O'Sullivan v. Deutsche Bank AG

TIMOTHY O'SULLIVAN et al., Plaintiffs, v. DEUTSCHE BANK AG et al., Defendants.

No. 17 CV 8709-LTS-GWG

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

March 28, 2019

MEMORANDUM OPINION & ORDER

Plaintiffs, members of the United States armed forces who were killed or injured in one of 55 terrorist attacks in Iraq between December 17, 2003, and October 12, 2011, as well as estates and family members of deceased military victims of such attacks, bring this action against seventeen financial institutions¹ pursuant to the civil liability provision of the Antiterrorism Act of 1992, 18 U.S.C. § 2333(a) (the "ATA"), as amended by the Justice Against Sponsors of Terrorism Act, Pub. L. No. 114-222, 130 Stat. 854 (2016) ("JASTA") (codified at 18 U.S.C. § 2333(d)(2)). Defendants now move pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss Plaintiffs' Complaint (docket entry no. 1, the "Compl.") for failure to state aclaim upon which relief can be granted. (Docket entry no. 102.) Defendant Commerzbank also moves to dismiss certain claims asserted solely against Commerzbank, for lack of personal jurisdiction. (Docket entry no. 107.) The Court has subject matter jurisdiction of this action pursuant to 28 U.S.C. § 1331 and 18 U.S.C. § 2338. The Court has considered the submissions of the parties carefully and, for the following reasons, Defendants' motion to dismiss the Complaint pursuant to Rule 12(b)(6) is granted.

BACKGROUND

The following abbreviated recitation of relevant facts is drawn from the Complaint, the well-pleaded factual content of which is taken as true for purposes of this motion practice.

Plaintiffs are members of the United States armed forces who were killed or injured in one of 55 terrorist attacks in Iraq between December 17, 2003, and October 12, 2011, as well as estates and family members of deceased military victims of such attacks. (Compl. ¶¶ 11-12, 99.) Defendants are international financial institutions with banking operations in the United States. (Id. ¶¶ 703-815.) The Complaint alleges primarily that Defendants' provision, from 2003 to 2011, of financial services to the government of Iran and its "Agents and Proxies"²in violation of U.S. sanctions helped Iran fund and support the terrorist organizations that carried out the attacks that injured Plaintiffs. (Id. ¶¶ 1-67.)

Since 1984, Iran has been designated a state sponsor of terrorism by the U.S. State Department. (Id. ¶ 13.) Iran has provided funding, transport, and safe harbor to terrorist organizations through government agencies and organizations such as the IRGC-QF, al Qaeda, and Hezbollah. (Id. ¶¶ 835-844, 874-959.) The IRGC-QF is a Specially Designated Global Terrorist ("SDGT") entity, and both al Qaeda and Hezbollah have been designated as Foreign Terrorist Organizations ("FTOs").³ (Id. ¶¶ 651, 660, 911.) In turn, the IRGC-QF, al Qaeda, and Hezbollah have provided, both directly and indirectly, funding, weapons, and training to terrorist organizations in Iraq, including AAI, AAH, JAM, and KH. (Id. ¶¶ 900-959, 960-987, 1021-1056.) Plaintiffs allege that designated FTOs AAI and KH either perpetrated, or were operating in the area where, nine of the 55 attacks that injured Plaintiffs occurred. (Id. ¶¶ 143, 184, 318, 339, 390, 430, 440, 541, 577.) AAI has "well-established ties" to al Qaeda and the IRGC, andKH has received assistance from the IRGC-QF and Hezbollah. (Id. ¶¶ 960-987, 1021-1038.) The Complaint also alleges that Special Groups AAH and JAM either perpetrated, or were operating in the area where, an additional seven attacks occurred. (Id. ¶¶ 109, 129, 137, 167, 176, 216, 557, 589, 596.) Neither AAH nor JAM is alleged to be a designated FTO, although both are alleged to have been connected to, and armed and trained by, the IRGC-QF and Hezbollah. (Id. ¶¶ 1039-1047, 1048-1056.) The Complaint does not identify who perpetrated the remaining 39 attacks that killed or injured Plaintiffs or their decedents, but it does allege that each of the 55 attacks involved Iranian-manufactured rockets, explosive devices, and other weapons "provided by Iran and/or its Agents and Proxies to Iranian-funded and Iranian-trained terror operatives, including the Terrorist Groups, in Iraq." (See id. ¶¶ 108, 115, 128, 136, 142, 148, 161, 166, 175, 183, 191, 199, 204, 217, 224, 234, 241, 246, 251, 256, 266, 271, 283, 293, 302, 307, 312, 317, 338, 351, 361, 366, 374, 379, 384, 402, 407, 414, 419, 424, 429, 443, 521, 532, 540, 556, 562, 571, 576, 583, 588, 594.)

