By Mark Hamblett –

A Lebanese bank that allegedly used an account in New York City to transfer millions to the financing arm of Hizballah can be sued in New York for deaths and injuries caused by that organization’s rocket attacks in Israel in 2006, a federal appeals court ruled Friday.

The U.S. Court of Appeals for the Second Circuit said due process is not violated by allowing a lawsuit to proceed against the Lebanese Canadian Bank, whose sole contact with the Southern District was a correspondent bank account with American Express.

The court’s decision in Licci v. Lebanese Canadian Bank, 10-1306-cv, reinstates a cause of action against the bank brought by Israeli, American and Canadian citizens who were injured, or whose family members were killed or injured, during a wave of attacks by Hizballah in Israel in July and August 2006.

“It should hardly be unforeseeable to a bank that selects and makes use of a particular forum’s banking system that it might be subject to the burden of a lawsuit in that forum for wrongs related to, and arising from, that use,” the court said.

Judges Robert Katzmann, Amalya Kearse and Robert Sack decided the due process question after having the New York Court of Appeals resolve open questions on New York’s long-arm statute, N.Y. C.P.L.R. 302(a)(1).

The claims against the bank under the Anti-Terrorism Act, the Alien Tort Statute and under Israeli law had been dismissed by Southern District Judge George Daniels in 2010. When plaintiffs appealed, the circuit certified two questions about personal jurisdiction under the state’s long-arm statute to the New York Court of Appeals.

The state court answered in 2012, holding 6-0 that jurisdiction was proper against the bank, which was alleged to have made dozens of wire transfers totaling millions of dollars from the AmEx account to the Shahid (Martyrs) Foundation –the alleged financial arm of Hizballah.

This, Judge Susan Phillips Read wrote for the court, showed that the bank had made “purposeful availment of New York’s dependable and transparent banking system” and the plaintiffs had shown that the transactions were related to the allegedly illegal activities (NYLJ, Nov. 21, 2012).

The case returned to the Second Circuit, where Sack said the plaintiffs, under the law as interpreted by the New York Court of Appeals, had a made a prima facie showing that Daniels could exercise personal jurisdiction over the bank under the long-arm statute.

That left the circuit to consider whether jurisdiction would comport with due process under the U.S. Constitution.

“We conclude that the selection and repeated use of New York’s banking system, as an instrument for accomplishing the alleged wrongs for which the plaintiffs seek redress, constitute a ‘purposeful avail[ment]…of the privilege of doing business in New York,’ such that jurisdiction is ‘consistent with due process requirements,'” Sack said, citing Bank Brussels Lamb ert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120 (2nd Circ. 2002)

“In light of the widespread acceptance and availability of U.S. currency, LCB could have, as it acknowledges, processed U.S.-dollar-denominated wire transfers for the Shahid accounts through correspondent accounts anywhere in the world,” Sack said. “But LCB deliberately chose to process the many Shahid wire transfers through AmEx in New York.”

The court was also persuaded by the recurring nature of the transactions. Sack cautioned the court was not suggesting that the “mere maintenance” of a correspondent account would alone support personal jurisdiction, but he said that was hardly the case here.

“In this case, the correspondent account at issue is alleged to have been used as an instrument to achieve the very wrong alleged,” he said.

“We conclude that in connection with this particular jurisdictional controversy–a lawsuit seeking redress for the allegedly unlawful provision of banking services of which the wire transfers are a part–allegations of LCB’s repeated, intentional execution of U.S.-dollar-denominated wire transfers on behalf of Shahid, in order to further Hizbollah’s terrorist goals, are sufficient.”

The panel then said it was reasonable to subject the bank to a lawsuit in New York.

“It is true…that the injuries and deaths for which compensation is sought occurred in Israel,” he said. “The claims, which are premised on LCB’s use of a correspondent account to support a terrorist organization, however, involve acts by banks in New York.”

“And although not controlling,” Sack said, “weighed in the balance is the United States’ and New York’s interest in monitoring banks and banking activity to ensure that its system is not used as an instrument in support of terrorism, money laundering, or other nefarious ends.”

Robert Tolchin argued for the plaintiffs.

Jonathan Siegfried of DLA Piper argued for the bank.

During the pendency of the appeal, the privately owned Lebanese Canadian Bank merged with the Lebanese subsidiary of Societe Generale SA, a French Bank.


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