Temima Spetner, Jason Kirschenbaum, Isabelle Kirschenbaum, individually and for the Estate of Martin Kirschenbaum, Joshua Kirschenbaum, Shoshana Burgett, David Kirschenbaum, Danielle Teitelbaum, Netanel Miller, Chaya Miller, Aharon Miller, Shani Miller, Adiya Miller, Altea Steinherz, Jonathan Steinherz, Temima Steinherz, Joseph Ginzberg, Peter Steinherz, Laurel Steinherz, Jacqueline Chambers, individually and as the Administrator of the Estate of Esther Bablar, Levana Cohen, individually and as the Administrator of the Estate of Esther Bablar, Eli Cohen, Sarah Elyakim, Joseph Cohen, Greta Geller, as the Administrator of the Estate of Greta Geller, Ilana Dorfman, as the Administrator of the Estate of Greta Geller, Rephael Kitsis, as the Administrator of the Estate of Greta Geller, Tova Guttman, as the Administrator of the Estate of Greta Geller, Gila Aluf, Shabtai Shatsky, individually and for the Estate of Keren Shatsky, Joanne Shatsky, individually and for the Estate of Keren Shatsky, Tzippora Shatsky Schwarz, Yosef Shatsky, Sara Shatsky Tzimmerman, Miriam Shatsky, David Shatsky, Hillel Trattner, Ronit Trattner, Aron Trattner, Shelley Trattner, Hadassah Diner, Efrat Fine, Yael Hillman, Chana Friedman Edri, Bella Friedman, Reuven Friedman, Yehiel Friedman, Zvi Friedman, Ilan Friedman, Miriam Friedman Schreiber, Steven Braun, Chaviva Braun, Yehuda Braun, Yoni Braun, Eliana Braun Peretz, Oriella Braun, Matanya Braun, Ginette Thaler, individually and for the Estate of Rachel Thaler, Leor Thaler, Michael Thaler, Zvi Thaler, Isaac Thaler, Miriam Ben-Yishai, individually and for the Estate of Shoshana Ben-Yishai, Yitzhak Ben-Yishai, individually and for the Estate of Shoshana Ben-Yishai, Jacob Ben-Yishai, Israel Ben-Yishai, Aviel Ben-Yishai, Chana Ben-Yishai, Yael Ben-Yishai, Myriam Miller, Chana Aidel Miller Schertzman, Tova Miller, Ilana Schertzman Cohen, Leslie Schertzman, Donald Schertzman, Daniel Schertzman, Arielle Schertzman Fisher, Abraham Schertzman, Yehuda Schertzman, Charles O. Morgan, Jr., for the Estate of Gloria Kushner, Leonard Mandelkorn, Ezra Kessler, Hannah Kessler Rosenstein, Klila Kessler, Yitzhak Zahavy, Julie Zahavy, Tzvee Zahavy, Bernice Zahavy, Mark Sokolow, Rena Sokolow, Jamie Sokolow Fenster, Lauren Sokolow Mandelstam, Elana Sokolow Rosman, Alan Bauer, Yehonaton Bauer, Revital Bauer, Binyamin Bauer, Daniel Bauer, Yehuda Bauer, Ludwig Bauer, individually and for the Estate of Ella Bauer, Phillip Bauer, Shoshana Zelcer Weitzman, Shmuel Waldman, Henna Novack, Morris Waldman, Eva Waldman, Chanie Bodenstein, Shaindy Weinberger, Philip Waldman, Abraham Waldman, Dassie Waldman Davis, Leslye Knox, individually and for the Estate of Aharon Ellis, Jordan Ellis, Mello Nee Ellis, individually and for the Estate of Prince Elkannann Ben Shaleak, Ametai Carter, Reuven Carter, Shaanon Carter, Shayrah Carter, Yoshahvyah Carter, Francine Ellis, Lynne Ellis, Shemariyah Ellis, Tsaphrerah Ellis, Yihonadov Ellis, Plaintiffs-Appellants, Arie Miller, Plaintiff, v. Palestine Investment Bank, Defendant-Appellee.
