Zapata v. HSBC Holdings PLC

• Decision Date: 30 September 2019
• Docket Number: 17-CV-6645 (NGG) (CLP)
• Citation: 414 F.Supp.3d 342
• Parties: Mary M. ZAPATA, individually and as administrator of the estate of Jaime J. Zapata; Amador Zapata Jr.; Amador Zapata III, individually and as administrator of the estate of Jaime J. Zapata); Carlos Zapata ; Jose Zapata ; E. William Zapata; Victor Avila, Jr., individually and as guardian for S.A. and V.E.A.; Victor Avila ; Magdalena Avila Villalobos; Jannette Quintana; Mathilde Cason, individually and as administrator of the estate of Arthur and Lesley Redelfs, and as guardian for R.R.; Robert Cason; Reuben Redelfs; Paul Redelfs; Katrina Redelfs Johnson; Beatrice Redelfs Duran; Rafael Morales, individually and as administrator of the estate of Rafael Morales Valencia; Maria Morales; Moraima Morales Cruz, individually and as guardian for G.C., A.C., and N.C.; Juan Cruz; Lourdes Batista, individually and as administrator of the estate of Felix Batista; Adrielle Batista; Amari Batista; Alysandra Batista; Andrea Batista; Adam Batista; Marlene Norono; and Jacqueline Batista, Plaintiffs, v. HSBC HOLDINGS PLC; HSBC Bank U.S.A., N.A.; HSBC Mexico S.A. Institucion de Banca Multiple, Grupo Financiero HSBC; and Grupo Financiero HSBC, S.A. de C.V., Defendants.
• Court: U.S. District Court — Eastern District of New York

414 F.Supp.3d 342

Mary M. ZAPATA, individually and as administrator of the estate of Jaime J. Zapata; Amador Zapata Jr.; Amador Zapata III, individually and as administrator of the estate of Jaime J. Zapata); Carlos Zapata ; Jose Zapata ; E. William Zapata; Victor Avila, Jr., individually and as guardian for S.A. and V.E.A.; Victor Avila ; Magdalena Avila Villalobos; Jannette Quintana; Mathilde Cason, individually and as administrator of the estate of Arthur and Lesley Redelfs, and as guardian for R.R.; Robert Cason; Reuben Redelfs; Paul Redelfs; Katrina Redelfs Johnson; Beatrice Redelfs Duran; Rafael Morales, individually and as administrator of the estate of Rafael Morales Valencia; Maria Morales; Moraima Morales Cruz, individually and as guardian for G.C., A.C., and N.C.; Juan Cruz; Lourdes Batista, individually and as administrator of the estate of Felix Batista; Adrielle Batista; Amari Batista; Alysandra Batista; Andrea Batista; Adam Batista; Marlene Norono; and Jacqueline Batista, Plaintiffs,

v.HSBC HOLDINGS PLC; HSBC Bank U.S.A., N.A.; HSBC Mexico S.A. Institucion de Banca Multiple, Grupo Financiero HSBC; and Grupo Financiero HSBC, S.A. de C.V., Defendants.

17-CV-6645 (NGG) (CLP)

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

September 30, 2019

Richard Elias, Greg Gutzler, Tamara Spicer, Pro Hac Vice, Elias Gutzler Spicer LLC, Saint Louis, MO, Benigno Martinez, III, Pro Hac Vice, Law Office of Benigno Trey Martinez, PLLC, Edward Michael Rodriguez, Pro Hac Vice, Atlas Hall & Rodriguez, LLP, Brownsville, TX, Geoffrey Graber, Pro Hac Vice, Cohen Milstein Sellers & Toll PLLC, Washington, DC, Michael B. Eisenkraft, Cohen Milstein Sellers & Toll PLLC, New York, NY, for Plaintiffs.

Mark G. Hanchet, Robert William Hamburg, Mayer Brown LLP, New York, NY, Andrew J. Pincus, Marc R. Cohen, Pro Hac Vice, Mayer Brown, LLP, Washington, DC, for Defendants HSBC Holdings PLC, a United Kingdom Corporation, HSBC Bank USA N.A., Institucion de Banca Grupo Financier HSBC Mexico S.A.