To reduce Iran's ability to utilize proceeds from the sale of its substantial oil reserves to fund and support terrorist activities, the United States has enacted a comprehensive sanctions regime. (Id. ¶¶ 845-853, 1344-1351); see also Exec. Order No. 12959, 60 Fed. Reg. 24757 (May 6, 1995). Among other things, U.S. sanctions prohibit the servicing of Iranian accounts by U.S. depository institutions, with some exceptions.⁴ (Compl. ¶ 1348.) Plaintiffsallege that Defendants provided U.S. dollar-denominated banking services to Iran and its Agents and Proxies in violation of U.S. sanctions by altering, falsifying, or omitting wire transfer information (id. ¶¶ 1418-1422), utilizing non-transparent cover payment messages⁵ (id. ¶¶ 1423-25), and improperly employing U-Turn exemptions (id. ¶¶ 1426-1429) for transactions involving sanctioned Iranian entities. For example, Plaintiffs allege that Defendant Deutsche Bank conducted U.S. dollar-clearing transactions for Iranian banks such as Bank Saderat and Bank Melli in violation of U.S. sanctions. (Id. ¶¶ 1487-1524.) Bank Saderat is an SDGT that is owned, in part, by the Iranian government and has allegedly facilitated the transfer of hundreds of millions of dollars to Hezbollah and other terrorist organizations. (Id. ¶¶ 821, 823, 828, 2314-2338.) Bank Melli is an SDN that has, among other things, provided banking services to the IRGC-QF. (Id. ¶¶ 1161-1183.) Plaintiffs allege that Deutsche Bank instructed its Iranian bank clients to include notes or codes in their payment messages to trigger special handling by Deutsche Bank, and that Deutsche Bank directed staff in overseas offices to remove information indicating a connection to a sanctioned entity before sending the payment to be processed by a correspondent bank in the United States. (See, e.g., id. ¶¶ 1493-1506.) Plaintiffs allege that BNPP provided similar services to al Shamal Islamic Bank, a Sudanese bank owned in part by Osama bin Laden that has provided funding for al Qaeda operations. (Id. ¶¶ 1795-1805, 1821-1833.)

Plaintiffs also allege that, between September 10, 2008, and December 31, 2008, Commerzbank maintained an account for Orphans Project Lebanon e.V. (the "Orphans Project")(id. ¶ 1691), and that the funds in that account primarily went to the Hezbollah Martyrs Foundation ("Martyrs Foundation"), a "designated" organization (id. ¶ 1692). The Complaint also alleges that Commerzbank "worked directly with IRISL to facilitate illicit payments" by allowing IRISL to use the accounts of its subsidiaries to initiate U.S. dollar transfers, and then zeroing out those accounts daily to allow IRISL to keep track of the funds that belonged to it, as opposed to its subsidiaries. (Id. ¶¶ 1671-1672.) IRISL is a "global operator of merchant vessels with a worldwide network of subsidiaries" that "provides a variety of maritime transport services." (Id. ¶ 1212 n.135.) IRISL has allegedly facilitated arms shipments for the IRGC and Hezbollah, including copper discs used to make explosively formed penetrator ("EFP") devices, and was listed as an SDN in September 2008. (Id. ¶¶ 1213-1219, 1240-1241.)

In addition to engaging in improper U.S. dollar-denominated banking services, Plaintiffs allege that Defendants violated U.S. sanctions by providing trade finance services (id. ¶¶ 1430-1443) and expert advice to Iran and its Agents and Proxies on how to evade economic sanctions (id. ¶¶ 49, 1371, 1385, 1396, 1444, 2412, 2435, 2500). For example, Plaintiffs allege that SCB facilitated letter of credit transactions to finance the purchase of aircraft, aircraft parts, and electromotors for hydraulic presses by, among others, Mahan Air.⁶ (Id. ¶¶ 1905-2063.) Mahan Air was listed as a SDGT in October 2011, and has allegedly transported weapons,personnel, and goods on behalf of Hezbollah and the IRGC-QF, including radio frequency modules used in explosive devices recovered by U.S. forces in Iraq. (Id. ¶¶ 1906, 1916-1919.) Similarly, the Complaint alleges that SCB served as a clearing bank for four transactions involving "U.S. origin goods" purchased by Kala Naft, a NIOC subsidiary. (Id. ¶¶ 2042-2045.) NIOC is "owned and overseen by the Government of Iran through its Ministry of Petroleum" and is "responsible for the exploration, production, refining, and export of oil and petroleum products in Iran." (Id. ¶ 1243.) NIOC appears on the SDN List and is allegedly "controlled by Iran through the IRGC." (Id. ¶¶ 1247, 1252.) SCB is also alleged to have facilitated letter of credit transactions for Mac Aviation, an Irish trading company that, on one occasion, directed the shipment of aircraft parts from a Malaysian company to Sasadja Moavanate Bazargani, an alleged "alter ego" of the Defense Industries Organization ("DIO"). (Compl. ¶¶ 1954, 1956, 1960, 1963, 1967.) DIO is an Iranian entity operated by MODAFL, and MODAFL procures and develops weapons for the IRGC-QF. (Id. ¶¶ 931, 940.) Both DIO and MODAFL have been designated as SDNs. (Id. ¶¶ 931, 1216 n.136.)

The Complaint details numerous additional examples of financial services allegedly provided by Defendants to various Iranian entities, including banks, airlines, shipping and oil companies, in violation of U.S. sanctions. (See id. ¶¶ 1487-1524 (Deutsche Bank), 1525-1636 (the HSBC Defendants), 1637-1719 (Commerzbank), 1720-1786 (Barclays), 1787-1847 (BNPP), 1848-2110 (SCB), 2111-2180 (the RBS Defendants), 2181-2238 (CASA and CACIB), 2239-2313 (Credit Suisse).) Pla...