Siegel v. HSBC Holdings, PLC

283 F.Supp.3d 722

Jeffrey SIEGEL, et al., Plaintiffs,

v.HSBC HOLDINGS, PLC, et al., Defendants.

Case No. 15–cv–10139

United States District Court, N.D. Illinois, Eastern Division.

Signed August 14, 2017

William T. Gibbs, Corboy & Demetrio, Chicago, IL, for Plaintiffs.

Mark G. Hanchet, Pro Hac Vice, Robert William Hamburg, Pro Hac Vice, Mayer Brown LLP, New York, NY, Justin Adam McCarty, Mayer Brown LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

John Robert Blakey, United States District Judge

On November 9, 2005, terrorists affiliated with al-Qaeda in Iraq ("AQI")¹ perpetuated coordinated bombings of three hotels in Amman, Jordan. Certain victims of that cowardly attack and their representatives² now allege that Defendants HSBC Holdings, plc ("HSBC–Holdings"), HSBC Bank USA, N.A. ("HSBC–U.S."), HSBC Bank Middle East Limited ("HSBC–Middle East"), HSBC North America Holdings, Inc. ("HSBC–North America"), and Al Rajhi Bank facilitated AQI's access to American financial markets, thereby aiding and abetting AQI's terrorist activity in violation of the Anti–Terrorism Act ("ATA"), 18 U.S.C. § 2333(d).

Currently pending before the Court are a Motion to Dismiss or To Transfer filed by Al Rajhi Bank [64] and a Motion to Strike, Dismiss and Transfer filed by the HSBC entities [67]. Both motions are fully briefed, and the Court heard oral argument on July 26, 2017.

For the reasons explained below, Al Rajhi Bank's motion is granted, and the collective HSBC motion is granted in part and denied in part, all without prejudice.

I. Background

A. Al Rajhi Bank

Al Rajhi Bank is incorporated under the laws of the Kingdom of Saudi Arabia and maintains its principal place of business there. [59] at 9. It functionally has no presence in the United States, according to the unrebutted affidavit submitted by its Chief Operations Officer. [52–1] at 1–3. It is not registered or licensed to do business here, and it does not have any employees, branch offices, subsidiaries or agencies here. Id.

Plaintiffs claim that Al Rajhi Bank entered into a "scheme" whereby it "established, maintained and administered a highly organized program to make financial payments to terrorist groups al-Qaeda and AQI possible." [59] at 27. Plaintiffs also generally allege the each Defendant, including Al Rajhi Bank, "committed numerous acts in furtherance of this scheme," and took "affirmative steps to conceal" these transactions from American regulators. Id. at 19–20.

Plaintiff's Amended Complaint also incorporates a report from 2010 entitled "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing," authored by the United States Senate Permanent Subcommittee on Investigations ("the Report"). Id. at 17. The Report reflects, inter alia , that while banks "rarely carry explicit links to terrorist financing," Al Rajhi Bank exhibits a number of troubling "factors," including "the naming of a key bank official in a list of al Qaeda financial benefactors, a U.S. law enforcement search of Al Rajhi nonprofit and business ventures in the United States to disrupt terrorist financing, a CIA report targeting the bank for being a ‘conduit’ for extremist finance, the bank's refusal to produce authenticating bank documents for use in the criminal trial of a client who cashed travelers cheques at the bank for use by terrorists, and multiple accounts held by suspect clients."Id. at 18–19.

Al Rajhi Bank is seeking to dismiss the claims against it for want of personal jurisdiction, or, in the alternative, to transfer this action to the Southern District of New York. See generally [64].

B. The HSBC Defendants

The Amended Complaint frequently makes wholesale reference to the "HSBC Defendants." These collective allegations purport that, inter alia , the HSBC Defendants were "offering a gateway for terrorists to gain access to U.S. dollars and the U.S. financial system," "opening U.S. correspondent accounts for high risk affiliates without conducting due diligence," and "providing U.S. correspondent services to banks with links to terrorism," including Al Rajhi Bank. [59] at 7–8.

1. HSBC–North America

Defendant HSBC–North America is a Delaware corporation with its principal place of business in New York City. [68–4] at 2. It principally serves as a holding company for its subsidiaries. Id.

The only allegation in the Amended Complaint specific to HSBC–North America states that its "officials, committee members, compliance officers, and Anti–Money Laundering (‘AML’) directors are involved with, and oversee, the compliance and AML operations at [HSBC–U.S.]." [59] at 7.

HSBC–North America is seeking to strike the claims against it pursuant to Federal Rule of Civil Procedure 12(f) or, in the alternative, to transfer this action to the Southern District of New York. See generally [67].

2. HSBC–Holdings

Defendant HSBC–Holdings is a holding company organized under the laws of the United Kingdom, with its principal place of business in London. [68–1] at 2. It is, by its own admission, the "ultimate parent company of the other HSBC Defendants," [68] at 4, and it has no operations or employees in the United States. [68–1] at 2.

