Terror Funding Suit Against Bank Sent to NY

WASHINGTON (CN) - Federal litigation over the impending deposition of an Israeli official, sought by plaintiffs who claim the Bank of China handled funds for Palestinian terrorists, has been transferred to Manhattan.

U.S. District Judge Shira Scheindlin, of the Southern District of New York, is already presiding over two cases based on similar allegations against the Bank of China. Four allied cases are pending in state courts in Manhattan.

Scheindlin is therefore better able to rule on motions that have been filed by plaintiffs and by the Israeli government concerning the deposition, according to a ruling in Washington, D.C., by U.S. District Judge Reggie Walton.

In all of the cases, victims of bombings and rocket attacks carried out in Israel between 2005 and 2007 by Islamic Jihad and Hamas, two groups that have been designated by the U.S. government as terrorist organizations, are suing the Bank of China for processing international wire transfers for the groups. The transfers allegedly continued even after the Israeli government notified officials of China's central bank that the transactions were helping the groups carry out terrorist attacks in Israel.

The D.C. lawsuit, based on the same allegations, was filed by the family of Daniel Wultz, an American teenager who was killed in a bombing in Tel Aviv in 2006.

Lawyers for the Wultz family succeeded in serving a subpoena on a former Israeli national security officer, Uzi Shaya, when he was visiting Washington last September. He was ordered to appear for a deposition in Washington in November.

Shortly before the scheduled deposition, Israel filed a motion to quash the subpoena. That prompted the plaintiffs in one of the suits pending before Judge Scheindlin to intervene and file a motion to strike Israel's motion to quash, or alternatively, transfer the motion to quash to the court in New York.

Invoking amendments to Rule 45 of the Federal Rules of Civil Procedure, which took effect in December 2013, Judge Walton opted to transfer the litigation surrounding the subpoena to Scheindlin.

Israel has cited the risk of disclosure of state secrets in its efforts to block the deposition of Shaya. In opposing the intervenors' motion to transfer the matter to New York, Israel raised concerns that it would be forced to relitigate issues in the new jurisdiction that have already been addressed in the case in Washington. Walton dismissed that concern.

Transferring the motions to New York "advances the objective of avoiding inconsistent rulings," Walton wrote. It also assures that the matter will be handled by a judge who is already immersed in the case.

"Judge Scheindlin has in fact taken an interest and active role in resolving any potential state secrets claim," wrote Walton, who noted that that she has already been in communication with Israel's Department of International Affairs about the deposition.

Although Walton indicated that the deposition could still be conduced in Washington D.C., he noted that Scheindlin has indicated that she is willing to personally supervise the deposition and set conditions to protect the privilege of any information that Shaya will be asked to disclose.

"Therefore, this court finds that Judge Scheindlin has been intimately involved with Israel's asserted state secrets claim, and accordingly is better informed to resolve this issue," Walton wrote.

"Any ruling by this court will inevitably disrupt Judge Scheindlin's management of the two highly complex actions currently pending in her court, as well as impact four other separate but related actions pending in the New York Supreme Court, about which this court has even less familiarity," Walton added.

Under the newly amended Rule 45, the court where compliance with the subpoena is required, in this case Walton's court, can transfer litigation concerning the subpoena to another court the case if "exceptional circumstances" warrant the transfer.

Scheindlin's familiarity with the full scope of the "complex and intricate" web of lawsuits pending against the Bank of China constitutes the sort of exceptional circumstance that justifies transferring the matter to New York, Walton concluded.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit