United States Court of Appeals, Second Circuit Docket No. 10-1306-cv
Court of Appeals
STATE OF NEW YORK
!!!!
YAAKOV LICCI, a minor, by his father and natural guardian ELIHAV LICCI and
by his mother and natural guardian YEHUDIT LICCI, et al., YAAKOV LICCI, a
minor, by his father and natural guardian ELIHAV LICCI and by his mother
and natural guardian YEHUDIT LICCI, et al., ELIHAV LICCI, YEHUDIT LICCI,
TZVI HIRSH, ARKADY GRAIPEL, TATIANA KREMER, YOSEF ZARONA, TAL SHANI,
SHLOMO COHEN, NITZAN GOLDENBERG, RINA DAHAN, RAPHAEL WEISS, AGAT
KLEIN, TATIANA KOVLEYOV, VALENTINA DEMESH, RIVKA EPON, JOSEPH MARIA,
IMMANUEL PENKER, ESTHER PINTO, AVISHAI REUVANCE, ELISHEVA ARON,
CHAYIM KUMER, SARAH YEFET, SHOSHANA SAPPIR, RAHMI GUHAD GHANAM,
a minor, by his father and natural guardian FUAD SHCHIV GHANAM and by his
mother and natural guardian SUHA SHCHIV GHANAM, SHCHIV GHANAM FUAD,
Individually, SUHA SHCHIV GHANAM, Individually, MA’AYAN ARDSTEIN, a minor,
by her father and natural guardian BRIAN ARDSTEIN, and by her mother and
natural guardian KEREN ARDSTEIN, NOA ARDSTEIN, a minor, by her father and
natural guardian BRIAN ARDSTEIN, and by her mother and natural guardian
KEREN ARDSTEIN, NETIYA YESHUA ARDSTEIN, a minor, by her father and
natural guardian BRIAN ARDSTEIN, and by her mother and natural guardian
KEREN ARDSTEIN, BRIAN ARDSTEIN, Individually, KEREN ARDSTEIN, Individually,
MARGALIT RAPPEPORT, a minor, by her mother and natural guardian LAURIE
R APPEPORRT, L AURIE R APPEPORT, Individually, YAIR M OR , O RNA M OR ,
MICHAEL FUCHS, ESQ., MUSHKA KAPLAN, a minor, by her father and natural
guardian CHAIM KAPLAN, and by her mother and natural guardian RIVKA
KAPLAN, ARYE LEIB KAPLAN, a minor, by his father and natural guardian
CHAIM KAPLAN, and by his mother and natural guardian RIVKA KAPLAN,
(Caption Continued on the Reverse)
Certification of Questions by the United States
Court of Appeals for the Second Circuit
BRIEF FOR PLAINTIFFS-APPELLANTS
THE BERKMAN LAW OFFICE, LLC
Attorneys for Plaintiffs-Appellants
111 Livingston Street, Suite 1928
Brooklyn, New York 11201
718-855-3627
Date Completed: July 5, 2012
MENACHEM KAPLAN, a minor, by his father and natural guardian CHAIM KAPLAN,
and by his mother and natural guardian RIVKA KAPLAN, CHANA KAPLAN, a
minor, by her father and natural guardian CHAIM KAPLAN, and by her mother
and natural guardian RIVKA KAPLAN, EFRAIM LEIB KAPLAN, a minor, by his
father and natural guardian CHAIM KAPLAN, and by his mother and natural
guardian RIVKA KAPLAN, CHAIM KAPLAN, Individually, RIVKA KAPLAN,
Individually, ROCHELLE SHALMONI, OZ SHALMONI, DAVID OCHAYON, YAAKOV
M AIMON , M IMI B ITON , M IRIAM J UMA’ A , as Personal Representative of
the Estate of FADYA JUMA’A, MIRIAM JUMA’A, Individually, SALAH JUMA’A,
Individually, SAID JUMA’A, Individually, ABD EL-RAHMAN JUMA’A, as Personal
Representative of the Estate of SAMIRA JUMA’A, ABD EL-RAHMAN JUMA’A,
Individually, RAHMA ABU-SHAHIN, ABDEL GAHNI, as Personal Representative
of the Estate of SOLTANA JUMA’A and Individually, SHADI SALMAN AZZAM, as
the Personal Representative of the Estate of MANAL CAMAL AZAM, KANAR
SHA’ADI AZZAM, a minor, by his father and natural guardian, SHADI SALMAN
AZZAM, ADEN SHA’ADI AZZAM, a minor, by his father and natural guardian,
SHADI SALMAN AZZAM, SHADI SALMAN AZZAM, Individually, ADINA MACHASSAN
DAGESH, ARKADY SPEKTOR, YORI ZOVREV, MAURINE GREENBERG, JACOB
KATZMACHER, DEBORAH CHANA KATZMACHER, CHAYA KATZMACHER, MIKIMI
STEINBERG, JARED SAUTER, DANIELLE SAUTER, YAAKOV ABUTBUL, ABRAHAM
NATHAN MOR, a minor, by his father and natural guardian, ZION MOR, and by
his mother and natural guardian, REVITAL MOR, BAT ZION MOR, a minor, by her
father and natural guardian, ZION MOR, and by her mother and natural guardian,
REVITAL MOR, MICHAL MOR, a minor, by her father and natural guardian, ZION
MOR, and by her mother and natural guardian, REVITAL MOR, ODED CHANA
MOR, a minor, by her father and natural guardian, ZION MOR, and by her
mother and natural guardian, REVITAL MOR, ZION MOR, Individually, REVITAL
MOR, Individually, ADHAM MAHANE TARRABASHI, JIHAN KAMUD ASLAN,
ZOHARA LOUIE SA’AD, IYAH ZAID GANAM, a minor, by his father and natural
guardian, ZIAD SHCHIV GHANAM, and by his mother and natural guardian,
GOUROV TISIR GHANAM, ZIAD SHCHIV GHANAM, Individually, GOUROV TISIR
GHANAM, Individually, THEODORE GREENBERG, EMILLA SALMAN ASLAN,
Plaintiffs-Appellants,
v.
AMERICAN EXPRESS BANK LTD., LEBANESE CANADIAN BANK, SAL,
Defendants-Respondents.
Table of Contents
TABLE OF AUTHORITIES .................................................................................. iv
QUESTIONS PRESENTED ....................................................................................1
PRELIMINARY STATEMENT .............................................................................. 2
STATEMENT OF FACTS .......................................................................................4
POINT I
THE EXERCISE OF PERSONAL JURISDICTION OVER LCB IS
ENTIRELY CONSISTENT WITH FEDERAL CONSTITUTIONAL
DUE PROCESS LIMITATIONS ............................................................................ 9
POINT II
DEFENDANT’S COMMUNICATIONS WITH AND USE OF
AMERICAN EXPRESS’ SERVICES IN NEW YORK TO
CONDUCT BUSINESS IN NEW YORK CONSTITUTE A
“TRANSACT[ION]” OF BUSINESS FOR THE PURPOSES OF
CPLR § 302(a)(1) ....................................................................................................12
POINT III
THE “ARTICULABLE NEXUS” AND “SUBSTANTIAL
RELATIONSHIP” TESTS UNDER CPLR § 302(a)(1) REQUIRE
ONLY THAT THE DEFENDANT’S TRANSACTION(S) AND
PLAINTIFF’S CAUSE OF ACTION ARE RELATED ......................................19
A. This Court’s CPLR § 302(a)(1) Cases Require Only that
the Relationship Between Defendant’s Transaction(s)
and Plaintiffs’ Cause of Action are not Disparate, not
that One Cause the Other ..................................................................20
B.
The Text of CPLR § 302(a)(1) Dictates Only that There
Not be a Disparate Relationship Between Defendant’s
Transaction(s) and Plaintiffs’ Cause of Action...............................29
C. The Legislative History of CPLR § 302(a)(1) Dictates
Only that There Not be a Disparate Relationship
Between Defendant’s Transaction(s) and Plaintiffs’
Cause of Action ...................................................................................38
POINT IV
ALTERNATIVELY, IF THIS COURT CONCLUDES THAT CPLR
§ 302(a)(1)’s “ARISING FROM” LANGUAGE DENOTES
CAUSATION, IT DENOTES MERE “BUT-FOR” CAUSATION,
RATHER THAN PROXIMATE CAUSATION .................................................47
POINT V
ALTERNATIVELY, IF THIS COURT CONCLUDES THAT CPLR
§ 302(a)(1)’s “ARISING FROM” LANGUAGE DENOTES
PROXIMATE CAUSATION, IT SHOULD FIND AN
EXCEPTION FOR CASES ARISING FROM ACTS OF
TERRORISM ..........................................................................................................51
POINT VI
PLAINTIFFS’ FACTUAL ALLEGATIONS AND THE LEGAL
ELEMENTS OF THEIR CLAIMS ADEQUATELY RELATE TO
LCB’S TRANSACTIONS IN NEW YORK.........................................................55
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POINT VII
PLAINTIFFS’ POSITION IS MODEST AND DOES NOT OPEN
THE PROVERBIAL “FLOODGATES OF LITIGATION” ...............................62
CONCLUSION ......................................................................................................64
-iii-
Table of Authorities
Constitution
U.S. CONST. art. III, § 2 ................................................................................................. 30
U.S. CONST. amend. XIV, § 1 ................................................................ 12, 33, 37-38, 41
Cases
Aetna Cas. & Sur. Co. v. Crowther, Inc., 581 N.E.2d 833 (Ill. App.
Ct. 1991) ...................................................................................................................... 36
Banco Ambrosiano, S.P.A. v. Artoc Bank & Trust Ltd., 62 N.Y.2d 65
(1984) ......................................................................................................................... 18
Boim v. Holy Land Found. for Relief and Dev., 549 F.3d 685 (7th Cir.
2008) (en banc) ............................................................................................................ 51
Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158 (2d Cir. 2010)..................... 13
Classic Auto Sales, Inc. v. Schocket, 832 P.2d 233 (Colo. 1992) ................................. 34
Cumberland Coal & Iron Co. v. Hoffman Steam Coal Co., 30 Barb. 159
(Gen. Term. 1859)............................................................................... 21-22, 45-46, 56
Deutsche Bank Sec., Inc. v Montana Bd. of Invs., 7 N.Y.3d 65 (2006)................... 12-13
Doundoulakis v. Town of Hempstead, 42 N.Y.2d 440 (1977) ...................................... 54
Fischbarg v. Doucet, 9 N.Y.3d 375 (2007)......................................................... 17, 21-22
George Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648 (1977) ................................... 14
Green v. Wilson, 565 N.W.2d 813 (Mich. 1997) ......................................................... 37
Greene v. Whiteside, 908 N.E.2d 975 (Ohio Ct. App. 2009) ...................................... 38
Haas v. Four Seasons Campground, Inc., 952 A.2d 688 (Pa. Super.
Ct. 2008) ..................................................................................................................... 38
Hanson v. Denckla, 357 U.S. 235 (1958) ...................................................................... 10
-iv-
Holder v. Humanitarian Law Project, ___ U.S. ___, 130 S. Ct. 2705,
2720, 2729 (2010) ...................................................................................................... 50
Indosuez Int’l Fin. B.V. v. Nat’l Reserve Bank, 98 N.Y.2d 238 (2002) ....................... 18
Int’l Shoe v. Washington, 326 U.S. 310 (1945) ............................................................... 9
J. McIntyre Machinery, Ltd. v. Nicastro, ___ U.S. ___, 131 S.Ct. 2780
(2011) ..................................................................................................................... 10-11
Johnson v. Ward, 4 N.Y.3d 516 (2005) ........................................................ 21-22, 25-27
Keefe v. Kirschenbaum & Kirschenbaum, P.C., 40 P.3d 1267 (Colo.