Mark G. Hanchet, Robert William Hamburg, Mayer Brown LLP, New York, NY, for Defendant Grupo Financiero HSBC, SA de CV.

MEMORANDUM & ORDER

NICHOLAS G. GARAUFIS, United States District Judge.

Thirty victims and family members of victims of violent acts perpetrated by Mexican drug cartels bring this suit under the Anti-Terrorism Act, 18 U.S.C. § 2331 et seq. (the "ATA"), alleging that Defendants HSBC Holdings plc ("HSBC Holdings"); HSBC Bank USA, N.A. ("HSBC US"); and two Mexican HSBC subsidiaries: (1) HSBC México S.A., Institutión de Banca Múltiple, Grupo Financiero HSBC, and (2) Grupo Financiero HSBC, S.A. de C.V. ("HSBC Mexico" and "Grupo Financiero" respectively and, collectively, the "Mexican HSBC Entities") committed acts of international terrorism by laundering drug proceeds for the cartels. (Compl. (Dkt. 1) ¶¶ 8-12.) HSBC Holdings moves to dismiss the complaint for lack of personal jurisdiction (HSBC Holdings Mot. to Dismiss for Lack of Jurisdiction ("HSBC Holdings Mot.") (Dkt. 32)), and all Defendants move to dismiss the complaint for failure to state a claim under the ATA (Mot. to Dismiss for Failure to State a Claim ("Defs. Mot.") (Dkt. 33)). For the reasons set forth below, HSBC Holdings' motion to dismiss for lack of personal jurisdiction is GRANTED and the remaining Defendants' motion to dismiss for failure to state a claim is GRANTED.

I. BACKGROUND

A. Factual Allegations

The Plaintiffs are victims and family members of the victims of five of Mexico's largest and most powerful drug cartels: the Sinaloa Cartel, the Juarez Cartel, the Los Zetas Cartel, the Gulf Cartel, and the Norte del Valle Cartel (collectively, the "Cartels"). (Compl. ¶¶ 1, 51-88.) The complaint details atrocities committed by the Cartels including: "gruesome public displays designed to intimidate and coerce" (id. ¶¶ 62-65); "attacks on children and women" (id. ¶¶ 66-67); "mass murders" (id. ¶ 68); "attacks on the media" (id. ¶¶ 69-73); "attacks on public officials" (id. ¶ 74); "attacks on police and military" (id. ¶¶ 75-76); "kidnappings" (id. ¶ 77); and "attacks on American civilians and officials" (id. ¶¶ 78-88). Plaintiffs allege that they or their family members were injured or killed in Mexico by acts of cartel violence between 2008 and 2011, incidents they characterize as "terrorist attacks." Specifically Plaintiffs allege that they were injured by:

• The 2011 attack outside San Luis Potosí on ICE Special Agents Jaime Zapata and Plaintiff Victor Avila, Jr. by the Los Zetas Cartel (id. ¶¶ 90-97);

• The 2010 attack in Ciudad Juárez by the Juarez-Cartel-aligned Barrio Aztecas street gang on U.S. consular employee Lesley Redelfs and her husband, Arthur Redelfs, in front of their infant child (id. ¶¶ 98-106);

• The 2010 murder in Ciudad Juárez of Rafael Morales, Jr., and members of his family by "assassins from the Sinaloa Cartel" (id. ¶¶ 107-112); and

• The 2008 murder in Saltillo, Coahuila, of U.S. security consultant Felix Batista by the Los Zetas Cartel (id. ¶¶ 113-115).

According to Plaintiffs, the Cartels rely on money laundering to integrate the substantial cash proceeds of their drug sales into the legitimate economy. (Id. ¶¶ 116-33.) As part of the laundering process, cash is deposited into USD-denominated bank accounts through intermediaries, typically either individuals or currency exchange businesses known as "casas de cambio." (Id. ¶¶ 126-133.) Plaintiffs allege that HSBC Mexico routinely opened USD-denominated accounts for and accepted large cash deposits from individuals and entities that were "known or suspected money launderers for [the Cartels]" (including casas de cambio and corporations known to work with or for the Cartels) without obtaining required know-your-customer ("KYC") information. (Compl. ¶¶ 159, 174-176). Plaintiffs further allege that these deposits were subsequently laundered by HSBC US into the American financial system, by wire transfers through HSBC US's correspondent account with HSBC Mexico, and by HSBC US's "Banknotes" program, through which it purchased bulk physical currency from HSBC Mexico. (Id. ¶¶ 216-225.) All of this, according to Plaintiffs, was possible because, despite several warnings from within and without the organization, HSBC Holdings, HSBC US, and HSBC Mexico deliberately maintained substandard anti-money laundering ("AML") policies, and because HSBC US failed to conduct appropriate due diligence on HSBC Mexico. (Id. ¶¶ 154-259.)

