United States Court of Appeals, Second Circuit Docket No. 10-1306-cv

Court of AppealsSTATE OF NEW YORK

YAAKOV LICCI, a minor, by his father and natural guardian ELIHAV LICCI andby his mother and natural guardian YEHUDIT LICCI, et al., YAAKOV LICCI, aminor, by his father and natural guardian ELIHAV LICCI and by his mother and natural guardian YEHUDIT LICCI, et al., ELIHAV LICCI, YEHUDIT LICCI, TZVI HIRSH, ARKADY GRAIPEL, TATIANA KREMER, YOSEF ZARONA, TAL SHANI,SHLOMO COHEN, NITZAN GOLDENBERG, RINA DAHAN, RAPHAEL WEISS, AGATKLEIN, TATIANA KOVLEYOV, VALENTINA DEMESH, RIVKA EPON, JOSEPH MARIA,IMMANUEL PENKER, ESTHER PINTO, AVISHAI REUVANCE, ELISHEVA ARON,CHAYIM KUMER, SARAH YEFET, SHOSHANA SAPPIR, RAHMI GUHAD GHANAM, a minor, by his father and natural guardian FUAD SHCHIV GHANAM and by hismother and natural guardian SUHA SHCHIV GHANAM, SHCHIV GHANAM FUAD,Individually, SUHA SHCHIV GHANAM, Individually, MA’AYAN ARDSTEIN, a minor,by her father and natural guardian BRIAN ARDSTEIN, and by her mother andnatural guardian KEREN ARDSTEIN, NOA ARDSTEIN, a minor, by her father andnatural guardian BRIAN ARDSTEIN, and by her mother and natural guardianKEREN ARDSTEIN, NETIYA YESHUA ARDSTEIN, a minor, by her father andnatural guardian BRIAN ARDSTEIN, and by her mother and natural guardianKEREN ARDSTEIN, BRIAN ARDSTEIN, Individually, KEREN ARDSTEIN, Individually,MARGALIT RAPPEPORT, a minor, by her mother and natural guardian LAURIERAPPEPORRT, LAURIE RAPPEPORT, Individually, YAIR MOR, ORNA MOR,MICHAEL FUCHS, ESQ., MUSHKA KAPLAN, a minor, by her father and naturalguardian CHAIM KAPLAN, and by her mother and natural guardian RIVKAKAPLAN, ARYE LEIB KAPLAN, a minor, by his father and natural guardianCHAIM KAPLAN, and by his mother and natural guardian RIVKA KAPLAN,

(Caption Continued on the Reverse)

Certification of Questions by the United StatesCourt of Appeals for the Second Circuit

BRIEF FOR PLAINTIFFS-APPELLANTS

THE BERKMAN LAW OFFICE, LLCAttorneys for Plaintiffs-Appellants111 Livingston Street, Suite 1928Brooklyn, New York 11201718-855-3627

Date Completed: July 5, 2012

MENACHEM KAPLAN, a minor, by his father and natural guardian CHAIM KAPLAN,and by his mother and natural guardian RIVKA KAPLAN, CHANA KAPLAN, aminor, by her father and natural guardian CHAIM KAPLAN, and by her motherand natural guardian RIVKA KAPLAN, EFRAIM LEIB KAPLAN, a minor, by hisfather and natural guardian CHAIM KAPLAN, and by his mother and naturalguardian RIVKA KAPLAN, CHAIM KAPLAN, Individually, RIVKA KAPLAN,Individually, ROCHELLE SHALMONI, OZ SHALMONI, DAVID OCHAYON, YAAKOVMAIMON, MIMI BITON, MIRIAM JUMA’A, as Personal Representative of the Estate of FADYA JUMA’A, MIRIAM JUMA’A, Individually, SALAH JUMA’A,Individually, SAID JUMA’A, Individually, ABD EL-RAHMAN JUMA’A, as PersonalRepresentative of the Estate of SAMIRA JUMA’A, ABD EL-RAHMAN JUMA’A,Individually, RAHMA ABU-SHAHIN, ABDEL GAHNI, as Personal Representativeof the Estate of SOLTANA JUMA’A and Individually, SHADI SALMAN AZZAM, asthe Personal Representative of the Estate of MANAL CAMAL AZAM, KANARSHA’ADI AZZAM, a minor, by his father and natural guardian, SHADI SALMANAZZAM, ADEN SHA’ADI AZZAM, a minor, by his father and natural guardian,SHADI SALMAN AZZAM, SHADI SALMAN AZZAM, Individually, ADINA MACHASSANDAGESH, ARKADY SPEKTOR, YORI ZOVREV, MAURINE GREENBERG, JACOBKATZMACHER, DEBORAH CHANA KATZMACHER, CHAYA KATZMACHER, MIKIMISTEINBERG, JARED SAUTER, DANIELLE SAUTER, YAAKOV ABUTBUL, ABRAHAMNATHAN MOR, a minor, by his father and natural guardian, ZION MOR, and byhis mother and natural guardian, REVITAL MOR, BAT ZION MOR, a minor, by herfather and natural guardian, ZION MOR, and by her mother and natural guardian,REVITAL MOR, MICHAL MOR, a minor, by her father and natural guardian, ZIONMOR, and by her mother and natural guardian, REVITAL MOR, ODED CHANAMOR, a minor, by her father and natural guardian, ZION MOR, and by hermother and natural guardian, REVITAL MOR, ZION MOR, Individually, REVITALMOR, Individually, ADHAM MAHANE TARRABASHI, JIHAN KAMUD ASLAN,ZOHARA LOUIE SA’AD, IYAH ZAID GANAM, a minor, by his father and naturalguardian, ZIAD SHCHIV GHANAM, and by his mother and natural guardian,GOUROV TISIR GHANAM, ZIAD SHCHIV GHANAM, Individually, GOUROV TISIRGHANAM, Individually, THEODORE GREENBERG, EMILLA SALMAN ASLAN,

Plaintiffs-Appellants, v.

AMERICAN EXPRESS BANK LTD., LEBANESE CANADIAN BANK, SAL,

Defendants-Respondents.

Table of Contents

TABLE OF AUTHORITIES .................................................................................. iv

QUESTIONS PRESENTED .................................................................................... 1

PRELIMINARY STATEMENT .............................................................................. 2

STATEMENT OF FACTS ....................................................................................... 4

POINT I

THE EXERCISE OF PERSONAL JURISDICTION OVER LCB IS ENTIRELY CONSISTENT WITH FEDERAL CONSTITUTIONAL DUE PROCESS LIMITATIONS ............................................................................ 9

POINT II

DEFENDANT’S COMMUNICATIONS WITH AND USE OF AMERICAN EXPRESS’ SERVICES IN NEW YORK TO CONDUCT BUSINESS IN NEW YORK CONSTITUTE A “TRANSACT[ION]” OF BUSINESS FOR THE PURPOSES OF CPLR § 302(a)(1) .................................................................................................... 12

POINT III

THE “ARTICULABLE NEXUS” AND “SUBSTANTIAL RELATIONSHIP” TESTS UNDER CPLR § 302(a)(1) REQUIRE ONLY THAT THE DEFENDANT’S TRANSACTION(S) AND PLAINTIFF’S CAUSE OF ACTION ARE RELATED ...................................... 19

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A. This Court’s CPLR § 302(a)(1) Cases Require Only that the Relationship Between Defendant’s Transaction(s) and Plaintiffs’ Cause of Action are not Disparate, not that One Cause the Other .................................................................. 20

B. The Text of CPLR § 302(a)(1) Dictates Only that There Not be a Disparate Relationship Between Defendant’s Transaction(s) and Plaintiffs’ Cause of Action ............................... 29

C. The Legislative History of CPLR § 302(a)(1) Dictates Only that There Not be a Disparate Relationship Between Defendant’s Transaction(s) and Plaintiffs’ Cause of Action ................................................................................... 38

POINT IV

ALTERNATIVELY, IF THIS COURT CONCLUDES THAT CPLR § 302(a)(1)’s “ARISING FROM” LANGUAGE DENOTES CAUSATION, IT DENOTES MERE “BUT-FOR” CAUSATION, RATHER THAN PROXIMATE CAUSATION ................................................. 47

POINT V

ALTERNATIVELY, IF THIS COURT CONCLUDES THAT CPLR § 302(a)(1)’s “ARISING FROM” LANGUAGE DENOTES PROXIMATE CAUSATION, IT SHOULD FIND AN EXCEPTION FOR CASES ARISING FROM ACTS OF TERRORISM .......................................................................................................... 51

POINT VI

PLAINTIFFS’ FACTUAL ALLEGATIONS AND THE LEGAL ELEMENTS OF THEIR CLAIMS ADEQUATELY RELATE TO LCB’S TRANSACTIONS IN NEW YORK ......................................................... 55

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POINT VII

PLAINTIFFS’ POSITION IS MODEST AND DOES NOT OPEN THE PROVERBIAL “FLOODGATES OF LITIGATION” ............................... 62

CONCLUSION ...................................................................................................... 64

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Table of Authorities

Constitution

U.S. CONST. art. III, § 2 ................................................................................................. 30

U.S. CONST. amend. XIV, § 1 ................................................................ 12, 33, 37-38, 41

Cases

Aetna Cas. & Sur. Co. v. Crowther, Inc., 581 N.E.2d 833 (Ill. App. Ct. 1991) ...................................................................................................................... 36

Banco Ambrosiano, S.P.A. v. Artoc Bank & Trust Ltd., 62 N.Y.2d 65 (1984) ......................................................................................................................... 18

Boim v. Holy Land Found. for Relief and Dev., 549 F.3d 685 (7th Cir. 2008) (en banc) ............................................................................................................ 51

Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158 (2d Cir. 2010) ..................... 13

Classic Auto Sales, Inc. v. Schocket, 832 P.2d 233 (Colo. 1992) ................................. 34

Cumberland Coal & Iron Co. v. Hoffman Steam Coal Co., 30 Barb. 159 (Gen. Term. 1859) ............................................................................... 21-22, 45-46, 56

Deutsche Bank Sec., Inc. v Montana Bd. of Invs., 7 N.Y.3d 65 (2006) ................... 12-13

Doundoulakis v. Town of Hempstead, 42 N.Y.2d 440 (1977) ...................................... 54

Fischbarg v. Doucet, 9 N.Y.3d 375 (2007) ......................................................... 17, 21-22

George Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648 (1977) ................................... 14

Green v. Wilson, 565 N.W.2d 813 (Mich. 1997) ......................................................... 37