2002) ............................................................................................................................ 35
Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460 (1988) ....................... 8, 12, 19, 40, 56
Licci v. Am. Express Bank Ltd., 704 F. Supp. 2d 403 (S.D.N.Y. 2010) .................... 7-8
Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50 (2d Cir. 2012) .................... passim
Longines-Wittnauer Watch Co. v Barnes & Reinecke, 15 N.Y.2d 443
(1965) .............................................................................................. 34-35, 39-40, 59-61
McGowan v. Smith, 52 N.Y.2d 268 (1981) ............................................. 8, 19, 22, 27-30
New London County Mut. Ins. Co. v. Nantes, 36 A.3d 224 (Conn.
2012) ............................................................................................................................ 35
Phelps v. Kingston, 536 A.2d 740 (N.H. 1987)............................................................ 37
Ryan v. Cerullo, 918 A.2d 867 (Conn. 2007) .............................................................. 35
Sifers v. Horen, 188 N.W.2d 623 (Mich. 1971) ...................................................... 36-37
Simonson v. Int’l Bank, 14 N.Y.2d 281 (1964).................................................. 37-38, 41
Spartan Motors, Inc. v. Lube Power, Inc., 786 N.E.2d 613 (Ill. App.
Ct. 2003) ...................................................................................................................... 36
SPCA of Upstate New York, Inc. v. American Working Collie Ass’n,
18 N.Y.3d 400 (2012) ............................................................................................ 20-24
State of New York v Patricia II, 6 N.Y.3d 160 (2006) ................................................. 31
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Talbot v. Johnson Newspaper Corp., 71 N.Y.2d 827 (1988).................................... 24-25
Tatro v. Manor Care, Inc., 625 N.E.2d 549 (Mass. 1994) ...................................... 47-49
Statutes and Regulations
CPLR § 302(a)(1) .................................................................................................... passim
CPLR § 302(a)(2) ..................................................................................................... 40, 60
CPLR § 302(a)(3) ........................................................................................................... 40
18 U.S.C. § 2333(a) ...................................................................................................... 1, 4
28 U.S.C. § 1331 ............................................................................................................ 30
28 U.S.C. § 1350 note .................................................................................................. 1, 4
31 U.S.C. § 5318(i).................................................................................................... 15-16
Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 § 312, Pub.
L. No. 107–56, 115 Stat. 272 (2001) ................................................................ 2, 15-16
67 Fed. Reg. 48348 (July 23, 2002) .............................................................................. 16
71 Fed. Reg. 496 (Jan. 4, 2006)..................................................................................... 16
76 Fed. Reg. 9403 (Feb, 17, 2011) ............................................................................ 2, 14
COLO. REV. STAT. § 13-1-124(1)(a) ............................................................................... 34
CONN. GEN. STAT. § 52-59b(a) ..................................................................................... 35
735 ILL. COMP. STAT. 5/2-209 ...................................................................................... 36
MASS. GEN. LAWS ch. 223A. § 3 ................................................................................... 48
MICH. COMP. LAWS § 600.705 ...................................................................................... 36
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N.H. REV. STAT. ANN. § 510:4 ...................................................................................... 37
OHIO REV. CODE ANN. § 2307.382(a) .......................................................................... 38
PA. CONS. STAT. § 5322(a) ............................................................................................ 38
22 N.Y.C.R.R. § 500.27 .................................................................................................... 3
Other Authority
4 C. Wright & A. Miller, Federal Practice & Procedure § 1068, n. 12 (3d
ed.).................................................................................................................... 33-35, 38
ADVISORY COMMITTEE ON PRACTICE AND PROCEDURE, SECOND
PRELIMINARY REPORT 38-39 (1958) ......................................................... 41-42, 44, 57
DAVID L. FERSTENDIG, HISTORICAL APPENDIX FOR CPLR 302 ....................... 43-44, 57
MEMORANDUM OF THE LAW REVIEW COMMISSION, NEW YORK STATE
LEGISLATIVE ANNUAL 164 (1979) ............................................................................. 44
SENATE FINANCE COMMITTEE & ASSEMBLY WAYS AND MEANS COMMITTEE,
FIFTH PRELIMINARY REPORT TO THE LEGISLATURE 66-67 (1961).................. 42-43, 57
BLACK’S LAW DICTIONARY 115 (8th ed. 2004) ............................................................ 30
Federal Financial Institutions Examination Council, Correspondent
Accounts (Foreign)—Overview,
http://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_047
.htm (last visited July 3, 2012). ............................................................................... 5-6
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Jo Becker, Beirut Bank Seen as a Hub of Hezbollah’s Financing, N.Y. TIMES,
Dec. 13, 2011, available at:
http://www.nytimes.com/2011/12/14/world/middleeast/beirutbank-seen-as-a-hub-of-hezbollahs-financing.html?pagewanted=all ................. 2
Mariam Karouny, “Lebanese Bank for Sale After U.S. Laundering
Claim,” Mar. 3, 2011,
http://www.reuters.com/article/2011/03/03/lebanon-bankidUSLDE7221KS20110303/................................................................................ 14-15
U.S. Department of State, Foreign Terrorist Organizations, Jan. 27,
2012, http://www.state.gov/j/ct/rls/other/des/123085.htm........................ 11
U.S. DEPARTMENT OF STATE, PATTERNS IN GLOBAL TERRORISM 1999 56
(2000) ......................................................................................................................... 50
U.S. Department of Treasury, Fact Sheet: Overview of Section 311 of the
USA PATRIOT Act, Feb. 10, 2011 ............................................................................. 3
U.S. Department of Treasury, Treasury Identifies Lebanese Canadian Bank
Sal as a “Primary Money Laundering Concern”, Feb. 10, 2011,
http://www.treasury.gov/press-center/pressreleases/pages/tg1057.aspx .................................................................................. 2-3
William E. Nelson, Civil Procedure in Twentieth-Century New York, 41 ST.
LOUIS U. L.J. 1157, 1216 (1997) ............................................................... 40-41, 44, 57
-viii-
BRIEF FOR PLAINTIFFS-APPELLANTS
QUESTIONS PRESENTED
The following two questions were certified to this Court by the
United States Court of Appeals for the Second Circuit (626*):
1.
Does a foreign bank’s maintenance of a correspondent
bank account at a financial institution in New York, and use of that account
to effect ‘dozens’ of multimillion dollar wire transfers on behalf of a foreign
client, constitute a ‘transact[ion]’ of business in New York within the
meaning of CPLR § 302(a)(1)?
2.
If so, do the plaintiffs’ claims under the Anti-Terrorism
Act, 18 U.S.C. § 2333(a), the Alien Tort Statute, 28 U.S.C. § 1350 note, or for
negligence or breach of statutory duty in violation of Israeli law, ‘aris[e]
from’ LCB’s transaction of business in New York within the meaning of
CPLR § 302(a)(1)?
Unless otherwise noted, parenthetical page references refer to
the Record on Appeal.
*
PRELIMINARY STATEMENT
The remaining defendant-respondent herein, the Lebanese
Canadian Bank, SAL (“LCB” or “Defendant”) has, through its business and
transactions in New York, facilitated the terrorism and related activities of
Hizballah,1 a Lebanese terrorist organization. LCB is the unofficial bank of
Hizballah and is regarded as the “hub” of Hizballah’s financial
operations.2 For its activities related to the cocaine trade in South America
and its ties to Hizballah, the United States Treasury identified LCB as a
“financial institution of primary money laundering concern under Section
311 of the USA PATRIOT Act.”3 LCB enabled millions of dollars of wire
“Hizballah,” a transliteration from another language, has
many different forms in English. We have adopted the form used by the
Second Circuit except to the extent that it appears in a quotation with a
different spelling.
2 See Jo Becker, Beirut Bank Seen as a Hub of Hezbollah’s Financing,
N.Y. TIMES, Dec. 13, 2011, available at:
http://www.nytimes.com/2011/12/14/world/middleeast/beirut-bankseen-as-a-hub-of-hezbollahs-financing.html?pagewanted=all.
1
Finding that the Lebanese Canadian Bank SAL is a Financial
Institution of Primary Money Laundering Concern, 76 Fed. Reg. 9403 (Feb,
17, 2011); see also U.S. Department of Treasury, Treasury Identifies Lebanese
Canadian Bank Sal as a “Primary Money Laundering Concern”, Feb. 10, 2011,
3
(continued next page)
-2-
transfers to Hizballah, which in turn enabled Hizballah to play a material
role in terrorist attacks that caused the plaintiffs-appellants (“Plaintiffs”) to
be significantly harmed. (46, 66-71, First Amended Complaint (“FAC”) at
¶¶ 53, 57-58, 113-20, 126-37). Plaintiffs have sued LCB for their damages in
federal court, and seek to establish personal jurisdiction over LCB in the
courts of the State of New York on the basis of LCB’s transactions
occurring in New York.
The Second Circuit Court of Appeals has certified to this Court
two questions, which are quoted above as the “Questions Presented.” (626)
Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 74-75 (2d Cir. 2012). This
Court accepted those questions on March 29, 2012 and communicated the
same to the Second Circuit on April 11, 2012. (628). This Court has
jurisdiction pursuant to 22 N.Y.C.R.R. § 500.27.
http://www.treasury.gov/press-center/press-releases/pages/tg1057.aspx;
U.S.
Department of Treasury, Fact Sheet: Overview of Section 311 of the USA
PATRIOT Act, Feb. 10, 2011.
-3-
STATEMENT OF FACTS
Plaintiffs, American and non-American citizens who reside in
Israel, were injured, or their family members killed or injured, by rockets
fired by Hizballah, a Lebanese terrorist organization, into northern Israel in
July and August 2006. (46-65, FAC ¶¶ 57-112). The Plaintiffs initiated this
action on July 11, 2008, (580) Licci, 673 F.3d at 57.4 The FAC, filed January
22, 2009, alleged, inter alia, that LCB violated the Anti-Terrorism Act
(“ATA”), 18 U.S.C. § 2333(a); the Alien Tort Statute (“ATS”), 28 U.S.C.
§ 1350 note; and Israeli tort law, which is applicable to this case under
choice of law principals. (580) Licci, 673 F.3d at 57.
Plaintiffs claim that New York courts have personal jurisdiction
over Defendant LCB, the unofficial bank of Hizballah, on the basis of LCB’s
dozens of dollar-denominated international wire transfers, totaling several
million dollars over the course of several years, on behalf of a Hizballah
affiliate that is controlled entirely by Hizballah. (45-46, FAC ¶¶ 45-54). In
This statement of facts relies on the FAC, which was filed
January 22, 2009. At this preliminary stage in the litigation, all of the wellpleaded factual allegations therein, whether recounted here or not, must be
accepted as true. (577-78) Licci, 673 F.3d at 56.
