CHAIM KAPLAN, INDIVIDUALLY AND AS NATURAL GUARDIAN OF PLAINTIFFS M.K.(1), A.L.K., M.K.(2), C.K. AND E.K, RIVKA KAPLAN, INDIVIDUALLY AND AS NATURAL GUARDIAN OF PLAINTIFFS M.K.(1), A.L.K., M.K.(2), C.K. AND E.K, M.K.(1), A MINOR, BY HER FATHER AND NATURAL GUARDIAN, CHAIM KAPLAN, AND BY HER MOTHER AND NATURAL GUARDIAN, RIVKA KAPLAN, M.K.(2), A MINOR, BY HIS FATHER AND NATURAL GUARDIAN, CHAIM KAPLAN, AND BY HIS MOTHER AND NATURAL GUARDIAN, RIVKA KAPLAN, A.L.K., A MINOR, BY HIS FATHER AND NATURAL GUARDIAN, CHAIM KAPLAN, AND BY HIS MOTHER AND NATURAL GUARDIAN, RIVKA KAPLAN, C.K., A MINOR, BY HER FATHER AND NATURAL GUARDIAN, CHAIM KAPLAN, AND BY HER MOTHER AND NATURAL GUARDIAN, RIVKA KAPLAN, E.K., A MINOR, BY HIS FATHER AND NATURAL GUARDIAN, CHAIM KAPLAN, AND BY HIS MOTHER AND NATURAL GUARDIAN, RIVKA KAPLAN, MICHAEL FUCHS, ESQ., AVISHAI REUVANE, ELISHEVA ARON, CHAYIM KUMER, NECHAMA KUMER, KEREN ARDSTEIN, INDIVIDUALLY AND AS NATURAL GUARDIAN OF PLAINTIFFS, M.A., A.C.A. AND N.Y.A., BRIAN ARDSTEIN, INDIVIDUALLY AND AS NATURAL GUARDIAN OF PLAINTIFFS, M.A., A.C.A. AND N.Y.A., M.A., A MINOR, BY HER FATHER AND NATURAL GUARDIAN, BRIAN ARDSTEIN, AND BY HER MOTHER AND NATURAL GUARDIAN, KEREN ARDSTEIN, N.A., A MINOR, BY HER FATHER AND NATURAL GUARDIAN, BRIAN ARDSTEIN, AND BY HER MOTHER AND NATURAL GUARDIAN, KEREN ARDSTEIN, A.C.A., A MINOR, BY HIS FATHER AND NATURAL GUARDIAN, BRIAN ARDSTEIN, AND BY HIS MOTHER AND NATURAL GUARDIAN, KEREN ARDSTEIN, N.Y.A., A MINOR, BY HIS FATHER AND NATURAL GUARDIAN, BRIAN ARDSTEIN, AND BY HIS MOTHER AND NATURAL GUARDIAN, KEREN ARDSTEIN, LAURIE RAPPEPORT, INDIVIDUALLY AND AS NATURAL GUARDIAN OF PLAINTIFF M.R., M.R., A MINOR, BY HER MOTHER AND NATURAL GUARDIAN, LAURIE RAPPEPORT, YAIR MOR, THEODORE GREENBERG, MAURINE GREENBERG, JACOB KATZMACHER, DEBORAH CHANA KATZMACHER, CHAYA KATZMACHER, MIKIMI STEINBERG, JARED SAUTER, DANIELLE SAUTER, MYRA MANDEL, Y.L., A MINOR, BY HIS FATHER AND NATURAL GUARDIAN, ELIHAV LICCI, AND BY HIS MOTHER AND NATURAL GUARDIAN, YEHUDIT LICCI, ELIHAV LICCI, INDIVIDUALLY AND AS NATURAL GUARDIAN OF PLAINTIFF, Y.L., YEHUDIT LICCI, INDIVIDUALLY AND AS NATURAL GUARDIAN OF PLAINTIFF, Y.L., 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, SARAH YEFET, SHOSHANA SAPPIR, Plaintiffs-Appellants, v. BANK SADERAT PLC, Defendant-Appellee, CENTRAL BANK OF THE ISLAMIC REPUBLIC OF IRAN, AKA BANK MARKAZI JOMHOURI ISLAMI IRAN, ISLAMIC REPUBLIC OF IRAN, CBI DOES 1-10, BSI DOES 1-10, BSPLC DOES 1-10, IRANIAN DOES 1-10, BANK SADERAT IRAN, Defendants.
