Licci v. Lebanese Canadian Bank SAL, No. 10-1306-cv (2d Cir. Oct. 18, 2013) [click for opinion]
American, Canadian, and Israeli citizens who were victims and relatives of victims of 2006 rocket attacks allegedly launched by the terrorist organization Hizballah sued Lebanese Canadian Bank, SAL ("LCB"), a foreign bank, in New York. Plaintiffs alleged that LCB repeatedly used a New York-based correspondent bank account to wire millions of dollars to the financial arm of Hizballah to finance the rocket attacks, in violation of the Anti-Terrorism Act (18 U.S.C. § 2333), the Alien Tort Statute (28 U.S.C. § 1350), and Israeli law. LCB's correspondent bank account with American Express Bank in New York was its only contact with the United States, so LCB moved to dismiss the action for lack of personal jurisdiction.
The district court granted the motion to dismiss, Plaintiffs appealed, and the Second Circuit certified two questions to the New York Court of Appeals: (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 make dozens of wire transfers on behalf of a foreign client constitute a transaction of business in New York within the meaning of New York Civil Practice Law and Rule § 302(a)(1)?; and (2) Do Plaintiffs' claims "arise from" LCB's transaction of business in New York within the meaning of CPLR § 302(a)(1)? The Court of Appeals said yes to both. The case then returned to the Second Circuit, which considered whether subjecting LCB to personal jurisdiction in New York comports with due process under the U.S. Constitution.
Applying well-settled principles of due process and personal jurisdiction, the Second Circuit held that LCB's selection and repeated use of New York's banking system as an instrument for accomplishing the alleged wrongs for which Plaintiffs seek redress constituted "purposeful availment" of the privilege of doing business in New York. The court cautioned that "mere maintenance" of an account would not support an exercise of personal jurisdiction over an account holder. But where, as here, LCB utilized the New York bank account to wire several million dollars through dozens of transactions, its contacts with New York were not "random, isolated, or fortuitous." The Second Circuit emphasized that, even though LCB had the ability to process the dollar-denominated wire transfers anywhere in the world, it specifically chose to process its many transfers through a bank located in New York.
The court rejected LCB's argument that Plaintiffs had failed to allege sufficient in-state effects, reasoning that a Plaintiff need not satisfy the "effects test" where the conduct forming the basis for personal jurisdiction occurs within the forum, establishing minimum contacts and reflecting purposeful availment of the privilege of carrying on activities in the forum. Finally, the court found the exercise of personal jurisdiction reasonable, noting that the state and federal governments have an interest in monitoring banks and banking activity to ensure that the banking system is not used as an instrument to support terrorism, money laundering, or other nefarious goals.
The court held that it had personal jurisdiction over LCB