Balintulo v. Ford Motor Co.

• Citation: 796 F.3d 160
• Decision Date: 27 July 2015
• Docket Number: 14–4137,14–4138,14–4132,14–4129,14–4130,14–3589,Nos. 14–4104,14–3607,14–4135,14–4131,14–4139.,14–4136,s. 14–4104
• Parties: Sakwe BALINTULO, as personal representative of Saba Balintulo, et al., Plaintiffs–Appellants, v. FORD MOTOR CO., International Business Machines Corp., Defendants–Movants.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

796 F.3d 160

Sakwe BALINTULO, as personal representative of Saba Balintulo, et al., Plaintiffs–Appellants

v.FORD MOTOR CO., International Business Machines Corp., Defendants–Movants.

Nos. 14–4104

14–4129

14–4132

14–3589

14–4130

14–4135

14–3607

14–4131

14–4136

14–4137

14–4138

14–4139.

United States Court of Appeals, Second Circuit.

Argued: June 24, 2015.

Decided: July 27, 2015.

Paul L. Hoffman (Diane E. Sammons, Nagel Rice, LLP, Roseland, NJ; Michael D. Hausfeld, Kristen M. Ward, Hausfeld, Washington, DC, on the brief), Schonbrun, Desimone, Seplow, Harris & Hoffman LLP, Venice, CA, for Plaintiffs–Appellants.

Jonathan Hacker (Anton Melitsky, on the brief), O'Melveny & Myers LLP, New York, NY, for Defendant–Movant Ford Motor Company.

Keith R. Hummel (Teena–Ann V. Sankoorikal, James E. Canning, on the brief), Cravath, Swaine & Moore LLP, New York, NY, for Defendant–Movant International Business Machines Corporation.

Before: CABRANES, HALL, and LIVINGSTON, Circuit Judges.

Opinion

JOSÉ A. CABRANES, Circuit Judge:

This appeal presents the question of whether plaintiffs, victims of South African apartheid, have plausibly alleged relevant conduct committed within the United States that is sufficient to rebut the Alien Tort Statute's presumption against extraterritoriality.

We hold that they have not.

Accordingly, we AFFIRM the August 28, 2014 order of the United States District Court for the Southern District of New York (Shira A. Scheindlin, Judge ).

BACKGROUND

Nearly a decade and a half ago, plaintiffs filed suit under the Alien Tort Statute (“ATS”)¹ against various corporations² for allegedly aiding and abetting crimes proscribed by “the law of nations” (also called “customary international law”)³ committed during apartheid by the South African government against South Africans within South Africa's sovereign territory.

The long and complicated procedural history of this consolidated case involves rulings from all three levels of the federal judiciary.⁴ As relevant here, the District Court, on April 8, 2009, held that plaintiffs may proceed against defendants Ford and IBM (the “Companies”) on an agency theory of liability for apartheid era crimes allegedly committed by their subsidiaries. Thereafter, the Companies sought a writ of mandamus in this Court. On September 17, 2010, while this case remained pending, we held, in Kiobel v. Royal Dutch Petroleum Co. (“Kiobel I ”), that the ATS does not confer jurisdiction over claims pursuant to customary international law against corporations.⁵ The Supreme Court granted certiorari and, on April 17, 2013, affirmed our judgment, while explicitly declining to reach the corporate liability question (“Kiobel II ”).⁶ Instead, the Court held that “the presumption against extraterritoriality applies to claims under the ATS”⁷ and thus the statute cannot be applied “to conduct in the territory of another sovereign.”⁸

Two days after the Supreme Court released its ruling in Kiobel II, we requested supplemental briefing from the parties on the impact of that decision on the present case. Thereafter, on August 21, 2013, in Balintulo v. Daimler AG, 727 F.3d 174, 188 (2d Cir.2013) (“Balintulo I ”), we denied the Companies' request for a writ of mandamus and remanded to the District Court where the Companies would be able to “seek the dismissal of all of the plaintiffs' claims, and prevail, prior to discovery, through a motion for judgment on the pleadings.” In so doing, we rejected plaintiffs' theory of vicarious liability for the Companies based on actions taken within South Africa by their South African subsidiaries and concluded that Kiobel II “forecloses the plaintiffs' claims because the plaintiffs have failed to allege that any relevant conduct occurred in the United States.”⁹