On December 11, 2012, HSBC Holdings and HSBC US entered into a deferred prosecution agreement in which they admitted laundering at least $881 million in drug-trafficking proceeds and agreed to pay $1.9 billion in forfeiture and fines. (Id. ¶¶ 250-259.)

B. Procedural History

1. Prior Litigation

Before instituting the present action, Plaintiffs filed a nearly identical complaint in the Southern District of Texas before Judge Andrew S. Hanen. (Compare First Amended Complaint, Zapata v. HSBC Holdings plc, No. 16-cv-30 (S.D. Tex. May 3, 2016) (the "Texas Action") (Dkt. 36); with Compl.) After Judge Hanen dismissed HSBC Holdings and the Mexican HSBC Entities for lack of personal jurisdiction, Plaintiffs voluntarily dismissed the Texas Action without prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i) and refiled in this court. See Zapata v. HSBC Holdings plc, No. 16-cv-30, 2017 WL 6939209, at *6 (S.D. Tex. Sept. 14, 2017) (" Zapata I") (dismissing HSBC Holdings); Zapata v. HSBC Holdings plc, No. 16-cv-30, 2017 WL 6939210, at *9 (S.D. Tex. Oct. 17, 2017) (" Zapata II") (dismissing the Mexican HSBC Entities); see also Notice of Voluntary Dismissal (Dkt. 36 at ECF 12-14); Order Dismissing Plfs. Claims Without Prejudice (Dkt. 36 at ECF 16).

2. The Instant Action

Plaintiffs bring this action pursuant to the ATA's civil remedies provision, codified at 18 U.S.C. § 2333(a). Section 2333(a) provides for recovery of treble damages and attorney's fees by United States nationals and their estates, survivors, and heirs for injuries sustained "by reason of an act of international terrorism." 18 U.S.C. § 2333(a). In support of their claim that Defendants engaged in acts of "international terrorism," Plaintiffs allege that Defendants violated two criminal provisions of the ATA: 18 U.S.C. § 2339A, which criminalizes the provision material support to terrorists, and 18 U.S.C. § 2339C, which criminalizes the financing of terrorism.¹

Plaintiffs bring ATA claims against:

1) Defendant HSBC Holdings, the ultimate parent company of all HSBC entities, including the remaining Defendants. HSBC Holdings is incorporated in England and Wales and headquartered in London.

2) Defendant HSBC US, a federally chartered bank headquartered in McLean, Virginia, with its principal office in New York City.

3) Defendant Grupo Financiero, an indirect subsidiary of HSBC Holdings.

4) Defendant HSBC Mexico, the principal operating company of Defendant Grupo Financiero.

Currently before the court are HSBC Holdings' motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) and all Defendants' motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6).

The court will first address HSBC Holdings' Rule 12(b)(2) motion and then address the remaining Defendants' Rule 12(b)(6) motion.

II. HSBC HOLDINGS' MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

HSBC Holdings offers two arguments in support of its motion. First, HSBC Holdings asserts that, under principles of issue preclusion, Zapata I estops Plaintiffs from relitigating the issue of personal jurisdiction over HSBC Holdings in this proceeding.² (See Mem. in Supp. of HSBC Holdings Mot. ("HSBC Holdings Mem.") (Dkt. 34) at 2-5.) Second, HSBC Holdings contends that, assuming issue preclusion does not apply, Plaintiffs have failed to establish personal jurisdiction over HSBC Holdings under Federal Rule of Civil Procedure 4(k)(2). (Id. at 5-8.)

For the reasons discussed below, the court agrees that Judge Hanen's order in the Texas Action...