Wultz v. Bank of China Ltd.

32 F.Supp.3d 486

Sheryl WULTZ, et al., Plaintiffs

v.BANK OF CHINA LIMITED, Defendant.

Rivka Martha Moriah, et al., Intervenors

The State of Israel, Movant.

No. 11–cv–1266 SAS.

United States District Court, S.D. New York.

Signed July 21, 2014.

David Boies, Esq., Mary Boies, Esq., Lee S. Wolosky, Esq., Steven I. Froot, Esq., Marilyn C. Kunstler, Esq., Joseph W. Dunn, Esq., Boies, Schiller & Flexner LLP, New York, NY, for Plaintiffs.

Robert Joseph Tolchin, Esq., Aalok J. Karambelkar, Esq., The Berkman Law Office, LLC, Brooklyn, NY, for Intervenors.

Mitchell R. Berger, Esq., Patton Boggs LLP (DC), Washington, D.C., Lanier Saperstein, Esq., William G. Primps, Esq., Neil McDonell, Esq., Eric Epstein, Esq., Daniel Goldberger, Esq., H. Alex Iliff, Esq., Geoffrey Sant, Esq., Dorsey & Whitney LLP, New York, NY, for Defendant.

Stewart D. Aaron, Esq., John B. Bellinger, III, Esq., Arnold & Porter LLP, New York, NY, for the State of Israel.

OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge:

I. INTRODUCTION

This suit arises out of the death of Daniel Wultz and the injuries of Yekutiel Wultz, suffered in a 2006 suicide bombing in Tel Aviv, Israel. Four members of the Wultz family brought suit against Bank of China (“BOC”), alleging acts of international terrorism under the Antiterrorism Act (“ATA”),¹ among other claims.

All of Plaintiffs' non-federal claims against BOC have been dismissed.² In addition, Plaintiffs' attempt to hold BOC liable for aiding and abetting international terrorism under the ATA has been categorically foreclosed by the Second Circuit.³

Plaintiffs' only remaining claim against BOC is for acts of international terrorism under the ATA, based on BOC allegedly having provided material support and resources to a terrorist organization.⁴

The general facts and procedural history of this case and Plaintiffs' numerous attempts to obtain discovery from BOC were laid out in previous opinions and familiarity with them is assumed.⁵ Before this Court is a motion filed by nonparty the State of Israel (“Israel”) to quash a deposition subpoena served on Uzi Shaya, a former Israeli national security officer.⁶ Israel argues that the subpoena should be quashed because it (1) violates Israel's sovereign immunity, (2) seeks sensitive national security information that constitutes foreign state secrets, and (3) contravenes Federal Rule of Civil Procedure 45.⁷ For the following reasons, Israel's motion is GRANTED.

II. BACKGROUND

A. Uzi Shaya

Shaya is a former Israeli government official, who was involved in Israeli national security matters between 1984 and 2007.⁸ From 2004 to 2007, Shaya was an official in Israel's National Security Council working with the Interagency Task Force for Combating Terrorist Financing and Financing of State Sponsors of Terrorism (“Task Force”).⁹ The Task Force worked to prevent terrorism by preventing the flow of funds to terrorist organizations.¹⁰ According to Plaintiffs, the Task Force learned in 2004 of a terrorist financing cell involving BOC.¹¹ The cell was operated by Said al-Shurafa (“Shurafa”), other members of the Shurafa family in Gaza, senior leaders of the Palestinian Islamic Jihad (“PIJ”), and Hamas.¹² From 2003 to 2008, the Shurafas used the BOC bank accounts held in their names (“Shurafa Accounts”) to launder millions of dollars to PIJ and Hamas operatives in Gaza and the West Bank.¹³

In 2005, Shaya and other members of the Task Force met with representatives of the People's Bank of China—BOC's chief regulator—to inform them that the Shurafa Accounts were being used to finance PIJ and Hamas.¹⁴ The Task Force asked the Chinese representatives to close the Shurafa Accounts.¹⁵ The Chinese representatives declined to do so.¹⁶ One year later, on April 17, 2006, PIJ operatives executed a suicide bombing that killed Daniel Wultz and seriously injured Yekutiel Wultz.

In 2009, Plaintiffs filed their Amended Complaint in the D.C. District Court.¹⁷ In October 2012, Plaintiffs and their counsel met with Shaya to determine whether he was willing to testify on Plaintiffs' behalf.¹⁸ On March 20, 2013, Shaya sent Plaintiffs' counsel a letter stating,

I have been contacted on behalf of plaintiffs ... to voluntarily testify.... Due to my previous employment and involvement in matters relating to Israel state security, I would like to underscore, that should I decide to testify, although I would testify as a private citizen [ ] in classified matters and matters relating to the security of the State of Israel and certain individuals, I am bound to the provisions of the Israeli law and to the subsequent guidance of the relevant authorities in Israel.

