The plaintiffs in the two related judgments in Licci v Lebanese Canadian Bank SAL and American Express Bank Ltd (2d Cir, 5 March 2012) were Israeli residents who had been the victims of Hezbollah rocket attacks in 2006. They alleged that Lebanese Canadian Bank (LCB) knowingly maintained bank accounts for a group allegedly affiliated with Hezbollah and that both LCB and Amex Bank had facilitated wire transfers for the affiliate. New York law does not impose a duty on a bank to protect non-customers from intentional torts committed by the bank's customers, but was it New York or Israeli law which governed the claims? New York, said the banks (for obvious reasons). Ultimately the 2d Circuit concluded while any tort would have occurred in Israel, all of the conduct on the part of Amex Bank that might have given rise to liability occurred in New York, which therefore had the closer connection to the claim. This led to the same result the trial judge had reached: the claim against Amex Bank was dismissed because New York law didn't impose a duty to non-customers.
Things were less clear to the 2d Circuit in respect of LCB. The court didn't think New York provided sufficient guidance on whether a New York court had the jurisdiction to hear the claims being asserted. The trial judge thought that the mere fact that LCB maintained a corresponding bank account in New York and used it to wire funds to the Hezbollah affiliate wasn't a sufficient basis for jurisdiction, but the 2d Circuit thought the whole question 'insufficiently developed' and certified two questions to go up to the Court of Appeals: (1) is using a correspondent account in New York for the purposes of wire transfers the transaction of business in the state, such that it would be captured by the 'long-arm' Civil Practice Law and Rules? and (2) if the answer to the previous question is 'yes', did the plaintiffs' claims actually arise from that transaction (or was the nexus between wire transfers and rocket attacks too attenuated)?
The New York Court of Appeals has now answered 'yes' to both questions posed by the 2d Circuit: Licci v Lebanese Canadian Bank SAL (20 November 2012). On question 1, the court concluded that while 'mere' maintenance of a correspondent bank account would be an insufficient basis for jurisdiction, repeated use of the account was, in effect, a 'course of dealing' that constituted 'purposeful availment' of the banking system of the state of New York over which its courts had jurisdiction. As to question 2, there was a 'substantial relationship' between the business transactions at issue and the claim being asserted; it was not necessary to establish a causal link between the two, as long as the claim was not 'completely unmoored' from the transactions. The viability of the claim itself – that the bank violated its duties to the plaintiffs in allegedly allowing terrorists to fund their activities through a New York account – was another question altogether, and not one to be determined on a jurisdictional challenge.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.