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United States of America v. Lebanese Canadian Bank Sal et al

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK


June 6, 2012

UNITED STATES OF AMERICA, PLAINTIFF,
v.
LEBANESE CANADIAN BANK SAL ET AL., DEFENDANTS.

The opinion of the court was delivered by: Paul A. Engelmayer, District Judge:

OPINION & ORDER

The United States moves for (1) leave to effect service of the Summons and Complaint in this matter by alternative means, upon defendants Lebanese Canadian Bank SAL, Ellissa Holding Company, and Hassan Ayash Exchange Company, and (2) issuance of letters rogatory as to the Republic of Lebanon, Togo, and Benin. Specifically, the government seeks authority to effect service on LCB, Ellissa, and Ayash via service by mail on the respective counsel who have appeared for each entity in connection with in rem proceedings in this action. LCB opposes the government's motion as to alternative service, but not as to letters rogatory. Neither Ellissa nor Ayash submitted a response to the government's motion. For the reasons that follow, the motion is granted in full.

I. Background*fn1

On December 15, 2011, the United States brought this in rem forfeiture action and civil money laundering complaint against multiple Lebanese financial institutions, as well as against various United States-based used car purchasers. The action arises out of an investigation, conducted by the U.S. Drug Enforcement Agency and other federal law enforcement agencies, into an alleged scheme to launder money, through the U.S. financial system and the used car market, for the benefit of Hizballah, designated as a Foreign Terrorist Organization by the U.S. Department of State, based in Lebanon.

Defendants Lebanese Canadian Bank SAL ("LCB"), Ellissa Holding Company ("Ellissa"), and Hassan Ayash Exchange Company ("Ayash") are headquartered in Lebanon. Defendants Salhab Travel Agency ("Salhab") and STE Marco SARL ("Marco") are located in Togo. Defendant STE Nomeco SARL ("Nomeco") is located in Benin. Lebanon, Togo, and Benin are not parties to the Hague Service Convention. See Convention on the Service Abroad of Judicial and Extra-judicial Documents in Civil or Commercial Matters, 20 U.S.T. 361, 658 U.N.T.S. 163 (Nov. 15, 1965) ("Hague Convention").

Between March 1 and March 7, 2012, copies of the Complaint, instructions for filing a claim in this action, and requests to waive formal service of process pursuant to Rule 4(d) of the Federal Rules of Civil Procedure were sent by commercial carrier to LCB, Ayash, and Ellissa at addresses in Lebanon. The packages sent to LCB and Ayash were delivered successfully; the packages sent to Ellissa were not delivered.

Between March 1 and March 7, 2012, copies of the Complaint, instructions for filing a claim in this action, and requests to waive formal service of process pursuant to Rule 4(d) were sent by commercial carrier to Salhab and Marco at addresses in Togo. The packages sent to Salhab were not delivered successfully; Marco is reported to have refused to accept the packages.

Between March 6 and March 7, 2012, copies of the Complaint, instructions for filing a claim in this action, and requests to waive formal service of process pursuant to Rule 4(d) of the Federal Rules of Civil Procedure were sent by commercial carrier to Nomeco at an address in Benin. The packages sent to Nomeco were delivered successfully.

On April 9, 2012, LCB filed a claim in the forfeiture action. In its claim, LCB asserted: "Claimant's appearance is expressly restricted to the defense of this claim, and the Verified Claim does not constitute an appearance for any other purpose, nor does it confer jurisdiction over Claimant." Dkt. 183.

In a letter dated April 12, 2012, the government requested additional time to serve LCB, Ayash, Ellissa, Salhab, Marco, and Nomeco, citing difficulties in perfecting service on those foreign entities. The government represented that it had retained counsel in Lebanon to assist the government in serving the entities in Lebanon, identified counsel in Togo to assist in serving the entities in Togo, and engaged State Department representatives in Benin to locate local counsel to assist in serving Nomeco.

On April 13, 2012, Ayash and Ellissa filed claims in the forfeiture action. In their claims, Ayash and Ellissa asserted: "Claimant's appearance is expressly restricted to the defense of this claim, and the Verified Claim does not constitute an appearance for any other purpose, nor does it confer jurisdiction over Claimant." Dkts. 191 & 192.

On April 23, 2012, counsel for LCB entered a "restricted appearance" in this matter for the purpose of moving to dismiss the government's Verified Complaint for lack of in rem jurisdiction over its assets.*fn2

On May 4, 2012, the government filed its motion to effect service on LCB, Ayash, and Ellissa through alternative means, and for the issuance of letters rogatory to Lebanon, Togo, and Benin. On May 18, 2012, LCB filed its opposition to the motion to effect service through alternative means; LCB does not oppose the government's motion for letters rogatory. Ayash and Ellissa did not submit a response to the government's motion.