Greene v. Whiteside, 908 N.E.2d 975 (Ohio Ct. App. 2009) ...................................... 38

Haas v. Four Seasons Campground, Inc., 952 A.2d 688 (Pa. Super. Ct. 2008) ..................................................................................................................... 38

Hanson v. Denckla, 357 U.S. 235 (1958) ...................................................................... 10

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Holder v. Humanitarian Law Project, ___ U.S. ___, 130 S. Ct. 2705, 2720, 2729 (2010) ...................................................................................................... 50

Indosuez Int’l Fin. B.V. v. Nat’l Reserve Bank, 98 N.Y.2d 238 (2002) ....................... 18

Int’l Shoe v. Washington, 326 U.S. 310 (1945) ............................................................... 9

J. McIntyre Machinery, Ltd. v. Nicastro, ___ U.S. ___, 131 S.Ct. 2780 (2011) ..................................................................................................................... 10-11

Johnson v. Ward, 4 N.Y.3d 516 (2005) ........................................................ 21-22, 25-27

Keefe v. Kirschenbaum & Kirschenbaum, P.C., 40 P.3d 1267 (Colo. 2002) ............................................................................................................................ 35

Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460 (1988) ....................... 8, 12, 19, 40, 56

Licci v. Am. Express Bank Ltd., 704 F. Supp. 2d 403 (S.D.N.Y. 2010) .................... 7-8

Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50 (2d Cir. 2012) .................... passim

Longines-Wittnauer Watch Co. v Barnes & Reinecke, 15 N.Y.2d 443 (1965) .............................................................................................. 34-35, 39-40, 59-61

McGowan v. Smith, 52 N.Y.2d 268 (1981) ............................................. 8, 19, 22, 27-30

New London County Mut. Ins. Co. v. Nantes, 36 A.3d 224 (Conn. 2012) ............................................................................................................................ 35

Phelps v. Kingston, 536 A.2d 740 (N.H. 1987) ............................................................ 37

Ryan v. Cerullo, 918 A.2d 867 (Conn. 2007) .............................................................. 35

Sifers v. Horen, 188 N.W.2d 623 (Mich. 1971) ...................................................... 36-37

Simonson v. Int’l Bank, 14 N.Y.2d 281 (1964) .................................................. 37-38, 41

Spartan Motors, Inc. v. Lube Power, Inc., 786 N.E.2d 613 (Ill. App. Ct. 2003) ...................................................................................................................... 36

SPCA of Upstate New York, Inc. v. American Working Collie Ass’n, 18 N.Y.3d 400 (2012) ............................................................................................ 20-24

State of New York v Patricia II, 6 N.Y.3d 160 (2006) ................................................. 31

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Talbot v. Johnson Newspaper Corp., 71 N.Y.2d 827 (1988).................................... 24-25

Tatro v. Manor Care, Inc., 625 N.E.2d 549 (Mass. 1994) ...................................... 47-49 Statutes and Regulations

CPLR § 302(a)(1) .................................................................................................... passim

CPLR § 302(a)(2) ..................................................................................................... 40, 60

CPLR § 302(a)(3) ........................................................................................................... 40

18 U.S.C. § 2333(a) ...................................................................................................... 1, 4

28 U.S.C. § 1331 ............................................................................................................ 30

28 U.S.C. § 1350 note .................................................................................................. 1, 4

31 U.S.C. § 5318(i) .................................................................................................... 15-16

Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 § 312, Pub. L. No. 107–56, 115 Stat. 272 (2001) ................................................................ 2, 15-16

67 Fed. Reg. 48348 (July 23, 2002) .............................................................................. 16

71 Fed. Reg. 496 (Jan. 4, 2006) ..................................................................................... 16

76 Fed. Reg. 9403 (Feb, 17, 2011) ............................................................................ 2, 14

COLO. REV. STAT. § 13-1-124(1)(a) ............................................................................... 34

CONN. GEN. STAT. § 52-59b(a) ..................................................................................... 35

735 ILL. COMP. STAT. 5/2-209 ...................................................................................... 36

MASS. GEN. LAWS ch. 223A. § 3 ................................................................................... 48

MICH. COMP. LAWS § 600.705 ...................................................................................... 36

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N.H. REV. STAT. ANN. § 510:4 ...................................................................................... 37

OHIO REV. CODE ANN. § 2307.382(a) .......................................................................... 38

PA. CONS. STAT. § 5322(a) ............................................................................................ 38

22 N.Y.C.R.R. § 500.27 .................................................................................................... 3

Other Authority

4 C. Wright & A. Miller, Federal Practice & Procedure § 1068, n. 12 (3d ed.) .................................................................................................................... 33-35, 38

ADVISORY COMMITTEE ON PRACTICE AND PROCEDURE, SECOND

PRELIMINARY REPORT 38-39 (1958) ......................................................... 41-42, 44, 57

DAVID L. FERSTENDIG, HISTORICAL APPENDIX FOR CPLR 302 ....................... 43-44, 57

MEMORANDUM OF THE LAW REVIEW COMMISSION, NEW YORK STATE

LEGISLATIVE ANNUAL 164 (1979) ............................................................................. 44

SENATE FINANCE COMMITTEE & ASSEMBLY WAYS AND MEANS COMMITTEE, FIFTH PRELIMINARY REPORT TO THE LEGISLATURE 66-67 (1961) .................. 42-43, 57

BLACK’S LAW DICTIONARY 115 (8th ed. 2004) ............................................................ 30

Federal Financial Institutions Examination Council, Correspondent Accounts (Foreign)—Overview, http://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_047.htm (last visited July 3, 2012). ............................................................................... 5-6

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Jo Becker, Beirut Bank Seen as a Hub of Hezbollah’s Financing, N.Y. TIMES, Dec. 13, 2011, available at: http://www.nytimes.com/2011/12/14/world/middleeast/beirut-bank-seen-as-a-hub-of-hezbollahs-financing.html?pagewanted=all ................. 2

Mariam Karouny, “Lebanese Bank for Sale After U.S. Laundering Claim,” Mar. 3, 2011, http://www.reuters.com/article/2011/03/03/lebanon-bank-idUSLDE7221KS20110303/................................................................................ 14-15

U.S. Department of State, Foreign Terrorist Organizations, Jan. 27, 2012, http://www.state.gov/j/ct/rls/other/des/123085.htm ........................ 11

U.S. DEPARTMENT OF STATE, PATTERNS IN GLOBAL TERRORISM 1999 56 (2000) ......................................................................................................................... 50

U.S. Department of Treasury, Fact Sheet: Overview of Section 311 of the USA PATRIOT Act, Feb. 10, 2011 ............................................................................. 3

U.S. Department of Treasury, Treasury Identifies Lebanese Canadian Bank Sal as a “Primary Money Laundering Concern”, Feb. 10, 2011, http://www.treasury.gov/press-center/press-releases/pages/tg1057.aspx .................................................................................. 2-3

William E. Nelson, Civil Procedure in Twentieth-Century New York, 41 ST. LOUIS U. L.J. 1157, 1216 (1997) ............................................................... 40-41, 44, 57

BRIEF FOR PLAINTIFFS-APPELLANTS

QUESTIONS PRESENTED

The following two questions were certified to this Court by the

United States Court of Appeals for the Second Circuit (626*):

1. Does a foreign bank’s maintenance of a correspondent

bank account at a financial institution in New York, and use of that account

to effect ‘dozens’ of multimillion dollar wire transfers on behalf of a foreign

client, constitute a ‘transact[ion]’ of business in New York within the

meaning of CPLR § 302(a)(1)?

2. If so, do the plaintiffs’ claims under the Anti-Terrorism

Act, 18 U.S.C. § 2333(a), the Alien Tort Statute, 28 U.S.C. § 1350 note, or for

negligence or breach of statutory duty in violation of Israeli law, ‘aris[e]

from’ LCB’s transaction of business in New York within the meaning of

CPLR § 302(a)(1)?

* Unless otherwise noted, parenthetical page references refer to

the Record on Appeal.

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PRELIMINARY STATEMENT

The remaining defendant-respondent herein, the Lebanese

Canadian Bank, SAL (“LCB” or “Defendant”) has, through its business and

transactions in New York, facilitated the terrorism and related activities of

Hizballah,1 a Lebanese terrorist organization. LCB is the unofficial bank of

Hizballah and is regarded as the “hub” of Hizballah’s financial

operations.2 For its activities related to the cocaine trade in South America

and its ties to Hizballah, the United States Treasury identified LCB as a

“financial institution of primary money laundering concern under Section

311 of the USA PATRIOT Act.”3 LCB enabled millions of dollars of wire

1 “Hizballah,” a transliteration from another language, has

many different forms in English. We have adopted the form used by the Second Circuit except to the extent that it appears in a quotation with a different spelling.

2 See Jo Becker, Beirut Bank Seen as a Hub of Hezbollah’s Financing, N.Y. TIMES, Dec. 13, 2011, available at: http://www.nytimes.com/2011/12/14/world/middleeast/beirut-bank-seen-as-a-hub-of-hezbollahs-financing.html?pagewanted=all.

3 Finding that the Lebanese Canadian Bank SAL is a Financial Institution of Primary Money Laundering Concern, 76 Fed. Reg. 9403 (Feb, 17, 2011); see also U.S. Department of Treasury, Treasury Identifies Lebanese Canadian Bank Sal as a “Primary Money Laundering Concern”, Feb. 10, 2011,

(continued next page)

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transfers to Hizballah, which in turn enabled Hizballah to play a material

role in terrorist attacks that caused the plaintiffs-appellants (“Plaintiffs”) to

be significantly harmed. (46, 66-71, First Amended Complaint (“FAC”) at

¶¶ 53, 57-58, 113-20, 126-37). Plaintiffs have sued LCB for their damages in

federal court, and seek to establish personal jurisdiction over LCB in the

courts of the State of New York on the basis of LCB’s transactions

occurring in New York.

The Second Circuit Court of Appeals has certified to this Court

two questions, which are quoted above as the “Questions Presented.” (626)

Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 74-75 (2d Cir. 2012). This

Court accepted those questions on March 29, 2012 and communicated the

same to the Second Circuit on April 11, 2012. (628). This Court has

jurisdiction pursuant to 22 N.Y.C.R.R. § 500.27.

http://www.treasury.gov/press-center/press-releases/pages/tg1057.aspx; U.S. Department of Treasury, Fact Sheet: Overview of Section 311 of the USA PATRIOT Act, Feb. 10, 2011.