Docket No. 22-1122-cv
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
August 10, 2023
August Term, 2022; Submitted: April 26, 2023
B e f o r e: CABRANES, LYNCH, and LOHIER, Circuit Judges.
*The Clerk of Court is directed to amend the caption as set forth above.
ROBERT J. TOLCHIN, The Berkman Law Office, LLC, Brooklyn, NY, for Plaintiffs-Appellants.
BANK SADERAT PLC, Did Not Appear.
GERARD
This appeal arises from a long-running action by Plaintiffs-Appellants, who are 18 American civilian victims of terrorist rocket attacks carried out in Israel in 2006 (together, “Plaintiffs“).1
The action has taken a circuitous journey. In 2010, Plaintiffs sued Bank Saderat PLC (“BSPLC“) in the United States District Court for the District of Columbia (“D.D.C.“), alleging that the bank, which is associated with the Islamic Republic of Iran (“Iran“), materially supported the rocket attacks, in violation of the Antiterrorism Act of 1990 (“ATA“),
The district court (I. Leo Glasser, J.) denied the motion and instead dismissed the complaint sua sponte, holding that it lacked personal jurisdiction over BSPLC. Key to the court‘s reasoning was its determination that, because BSPLC had defaulted post-transfer, and it had prevailed on its jurisdiction defense in the D.D.C. pre-transfer, it had not forfeited its objection to personal jurisdiction. That conclusion, however, was founded on a mistake of fact: that BSPLC had “won” its personal jurisdiction defense in the D.D.C. App‘x 54 (emphasis omitted). Because the district court‘s conclusion that BSPLC‘s default did not forfeit its defense relied on an incorrect factual premise, we VACATE the district court‘s judgment and REMAND for proceedings consistent with this opinion.
BACKGROUND2
The ATA provides that “[a]ny national of the United States injured in his or her person, property, or business by reason of an act of international terrorism, or his or her estate, survivors, or heirs, may sue therefor in any appropriate district court of the United States.”
In 2010, Plaintiffs filed this lawsuit in the D.D.C. against multiple banks associated with Iran, including BSPLC, alleging that the defendants materially supported the rocket attacks in violation of U.S. and Israeli law. As relevant here, Plaintiffs brought two ATA claims against BSPLC, alleging that between 2001 and 2006, BSPLC facilitated the transfer of over $50 million originating from Iran, flowing through the Central Bank of Iran, Bank Saderat Iran (“BSI“), BSPLC, and finally landing in Hezbollah‘s accounts in BSI branches in Lebanon. BSPLC is
incorporated in London, United Kingdom, and is a wholly owned subsidiary of BSI, which is incorporated in Iran. Plaintiffs’ complaint did not allege that any portion of the $50 million transferred to Hezbollah through these foreign entities passed through the New York banking system. Rather, they alleged that BSPLC‘s conduct as a whole was connected to the United States because it was intended to facilitate terror attacks that targeted Americans.
BSPLC appeared in the action and moved to dismiss the claims based on a variety of defenses, including lack of personal jurisdiction. It did not argue, however, that it lacked contacts specifically with the District of Columbia. Instead, it broadly contested its contacts with the entire United States because Plaintiffs’ jurisdictional theory was predicated on
purposes of
The D.D.C. did not decide that issue. In 2013, it dismissed the ATA claims against BSPLC on other grounds.4 Kaplan v. Cent. Bank of Islamic Republic of Iran (”Kaplan I“), 961 F. Supp. 2d 185, 199-204 (D.D.C. 2013), aff‘d in part, vacated in part, 896 F.3d 501 (D.C. Cir. 2018). Plaintiffs appealed.