Claims in this matter have been filed on behalf of LCB, all assets of Ayash, and all assets of Ellissa. Salhab, Marco, and Nomeco have not filed claims.

II.Legal Standard

Under Rule 4(f) of the Federal Rule of Civil Procedure, service may be effected upon individuals in foreign countries by any of three mechanisms: (1) "any internationally agreed means of service that is reasonably calculated to give notice, such as those authorized by the [Hague Convention]"; (2) "by a method that is reasonably calculated to give notice," for example, "as the foreign authority directs in response to a letter rogatory"; and (3) "by other means not prohibited by international agreement, as the court orders." Fed. R. Civ. P. 4(f)(1)--

(3). Rule 4(h) provides that service of process on foreign corporations may be made in the same manner as on individual defendants under Rule 4(f).

It is well established that "there is no hierarchy among the subsections in Rule 4(f)." Advanced Aerofoil Techs., AG v. Todaro, No. 11-cv-9505, 2012 WL 299959, at *1 (S.D.N.Y. Jan. 31, 2012). Rule 4(f)(3), which permits courts to allow service on a defendant in a foreign country by any "means not prohibited by international agreement," is "neither a last resort nor extraordinary relief. It is merely one means among several which enables service of process on an international defendant." Id. (citing Rio Props. v. Rio Int'l Interlink, 284 F.3d 1007, 1015 (9th Cir. 2002) (quotation marks and citation omitted)). The decision of whether to order service of process under Rule 4(f)(3) is "committed to the sound discretion of the district court." Madu, Edozie & Madu, P.C. v. SocketWorks Ltd. Nigeria, 265 F.R.D. 106, 115 (S.D.N.Y. 2010) (quotation marks and citations omitted). To obtain the Court's permission to utilize Rule 4(f)(3), plaintiffs must show that "the facts and circumstances of the present case necessitate . . . district court intervention." Rio Int'l Interlink, 284 F.3d at 1016 (citation omitted).

III.Discussion

The government seeks authority to effect service on LCB, Ellissa, and Ayash through service by mail on the respective counsel who have appeared for each entity in this action. LCB counters that its counsel properly entered a "restricted appearance" in the in rem action under the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions ("Supplemental Rules"), thereby precluding the government from, effectively, capitalizing on that appearance as a means to obtain personal jurisdiction in this civil litigation.

The Supplemental Rules permit counsel to make restricted appearances with respect to certain types of in rem actions. Supplemental Rule E(8) provides:

An appearance to defend against an admiralty and maritime claim with respect to which there has issued process in rem . . . may be expressly restricted to the defense of such claim, and in that event is not an appearance for the purposes of any other claim with respect to which such process is not available or has not been served.

Where Supplemental Rule E(8) applies, service as to in personam claims must be based on factors "unrelated to the restricted appearance" as to in rem claims. Hall v. S.V. "Jackie O," No. 89-23, 1990 WL 198415, at *1 (D.V.I. Nov. 13, 1990).

LCB argues that the Court should not permit the government to effect service on in rem counsel for the defendants, because doing so would violate Supplemental Rule E(8). The Court disagrees, because Supplemental Rule E(8) does not apply here. Supplemental Rule E(8) applies only to appearances made "to defend against an admiralty and maritime claim." However, "Rule E(8), by its language and read in conjunction with other relevant Supplemental Rules, does not apply in civil forfeiture cases." U.S. v. All Right, Title and Interest in Contents of Following Accounts at Morgan Guar. Trust Co. of N.Y., No. 95-cv-10929, 1996 WL 695671, at *14 (S.D.N.Y. Dec. 5, 1996) ("With respect to ordinary civil action[s] in which process has issued in rem, whether an appearance to defend the res constitutes a waiver of personal jurisdiction has been considered best left to case-by-case development.").

In this case, the government brings its claims based on the civil forfeiture statutes, not under admiralty or maritime laws. The cases on which LCB relies, by contrast, arise out of maritime claims. See, e.g., Ventura Packers, Inc. v. F/V Jeanine Kathleen, 424 F.3d 852, 863 (9th Cir. 2005); Custer v. M/V "Sea Bird," No. 08-61780, 2009 WL 901509 (S.D. Fla. Mar. 31, 2009). Indeed, LCB itself acknowledges that, under the Federal Rules of Civil Procedure, "the distinction between a special and general appearance has been abolished." Def. Opp. at 2. Those Rules apply here, and they do not provide for restricted appearances for the purposes of in rem claims where a defendant is also the subject of in personam claims in the same action.

