Kashef v. Sa

• Decision Date: 03 March 2020
• Docket Number: 16-cv-3228 (AJN)
• Citation: 442 F.Supp.3d 809
• Parties: Entesar Osman KASHEF, et al., Plaintiffs, v. BNP PARIBAS SA, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

442 F.Supp.3d 809

Entesar Osman KASHEF, et al., Plaintiffs,

v.BNP PARIBAS SA, et al., Defendants.

16-cv-3228 (AJN)

United States District Court, S.D. New York.

Signed March 3, 2020

Brent William Landau, Hausfeld LLP, Tobias Barrington Wolff, University of Pennsylvania Law School, Philadelphia, PA, Kathryn Lee Boyd, Matthew Philip Rand, Pierce Bainbridge Beck Price & Hecht LLP, Deborah Drooz, Brownstein Hyatt Farber Schreck LLP, Robert Louis Palmer, McKool Smith, Thomas Bernard Watson, Diamond McCarthy, Los Angeles, CA, Amanda Erin Lee-Dasgupta, Michael D. Hausfeld, Richard S. Lewis, Scott Gilmore, Hausfeld LLP, Washington, DC, Shira Lauren Feldman, Deborah Hilarie Renner, Pierce Bainbridge Beck Price & Hecht LLP, New York, NY, for Plaintiffs.

Carmine D. Boccuzzi, Jr., Lawrence B. Friedman, Avram E. Luft, Jonathan I. Blackman, Katherine Rosemary Lynch, Cleary Gottlieb Steen & Hamilton LLP, New York, NY, for Defendants.

OPINION AND ORDER

ALISON J. NATHAN, District Judge:

This case arises out of horrific human-rights abuses committed by the Government of Sudan and militias operating in Sudan between 1977 and 2009. Plaintiffs are the victims of those abuses. They bring suit against BNP Paribas S.A., a French financial institution, several of its branches and subsidiaries, and individuals working for the bank (collectively, BNPP). They allege that BNPP engaged in illicit and fraudulent financial practices that allowed the Sudanese government to evade American sanctions. By sustaining the Sudanese regime and perpetuating the genocide, Plaintiffs allege that BNPP committed a host of state-law torts.

The Court must, as a preliminary matter, determine which jurisdiction's law applies to Plaintiffs' claims. The parties put forward four possibilities: federal law, New York State law, Swiss law, and Sudanese law. The Court concludes that Switzerland has the greatest interest in this litigation and Swiss law therefore governs Plaintiffs' claims. However, the parties have provided little briefing on the application of Swiss law to this case, and have rested instead on dueling and contradictory expert declarations. The Court therefore orders the parties to meet and confer regarding potential additional discovery as to the meaning of Swiss law and propose a briefing schedule. The Court will also schedule a hearing to determine whether Plaintiffs have stated a claim for relief under Swiss law.

I. BACKGROUND

A. Plaintiffs' Allege That BNPP Facilitated Atrocities

For purposes of this motion to dismiss, the Court accepts Plaintiffs' well-pleaded allegations in the Second Amended Complaint (Compl.) as true. See Dkt. No. 49. Plaintiffs have also attached various exhibits to the Second Amended Complaint. Exhibits B and D contain BNPP's plea agreements with, respectively, the United States Attorney for the Southern District of New York and the District Attorney of the County of New York. These plea agreements resolved criminal charges against BNPP; Plaintiffs contend that these charges are related to the conduct alleged here. Exhibits C and E contain stipulations of fact that BNPP agreed to as part of these two plea agreements. These two stipulations of fact largely overlap. See Compl. ¶ 201. BNPP expressly "admit[ed] the facts set forth" in these stipulations. Compl. Ex. B at 2. And it agreed that these facts "[were] true and correct, and that had the matter gone to trial, the United States and New York State would have proved them beyond a reasonable doubt." Compl. Ex. C at 1. In its factual recitation, the Court therefore accepts the facts contained in these stipulations as true. See Roth v. Jennings , 489 F.3d 499, 509 (2d Cir. 2007) ("Documents that are attached to the complaint or incorporated in it by reference are deemed part of the pleading and may be considered.").

In the 1980s, the Sudanese government and militia groups within Sudan began committing horrific human-rights violations. Compl. ¶ 69-70. Among other abuses, Plaintiffs suffered "beatings, maiming, sexual assault, rape, infection with HIV, loss of properly, displacement from their homes, and watching family members be killed." Compl. ¶ 24; see also id. ¶¶ 30-50. As a result, the United States in 1997 imposed sanctions on Sudan aimed at cutting off the regime's access to the American financial market. Compl. ¶ 8. Under this sanctions regime, banks operating in the United States could no longer broker U.S. dollar transactions for, or extend credit to, the Sudanese government and its agencies and instrumentalities. Compl. ¶ 8.

