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Wultz v. Bank of China Ltd.

United States District Court, S.D. New York

July 21, 2014

SHERYL WULTZ, et al., Plaintiffs,

Page 487

For Plaintiffs: David Boies, Esq., Mary Boies, Esq., Lee S. Wolosky, Esq., Steen I. Froot, Esq., Marilyn C. Kunstler, Esq., Joseph W. Dunn, Esq., Boies, Schiller & Flexner LLP, New York, NY.

For Intervenors: Robert Joseph Tolchin, Esq., Aalok J. Karambelkar, Esq., The Berkman Law Office, LLC, Brooklyn, NY.

For Defendant: Mitchell R. Berger, Esq., Patton Boggs LLP (DC), Washington, D.C.; Lanier Saperstein, Esq., William G. Primps, Esq., Neil McDonell, Esq., Eric Epstein, Esq., Daniel Goldberger, Esq., H. Alex Iliff, Esq., Geoffrey Sant, Esq., Dorsey & Whitney LLP, New York, NY.

For State of Israel: Stewart D. Aaron, Esq., John B. Bellinger, III, Esq., Arnold & Porter LLP, New York, NY.

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Shira A. Scheindlin, United States District Judge.


This suit arises out of the death of Daniel Wultz and the injuries of Yekutiel Wultz, suffered in a 2006 suicide bombing in Tel Aviv, Israel. Four members of the Wultz family brought suit against Bank of China (" BOC" ), alleging acts of international terrorism under the Antiterrorism Act (" ATA" ),[1] among other claims.

All of Plaintiffs' non-federal claims against BOC have been dismissed.[2] In addition, Plaintiffs' attempt to hold BOC liable for aiding and abetting international terrorism under the ATA has been categorically foreclosed by the Second Circuit.[3]

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Plaintiffs' only remaining claim against BOC is for acts of international terrorism under the ATA, based on BOC allegedly having provided material support and resources to a terrorist organization.[4]

The general facts and procedural history of this case and Plaintiffs' numerous attempts to obtain discovery from BOC were laid out in previous opinions and familiarity with them is assumed.[5] Before this Court is a motion filed by nonparty the State of Israel (" Israel" ) to quash a deposition subpoena served on Uzi Shaya, a former Israeli national security officer.[6] Israel argues that the subpoena should be quashed because it (1) violates Israel's sovereign immunity, (2) seeks sensitive national security information that constitutes foreign state secrets, and (3) contravenes Federal Rule of Civil Procedure 45.[7] For the following reasons, Israel's motion is GRANTED.


A. Uzi Shaya

Shaya is a former Israeli government official, who was involved in Israeli national security matters between 1984 and 2007.[8] From 2004 to 2007, Shaya was an official in Israel's National Security Council working with the Interagency Task Force for Combating Terrorist Financing and Financing of State Sponsors of Terrorism (" Task Force" ).[9] The Task Force worked to prevent terrorism by preventing the flow of funds to terrorist organizations.[10] According to Plaintiffs, the Task Force learned in 2004 of a terrorist financing cell involving BOC.[11] The cell was operated by Said al-Shurafa (" Shurafa" ), other members of the Shurafa family in Gaza, senior leaders of the Palestinian Islamic Jihad (" PIJ" ), and Hamas.[12] From 2003 to

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2008, the Shurafas used the BOC bank accounts held in their names (" Shurafa Accounts" ) to launder millions of dollars to PIJ and Hamas operatives in Gaza and the West Bank.[13]

In 2005, Shaya and other members of the Task Force met with representatives of the People's Bank of China -- BOC's chief regulator -- to inform them that the Shurafa Accounts were being used to finance PIJ and Hamas.[14] The Task Force asked the Chinese representatives to close the Shurafa Accounts.[15] The Chinese representatives declined to do so.[16] One year later, on April 17, 2006, PIJ operatives executed a suicide bombing that killed Daniel Wultz and seriously injured Yekutiel Wultz.