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STATEMENT OF FACTS

Plaintiffs, American and non-American citizens who reside in

Israel, were injured, or their family members killed or injured, by rockets

fired by Hizballah, a Lebanese terrorist organization, into northern Israel in

July and August 2006. (46-65, FAC ¶¶ 57-112). The Plaintiffs initiated this

action on July 11, 2008, (580) Licci, 673 F.3d at 57.4 The FAC, filed January

22, 2009, alleged, inter alia, that LCB violated the Anti-Terrorism Act

(“ATA”), 18 U.S.C. § 2333(a); the Alien Tort Statute (“ATS”), 28 U.S.C.

§ 1350 note; and Israeli tort law, which is applicable to this case under

choice of law principals. (580) Licci, 673 F.3d at 57.

Plaintiffs claim that New York courts have personal jurisdiction

over Defendant LCB, the unofficial bank of Hizballah, on the basis of LCB’s

dozens of dollar-denominated international wire transfers, totaling several

million dollars over the course of several years, on behalf of a Hizballah

affiliate that is controlled entirely by Hizballah. (45-46, FAC ¶¶ 45-54). In

4 This statement of facts relies on the FAC, which was filed

January 22, 2009. At this preliminary stage in the litigation, all of the well-pleaded factual allegations therein, whether recounted here or not, must be accepted as true. (577-78) Licci, 673 F.3d at 56.

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order to facilitate those transfers, it is alleged that LCB maintained and

used a correspondent banking account5 with (now dismissed) defendant

5 The Federal Financial Institutions Examination Council

(FFIEC), an interagency body empowered to prescribe principles and standards in the assistance of other governmental agencies including the Federal Reserve, explains correspondent banking relationships that cross international boarders as follows: “Foreign financial institutions maintain accounts at U.S. banks to gain access to the U.S. financial system and to take advantage of services and products that may not be available in the foreign financial institution’s jurisdiction. These services may be performed more economically or efficiently by the U.S. bank or may be necessary for other reasons, such as the facilitation of international trade. Services may include: [(1)] Cash management services, including deposit accounts. [(2)] International funds transfers. [(3)] Check clearing. [(4)] Payable through accounts. [(5)] Pouch activities. [(6)] Foreign exchange services. [(7)] Overnight investment accounts (sweep accounts). [(9)] Loans and letters of credit.”

It explains further that “[e]ach relationship that a U.S. bank has with a foreign correspondent financial institution should be governed by an agreement or a contract describing each party’s responsibilities and other relationship details (e.g., products and services provided, acceptance of deposits, clearing of items, forms of payment, and acceptable forms of endorsement). The agreement or contract should also consider the foreign financial institution’s [anti-money laundering] regulatory requirements, customer base, due diligence procedures, and permitted third-party usage of the correspondent account.”

(continued next page)

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American Express Bank, Ltd. (“AmEx”) in New York. (44-46, FAC ¶¶ 42-

45, 54-56). Plaintiffs alleged that LCB facilitated the above-mentioned wire

transfers to Hizballah through that correspondent banking account in New

York. (46, FAC ¶¶ 54-56). Plaintiffs contend that those wire transfers and

the various bilateral communications that were necessary to effect both the

underlying relationship between the banks and the wire transfers at issue

amount to “transact[ions]” within the scope of CPLR § 302(a)(1), and

therefore are sufficient to establish long arm jurisdiction in the courts of

New York.

In order to open its correspondent account with AmEx, LCB

entered into a business relationship with AmEx. The two banks initiated

that relationship starting no later than 2004 and continued to maintain it

And the FFIEC posits that “U.S. banks that offer foreign

correspondent financial institution services should have policies, procedures, and processes to manage the [Bank Secrecy Act]/[anti-money laundering] risks inherent with these relationships and should closely monitor transactions related to these accounts to detect and report suspicious activities.” Federal Financial Institutions Examination Council, Correspondent Accounts (Foreign)—Overview, http://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_047.htm (last visited July 3, 2012).

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until at least July 12, 2006. (45, FAC ¶ 45). Starting in 2004, LCB and AmEx

began providing extensive wire transfer services to Hizballah and/or a

Hizballah affiliate. (45-46, FAC ¶¶ 52-56). Between 2004 and July 12, 2006,

Hizballah effected dozens of U.S. dollar-denominated wire transfers

utilizing the New York-based services of LCB and AmEx. (46, FAC, ¶¶ 53-

55). Those wire transfers are valued in the millions of dollars, money that

Hizballah needed to plan, prepare, and carry out its terrorist activities. (46,

66, FAC ¶¶ 53, 113-17). All of those wire transfers were carried out in and

through the State of New York. (46, 67, FAC ¶¶ 54-56, 118-19).

The United States District Court for the Southern District of

New York dismissed Plaintiffs’ FAC without the benefit of jurisdictional

discovery. Licci v. Am. Express Bank Ltd., 704 F. Supp. 2d 403 (S.D.N.Y. 2010)

(Daniels, J.), reasoning that LCB’s maintenance of a correspondent banking

account in New York and use of that account to wire funds on behalf of the

Hizballah affiliate were insufficient to establish specific personal

jurisdiction over LCB under New York’s long-arm statute, CPLR

§ 302(a)(1). Licci, 704 F. Supp. 2d at 407. The district court further held that

there was no “articulable nexus or substantial relationship...between LCB’s

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general use of its correspondent account for wire transfers through New

York and the specific terrorist activities by Hizbollah underlying plaintiffs’

claims.” Id. at 408. The Plaintiffs timely appealed to the Second Circuit.

(572).

The Second Circuit was not convinced by the district court’s

conclusions, and held that the questions presented by this appeal are

“insufficiently developed…to enable us to predict with confidence how the

New York Court of Appeals would resolve these issues of New York State

law.” (577) Licci, 673 F.3d at 55. Nevertheless, it stated explicitly that if it

were

required to decide ourselves, we might conclude… that the first prong of the long-arm jurisdiction test under N.Y. CPLR § 302(a)(1)—whether the defendant has transacted business within New York—may be satisfied by the defendant’s use of a correspondent bank account in New York, even if no other contacts between the defendant and New York can be established, if the defendant’s use of that account was purposeful.

(603) Id. at 66. (Emphasis omitted). It similarly stated that “[t]o the extent

that the Court of Appeals determined in Kreutter [v. McFadden Oil Corp., 71

N.Y.2d 460 (1988)] and McGowan [v. Smith, 52 N.Y.2d 268 (1981)] that the

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nexus requirement may be satisfied by a showing of a ‘substantial

relationship’ or an ‘articulable nexus,’ respectively, it would appear as

though no showing of causation is required by N.Y. CPLR § 302(a)(1).”

(615-16) Id. at 71. (Internal citations omitted). Notwithstanding its apparent

inclination to side with the Plaintiffs, the Second Circuit felt it necessary, in

light of a perceived uncertainty in New York’s law, to certify the two

questions now before this Court. (622-24) Id. at 74-75.

POINT I

THE EXERCISE OF PERSONAL JURISDICTION OVER LCB IS ENTIRELY CONSISTENT WITH FEDERAL CONSTITUTIONAL DUE PROCESS LIMITATIONS

To maintain jurisdiction, courts must be satisfied that the

defendant has established minimum, sufficient contacts with the state

“such that the maintenance of the suit does not offend traditional notions

of fair play and substantial justice.” See Int’l Shoe v. Washington, 326 U.S.

310, 316 (1945). (Internal quotation marks omitted). Necessarily, the

“minimum contacts” and “purposeful availment” inquiries that grow out

of International Shoe have changed over time as technological advances

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have minimized the business need for physical presence in a locality and

have altered notions of what it means to be “in” a state. See Hanson v.

Denckla, 357 U.S. 235, 250-52 (1958).

In its most recent pronouncement on the subject, the Supreme

Court reiterated that jurisdiction is available when a defendant

“purposefully avails itself of the privilege of conducting activities within

the forum State, thus invoking the benefits and protections of its laws.” J.

McIntyre Machinery, Ltd. v. Nicastro, ___ U.S. ___, 131 S.Ct. 2780, 2785 (2011)

(plurality opinion) (quoting Hanson, 357 U.S. at 253). The Court affirmed

that deliberately contacting entities in another forum, entering into

relationships with such entities, and engaging in other activity directed to a

particular forum can form a basis for specific personal jurisdiction in the

courts of that forum. Id. at 2788.

Manufacturers and other concerns that actively seek out

business in a foreign forum thereby subject themselves to personal

jurisdiction in that forum. Id. Sometimes, merely sending goods (including

money transfers, which are the “goods” in the banking business) to a

foreign jurisdiction is sufficient if the claims relate in some way to the

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transmission. The touchstone is simply whether the transmission at issue

was commissioned with the purpose of engaging business in the forum

state. See id.

There is simply no question that LCB actively and purposefully

sought business in New York. It deliberately made contacts and contracts6

with AmEx to conduct business in New York. (44-46, FAC ¶¶ 41-45, 52-

56). It purposefully availed itself of the laws and protections of the state of

New York by transmitting assets to New York on behalf of Hizballah, a

major client and a known terrorist organization.7 And it transmitted those

assets for the express purpose of conducting business in New York.

Exercising personal jurisdiction over LCB for claims related to these

6 Because the motion in the district court was a pre-answer

motion, no discovery was conducted. Accordingly, the contracts are not in the record. However, it is inconceivable that two banks would have a multi-million dollar ongoing correspondent banking relationship without some form of writing between them. See supra footnote 5. Undoubtedly, whatever writing exists may contain provisions that bear on jurisdiction, such as forum selection or choice of law clauses, etc.

7 Hizballah is listed by the U.S. Department of State as a Foreign Terrorist Organization. U.S. Department of State, Foreign Terrorist Organizations, Jan. 27, 2012, http://www.state.gov/j/ct/rls/other/des/123085.htm.

-12-

transfers is plainly consistent with the Due Process Clause of the United

States Constitution, U.S. CONST. amend. XIV, § 1 (“Due Process”).

POINT II

DEFENDANT’S COMMUNICATIONS WITH AND USE OF AMERICAN EXPRESS’ SERVICES IN NEW YORK TO CONDUCT BUSINESS IN NEW YORK CONSTITUTE A “TRANSACT[ION]” OF BUSINESS FOR THE PURPOSES OF CPLR § 302(a)(1)

A single act can provide a basis for jurisdiction under CPLR

§ 301(a)(1). Deutsche Bank Sec., Inc. v Montana Bd. of Invs., 7 N.Y.3d 65, 71

(2006); Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467 (1988). This Court

indicated in Kreutter that § 302(a)(1) “authorizes the court to exercise

jurisdiction over nondomiciliaries for tort and contract claims arising from

a defendant’s transaction of business in this State,” even if plaintiffs are

able to demonstrate just one transaction. Id. It does not matter whether the

defendant has ever set foot in the state of New York “so long as the

defendant’s activities here were purposeful and there is a substantial

relationship between the transaction and the claim asserted.” Id.