Two decisions relevant to personal jurisdiction under the ATA were issued in the D.D.C. and in this Circuit after Plaintiffs filed their complaint. First, prior to the 2013 dismissal of this case, Judge Royce C. Lamberth of the D.D.C. – the same judge who was presiding over this case – decided in a separate action,
Wultz v. Islamic Republic of Iran, that the venue provision of the ATA,
In 2018, the D.C. Circuit partially vacated Kaplan I and instructed the D.D.C. to decide whether it could exercise personal jurisdiction over BSPLC before addressing any defenses on the merits. Kaplan v. Cent. Bank of the Islamic Republic of Iran (”Kaplan II“), 896 F.3d 501, 514, 516 (D.C. Cir. 2018). On remand,
Plaintiffs moved to sever the ATA claims against BSPLC and transfer those claims to the E.D.N.Y. In that motion, Plaintiffs explained that they expected Judge Lamberth to apply his interpretation of the ATA‘s venue provision as he had done in Wultz, and because they conceded that BSPLC did not have contacts with the District of Columbia, Plaintiffs instead intended to seek jurisdictional discovery of BSPLC‘s New York contacts once the case was transferred. Plaintiffs also explained that BSPLC did not oppose the transfer, which it agreed to “[w]hile reserving all its rights, contesting personal jurisdiction in the United States and without otherwise admitting or agreeing with [P]laintiffs’ claims or assertions.” App‘x 8 (emphasis added). Judge Lamberth granted the request, reasoning that jurisdictional transfer pursuant to
Shortly after the case was transferred to the E.D.N.Y., BSPLC‘s counsel moved to withdraw, averring that BSPLC had discharged its attorneys and decided to cease participating in the case even after being advised that withdrawal would “result in forfeiture of its defenses . . . including its defense of lack of personal jurisdiction.” App‘x 23. The district court granted the motion, and when BSPLC failed to substitute counsel, the Clerk of Court entered default on September 5, 2019.8
Plaintiffs then moved for default judgment, which the district court denied. Instead, it dismissed the case for lack of personal jurisdiction, concluding that the 2010 complaint failed to allege that BSPLC maintained contacts with New York. The court exercised its discretion to raise personal jurisdiction sua sponte, reasoning that BSPLC effectively had never appeared in the E.D.N.Y., and that BSPLC‘s default did not forfeit its jurisdictional defense because, in the district court‘s estimation, BSPLC had previously won its personal jurisdiction challenge in the D.D.C. This appeal followed.
DISCUSSION
On appeal, Plaintiffs argue that the district court abused its discretion in three ways: (1) by failing to recognize that BSPLC forfeited its personal jurisdiction defense when it withdrew from the case, (2) by concluding that the court lacked personal jurisdiction over BSPLC, and (3) by raising personal jurisdiction sua sponte in the first place. Because we conclude that the district court rested its forfeiture determination on a clearly erroneous finding of fact, we do not decide Plaintiffs’ alternative arguments.
I. Standard of Review
A district court‘s ruling that a defendant “did not waive personal jurisdiction is reviewed for abuse of discretion.” Hamilton v. Atlas Turner, Inc., 197 F.3d 58, 60 (2d Cir. 1999). So too is a district court‘s decision to grant or deny a plaintiff‘s motion for default judgment. City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 131-32 (2d Cir. 2011). A district court abuses – or, more precisely, exceeds – its discretion when its decision reflects an “error of law,” rests on a “clearly erroneous factual finding,” or “cannot be located within the range of permissible decisions.”9 Zervos v. Verizon New York, Inc., 252 F.3d 163, 169 (2d Cir. 2001).
II. Personal Jurisdiction and Default
We consider whether the district court appropriately exercised its broad discretion to raise personal jurisdiction on its own initiative, and whether forfeiture “not only occurred but was so clear that the District Judge exceeded his allowable discretion in ruling that forfeiture had not occurred.” Hamilton, 197
F.3d at 61.