4
-4-
order to facilitate those transfers, it is alleged that LCB maintained and
used a correspondent banking account5 with (now dismissed) defendant
The Federal Financial Institutions Examination Council
(FFIEC), an interagency body empowered to prescribe principles and
standards in the assistance of other governmental agencies including the
Federal Reserve, explains correspondent banking relationships that cross
international boarders as follows: “Foreign financial institutions maintain
accounts at U.S. banks to gain access to the U.S. financial system and to
take advantage of services and products that may not be available in the
foreign financial institution’s jurisdiction. These services may be performed
more economically or efficiently by the U.S. bank or may be necessary for
other reasons, such as the facilitation of international trade. Services may
include: [(1)] Cash management services, including deposit accounts. [(2)]
International funds transfers. [(3)] Check clearing. [(4)] Payable through
accounts. [(5)] Pouch activities. [(6)] Foreign exchange services. [(7)]
Overnight investment accounts (sweep accounts). [(9)] Loans and letters of
credit.”
It explains further that “[e]ach relationship that a U.S. bank has
with a foreign correspondent financial institution should be governed by
an agreement or a contract describing each party’s responsibilities and
other relationship details (e.g., products and services provided, acceptance
of deposits, clearing of items, forms of payment, and acceptable forms of
endorsement). The agreement or contract should also consider the foreign
financial institution’s [anti-money laundering] regulatory requirements,
customer base, due diligence procedures, and permitted third-party usage
of the correspondent account.”
5
(continued next page)
-5-
American Express Bank, Ltd. (“AmEx”) in New York. (44-46, FAC ¶¶ 4245, 54-56). Plaintiffs alleged that LCB facilitated the above-mentioned wire
transfers to Hizballah through that correspondent banking account in New
York. (46, FAC ¶¶ 54-56). Plaintiffs contend that those wire transfers and
the various bilateral communications that were necessary to effect both the
underlying relationship between the banks and the wire transfers at issue
amount to “transact[ions]” within the scope of CPLR § 302(a)(1), and
therefore are sufficient to establish long arm jurisdiction in the courts of
New York.
In order to open its correspondent account with AmEx, LCB
entered into a business relationship with AmEx. The two banks initiated
that relationship starting no later than 2004 and continued to maintain it
And the FFIEC posits that “U.S. banks that offer foreign
correspondent financial institution services should have policies,
procedures, and processes to manage the [Bank Secrecy Act]/[anti-money
laundering] risks inherent with these relationships and should closely
monitor transactions related to these accounts to detect and report
suspicious activities.” Federal Financial Institutions Examination Council,
Correspondent
Accounts
(Foreign)—Overview,
http://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_047.htm
(last visited July 3, 2012).
-6-
until at least July 12, 2006. (45, FAC ¶ 45). Starting in 2004, LCB and AmEx
began providing extensive wire transfer services to Hizballah and/or a
Hizballah affiliate. (45-46, FAC ¶¶ 52-56). Between 2004 and July 12, 2006,
Hizballah effected dozens of U.S. dollar-denominated wire transfers
utilizing the New York-based services of LCB and AmEx. (46, FAC, ¶¶ 5355). Those wire transfers are valued in the millions of dollars, money that
Hizballah needed to plan, prepare, and carry out its terrorist activities. (46,
66, FAC ¶¶ 53, 113-17). All of those wire transfers were carried out in and
through the State of New York. (46, 67, FAC ¶¶ 54-56, 118-19).
The United States District Court for the Southern District of
New York dismissed Plaintiffs’ FAC without the benefit of jurisdictional
discovery. Licci v. Am. Express Bank Ltd., 704 F. Supp. 2d 403 (S.D.N.Y. 2010)
(Daniels, J.), reasoning that LCB’s maintenance of a correspondent banking
account in New York and use of that account to wire funds on behalf of the
Hizballah affiliate were insufficient to establish specific personal
jurisdiction over LCB under New York’s long-arm statute, CPLR
§ 302(a)(1). Licci, 704 F. Supp. 2d at 407. The district court further held that
there was no “articulable nexus or substantial relationship...between LCB’s
-7-
general use of its correspondent account for wire transfers through New
York and the specific terrorist activities by Hizbollah underlying plaintiffs’
claims.” Id. at 408. The Plaintiffs timely appealed to the Second Circuit.
(572).
The Second Circuit was not convinced by the district court’s
conclusions, and held that the questions presented by this appeal are
“insufficiently developed…to enable us to predict with confidence how the
New York Court of Appeals would resolve these issues of New York State
law.” (577) Licci, 673 F.3d at 55. Nevertheless, it stated explicitly that if it
were
required to decide ourselves, we might conclude…
that the first prong of the long-arm jurisdiction test
under N.Y. CPLR § 302(a)(1)—whether the
defendant has transacted business within New
York—may be satisfied by the defendant’s use of a
correspondent bank account in New York, even if
no other contacts between the defendant and New
York can be established, if the defendant’s use of
that account was purposeful.
(603) Id. at 66. (Emphasis omitted). It similarly stated that “[t]o the extent
that the Court of Appeals determined in Kreutter [v. McFadden Oil Corp., 71
N.Y.2d 460 (1988)] and McGowan [v. Smith, 52 N.Y.2d 268 (1981)] that the
-8-
nexus requirement may be satisfied by a showing of a ‘substantial
relationship’ or an ‘articulable nexus,’ respectively, it would appear as
though no showing of causation is required by N.Y. CPLR § 302(a)(1).”
(615-16) Id. at 71. (Internal citations omitted). Notwithstanding its apparent
inclination to side with the Plaintiffs, the Second Circuit felt it necessary, in
light of a perceived uncertainty in New York’s law, to certify the two
questions now before this Court. (622-24) Id. at 74-75.
POINT I
THE EXERCISE OF PERSONAL JURISDICTION
OVER LCB IS ENTIRELY CONSISTENT WITH
FEDERAL CONSTITUTIONAL DUE PROCESS
LIMITATIONS
To maintain jurisdiction, courts must be satisfied that the
defendant has established minimum, sufficient contacts with the state
“such that the maintenance of the suit does not offend traditional notions
of fair play and substantial justice.” See Int’l Shoe v. Washington, 326 U.S.
310, 316 (1945). (Internal quotation marks omitted). Necessarily, the
“minimum contacts” and “purposeful availment” inquiries that grow out
of International Shoe have changed over time as technological advances
-9-
have minimized the business need for physical presence in a locality and
have altered notions of what it means to be “in” a state. See Hanson v.
Denckla, 357 U.S. 235, 250-52 (1958).
In its most recent pronouncement on the subject, the Supreme
Court reiterated that jurisdiction is available when a defendant
“purposefully avails itself of the privilege of conducting activities within
the forum State, thus invoking the benefits and protections of its laws.” J.
McIntyre Machinery, Ltd. v. Nicastro, ___ U.S. ___, 131 S.Ct. 2780, 2785 (2011)
(plurality opinion) (quoting Hanson, 357 U.S. at 253). The Court affirmed
that deliberately contacting entities in another forum, entering into
relationships with such entities, and engaging in other activity directed to a
particular forum can form a basis for specific personal jurisdiction in the
courts of that forum. Id. at 2788.
Manufacturers and other concerns that actively seek out
business in a foreign forum thereby subject themselves to personal
jurisdiction in that forum. Id. Sometimes, merely sending goods (including
money transfers, which are the “goods” in the banking business) to a
foreign jurisdiction is sufficient if the claims relate in some way to the
-10-
transmission. The touchstone is simply whether the transmission at issue
was commissioned with the purpose of engaging business in the forum
state. See id.
There is simply no question that LCB actively and purposefully
sought business in New York. It deliberately made contacts and contracts6
with AmEx to conduct business in New York. (44-46, FAC ¶¶ 41-45, 5256). It purposefully availed itself of the laws and protections of the state of
New York by transmitting assets to New York on behalf of Hizballah, a
major client and a known terrorist organization.7 And it transmitted those
assets for the express purpose of conducting business in New York.
Exercising personal jurisdiction over LCB for claims related to these
Because the motion in the district court was a pre-answer
motion, no discovery was conducted. Accordingly, the contracts are not in
the record. However, it is inconceivable that two banks would have a
multi-million dollar ongoing correspondent banking relationship without
some form of writing between them. See supra footnote 5. Undoubtedly,
whatever writing exists may contain provisions that bear on jurisdiction,
such as forum selection or choice of law clauses, etc.
7 Hizballah is listed by the U.S. Department of State as a
Foreign Terrorist Organization. U.S. Department of State, Foreign Terrorist
Organizations, Jan. 27, 2012, http://www.state.gov/j/ct/rls/other/des/123085.htm.
6
-11-
transfers is plainly consistent with the Due Process Clause of the United
States Constitution, U.S. CONST. amend. XIV, § 1 (“Due Process”).
POINT II
DEFENDANT’S COMMUNICATIONS WITH AND
USE OF AMERICAN EXPRESS’ SERVICES IN NEW
YORK TO CONDUCT BUSINESS IN NEW YORK
CONSTITUTE A “TRANSACT[ION]” OF BUSINESS
FOR THE PURPOSES OF CPLR § 302(a)(1)
A single act can provide a basis for jurisdiction under CPLR
§ 301(a)(1). Deutsche Bank Sec., Inc. v Montana Bd. of Invs., 7 N.Y.3d 65, 71
(2006); Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467 (1988). This Court
indicated in Kreutter that § 302(a)(1) “authorizes the court to exercise
jurisdiction over nondomiciliaries for tort and contract claims arising from
a defendant’s transaction of business in this State,” even if plaintiffs are
able to demonstrate just one transaction. Id. It does not matter whether the
defendant has ever set foot in the state of New York “so long as the
defendant’s activities here were purposeful and there is a substantial
relationship between the transaction and the claim asserted.” Id.
Accordingly, a single shipment by an out-of-state defendant into New York
“might well be sufficient” to establish personal jurisdiction under
-12-
§ 302(a)(1). Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 170 (2d Cir.
2010).
Deutsche Bank involved a series of communications that all took
place on one day and were made across state lines via the Bloomberg
Messaging System, an instant messaging service for investment traders. See
Deutsche Bank, 7 N.Y.3d at 69-70. The defendant, a Montana state agency,
deliberately communicated with the plaintiff’s representative, who was
located in New York. Id. This Court declared that “a sophisticated
institutional trader knowingly entering our state—whether electronically
or otherwise—to negotiate and conclude a substantial transaction is within
the embrace of the New York long-arm statute.” Id. at 72.
LCB, a sophisticated institutional trader,8 “entered” the State of
New York for the purpose of conducting business on multiple occasions. It
“LCB offers a broad range of corporate, retail, and investment
products, and maintains extensive correspondent accounts with banks
worldwide, including several U.S. financial institutions. As of 2009 LCB’s
total assets were worth over $5 billion.” Finding that the Lebanese
Canadian Bank SAL is a Financial Institution of Primary Money
Laundering Concern, 76 Fed. Reg. 9403, 9404 (Feb, 17, 2011). As of 2011, it
was ranked as one of Lebanon’s top banks, “with more than $5 billion in
8
(continued next page)
-13-
entered the state to form its relationship with AmEx. And it entered the
state each time it requested a wire transfer using its correspondent account
in New York. Each one of those single acts was purposeful and substantial
and done with the intent to engage in business in New York. Each one,
even when taken individually, gives rise to personal jurisdiction.
