Israeli Terror Victims to Sue Chinese Bank in NY
(CN) - Victims of bombings and rocket attacks in Israel can sue the Bank of China in a New York court for handling international fund transfers that allegedly facilitated the terrorist actions, an appeals court ruled.
In a unanimous decision, the New York Appellate Division's First Department rejected the bank's assertion it would be unfairly inconvenienced by having to litigate the case in New York even though most of the evidence is in China. The court also denied the bank's claim that the action should be governed by the laws of China.
Since the plaintiffs were injured in Israel, the court should apply Israeli law in adjudicating the plaintiffs' claims, the court ruled in an opinion written by Associate Justice Paul G. Feinman.
Justices John W. Sweeny, Jr., Karla Moskowitz and Rosalyn H. Richter joined in the decision.
The suit was filed by 50 citizens or residents of Israel who were injured or who lost family members in bombings and rocket attacks carried out by Palestine Islamic Jihad and Hamas in Israel between 2005 and 2007.
The plaintiffs alleged that the bank handled international wire transfers for those groups, which have been designated as terrorists organizations by the United States, even though Israeli authorities notified officials of China's central bank that the transactions were facilitating attacks on Israel. An Israeli law makes it a crime to provide material support or services to terrorist organizations.
The suit was filed in New York because at least some of the wire transfers between accounts purportedly owned by leaders of the two groups were allegedly processed by New York branches of the Bank of China. The United States has imposed global sanctions that are aimed at preventing the groups from using the international banking system to help finance terrorist attacks. The Bank of China is reportedly one of only a handful of banks that have defied the U.S. sanctions.
New York is an appropriate forum for the lawsuit because the state "has a very strong interest as a world financial center in overseeing financial institutions operating in the United States," Feinman wrote. "In addition, having been the target of several terrorist attacks, New York has a great interest in combating terrorism, including its financial aspects."
The Bank of China is facing similar claims in another lawsuit that is now underway in the federal court in Manhattan, Wultz v Islamic Republic of Iran. That suit was brought on behalf of an American man who was injured and whose son who was killed in a suicide bombing in Tel Aviv. A federal judge considered and rejected the bank's inconvenient-forum claim in that case, and that suit is now in the discovery phase.
In his ruling, Feinman adopted the federal court's rationale that since the bank had been notified that wire transfers it was handling were facilitating terrorist activities that ultimately harmed the plaintiffs, the usual rule that banks have no duty to protect non-customers from intentional torts committed by their customers does not apply.
Feinman also cited the federal lawsuit, which the Bank of China is actively litigating, in support of his conclusion that the bank will not be unfairly inconvenienced by having to defend itself in a New York court in the action at issue in this case.
Lawyers for the bank argued that it would face limitless liability if it had a duty to protect members of the general public from torts that are allegedly facilitated by the banking transactions it routinely handles for its millions of customers. Rejecting that argument, Feinman concluded that the bank could be held liable only in cases where it was expressly warned about the banking activities of terrorists. "Here, it is alleged that BOC knowingly facilitated acts of terrorism against innocent civilians, and did so after being put on notice by officials of [China's] central bank at the insistence of Israeli government officials," Feinman wrote. Under those circumstances, "BOC's argument that it was doing nothing more than 'routine' banking services is unpersuasive," he concluded.
The ruling affirms in most respects a decision handed down by New York County Supreme Court Justice Barbara R. Kapnick. However, Kapnick ruled that New York law, not Israeli law, should govern the case.