In 2009, Plaintiffs filed their Amended Complaint in the D.C. District Court.[17] In October 2012, Plaintiffs and their counsel met with Shaya to determine whether he was willing to testify on Plaintiffs' behalf.[18] On March 20, 2013, Shaya sent Plaintiffs' counsel a letter stating,

I have been contacted on behalf of plaintiffs ... to voluntarily testify . . . . Due to my previous employment and involvement in matters relating to Israel state security, I would like to underscore, that should I decide to testify, although I would testify as a private citizen [] in classified matters and matters relating to the security of the State of Israel and certain individuals, I am bound to the provisions of the Israeli law and to the subsequent guidance of the relevant authorities in Israel.
Should I decide to provide such testimony, it would be based upon knowledge I accrued ... as a member of the Counterterrotism Staff of Israel's National Security Council, which naturally includes certain classified matters.[19]

Shaya then set forth " specific prerequisites" to any potential voluntary deposition.[20] For example, he requested that the parties conduct the deposition in Israel, prohibit photography, excuse him from answering questions that implicate Israeli security, and allow him to consult with both an Israeli government legal advisor and security information officer during the deposition.[21]

On August 29, 2013, Shaya wrote again to Plaintiffs' counsel to explain that he is " inclined to give a deposition." [22] However, he warned, " [U]ntil I receive express written permission [from Israel] to provide information that came to me in my official capacity as a state employee and information about the activities that I engaged in while employed by the State, I am prohibited from doing so." [23] Shaya also reported that Israeli Penal Law 5737-1977 forbids him from providing such testimony without authorization.[24] As such, he asked

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Plaintiffs to postpone scheduling the deposition for three months so that he could " secure and finalize such permission" from Israel.[25] He would " consider [whether] to provide [] testimony concerning this matter at that time." [26]

On September 18, 2013, Plaintiffs served a subpoena on Shaya, who was visiting Washington D.C.[27] The subpoena compelled him to attend a deposition at Plaintiffs' counsels' office in Washington D.C. on November 25, 2013.[28] On September 27, 2013, this Court wrote to Israel to notify it about the deposition and ask whether it objected to Shaya's participation.[29] After discussion with the parties, I agreed to supervise Shaya's deposition in my courtroom on November 25, 2013.[30]

B. Post-Subpoena Briefing

On November 4, 2013, Intervenors -- Plaintiffs in Moriah v. Bank of China, a related suit -- filed a motion in the D.C. District Court to intervene " regarding the enforcement [of the] subpoena served ... on Uzi Shaya." [31] On November 15, 2013, Israel filed its motion to quash the subpoena in the D.C. District Court.[32] On November 19, 2013, Judge Reggie B. Walton of the D.C. District Court entered an Order staying Shaya's deposition pending resolution of Israel's motion to quash and setting a briefing schedule.[33] On November 26, 2013, after Plaintiffs and Israel consented, Judge Walton granted Intervenors' motion to intervene.[34] Plaintiffs and Intervenors then filed briefs in opposition to Israel's motion.[35]

On December 2, 2013, Intervenors moved to strike or transfer the proceeding to this Court.[36] Israel filed papers in opposition.[37] On May 30, 2014, Judge Walton denied with prejudice Interveners' request to transfer the physical location of Shaya's deposition to this Court.[38] However, Judge Walton granted Intervenors' motion to transfer Israel's motion to quash.[39] As a result, Israel's motion to quash, and all associated briefing were transferred to this Court.


A. Non-Party Subpoenas Under Rule 45

In general, " [p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or

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defense." [40] Nevertheless, a district court has discretion to circumscribe discovery even of relevant evidence by issuing " an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense." [41] Rule 45 affords additional protection for non-parties subject to a subpoena by requiring parties to " avoid imposing undue burden or expense on a person subject to the subpoena." [42] Specifically, the court " must quash or modify any subpoena" that

(I) fails to allow a reasonable time to comply; (ii) requires a person to comply beyond [100 miles of where the person resides, is employed, or regularly transacts business in person . . .]; (iii) requires disclosure of privileged or other protected matter, if no exception or waiver applies; or (iv) subjects a person to undue burden.[43]

In addition, amendments to Rule 45 have " enlarge[d] the protections afforded persons who are required to assist the court by giving information or evidence." [44]

B. Foreign Official Immunity

In Samantar v. Yousuf, the United States Supreme Court clarified that the Foreign Sovereign Immunities Act (" FSIA" ) governs determinations of sovereign immunity for foreign states, but not for foreign officials.[45] The Court explained that when Congress enacted the FSIA, it did not intend to " eliminate[ ] the State Department's role in determinations regarding individual official immunity," a procedure that developed as a matter of common law.[46] In addition, " from the time of the FSIA's enactment [the State Department has] understood the Act to leave intact the Department's role in official immunity cases." [47] Therefore, " [e]ven if a suit [against a foreign official] is not governed by the Act, it may still be barred by foreign sovereign immunity under the common law." [48]