While a single act is not always sufficient to create personal
jurisdiction, many acts performed in an ongoing or continuous business
relationship are. See George Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648, 653
(1977) (identifying that the existence of an ongoing contractual
relationship, rather than a one-time-event, counsels in favor of
jurisdiction). LCB had an ongoing business relationship with AmEx in
New York. This ongoing business relationship was manifested through its
contract to open a correspondent account in New York. It was furthered by
assets, 35 branches in Lebanon[,] and an office in Montreal.” Mariam
Karouny, “Lebanese Bank for Sale After U.S. Laundering Claim,” Mar. 3,
2011,
http://www.reuters.com/article/2011/03/03/lebanon-bankidUSLDE7221KS20110303/.
-14-
the due diligence investigation9 that AmEx presumably performed, or at
least should have performed, (both before and after entering into its
relationship with LCB) pursuant to good business practice and the due
diligence requirements imposed upon it by the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 § 312, Pub. L. No. 107–56, 115 Stat. 272
(2001) (“USA PATRIOT Act”). See 31 U.S.C. § 5318(i).10 Its relationship was
As delineated further in the next footnote, AmEx was subject
to the due diligence requirements of the USA PATRIOT Act when entering
into its relationship with LCB and at all times thereafter.
10 The USA PATRIOT Act, § 312, requires that “[e]ach financial
institution that establishes, maintains, administers, or manages a private
banking account or a correspondent account in the United States for a nonUnited States person, including a…representative of a non-United States
person…establish appropriate, specific, and, where necessary, enhanced,
due diligence policies, procedures, and controls that are reasonably
designed to detect and report instances of money laundering through those
accounts.” 31 U.S.C. § 5318(i).
The Interim Final Rule promulgated by Treasury pursuant to
§ 312, Special Due Diligence Programs for Certain Foreign Accounts, 67
Fed. Reg. 48348 (July 23, 2002), which was in force until February 3, 2006,
required all banks to assess the degree to which a correspondent account
poses a risk of money laundering and to take appropriate steps to guard
against money laundering. See id. at 48350. It expressed that correspondent
9
(continued next page)
-15-
furthered with each of dozens of wire transfers over a period of years. (4546, 89, FAC ¶¶ 52-56, 179). Such a prolonged relationship is certainly a
“transact[ion]” for the purposes of CPLR § 302(a)(1).
Finally, personal jurisdiction rests over the out-of-state
defendants when their New York agent performs substantial work for
accounts used to provide services to third parties (such as Hizballah and its
affiliates) must receive a higher priority of due diligence. Id.
On January 4, 2006, Treasury promulgated a Final Rule that
was effective on February 3, 2006 (until a subsequent amendment after the
dates relevant to this appeal). Special Due Diligence Programs for Certain
Foreign Accounts, 71 Fed. Reg. 496. The Final Rule required covered banks
(including AmEx) to assess the risk posed by each of their correspondent
accounts. The risk assessment had to consider matters such as “[t]he nature
of the foreign financial institution’s business and the markets it serves, and
the extent to which its business and the markets it serves present an
increased risk for money laundering” and “[t]he anti-money laundering
and supervisory regime of the jurisdiction that issued the charter or license
to the foreign financial institution.” Id. at 502-03. Given that LCB operates
in a market with a large exposure to terrorist activity and in a country that
is not known to be friendly to the laws of the United States, the above
factors undoubtedly increased the burden of AmEx’s due diligence
towards its LCB correspondent account(s). While the risk-based due
diligence regime did not apply until October 2, 2006 to correspondent
accounts opened prior to April 4, 2006, AmEx and LCB were undoubtedly
(continued next page)
-16-
them in New York. See Fischbarg v. Doucet, 9 N.Y.3d 375 (2007). The clients
of a New York attorney were found to be subject to jurisdiction in New
York notwithstanding the fact that the clients never stepped foot in New
York. Id. at 377. The clients, residents of California, communicated with
their attorney by telephone and mail. The attorney performed all or
materially all of his work for them from his New York office. Id. at 377-78.
This Court found that the defendants’ “purposeful attempt to establish an
attorney-client relationship” in New York, coupled with “their direct
participation in that relationship” that they projected through their
communications into the State of New York, was sufficient for the
purposes of § 302(a)(1). Id. at 380-84.
LCB deliberately sought out the assistance of AmEx. It needed
AmEx to conduct its business in the United States as it did not have, and
presumably could not obtain at reasonable cost, its own account or
physical presence in the United States. See (43-44, FAC ¶¶ 33-43).
Accordingly, it entered into an ongoing contractual relationship with
engaged in significant correspondence in the months following the release
of these rules in order to ensure future compliance with them.
-17-
AmEx by which AmEx would act as its agent in New York to siphon
dollars to and from Hizballah accounts. Id. It thus purposefully availed
itself of the benefits and protections of this state. See also, e.g., Indosuez Int’l
Fin. B.V. v. Nat’l Reserve Bank, 98 N.Y.2d 238, 244 (2002) (finding
jurisdiction on the basis of a series of dollar-denominated international
transactions that needed to occur in New York); Banco Ambrosiano, S.P.A. v.
Artoc Bank & Trust Ltd., 62 N.Y.2d 65, 72-73 (1984) (finding jurisdiction
solely on the basis of defendant’s maintenance of a correspondent account
that it needed in New York to conduct its international business). The
present case presents a very clear § 302(a)(1) “transact[ion].”
POINT III
THE “ARTICULABLE NEXUS” AND “SUBSTANTIAL
RELATIONSHIP” TESTS UNDER CPLR § 302(a)(1)
REQUIRE ONLY THAT THE DEFENDANT’S
TRANSACTION(S) AND PLAINTIFF’S CAUSE OF
ACTION ARE RELATED
This Court has interpreted CPLR § 302(a)(1) to require that
there be either an “articulable nexus,” McGowan v. Smith, 52 N.Y.2d 268,
272 (1981), or a “substantial relationship,” Kreutter v McFadden Oil Corp., 71
N.Y.2d 460, 467 (1988), between the cause of action and the transaction(s)
-18-
that gives rise to jurisdiction. Those requirements, which we will refer to
collectively as the “nexus limitations,”11 require only that the transaction
and the cause of action are related. There must be some connection
between the two. An alternative rule would, pursuant to CPLR § 302(a)(1),
make unrelated torts, contracts, property disputes, and countless other
matters subject to general jurisdiction whenever, for example, someone
driving from Lebanon, Pennsylvania to Lebanon, Connecticut buys a soda
at a convenience store in Lebanon, New York. That simply cannot be. The
nexus limitations prevent the back-door exercise of general jurisdiction but
(consistent with the objective of the statute) permit the exercise of specific
jurisdiction for claims that relate to the purchase of that can of soda, even if
those causes of action are not directly caused by the purchase. Causation is
not necessary.12
Plaintiffs coin their own phrase as a means of demonstrating
that they rely on neither the “articulable nexus” test nor the “substantial
relationship” test exclusively. It is unclear whether there is a difference
between the tests and, if there is a difference, what that difference is.
Accordingly, we will refer to both with the term “nexus limitations.”
12 While Plaintiffs strongly object to the use of a causation
standard, as explained at length below, they are certain that, if required to
11
(continued next page)
-19-
A.
This Court’s CPLR § 302(a)(1) Cases Require Only that the
Relationship Between Defendant’s Transaction(s) and
Plaintiffs’ Cause of Action are not Disparate, not that One
Cause the Other
When assessing whether the nexus limitations of CPLR
§ 302(a)(1) have been satisfied, this Court has inquired whether “the
relationship between the activities and the allegedly offending statement is
too diluted.” SPCA of Upstate New York, Inc. v. American Working Collie
Ass’n, 18 N.Y.3d 400, 404 (2012). It has inquired into whether “the
relationship between the claim and transaction is too attenuated.” Johnson
v. Ward, 4 N.Y.3d 516, 520 (2005). Jurisdiction has been denied when a
contact has a mere “tangential relationship to the present case.” Fischbarg v.
Doucet, 9 N.Y.3d at 384. As far as the plaintiffs are aware, this Court has
never denied jurisdiction under CPLR § 302(a)(1) on the basis of a
deficiency of causation.
As discussed infra in the section relating to legislative history,
the nexus requirements likely derive from a simple desire to avoid having
do so and with the benefit of jurisdictional discovery, they will be able to
demonstrate causation.
-20-
the courts of New York assume jurisdiction in cases involving only
tangential relationships or, perhaps, no relationships, to the State of New
York. They likely derive ultimately from an 1859 decision in which the
plaintiff, a Maryland corporation, sought jurisdiction in New York over
another Maryland corporation in a dispute involving Maryland property.
The court noted that it “would seem little short of preposterous” to suggest
that the State of New York had any connection to the dispute. Cumberland
Coal & Iron Co. v. Hoffman Steam Coal Co., 30 Barb. 159 (Gen. Term. 1859).
As explained further below, in order to avoid problems like the
one presented in Cumberland Coal, the State Legislature demanded in CPLR
§ 302(a)(1) that the “cause of action” for which jurisdiction is sought must
“aris[e] from” the “transact[ion of] any business within the state.” Id. And
based on that language, this Court gave us the nexus limitations. McGowan
v. Smith, 52 N.Y.2d 268, 272-73 (1981) (explicitly deriving the necessity of
“some articulable nexus between the business transacted and the cause of
action sued upon” from the “statutory scheme” that demands that the
“cause of action arose out of those business contacts” (a clear reference to
the “arising from” language of CPLR § 302(a)). (Emphasis added).
-21-
To be clear, the nexus limitations are there only to ensure that
the relationship between the cause of action and the transaction is not “too
diluted,” SPCA, 18 N.Y.3d at 404, “too attenuated,” Johnson, 4 N.Y.3d at
520, or simply “tangential.” Fischbarg, 9 N.Y.3d at 384. They impose a
requirement of “some articulable nexus.” McGowan, 52 N.Y.2d at 272
(emphasis added). They do not demand causation or any sort of strict
relationship.
This claim regarding the scope of the nexus limitations is
confirmed by looking at some of the cases in which jurisdiction was denied
by this Court. They demonstrate both that (1) causation is irrelevant, and
(2) all the Court needs to grant jurisdiction is some clear link (what we will
describe infra in the section relating to textual analysis as an “origin”)
between the claim and the stated basis for jurisdiction (e.g., the
transaction). For example:
• SPCA involved an out-of-state corporation that had no New
York presence but made “three phone calls and two short visits—totaling
less than three hours” to New York and donated supplies to the plaintiff in
New York. SPCA, 18 N.Y.3d at 405. This Court found that there was no
-22-
“substantial relationship” between “the allegedly defamatory statements
and defendants’ New York activities.” Id. This Court did not devote even a
single word of its decision to assessing causation. To the contrary, it
suggested that if the defendant had actively chosen a New York
destination for its philanthropy, that might have formed a “substantial
relationship,” despite that doing so would not have caused the alleged
defamation. Id. The Court continued and noted that the standard for
“substantial relationship” is stricter in defamation cases out of a desire to
avoid unduly chilling speech. Id. at 405-06. The risk of unduly chilling
speech is absent here and, nevertheless, the Defendant asks this Court to
invent a stricter standard than the one that it used in SPCA.
