Yaakov v. Lebanese Canadian Bank

• Decision Date: 20 November 2012
• Citation: 20 N.Y.3d 327,984 N.E.2d 893,2012 N.Y. Slip Op. 07854,960 N.Y.S.2d 695
• Parties: Yaakov LICCI, a Minor, by His Father and Natural Guardian, Elihav Licci, and by His Mother and Natural Guardian, Yehudit Licci, et al., Appellants, v. LEBANESE CANADIAN BANK, SAL, Respondent, et al., Defendant.
• Court: New York Court of Appeals Court of Appeals

20 N.Y.3d 327

984 N.E.2d 893

960 N.Y.S.2d 695

2012 N.Y. Slip Op. 07854

Yaakov LICCI, a Minor, by His Father and Natural Guardian, Elihav Licci, and by His Mother and Natural Guardian, Yehudit Licci, et al., Appellants,

v.LEBANESE CANADIAN BANK, SAL, Respondent, et al., Defendant.

Court of Appeals of New York.

Nov. 20, 2012.

The Berkman Law Office, LLC, Brooklyn (Robert J. Tolchin of counsel), and Meir Katz of the Maryland bar, admitted pro hac vice, for appellants.

DLA Piper LLP, New York City (Jonathan D. Siegfried, Andrew Deutsch and Joshua Sprague of counsel), for respondent.

OPINION OF THE COURT

READ, J.

Plaintiffs are several dozen United States, Canadian, and Israeli citizens who reside in Israel and were injured, or whose family members were killed or injured, in rocket attacks allegedly launched by Hizballah during the Second Lebanon War in July and August 2006. Hizballah is designated by the United States Department of State as an Islamic terrorist organization. Plaintiffs brought suit in July 2008 in Supreme Court against the Lebanese Canadian Bank, SAL (LCB or the bank), a now defunct bank headquartered in Beirut,¹ claiming that LCB, with the aid of codefendant American Express Bank (AmEx), assisted Hizballah in committing these illegal attacks by facilitating international monetary transactions through the Shahid Foundation (Shahid or the foundation),² an entity the complaint identifies as part of the “financial arm” of Hizballah. After AmEx removed the lawsuit to the United States District Court for the Southern District of New York, plaintiffs filed an amended complaint in January 2009, bringing claims against LCB, depending on their citizenship, for primary and aiding-and-abetting liability for international terrorism under the Anti–Terrorism Act ³ (United States citizens); aiding-and-abetting liability for genocide, war crimes and crimes against humanity in violation of international law, as made actionable by the Alien Tort Statute (ATS) ⁴ (various Canadian and Israeli citizens);and negligence and breach of statutory duty in violation of Israeli law ⁵ (all but four plaintiffs). Plaintiffs asserted personal jurisdiction over LCB under New York's long-arm statute, which states at CPLR 302(a)(1) as follows:

“(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:

“1. transacts any business within the state ...;” (emphases added).

In April 2009, LCB moved under Federal Rules of Civil Procedure rule 12(b)(2) to dismiss the complaint for lack of personal jurisdiction, and under Federal Rule 12(b)(6) for failure to state a claim upon which relief can be granted.⁶ Plaintiffs opposed LCB's motion and submitted evidence linking Hizballah and Shahid, including a declaration from a former Israeli counter-terrorism official attesting to Shahid's status as a financial front for Hizballah. LCB did not operate branches or offices, or maintain employees, in the United States. Its sole point of contact with the United States was a correspondent banking account with AmEx in New York. Plaintiffs allege that LCB used this correspondent account with AmEx to transfer several million dollars by means of “dozens” of international wire transfers on behalf of Shahid; that LCB knew that Hizballah was a terrorist organization and that Shahid was part of its financial arm; that the wire transfers “caused, enabled and facilitated the terrorist rocket attacks” that injured them and their families; and that LCB knew that Hizballah required wire transfer services in order to operate, plan, prepare for and carry out such terrorist attacks. Plaintiffs also claim that LCB's official policy “continuously supports and supported Hizbollah and its anti-Israel program, goals and activities”; and that LCB carried out the wire transfers “to assist and advance Hizbollah's goal of using terrorism to destroy the State of Israel.”