In absence of any international agreement to the contrary, the issue is, then, whether service by delivery to the three defendants' U.S. counsel would comport with constitutional due process. Under the circumstances presented, the Court concludes that it would. LCB, Ellissa, and Ayash are demonstrably aware of the claims brought by the government. All three have retained counsel in order to contest the same allegations-albeit in the context of the in rem claims for property-that serve as the basis for the in personam claims. Finally, the government has represented-and LCB has not disputed-that counsel has necessarily consulted with their foreign entity clients with respect to the extent of their counsel's authority in this case. Under these circumstances, the Court is confident that authorizing such alternate service would not deprive these defendant entities of fair notice of this lawsuit.

In evaluating whether alternative service is "necessitate[d]", Rio Int'l Interlink, 284 F.3d at 1016, district courts in this Circuit have generally required: "(1) a showing that the plaintiff has reasonably attempted to effectuate service on the defendant, and (2) a showing that the circumstances are such that the court's intervention is necessary." Devi v. Rajapaska, No. 11-cv-6634, 2012 WL 309605, at *1 (S.D.N.Y. Jan. 31, 2012); see, e.g., Madu, Edozie & Madu, 265 F.R.D. 106; Prediction Co. v. Rajgarhia, No. 09-cv-7459, 2010 WL 1050307, at *1 (S.D.N.Y. Mar. 22, 2010); SEC v. Anticevic, No. 05-cv-6991, 2009 WL 361739, at *3 (S.D.N.Y. Feb. 13, 2009).

The government has comfortably made those showings. First, it has taken reasonable steps to effect service on LCB, Ellissa, and Ayash: It mailed waiver of service packages (which were received by both LCB and Ayash) in March, and after counsel for the three entities made appearances in this action, it asked counsel of record to accept or waive service on the entities' behalf. In fact, the Court twice extended the deadline to effect service on these defendants based on the government's representation that it was engaged in good-faith discussions with defense counsel in an effort to obtain a waiver of service. See Dkts. 233 & 257. Second, the Court's intervention is, clearly, necessary. Lebanon is not a party to the Hague Convention, and thus alternative methods of service otherwise available under Rule 4(f)(1) are unavailable here. See, e.g., Ehrenfeld v. Salim a Bin Mahfouz, No. 04-cv-9641, 2005 WL 696769, at *2 (S.D.N.Y. Mar. 23, 2005) (granting alternative service under Rule 4(f)(3) where defendant resided in Saudi Arabia, a non-party to the Hague Convention). Additionally, the government has already requested that the defendants' U.S. counsel accept or waive service on their behalf, but counsel declined to do so.

This action involves a large number of foreign and domestic entities. Many are subject to asset restraints pursuant to the Court's December 16, 2011, Restraining Order (Dkt. 2). Motion practice is underway (in some instances, resolved) as to some of these restraints. The Court intends to expedite this litigation, and to proceed to the merits of the government's claims as quickly as realistically possible, so as to minimize the harm worked by such restraints. Although it is possible that the government may eventually effect service under Rule 4(f)(2) via letters rogatory to Lebanon pursuant to this Opinion and Order, there is no assurance that that will happen soon. LCB has not made any persuasive argument as to why this Court should prevent the government from utilizing alternative service now, or why such service should wait until the letters rogatory process runs its course. Such service, and expedition of this consequential litigation, is clearly in the public interest and the interest of all parties, viewed collectively. Accordingly, because the government has shown that it has made all reasonable efforts to effect service on LCB, Ellissa, and Ayash, because alternative service on foreign entities is authorized by Rule 4(f), because alternative service is not prohibited by any international agreement, and because the circumstances convincingly demonstrate that intervention by the Court is necessary and in the public interest, the Court grants the government's motion and authorizes both mechanisms of alternative service.

CONCLUSION

Upon consideration of the motion by the United States for leave to effect service of the Summons and Complaint in this matter upon defendants Lebanese Canadian Bank, SAL, Ellissa Holding Company, and Ayash Exchange Company though their United States counsel via Federal Express, and for the issuance of letters rogatory to the appropriate judicial authorities of the Republics of Lebanon, Togo, and Benin for the service of the Summons and Complaint upon defendants Lebanese Canadian Bank SAL, Ellissa Holding Company, Hassan Ayash Exchange Company, Salhab Travel Agency, STE Marco SAL, and STE Nomeco SAL, it is hereby ordered that the motion is GRANTED.

It is hereby ordered that the Clerk of Court shall reissue a summons stating that the in personam defendants must serve their respective answers to the Complaint on or before July 6, 2012.

It is further ordered that certified copies of the (1) Complaint, (2) Summons, and (3) the Court's Individual Rules in Civil Cases (attached) be issued.

It is further ordered that the government serve via Federal Express certified copies of the documents set forth above on United States counsel in this action for defendants Lebanese Canadian Bank, SAL, Ellissa Holding Company, and Ayash Exchange Company.

It is, finally, ordered that letters rogatory are to issue, with one original to be retained in the Court's files, and another original to be certified by the Clerk and delivered to the Assistant


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