King v. Habib Bank Ltd.

KEVIN KING, ET AL., Plaintiffs, v. HABIB BANK LIMITED, Defendant.

KATHLEEN L. ALEXANDER, ET AL., Plaintiffs, v. HABIB BANK LIMITED, Defendant.

MARY B, ET AL., Plaintiffs, v. HABIB BANK LIMITED, Defendant.

Nos. 20 Civ. 4322 (LGS), 21 Civ. 2351 (LGS), 21 Civ. 6044 (LGS)

United States District Court, S.D. New York

September 28, 2022

OPINION AND ORDER

LORINA G. SCHOFIELD UNITED STATES DISTRICT JUDGE.

Plaintiffs in these consolidated cases are 370 individuals who were injured or whose family members were injured or killed in terrorist attacks, who bring this action against Defendant Habib Bank Limited (“HBL”) under the Anti-Terrorism Act (“ATA”), as amended by the Justice Against Sponsors of Terrorism Act (“JASTA”), 18 U.S.C. § 2333. Defendant moves to dismiss the Complaints. For the reasons stated below, the motion is granted in part and denied in part.

I. BACKGROUND

The following facts are taken from the Complaints, which are substantially identical. Except as otherwise noted, their allegations are assumed to be true for purposes of this motion. See R.M. Bacon, LLC v. Saint-Gobain Performance Plastics Corp., 959 F.3d 509, 512 (2d Cir. 2020).

Plaintiffs were injured or had family members who were injured or killed in terrorist attacks in Afghanistan between 2010 and 2019. The attacks were planned, authorized and committed by al-Qaeda, sometimes in conjunction with one or more other groups, including: Lashkar-e-Taiba (“LeT”) Jaish-e-Mohammed (“JeM”) and its alter ego Al-Rehmat Trust (“ART”), the Afghan Taliban including the Haqqani Network, and the Pakistani Taliban. The Complaints label these groups, collectively, the al-Qaeda Terror Syndicate (the “Syndicate”). The U.S government designated al-Qaeda a Foreign Terrorist Organization (“FTO”) in 1999; LeT and JeM in 2001; ART and the Pakistani Taliban in 2010; and the Haqqani Network in 2012 (collectively, the “Syndicate FTOs”). Outside of the Haqqani Network, the Afghan Taliban has not been designated an FTO for purposes of the ATA and JASTA, but was considered a terrorist organization for some purposes by the U.S. government during the period in which the attacks at issue here took place.

Defendant is the largest commercial bank in Pakistan, and it operated a New York branch until at least 2020. Defendant has provided banking services for decades to notorious terrorists, fronts and fundraisers with direct connections to al-Qaeda including Osama bin Laden; Jalaluddin Haqqani, founder of the Haqqani Network; Hafiz Muhammad Saeed and Zafar Iqbal, founders of LeT; Al Rashid Trust, an al-Qaeda front; Al-Rehmat Trust, a JeM front; Dawood Ibrahim, founder of the al-Qaeda-linked terrorist and criminal group D-Company; and Pakistan's Inter-Services Intelligence. One of Defendant's largest U.S. dollar clearing accounts was held by Al Rajhi Bank (“ARB”), which the U.S. government and the media have linked to funding of al-Qaeda.

Defendant has operated in a regulated sector subject to rigorous due diligence, antimoney laundering (“AML”) and “Know-Your-Customer” requirements. For years, Defendant has flouted regulations designed to stem the flow of funds to terrorists. Among other abuses, Defendant placed terrorists or those linked to terrorists on a “whitelist” or “good guy list” of people ostensibly pre-cleared for reduced scrutiny of their transactions. Defendant engaged in tactics, such as “wire-stripping,” that shield the identities of parties to transactions. Defendant's conduct precipitated multiple investigations by the New York Department of Financial Services (“NYDFS”). In 2006, Defendant first committed to clean up its AML procedures, with respect to its correspondent banking services for non-U.S. banks and its U.S. dollar clearing services. In 2015, Defendant again committed to reform in a consent order, after NYDFS found that Defendant had not abided by the 2006 agreement. In 2017, NYDFS charged Defendant with several violations -- which Defendant settled for a $255 million fine and loss of its New York banking license -- due to ongoing deficiencies including with Defendant's diligence on ARB, its “whitelist,” and its concealment of suspicious transactions. NYDFS stated that Defendant's banking practices “open the door to the financing of terrorist activities that pose a grave threat to the people of this State and the financial system as a whole.” II. STANDARD