• Similarly, in Talbot v. Johnson Newspaper Corp., 71 N.Y.2d 827
(1988), this Court denied jurisdiction for a defamation action on the
grounds that there was an insufficient nexus between a college coach’s
defamation action (the cause of action) and a former student’s pursuit of a
college degree in New York (the transaction). The Court noted that “there
was no showing that—years after termination of [one of the defendants’
relationship with her New York university]—there was the required nexus
-23-
between the [the defendants’] New York ‘business’ and the cause of
action.” Id. at 829. Again, the Court did not hold that the New York
“business” did not cause the defamation. Nor did it address causation. It
held, rather, that the relationship between the cause of action and the
transaction was attenuated—implying that a greater relationship between
the two could have provided a basis for jurisdiction. The letter that
allegedly defamed the plaintiff was written two years after the defendant
had left her university. Id. at 828. It appears that the passage of time, more
than anything else, is what motivated this Court to deny jurisdiction. See id.
at 828-29. Of course, passage of time does not undermine causation and a
shorter temporal window cannot create causation where it does not
already exist.13
It is important to note that Talbot does not undermine the
Plaintiffs’ arguments. In the present case, there is no significant (defined
with reference to the nature of the action and it the circumstances that
surround it) passage of time to render the transactions by LCB on behalf of
Hizballah too attenuated. In a defamation action, the passage of two years
between the underlying incident and the allegedly defamatory speech,
which increases the risk of error on the part of the speaker and renders the
speech stale, might indeed be a significant passage of time. Two years, or
even many years, after a terrorist attack that involves serious injury and
13
(continued next page)
-24-
•In Johnson v. Ward, 4 N.Y.3d 516 (2005), this Court denied
jurisdiction in a negligence action on the grounds that there was an
“insufficient nexus” between the tort and the defendant’s New York
connections. Id. at 518. The plaintiffs were struck by a car in New Jersey.
The driver of the other car, the defendant, possessed a New York driver’s
license and had registered his car in New York. He had since moved to
New Jersey but retained his New York license and registration. Id. The
Court noted that the accident had little or nothing to do with the New York
license and registration:
The relationship between the negligence claim and
defendant’s possession of a New York license and
registration at the time of the accident is too
insubstantial to warrant a New York court’s
exercise of personal jurisdiction over defendant.
The negligent driver could have had a license from
any state, or no license—that defendant had a New
York license and registration is merely coincidental.
Id. at 520. Note that the Court made no mention of causation.
death is not very much time at all. And, as noted above, the standards are
heightened in defamation cases—a factor not relevant here. See SPCA, at
405-06.
-25-
The Johnson Court actually understated the divide between the
New York license and registration and the New Jersey accident: they have
nothing to do with each other. As the Court indicated, the defendant could
have just as easily been driving without a license or could have had a
license from a different state. Moreover, even if we assume that the
defendant had some extrinsic need for a New York license and registration,
the fact of that license was neither the cause nor the origin of the accident
in New Jersey. The defendant had permission to drive in New Jersey not
because of his license, but because the laws of New Jersey permitted him to
drive in New Jersey. The New York license and registration only become
relevant once applicable law—New Jersey law—recognizes them. In
contrast, LCB’s connection to New York—a connection that it sought out
and relied upon for the execution of its business—is closely related to the
Plaintiffs’ claims.
• In McGowan v Smith, 52 N.Y.2d 268, 270 (1981), this Court
denied jurisdiction over a Japanese exporter of a fondue pot. The machine
had been shipped by the Japanese company to a store in Buffalo where it
was purchased by the plaintiff and brought to Ontario, Canada. In Ontario,
-26-
it allegedly injured the plaintiff. The plaintiff sued the retailer, a New York
department store, which attempted to implead the Japanese exporter. Id. at
270-71. The exporter had made several trips to New York to engage in
marketing research. This Court held that those trips did not “bear a
substantial relationship to the transaction out of which the instant cause of
action arose.” Id. at 272. The Court explained:
Essential to the maintenance of a suit against a
nondomiciliary under CPLR 302 (subd [a], par 1) is
the existence of some articulable nexus between the
business transacted and the cause of action sued
upon. Indeed, it is this basic requirement that
differentiates the long-arm authority conferred by
CPLR 302 (subd [a], par 1) from the more
traditional authority of the New York courts under
CPLR 301 to exercise in personam jurisdiction over
foreign defendants who are “present” within the
State by virtue of their “doing business” here.
Where jurisdiction is predicated upon the
provisions of CPLR 301, there is no need to
establish a connection between the cause of action
in issue and the foreign defendant’s business
activities within the State, because the authority of
the New York courts is based solely upon the fact
that the defendant is engaged in such a continuous
and systematic course of doing business here as to
warrant a finding of its presence in this jurisdiction.
-27-
Where the plaintiff’s proof falls short of establishing
such a systematic course of doing business,
however, our statutory scheme permits him to
bring the foreign defendant within the power of the
New York courts upon a lesser showing of some
business contacts within the State only if he
demonstrates that his cause of action arose out of
those business contacts.
Id. at 272-73 (internal citation and quotation marks omitted). The reason for
the nexus limitations thus rests in the distinction between CPLR § 301 and
CPLR § 302. CPLR § 301 provides jurisdiction for presence in the State of
New York. CPLR § 302 applies where presence—and thus the connection
to the state—is deficient. The nexus limitations are there to fill that
deficiency by requiring that there be some connection between the cause of
action and the State of New York. That connection is achieved by requiring
that the plaintiff’s cause of action “arise[s]” (as explained infra in the
section on textual analysis, that word, as used here, means “originates”)
from defendant’s transaction in the state. Demanding causation would be
excessive and entirely unnecessary in light of the nexus limitations’
objectives.
-28-
B.
The Text of CPLR § 302(a)(1) Dictates Only that There Not be
a Disparate Relationship Between Defendant’s Transaction(s)
and Plaintiffs’ Cause of Action
CPLR § 302(a)(1) provides that courts in New York may
exercise personal jurisdiction with regard to a “cause of action arising
from” the acts of a non-domiciliary who “transacts any business within the
state or contracts anywhere to supply goods or services in the state.” Id.
The word “any” is expansive, suggesting no limitation. The word
“transacts” likewise provides no meaningful limitation.
The phrase “arising from” thus forms the textual basis for the
nexus limitations incorporated into CPLR § 302(a)(1). See McGowan 52
N.Y.2d at 272-73 (explicitly deriving the necessity of “some articulable
nexus between the business transacted and the cause of action sued upon”
from the “statutory scheme” that demands that the “cause of action arose
out of those business contacts” (a clear reference to the “arising from”
language of CPLR § 302(a))). (Emphasis added).
The word “arise” has four senses in Black’s Law Dictionary.
The first of those senses is “to originate” or “to stem from.” BLACK’S LAW
DICTIONARY 115 (8th ed. 2004). That is, of course, the same sense of the
-29-
word that appears in the United States Constitution’s jurisdictional
discussion: “The judicial Power shall extend to all Cases, in Law and
Equity, arising under this Constitution….” U.S. CONST. art. III, § 2.
(Emphasis added); see also 28 U.S.C. § 1331 (“The district courts shall have
original jurisdiction of all civil actions arising under the Constitution, laws,
or treaties of the United States.” (Emphasis added)). It is also clearly the
most common usage of the word “arise.” If one were to say, for example,
that “this brief arises from the Defendant’s illegal actions,” an accurate and
grammatically correct statement, he would be saying only that Defendant’s
actions gave birth to these legal proceedings. He would not be making the
stronger claim that the Defendant caused this brief.
CPLR § 302(a)(1) incorporates, on its face, no causation
requirement. If the New York Legislature insisted upon a direct causation
requirement, it could have easily substituted the words “caused by” for the
words “arising from.” The statute would have then applied “to a cause of
action caused by any of the acts enumerated in this section.” Plainly, the
Legislature chose not to phrase the statute that way because it intended no
causation requirement. In order to give the statutory language its full
-30-
effect, see State of New York v Patricia II, 6 N.Y.3d 160, 162 (2006) (“The
starting point is always to look to the language itself and where the
language of a statute is clear and unambiguous, courts must give effect to
its plain meaning.” (Internal quotation marks and alteration marks
omitted)), this Court should not allow the nexus limitations to undermine
the objectives of New York’s long arm statute.
Rather, New York’s long arm statute demands that the
plaintiff’s cause of action originate from the defendant’s transactions in the
State of New York. An origin for a cause of action is an event that gave rise
to or inspired, but did not necessarily cause, the plaintiff’s cause of action.
For example, a reckless driver who creates a distraction while swerving on
the road where that distraction causes an accident between two other
drivers elsewhere on the road has arguably originated the injured
plaintiff’s cause of action. That origination gives rise to long arm
jurisdiction over that driver in New York.14 Conversely, a Pennsylvania
Appellants take no position on this appeal as to whether such
a plaintiff would be able to recover under New York’s tort law, which
might have an independent proximate causation requirement. It does not
matter, though, as the plaintiff’s inability to win on the merits does not
14
(continued next page)
-31-
resident who rents a car in Pennsylvania, drives it through New York en
route to New Hampshire, but strikes a pedestrian in Vermont along the
way should not be subject to long arm jurisdiction in the State of New York
despite that, strictly speaking, his use of New York’s roads caused his
entrée into Vermont and the accident. The defendant’s use of New York’s
roads did not originate the accident in Vermont even if that use would be
deemed a cause of the accident. An alternative rule that looks only to
causation would be overbroad as it would allow jurisdiction in New York
despite that New York’s connection to the Vermont accident is
exceptionally weak.
In the present case, LCB’s transactions in New York originated
the terrorist attacks by Hizballah that resulted in the Plaintiffs’ significant
injuries. Regardless of whether LCB’s transactions will ultimately be
determined to have actually caused the Hizballah attacks—a point that is
deprive New York’s courts of jurisdiction over the defendant should the
plaintiff decide to sue notwithstanding that perhaps he will not be able to
win on the merits.
-32-
premature to address prior to discovery—LCB’s transactions were, no
doubt, an origin of those attacks.
Other states with long-arm statutory language similar to New
York’s have likewise interpreted that language broadly and without a strict
causation requirement.15 For example:
According to Wright & Miller, at least twenty-eight
jurisdictions have adopted long arm statutes that extend the jurisdiction of
their courts to the limits of Due Process. 4 C. Wright & A. Miller, Federal
Practice & Procedure § 1068, n. 12 (3d ed.) (listing (1) Alabama,
(2) Arkansas, (3) California, (4) Colorado, (5) Georgia, (6) Illinois,
(7) Indiana,
(8) Iowa,
(9) Kansas,
(10) Kentucky,
(11) Louisiana,
(12) Maryland, (13) Michigan, (14) Minnesota, (15) Missouri, (16) Nevada,
(17) New Jersey, (18) North Dakota, (19) Oregon, (20) Pennsylvania,
(21) Puerto Rico, (22) South Carolina, (23) South Dakota, (24) Tennessee,
(25) Texas, (26) Utah, (27) Washington, and (28) West Virginia). The
language of many of these long arm statutes is remarkably similar to that
of New York—some of them are highlighted in the text. While this Court
has chosen not to extend the jurisdiction of New York’s courts to the extent
permissible under the Federal Constitution on the grounds that the
language of CPLR § 302 is “too plain and precise to permit it to be read [as
co-extensive with the Federal Constitution],” see Longines-Wittnauer Watch
Co. v Barnes & Reinecke, 15 N.Y.2d 443, 459-60 (1965), the interpretation of
New York’s long arm statute ought to be influenced, to the extent that it is
ambiguous, by interpretations of similar language by other courts. See id. at
457 n.5.
