Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 20 N.Y.3d 327 (2012)

A foreign bank’s repeated use of a New York correspondent account to effect wire transfers on behalf of a client constitutes transacting business in New York and establishes an articulable nexus between the transaction and alleged breaches of statutory duties, thus satisfying the requirements for personal jurisdiction under CPLR 302(a)(1).

Summary

This case addresses whether New York courts can exercise personal jurisdiction over a foreign bank, Lebanese Canadian Bank (LCB), based on its use of a correspondent bank account in New York to transfer funds for a client allegedly linked to terrorist activities. The plaintiffs, victims of rocket attacks in Israel, sued LCB, claiming that the bank’s wire transfers facilitated terrorist acts. The New York Court of Appeals held that LCB’s repeated use of the correspondent account to conduct transactions constituted transacting business in New York and created a sufficient connection between the transactions and the plaintiffs’ claims to establish personal jurisdiction under New York’s long-arm statute.

Facts

Plaintiffs, residing in Israel, were injured or lost family members in rocket attacks during the Second Lebanon War in 2006. They sued Lebanese Canadian Bank (LCB), alleging that LCB assisted Hizballah by facilitating monetary transactions through the Shahid Foundation, identified as Hizballah’s financial arm. LCB maintained a correspondent banking account with American Express Bank (AmEx) in New York. Plaintiffs alleged that LCB used this account to transfer millions of dollars via dozens of wire transfers on behalf of Shahid, knowing that Hizballah was a terrorist organization and that Shahid was supporting terrorist activities. Plaintiffs claimed LCB’s actions enabled and facilitated the attacks.

Procedural History

The case was initially filed in New York Supreme Court, then removed to the U.S. District Court for the Southern District of New York. The District Court dismissed the case for lack of personal jurisdiction, finding that LCB’s maintenance and use of the correspondent account was insufficient to establish jurisdiction and that the claims did not “arise from” the bank’s activities in New York. The plaintiffs appealed to the Second Circuit Court of Appeals, which then certified questions of New York law to the New York Court of Appeals regarding the interpretation of CPLR 302(a)(1).

Issue(s)

1. Whether a foreign bank’s maintenance and use of a correspondent bank account in New York to effect numerous wire transfers on behalf of a foreign client constitutes transacting business in New York under CPLR 302(a)(1)?

2. Whether the plaintiffs’ claims under the Anti-Terrorism Act, the Alien Tort Statute, or for negligence or breach of statutory duty in violation of Israeli law, “arise from” LCB’s transaction of business in New York within the meaning of CPLR 302(a)(1)?

Holding

1. Yes, because the foreign bank’s repeated use of a New York correspondent account to effect wire transfers constitutes a purposeful availment of New York’s banking system.

2. Yes, because there is an articulable nexus or substantial relationship between LCB’s transaction of business in New York and the plaintiffs’ claims, as the alleged breaches of statutory duties occurred when LCB used the New York account to support terrorist activities.

Court’s Reasoning

The Court of Appeals emphasized that the jurisdictional inquiry under CPLR 302(a)(1) requires examining the specific facts of each case to determine whether the defendant “purposefully availed” itself of the privilege of conducting activities in New York. The court distinguished this case from Amigo Foods Corp. v. Marine Midland Bank-N.Y., where the bank’s involvement was passive and unilateral. Here, LCB’s repeated use of the AmEx account on behalf of a client indicated a “course of dealing,” showing purposeful availment of New York’s banking system. Regarding the “arise from” prong, the Court found an “articulable nexus” between LCB’s use of the New York account and the plaintiffs’ claims. Even though the direct harm came from rocket attacks, LCB’s alleged support of terrorist activities through the New York account was sufficiently related to the cause of action. The court stated, “Complaints alleging a foreign bank’s repeated use of a correspondent account in New York on behalf of a client—in effect, a ‘course of dealing’—show purposeful availment of New York’s dependable and transparent banking system, the dollar as a stable and fungible currency, and the predictable jurisdictional and commercial law of New York and the United States.” The court also noted, “where at least one element arises from the New York contacts, the relationship between the business transaction and the claim asserted supports specific jurisdiction under the statute.”