Accordingly, a single shipment by an out-of-state defendant into New York

“might well be sufficient” to establish personal jurisdiction under

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§ 302(a)(1). Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 170 (2d Cir.

2010).

Deutsche Bank involved a series of communications that all took

place on one day and were made across state lines via the Bloomberg

Messaging System, an instant messaging service for investment traders. See

Deutsche Bank, 7 N.Y.3d at 69-70. The defendant, a Montana state agency,

deliberately communicated with the plaintiff’s representative, who was

located in New York. Id. This Court declared that “a sophisticated

institutional trader knowingly entering our state—whether electronically

or otherwise—to negotiate and conclude a substantial transaction is within

the embrace of the New York long-arm statute.” Id. at 72.

LCB, a sophisticated institutional trader,8 “entered” the State of

New York for the purpose of conducting business on multiple occasions. It

8 “LCB offers a broad range of corporate, retail, and investment

products, and maintains extensive correspondent accounts with banks worldwide, including several U.S. financial institutions. As of 2009 LCB’s total assets were worth over $5 billion.” Finding that the Lebanese Canadian Bank SAL is a Financial Institution of Primary Money Laundering Concern, 76 Fed. Reg. 9403, 9404 (Feb, 17, 2011). As of 2011, it was ranked as one of Lebanon’s top banks, “with more than $5 billion in

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entered the state to form its relationship with AmEx. And it entered the

state each time it requested a wire transfer using its correspondent account

in New York. Each one of those single acts was purposeful and substantial

and done with the intent to engage in business in New York. Each one,

even when taken individually, gives rise to personal jurisdiction.

While a single act is not always sufficient to create personal

jurisdiction, many acts performed in an ongoing or continuous business

relationship are. See George Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648, 653

(1977) (identifying that the existence of an ongoing contractual

relationship, rather than a one-time-event, counsels in favor of

jurisdiction). LCB had an ongoing business relationship with AmEx in

New York. This ongoing business relationship was manifested through its

contract to open a correspondent account in New York. It was furthered by

assets, 35 branches in Lebanon[,] and an office in Montreal.” Mariam Karouny, “Lebanese Bank for Sale After U.S. Laundering Claim,” Mar. 3, 2011, http://www.reuters.com/article/2011/03/03/lebanon-bank-idUSLDE7221KS20110303/.

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the due diligence investigation9 that AmEx presumably performed, or at

least should have performed, (both before and after entering into its

relationship with LCB) pursuant to good business practice and the due

diligence requirements imposed upon it by the Uniting and Strengthening

America by Providing Appropriate Tools Required to Intercept and

Obstruct Terrorism Act of 2001 § 312, Pub. L. No. 107–56, 115 Stat. 272

(2001) (“USA PATRIOT Act”). See 31 U.S.C. § 5318(i).10 Its relationship was

9 As delineated further in the next footnote, AmEx was subject

to the due diligence requirements of the USA PATRIOT Act when entering into its relationship with LCB and at all times thereafter.

10 The USA PATRIOT Act, § 312, requires that “[e]ach financial institution that establishes, maintains, administers, or manages a private banking account or a correspondent account in the United States for a non-United States person, including a…representative of a non-United States person…establish appropriate, specific, and, where necessary, enhanced, due diligence policies, procedures, and controls that are reasonably designed to detect and report instances of money laundering through those accounts.” 31 U.S.C. § 5318(i).

The Interim Final Rule promulgated by Treasury pursuant to § 312, Special Due Diligence Programs for Certain Foreign Accounts, 67 Fed. Reg. 48348 (July 23, 2002), which was in force until February 3, 2006, required all banks to assess the degree to which a correspondent account poses a risk of money laundering and to take appropriate steps to guard against money laundering. See id. at 48350. It expressed that correspondent

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furthered with each of dozens of wire transfers over a period of years. (45-

46, 89, FAC ¶¶ 52-56, 179). Such a prolonged relationship is certainly a

“transact[ion]” for the purposes of CPLR § 302(a)(1).

Finally, personal jurisdiction rests over the out-of-state

defendants when their New York agent performs substantial work for

accounts used to provide services to third parties (such as Hizballah and its affiliates) must receive a higher priority of due diligence. Id.

On January 4, 2006, Treasury promulgated a Final Rule that was effective on February 3, 2006 (until a subsequent amendment after the dates relevant to this appeal). Special Due Diligence Programs for Certain Foreign Accounts, 71 Fed. Reg. 496. The Final Rule required covered banks (including AmEx) to assess the risk posed by each of their correspondent accounts. The risk assessment had to consider matters such as “[t]he nature of the foreign financial institution’s business and the markets it serves, and the extent to which its business and the markets it serves present an increased risk for money laundering” and “[t]he anti-money laundering and supervisory regime of the jurisdiction that issued the charter or license to the foreign financial institution.” Id. at 502-03. Given that LCB operates in a market with a large exposure to terrorist activity and in a country that is not known to be friendly to the laws of the United States, the above factors undoubtedly increased the burden of AmEx’s due diligence towards its LCB correspondent account(s). While the risk-based due diligence regime did not apply until October 2, 2006 to correspondent accounts opened prior to April 4, 2006, AmEx and LCB were undoubtedly

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them in New York. See Fischbarg v. Doucet, 9 N.Y.3d 375 (2007). The clients

of a New York attorney were found to be subject to jurisdiction in New

York notwithstanding the fact that the clients never stepped foot in New

York. Id. at 377. The clients, residents of California, communicated with

their attorney by telephone and mail. The attorney performed all or

materially all of his work for them from his New York office. Id. at 377-78.

This Court found that the defendants’ “purposeful attempt to establish an

attorney-client relationship” in New York, coupled with “their direct

participation in that relationship” that they projected through their

communications into the State of New York, was sufficient for the

purposes of § 302(a)(1). Id. at 380-84.

LCB deliberately sought out the assistance of AmEx. It needed

AmEx to conduct its business in the United States as it did not have, and

presumably could not obtain at reasonable cost, its own account or

physical presence in the United States. See (43-44, FAC ¶¶ 33-43).

Accordingly, it entered into an ongoing contractual relationship with

engaged in significant correspondence in the months following the release of these rules in order to ensure future compliance with them.

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AmEx by which AmEx would act as its agent in New York to siphon

dollars to and from Hizballah accounts. Id. It thus purposefully availed

itself of the benefits and protections of this state. See also, e.g., Indosuez Int’l

Fin. B.V. v. Nat’l Reserve Bank, 98 N.Y.2d 238, 244 (2002) (finding

jurisdiction on the basis of a series of dollar-denominated international

transactions that needed to occur in New York); Banco Ambrosiano, S.P.A. v.

Artoc Bank & Trust Ltd., 62 N.Y.2d 65, 72-73 (1984) (finding jurisdiction

solely on the basis of defendant’s maintenance of a correspondent account

that it needed in New York to conduct its international business). The

present case presents a very clear § 302(a)(1) “transact[ion].”

POINT III

THE “ARTICULABLE NEXUS” AND “SUBSTANTIAL RELATIONSHIP” TESTS UNDER CPLR § 302(a)(1) REQUIRE ONLY THAT THE DEFENDANT’S TRANSACTION(S) AND PLAINTIFF’S CAUSE OF ACTION ARE RELATED

This Court has interpreted CPLR § 302(a)(1) to require that

there be either an “articulable nexus,” McGowan v. Smith, 52 N.Y.2d 268,

272 (1981), or a “substantial relationship,” Kreutter v McFadden Oil Corp., 71

N.Y.2d 460, 467 (1988), between the cause of action and the transaction(s)

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that gives rise to jurisdiction. Those requirements, which we will refer to

collectively as the “nexus limitations,”11 require only that the transaction

and the cause of action are related. There must be some connection

between the two. An alternative rule would, pursuant to CPLR § 302(a)(1),

make unrelated torts, contracts, property disputes, and countless other

matters subject to general jurisdiction whenever, for example, someone

driving from Lebanon, Pennsylvania to Lebanon, Connecticut buys a soda

at a convenience store in Lebanon, New York. That simply cannot be. The

nexus limitations prevent the back-door exercise of general jurisdiction but

(consistent with the objective of the statute) permit the exercise of specific

jurisdiction for claims that relate to the purchase of that can of soda, even if

those causes of action are not directly caused by the purchase. Causation is

not necessary.12

11 Plaintiffs coin their own phrase as a means of demonstrating

that they rely on neither the “articulable nexus” test nor the “substantial relationship” test exclusively. It is unclear whether there is a difference between the tests and, if there is a difference, what that difference is. Accordingly, we will refer to both with the term “nexus limitations.”

12 While Plaintiffs strongly object to the use of a causation standard, as explained at length below, they are certain that, if required to

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A. This Court’s CPLR § 302(a)(1) Cases Require Only that the Relationship Between Defendant’s Transaction(s) and Plaintiffs’ Cause of Action are not Disparate, not that One Cause the Other

When assessing whether the nexus limitations of CPLR

§ 302(a)(1) have been satisfied, this Court has inquired whether “the

relationship between the activities and the allegedly offending statement is

too diluted.” SPCA of Upstate New York, Inc. v. American Working Collie

Ass’n, 18 N.Y.3d 400, 404 (2012). It has inquired into whether “the

relationship between the claim and transaction is too attenuated.” Johnson

v. Ward, 4 N.Y.3d 516, 520 (2005). Jurisdiction has been denied when a

contact has a mere “tangential relationship to the present case.” Fischbarg v.

Doucet, 9 N.Y.3d at 384. As far as the plaintiffs are aware, this Court has

never denied jurisdiction under CPLR § 302(a)(1) on the basis of a

deficiency of causation.

As discussed infra in the section relating to legislative history,

the nexus requirements likely derive from a simple desire to avoid having

do so and with the benefit of jurisdictional discovery, they will be able to demonstrate causation.

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the courts of New York assume jurisdiction in cases involving only

tangential relationships or, perhaps, no relationships, to the State of New

York. They likely derive ultimately from an 1859 decision in which the

plaintiff, a Maryland corporation, sought jurisdiction in New York over

another Maryland corporation in a dispute involving Maryland property.