On a motion to dismiss, a court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in favor of the non-moving party but does not consider “conclusory allegations or legal conclusions couched as factual allegations.” Dixon v. von Blanckensee, 994 F.3d 95, 101 (2d Cir. 2021) (internal quotation marks omitted). To withstand a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Kaplan v. Lebanese Canadian Bank, SAL, 999 F.3d 842, 854 (2d Cir. 2021) (internal quotation marks omitted) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678; accord Dane v. UnitedHealthcare Ins. Co., 974 F.3d 183, 189 (2d Cir. 2020). It is not enough for a complaint to allege facts that are consistent with liability; it must “nudge[]” claims “across the line from conceivable to plausible.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); accord Bensch v. Estate of Umar, 2 F.4th 70, 80 (2d Cir. 2021). To survive dismissal, “plaintiffs must provide the grounds upon which [their] claim rests through factual allegations sufficient to raise a right to relief above the speculative level.” Rich v. Fox News Network, LLC, 939 F.3d 112, 121 (2d Cir. 2019) (alteration in original) (internal quotation marks omitted).

III. DISCUSSION

A. Personal Jurisdiction

The Complaints sufficiently allege that the Court has personal jurisdiction over Defendant because Plaintiffs' claims arise out of Defendant's purposeful availment of the privilege of doing business in New York. To the extent Defendant wishes to raise a factual challenge to jurisdiction, Defendant may renew its motion after jurisdictional discovery.

“Before a court may exercise personal jurisdiction over a defendant, three requirements must be met: (1) ‘the plaintiff's service of process upon the defendant must have been procedurally proper'; (2) ‘there must be a statutory basis for personal jurisdiction that renders such service of process effective'; and (3) ‘the exercise of personal jurisdiction must comport with constitutional due process principles.'” Schwab Short-Term Bond Mkt. Fund v. Lloyds Banking Grp. PLC, 22 F.4th 103, 122 (2d Cir. 2021) (quoting Waldman v. Palestine Liberation Org., 835 F.3d 317, 327-28 (2d Cir. 2016) (in turn quoting Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 59-60 (2d Cir. 2012))). Defendant does not challenge the procedural propriety of service of process. Plaintiff alleges personal jurisdiction under the “transacting business” provision of New York's long-arm statute, CPLR § 302(a)(1). “The CPLR 302(a)(1) jurisdictional inquiry is twofold: under the first prong the defendant must have conducted sufficient activities to have transacted business in the state, and under the second prong, the claims must arise from the transactions.” Al Rushaid v. Pictet & Cie, 68 N.E.3d 1, 7 (N.Y. 2016). Similarly, “[f]or a State to exercise jurisdiction consistent with due process, the defendant's suit-related conduct must create a substantial connection with the forum State.” Walden v. Fiore, 571 U.S. 277, 284 (2014).

Plaintiffs primarily rely on a theory that “minimum contacts necessary to support such jurisdiction exist where the defendant purposefully availed itself of the privilege of doing business in the forum and could foresee being haled into court there.” Schwab, 22 F.4th at 122 (quoting Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 170 (2d Cir. 2013)). “[T]he selection and repeated use of New York's banking system, as an instrument for accomplishing the alleged wrongs for which the plaintiffs seek redress, constitutes purposeful availment” sufficient to ground personal jurisdiction. Licci, 732 F.3d at 171 (cleaned up). Since Licci, “a series of terrorism-financing cases in the Second Circuit [have] conclude[ed] that jurisdiction lies over banks that executed funds transfers in New York, [including] through their New York branch.” Bartlett v. Societe Generale de Banque Au Liban SAL, No. 19 Civ. 7, 2020 WL 7089448, at *5 (E.D.N.Y. Nov. 25, 2020).

The Complaints allege sufficient facts from which to infer that Defendant used its New York branch -- and hence New York's banking system -- “as an instrument to achieve the very wrong alleged,” that is, “to further [al-Qaeda's] terrorist goals.” Licci, 732 F.3d at 171. The Complaints allege that a large volume of the transactions through Defendant's New York branch were for ARB, a known financier of al-Qaeda, during the period of time that the attacks at issue took place, years after ARB's ties to terrorists became publicly known. The Complaints allege that Defendant used a “whitelist” and “wire-stripping” to reduce the level of scrutiny on transactions by certain customers, likely including terrorists. Those practices make it plausible that transactions for terrorists and their funders and fronts were processed through Defendant's New York branch undetected, and that Defendant executed banking transactions in New York in order to aid and abet terrorism -- the very “conduct that could have subjected them to liability under the ATA.” Waldman, 835 F.3d at 335.

Contrary to Defendant's argument,...