Our case law has drawn an “important distinction . . . between appearing and non-appearing parties with respect to defenses of personal jurisdiction.” Sinoying Logistics Pte Ltd. v. Yi Da Xin Trading Corp., 619 F.3d 207, 213 (2d Cir. 2010). In general, an appearing defendant that fails to timely assert the defense in its initial motion or pleading waives or forfeits10 the right to raise it in later stages of litigation, or when seeking relief from the judgment.11 “R” Best Produce, Inc. v.
DiSapio, 540 F.3d 115, 123 (2d Cir. 2008). Conversely, a non-appearing defendant, even with notice of the action, does not forfeit its personal jurisdiction defense. Id.
We have held that, before entering a default judgment against a non appearing defendant, a district court “may first assure itself that it has personal jurisdiction over the defendant” – unless the defense has been waived or forfeited, in which case “a district court should not raise personal jurisdiction sua sponte.” Sinoying, 619 F.3d at 213 (emphasis in original). That is because personal jurisdiction is an individual right that may be “purposely waived or inadvertently forfeited.” Mickalis Pawn Shop, 645 F.3d at 133.
Whether waiver or forfeiture occurred, however, is not always clear. In one common scenario, a defendant timely objects to personal jurisdiction, extensively participates in litigation, then later reasserts the defense. See Hamilton, 197 F.3d at 61. In such cases, “we consider all of the relevant circumstances” to determine whether the defendant forfeited its objection to personal jurisdiction. Id. In Hamilton, after considering all the circumstances, we held that a defendant that raised an objection to personal jurisdiction in its initial pleading could not obtain
post-verdict
This case presents a closer call. Where, as here, a defendant defaults after nearly a decade of litigation, we are confronted with the subtler question of whether the defendant deliberately abandoned the litigation, thereby forfeiting all defenses. In Mickalis Pawn Shop, we stated that “a defendant forfeits its jurisdictional defense if it appears before a district court to press that defense but then willfully withdraws from the litigation and defaults, even after being warned of the consequences of doing so.” 645 F.3d at 135. There, the district court preliminarily denied personal jurisdiction challenges made by two out-of-state defendants. Id. at 118-20. One defendant subsequently withdrew during discovery, and the other withdrew during jury selection. Id. at 122-23. The district court then entered default judgment against both of them. Id. at 123-25. We affirmed the district court‘s decision to decline to “raise sua sponte the defense of lack of personal jurisdiction on behalf of parties who have elected not to pursue those defenses for themselves,” id. at 135 (internal quotation marks omitted and alterations adopted), emphasizing that defendants who “unsuccessfully raise[] a
jurisdictional objection at the outset, but later create[] the impression that [they have] abandoned it, may not seek to renew [their] jurisdictional argument on appeal following an adverse determination on the merits.” Id. at 134.
III. Whether BSPLC Forfeited Its Personal Jurisdiction Defense
The district court distinguished Mickalis Pawn Shop on the basis that the defendants there lost their jurisdictional challenges before withdrawing from the case. The court reasoned that, “[i]n contrast to the situation in Mickalis Pawn Shop, here BSPLC challenged the exercise of the court‘s jurisdiction over it in the District of Columbia and won.” App‘x 54 (emphasis in original). Then, “[a]fter winning, [BSPLC] took no further action,” and “effectively” did not appear after the case was transferred to the E.D.N.Y. Id. at 54-55.
We do not decide whether we would arrive at the same conclusion if tasked with determining, in the first instance, whether BSPLC forfeited its defenses. Beyond that case specific issue, this appeal raises a novel issue of law: to what extent, in a transferred case, a transferee court must consider a defaulting defendant‘s litigation conduct in the original forum when assessing whether that defendant abandoned the litigation, thereby forfeiting its defense of personal jurisdiction. The answer is potentially dispositive of this appeal because, unlike
the defendants’ withdrawals in Mickalis Pawn Shop, assessing whether BSPLC‘s withdrawal was willful requires considering its pre-transfer conduct in a different forum.
