Judge Scheindlin
Judge Scheindlin (NYLJ/Rick Kopstein)

After a federal appellate court all but instructed her to dismiss the case, Southern District Judge Shira Scheindlin (See Profile) has kept alive a lawsuit accusing Ford, IBM and other companies of abusing human rights by doing business with South Africa’s apartheid regime.

Defying the U.S. Court of Appeals for the Second Circuit, Scheindlin on Thursday said that the companies still might face liability under the Alien Tort Statute for providing vehicles, computers and other materials that helped the South African government violate international law through torture and extrajudicial killings.

In August 2013, the circuit remanded two cases led by Ntzebesa v. Citigroup, 02-ms-01499, which is part of the multidistrict litigation in In Re South Africa Apartheid Litigation, 02 MDL 1499.

The case was remanded to Scheindlin because the U.S. Supreme Court had held four months earlier that the strong presumption against lawsuits in U.S. courts for actions that occur entirely outside of the United States also applies to the Alien Tort Statute (ATS) (NYLJ, April 18, 2013).

The Supreme Court’s decision in Kiobel v. Royal Dutch Petroleum, 133 S.Ct. 1659 (2013), had been highly anticipated, and the circuit had put on hold consideration of Ntzebesa until Kiobel clarified the landscape on the scope of the ATS.

Once the Supreme Court ruled, lawyers for Ford and other defendants pressed their claim for a writ of mandamus by the circuit ordering Scheindlin to dismiss Ntzebesa.

However, on Aug. 21, 2013, Circuit Judge Jose Cabranes (See Profile) said the extraordinary remedy of a writ of mandamus was not necessary because Kiobel clearly compelled Scheindlin to dismiss the case (NYLJ, Aug. 22, 2013).

But on Thursday, Scheindlin held the ATS allows for suits in U.S. courts against corporations for aiding and abetting violations of international law even where the alleged wrongdoing was committed entirely outside of the United States.

Her conclusion runs directly contrary to the one reached by Cabranes and another Second Circuit judge in “Kiobel 1” (NYLJ, Sept. 20, 2010).

In Kiobel 1, Cabranes, joined by Judge Dennis Jacobs (See Profile), said customary international law “has steadfastly rejected the notion of corporate liability for international crimes, and no international tribunal has ever held a corporation liable for violation of the laws of nations.”

Cabranes also said “nothing in the opinion foreclosed suits against individuals for violations of customary international law—including employees, managers, officers, and directors of a corporation—as well as anyone who purposefully aids or abets a violation of customary international law.”

Judge Pierre Leval (See Profile) joined only in the judgment, arguing in an 88-page opinion the majority opinion “deals a substantial blow to international law and its undertaking to protect fundamental human rights.”

But in Kiobel 2, the basis for the Second Circuit’s opinion was skirted by the Supreme Court as it decided the case entirely on the issue of extraterritoriality.

Scheindlin said Thursday the Supreme Court initially granted certiorari and heard oral argument on corporate liability under the act, but “Kiobel 2 makes no mention” corporate liability and instead concluded only that the strong presumption against extraterritorial application of U.S. laws also applies to the ATS.

“The court clarified that because ‘[c]orporations are often present in many countries … it would reach too far to say that mere corporate presence suffices” to overcome the presumption.

These comments, Scheindlin said, are a far cry from the out-and-out rejection of aiding and abetting liability for corporations under the ATS made by the Second Circuit in Kiobel 1. So the judge declared, “The question of corporate liability for the ATS claims remains open in the Second Circuit.”

“Nothing in the text, history or purposes of the ATS indicates that corporations are immune from liability on the basis of federal common law,” Scheindlin said. “However, even if the majority in Kiobel 1 correctly held that the sources of corporate liability must be found in customary international law, the court’s conclusion that customary international law does not recognize such liability is factually and legally incorrect.”

Lawyers for the plaintiffs on the motion are Bruce Nagel, Jay Rice and Diane Simmons of Nagel Rice in Roseland, N.J., Tyler Giannini of the International Human Rights Clinic at Harvard Law School; Linda Nussbaum of Grant & Eisenhofer; Paul Hoffman of Schonbrun DeSimone Seplow Harris & Hoffman in Los Angeles; Judith Brown Chomsky of Elkins Park, Pa.; and Michael Osborne of Cape Town, South Africa.

Keith Hummel of Cravath, Swaine & Moore represents IBM and Jonathan Hacker of O’Melveny & Myers represents Ford Motor Co.

Scheindlin gave the putative class action plaintiffs until May 15 to ask for permission to amend.