Courts apply a " two-step procedure" to assess common-law claims of foreign sovereign immunity.[49] " Under that procedure, the diplomatic representative of the sovereign could request a 'suggestion of immunity' from the State Department." [50] If the State Department grants the request, " the district court surrenders] its jurisdiction." [51] But if the State Department declines the request or provides no response, " a district court ha[s] authority to decide for itself whether all the requisites for such immunity exist[]." [52] When deciding for itself, " a district court inquire[s] whether the ground of immunity is one which it is the established

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policy of the State Department to recognize." [53]

Case law involving immunity of nonparty foreign officials is scarce. But a D.C. District Court recently held -- and the D.C. Circuit unanimously affirmed -- that nonparty, Alvaro Uribe, a former president of Colombia, could not be deposed even though he was served with a subpoena while visiting the District of Columbia.[54] In that case, the State Department granted a Suggestion of Immunity that " former President Uribe enjoys residual immunity from this Court's jurisdiction insofar as Plaintiffs seek information (i) relating to acts taken in his official capacity as a government official; or (ii) obtained in his official capacity as a government official." [55] The court agreed that Uribe could not be compelled to testify about " information he received and acts he took in his official capacity as a government official." [56]

The Supreme Court has similarly observed that it " may be correct as a matter of common-law principles" that " foreign sovereign immunity extends to an individual official 'for acts committed in his official capacity.'" [57] As the court in Giraldo v. Drummond recognized, this immunity protects non-parties from compelled testimony because " sovereign immunity is an immunity from trial and the attendant burdens of litigation, and not just a defense to liability on the merits." [58] Moreover, " [t]he common law of foreign sovereign immunity made no distinction between the time of the commission of official acts and the time of suit." [59] Thus, unlike head-of-state immunity, which is based on status, " immunity based on acts . . . does not depend on tenure in office" and is available to officials even after leaving office.[60]


A. Israel Has Standing to Challenge the Subpoena

Both Plaintiffs and Intervenors contend that Israel lacks standing to challenge the subpoena because Shaya -- the

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subpoenaed party -- has not objected.[61] However, " [t]he basis for recognizing [foreign official immunity] is that 'the acts of [] official representatives of the state are those of the state itself, when exercised within the scope of their delineated powers.'" [62] And as the State Department has asserted, the " immunity protecting foreign officials for their official acts ultimately belongs to the sovereign rather than the official." [63] As such, regardless of whether Shaya is willing to testify,[64] Israel has standing to protect its rights and interests.[65]

Moreover, Israel has standing to prevent disclosure of sensitive information that implicates its national security. Under Rule 45, any person or entity -- even those not subject to the subpoena -- may move to quash a subpoena that " requires disclosure of privileged or other protected matter . . . ." [66] Here, Israel's National Security Advisor, Yaacov Amidror, declared that the subpoena requires disclosure of " sensitive and classified information" that Shaya learned in his official capacity.[67] In addition, " [a]ny disclosure of such information would implicate the methods and activities used by the State of Israel to prevent terrorism, would harm Israel's national security, would compromise Israel's ability to protect the lives of its citizens, residents, and tourists from terrorism . . . ." [68]

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Plaintiffs insist that the subpoena does not " infringe on [Israel's] national security interests." [69] But the D.C. Circuit has " consistently deferred to executive affidavits predicting harm to the national security, and have found it unwise to undertake searching judicial review." [70] Accordingly, I will not second-guess the assessment of the National Security Advisor.[71]

B. Shaya Is Immune from Testifying

On June 12, 2014, Israel requested a Suggestion of Immunity from the State Department.[72] Because the State Department has yet to respond, this Court " ha[s] authority to decide for itself whether all the requisites for such immunity exist[]." [73] In doing so, I must determine " whether the ground of immunity is one which it is the established policy of the State Department to recognize." [74]

