The 2nd U.S. Circuit Court of Appeals said the defendants were protected by sovereign immunity and the plaintiffs would need to prove that the princes engaged in intentional actions aimed at U.S. residents.
Justin Timothy Green, a lawyer for the plaintiffs, said he was disappointed with the ruling and the plaintiffs were considering an appeal because the decision would make it harder to collect from others.
"The bottom line is it's a difficult proof level to say someone gave money intending it to be used in a terrorist attack in the United States as opposed to merely giving it to anti-American groups and foreseeing it," he said.
"Ultimately, al Qaeda couldn't have done the attacks if they didn't have the resources to train and equip the 19 terrorists" responsible for the Sept. 11 attacks, Green said.
Nancy Dutton, an attorney for Saudi Arabian Embassy in Washington, said lawyers for the kingdom would have no comment until the litigation was completely over.
Lawsuits seeking billions of dollars in damages were filed by representatives, survivors and relatives of the victims against foreign governments, charities, financial institutions and individuals believed to have provided support to al Qaeda.
The plaintiffs claimed the defendants gave money to charities in order to funnel it to terrorist organizations behind the attacks on the World Trade Center and Pentagon.
In its ruling, the judges said it would have to dismiss the case against the princes even if it were proven that they were aware of bin Laden's public vows to harm the United States.
"Even if the four princes were reckless in monitoring how their donations were spent, or could and did foresee that recipients of their donations would attack targets in the United States, that would be insufficient," the three-judge panel said.
The appeals court also agreed with a lower court that a Saudi banker and a charitable organization cannot be held liable.