15
-33-
• Colorado. COLO. REV. STAT. § 13-1-124(1)(a) provides a basis
for jurisdiction for one who “engage[es] in any act…concerning any cause
of action arising from the transaction of any business within this state.” Id.
It subjects to jurisdiction any party that engages in purposeful acts
performed within the state in relation to the contract or transaction that
creates the basis of jurisdiction. Those purposeful acts can give rise to
jurisdiction despite that they might be preliminary or subsequent to the
execution of the contract. Classic Auto Sales, Inc. v. Schocket, 832 P.2d 233,
239 (Colo. 1992). The purpose of the nexus requirement appears to be an
assurance that the defendant has fair warning of the possibility that he
might be hailed into a Colorado court, thus making extraneous the need for
a strict causation requirement. See Keefe v. Kirschenbaum & Kirschenbaum,
P.C., 40 P.3d 1267, 1271 (Colo. 2002).
• Connecticut. CONN. GEN. STAT. § 52-59b(a) provides a basis
for jurisdiction for one who acts creating a “cause of action arising from”
the “[t]ransact[ion of] any business within the state.” Id. That language
requires simply that “the present litigation bears some connection with the
business conducted by the foreign corporation in this state.” Where the
-34-
plaintiff’s cause of action has “no connection with or relationship to”
business transacted in Connecticut, there can be no jurisdiction. Ryan v.
Cerullo, 918 A.2d 867, 880 (Conn. 2007) (emphasis added); see also New
London County Mut. Ins. Co. v. Nantes, 36 A.3d 224, 234 (Conn. 2012) (“Our
courts have consistently interpreted ‘arising out of’ to mean ‘was
connected with,’ ‘had its origins in,’ ‘grew out of,’ ‘flowed from,’ or ‘was
incident to’ ….”). Where there is a connection, even if there is no causation,
there is a basis for jurisdiction.
• Illinois. 735 ILL. COMP. STAT. 5/2-209 provides a basis for
jurisdiction for acts giving rise “to any cause of action arising from
the…transaction of any business within this State.” Id. The “arising from”
language is there “to insure that there is a close relationship between a
cause of action against a nonresident defendant and his jurisdictional
activities. The minimum relationship required by the phrase is that the
plaintiff’s action be one which lies in the wake of the commercial activities
by which the defendant submitted to the jurisdiction of Illinois courts.”
Aetna Cas. & Sur. Co. v. Crowther, Inc., 581 N.E.2d 833, 835-36 (Ill. App. Ct.
1991) (internal quotation marks omitted). More recent cases explore simply
-35-
whether there is any “connection” between the cause of action and the
state. See, e.g., Spartan Motors, Inc. v. Lube Power, Inc., 786 N.E.2d 613, 619
(Ill. App. Ct. 2003).
• Michigan. MICH. COMP. LAWS § 600.705 provides a basis for
jurisdiction for those claims that “aris[e] out of…[t]he transaction of any
business within the state.” The Supreme Court of Michigan has determined
that this language “extend[s] the state’s jurisdiction to the farthest limits
permitted by due process.” Sifers v. Horen, 188 N.W.2d 623, 623-24 (Mich.
1971). It is broader than “doing business.” Id. at 624 (citing Simonson v. Int’l
Bank, 14 N.Y.2d 281 (1964)). It “includes each and every” and
“comprehends the slightest.” Id. at 624 n.2. See also Green v. Wilson, 565
N.W.2d 813, 816-17 (Mich. 1997) (identifying that the outer limits are
generally consistent with federal Due Process requirements, but insisting
on a separate inquiry to determine whether the limitations of the long arm
statute are met in light of the fact that the legislature chose not to adopt a
catch-all grant of jurisdiction).
• New Hampshire. N.H. REV. STAT. ANN. § 510:4 provides a
basis for jurisdiction for “any cause of action arising from or growing out
-36-
of” the acts of one who “transacts any business within this state.” Id. The
state legislature intended that provision, wrote the Supreme Court of New
Hampshire, “to be construed in the broadest legal sense to encompass
personal, private and commercial transactions.” Phelps v. Kingston, 536
A.2d 740, 742 (N.H. 1987). It “provide[s] jurisdiction over foreign
defendants to the full extent that the statutory language and due process
will allow.” Id.
• Ohio. OHIO REV. CODE ANN. § 2307.382(a) provides a basis for
jurisdiction for one’s acts generating “a cause of action arising from [a]
person’s [t]ransacting any business in this state.” Id. (line break omitted).
Ohio courts define “transacting” broadly: “The word ‘transact’ is broader
than the term ‘contract’ and includes in its meaning ‘to carry on business’
and ‘to have dealings.’” Greene v. Whiteside, 908 N.E.2d 975, 980 (Ohio Ct.
App. 2009). There does not appear to be a causation requirement.
• Pennsylvania. PA. CONS. STAT. § 5322(a) provides a basis for
jurisdiction for one who acts generating “a cause of action or other matter
arising
from
such
person
[t]ransacting
any
business
in
this
Commonwealth.” Id. (line break omitted). That language “permits the
-37-
exercise of jurisdiction to the fullest extent allowed under the Constitution
of the United States and may be based on the most minimum contact with
this Commonwealth allowed under the Constitution of the United States,
Fourteenth Amendment’s Due Process Clause.” Haas v. Four Seasons
Campground, Inc., 952 A.2d 688, 692 (Pa. Super. Ct. 2008) (internal quotation
marks omitted).
Following the lead of these highest courts of sister states, this
Court should continue to interpret the words “transacts any business
within the state” broadly, in a manner that does not demand a showing of
causation between the transaction and the plaintiff’s claims.
C.
The Legislative History of CPLR § 302(a)(1) Dictates Only
that There Not be a Disparate Relationship Between
Defendant’s Transaction(s) and Plaintiffs’ Cause of Action
The legislative history of CPLR § 302(a)(1) indicates an intent
by the State Legislature to create an expansive grant of jurisdiction. Indeed,
the purpose of long arm statutes in general was to expand, not contract,
jurisdiction. 4 C. Wright & A. Miller, Federal Practice & Procedure § 1068
(3d ed.). New York’s long arm statute was no different. Simonson v. Int’l
Bank, 14 N.Y.2d 281, 288 (1964) (“[CPLR § 302] discards the concept of
-38-
‘doing business’ as a test of jurisdiction and substitutes therefor the
broader standard of ‘transacting any business’; it further abandons the
requirement of the defendant’s ‘presence’ in cases involving real property
situated in this State and tortious acts (other than defamation) committed
here.”); Longines-Wittnauer Watch Co. v Barnes & Reinecke, 15 N.Y.2d 443,
452, 456 (1965) (“The Advisory Committee which drafted [CPLR
§ 302]…follow[ed] the broad, inclusive language of the Illinois provision,
adopting as the criterion the ‘transact[ion of] any business within the state’.
The design of the legislation, as expressed by the committee, was to take
advantage of the ‘new [jurisdictional] enclave’ opened up by International
Shoe….” (Internal citation and quotation marks omitted); Kreutter v
McFadden Oil Corp., 71 N.Y.2d 460, 466-67 (1988) (“[CPLR § 302] was
enacted in response to [decisions by the U.S. Supreme Court that]
expanded the permissible powers of States to obtain personal jurisdiction
over
nondomiciliaries.”).
Indeed,
the
enactment
of
CPLR
§ 302
“undoubtedly produced the most significant expansion of state court
jurisdiction during the entire course of the twentieth century.” William E.
Nelson, Civil Procedure in Twentieth-Century New York, 41 ST. LOUIS U. L.J.
-39-
1157, 1216 (1997). When this Court read a portion16 of § 302 narrowly
shortly after the statute was enacted, the Legislature, acting consistently
with its original objective, “immediately amended the long-arm statute to
reverse this aspect of the [Court of Appeals’ decision] and explicitly grant
jurisdiction [in future occurrences].” Nelson, supra. Reading § 302 now to
excessively restrict access to New York courts would frustrate the
expansive purpose for which § 302 was enacted.
The Advisory Committee that drafted the first version of what
would become CPLR § 302 intended to exercise the State’s new powers to
expand jurisdiction over non-residents in a manner consistent with the Due
Process Clause. Simonson, 14 N.Y.2d at 288. The original draft version of
the statute, as proposed in 1958, read:
(a) A court may exercise jurisdiction over any
person, or his administrator or executor, only as to a
cause of action arising from any of his acts
Relating to CPLR § 302(a)(2), not relevant to this appeal. The
Legislature overturned a portion of Longines-Wittnauer Watch Co. v. Barnes
& Reinecke, 15 N.Y.2d 443, 459-60 (1965). The amendment added the CPLR
§ 302(a)(3) extension of long arm jurisdiction over defendants who commit
a tortious act outside of New York but cause injury within New York.
16
-40-
enumerated in this section, in the same manner as if
he were a domiciliary of the state, if, in person or
through an agent, he:
(1)
transacts business within the state; or
(2) commits a tortious act within the state
resulting in physical injury to person or property; or
(3) owns, uses or possesses any real property
situated within the state.
ADVISORY COMMITTEE
ON
PRACTICE
AND
PROCEDURE, SECOND PRELIMINARY
REPORT 38-39 (1958). It modeled the statute after Illinois’ long arm statute
with the intent of “tak[ing] advantage of the constitutional power of the
state of New York to subject non-residents to personal jurisdiction when
they commit acts within the state.” Id. at 39.
In 1961, two legislative committees made only minor changes
to the proposed legislation. Their revisions read (new language italicized):
(a) Acts which are the basis of jurisdiction. A court
may exercise personal jurisdiction over any nondomiciliary, or his executor or administrator, as to a
cause of action arising from any of the acts
enumerated in this section, in the same manner as if
he were a domiciliary of the state, if, in person or
through an agent, he
1.
transacts any business within the state; or
-41-
2.
commits a tortious act within the state, except
as to a cause of action for deformation [sic] of
character arising from the act; or
3.
owns, uses or possesses any real property
situated within the state.
SENATE FINANCE COMMITTEE & ASSEMBLY WAYS
FIFTH PRELIMINARY REPORT
TO THE
AND
MEANS COMMITTEE,
LEGISLATURE 66-67 (1961). (Emphasis
added). It appears that the Committees’ primary concerns related to the
second prong of the statute (relating to tortious acts). See id. Their only
amendment to relevant language was to add the word “any” after
“transacts,” indicating an intent to render the statute even more expansive
than did the Advisory Committee. Id.
While the language relevant to the present litigation (“As to a
cause of action arising from any of the acts enumerated in this section, a
court may exercise personal jurisdiction over any non-domiciliary, or his
executor or administrator, who in person or through an agent transacts any
business within the state…” CPLR § 302) has since changed only in the
-42-
order of its words,17 subsequent amendments to the statute indicate a
consistent and steady legislative intent to expand the scope of § 302. See
DAVID L. FERSTENDIG, HISTORICAL APPENDIX
FOR
CPLR 302 (“[T]he
legislature has now and again shown a willingness to target identifiable
problems and expand CPLR 302 to meet them.” (Emphasis added)). For
example, the Legislature expanded the scope of CPLR § 302(a)(1) in 197918
“to allow New York courts to exercise personal jurisdiction over a
nondomiciliary who contracts outside New York to supply goods or
services in New York, even if the contract is breached before the goods are
ever shipped into, or the services performed in, New York.” Id.;
MEMORANDUM
OF THE
LAW REVIEW COMMISSION, NEW YORK STATE
LEGISLATIVE ANNUAL 164 (1979). Similarly, in 1966, shortly after § 302’s
enactment, the Legislature made changes to the statute to overrule a
In addition to switching the order of the first and second
clauses of the statute, the version currently in effect lacks the words “in the
same manner as if he were a domiciliary of the state.” Those words were
likely superfluous when written and, in any event, do not affect the current
litigation.
