordinary remedy is not necessary because Kiobel clearly compels Scheindlin to dismiss the case.

"The opinion of the Supreme Court in Kiobel plainly bars common-law suits, like this one, alleging violations of customary international law based solely on conduct occurring abroad," he wrote. "Because of that unambiguous holding, the defendants will be able to obtain their desired relief (dismissal of all claims) in the District Court through a motion for judgment on the pleadings, without resort to a writ of mandamus."

Cabranes rejected all of the arguments put forth by the plaintiffs. The plaintiffs had argued that the Alien Tort Statute still allows suits over foreign conduct if the defendants are U.S. nationals or if the conduct implicates American interests. They said that fighting the injustice of apartheid was, itself, an American interest.

That argument, Cabranes wrote, "seeks to evade the bright-line clarity of the Court's actual holding."

He also rejected the plaintiffs' argument that the defendants took actions in the U.S. to evade U.S. sanctions against the apartheid government, finding that none of those alleged actions "ties the relevant human rights violations to actions taken within the United States."

Daimler was represented on appeal by Lisa Blatt, a partner at Arnold & Porter.

Ford was represented by Sri Srinivasan, formerly of O'Melveny & Myers, who is now a D.C. Circuit judge.

IBM was represented by Keith Hummel, a partner at Cravath, Swaine & Moore.

One group of plaintiffs was represented by Steig Olson, formerly of Hausfeld and now a partner at Quinn Emanuel Urquhart & Sullivan. A second group of plaintiffs was represented by Paul Hoffman of Schonbrun Desimone Seplow Harrison & Hoffman.

None of the attorneys returned calls seeking comment.