The court noted that it “would seem little short of preposterous” to suggest

that the State of New York had any connection to the dispute. Cumberland

Coal & Iron Co. v. Hoffman Steam Coal Co., 30 Barb. 159 (Gen. Term. 1859).

As explained further below, in order to avoid problems like the

one presented in Cumberland Coal, the State Legislature demanded in CPLR

§ 302(a)(1) that the “cause of action” for which jurisdiction is sought must

“aris[e] from” the “transact[ion of] any business within the state.” Id. And

based on that language, this Court gave us the nexus limitations. McGowan

v. Smith, 52 N.Y.2d 268, 272-73 (1981) (explicitly deriving the necessity of

“some articulable nexus between the business transacted and the cause of

action sued upon” from the “statutory scheme” that demands that the

“cause of action arose out of those business contacts” (a clear reference to

the “arising from” language of CPLR § 302(a)). (Emphasis added).

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To be clear, the nexus limitations are there only to ensure that

the relationship between the cause of action and the transaction is not “too

diluted,” SPCA, 18 N.Y.3d at 404, “too attenuated,” Johnson, 4 N.Y.3d at

520, or simply “tangential.” Fischbarg, 9 N.Y.3d at 384. They impose a

requirement of “some articulable nexus.” McGowan, 52 N.Y.2d at 272

(emphasis added). They do not demand causation or any sort of strict

relationship.

This claim regarding the scope of the nexus limitations is

confirmed by looking at some of the cases in which jurisdiction was denied

by this Court. They demonstrate both that (1) causation is irrelevant, and

(2) all the Court needs to grant jurisdiction is some clear link (what we will

describe infra in the section relating to textual analysis as an “origin”)

between the claim and the stated basis for jurisdiction (e.g., the

transaction). For example:

• SPCA involved an out-of-state corporation that had no New

York presence but made “three phone calls and two short visits—totaling

less than three hours” to New York and donated supplies to the plaintiff in

New York. SPCA, 18 N.Y.3d at 405. This Court found that there was no

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“substantial relationship” between “the allegedly defamatory statements

and defendants’ New York activities.” Id. This Court did not devote even a

single word of its decision to assessing causation. To the contrary, it

suggested that if the defendant had actively chosen a New York

destination for its philanthropy, that might have formed a “substantial

relationship,” despite that doing so would not have caused the alleged

defamation. Id. The Court continued and noted that the standard for

“substantial relationship” is stricter in defamation cases out of a desire to

avoid unduly chilling speech. Id. at 405-06. The risk of unduly chilling

speech is absent here and, nevertheless, the Defendant asks this Court to

invent a stricter standard than the one that it used in SPCA.

• Similarly, in Talbot v. Johnson Newspaper Corp., 71 N.Y.2d 827

(1988), this Court denied jurisdiction for a defamation action on the

grounds that there was an insufficient nexus between a college coach’s

defamation action (the cause of action) and a former student’s pursuit of a

college degree in New York (the transaction). The Court noted that “there

was no showing that—years after termination of [one of the defendants’

relationship with her New York university]—there was the required nexus

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between the [the defendants’] New York ‘business’ and the cause of

action.” Id. at 829. Again, the Court did not hold that the New York

“business” did not cause the defamation. Nor did it address causation. It

held, rather, that the relationship between the cause of action and the

transaction was attenuated—implying that a greater relationship between

the two could have provided a basis for jurisdiction. The letter that

allegedly defamed the plaintiff was written two years after the defendant

had left her university. Id. at 828. It appears that the passage of time, more

than anything else, is what motivated this Court to deny jurisdiction. See id.

at 828-29. Of course, passage of time does not undermine causation and a

shorter temporal window cannot create causation where it does not

already exist.13

13 It is important to note that Talbot does not undermine the

Plaintiffs’ arguments. In the present case, there is no significant (defined with reference to the nature of the action and it the circumstances that surround it) passage of time to render the transactions by LCB on behalf of Hizballah too attenuated. In a defamation action, the passage of two years between the underlying incident and the allegedly defamatory speech, which increases the risk of error on the part of the speaker and renders the speech stale, might indeed be a significant passage of time. Two years, or even many years, after a terrorist attack that involves serious injury and

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•In Johnson v. Ward, 4 N.Y.3d 516 (2005), this Court denied

jurisdiction in a negligence action on the grounds that there was an

“insufficient nexus” between the tort and the defendant’s New York

connections. Id. at 518. The plaintiffs were struck by a car in New Jersey.

The driver of the other car, the defendant, possessed a New York driver’s

license and had registered his car in New York. He had since moved to

New Jersey but retained his New York license and registration. Id. The

Court noted that the accident had little or nothing to do with the New York

license and registration:

The relationship between the negligence claim and defendant’s possession of a New York license and registration at the time of the accident is too insubstantial to warrant a New York court’s exercise of personal jurisdiction over defendant. The negligent driver could have had a license from any state, or no license—that defendant had a New York license and registration is merely coincidental.

Id. at 520. Note that the Court made no mention of causation.

death is not very much time at all. And, as noted above, the standards are heightened in defamation cases—a factor not relevant here. See SPCA, at 405-06.

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The Johnson Court actually understated the divide between the

New York license and registration and the New Jersey accident: they have

nothing to do with each other. As the Court indicated, the defendant could

have just as easily been driving without a license or could have had a

license from a different state. Moreover, even if we assume that the

defendant had some extrinsic need for a New York license and registration,

the fact of that license was neither the cause nor the origin of the accident

in New Jersey. The defendant had permission to drive in New Jersey not

because of his license, but because the laws of New Jersey permitted him to

drive in New Jersey. The New York license and registration only become

relevant once applicable law—New Jersey law—recognizes them. In

contrast, LCB’s connection to New York—a connection that it sought out

and relied upon for the execution of its business—is closely related to the

Plaintiffs’ claims.

• In McGowan v Smith, 52 N.Y.2d 268, 270 (1981), this Court

denied jurisdiction over a Japanese exporter of a fondue pot. The machine

had been shipped by the Japanese company to a store in Buffalo where it

was purchased by the plaintiff and brought to Ontario, Canada. In Ontario,

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it allegedly injured the plaintiff. The plaintiff sued the retailer, a New York

department store, which attempted to implead the Japanese exporter. Id. at

270-71. The exporter had made several trips to New York to engage in

marketing research. This Court held that those trips did not “bear a

substantial relationship to the transaction out of which the instant cause of

action arose.” Id. at 272. The Court explained:

Essential to the maintenance of a suit against a nondomiciliary under CPLR 302 (subd [a], par 1) is the existence of some articulable nexus between the business transacted and the cause of action sued upon. Indeed, it is this basic requirement that differentiates the long-arm authority conferred by CPLR 302 (subd [a], par 1) from the more traditional authority of the New York courts under CPLR 301 to exercise in personam jurisdiction over foreign defendants who are “present” within the State by virtue of their “doing business” here. Where jurisdiction is predicated upon the provisions of CPLR 301, there is no need to establish a connection between the cause of action in issue and the foreign defendant’s business activities within the State, because the authority of the New York courts is based solely upon the fact that the defendant is engaged in such a continuous and systematic course of doing business here as to warrant a finding of its presence in this jurisdiction.

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Where the plaintiff’s proof falls short of establishing such a systematic course of doing business, however, our statutory scheme permits him to bring the foreign defendant within the power of the New York courts upon a lesser showing of some business contacts within the State only if he demonstrates that his cause of action arose out of those business contacts.

Id. at 272-73 (internal citation and quotation marks omitted). The reason for

the nexus limitations thus rests in the distinction between CPLR § 301 and

CPLR § 302. CPLR § 301 provides jurisdiction for presence in the State of

New York. CPLR § 302 applies where presence—and thus the connection

to the state—is deficient. The nexus limitations are there to fill that

deficiency by requiring that there be some connection between the cause of

action and the State of New York. That connection is achieved by requiring

that the plaintiff’s cause of action “arise[s]” (as explained infra in the

section on textual analysis, that word, as used here, means “originates”)

from defendant’s transaction in the state. Demanding causation would be

excessive and entirely unnecessary in light of the nexus limitations’

objectives.

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B. The Text of CPLR § 302(a)(1) Dictates Only that There Not be a Disparate Relationship Between Defendant’s Transaction(s) and Plaintiffs’ Cause of Action

CPLR § 302(a)(1) provides that courts in New York may

exercise personal jurisdiction with regard to a “cause of action arising

from” the acts of a non-domiciliary who “transacts any business within the

state or contracts anywhere to supply goods or services in the state.” Id.

The word “any” is expansive, suggesting no limitation. The word

“transacts” likewise provides no meaningful limitation.

The phrase “arising from” thus forms the textual basis for the

nexus limitations incorporated into CPLR § 302(a)(1). See McGowan 52

N.Y.2d at 272-73 (explicitly deriving the necessity of “some articulable

nexus between the business transacted and the cause of action sued upon”

from the “statutory scheme” that demands that the “cause of action arose

out of those business contacts” (a clear reference to the “arising from”

language of CPLR § 302(a))). (Emphasis added).

The word “arise” has four senses in Black’s Law Dictionary.

The first of those senses is “to originate” or “to stem from.” BLACK’S LAW

DICTIONARY 115 (8th ed. 2004). That is, of course, the same sense of the

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word that appears in the United States Constitution’s jurisdictional

discussion: “The judicial Power shall extend to all Cases, in Law and

Equity, arising under this Constitution….” U.S. CONST. art. III, § 2.

(Emphasis added); see also 28 U.S.C. § 1331 (“The district courts shall have

original jurisdiction of all civil actions arising under the Constitution, laws,

or treaties of the United States.” (Emphasis added)). It is also clearly the

most common usage of the word “arise.” If one were to say, for example,

that “this brief arises from the Defendant’s illegal actions,” an accurate and

grammatically correct statement, he would be saying only that Defendant’s

actions gave birth to these legal proceedings. He would not be making the

stronger claim that the Defendant caused this brief.

CPLR § 302(a)(1) incorporates, on its face, no causation

requirement. If the New York Legislature insisted upon a direct causation

requirement, it could have easily substituted the words “caused by” for the

words “arising from.” The statute would have then applied “to a cause of

action caused by any of the acts enumerated in this section.” Plainly, the

Legislature chose not to phrase the statute that way because it intended no

causation requirement. In order to give the statutory language its full

-31-

effect, see State of New York v Patricia II, 6 N.Y.3d 160, 162 (2006) (“The

starting point is always to look to the language itself and where the

language of a statute is clear and unambiguous, courts must give effect to

its plain meaning.” (Internal quotation marks and alteration marks

omitted)), this Court should not allow the nexus limitations to undermine

the objectives of New York’s long arm statute.

