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Yaakov Licci, A Minor, By His Father and Natural Guardian, Elihav Licci and By His Mother and Natural Guardian, Yehudit Licci, et al v. Lebanese Canadian Bank

November 20, 2012

YAAKOV LICCI, A MINOR, BY HIS FATHER AND NATURAL GUARDIAN, ELIHAV LICCI AND BY HIS MOTHER AND NATURAL GUARDIAN, YEHUDIT LICCI, ET AL., APPELLANTS,
v.
LEBANESE CANADIAN BANK, SAL; AMERICAN EXPRESS BANK LTD., RESPONDENTS.



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

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

Plaintiffs are several dozen United States, Canadian, and Israeli citizens who reside in Israel and were injured, or whose family members were killed or injured, in rocket attacks allegedly launched by Hizballah during the Second Lebanon War in July and August 2006. Hizballah is designated by the United States Department of State as an Islamic terrorist organization. Plaintiffs brought suit in July 2008 in Supreme Court against the Lebanese Canadian Bank, SAL (LCB or the bank), a now defunct bank headquartered in Beirut,*fn1 claiming that LCB, with the aid of co-defendant American Express Bank (AmEx), assisted Hizballah in committing these illegal attacks by facilitating international monetary transactions through the Shahid Foundation (Shahid or the foundation),*fn2 an entity the complaint identifies as part of the "financial arm" of Hizballah. After AmEx removed the lawsuit to the United States District Court for the Southern District of New York, plaintiffs filed an amended complaint in January 2009, bringing claims against LCB, depending on their citizenship, for primary and aiding-and-abetting liability for international terrorism under the Anti-Terrorism Act*fn3 (United States citizens); aiding-and-abetting liability for genocide, war crimes and crimes against humanity in violation of international law, as made actionable by the Alien Tort Statute (ATS)*fn4 (various Canadian and Israeli citizens); and negligence and breach of statutory duty in violation of Israeli law*fn5 (all but four plaintiffs). Plaintiffs asserted personal jurisdiction over LCB under New York's long-arm statute, which states at CPLR 302 (a) (1) as follows:

"(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent: "1. transacts any business within the state . . .; (emphases added)."

In April 2009, LCB moved under Federal Rule 12 (b) (2) to dismiss the complaint for lack of personal jurisdiction, and under Federal Rule 12 (b) (6) for failure to state a claim upon which relief can be granted.*fn6 Plaintiffs opposed LCB's motion and submitted evidence linking Hizballah and Shahid, including a declaration from a former Israeli counter-terrorism official attesting to Shahid's status as a financial front for Hizballah. LCB did not operate branches or offices, or maintain employees, in the United States. Its sole point of contact with the United States was a correspondent banking account with AmEx in New York. Plaintiffs allege that LCB used this correspondent account with AmEx to transfer several million dollars by means of "dozens" of international wire transfers on behalf of Shahid; that LCB knew that Hizballah was a terrorist organization and that Shahid was part of its financial arm; that the wire transfers "caused, enabled, and facilitated the terrorist rocket attacks" that injured them and their families; and that LCB knew that Hizballah required wire transfer services in order to operate, plan, prepare for and carry out such terrorist attacks. Plaintiffs also claim that LCB's official policy "continuously supports and supported Hizballah and its anti-Israel program, goals, and activities"; and that LCB carried out the wire transfers "to assist and advance Hizballah's goal of using terrorism to destroy the State of Israel."

On March 31, 2010, the District Court Judge granted LCB's motion to dismiss for lack of personal jurisdiction, concluding that plaintiffs had not made a prima facie showing under CPLR 302 (a) (1). First, the Judge concluded that LCB had not "transacted business" within the meaning of section 302 (a)

(1) because "mere maintenance of [a] correspondent bank account with a financial institution in New York is not, standing alone, a sufficient basis to subject a foreign defendant to personal jurisdiction," citing Tamam v Fransabank SAL (677 F Supp 2d 720, 726 [SD NY 2010]);*fn7 and "active execution through New York of dozens of wire transfers totaling millions of dollars over a multi-year period" does not convert "mere maintenance" into "a 'use' of the correspondent account . . . sufficient to confer jurisdiction over a foreign bank" since "no meaningful distinction may be drawn between a foreign bank's maintenance of a correspondent account to effect international wire transfers and its indiscriminate use of that account for that exact purpose" (704 F Supp 2d at 407-408).