The State Department recently defined the contours of immunity for foreign officials in Giraldo. There, the plaintiffs, legal representatives of terror victims, served a subpoena on former Colombian President Alvaro Uribe, a nonparty.[75] Plaintiffs sought to depose Uribe regarding information about terrorist activity in Colombia.[76] The State Department granted a Suggestion of Immunity that " former President Uribe enjoys residual immunity from this Court's jurisdiction insofar as Plaintiffs seek information (I) relating to acts taken in his official capacity as a government official; or (ii) obtained in his official capacity as a government official." [77] The district court adopted the State Department's Suggestion of Immunity, agreeing that Uribe could not be compelled to testify about " information he received and acts he took in his official capacity as a government official." [78] The D.C. Circuit unanimously affirmed.[79]

Plaintiffs argue that Giraldo is distinguishable.[80] First, they contend that because Uribe was a former head of state, he was entitled to " far greater immunity than

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other officials, such as Shaya." [81] But head-of-state immunity was unavailable to Uribe -- a former president -- because it only applies to sitting heads of state.[82] Instead, the court recognized Uribe's immunity as a former " foreign official." [83] Unlike head-of-state immunity, foreign official immunity " does not depend on tenure in office" and extends to former officials, like Uribe and Shaya.[84]

Second, Plaintiffs argue that the Giraldo plaintiffs sought to depose Uribe in order to " challenge the actions of the [Colombian] government." [85] By contrast, their subpoena would not " call into question" the actions of Israel or Shaya.[86] But official immunity operates not only as shield from accusations or claims of wrongdoing. It also offers broad protection from a domestic court's jurisdiction.[87] As the D.C. Circuit has explained, " sovereign immunity is an immunity from trial and the attendant burdens of litigation, and not just a defense to liability on the merits." [88] As such, in Giraldo, the court found Uribe to be immune from compelled testimony even though neither he nor Colombia faced any claim of wrongdoing.[89]

Third, Plaintiffs argue that Giraldo is distinguishable because Uribe " failed to appear at his deposition and opposed the plaintiff's motion to compel." [90] This is a distinction without a difference because foreign official immunity " ultimately belongs to the sovereign rather than the official." [91] Thus, in Giraldo, it was the Colombian Government's " formal[] request[]" for immunity that prompted the State Department to issue its Suggestion

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of Immunity for Uribe.[92]

C. Israel Has Not Waived Immunity

Next, Plaintiffs and Intervenors argue that Israel waived immunity by encouraging Plaintiffs to bring the underlying lawsuits. In the D.C. Circuit, " [e]xplicit waivers of sovereign immunity are narrowly construed 'in favor of the sovereign." '[93] " [A] foreign sovereign will not be found to have waived its immunity unless it has clearly and unambiguously done so." [94] Furthermore, " [t]he theory of implied waiver contains an intentionality requirement, and that a finding of 'an implied waiver depends upon the foreign government's having at some point indicated its amenability to suit.'" [95]

For obvious reasons, sovereigns that wish to waive an official's immunity tend to do so expressly.[96] Here, Plaintiffs cannot -- and do not -- contend that Israel expressly waived immunity. At most, Plaintiffs suggest that Israel " commit[ted]" to make Shaya available to testify.[97] Intervenors similarly complain that Israel " initially agreed to provide [] access to [] Shaya." [98] But no evidence suggests that Israel intended to waive Shaya's immunity with respect to this Court's jurisdiction.[99] Because I find that Shaya is immune as to information regarding acts taken or knowledge obtained in his official capacity as a government official, I need not determine whether Shaya's testimony is also protected as a foreign state secret.[100]

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Finally, Plaintiffs seek to depose Shaya on information he acquired after leaving office -- namely, " his personal knowledge" about Israel's efforts to commence the underlying litigation and BOC's efforts to " prevent him from testifying." [101] Assuming, arguendo, that this information is relevant, the question remains whether Shaya learned this information in his official or personal capacity.[102] In any event, to compel Shaya to testify in the United States would violate Rule 45's 100-mile restriction.[103] Shaya is an Israeli citizen and resident.[104] Holding the deposition in the United States would burden both Shaya and the representatives from the Israeli Government, who would necessarily accompany him.[105]

To the extent that Shaya wishes to testify voluntarily as to information unrelated to acts taken or knowledge obtained in his official capacity, the deposition is permitted. If it is held in the United States, the deposition will be carefully supervised by myself or Judge Gorenstein. The courtroom will be closed for the entirety of the deposition and courtroom access will be restricted to counsel of record, court personnel, and other authorized persons. A representative from Israel is invited to attend to raise any objections. If a deposition is held in Israel, similar arrangements will be made.


For the foregoing reasons, Israel's motion is GRANTED.[106]


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