Bernhardt v. Islamic Republic of Iran

DANA MARIE BERNHARDT et al., Plaintiffs, v. ISLAMIC REPUBLIC OF IRAN et al., Defendants.

Civil Action No. 18-2739 (TJK)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

November 16, 2020

MEMORANDUM OPINION

The families of two deceased American contractors sue Iran and four related financial institutions—the HSBC Defendants—for their alleged roles in an al-Qaeda terrorist's 2009 suicide attack at a military installation in Afghanistan. Before the Court is the HSBC Defendants' motion to dismiss the claims against them, asserted under the Justice Against Sponsors of Terrorism Act, for (1) lack of personal jurisdiction over the non-U.S. HSBC Defendants and (2) failure to state a claim as to all the HSBC Defendants. For the reasons explained below, the Court will grant the motion and dismiss the claims against the HSBC Defendants.

I. Background

According to the Amended Complaint, on December 30, 2009, Humam Khalil al-Balawi, a suicide bomber, attacked personnel at Camp Chapman, a "secret CIA base" in Afghanistan, killing nine, including Dane Paresi, a former Green Beret, and Jeremy Wise, a former Navy SEAL. ECF No. 10 ("Am. Compl.") ¶¶ 22-23, 227. The Central Intelligence Agency (CIA) allegedly thought that Balawi was a double agent working for the United States by infiltrating al- Qaeda's leadership in Northwest Pakistan. Id. ¶ 24. Instead, tragically, he was a triple agent loyal to al-Qaeda. Id. ¶ 25.

But according to Plaintiffs, the Camp Chapman suicide attack was part of a broader conspiracy by al-Qaeda and its allies, including the Islamic Republic of Iran ("Iran"), to attack the United States and its allies with acts of international terrorism. Id. ¶ 26. Plaintiffs allege that Iran has long supported al-Qaeda, id. ¶¶ 56-101, and, relevant here, served as a "critical transit point for funding to support [al-Qaeda's] activities in Afghanistan and Pakistan," id. ¶ 27. Plaintiffs further allege that the conspiracy was facilitated by a larger group of co-conspirators who "willingly provided material support and resources to the conspirators, including financial services, while knowing that such services would facilitate terrorist attacks" like the one at Camp Chapman, including Bank Melli Iran ("Bank Melli"), Bank Saderat PLC in Iran ("Bank Saderat") and Al Rajhi Bank in Saudi Arabia. Id. ¶ 29.

One step further, Plaintiffs allege that the four related financial institutions at issue here—HSBC Holdings PLC ("HSBC"), HSBC Bank PLC ("HBEU"), HSBC Bank USA, N.A. ("HBUS"), and HSBC North America Holdings Inc. ("HBNA") (collectively, the "HSBC Defendants")—funded and facilitated this conspiracy by laundering funds and engaging in other illicit financial transactions with Iran and these other co-conspirators. Id. ¶ 29. HSBC is a United Kingdom bank holding company with its principal place of business in London, which "owns and/or controls" HBEU, HBNA, and HBUS. Id. ¶ 12; ECF No. 32 ("MTD") at 4. HBEU is a financial institution organized under the laws of England and Wales, also headquartered in London. Am. Compl. ¶ 13; MTD at 4. HBNA is a holding company located in New York City that owns HBUS, a nationally chartered bank that operates more than 240 bank branches throughout the United States. Am. Compl. ¶¶ 14-15; MTD at 4.

According to Plaintiffs, the HSBC Defendants joined a financial conspiracy to provide material support for these acts of terrorism by, among other things, over "the course of nearly ten years . . . purposely, knowingly, and/or recklessly violat[ing] the [anti-money laundering] statutes and other economic sanctions levied against Iran and various Iranian banking institutions, id. ¶ 31, and providing "substantial assistance to banks known to be connected to the same terrorist financial network, such as Al Rajhi Bank, id. at 36. In particular, Plaintiffs allege that the HSBC Defendants—in particular HBUS and HBEU—joined the financial conspiracy by devising fraudulent schemes in which they "stripped" or "repaired" transactions with Iranian banks, including Bank Melli and Bank Saderat ("the Iranian Banks"), to hide the true nature of transactions that originated in Iran or were otherwise associated with Iran or Specially Designated Nationals and Blocked Persons (SDNs). Id. ¶¶ 32, 134-37. Thus, Plaintiffs say, they allowed those transactions to avoid detection by the Treasury Department's Office of Foreign Assets Control (OFAC), thereby intentionally violating U.S. law.¹ Id. ¶ 32. Similarly, Plaintiffs assert that the HSBC Defendants, especially HBUS and HBEU, engaged in fraudulent schemes to avoid OFAC detection, including one in which they would style transactions as bank-to-bank "cover" transactions to hide the identity of the transaction originator, also in violation of U.S. law. Id. ¶¶ 33, 138-50. According to Plaintiffs, in 2010, HBUS hired Deloitte LLP as an outside auditor to identify OFAC-sensitive transactions that the HSBC Defendants had illegally conducted. Id. ¶ 34. That review identified more than 25,000 illegal transactions involving Iran, valued at more than $19.4 billion. Id. On top of these alleged violations, according to Plaintiffs,the HSBC Defendants assisted banks with connections to al-Qaeda, such as Al Rajhi Bank, which was widely known to serve as a conduit for terrorist transactions.² Id. ¶¶ 35, 151-185. Despite pressure from HBUS's own in-house compliance department to end the affiliation, they say, it provided Al Rajhi Bank access to nearly one billion dollars in U.S. banknotes through 2010. Id. ¶ 177-182. Finally, Plaintiffs accuse the HSBC Defendants of advancing the conspiracy by maintaining intentionally weak anti-money laundering policies and failing to perform adequate due diligence in various ways, including relating to its correspondent bank relationships. Id. ¶¶ 186-202.

