Lelchook v. Islamic Republic of Iran, No. 15-cv-13715 (D. Mass. Dec. 20, 2016) [click for opinion]
During the summer of 2006, David Lelchook, an American citizen, was killed by a rocket fired by Hezbollah into northern Israel. Plaintiffs, his relatives, alleged that Defendants—the Islamic Republic of Iran, the Central Bank of the Islamic Republic of Iran, Bank Saderat Iran, and Bank Saderat, PLC ("BSPLC")—helped wire money to Hezbollah. Plaintiffs filed claims under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602 et seq., the Antiterrorism Act, 18 U.S.C. § 2331 et seq., and supplemental tort claims under Israeli and Massachusetts law. BSPLC moved to dismiss for lack of personal jurisdiction.
Plaintiffs asserted two bases for personal jurisdiction over BSPLC. First, they argued that the rocket attack that killed David Lelchook was directed at the United States. Second, they asserted that some, or all, of the $50 million transferred between BSPLC and its parent bank, which was ultimately wired to Hezbollah, was processed through the United States.
The court explained that personal jurisdiction in federal question cases is governed by the due process clause of the fifth amendment, and requires minimum contacts only with the United States, rather than a particular forum state. However the court held that the rocket attacks did not provide such contacts. While Plaintiffs alleged that BSPLC helped funnel funds from Iran to Hezbollah, that Hezbollah then fired rockets into Israel, and that one of these rockets struck and killed an American citizen, Plaintiffs failed to allege that Hezbollah purposefully directed the rockets at the United States or American citizens abroad. Furthermore, several courts had already rejected similar arguments: allegations that a foreign defendant had targeted American citizens living abroad—without allegations of knowledge the victims were American citizens or connected to the United States—were insufficient to support the exercise of personal jurisdiction.
The court then considered Plaintiffs' second basis for jurisdiction: that the wire transfers were processed through the U.S. banking system. The court noted that a district court cannot exercise personal jurisdiction unless a statute or rule authorizes the forum court to exercise its dominion over the defendants. While Federal Rule of Civil Procedure 4(k)(2) is such a statute, it provides for personal jurisdiction only if the defendant is not subject to jurisdiction in any particular state's courts. Here, however, that requirement was not met, as BSPLC was likely subject to jurisdiction in New York.
The court explained that when BSPLC transferred funds to another foreign bank, the transaction was likely processed in New York because the funds were denominated in U.S. dollars. Eurodollar transactions are settled electronically in New York through a bank-owned clearing house and then maintained by book entries of credits and debits in the counterparties' accounting system. Nearly all U.S.-dollar transfers initiated through banks outside of the United States are processed electronically by correspondent banks in the United States, almost exclusively in New York, even if between foreign banks. The court noted that New York courts have found personal jurisdiction under similar circumstances, where a foreign bank maintained and utilized a correspondent account in New York to process similar dollar-denominated transactions, and concluded that there is probably personal jurisdiction in New York.
Finding no personal jurisdiction over Plaintiff in Massachusetts for these reasons, but likely jurisdiction in New York, the court denied the motion to dismiss and transferred the case to the Eastern District of New York.