Second Circuit Revives Terrorism Victims' Suit Against Foreign Bank

Correspondent Banking

On October 18, the U.S. Court of Appeals for the Second Circuit vacated and remanded a district court’s judgment and held that subjecting a foreign bank to personal jurisdiction in New York was within the reach of New York’s long-arm statute and comported with due process protections provided under the U.S. Constitution.  Licci v. Lebanese Canadian Bank SAL, No. 10-1306, 2013 WL 5700963 (2d Cir. Oct. 18, 2013). The complaint, brought by individuals who were harmed by rocket attacks in Israel carried out by the terrorist group Hezbollah, alleges that the foreign bank used its correspondent bank account in New York to wire millions of dollars to Hezbollah, knowing that the money would enable the group to carry out terrorist attacks. The New York Court of Appeals had accepted the Second Circuit’s certification question concerning the scope of New York’s long-arm statute and explained that a foreign bank’s use of a New York correspondent account to execute dozens of wire transfers is sufficiently purposeful conduct to constitute a “transaction of business” under the state’s long-arm statute. After resolving the question of personal jurisdiction under state law, the Second Circuit also held that subjecting the defendant bank to personal jurisdiction did not violate due process under the Constitution, finding that the alleged conduct—the deliberate and “repeated use of New York’s banking system” for the purpose of “repeated, intentional execution of U.S.‐dollar‐denominated wire transfers”—satisfied the minimum contacts test established by the Supreme Court in International Shoe. The court further noted that the bank should have foreseen that “it might be subject to the burden of a lawsuit” in that same forum for wrongs related to, and arising from, that use. The Second Circuit specifically noted that a foreign defendant’s “mere maintenance” of a correspondent account in the U.S. is not by itself sufficient to support the constitutional exercise of personal jurisdiction over the account-holder.