Rather, New York’s long arm statute demands that the

plaintiff’s cause of action originate from the defendant’s transactions in the

State of New York. An origin for a cause of action is an event that gave rise

to or inspired, but did not necessarily cause, the plaintiff’s cause of action.

For example, a reckless driver who creates a distraction while swerving on

the road where that distraction causes an accident between two other

drivers elsewhere on the road has arguably originated the injured

plaintiff’s cause of action. That origination gives rise to long arm

jurisdiction over that driver in New York.14 Conversely, a Pennsylvania

14 Appellants take no position on this appeal as to whether such

a plaintiff would be able to recover under New York’s tort law, which might have an independent proximate causation requirement. It does not matter, though, as the plaintiff’s inability to win on the merits does not

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resident who rents a car in Pennsylvania, drives it through New York en

route to New Hampshire, but strikes a pedestrian in Vermont along the

way should not be subject to long arm jurisdiction in the State of New York

despite that, strictly speaking, his use of New York’s roads caused his

entrée into Vermont and the accident. The defendant’s use of New York’s

roads did not originate the accident in Vermont even if that use would be

deemed a cause of the accident. An alternative rule that looks only to

causation would be overbroad as it would allow jurisdiction in New York

despite that New York’s connection to the Vermont accident is

exceptionally weak.

In the present case, LCB’s transactions in New York originated

the terrorist attacks by Hizballah that resulted in the Plaintiffs’ significant

injuries. Regardless of whether LCB’s transactions will ultimately be

determined to have actually caused the Hizballah attacks—a point that is

deprive New York’s courts of jurisdiction over the defendant should the plaintiff decide to sue notwithstanding that perhaps he will not be able to win on the merits.

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premature to address prior to discovery—LCB’s transactions were, no

doubt, an origin of those attacks.

Other states with long-arm statutory language similar to New

York’s have likewise interpreted that language broadly and without a strict

causation requirement.15 For example:

15 According to Wright & Miller, at least twenty-eight

jurisdictions have adopted long arm statutes that extend the jurisdiction of their courts to the limits of Due Process. 4 C. Wright & A. Miller, Federal Practice & Procedure § 1068, n. 12 (3d ed.) (listing (1) Alabama, (2) Arkansas, (3) California, (4) Colorado, (5) Georgia, (6) Illinois, (7) Indiana, (8) Iowa, (9) Kansas, (10) Kentucky, (11) Louisiana, (12) Maryland, (13) Michigan, (14) Minnesota, (15) Missouri, (16) Nevada, (17) New Jersey, (18) North Dakota, (19) Oregon, (20) Pennsylvania, (21) Puerto Rico, (22) South Carolina, (23) South Dakota, (24) Tennessee, (25) Texas, (26) Utah, (27) Washington, and (28) West Virginia). The language of many of these long arm statutes is remarkably similar to that of New York—some of them are highlighted in the text. While this Court has chosen not to extend the jurisdiction of New York’s courts to the extent permissible under the Federal Constitution on the grounds that the language of CPLR § 302 is “too plain and precise to permit it to be read [as co-extensive with the Federal Constitution],” see Longines-Wittnauer Watch Co. v Barnes & Reinecke, 15 N.Y.2d 443, 459-60 (1965), the interpretation of New York’s long arm statute ought to be influenced, to the extent that it is ambiguous, by interpretations of similar language by other courts. See id. at 457 n.5.

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• Colorado. COLO. REV. STAT. § 13-1-124(1)(a) provides a basis

for jurisdiction for one who “engage[es] in any act…concerning any cause

of action arising from the transaction of any business within this state.” Id.

It subjects to jurisdiction any party that engages in purposeful acts

performed within the state in relation to the contract or transaction that

creates the basis of jurisdiction. Those purposeful acts can give rise to

jurisdiction despite that they might be preliminary or subsequent to the

execution of the contract. Classic Auto Sales, Inc. v. Schocket, 832 P.2d 233,

239 (Colo. 1992). The purpose of the nexus requirement appears to be an

assurance that the defendant has fair warning of the possibility that he

might be hailed into a Colorado court, thus making extraneous the need for

a strict causation requirement. See Keefe v. Kirschenbaum & Kirschenbaum,

P.C., 40 P.3d 1267, 1271 (Colo. 2002).

• Connecticut. CONN. GEN. STAT. § 52-59b(a) provides a basis

for jurisdiction for one who acts creating a “cause of action arising from”

the “[t]ransact[ion of] any business within the state.” Id. That language

requires simply that “the present litigation bears some connection with the

business conducted by the foreign corporation in this state.” Where the

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plaintiff’s cause of action has “no connection with or relationship to”

business transacted in Connecticut, there can be no jurisdiction. Ryan v.

Cerullo, 918 A.2d 867, 880 (Conn. 2007) (emphasis added); see also New

London County Mut. Ins. Co. v. Nantes, 36 A.3d 224, 234 (Conn. 2012) (“Our

courts have consistently interpreted ‘arising out of’ to mean ‘was

connected with,’ ‘had its origins in,’ ‘grew out of,’ ‘flowed from,’ or ‘was

incident to’ ….”). Where there is a connection, even if there is no causation,

there is a basis for jurisdiction.

• Illinois. 735 ILL. COMP. STAT. 5/2-209 provides a basis for

jurisdiction for acts giving rise “to any cause of action arising from

the…transaction of any business within this State.” Id. The “arising from”

language is there “to insure that there is a close relationship between a

cause of action against a nonresident defendant and his jurisdictional

activities. The minimum relationship required by the phrase is that the

plaintiff’s action be one which lies in the wake of the commercial activities

by which the defendant submitted to the jurisdiction of Illinois courts.”

Aetna Cas. & Sur. Co. v. Crowther, Inc., 581 N.E.2d 833, 835-36 (Ill. App. Ct.

1991) (internal quotation marks omitted). More recent cases explore simply

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whether there is any “connection” between the cause of action and the

state. See, e.g., Spartan Motors, Inc. v. Lube Power, Inc., 786 N.E.2d 613, 619

(Ill. App. Ct. 2003).

• Michigan. MICH. COMP. LAWS § 600.705 provides a basis for

jurisdiction for those claims that “aris[e] out of…[t]he transaction of any

business within the state.” The Supreme Court of Michigan has determined

that this language “extend[s] the state’s jurisdiction to the farthest limits

permitted by due process.” Sifers v. Horen, 188 N.W.2d 623, 623-24 (Mich.

1971). It is broader than “doing business.” Id. at 624 (citing Simonson v. Int’l

Bank, 14 N.Y.2d 281 (1964)). It “includes each and every” and

“comprehends the slightest.” Id. at 624 n.2. See also Green v. Wilson, 565

N.W.2d 813, 816-17 (Mich. 1997) (identifying that the outer limits are

generally consistent with federal Due Process requirements, but insisting

on a separate inquiry to determine whether the limitations of the long arm

statute are met in light of the fact that the legislature chose not to adopt a

catch-all grant of jurisdiction).

• New Hampshire. N.H. REV. STAT. ANN. § 510:4 provides a

basis for jurisdiction for “any cause of action arising from or growing out

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of” the acts of one who “transacts any business within this state.” Id. The

state legislature intended that provision, wrote the Supreme Court of New

Hampshire, “to be construed in the broadest legal sense to encompass

personal, private and commercial transactions.” Phelps v. Kingston, 536

A.2d 740, 742 (N.H. 1987). It “provide[s] jurisdiction over foreign

defendants to the full extent that the statutory language and due process

will allow.” Id.

• Ohio. OHIO REV. CODE ANN. § 2307.382(a) provides a basis for

jurisdiction for one’s acts generating “a cause of action arising from [a]

person’s [t]ransacting any business in this state.” Id. (line break omitted).

Ohio courts define “transacting” broadly: “The word ‘transact’ is broader

than the term ‘contract’ and includes in its meaning ‘to carry on business’

and ‘to have dealings.’” Greene v. Whiteside, 908 N.E.2d 975, 980 (Ohio Ct.

App. 2009). There does not appear to be a causation requirement.

• Pennsylvania. PA. CONS. STAT. § 5322(a) provides a basis for

jurisdiction for one who acts generating “a cause of action or other matter

arising from such person [t]ransacting any business in this

Commonwealth.” Id. (line break omitted). That language “permits the

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exercise of jurisdiction to the fullest extent allowed under the Constitution

of the United States and may be based on the most minimum contact with

this Commonwealth allowed under the Constitution of the United States,

Fourteenth Amendment’s Due Process Clause.” Haas v. Four Seasons

Campground, Inc., 952 A.2d 688, 692 (Pa. Super. Ct. 2008) (internal quotation

marks omitted).

Following the lead of these highest courts of sister states, this

Court should continue to interpret the words “transacts any business

within the state” broadly, in a manner that does not demand a showing of

causation between the transaction and the plaintiff’s claims.

C. The Legislative History of CPLR § 302(a)(1) Dictates Only that There Not be a Disparate Relationship Between Defendant’s Transaction(s) and Plaintiffs’ Cause of Action

The legislative history of CPLR § 302(a)(1) indicates an intent

by the State Legislature to create an expansive grant of jurisdiction. Indeed,

the purpose of long arm statutes in general was to expand, not contract,

jurisdiction. 4 C. Wright & A. Miller, Federal Practice & Procedure § 1068

(3d ed.). New York’s long arm statute was no different. Simonson v. Int’l

Bank, 14 N.Y.2d 281, 288 (1964) (“[CPLR § 302] discards the concept of

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‘doing business’ as a test of jurisdiction and substitutes therefor the

broader standard of ‘transacting any business’; it further abandons the

requirement of the defendant’s ‘presence’ in cases involving real property

situated in this State and tortious acts (other than defamation) committed

here.”); Longines-Wittnauer Watch Co. v Barnes & Reinecke, 15 N.Y.2d 443,

452, 456 (1965) (“The Advisory Committee which drafted [CPLR

§ 302]…follow[ed] the broad, inclusive language of the Illinois provision,

adopting as the criterion the ‘transact[ion of] any business within the state’.