No. 20-3849-cv
United States Court of Appeals For the Second Circuit
JUNE 16, 2023
AUGUST TERM 2021
ARGUED: FEBRUARY 25, 2022
Before: WALKER, MENASHI, and LEE, Circuit Judges.
Plaintiffs-Appellants are American victims, and the relatives and estates of victims, of terrorist attacks in Israel between 2001 and 2003. Plaintiffs allege that Palestine Investment Bank (PIB) facilitated the attacks by knowingly providing financial services to the terrorist organizations that allegedly perpetrated them, in violation of the Anti-Terrorism Act,
MICHAEL RADINE (Gary M. Osen, Ari Ungar, Aaron A. Schlanger, on the brief), Osen LLC, Hackensack, NJ, for Plaintiffs-Appellants.
MITCHELL R. BERGER (Gassan A. Baloul, on the brief), Squire Patton Boggs, New York, NY and Washington, DC, for Defendant-Appellee.
Gregory P. Hansel, Preti, Flaherty, Beliveau & Pachios, Chartered LLP, Portland, ME, for amici curiae Former United States Government Officials.
Douglass A. Mitchell, Jenner & Block LLP, Washington, DC; Mordechai Biser, Abba Cohen, Agudath Israel of America; Nathan J. Diament, Union of Orthodox Jewish Congregations of America; Jonathan L. Sherman, One Israel Fund, Ltd., for amici curiae Agudath Israel of America, Union of Orthodox Jewish Congregations of America, and One Israel Fund, Ltd.; Jonathan M. Rotter, Glancy Prongay & Murray LLP, Los Angeles, CA, for amicus curiae StandWithUs.
JOHN M. WALKER, JR., Circuit Judge:
Plaintiffs-Appellants are American victims, and the relatives and estates of victims, of terrorist attacks in Israel between 2001 and 2003. Plaintiffs allege that Palestine Investment Bank (PIB) facilitated the attacks by knowingly providing financial services to the terrorist organizations that allegedly perpetrated them, in violation of the Anti-Terrorism Act,
BACKGROUND
The following facts are taken from plaintiffs’ complaint and declaration to the extent “they are uncontroverted by [PIB‘s] affidavits.”1 Plaintiffs’ claims arise from thirteen attacks allegedly committed by Hamas and terrorists supported by the Arab Liberation Front (ALF) during the “Second Intifada.”2
PIB is a commercial bank headquartered in the Palestinian Territories. During the relevant period, PIB maintained a U.S. dollar-denominated checking account for the head of the ALF, a Palestinian proxy for Saddam Hussein‘s regime in Iraq. Plaintiffs allege that Saddam Hussein‘s government transferred so-called incentive payments to ALF‘s account at PIB to support and reward terrorist activities. Plaintiffs estimate that the Iraqi government transferred to ALF between $9.5 million and $35 million, which was ultimately disbursed to families of deceased terrorists, primarily through PIB-issued checks.
PIB also maintained an account for Hamas‘s U.S.-based fundraising arm, the Holy Land Foundation (HLF). HLF wired dollars from accounts in the United States to its account with PIB in the Palestinian Territories, which was then used to finance Hamas‘s operations. The United States designated Hamas as a Foreign Terrorist Organization in 1997 and HLF as a Specially Designated Global Terrorist in December 2001.3
During the relevant period, PIB had no offices, branches, or employees in New York. A foreign bank that lacks a physical presence in the United States, such as PIB, cannot directly access U.S.-based payment systems that allow financial institutions to electronically transfer dollar-denominated funds. But it can move funds to and from the United States by using a correspondent banking account, which is an account in a domestic bank that is held in the foreign bank‘s name.4 PIB did not hold a correspondent banking account in its own name with any bank in the United States. To process dollar-denominated transfers, PIB instead used a correspondent account with the Amman-branch of Arab Jordan Investment Bank (AJIB). AJIB, in turn, held correspondent banking accounts at three banks in New York—Citibank, Chase Manhattan, and Bank of New York Mellon. This practice, sometimes
AJIB‘s New York correspondent accounts were the only means it used to process dollar-based transactions. AJIB advertised its correspondent account relationships in trade publications such as the Bankers’ Almanac, which listed only the three New York accounts as having dollar-processing capabilities. Because of these public disclosures, PIB knew that the wire transfers had to route through New York. While there are alternatives to processing transactions through New York, PIB did not seek them out, nor did PIB refuse transfers from AJIB despite knowing that they would be routed through New York.