The Amended Complaint asserts two counts against the HSBC Defendants under the Justice Against Sponsors of Terrorism Act (JASTA), 18 U.S.C. § 2333(d): one for aiding and abetting the extrajudicial killings of Paresi and Wise (Count II), and the other for participating in a conspiracy that caused their deaths (Count III). Earlier this year, the HSBC Defendants moved to dismiss these counts, asserting that (1) the Court lacks personal jurisdiction over the two non-U.S. HSBC Defendants, HSBC and HBEU,³ and (2) the Amended Complaint must be dismissed as to all HSBC Defendants because Plaintiffs have failed to state a claim against them under JASTA's secondary liability provisions. ECF No. 32.

II. Legal Standards

To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff bears the burden of making "a prima facie showing of the pertinent jurisdictional facts." Livnat v.Palestinian Auth., 851 F.3d 45, 56-7 (D.C. Cir. 2017) (internal quotes omitted). A plaintiff "must allege specific acts connecting [each] defendant with the forum." IMAPizza, LLC v. At Pizza Ltd., 334 F. Supp. 3d 95, 108 (D.D.C. 2018) (quoting Second Amendment Found. v. U.S. Conf. of Mayors, 274 F.3d 521, 524 (D.C. Cir. 2001)). Factual disputes must be resolved in favor of the plaintiff, but the Court need not accept unsupported inferences. Livnat, 851 F.3d at 57.

"To survive a motion to dismiss [for failure to state a claim], a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The Court should consider only well-pleaded factual allegations and ignore mere conclusory legal statements. Id.

III. Analysis

A. Personal Jurisdiction

Plaintiffs argue that this court has specific personal jurisdiction over HSBC and HBEU under Rule 4(k)(2) of the Federal Rules of Civil Procedure.⁴ That Rule permits a federal court to exercise jurisdiction over (1) a claim arising under federal law, (2) against a defendant served by a summons, (3) that is not subject to the jurisdiction of any single state court, (4) provided that the exercise of federal jurisdiction is consistent with the Constitution (and laws) of the United States. Mwani v. bin Laden, 417 F.3d 1, 10 (D.C. Cir. 2005). The parties do not dispute thatfirst three elements are satisfied: (1) Plaintiffs' claims arise out of federal law, 18 U.S.C. § 2333(d), Am. Compl. ¶¶ 254-80; (2) HSBC and HBEU formally agreed to waive service, ECF Nos. 14-15; and (3) HSBC and HBEU assert that they "are not subject to jurisdiction in any state's court of general jurisdiction,"⁵ MTD at 9.

Thus, the Court's personal jurisdiction over HSBC and HBEU turns on the final element. "Whether the exercise of jurisdiction is 'consistent with the Constitution' for purposes of Rule 4(k)(2) depends on whether a defendant has sufficient contacts with the United States as a whole to justify the exercise of personal jurisdiction under the Due Process Clause of the Fifth Amendment." Mwani, 417 F.3d at 11. This requires the Court to determine "if the defendant has purposefully directed his activities at residents of the forum and [if] the litigation results from alleged injuries that arise out of or relate to those activities." Id. at 12 (cleaned up). The Court concludes that even if HSBC and HBEU purposefully directed their activities at the United States, Plaintiffs have not shown that their injuries arise out of or relate to those activities. Thus, the Court cannot exercise personal jurisdiction over HSBC and HBEU.

Plaintiffs allege that these entities—that represent that they have no "representative offices, direct subsidiaries, or branches in the United States," MTD at 9—directed their activities at financial markets and institutions in this country in various ways during the purported financial conspiracy outlined above. They assert that...