The district court did not directly address that legal question, however, because it understood the effect of transfer as resetting BSPLC‘s appearance in the case, thereby permitting it to “assure itself that it has personal jurisdiction over the defendant.” Sinoying, 619 F.3d at 213. Yet the district court‘s forfeiture determination, which was based on BSPLC‘s pre-transfer litigation conduct and is a prerequisite to the district court‘s authority to sua sponte assess personal jurisdiction, relied on a clearly erroneous factual finding: that BSPLC “challenged the exercise of the court‘s jurisdiction over it in the District of
The record demonstrates that BSPLC‘s pre-transfer objection to personal jurisdiction, originally raised in its 2011 motion to dismiss, addressed only Plaintiffs’ theory that jurisdiction existed under
States as a whole. Instead of dismissing the case for want of jurisdiction anywhere in the United States, however, the D.D.C. initially skipped over the question of personal jurisdiction and dismissed the case on a merits ground. Then, instructed by the D.C. Circuit to address personal jurisdiction as a threshold matter, the D.D.C. again declined to address BSPLC‘s arguments under
In response, the D.D.C. granted not BSPLC‘s motion to dismiss for lack of jurisdiction, but the Plaintiffs’ motion to transfer, holding that transfer to the E.D.N.Y. was in the interest of justice because New York courts could “plausibly” exercise jurisdiction over BSPLC. Kaplan III, 2019 WL 2103424, at *3. That conclusion forecloses any finding that BSPLC had prevailed on its challenge to jurisdiction anywhere in the United States, because the premise that at least one
state‘s “courts of general jurisdiction,”
In sum, the district court premised its legal conclusion – that this case was distinguishable from Mickalis Pawn Shop – on the incorrect factual finding that BSPLC‘s pre-transfer, pre-default personal jurisdiction challenge in the District of Columbia was successful. The record demonstrates that BSPLC achieved no such victory. It was therefore clear error for the district court to find otherwise, and to rely on that fact for the purpose of distinguishing BSPLC‘s conduct from that of the defendants in Mickalis Pawn Shop.
We caution, however, that by remanding for the district court to correct
that factual error, we do not mean to suggest that it may not appropriately conclude that BSPLC never forfeited its objection to personal jurisdiction in New York. We express no view on that ultimate issue. Rather, the district court‘s factual misstep leaves us unable to determine whether forfeiture is “so clear that the District Judge exceeded his allowable discretion in ruling that forfeiture had not occurred.” Hamilton, 197 F.3d at 61. We observe only that reconsideration of the case in light of the
IV. Effect of Transfer
The forfeiture analysis that is required on remand in this case is not as simple as in Mickalis Pawn Shop, however, because in that case, all the proceedings took place in a single district. Here, the case was transferred from another district pursuant to the jurisdictional transfer statute,
Accordingly, on remand, the district court should also address the
antecedent legal issue raised by the transfer of venue occurring immediately before BSPLC‘s withdrawal from the case: the extent to which
Transferring an existing case decouples the usually united attributes of a defendant‘s appearance in a venue (or lack thereof) and its opposition to the district court‘s exercise of personal jurisdiction (or waiver thereof). Our cases describing a district court‘s discretion to assure itself of personal jurisdiction before entering default judgment against a non-appearing defendant have
involved actions that were filed in the same forum considering its jurisdiction. See, e.g., Sinoying, 619 F.3d at 213. The typical non-appearing defendant in such a case can be conceived of as retaining its right to object to the rulings of a court lacking in personam jurisdiction because, instead of mounting a jurisdictional challenge, the defendant opposes “litigating in a distant or inconvenient forum” by remaining completely absent from the proceedings. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980). The defendant‘s deliberate absence, however, comes with a tradeoff: giving up the right “to plead or otherwise defend” the action,
Therefore, the defendant‘s appearance and whether it waives or forfeits its jurisdictional defenses are two events that are usually apparent at the outset of a newly filed case at around the same time. In this case, however, BSPLC appeared to defend the action when it was commenced in the
motion including both its merits defenses and its opposition to personal jurisdiction that was asserted by Plaintiffs under a completely different theory than that on which they now rely. BSPLC then received an ambivalent ruling that did not finally determine whether it could be haled into any court in the United States, chose not to oppose Plaintiffs’ motion to continue litigating personal jurisdiction in another district, and finally – just after the case was called in the E.D.N.Y. – abruptly decided to “stop participating in the proceedings.” App‘x 55. Unlike the typical non-appearing defendant in a newly filed case, BSPLC had a history of appearing and participating in the same case. Whether that history matters once the case arrived in the E.D.N.Y., however, depends on whether BSPLC can be properly analogized to a non-appearing defendant in a newly filed case, or whether, under the law of jurisdictional transfer, the case is understood as a continuation of the same litigation that had been going on for a decade.