PIB used nested correspondent accounts to funnel dollar-denominated payments from Iraq‘s government to ALF. From an originating bank, Iraqi funds were sent to AJIB‘s correspondent account in New York. Once the funds reached AJIB‘s account, AJIB notified PIB that a transfer was made for the benefit of a PIB account holder, which, in this case, was the head of the ALF. Drawing on these cash infusions from Iraq, the head of the ALF then issued dollar-denominated incentive payment checks from his PIB account to the families of terrorists, including the word “martyr” in the memo line of some checks.
Except for checks issued to ultimate recipients who were also PIB accountholders (which were cleared internally on PIB‘s books), the incentive payment checks were cleared and settled in New York before reaching their ultimate recipients’ accounts at other banks.5
PIB also repeatedly processed payments for HLF. Plaintiffs allege that PIB directed HLF to use AJIB‘s New York correspondent accounts when transferring funds between HLF‘s account in the United States and its account with PIB in the Palestinian Territories. Plaintiffs point to at least one transfer from August 2001, in which HLF wired funds from its account in Texas with instructions that the transfer route through AJIB‘s correspondent account with Chase Manhattan in New York. Because PIB did not advertise its correspondent accounts at the time, plaintiffs suggest that the only way HLF could have known to send its funds to that correspondent account in New York was if PIB had selected the specific account and instructed HLF to use it.
PIB moved to dismiss the complaint on the ground that its connections with New York were too attenuated to subject it to personal jurisdiction. The district court held oral argument on the motion but did not conduct an evidentiary hearing. It granted PIB‘s motion, ruling that New York‘s long-arm statute, Civil Practice Law and Rule (C.P.L.R.) § 302, did not authorize jurisdiction over PIB. The district court reasoned that the New York correspondent accounts at issue were not held in PIB‘s name and that AJIB was not PIB‘s agent for purposes of § 302. The district court did not reach whether jurisdiction was consistent with the Due Process Clause of the Constitution or whether, as PIB argued, plaintiffs failed to state a claim. Plaintiffs timely appealed.
DISCUSSION
This appeal requires us to answer a single question: whether the district court has personal jurisdiction over PIB.
We review a district court‘s decision on the question of personal jurisdiction “for clear error on factual holdings and de novo on legal conclusions.”7 “[W]hether an agency relationship exists is a mixed question of law and fact.”8 Where, as here, the district court did not conduct a “full-blown evidentiary hearing,” relying instead on pleadings and affidavits, the plaintiff need only make a prima facie showing that jurisdiction exists.9
I. Jurisdiction Under New York‘s Long-Arm Statute
A. Transacting Business in New York
Both our court and the New York Court of Appeals have on several occasions addressed whether the use of a correspondent bank account involves transacting business and therefore can support the exercise of jurisdiction over a non-domiciliary bank. The most notable of these precedents is the Licci ex rel. Licci v. Lebanese Canadian Bank, SAL line of cases.13 Licci supplies two relevant principles. First, the existence of a correspondent account in New York, without more, does not subject a defendant foreign bank
Because the touchstone for jurisdiction under New York‘s long-arm statute is the intent to reach the forum, jurisdiction cannot be based on conduct in the forum that is extraneous or coincidental. As the New York Court of Appeals recently clarified, “[i]t is precisely the fact that defendants chose New York, when other jurisdictions were available, that makes the New York connection ‘volitional’ and not ‘coincidental.‘”16 We were satisfied in Licci that the foreign bank‘s recurrent transfers to a New York correspondent account indicated “a lack of coincidence” and a desire to benefit from New York‘s “dependable and transparent banking system.”17