17
-43-
decision by this Court that the Legislature deemed to be overly restrictive.
Nelson, supra, at 1216.
The State Legislature apparently paid little attention to the
words “arising from,” which were included in the initial proposal of 1958.
See
ADVISORY COMMITTEE
ON
PRACTICE
AND
PROCEDURE, SECOND
PRELIMINARY REPORT 38-39 (1958). It would be odd in the extreme if the
Legislature, which was motivated to expand jurisdiction over nonresidents, included language that was intended to impose a highly
restrictive causation requirement, and did so without even commenting
about that restrictive intent.
As far as Plaintiffs are aware, the first time that the words
“arising from” (or a derivation) appear in this State with reference to
jurisdiction over non-residents was in the 1859 case of Cumberland Coal &
Iron Co., supra. The Cumberland Coal Court wrote that it cannot accept
jurisdiction over a foreign corporation unless the case meets the following
requirement: “The cause of action, or the subject, or at least some property
The 1979 amendments added the words “or contracts
anywhere to supply goods or services in the state” after “transacts any
18
(continued next page)
-44-
to be acted on, must have arisen or be situated within our jurisdiction.” Id.,
30 Barb. at 159. (Emphasis added). In Cumberland Coal & Iron Co., the word
“arisen” was intended to require not causation, but origin. As the court
explained, a “cause of action or the subject” which has not “arisen” in New
York would have no connection to the state and the court’s exercise of
jurisdiction “would operate on nothing in the state, and be…disregarded
by other states, when called upon to give effect to the judgment…[on the
grounds that it was] not a ‘judicial act,’ to which another state was bound
‘to give full faith and credit.’” Id. Overcoming those problems requires only
that the cause of action or the subject of the litigation originate in New
York.
It is likely that the phrase “arising from” in CPLR § 302 derives
from this use by Cumberland Coal & Iron Co. and its progeny. The
Legislature sought out some language that was consistent with its
objectives to expand jurisdiction while, at the same time, avoiding general
jurisdiction over people with nothing more than the most superficial or
transient connections to New York, such as travelers on layover at a New
business within the state.” CPLR § 302.
-45-
York airport. Or, perhaps more importantly, to avoid assuming jurisdiction
in cases like the one presented in Cumberland Coal & Iron Co.:
[P]laintiffs [sic], a Maryland corporation, ask the
court of New York to entertain in effect an
ejectment against another Maryland corporation,
for lands in Maryland—a proposition which needs
only to be stated to be refuted. To say, in such a
case, that either “the cause of action” or “the subject
of action,” exists, or has arisen in New York, or that
the legislature of New York contemplated assuming
jurisdiction in such a case, would seem little short
of preposterous.
Cumberland Coal & Iron Co., 30 Barb. 159.
Nothing in the legislative history of CPLR § 302(a)(1) supports
Defendant’s claims. Indeed, its position and the legislative history are
immiscible.
-46-
POINT IV
ALTERNATIVELY, IF THIS COURT CONCLUDES
THAT CPLR § 302(a)(1)’S “ARISING FROM”
LANGUAGE DENOTES CAUSATION, IT DENOTES
MERE “BUT-FOR” CAUSATION, RATHER THAN
PROXIMATE CAUSATION
Plaintiffs are aware of no jurisdiction that strictly demands
proximate causation between the transaction that gives rise to jurisdiction
and the cause of action. Nevertheless, Defendants asked the Second
Circuit, and presumably will ask this Court, to adopt an antiquated and
unduly restrictive proximate causation standard. That standard is not
implied by the language of CPLR § 302(a)(1) or its legislative history. It has
no basis in the decisions of the Court, and it is punitively excessive. It
should be rejected.
The Supreme Judicial Court of Massachusetts considered the
propriety of the two tests—proximate causation and but-for causation—
with regard to similar language in the Massachusetts long arm statute.19
That statute, MASS. GEN. LAWS ch. 223A. § 3, provides that
“[a] court may exercise personal jurisdiction over a person, who acts…as to
a cause of action in law or equity arising from the person’s transacting any
19
(continued next page)
-47-
Tatro v. Manor Care, Inc., 625 N.E.2d 549 (Mass. 1994). Tatro was a slip and
fall tort action. The plaintiff was injured in her out-of-state hotel room. She
claimed that Massachusetts’ courts had personal jurisdiction over the
defendant by virtue of the defendant’s business activities within
Massachusetts. Id. at 549-50. The court found that the defendant had
actively and purposefully solicited business in Massachusetts and made
contacts with potential clients in Massachusetts. That, the court held, was
adequate to meet Massachusetts’ “transaction” standard. Id. at 552. The
defendant argued that the plaintiff’s claims did not “arise from” its
transactions in Massachusetts because they were not the proximate cause
of her injuries. See id. at 552-53. The court then looked at decisions by the
federal courts of appeals for the First, Fifth, Sixth, and Ninth Circuits. It
found that the First Circuit was alone in requiring proximate causation.
And it wrote about the other decisions: “The latter approach is more
consistent with the language of our statute and with decisions of this court
interpreting it. There is no readily apparent basis in the statutory language
(‘arising from’) for the restrictive proximate cause approach adopted by the
business in this commonwealth.” Id.
-48-
First Circuit.” Id. at 553. The court continued: “We doubt that the
Legislature intended to foreclose a resident of Massachusetts, injured in
another State, from seeking relief in the courts of the Commonwealth when
the literal requirements of the long-arm statute have been satisfied.” Id. at
553-54.
Having adopted a but-for causation standard to interpret its
long arm statute, the Massachusetts Supreme Judicial Court had no trouble
finding that jurisdiction existed with regard to the plaintiff’s slip and fall.
The court held that but for the defendant’s solicitation of the plaintiff’s
business in Massachusetts, she would not have been injured. Id. at 554.
So too here. But for LCB’s transfer of funds to the United States,
Hizballah would not have had the funds that it needed to engage in acts of
terrorism in violation of the laws of the United States. (66-67, FAC ¶¶ 11320). Indeed, access to hard currency is necessary for the operation of an
international terrorist organization.20 It does not matter whether the
See, e.g., U.S. DEPARTMENT OF STATE, PATTERNS IN GLOBAL
TERRORISM 1999 56 (2000) (listing “money, training, and weapons” as
provisions that Iran provided to terrorist organizations in order to
“undermine the peace process” in Israel).
20
-49-
specific dollars transferred were actually used for acts of terrorism because
money is fungible and money given to terrorist organizations can be used
for any purpose, regardless of the intention of the donor.
Money is fungible, and when foreign terrorist
organizations that have a dual structure raise funds,
they highlight the civilian and humanitarian ends to
which such moneys could be put. But there is
reason to believe that foreign terrorist organizations
do not maintain legitimate financial firewalls
between those funds raised for civil, nonviolent
activities, and those ultimately used to support
violent, terrorist operations. Thus, funds raised
ostensibly for charitable purposes have in the past
been redirected by some terrorist groups to fund
the purchase of arms and explosives.
Holder v. Humanitarian Law Project, ___ U.S. ___, 130 S. Ct. 2705, 2720, 2729
(2010). (Internal citations and quotation marks omitted).
LCB’s transfer of funds to Hizballah—in violation of federal
law, see Boim v. Holy Land Found. for Relief and Dev., 549 F.3d 685, 690-91
(7th Cir. 2008) (en banc)—enabled Hizballah to effect its terrorist objectives
generally and its attack against the Plaintiffs. The fungibility of money and
the Supreme Court’s affirmation that donations to terrorist organizations
can be presumed to be used for the objectives of terrorism are sufficient to
-50-
render LCB’s transactions on behalf of Hizballah’s behalf a but-for cause of
the plaintiff’s cause of action, certainly, at least, for present purposes where
no jurisdictional or merits discovery has taken place.
POINT V
ALTERNATIVELY, IF THIS COURT CONCLUDES
THAT CPLR § 302(a)(1)’S “ARISING FROM”
LANGUAGE DENOTES PROXIMATE CAUSATION,
IT SHOULD FIND AN EXCEPTION FOR CASES
ARISING FROM ACTS OF TERRORISM
Even if this Court finds that CPLR § 302(a)(1) demands
proximate causation between a defendant’s transaction and a plaintiff’s
claim, it should find that there is a more lenient jurisdictional standard for
claims arising from acts of terrorism.21 Terrorists deliberately and willfully
place innocent victims at risk of severe bodily harm or death. Indeed, that
is their very objective. By doing so, they presume (or should be presumed
to presume) that they are subjecting themselves to severe legal
consequences. Little deference should be given to the preference of such
-51-
scofflaws of all civilized societies as to the specific forum in which they are
brought to justice. A terrorist launching a missile from Lebanon into
southern Israel or a pirate seizing a boat off the coast of Somalia does so
believing that the anarchic locale from which he operates will permit him
to act without consequence. Given that bringing him to justice in his
location is unlikely to be practicable, but starting from the presumption
that our law cannot countenance allowing such villainy to escape justice on
jurisdictional technicalities, this Court should give heed to the reality that
terrorists, and those who facilitate and enable them, are functionally
indifferent if they are brought to trial in New York, California, Tokyo, or
Haifa, Israel. In fact, the terrorist might even prefer other jurisdictions due
to a profound disrespect and disregard for the State of Israel and its
government, and the fact that in a jurisdiction such as New York or the
United States federal courts, even a terrorist will receive a fair trial.
The rule should be the same for those who facilitate terrorism.
To limit such a principle to those who strap bombs on their backs and blow
As noted above in footnote 12, Plaintiffs believe that with
jurisdictional discovery they will be able to prevail even if this Court
21
(continued next page)
-52-
themselves to pieces with the hope of spreading death and maximizing
pain would be to misunderstand how terrorism operates. The bomber who
kills himself is perforce dispensable. He often does not expect to return to
plan or facilitate a second mission. Rather, those who train, recruit,
organize, fund, and otherwise facilitate global terror networks are the true
perpetrators of our generation’s most despicable crimes. The flow of
money is essential to the operation of a global terror network. When the
money dries up, so does the operation of the terror network. A financial
institution, such as LCB, the unofficial bank of Hizballah—a bank that
facilitates the flow of money to a terrorist organization, turning a blind eye
to what it knows or should know its customers are doing with the
money—is a knowing facilitator of terrorism. (68-75, FAC ¶¶ 126-37). And
for those acts, it should have every expectation that it will be subject to
jurisdiction in any place that a victim and his or her heirs might be found.
Much like this Court (and materially all other courts in the
United States) has found an exception to the rules of negligence for
“abnormally dangerous” or “ultrahazardous” activities, this Court should
imposes a proximate causation requirement.
