Back in April, my colleague Keith Gibson questioned whether Alien Tort Statute cases would remain viable in the Second Circuit in light of the Supreme Court’s rulings in the Kiobel cases.  The discussion was prompted by Judge Scheindlin’s decision to permit two putative classes of black South Africans who were victims of apartheid-era violence and discrimination to move for leave to file an amended complaint in a long-running ATS case pending in the SDNY.  In something of an unexpected twist given her previous finding that corporations can be held liable under the ATS following the Supreme Court’s decision in Kiobel II, Judge Scheindlin last week denied leave to amend and ordered that all remaining claims against Ford and IBM be dismissed with prejudice.  The decision, which continues the trend of limiting the applicability of the ATS to conduct abroad by US-based corporations, is sure to be welcomed by corporate defendants.

As Judge Scheindlin noted, the Supreme Court’s decision in Kiobel II “drastically limits the viability of ATS claims based on conduct occurring abroad.”  The Court held that the presumption against extraterritoriality applies to ATS claims and could be overcome only in those cases where “claims touch and concern the territory of the United States… with sufficient force to displace the presumption.”  Thus, in granting leave to seek to amend their complaint, Judge Scheindlin instructed the plaintiffs that they “must make a preliminary showing that they can plausibly plead that [IBM and Ford] engaged in actions that ‘touch and concern’ the United States with sufficient force to overcome the presumption against the extraterritorial reach of the ATS,” and that IBM and Ford acted with knowledge and with the purpose of aiding and abetting the South African regime’s alleged tortious conduct.  Despite pleading additional and new specific details, the plaintiffs’ underlying theory of recovery remained unchanged, namely that IBM and Ford are vicariously liable for the conduct of their foreign subsidiaries that took place abroad.  And as Judge Scheindlin recognized, Second Circuit precedent provides that vicarious liability is insufficient to overcome Kiobel II’s presumption against extraterritoriality.  See Balintulo v. Daimler AG, 727 F.3d 174 (2d. Cir. 2013).

The decision to dismiss the plaintiffs’ claims with prejudice comes as something of a surprise given Judge Scheindlin’s granting of leave just four months prior.  Indeed, the Judge left little doubt that she was not terribly pleased with her decision, noting that binding precedent required her to dismiss the plaintiffs’ claims “no matter what [her] personal view of the law may be.”   Corporate defendants, particularly those sued under the ATS in the Second Circuit, are sure to be happy with the outcome, which demonstrates that plaintiffs seeking to recover for tortious conduct abroad by subsidiaries of American corporations face a steep, difficult challenge.