The Amended Complaint contends that HSBC–Holdings "used tactics to circumvent" regulatory procedures that identify and halt transactions involving prohibited persons and countries. [59] at 22. These "tactics" include "stripping information from wire transfer documentation to conceal the participation of a prohibited country or person, or characterizing a transaction as a transfer between banks in an approved jurisdiction, while omitting payment details that would disclose participation of a prohibited originator or beneficiary." Id.

HSBC–Holdings is seeking to have the claims against it dismissed for lack of personal jurisdiction. See generally [67].

3. HSBC–Middle East

Defendant HSBC–Middle East is a bank incorporated and headquartered in Dubai, with no U.S. operations or employees. [68–2] at 2. It does not offer the "correspondent" banking services that are central to Plaintiffs' allegations.³ [68–3] at 2.

HSBC–Middle East is also seeking to have the claims against it dismissed for want of personal jurisdiction. See generally [67].

4. HSBC–U.S.

Finally, Defendant HSBC–U.S. is a national banking association with its principal place of business in McLean, Virginia and its principal executive offices in New York, New York. [68–3] at 2. It also maintains an office in Mettawa, Illinois. [59] at 7.

HSBC–U.S. offers commercial and consumer banking products, including the international correspondent banking services central to Plaintiffs' allegations. [68–3] at 2–3. HSBC–U.S.'s correspondent banking business is centered in New York. Id. at 3. HSBC–U.S. does not have any bank branches in this judicial district, and, according to an unrebutted affidavit submitted by Matthew F. Living, Head of the Correspondent Banking and Business Management Financial Institutions Group at HSBC–U.S., no employees or documents involved in correspondent banking services are in this judicial district.

HSBC–U.S. has not moved to dismiss, but rather seeks to transfer, the claims against it to the Southern District of New York. See generally [67].

II. Analysis

A. Motions to Dismiss Claims Against Al Rajhi Bank, HSBC–Holdings, and HSBC–Middle East

Al Rajhi Bank, HSBC–Holdings, and HSBC–Middle East each seek to dismiss the claims against them pursuant to Rule 12(b)(2), which permits a court to dismiss claims for "lack of personal jurisdiction." Fed. R. Civ. P. 12(b)(2) ; Abbott Labs., Inc. v. BioValve Techs., Inc. , 543 F.Supp.2d 913, 918 (N.D. Ill. 2008). To successfully oppose a Rule 12(b)(2) motion, Plaintiffs bear the burden of demonstrating that the Court has personal jurisdiction over the moving defendant. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997) ; United Airlines, Inc. v. Zaman , 152 F.Supp.3d 1041, 1045 (N.D. Ill 2015). In making this determination, the Court may receive and weigh affidavits from both parties. Nelson by Carson v. Park Indus., Inc. , 717 F.2d 1120, 1123 (7th Cir. 1983). The Court draws every reasonable inference and resolves all factual disputes in favor of Plaintiffs. GCIU–Employer Ret. Fund v. Goldfarb Corp. , 565 F.3d 1018, 1020 n.1 (7th Cir. 2009). Unrefuted facts in a defendant's affidavits, however, will be taken as true. Id.

1. Principles of Personal Jurisdiction

"Personal jurisdiction" refers to the Court's "power over the parties." KM Enters., Inc. v. Glob. Traffic Techs., Inc. , 725 F.3d 718, 723 (7th Cir. 2013). It involves the Court's "power to bring a person into its adjudicative process." N. Grain Mktg., LLC v. Greving , 743 F.3d 487, 491 (7th Cir. 2014) (internal quotation omitted). While that power "derives ultimately from the state (in the general sense of the term), the party's contacts with the state, and the reasonableness of the assertion of judicial authority," the "mechanics for asserting personal jurisdiction in federal court are found in Federal Rule of Civil Procedure 4(k)." KM Enters., 725 F.3d at 723.

Indeed, "Plaintiffs and all moving Defendants acknowledge that Federal Rule of Civil Procedure 4(k)(2) governs this jurisdictional analysis." [70] at 7. Rule 4(k)(2) provides that where defendants are not subject to the jurisdiction of any state's court system and the plaintiffs' claims arise under federal law, any federal district court may, as a matter of procedure, properly exercise jurisdiction over the defendants.

Of course, the Court's exercise of jurisdiction in a Rule 4(k)(2) case must still comport with the Constitution's due process requirements. See Torrent Pharm. Ltd. v. Daiichi Sankyo, Inc. , 196 F.Supp.3d 871, 879 (N.D. Ill. 2016). The "Due Process Clause permits courts to exercise either general (‘all-purpose’) jurisdiction or specific (‘conduct-linked’) jurisdiction." Id. Only the latter is implicated here, however, as Plaintiffs confirmed at the July 26 hearing that they do not contend that this Court has...