Second, the District Court Judge opined that plaintiffs' claims did not "arise from" LCB's wire transfers in New York because no "articulable nexus or substantial relationship exist[ed] between LCB's general use of its correspondent account for wire transfers through New York and the specific terrorist activities by Hizballah underlying plaintiffs' claims," again citing Tamam (id. at 408; see n 7, supra). He considered it important that although "plaintiffs allege[d] that [the] transferred funds at issue 'substantially increased' Hizballah's ability to commit rocket attacks, including the ones in which plaintiffs were harmed[, they] themselves [were] not customers of [LCB or AmEx], nor did they have any financial interest in the wired funds" (id.). Next, the Judge observed that the harms suffered by plaintiffs and their family members were caused by rockets, not banking services. As a result, he concluded, "LCB's maintenance or use of its correspondent bank account [was] too attenuated from Hizballah's attacks in Israel to assert personal jurisdiction based solely on wire transfers through New York" (id.).

Additionally, the District Court Judge denied plaintiffs' "alternative request" to conduct limited jurisdictional discovery because "[t]he Court's finding, that LCB's correspondent banking activities were insufficient to subject it to jurisdiction, renders the proposed discovery sought by plaintiffs futile" (id.). Having granted LCB's motion to dismiss the complaint for lack of personal jurisdiction, the Judge did not consider whether the pleadings stated a cognizable legal claim.

Plaintiffs appealed the dismissal to the United States Court of Appeals for the Second Circuit.*fn8 Noting that in order to determine whether personal jurisdiction exists under CPLR 302 (a) (1), "'a court must decide (1) whether the defendant "transacts any business" in New York and, if so, (2) whether the cause of action asserted "aris[es] from" such a business transaction'" (673 F3d 50, 60 [2d Cir 2012], quoting Best Van Lines, Inc. v Walker, 490 F3d 239, 246 [2d Cir 2007]), the Second Circuit has asked us to resolve two questions of New York law regarding this two-prong jurisdictional analysis, which we now consider.

Certified Question No. 1 (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 effect "dozens" of wire transfers on behalf of a foreign client, constitute a "transact[ion]" of business in New York within the meaning of N.Y.C.P.L.R. § 302 (a)

(1)? (673 F3d at 66)

In asking us this, the Second Circuit observed that we had "apparently not yet addressed the precise question" of "whether a foreign bank's frequent use of a correspondent account in New York to effect international wire transfers on behalf of an overseas client is an act directed with sufficient purposefulness at New York to constitute a transaction of business" under our long-arm statute (673 F3d at 62-63). As the Court recognized, though, we have discussed similar or related issues in several decisions, first and perhaps most importantly in Amigo Foods Corp. v Marine Midland Bank-N.Y. (39 NY2d 391 [1976]; see also Ehrlich-Bober & Co. v Univ. of Houston, 49 NY2d 574 [1980] [upholding personal jurisdiction over defendant public university located in Texas based upon use of a correspondent bank in New York to carry out a transaction with plaintiff New York securities dealer where other contacts existed -- i.e., the disputed "reverse repurchase" agreements involved phone calls and visits to the plaintiff's office in New York, and the placing of a securities order and delivery and payment in that office]; Banco Ambrosiano v Artoc Bank & Trust, 62 NY2d 65 [1984] [quasi-in-rem jurisdiction exists where a defendant Bahamian bank regularly used its New York correspondent account to accomplish its international banking business, including the loan transaction at issue]); and Indosuez Intl. Fin. v National Reserve Bank, 98 NY2d 238 [2002] [upholding personal jurisdiction over a Russian bank that maintained a bank account in New York and regularly used it in connection with currency-exchange options transactions, thus establishing a "course of dealing" in New York]).

Plaintiff Amigo Foods Corporation (Amigo), a New York wholesaler, contracted to buy several truckloads of potatoes from defendant E. H. Parent, Inc. (Parent), a Maine potato grower and distributor; payment was to be made at or through Aroostook Trust Company (Aroostook), a Maine bank. Amigo obtained a letter of credit in New York from defendant Marine Midland Bank (Marine), which delivered it to Aroostook's New York correspondent, defendant Irving Trust Company (Irving). Amigo alleged that Parent refused to accept payment and thus breached the contract or, alternatively, that the banks wrongfully failed to deliver and pay Parent in accordance with the terms of the letter of credit. Parent, for its part, claimed never to have received payment and cross-claimed against the banks.

Aroostook made a pre-answer motion to dismiss for lack of personal jurisdiction, stating in its supporting affidavit that "'[b]eyond the notification to its depositor of the arrival of the Letter of Credit and the notification to Irving . . ., who had forwarded the Letter of Credit, [it] took no action, and had none to take'"; and, therefore, "did not act in New York out of which the cause of action arose" (Amigo Foods, 39 NY2d at 395). In opposition, Amigo alleged that Aroostook and Irving were agents or, alternatively, their relationship was uncertain and so depositions were warranted on the question of jurisdiction. Supreme Court agreed ...


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