While the foreign bank in Licci executed the challenged transactions through a correspondent account that it had opened in New York, our decision did not cabin jurisdiction to only the owner of the correspondent account. This case asks us to consider whether jurisdiction can be based on a foreign bank‘s use of a correspondent account that it does not own. As we explain below, a foreign bank‘s choice to project itself into New York can be evident through the selection and repeated use of an agent‘s correspondent account in the forum. This result follows from two strands of well-established jurisprudence. A foreign entity can be subject to suit in New York based on the acts of its agent. And sustained use of a correspondent banking account constitutes “transacting business” within the meaning of
Plaintiffs allege that AJIB acted as PIB‘s agent when it repeatedly facilitated and processed funds transfers to PIB‘s dollar-denominated accounts. Agency within the meaning of § 302(a) is given a “broad[]” interpretation.18 A plaintiff does not need to establish a “formal agency relationship” in order to attribute the actions of the agent to the principal.19 To exercise personal jurisdiction over a defendant based on the acts of an agent, a showing must be made that “the alleged agent acted in New York for the benefit of, with the knowledge and consent of, and under some control by, the nonresident principal.”20
We easily find that plaintiffs successfully pled benefit as well as knowledge and consent. As for the former, AJIB‘s alleged role in transferring payments through its correspondent accounts in New
We disagree with the district court‘s conclusion that the complaint failed to plausibly allege that PIB exercised “some control” over AJIB. To start, PIB conceded that AJIB was required to follow PIB‘s instructions as to the amount of funds to transfer and the beneficiary of those funds.23 AJIB could not choose to transfer a different amount for the benefit of a PIB customer or transfer to a beneficiary of AJIB‘s own choosing. PIB acknowledged that, “[i]n the event” that a request was made by a PIB customer, PIB instructed AJIB to make certain transfers “to the U.S. bank.”24 AJIB did not ignore or reject those instructions. These allegations indicate that AJIB‘s conduct vis-à-vis the correspondent account was not “unilateral.”25
Once PIB chose to offer dollar-denominated banking services, it necessarily exercised control by utilizing AJIB‘s correspondent bank accounts in New York. Contrary to the district court‘s determination, the absence of allegations that PIB routinely designated which of AJIB‘s three correspondent accounts to use in New York is of no moment because PIB had already selected the forum and any of the three banks would do.
We also find plausible plaintiffs’ allegations that PIB exercised control over the transactions by directing its customers to use certain correspondent accounts in New York. Plaintiffs allege that, on at least one occasion, HLF transferred funds from its Texas-based account to its account at PIB with instructions on the payment form to use AJIB‘s correspondent account at Chase Manhattan in New York. Because PIB did not advertise its correspondent accounts, we can reasonably infer that PIB designated one of AJIB‘s correspondent accounts and then instructed HLF to send its funds there, thereby controlling the flow of funds and ensuring that they would pass through New York.
While New York remains “the national and international center for wholesale wire transfers,” alternative channels that bypass the State existed at the time that would have enabled PIB to provide dollar-denominated banking services to its clients.27 For example, PIB could have sought out dollar-clearing centers outside of the U.S.28 It also could have arranged to keep sufficient U.S. banknotes on hand for entirely physical, rather than electronic, funds transfers. That these alternatives may have been less attractive to PIB is further support that the purpose of holding a correspondent account with AJIB was to gain convenient access to New York‘s financial system. The fact that PIB injected itself into the payment process leads us to conclude that its contact with New York was not random or fortuitous but sufficiently purposeful to satisfy New York‘s long-arm statute.
