Rasheed Al Rushaid, et al. v. Pictet & Cie, et al., No. 180 (N.Y. 2016)

A foreign bank purposefully avails itself of the privilege of conducting activities within New York, subjecting it to personal jurisdiction, when it repeatedly uses a New York correspondent bank account to facilitate transactions substantially related to the plaintiff’s claims.

Summary

The New York Court of Appeals held that it had personal jurisdiction over Pictet & Cie (Pictet), a Swiss bank, because of its repeated use of New York correspondent bank accounts to launder funds related to a bribery and kickback scheme. Pictet’s vice president, Chambaz, assisted ARPD employees in setting up accounts to receive funds in a scheme that harmed the plaintiffs. The court distinguished this from cases where the use of the correspondent account was passive or incidental. The court found that the defendant’s repeated and purposeful use of the New York accounts demonstrated a sufficient nexus to New York to establish personal jurisdiction, as the New York accounts were used to further the money laundering scheme. This decision clarifies the standard for establishing personal jurisdiction based on the use of correspondent accounts in New York, emphasizing purposeful availment.

Facts

Plaintiff Rasheed Al Rushaid, co-owner of Al Rushaid Petroleum Investment Corporation (ARPIC), sued Pictet, a Swiss bank, along with its Vice President Chambaz, alleging that Pictet knowingly laundered funds related to a bribery and kickback scheme involving employees of Al Rushaid Parker Drilling, Ltd. (ARPD), a subsidiary of ARPIC. ARPD employees accepted bribes and kickbacks from vendors in exchange for purchasing goods and services at inflated prices. Chambaz, a Pictet executive, assisted the employees by setting up a shell company, TSJ Engineering Consulting Co., Ltd., in the British Virgin Islands to receive the bribes. Pictet then used its New York correspondent bank accounts to transfer the funds to the shell company’s Geneva-based Pictet account and the employees' individual accounts. Documents showed numerous wire transfers totaling over $4 million through Pictet's New York correspondent accounts. The plaintiffs sought over $350 million in damages.

Procedural History

Plaintiffs sued the defendants in New York state court. The trial court granted the defendants' motion to dismiss for lack of personal jurisdiction, concluding that the use of correspondent accounts was passive. The Appellate Division affirmed, distinguishing the case from Licci v. Lebanese Canadian Bank, SAL, and holding that the defendants did not purposefully avail themselves of New York. The Court of Appeals granted leave to appeal.

Issue(s)

1. Whether the use of New York correspondent bank accounts by a foreign bank, in connection with a money-laundering scheme, constitutes transacting business within the state, thus satisfying the first prong of CPLR 302(a)(1).
2. Whether the plaintiffs' claims, based on the foreign bank's role in the money-laundering scheme, arose from the bank's transactions in New York, satisfying the second prong of CPLR 302(a)(1).

Holding

1. Yes, because Pictet's repeated use of New York correspondent accounts, as a central component of a money-laundering scheme, constituted the transaction of business within the state.
2. Yes, because the plaintiffs' claims of aiding and abetting breach of fiduciary duty and conspiracy were substantially related to Pictet's transactions in New York via its correspondent accounts.

Court’s Reasoning

The court applied CPLR 302(a)(1), New York's long-arm statute, which requires that the non-domiciliary transact business within the state and that the claim arise from that transaction. The court focused on whether Pictet's activities demonstrated "purposeful availment." The court distinguished the case from Amigo Foods Corp. v. Marine Midland Bank-NY, where the use of the correspondent account was passive and unilateral. Here, Pictet's use of the New York correspondent accounts was a deliberate and integral part of the money-laundering scheme. The court held that Pictet's repeated use of New York correspondent accounts to transfer funds for its client's benefit constituted "purposeful availment" of the New York banking system and thus satisfied the first prong of CPLR 302(a)(1). "Repeated, deliberate use that is approved by the foreign bank on behalf and for the benefit of a customer — as in Licci — demonstrates volitional activity constituting transaction of business." The court also found that the plaintiffs' claims, which included aiding and abetting breach of fiduciary duty and conspiracy, had a "substantial relationship" with Pictet's banking transactions in New York, thus satisfying the second prong of CPLR 302(a)(1).

Practical Implications

This case provides important guidance on establishing personal jurisdiction over foreign banks based on their use of New York correspondent accounts. It is vital for cases involving claims against foreign banks for financial misconduct. The ruling clarifies that a foreign bank can be subject to jurisdiction even if it does not directly direct deposits into a New York account; its active involvement in a scheme that uses such accounts is sufficient. This ruling impacts how attorneys analyze and litigate cases involving international financial transactions and potential liability for aiding and abetting illegal activities. Courts may be more willing to assert jurisdiction over foreign financial institutions that use New York's banking infrastructure to further financial schemes. It reaffirms that the quality and quantity of a foreign bank's contacts with the correspondent bank matter more than whether another bank could have been used. Later cases may cite this case to assert jurisdiction over financial institutions implicated in illicit transactions.