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Mashreqbank Psc, Plaintiff-Respondent v. Ahmed Hamad Al Gosaibi & Brothers Company

September 25, 2012

MASHREQBANK PSC, PLAINTIFF-RESPONDENT,
v.
AHMED HAMAD AL GOSAIBI & BROTHERS COMPANY, DEFENDANT-APPELLANT. AHMED HAMAD AL GOSAIBI & BROTHERS COMPANY, THIRD PARTY PLAINTIFF-APPELLANT, MAAN ABDUL WAHEED AL SANEA, THIRD PARTY DEFENDANT-RESPONDENT, AWAL BANK BSC, THIRD PARTY DEFENDANT.



The opinion of the court was delivered by: Catterson, J.

Mashreqbank PSC v Ahmed Hamad Al Gosaibi & Bros. Co.

Appellate Division, First Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on September 25, 2012

Angela M. Mazzarelli, J.P. Richard T. Andrias James M. Catterson Shelia Abdus-Salaam Sallie Manzanet-Daniels,JJ.

CATTERSON, J.

In these dual actions arising from an alleged Ponzi scheme of global proportions, precedent mandates reversal of the motion court's sua sponte dismissal of the main action on a forum non conveniens ground. Moreover, we find that dismissal of the related third-party action, on notice of motion, on a forum non conveniens ground, was an improvident exercise of the court's discretion. New York has a compelling interest in adjudicating controversies that implicate its preeminent position in the international banking system, and in any event, the third-party defendant failed to demonstrate that New York is an inconvenient forum.

Plaintiff Mashreqbank PSC (hereinafter referred to as "Mashreqbank") is a United Arab Emirates (hereinafter referred to as "UAE") bank with its principal place of business located in New York. Mashreqbank filed the instant action against defendant Ahmad Hamad Al Gosaibi & Brothers Company (hereinafter referred to as "AHAB") seeking to recover $150 million in connection with a series of financial transactions executed in New York. AHAB is a Saudi Arabian general partnership with a principal place of business in Saudi Arabia.

Mashreqbank alleges that it wired the $150 million to an account at the Bank of America in New York as part of a currency exchange transaction with AHAB. Mashreqbank further alleges that AHAB failed to transfer the Saudi riyals contemplated by the currency exchange. Instead, the funds in the Bank of America account were transferred to an HSBC account located in New York and controlled by third-party defendant Maan Abdul Waheed Al Sanea (hereinafter referred to as "Al Sanea"). The HSBC account was in the name of Awal Bank BSC (hereinafter referred to as "Awal"). Awal is a bank established by Al Sanea in Bahrain.

Mashreqbank filed the instant action seeking damages for breach of contract for the currency exchanges that took place in New York through Mashreqbank's bank in New York to AHAB's bank in New York. Additionally, Mashreqbank filed an order of attachment against AHAB's property in New York including the funds contained in the Al Sanea Bank of America account. At the time of the attachment, Al Sanea had already transferred all of the money in question through the HSBC account in New York to institutions outside of the United States.

AHAB filed its answer and a third-party action against Al Sanea and Awal alleging that both third-party defendants engaged in an international Ponzi scheme using AHAB's accounts without AHAB's knowledge and/or consent. Thus, AHAB claimed that any liability that AHAB might have to Mashreqbank was solely due to Al Senea's theft of the money through the currency exchange transactions that took place in New York. AHAB later counterclaimed against Mashreqbank asserting that Mashreqbank aided and abetted Al Sanea in the perpetration of Al Sanea's Ponzi scheme.

Al Sanea moved to dismiss the third-party complaint on the ground of forum non conveniens and lack of personal jurisdiction [*fn1 ]. In support of his motion, insofar as relevant, Al Sanea averred as follows: that he is a Saudi citizen and resident; that he holds a 47% interest in defendant Awal Bank, which he also controls; that AHAB is a Saudi partnership; and that the transaction would be governed by Saudi law. He further averred that at least one of the underlying transactional documents selected a UAE forum; that all of AHAB's witnesses, except its professional advisers, and all its documents are in Saudi Arabia; and that both translation and travel would be expensive because many, if not all, of the witnesses speak Arabic as a first language and many of the documents are in Arabic. Al Sanea also maintained that legal restrictions would prevent most of the witnesses from traveling to New York.

Al Sanea further stated that AHAB made a fraud claim to Saudi authorities and that there are pending criminal and civil proceedings in Bahrain, the UAE, the Cayman Islands, and the United Kingdom. Al Sanea also submitted the affidavit of an expert on Saudi law who opined that Saudi Arabia is capable of adjudicating this type of commercial dispute and could hear the matter through its Board of Grievances. The expert further opined that the ad hoc committee that was formed can investigate and resolve the dispute.

In opposition, Mashreqbank submitted a list indicating that most of the relevant documents are in English. The former general manager of the Money Exchange, the entity involved in the subject transaction, averred that the employees with knowledge of the transaction speak English fluently, and reside in England, Bahrain, Saudi Arabia, India, Jordan and Canada. He further stated that the documents located in Saudi Arabia are available electronically.

Mashreqbank also submitted the affidavit of the Saudi lawyer who had represented Mashreqbank before the Saudi special committee. He disagreed with Al Sanea's expert about the ad hoc committee's role, averring that it lacks the power to adjudicate the dispute between the parties. Mashreqbank's expert in Saudi law opined that differences between New York and Saudi law would limit access to documents and testimony. He further testified that, although the Saudi Board of Grievances can adjudicate this dispute, there could be long delays and uncertainty over whether the Board would exercise jurisdiction.

In reply, Al Sanea identified witnesses who do not reside in New York. He noted that none of the witnesses identified in Mashreqbank's and AHAB's discovery responses reside in New York, and only three reside in countries subject to the Hague Convention rules on taking evidence abroad in commercial matters. He further noted that the amount Mashreqbank seeks from AHAB in this action is encompassed in Mashreqbank's action against AHAB in the UAE.

The motion court dismissed the third-party action, finding that the factors in Islamic Republic of Iran v. Pahlavi (62 N.Y.2d 474, 478 N.Y.S.2d 597, 467 N.E.2d 245 (1984), cert. denied 469 U.S. 1108, 105 S.Ct. 783, 83 L.Ed.2d 778 (1985)) weighed in favor of dismissal on the ground of forum non conveniens. Having found that the relevant factors warrant dismissal of the third-party action, the court sua sponte dismissed the main action. For the reasons set forth below, this was error.

In VSL Corp. v. Dunes Hotels & Casinos, (70 N.Y.2d 948, 524 N.Y.S.2d 671, 519 N.E.2d 617 (1988)), the Court of Appeals reversed this Court's sua sponte dismissal of an action concerning construction in Las Vegas. The dispute was between California and Nevada corporations. A New York corporation provided a financial guarantee, and resolution of the dispute required an interpretation of Nevada law. The Court stated that: "Under CPLR 327(a) a court may stay or dismiss an action in whole or in part on forum non conveniens grounds only upon ...


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