The design of the legislation, as expressed by the committee, was to take

advantage of the ‘new [jurisdictional] enclave’ opened up by International

Shoe….” (Internal citation and quotation marks omitted); Kreutter v

McFadden Oil Corp., 71 N.Y.2d 460, 466-67 (1988) (“[CPLR § 302] was

enacted in response to [decisions by the U.S. Supreme Court that]

expanded the permissible powers of States to obtain personal jurisdiction

over nondomiciliaries.”). Indeed, the enactment of CPLR § 302

“undoubtedly produced the most significant expansion of state court

jurisdiction during the entire course of the twentieth century.” William E.

Nelson, Civil Procedure in Twentieth-Century New York, 41 ST. LOUIS U. L.J.

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1157, 1216 (1997). When this Court read a portion16 of § 302 narrowly

shortly after the statute was enacted, the Legislature, acting consistently

with its original objective, “immediately amended the long-arm statute to

reverse this aspect of the [Court of Appeals’ decision] and explicitly grant

jurisdiction [in future occurrences].” Nelson, supra. Reading § 302 now to

excessively restrict access to New York courts would frustrate the

expansive purpose for which § 302 was enacted.

The Advisory Committee that drafted the first version of what

would become CPLR § 302 intended to exercise the State’s new powers to

expand jurisdiction over non-residents in a manner consistent with the Due

Process Clause. Simonson, 14 N.Y.2d at 288. The original draft version of

the statute, as proposed in 1958, read:

(a) A court may exercise jurisdiction over any person, or his administrator or executor, only as to a cause of action arising from any of his acts

16 Relating to CPLR § 302(a)(2), not relevant to this appeal. The

Legislature overturned a portion of Longines-Wittnauer Watch Co. v. Barnes & Reinecke, 15 N.Y.2d 443, 459-60 (1965). The amendment added the CPLR § 302(a)(3) extension of long arm jurisdiction over defendants who commit a tortious act outside of New York but cause injury within New York.

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enumerated in this section, in the same manner as if he were a domiciliary of the state, if, in person or through an agent, he:

(1) transacts business within the state; or

(2) commits a tortious act within the state resulting in physical injury to person or property; or

(3) owns, uses or possesses any real property situated within the state.

ADVISORY COMMITTEE ON PRACTICE AND PROCEDURE, SECOND PRELIMINARY

REPORT 38-39 (1958). It modeled the statute after Illinois’ long arm statute

with the intent of “tak[ing] advantage of the constitutional power of the

state of New York to subject non-residents to personal jurisdiction when

they commit acts within the state.” Id. at 39.

In 1961, two legislative committees made only minor changes

to the proposed legislation. Their revisions read (new language italicized):

(a) Acts which are the basis of jurisdiction. A court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, as to a cause of action arising from any of the acts enumerated in this section, in the same manner as if he were a domiciliary of the state, if, in person or through an agent, he

1. transacts any business within the state; or

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2. commits a tortious act within the state, except as to a cause of action for deformation [sic] of character arising from the act; or

3. owns, uses or possesses any real property situated within the state.

SENATE FINANCE COMMITTEE & ASSEMBLY WAYS AND MEANS COMMITTEE,

FIFTH PRELIMINARY REPORT TO THE LEGISLATURE 66-67 (1961). (Emphasis

added). It appears that the Committees’ primary concerns related to the

second prong of the statute (relating to tortious acts). See id. Their only

amendment to relevant language was to add the word “any” after

“transacts,” indicating an intent to render the statute even more expansive

than did the Advisory Committee. Id.

While the language relevant to the present litigation (“As to a

cause of action arising from any of the acts enumerated in this section, a

court may exercise personal jurisdiction over any non-domiciliary, or his

executor or administrator, who in person or through an agent transacts any

business within the state…” CPLR § 302) has since changed only in the

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order of its words,17 subsequent amendments to the statute indicate a

consistent and steady legislative intent to expand the scope of § 302. See

DAVID L. FERSTENDIG, HISTORICAL APPENDIX FOR CPLR 302 (“[T]he

legislature has now and again shown a willingness to target identifiable

problems and expand CPLR 302 to meet them.” (Emphasis added)). For

example, the Legislature expanded the scope of CPLR § 302(a)(1) in 197918

“to allow New York courts to exercise personal jurisdiction over a

nondomiciliary who contracts outside New York to supply goods or

services in New York, even if the contract is breached before the goods are

ever shipped into, or the services performed in, New York.” Id.;

MEMORANDUM OF THE LAW REVIEW COMMISSION, NEW YORK STATE

LEGISLATIVE ANNUAL 164 (1979). Similarly, in 1966, shortly after § 302’s

enactment, the Legislature made changes to the statute to overrule a

17 In addition to switching the order of the first and second

clauses of the statute, the version currently in effect lacks the words “in the same manner as if he were a domiciliary of the state.” Those words were likely superfluous when written and, in any event, do not affect the current litigation.

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decision by this Court that the Legislature deemed to be overly restrictive.

Nelson, supra, at 1216.

The State Legislature apparently paid little attention to the

words “arising from,” which were included in the initial proposal of 1958.

See ADVISORY COMMITTEE ON PRACTICE AND PROCEDURE, SECOND

PRELIMINARY REPORT 38-39 (1958). It would be odd in the extreme if the

Legislature, which was motivated to expand jurisdiction over non-

residents, included language that was intended to impose a highly

restrictive causation requirement, and did so without even commenting

about that restrictive intent.

As far as Plaintiffs are aware, the first time that the words

“arising from” (or a derivation) appear in this State with reference to

jurisdiction over non-residents was in the 1859 case of Cumberland Coal &

Iron Co., supra. The Cumberland Coal Court wrote that it cannot accept

jurisdiction over a foreign corporation unless the case meets the following

requirement: “The cause of action, or the subject, or at least some property

18 The 1979 amendments added the words “or contracts

anywhere to supply goods or services in the state” after “transacts any (continued next page)

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to be acted on, must have arisen or be situated within our jurisdiction.” Id.,

30 Barb. at 159. (Emphasis added). In Cumberland Coal & Iron Co., the word

“arisen” was intended to require not causation, but origin. As the court

explained, a “cause of action or the subject” which has not “arisen” in New

York would have no connection to the state and the court’s exercise of

jurisdiction “would operate on nothing in the state, and be…disregarded

by other states, when called upon to give effect to the judgment…[on the

grounds that it was] not a ‘judicial act,’ to which another state was bound

‘to give full faith and credit.’” Id. Overcoming those problems requires only

that the cause of action or the subject of the litigation originate in New

York.

It is likely that the phrase “arising from” in CPLR § 302 derives

from this use by Cumberland Coal & Iron Co. and its progeny. The

Legislature sought out some language that was consistent with its

objectives to expand jurisdiction while, at the same time, avoiding general

jurisdiction over people with nothing more than the most superficial or

transient connections to New York, such as travelers on layover at a New

business within the state.” CPLR § 302.

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York airport. Or, perhaps more importantly, to avoid assuming jurisdiction

in cases like the one presented in Cumberland Coal & Iron Co.:

[P]laintiffs [sic], a Maryland corporation, ask the court of New York to entertain in effect an ejectment against another Maryland corporation, for lands in Maryland—a proposition which needs only to be stated to be refuted. To say, in such a case, that either “the cause of action” or “the subject of action,” exists, or has arisen in New York, or that the legislature of New York contemplated assuming jurisdiction in such a case, would seem little short of preposterous.

Cumberland Coal & Iron Co., 30 Barb. 159.

Nothing in the legislative history of CPLR § 302(a)(1) supports

Defendant’s claims. Indeed, its position and the legislative history are

immiscible.

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POINT IV

ALTERNATIVELY, IF THIS COURT CONCLUDES THAT CPLR § 302(a)(1)’S “ARISING FROM” LANGUAGE DENOTES CAUSATION, IT DENOTES MERE “BUT-FOR” CAUSATION, RATHER THAN PROXIMATE CAUSATION

Plaintiffs are aware of no jurisdiction that strictly demands

proximate causation between the transaction that gives rise to jurisdiction

and the cause of action. Nevertheless, Defendants asked the Second

Circuit, and presumably will ask this Court, to adopt an antiquated and

unduly restrictive proximate causation standard. That standard is not

implied by the language of CPLR § 302(a)(1) or its legislative history. It has

no basis in the decisions of the Court, and it is punitively excessive. It

should be rejected.

The Supreme Judicial Court of Massachusetts considered the

propriety of the two tests—proximate causation and but-for causation—

with regard to similar language in the Massachusetts long arm statute.19

19 That statute, MASS. GEN. LAWS ch. 223A. § 3, provides that

“[a] court may exercise personal jurisdiction over a person, who acts…as to a cause of action in law or equity arising from the person’s transacting any

(continued next page)

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Tatro v. Manor Care, Inc., 625 N.E.2d 549 (Mass. 1994). Tatro was a slip and

fall tort action. The plaintiff was injured in her out-of-state hotel room. She

claimed that Massachusetts’ courts had personal jurisdiction over the

defendant by virtue of the defendant’s business activities within

Massachusetts. Id. at 549-50. The court found that the defendant had

actively and purposefully solicited business in Massachusetts and made

contacts with potential clients in Massachusetts. That, the court held, was

adequate to meet Massachusetts’ “transaction” standard. Id. at 552. The

defendant argued that the plaintiff’s claims did not “arise from” its

transactions in Massachusetts because they were not the proximate cause

of her injuries. See id. at 552-53. The court then looked at decisions by the

federal courts of appeals for the First, Fifth, Sixth, and Ninth Circuits. It

found that the First Circuit was alone in requiring proximate causation.

And it wrote about the other decisions: “The latter approach is more

consistent with the language of our statute and with decisions of this court

interpreting it. There is no readily apparent basis in the statutory language

(‘arising from’) for the restrictive proximate cause approach adopted by the

business in this commonwealth.” Id.

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First Circuit.” Id. at 553. The court continued: “We doubt that the

Legislature intended to foreclose a resident of Massachusetts, injured in

another State, from seeking relief in the courts of the Commonwealth when

the literal requirements of the long-arm statute have been satisfied.” Id. at

553-54.

Having adopted a but-for causation standard to interpret its

long arm statute, the Massachusetts Supreme Judicial Court had no trouble

finding that jurisdiction existed with regard to the plaintiff’s slip and fall.

The court held that but for the defendant’s solicitation of the plaintiff’s

business in Massachusetts, she would not have been injured. Id. at 554.