On remand, the Companies moved for a judgment in their favor. The District Court ordered the Companies to brief the question of whether corporations can be held liable under the ATS following Kiobel II. On April 17, 2014, the District Court held that the Supreme Court in Kiobel II, which, as noted earlier, expressly declined to address the question of corporate liability under customary international law, had nonetheless overruled the holding of Kiobel I and thus altered the law of the Circuit in that respect.¹⁰ The District Court also permitted plaintiffs to move to amend their complaints in order to allege facts sufficient to overcome the ATS's presumption against extraterritoriality.¹¹ After plaintiffs submitted their proposed amended complaints, the District Court held that the proposed amendments were futile because the “relevant conduct” alleged “all occurred abroad” and because plaintiffs' theory of liability was foreclosed by this Court's decision in Balintulo I.¹²

DISCUSSION

We generally review a district court's decision to permit or deny leave to amend a complaint for abuse of discretion, “keeping in mind that leave to amend should be freely granted when justice so requires.”¹³ However, when denial of leave to file a revised pleading is based on a legal interpretation, such as futility, a reviewing court conducts a de novo review.¹⁴ A proposed amendment to a complaint is futile when it “could not withstand a motion to dismiss.”¹⁵ In order to survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ”¹⁶ And while a court must accept all of the allegations contained in a complaint as true, “that tenet is inapplicable to legal conclusions, and threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”¹⁷

I. The ATS Claims

On appeal, plaintiffs claim that they have alleged extensive new facts demonstrating that the Companies' U.S.-based actions constituted unlawful aiding and abetting of crimes in violation of the law of nations. They allege that the Companies' “specialized product development, sales of such tailored products, and provision of expertise and training” were aimed at facilitating abuses committed in South Africa.¹⁸ Specifically, plaintiffs allege that defendant Ford (1) provided specialized vehicles to the South African police and security forces to enable these forces to enforce apartheid,¹⁹ and (2) shared information with the South African regime about anti-apartheid and union activists, thereby facilitating the suppression of anti-apartheid activity.²⁰ As for IBM, plaintiffs claim that the company (1) designed specific technologies that were essential for racial separation under apartheid and the denationalization of black South Africans;²¹ (2) bid on, and executed, contracts in South Africa with unlawful purposes such as “denationalization”²² of black South Africans;²³ and (3) provided training, support, and expertise to the South African government in using IBM's specialized technologies.²⁴

In turn, the Companies assert that the District Court properly denied plaintiffs' motion for leave to amend their complaints because (1) plaintiffs cannot satisfy the ATS's territoriality and mens rea requirements; (2) corporations cannot be sued under the ATS; and (3) there is no aiding and abetting liability under the ATS.

II. Jurisdiction Under the ATS

Our inquiry begins by assessing whether the ATS grants us jurisdiction over plaintiffs' action. The Alien Tort Statute contains numerous jurisdictional predicates, each of which must be satisfied before a court may properly assume jurisdiction over an ATS claim.²⁵ Thus, at the outset, a court must assure itself that: “(1) the complaint pleads a violation of the law of nations; (2) the presumption against the extraterritorial application of the ATS, announced by the Supreme Court in Kiobel [II ], does not bar the claim; (3) customary international law recognizes [the asserted] liability [of a] defendant; and (4) the theory of liability alleged by plaintiffs (i.e., aiding and abetting, conspiracy) is recognized by customary international law [or ‘the law of nations'].”²⁶ And while a defect in any of these jurisdictional predicates would be fatal to a plaintiff's claims, courts retain discretion regarding the order and manner in which they undertake these inquiries.²⁷

Here, we begin by addressing the question of whether plaintiffs, in their proposed amended complaints, allege sufficient conduct to displace the ATS's presumption against extraterritoriality. Because we agree with the District Court's conclusion that they do not, we need not address the other jurisdictional predicates.²⁸

A. ATS and the Presumption Against Extraterritoriality

As noted above, the Supreme Court in Kiobel II made clear that claims under the ATS cannot be brought for violations of the law of nations occurring within the territory of a sovereign nation other than the United States.²⁹ The Court explained that it was dismissing the plaintiffs' claims because “all the relevant conduct took place outside the United States.”³⁰ The wholly extraterritorial nature of the Kiobel plaintiffs' claims was “a dispositive fact” for the Kiobel II Court and so it had no reason to explore how courts should proceed where, as here, some of the “relevant conduct” occurred in the United States.³¹

In Mastafa v. Chevron Corporation, we applied the Supreme Court's rulings in Morrison v. National Australia Bank Limited³² and Kiobel II to clarify that the “focus” of the ATS inquiry is on the nature and location of the conduct constituting the alleged offenses under the law of nations.³³ Accordingly, to determine whether specific claims can be brought under the ATS, a court must isolate the “relevant conduct” of a defendant—conduct that is alleged to be either a direct violation of the law of nations or the aiding and abetting of another's violation of the law of nations—in a complaint and then conduct a two-step jurisdictional analysis.

Step one is a determination of whether that “relevant conduct” sufficiently “touches and concerns” the United States so as to displace the...