On March 31, 2010, the District Court Judge granted LCB's motion to dismiss for lack of personal jurisdiction, concluding that plaintiffs had not made a prima facie showing under CPLR 302(a)(1). First, the Judge concluded that LCB had not “transacted business” within the meaning of section 302(a)(1) because “mere maintenance of [a] correspondent bank account with a financial institution in New York is not, standing alone, a sufficient basis to subject a foreign defendant to personal jurisdiction,” citing Tamam v. Fransabank SAL, 677.F Supp.2d 720, 727 (S.D.N.Y.2010); ⁷ and “active execution through New York of dozens of wire transfers totaling millions of dollars over a multi-year period” does not convert “mere maintenance” into “a ‘use’ of a correspondent account ... sufficient to confer jurisdiction over a foreign bank” since “no meaningful distinction may be drawn between a foreign bank's maintenance of a correspondent account to effect international wire transfers and its indiscriminate use of that account for that exact purpose” (704 F.Supp.2d at 407–408).

Second, the District Court Judge opined that plaintiffs' claims did not “arise from” LCB's wire transfers in New York because no “articulable nexus or substantial relationship exist[ed] between LCB's general use of its correspondent account for wire transfers through New York and the specific terrorist activities by Hizbollah underlying plaintiffs' claims,” again citing Tamam( id. at 408;see n. 7, supra ). He considered it important that although “plaintiffs allege[d] that [the] transferred funds at issue ‘substantially increased’ Hizbollah's ability to commit rocket attacks, including the ones in which plaintiffs were harmed[, they] themselves [were] not customers of [LCB or AmEx], nor did they have any financial interest in the wired funds” ( id.). Next, the Judge observed that the harms suffered by plaintiffs and their family members were caused by rockets, not banking services. As a result, he concluded, “LCB's maintenance or use of its correspondent bank account [was] too attenuated from Hizbollah's attacks in Israel to assert personal jurisdiction based solely on wire transfers through New York” ( id.).

Additionally, the District Court Judge denied plaintiffs' “alternative request” to conduct limited jurisdictional discovery because “[t]he Court's finding, that LCB's correspondent banking activities [were] insufficient to subject it to jurisdiction, renders the proposed discovery sought by plaintiffs futile” ( id.). Having granted LCB's motion to dismiss the complaint for lack of personal jurisdiction, the Judge did not consider whether the pleadings stated a cognizable legal claim.

Plaintiffs appealed the dismissal to the United States Court of Appeals for the Second Circuit.⁸ Noting that in order to determine whether personal jurisdiction exists under CPLR 302(a)(1), “ ‘a court must decide (1) whether the defendant “transacts any business” in New York and, if so, (2) whether [the] cause of action “aris[es] from” such a business transaction’ ” ( 673 F.3d 50, 60 [2012], quoting Best Van Lines, Inc. v. Walker, 490 F.3d 239, 246 [2d Cir.2007] ), the Second Circuit has asked us to resolve two questions of New York law regarding this two-prong jurisdictional analysis, which we now consider.

Certified Question No. 1

“(1) Does a foreign bank's maintenance of a correspondent bank account at a financial institution in New York, and use of that account to effect ‘dozens' of wire transfers on behalf of a foreign client, constitute a ‘transact[ion]’ of business in New York within the meaning of N.Y. C.P.L.R. § 302(a)(1)?” (673 F.3d at 66.)

In asking us this, the Second Circuit observed that we had “apparently not yet addressed the precise question” of “whether a foreign bank's frequent use of a correspondent account in New York to effect international wire transfers on behalf of an overseas client is an act directed with sufficient purposefulness at New York to constitute a transaction of business” under our long-arm statute (673 F.3d at 62–63). As the court recognized, though, we have discussed similar or related issues in several decisions, first and perhaps most importantly in Amigo Foods Corp. v. Marine Midland Bank–N.Y., 39 N.Y.2d 391, 384 N.Y.S.2d 124, 348 N.E.2d 581 (1976);see also Ehrlich–Bober & Co. v. University of Houston, 49 N.Y.2d 574, 427 N.Y.S.2d 604, 404 N.E.2d 726 (1980) (upholding personal jurisdiction over defendant public university located in Texas based upon use of a correspondent bank in New York to carry out a transaction with plaintiff New York securities dealer where other contacts existed—i.e., the disputed “reverse repurchase” agreements involved phone calls and visits to plaintiff's office in New York, and the placing of a securities order and delivery and payment in that office); Banco Ambrosiano v. Artoc Bank & Trust, 62 N.Y.2d 65, 476 N.Y.S.2d 64, 464 N.E.2d 432 (1984) (quasi-in-rem jurisdiction exists where defendant Bahamian bank regularly used its New York correspondent account to accomplish its international banking business, including the loan transaction at issue); Indosuez Intl. Fin. v. National Reserve Bank, 98 N.Y.2d 238, 746 N.Y.S.2d 631, 774 N.E.2d 696 (2002) (upholding personal jurisdiction over defendant Russian bank that maintained a bank account in New York and regularly used it in connection with currency-exchange options transactions, thus establishing a “course of dealing” in New York).

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