PIB makes several arguments against the exercise of personal jurisdiction on these facts. It relies on Article 4A of the New York Uniform Commercial Code for the proposition that “[a] receiving bank is not the agent of the sender or beneficiary of the payment order it accepts, or of any other party to the funds transfer.”29 But agency under § 302 is not bound either by the “formalities of agency law”30 or by the UCC‘s framework governing a party‘s rights and obligations when making electronic funds transfers.31 Moreover, the cases that PIB cites involved parties seeking to attach or garnish assets that were “midstream,” in other words assets that were in the process of being transferred between banks.32 We thus understand Article 4A to qualify the court‘s attachment power in the context of international funds transfers, separate from the threshold question of whether the court has personal jurisdiction over the bank involved in the transfer.
PIB also asserts that Licci rejected jurisdiction over foreign banks using nested correspondent accounts and that finding
the world.”35 In making that observation, we contrasted LCB‘s use of a correspondent account in New York with a foreign bank that had correspondent relationships throughout the world any of which could have been used to process transfers. According to PIB, this statement in Licci demonstrates that the district court cannot exercise jurisdiction over PIB here because PIB did not itself have a correspondent account in New York but had only a correspondent account with AJIB in Jordan.36 We do not adopt PIB‘s cramped reading of Licci. To the contrary, we understand the Licci dicta to stand for the unsurprising proposition that jurisdiction requires a choice by the defendant bank to avail itself of the benefits of the New York financial system. Simply transacting in U.S. dollars does not make a defendant bank amenable to suit in New York. PIB, like LCB, chose to transact business in New York—albeit one step removed, through a nesting correspondent mechanism.
B. Claims “Arising from” Business Transacted in New York
Plaintiffs likewise plausibly allege that their causes of action arise out of PIB‘s transacting business in New York. This second element of
permissive” inquiry requires only that “at least one element [of the claim] arises from [defendant‘s] New York contacts.”38
Plaintiffs allege that PIB‘s use of correspondent accounts through its agent, AJIB, permitted Saddam Hussein‘s government to funnel dollars repeatedly to ALF to enable it to incentivize and reward terrorist activity and also permitted Texas-based HLF to send funds from the United States to Hamas to support attacks perpetrated on plaintiffs and their families. By processing payments bearing indicia of terrorism financing on behalf of ALF and knowingly providing material support to a customer linked to Hamas, a designated Foreign Terrorist Organization, PIB facilitated the attacks that are at the heart of
PIB pushes back on the inference that the incentive payments were processed through New York. Because checks between account holders at Palestinian banks were settled daily on an aggregate basis rather than as individual transactions, PIB suggests that plaintiffs cannot trace any particular payment from the head of ALF to the families of terrorists. But PIB admits that any inter-bank dollar transfer to settle a debt was processed through New York. We find it plausible that, of the transfers alleged to have originated with ALF, at least some portion of them was transferred through New York. At this stage of the litigation, plaintiffs are not obligated to produce particularized proof as to each payment. They have met their burden here because they averred facts and produced copies of checks and receipt vouchers from ALF to families of terrorists.39 Moreover, it is not disputed that funds transferred from Iraq‘s government to ALF‘s account at PIB, from which the incentive payments were disbursed, were processed through New York.
PIB also argues that plaintiffs omit a “causal connection” between the funds transferred from HLF‘s Texas-based account to its account at PIB and plaintiffs’ injuries from Hamas‘s terrorist operations.40 PIB‘s argument reflects a fundamental misunderstanding of the “arising from” requirement. The nexus element simply ensures that the transaction is “not completely unmoored” from the claim.41 Plaintiffs’ allegations are sufficient: by directing the transfers to AJIB‘s account in New York, PIB used New York‘s financial system to facilitate financial support for Hamas that is the basis of certain of plaintiffs’ claims.
We are similarly not persuaded by PIB‘s alternative attempt to narrow the scope of the nexus requirement. PIB argues that the August 2001 transfers, which plaintiffs included for illustrative purposes, lack a connection to the plaintiffs’ case because they occurred a week before the start of the “relevant period.”42 We disagree. Plaintiffs’ allegation that PIB supplied HLF with instructions on how to send dollar-based transfers to AJIB‘s
correspondent account in New York shortly before the attacks is sufficiently contemporaneous.
