Financial institutions have been increasingly subjected to actions seeking to hold them responsible for acts of international terrorism under Section 2333 of the Anti-Terrorism Act (ATA). However, recent decisions from the US Court of Appeals for the Second and Ninth Circuits have called into question a plaintiff’s ability to pursue institutions, including banks, under a direct theory of liability for harm resulting from international terrorism.

While these decisions appear to foreclose the use of the ATA to hold financial institutions directly liable for acts of international terrorism, they do not preclude the use of the ATA under certain circumstances, including those providing for the use of secondary liability. In fact, in 2016, the Justice Against Sponsors of Terrorism Act (JASTA) amended the ATA to explicitly provide for secondary liability for acts occurring on or after September 11, 2001.

Thus, while these recent circuit court decisions provide some comfort, the recently amended ATA provides an alternative route to liability that to date remains largely unexplored. In light of the Second and Ninth Circuits’ decisions, plaintiffs may attempt to reframe their claims against institutions so that they sound in aiding and abetting liability for international terrorism under the ATA.

Second Circuit Decision: Linde v. Arab Bank, PLC, No. 16-2098-CV (CON), 2018 WL 797454 (2d Cir. Feb. 9, 2018)

The Second Circuit’s recent Arab Bank decision is particularly noteworthy because it resulted in the vacatur of the very first verdict holding a bank civilly liable under the ATA for committing an act of international terrorism. Not only did the Arab Bank decision clarify what needs to be proven to hold institutions directly liable for acts of international terrorism under the ATA, but it also provided much needed guidance regarding the ATA’s newly added aiding and abetting theory of liability.

Plaintiffs brought suit against Arab Bank, PLC (Arab Bank) pursuant to Section 2333 of the ATA, which provides a civil remedy by which American citizens injured by an act of international terrorism can recover damages from those responsible for such an act.

In vacating the 2014 jury verdict against Arab Bank, the Second Circuit held that a financial institution such as a bank cannot be held directly liable for an act of “international terrorism” under Section 2333 of the ATA if the extent of its crime is that it violated Section 2339B of the ATA. (Section 2339B criminalizes the knowing provision of material support, such as financial services, to a designated foreign terrorist organization.)

Rather, the Second Circuit held that an institution may only be held liable for international terrorism so long as its behavior satisfies all of the definitional requirements set forth in Section 2331(1) of the ATA. The ATA defines international terrorism as activities that:

(a) involve violent acts or acts dangerous to human life illegal under United States federal or state law; (b) appear to be intended to (i) intimidate or coerce civilians; or (ii) influence governmental policy through intimidation or coercion; or (iii) affect a government’s actions through mass destruction, assassination, or kidnapping; and (c) occur primarily outside of the jurisdiction of the United States.

See 18 U.S.C.A. § 2331(1).

In contravention of the above statutory language defining international terrorism, the district court instructed the Arab Bank jury that proof that Arab Bank violated Section 2339B of the ATA necessarily proved Arab Bank’s commission of an act of international terrorism.

In determining that this instruction constituted error and mandating that the Arab Bank verdict be overturned, the Second Circuit held that a proper instruction must include all of Section 2331(1)’s definitional elements, including those pertaining to violence, danger and intimidation—for the jury charge to be proper.

Accordingly, to hold a financial institution directly liable under Section 2333 for an act of international terrorism, plaintiffs will have to plead and prove that the financial institution engaged in conduct involving violence, coercion or intimidation.

Given the difficulty of proving that responsible financial institutions engage in such illicit behavior, it is possible that plaintiffs will rely on an aiding and abetting theory of liability to pursue financial institutions for harm caused by international terrorism.

Ninth Circuit Decision: Fields v. Twitter, Inc., No. 16-17165, 2018 WL 626800 (9th Cir. Jan. 31, 2018)

Lending further support to the idea that it may be increasingly difficult to demonstrate that an institution is directly liable for an act of international terrorism, the Ninth Circuit recently held that the appropriate causation standard for primary liability under the ATA requires an institution’s actions to directly cause the harm resulting from an act of international terrorism.

Specifically, the Ninth Circuit affirmed the lower court’s dismissal of a lawsuit that claimed Twitter, Inc. (Twitter) was primarily liable under the ATA for a terrorist attack perpetrated by ISIS in Jordan. Section 2333 of the ATA provides that:

Any national of the United States injured in his or her person, property, or business by reason of an act of international terrorism, or his or her estate, survivors, or heirs, may sue therefor in any appropriate district court of the United States and shall recover threefold the damages he or she sustains and the cost of the suit, including attorney’s fees.

See 18 U.S.C.A. § 2333 (emphasis added).

Plaintiffs sued Twitter on behalf of their family members killed during the attack, claiming that plaintiffs’ injuries occurred “by reason of” Twitter’s knowing provision of material support to ISIS in the form of Twitter accounts and direct-messaging services. The Ninth Circuit held that plaintiffs did not adequately plead proximate causation to satisfy the ATA’s “by reason of,” requirement because they failed to show some direct relationship between the injuries suffered and Twitter’s acts.

Key Takeaways from the Circuit Court Decisions

The Second Circuit’s Arab Bank decision would suggest that plaintiffs may seek to assert that institutions aided and abetted international terrorism, instead of directly caused international terrorism, because such secondary liability does not require showing that the aider and abettor caused the actual harm. (In its decision, the Second Circuit explained that the relevant causation inquiry under an aiding and abetting theory of liability is whether the act of international terrorism was facilitated by the aider and abettor, not whether the aider and abettor caused the actual injury resulting from the act of international terrorism.)

In its Arab Bank decision, the Second Circuit also clarified that under a secondary theory of liability, plaintiffs would not need to show that the institution’s acts themselves constituted “international terrorism” as defined by Section 2331(1) of the ATA. Rather, plaintiffs would have to prove that the institution was “aware” that, by assisting the terrorist organization, it was itself assuming a role in the terrorist’s violent or coercive activities.

Both the recent Second and Ninth Circuit decisions parsing institutions’ direct liability for acts of international terrorism demonstrate the difficulty of showing that such institutions either sought to engage in the violent or coercive acts necessary for proving international terrorism or caused the harm resulting from acts of international terrorism through their provision of services to terrorist organizations.

Liability under the ATA for institutions will likely continue to be the subject of analysis until the United States Supreme Court weighs in on the matter. Given the significant amount of potential damages recoverable under the ATA, banks and other institutions should closely follow the development of theories of liability under Section 2333 of the ATA in order to best protect themselves from civil liability for their provision of services to a wide variety of international organizations.