These sanctions posed a serious obstacle to the Sudanese government. Sudan is an oil-rich country, and for years had sold oil on the international market. Compl. ¶¶ 4-5, 71-72. The international oil market, however, is priced in U.S. dollars and clears transactions overwhelmingly through New York. Compl. ¶¶ 6, 75-76. Countries that trade oil in non-dollar currencies or are unable to clear transactions in the United States are severely disadvantaged. Compl. ¶ 6. They must either sell their oil at a below-market price or barter their oil in exchange for other goods or services, "both of which have significant drawbacks." Compl. ¶ 77, see also id. ¶ 12 ("Absent [access to the U.S. financial system], countries need to export commodities and import goods through barter or through use of secondary currencies, both of which are significantly less efficient and result in less revenue from exports and more costly imports."). To maximize its oil revenue, Sudan therefore needed access to this America-centric market—which the sanctions regime had attempted to cut off.

The Sudanese government turned to BNPP for help. BNPP's Geneva subsidiary used various financial tricks and fraud to permit the Sudanese government and banks to get around the sanctions and transact in dollars. The Court details these practices at length, and takes special care to emphasize the location in which they occurred: Switzerland.

First, BNPP Geneva served as the sole correspondent bank for the Sudanese government and the primary European correspondent bank for all major Sudanese commercial banks. A correspondent bank provides financial services on behalf of other financial institutions. In this case, BNPP Geneva provided dollar-based services to Sudanese entities, such as serving as an intermediary for dollar transactions. For example, the Sudanese government deposited money it earned from selling oil into the Central Bank of Sudan's account at BNPP Geneva. Compl. ¶ 105. And "nearly all major Sudanese commercial banks had U.S. dollar accounts with BNPP." Compl. ¶ 104. The statement of facts that BNPP stipulated to as part of its federal criminal proceeding makes clear that "BNPP Geneva" filled the role of correspondent bank, not any other of BNPP's branches, like BNPP New York. Ex. C. ¶ 19.

Second, BNPP Geneva established accounts with various banks in Africa, Europe, and the Middle East. BNPP Geneva then worked with these banks to "structure payments in highly complicated ways, with no legitimate business purpose, to conceal" transactions that violated American sanctions. Ex. C ¶ 16(b). These banks are variously called "regional banks" and "satellite banks" in the parties' filings. Once again, it was BNPP Geneva, not any other branch or subsidiary, that "successfully used the satellite bank structure ... to process thousands of U.S. dollar transactions." Ex. C ¶ 24; see also Ex. I ¶ 19 ("BNPP Geneva successfully used the Regional Bank structure, which had no business purpose other than to help BNPP's Sudanese clients evade the U.S. embargo, to process thousands of U.S. dollar transactions, worth billions of dollars in total.").

Third, BNPP Geneva offered letters of credit that helped finance Sudanese exports and imports. Compl. ¶ 106. Such letters protect against the risk of a party's non-performance in large commercial transactions. Compl. ¶ 80. They are "an essential part of trade finance." Compl. ¶ 80. "BNPP Geneva developed a business in letters of credit for Sudanese banks," and "letters of credit managed by BNPP Geneva represented approximately a quarter of all exports and a fifth of all imports for Sudan." Ex. C. ¶ 19. These letters of credit served dual purposes: they "enabled the [Sudanese government] to import weapons and other goods sold in dollars" and "facilitated and increased revenues from Sudan's crude oil sales, which accounted for nearly all of the country's exports." Compl. ¶ 108. By "having access to dollars and dollar-denominated letters of credit to purchase goods to import, the [Government of Sudan] was able to purchase materially more imports than it otherwise would ... BNPP's assistance gave the [Government of Sudan] more buying power than it otherwise would have had ... U.S. Sanctions were intended to prevent this precise outcome." Compl. ¶ 109.

Fourth, BNPP Geneva agreed with sanctioned entities in Sudan "not to mention their names in U.S. dollar transactions processed through the United States," and instructed satellite banks to do the same. Ex. C. ¶¶ 16(c)-(e), 21-22, 27. This helped "prevent the transactions from being blocked when they entered the United States." Ex. C ¶ 18.

Fifth, BNPP Geneva grew concerned that using BNPP's New York branch to clear dollars was too risky. BNPP Geneva thus began using other, unaffiliated United States banks to conduct the transactions, so that "the problem of violating U.S. sanctions shifted to the unaffiliated U.S. bank." Ex. I ¶ 48 (internal quotation marks omitted). Yet again, it was "BNPP Geneva employees [who] were instructed to have U.S. Dollar payments involving Sanctioned Entities cleared through" an unaffiliated American bank, and "the vast majority BNPP Geneva's transactions" were cleared through this bank. Ex. C. ¶¶ 29-31.

BNPP Geneva's financial chicanery created "a macabre feedback loop." Compl. ¶ 11. Because of these schemes, Sudan was able to realize market value for its oil and other goods. This in turn allowed...