II. Compliance with Constitutional Due Process
Because it concluded that personal jurisdiction was not authorized by
Where, as here, specific jurisdiction is invoked, the Due Process Clause of the Constitution requires that the defendant have sufficient “minimum contacts” with the forum and that jurisdiction “not offend traditional notions of fair play and
“Minimum contacts” requires finding that PIB directed its conduct at New York such that it could reasonably foresee being subject to suit here. To be sure, there is no evidence that PIB was physically present in New York, let alone the United States, but PIB had repeated contact with New York through AJIB‘s correspondent accounts. While the contacts with the forum must be “created by the defendant itself,” we also recognize that the “defendant can purposefully avail itself of a forum through the action of a third party by directing its agents . . . to take action there.”47 We find the allegations of PIB‘s contacts through its agent AJIB sufficient to satisfy due process for the same reason that New York‘s long-arm statute is satisfied.
Due process ensures that the foreign defendant is not haled into the forum based solely on the “unilateral activity” of a third party.48 But, as we noted, PIB‘s use of a New York account through AJIB overcomes any claim that AJIB‘s acts were “unilateral.” PIB chose to accept dollar-denominated transfers from Iraq and HLF through the use of a correspondent bank account. PIB‘s relationship with AJIB provided not only a way to clear dollar-denominated transfers on behalf of ALF and HLF, but also the exclusive means of doing so. As PIB knew, AJIB could not facilitate the transfers through alternative jurisdictions. Moreover, AJIB acted at PIB‘s direction: avoiding New York would have required AJIB to ignore PIB‘s instructions, which PIB concedes AJIB did not do.
Likewise, HLF did not route its transfers from Texas through New York at its own discretion. Accepting the complaint‘s allegations as true, PIB affirmatively directed HLF to send its money to a specific correspondent account in New York to which PIB had access through its own account with AJIB. PIB thus oversaw the flow of funds moving from its customer‘s account in Texas to New York to the Palestinian Territories. The New York account was not random; it was necessary to effect the transfers.
We are also satisfied that PIB‘s use of AJIB‘s correspondent account in New York was sufficiently related to plaintiffs’ injuries because it was “an instrument to achieve the very wrong alleged.”49 As we explained in Licci: where the cause of action entails the “unlawful provision of banking services of which the wire transfers are a part[,] allegations of [the defendant bank‘s] repeated, intentional execution of U.S.-dollar-denominated wire
At this juncture, we are interested only in the question of personal jurisdiction and the nature of the contacts that would support such exercise. PIB‘s argument that HLF was not designated a terrorist organization until several months into the relevant period is more properly raised in a Rule 12(b)(6) challenge.
A defendant who has been found to have minimum contacts can defeat jurisdiction by “present[ing] a compelling case that the presence of some other considerations would render jurisdiction unreasonable.”51 PIB did not argue before the district court that being haled into the New York forum would be unreasonable. Nor does PIB so contend on appeal. In any event, we do not find this to be the
“unusual” case where dismissal is warranted because bringing PIB into a New York court would be unreasonable.52 Claims brought under the Anti-Terrorism Act routinely involve international defendants. We are cognizant of New York‘s interest in “monitoring banks and banking activity to ensure that its system is not used as an instrument in support of terrorism,” which is perhaps heightened given that nested correspondent accounts could permit a bank, like PIB, to shield its identity from the New York banks or other interested parties.53 Moreover, we are satisfied that “the conveniences of modern communication and transportation,” including email and remote video capabilities, support our finding that PIB‘s appearance in New York would not be fundamentally unfair.54
CONCLUSION
For the foregoing reasons, we VACATE the district court‘s decision and REMAND for further proceedings consistent with this opinion.55
Notes
We express no opinion as to the merits of PIB‘s alternative argument that plaintiffs fail to state a claim under the Anti-Terrorism Act. We leave resolution of that issue for the district court to address in the first instance.