-53-
find an exception to the rules of personal jurisdiction for deliberate acts of
terror. The policy justification for imposing strict liability upon tortfeasors
conducting abnormally dangerous activities were spelled out by this Court
in 1977: “[T]hose who engage in activity of sufficiently high risk of harm to
others, especially where there are reasonable even if more costly
alternatives, should bear the cost of harm caused the innocent.”
Doundoulakis v. Town of Hempstead, 42 N.Y.2d 440, 448 (1977). If that
formulation has any application outside of the law of negligence, it applies
here. Terrorists, and their facilitators, act with disdain for innocent civilians
and disregard for human life. Banks that provide the money necessary to
continue international terror operations are likewise acting with disdain
for human life. They should be made to bear the costs of their actions, and
should not be permitted to hide themselves from civil justice in
jurisdictional lacunae.
-54-
POINT VI
PLAINTIFFS’ FACTUAL ALLEGATIONS AND THE
LEGAL
ELEMENTS
OF
THEIR
CLAIMS
ADEQUATELY RELATE TO LCB’S TRANSACTIONS
IN NEW YORK
The Second Circuit, in its analysis of the nexus limitations,
raised a subsidiary question. It noted that there must be a nexus between a
defendant’s transactions and the “a cause of action,” CPLR § 302(a), but
expressed confusion over what the words “cause of action” refer to. Is it
the legal elements of the claims that the plaintiffs raise against the
defendant, or the factual allegations (literally, the “cause”) that give rise to
their action? See (616-22) Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50,
71-73 (2d Cir. 2012). Plaintiffs believe that the latter is the better standard,
but easily satisfy both of the standards.
The Second Circuit indicated that recent decisions from this
Court “have generally undertaken fact-bound analyses that shed little light
on how the nexus requirement should be applied in the instant case” and
found no decision from the Court of Appeals that counseled in either
direction, (619-20) id. at 72 & n.24, aside from noting that Kreutter v.
McFadden Oil Corp., 71 N.Y.2d 460, 467 (1988), said that the nexus
-55-
limitations refer to the “claim asserted.” (616-17) Licci, 673 F.3d at 71.
(Emphasis in original).
Accordingly, the question posed by the Second Circuit must be
answered by exploring the origins and purpose of the nexus limitations.
Once we establish why CPLR § 302(a) has nexus limitations, it will be a
great deal easier to figure out to what the transaction must relate. And, as
discussed at length above, the nexus limitations, developed initially by the
courts of this state, see, e.g., Cumberland Coal & Iron Co., supra, were
incorporated into statute by the drafters of CPLR § 302(a), and were then
developed by this Court in its role as the interpreter of the statutes of New
York. The purpose of the nexus limitations is to ensure that there is some
connection between plaintiff’s claims and the stated basis of the court’s
jurisdiction in New York. In so doing, the state can be assured that there
will be some link between the case and the State of New York. To fulfill
that objective, the aforementioned link need not be substantial. It certainly
need not be causative.
The Legislature chose to use the words “cause of action”
without much discussion. See ADVISORY COMMITTEE
-56-
ON
PRACTICE
AND
PROCEDURE, SECOND PRELIMINARY REPORT 38-39 (1958); SENATE FINANCE
COMMITTEE & ASSEMBLY WAYS
AND
MEANS COMMITTEE, FIFTH PRELIMINARY
REPORT TO THE LEGISLATURE 66-67 (1961); DAVID L. FERSTENDIG, HISTORICAL
APPENDIX FOR CPLR 302. While the words “cause of action” generally refer
to a “particular theory of recovery,” it is extremely unlikely that the
Legislature intended to require that plaintiffs demonstrate a nexus between
the defendant’s transaction and the entirety of their theory of recovery.
This is so for at least two reasons: First, theories of recovery are often
highly complex and involve multiple elements. It would be unreasonable
to require plaintiffs to show a connection to an entire theory of recovery
(that is, each of multiple elements). Second, it would present a highly
restrictive standard that would be inconsistent with the purpose of CPLR
§ 302(a)—to vastly expand jurisdiction. See Nelson, supra, at 1216.
The Second Circuit recognized this as well and suggested an
alternative: require the plaintiff to show a connection between the
defendant’s transaction and some of the elements of the cause of action.
Operating under that theory, the Second Circuit was left with the
additional problem of trying to decide which elements of the cause(s) of
-57-
action were relevant. (617) Licci, 673 F.3d at 72 (“[I]f a ‘claim’ refers to the
elements of a cause of action, it is unclear whether the relevant element
here is the plaintiffs’ ‘injuries’ or the defendant’s wrongful act…. In other
words, for sufficient nexus to exist, must the plaintiffs’ injuries—the deaths
and injuries in Israel—’aris[e] from’ the defendant’s use of a New York
correspondent bank account, or must the defendant’s alleged wrongful
act—LCB’s transfer of funds—’aris[e] from’ the use of that account?”).
(Emphasis in original). Neither seems appropriate. If the statute demands a
nexus with the “cause of action,” how can courts be satisfied simply by
finding a nexus with part of a cause of action?
Surely the Second Circuit’s approach of splitting the cause of
action is necessary if there is no alternative. As noted above, requiring a
nexus with an entire cause of action is unreasonable and inconsistent with
the intent of CPLR § 302(a). Assuming, arguendo, that there is no
alternative, requiring that plaintiffs find a nexus between the defendant’s
transaction and the plaintiff’s injuries cannot be correct for the same
reasons. There will be a clear nexus between the defendant’s transaction
and the plaintiff’s injuries only in breach of contract type cases where the
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injury and the transaction are one and the same. But CPLR § 302(a)(1) is
not limited to breach of contract cases; it applies even in certain tort cases,
as explained immediately below. See Longines-Wittnauer Watch Co. v Barnes
& Reinecke, 15 N.Y.2d at 464-67. Clearly, therefore, § 302(a)(1) can provide
jurisdiction despite that there is a disconnect between the defendant’s
actions and the plaintiffs injuries. All that is required under this theory is
that the elements of the cause of action regarding the defendant’s illegal
activities relate to its transaction in New York.
Longines22 involved negligence and breach of warranty claims
for an injury to a ten-year-old boy. Id. at 455, 464-65. He was attempting to
split a rock with a geologist’s hammer that was labeled “[u]nbreakable
[t]ools.” Unfortunately, a piece of the hammer broke off and penetrated his
right eye. Id. at 464-65. At issue in the case was whether the manufacturer,
an Illinois corporation that had shipped the hammer F.O.B. Illinois, was
subject to personal jurisdiction in New York pursuant to CPLR § 302.
Longines, 15 N.Y.2d at 465. The Court held that because the manufacturer’s
Longines addressed three consolidated cases. The one we
discuss here is Singer v. Walker.
22
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tortious act had occurred in Illinois and not in New York, CPLR § 302(a)(2)
did not apply. Longines, 15 N.Y.2d at 465-66. This Court nevertheless found
CPLR § 302(a)(1) applicable, explicitly stating that “[i]t is clear that
paragraph 1 is not limited to actions in contract; it applies as well to actions
in tort when supported by a sufficient showing of facts.” For example, a
foreign manufacturer that ships a substantial quantity of goods into the
state has transacted business in the state for the purposes of CPLR
§ 302(a)(1) and is thus liable for the torts that occur as a result. Longines, 15
N.Y.2d at 466. This is so despite that there is no clear nexus between the
manufacturer’s shipments and other interstate transactions with customers
in New York (the transaction(s)) and the impalement of a young New
Yorker’s right eye (the plaintiff-focused element of the cause of action).
Rather, operating under this theory, the nexus limitations demand that the
transaction relate to the defendant-focused elements of the cause of action
(for example, the defendant’s negligence and false advertising).
There is an alternative to splitting the cause of action into
pieces. The “cause of action” referred to in the statute is not elements of the
plaintiff’s legal theory, but their basis for seeking judicial intervention. It
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refers, quite literally, to the cause (the impetus) of their action (entering into
the trial court to file a complaint). Reading the statute this way is both
more consistent with the statutory language than is attempting to divide
the elements of a legal claim and it comports with the statute’s intent and
purpose (as discussed above).
Plaintiffs in this action have alleged various facts that give
them cause to seek judicial intervention against LCB pertaining to LCB’s
illegal funds transfers to Hizballah. Those facts all grow out of (i.e., arise
from) LCB’s various transactions in New York with AmEx. The Plaintiffs
thus easily meet this standard.23
If this Court opts to adopt the Second Circuit’s claim-splitting
approach and requires the Plaintiffs to show a nexus between the legal
elements pertaining to LCB’s illegal funds transfers to Hizballah (the cause
of action) and their transactions with AmEx in New York (the transaction),
Plaintiffs can meet that standard as well. The precise nature of the legal
elements, however, are still in dispute and will likely have to be resolved in
subsequent litigation in the Second Circuit and the district court.
23
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POINT VII
PLAINTIFFS’ POSITION IS MODEST AND DOES
NOT OPEN THE PROVERBIAL “FLOODGATES OF
LITIGATION”
Whenever a plaintiff argues for a jurisdiction in a case of first
impression or where prior precedent is not obviously controlling as to the
question of jurisdiction, defendants almost invariably retort that the
plaintiffs’ arguments will open the “floodgates of litigation.” However,
Plaintiffs do not believe that the position they advance here will lead to any
significant increase in the workload of New York’s courts.
Plaintiffs’ requests are both consistent with—indeed, drawn
from—prior precedent, careful statutory textual analysis, and an
exploration of the legislative history. Plaintiffs’ requests are also modest.
They ask this Court to grant jurisdiction only where a plaintiff’s cause of
action originates from the New York transactions of the defendant, while
defining the word “transactions” in a manner consistent with prior
precedent and common sense.
If this Court rules in Plaintiffs’ favor, the universe of cases that
would then be able to be brought in New York courts, but which could not
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otherwise be brought in New York Courts under some other jurisdictional
ground, is quite small.
We are dealing here with plaintiffs injured outside of New
York as a result of the conduct of others which was actively sought out by
the defendant and facilitated or funded by wire transfers through a New
York bank. While the Plaintiffs’ arguments are not limited to the specific
facts of this case, many cases that might seem to fall within the bounds of
the theories that the Plaintiffs here advance actually already are subject to
jurisdiction pursuant to other aspects of the long arm statute. Further,
many of those cases that would be granted jurisdiction solely on the basis
of the arguments presented here will likely be unable to meet causation
standards embedded in substantive law.
Granting jurisdiction in this case will do a great deal to clarify
the State of New York’s jurisdictional law, its definition of “transaction”
pursuant to CPLR § 302(a)(1), and the nature of the nexus limitations. It
will also facilitate just actions by a limited number of parties harmed who
wish to legitimately seek redress in New York. It will not open the
floodgates of litigation.
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CONCLUSION
For the foregoing reasons, this Court should answer the Second
Circuit’s certified questions affirmatively and rule definitively that the
courts of New York have personal jurisdiction over the Defendant in this
litigation.
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Dated:
Brooklyn, New York
July 5, 2012
Respectfully submitted,
THE BERKMAN LAW OFFICE, LLC
Attorneys for the Petitioners-Appellants
by:
Robert J. Tolchin
111 Livingston Street, Suite 1928
Brooklyn, New York 11201
(718) 855-3627
Of counsel:
Robert J. Tolchin, Esq.
Attorney of record
Meir Katz, Esq.
pro hoc vice (pending)
Law student interns Aviva Vogelstein and Glen Argov assisted in the
preparation of this brief
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