The district court adopted aspects of both approaches. It initially analogized to a newly filed case and, writing on a clean slate, disregarded BSPLC‘s pre-transfer appearance in the D.D.C. in order to raise personal jurisdiction on its own initiative. Yet, the court apparently assumed that it could also look to BSPLC‘s pre-transfer conduct – in the same case and in a different
judicial district – to find that BSPLC did not forfeit the defense because it successfully challenged personal jurisdiction in the District of Columbia. In other words, for the purpose of party appearance, it treated transfer as just a variant on dismissal in the first district, only for the case to be filed anew in the second district. But for the purpose of distinguishing BSPLC‘s conduct from the defendants in Mickalis Pawn Shop, it treated transfer as a continuation of the same case.
We see a missing piece in that analysis: the extent to which
On the one hand, transfers may be understood as analogous to a dismissal of claims in the original district, followed by filing the same claims as a new case in the second district. That is because, when considering a motion to transfer under
We decline to determine in the first instance whether
Plaintiffs did not brief the issue either on appeal or before the district court.13 Cf. Schonfeld v. Hilliard, 218 F.3d 164, 184 (2d Cir. 2000) (“Although we are empowered to affirm a district court‘s decision on a theory not considered below, it is our distinctly preferred practice to remand such issues for consideration by the district court in the first instance. This is particularly appropriate when, as here, such theories have been briefed and argued only cursorily in this Court.“).
We observe only that the question is one of first impression and potentially determinative on remand. If the district court decides that, under principles of transfer, a withdrawn defendant in a transferred case is properly analogized to a non-appearing defendant in a newly filed case and its pre-transfer litigation history is irrelevant to determining whether the defaulting defendant forfeited its
defenses, Plaintiffs may appeal from that judgment and the question will be squarely presented. But if the district court decides that a transferred case is not so analogous to a newly filed case such that the defendant‘s pre-transfer litigation history can be considered to determine whether the defendant abandoned the case, it must assess that history accurately.
Therefore, in addition to reconsidering BSPLC‘s pre-transfer litigation conduct in light of the corrected premise, we observe that potentially adverse changes in the legal landscape that may have motivated the defendant‘s withdrawal are relevant circumstances bearing on its willful abandonment. The legal context relevant to this case significantly changed after 2010. Accordingly, under the premise that BSPLC neither won nor lost its personal jurisdiction objection in the D.D.C., if the district court finds pre-transfer litigation conduct relevant, it should consider whether BSPLC withdrew because it perceived that its chances of prevailing on its defense had soured following our line of cases since Licci I, which hold that foreign defendants are deemed to have submitted to personal jurisdiction in New York under certain conditions. See Licci I, 732 F.3d at 165. It should also consider the significance, if any, of BSPLC‘s pre-transfer decision to consent to Plaintiffs’ motion to transfer venue to New York instead of
renewing its motion to dismiss, which had an arguably greater chance of success under Judge Lamberth‘s favorable holding in Wultz.
We remand for the district court to reconsider its forfeiture conclusion in light of the corrected fact that, prior to the transfer, BSPLC challenged only personal jurisdiction predicated on
CONCLUSION
For the reasons set forth above, we VACATE the district court‘s judgment denying Plaintiffs’ motion for default judgment and dismissing the case for lack of jurisdiction, and REMAND the case to the district court for proceedings consistent with this opinion.