Should I decide to provide such testimony, it would be based upon knowledge I accrued ... as a member of the Counterterrorism Staff of Israel's National Security Council, which naturally includes certain classified matters.¹⁹

Shaya then set forth “specific prerequisites” to any potential voluntary deposition.²⁰ For example, he requested that the parties conduct the deposition in Israel, prohibit photography, excuse him from answering questions that implicate Israeli security, and allow him to consult with both an Israeli government legal advisor and security information officer during the deposition.²¹

On August 29, 2013, Shaya wrote again to Plaintiffs' counsel to explain that he is “inclined to give a deposition.”²² However, he warned, “[U]ntil I receive express written permission [from Israel] to provide information that came to me in my official capacity as a state employee and information about the activities that I engaged in while employed by the State, I am prohibited from doing so.”²³ Shaya also reported that Israeli Penal Law 5737–1977 forbids him from providing such testimony without authorization.²⁴ As such, he asked Plaintiffs to postpone scheduling the deposition for three months so that he could “secure and finalize such permission” from Israel.²⁵ He would “consider [whether] to provide [ ] testimony concerning this matter at that time.”²⁶

On September 18, 2013, Plaintiffs served a subpoena on Shaya, who was visiting Washington D.C.²⁷ The subpoena compelled him to attend a deposition at Plaintiffs' counsels' office in Washington D.C. on November 25, 2013.²⁸ On September 27, 2013, this Court wrote to Israel to notify it about the deposition and ask whether it objected to Shaya's participation.²⁹ After discussion with the parties, I agreed to supervise Shaya's deposition in my courtroom on November 25, 2013.³⁰

B. Post–Subpoena Briefing

On November 4, 2013, Intervenors—Plaintiffs in Moriah v. Bank of China, a related suit—filed a motion in the D.C. District Court to intervene “regarding the enforcement [of the] subpoena served ... on Uzi Shaya.”³¹ On November 15, 2013, Israel filed its motion to quash the subpoena in the D.C. District Court.³² On November 19, 2013, Judge Reggie B. Walton of the D.C. District Court entered an Order staying Shaya's deposition pending resolution of Israel's motion to quash and setting a briefing schedule.³³ On November 26, 2013, after Plaintiffs and Israel consented, Judge Walton granted Intervenors' motion to intervene.³⁴ Plaintiffs and Intervenors then filed briefs in opposition to Israel's motion.³⁵

On December 2, 2013, Intervenors moved to strike or transfer the proceeding to this Court.³⁶ Israel filed papers in opposition.³⁷ On May 30, 2014, Judge Walton denied with prejudice Intervenors' request to transfer the physical location of Shaya's deposition to this Court.³⁸ However, Judge Walton granted Intervenors' motion to transfer Israel's motion to quash.³⁹ As a result, Israel's motion to quash, and all associated briefing were transferred to this Court.

III. APPLICABLE LAW

A. Non–Party Subpoenas Under Rule 45

In general, “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense.”⁴⁰ Nevertheless, a district court has discretion to circumscribe discovery even of relevant evidence by issuing “an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.”⁴¹ Rule 45 affords additional protection for non-parties subject to a subpoena by requiring parties to “avoid imposing undue burden or expense on a person subject to the subpoena.”⁴² Specifically, the court “must quash or modify any subpoena” that

(I) fails to allow a reasonable time to comply; (ii) requires a person to comply beyond [100 miles of where the person resides, is employed, or regularly transacts business in person ...]; (iii) requires disclosure of privileged or other protected matter, if no exception or waiver applies; or (iv) subjects a person to undue burden.⁴³

In addition, amendments to Rule 45 have “enlarge[d] the protections afforded persons who are required to assist the court by giving information or evidence.”⁴⁴

B. Foreign Official Immunity

In Samantar v. Yousuf, the United States Supreme Court clarified that the Foreign Sovereign Immunities Act (“FSIA”) governs determinations of sovereign immunity for foreign states, but not for foreign officials.⁴⁵ The Court explained that when Congress enacted the FSIA, it did not intend to “eliminate[ ] the State Department's role in determinations regarding individual official immunity,” a procedure that developed as a matter of common law.⁴⁶ In addition, “from the time of the FSIA's enactment [the State Department has] understood the Act to leave intact the Department's role in official immunity cases.”⁴⁷ Therefore, “[e]ven if a suit [against a foreign official] is not governed by the Act, it may still be barred by foreign sovereign immunity under the common law.”⁴⁸

Courts apply a “two-step procedure” to assess common-law claims of foreign sovereign immunity.⁴⁹ “Under that procedure, the diplomatic representative of the sovereign could request a ‘suggestion of immunity’ from the State Department.”⁵⁰ If the State Department grants the request, “the district court surrender[s] its jurisdiction.”⁵¹ But if the State...