So too here. But for LCB’s transfer of funds to the United States,

Hizballah would not have had the funds that it needed to engage in acts of

terrorism in violation of the laws of the United States. (66-67, FAC ¶¶ 113-

20). Indeed, access to hard currency is necessary for the operation of an

international terrorist organization.20 It does not matter whether the

20 See, e.g., U.S. DEPARTMENT OF STATE, PATTERNS IN GLOBAL

TERRORISM 1999 56 (2000) (listing “money, training, and weapons” as provisions that Iran provided to terrorist organizations in order to “undermine the peace process” in Israel).

-50-

specific dollars transferred were actually used for acts of terrorism because

money is fungible and money given to terrorist organizations can be used

for any purpose, regardless of the intention of the donor.

Money is fungible, and when foreign terrorist organizations that have a dual structure raise funds, they highlight the civilian and humanitarian ends to which such moneys could be put. But there is reason to believe that foreign terrorist organizations do not maintain legitimate financial firewalls between those funds raised for civil, nonviolent activities, and those ultimately used to support violent, terrorist operations. Thus, funds raised ostensibly for charitable purposes have in the past been redirected by some terrorist groups to fund the purchase of arms and explosives.

Holder v. Humanitarian Law Project, ___ U.S. ___, 130 S. Ct. 2705, 2720, 2729

(2010). (Internal citations and quotation marks omitted).

LCB’s transfer of funds to Hizballah—in violation of federal

law, see Boim v. Holy Land Found. for Relief and Dev., 549 F.3d 685, 690-91

(7th Cir. 2008) (en banc)—enabled Hizballah to effect its terrorist objectives

generally and its attack against the Plaintiffs. The fungibility of money and

the Supreme Court’s affirmation that donations to terrorist organizations

can be presumed to be used for the objectives of terrorism are sufficient to

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render LCB’s transactions on behalf of Hizballah’s behalf a but-for cause of

the plaintiff’s cause of action, certainly, at least, for present purposes where

no jurisdictional or merits discovery has taken place.

POINT V

ALTERNATIVELY, IF THIS COURT CONCLUDES THAT CPLR § 302(a)(1)’S “ARISING FROM” LANGUAGE DENOTES PROXIMATE CAUSATION, IT SHOULD FIND AN EXCEPTION FOR CASES ARISING FROM ACTS OF TERRORISM

Even if this Court finds that CPLR § 302(a)(1) demands

proximate causation between a defendant’s transaction and a plaintiff’s

claim, it should find that there is a more lenient jurisdictional standard for

claims arising from acts of terrorism.21 Terrorists deliberately and willfully

place innocent victims at risk of severe bodily harm or death. Indeed, that

is their very objective. By doing so, they presume (or should be presumed

to presume) that they are subjecting themselves to severe legal

consequences. Little deference should be given to the preference of such

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scofflaws of all civilized societies as to the specific forum in which they are

brought to justice. A terrorist launching a missile from Lebanon into

southern Israel or a pirate seizing a boat off the coast of Somalia does so

believing that the anarchic locale from which he operates will permit him

to act without consequence. Given that bringing him to justice in his

location is unlikely to be practicable, but starting from the presumption

that our law cannot countenance allowing such villainy to escape justice on

jurisdictional technicalities, this Court should give heed to the reality that

terrorists, and those who facilitate and enable them, are functionally

indifferent if they are brought to trial in New York, California, Tokyo, or

Haifa, Israel. In fact, the terrorist might even prefer other jurisdictions due

to a profound disrespect and disregard for the State of Israel and its

government, and the fact that in a jurisdiction such as New York or the

United States federal courts, even a terrorist will receive a fair trial.

The rule should be the same for those who facilitate terrorism.

To limit such a principle to those who strap bombs on their backs and blow

21 As noted above in footnote 12, Plaintiffs believe that with

jurisdictional discovery they will be able to prevail even if this Court (continued next page)

-53-

themselves to pieces with the hope of spreading death and maximizing

pain would be to misunderstand how terrorism operates. The bomber who

kills himself is perforce dispensable. He often does not expect to return to

plan or facilitate a second mission. Rather, those who train, recruit,

organize, fund, and otherwise facilitate global terror networks are the true

perpetrators of our generation’s most despicable crimes. The flow of

money is essential to the operation of a global terror network. When the

money dries up, so does the operation of the terror network. A financial

institution, such as LCB, the unofficial bank of Hizballah—a bank that

facilitates the flow of money to a terrorist organization, turning a blind eye

to what it knows or should know its customers are doing with the

money—is a knowing facilitator of terrorism. (68-75, FAC ¶¶ 126-37). And

for those acts, it should have every expectation that it will be subject to

jurisdiction in any place that a victim and his or her heirs might be found.

Much like this Court (and materially all other courts in the

United States) has found an exception to the rules of negligence for

“abnormally dangerous” or “ultrahazardous” activities, this Court should

imposes a proximate causation requirement.

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find an exception to the rules of personal jurisdiction for deliberate acts of

terror. The policy justification for imposing strict liability upon tortfeasors

conducting abnormally dangerous activities were spelled out by this Court

in 1977: “[T]hose who engage in activity of sufficiently high risk of harm to

others, especially where there are reasonable even if more costly

alternatives, should bear the cost of harm caused the innocent.”

Doundoulakis v. Town of Hempstead, 42 N.Y.2d 440, 448 (1977). If that

formulation has any application outside of the law of negligence, it applies

here. Terrorists, and their facilitators, act with disdain for innocent civilians

and disregard for human life. Banks that provide the money necessary to

continue international terror operations are likewise acting with disdain

for human life. They should be made to bear the costs of their actions, and

should not be permitted to hide themselves from civil justice in

jurisdictional lacunae.

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POINT VI

PLAINTIFFS’ FACTUAL ALLEGATIONS AND THE LEGAL ELEMENTS OF THEIR CLAIMS ADEQUATELY RELATE TO LCB’S TRANSACTIONS IN NEW YORK

The Second Circuit, in its analysis of the nexus limitations,

raised a subsidiary question. It noted that there must be a nexus between a

defendant’s transactions and the “a cause of action,” CPLR § 302(a), but

expressed confusion over what the words “cause of action” refer to. Is it

the legal elements of the claims that the plaintiffs raise against the

defendant, or the factual allegations (literally, the “cause”) that give rise to

their action? See (616-22) Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50,

71-73 (2d Cir. 2012). Plaintiffs believe that the latter is the better standard,

but easily satisfy both of the standards.

The Second Circuit indicated that recent decisions from this

Court “have generally undertaken fact-bound analyses that shed little light

on how the nexus requirement should be applied in the instant case” and

found no decision from the Court of Appeals that counseled in either

direction, (619-20) id. at 72 & n.24, aside from noting that Kreutter v.

McFadden Oil Corp., 71 N.Y.2d 460, 467 (1988), said that the nexus

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limitations refer to the “claim asserted.” (616-17) Licci, 673 F.3d at 71.

(Emphasis in original).

Accordingly, the question posed by the Second Circuit must be

answered by exploring the origins and purpose of the nexus limitations.

Once we establish why CPLR § 302(a) has nexus limitations, it will be a

great deal easier to figure out to what the transaction must relate. And, as

discussed at length above, the nexus limitations, developed initially by the

courts of this state, see, e.g., Cumberland Coal & Iron Co., supra, were

incorporated into statute by the drafters of CPLR § 302(a), and were then

developed by this Court in its role as the interpreter of the statutes of New

York. The purpose of the nexus limitations is to ensure that there is some

connection between plaintiff’s claims and the stated basis of the court’s

jurisdiction in New York. In so doing, the state can be assured that there

will be some link between the case and the State of New York. To fulfill

that objective, the aforementioned link need not be substantial. It certainly

need not be causative.

The Legislature chose to use the words “cause of action”

without much discussion. See ADVISORY COMMITTEE ON PRACTICE AND

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PROCEDURE, SECOND PRELIMINARY REPORT 38-39 (1958); SENATE FINANCE

COMMITTEE & ASSEMBLY WAYS AND MEANS COMMITTEE, FIFTH PRELIMINARY

REPORT TO THE LEGISLATURE 66-67 (1961); DAVID L. FERSTENDIG, HISTORICAL

APPENDIX FOR CPLR 302. While the words “cause of action” generally refer

to a “particular theory of recovery,” it is extremely unlikely that the

Legislature intended to require that plaintiffs demonstrate a nexus between

the defendant’s transaction and the entirety of their theory of recovery.

This is so for at least two reasons: First, theories of recovery are often

highly complex and involve multiple elements. It would be unreasonable

to require plaintiffs to show a connection to an entire theory of recovery

(that is, each of multiple elements). Second, it would present a highly

restrictive standard that would be inconsistent with the purpose of CPLR

§ 302(a)—to vastly expand jurisdiction. See Nelson, supra, at 1216.

The Second Circuit recognized this as well and suggested an

alternative: require the plaintiff to show a connection between the

defendant’s transaction and some of the elements of the cause of action.

Operating under that theory, the Second Circuit was left with the

additional problem of trying to decide which elements of the cause(s) of

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action were relevant. (617) Licci, 673 F.3d at 72 (“[I]f a ‘claim’ refers to the

elements of a cause of action, it is unclear whether the relevant element

here is the plaintiffs’ ‘injuries’ or the defendant’s wrongful act…. In other

words, for sufficient nexus to exist, must the plaintiffs’ injuries—the deaths

and injuries in Israel—’aris[e] from’ the defendant’s use of a New York

correspondent bank account, or must the defendant’s alleged wrongful

act—LCB’s transfer of funds—’aris[e] from’ the use of that account?”).

(Emphasis in original). Neither seems appropriate. If the statute demands a

nexus with the “cause of action,” how can courts be satisfied simply by

finding a nexus with part of a cause of action?

Surely the Second Circuit’s approach of splitting the cause of

action is necessary if there is no alternative. As noted above, requiring a

nexus with an entire cause of action is unreasonable and inconsistent with

the intent of CPLR § 302(a). Assuming, arguendo, that there is no

alternative, requiring that plaintiffs find a nexus between the defendant’s

transaction and the plaintiff’s injuries cannot be correct for the same

reasons. There will be a clear nexus between the defendant’s transaction

and the plaintiff’s injuries only in breach of contract type cases where the

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injury and the transaction are one and the same. But CPLR § 302(a)(1) is

not limited to breach of contract cases; it applies even in certain tort cases,

as explained immediately below. See Longines-Wittnauer Watch Co. v Barnes

& Reinecke, 15 N.Y.2d at 464-67. Clearly, therefore, § 302(a)(1) can provide

jurisdiction despite that there is a disconnect between the defendant’s

actions and the plaintiffs injuries. All that is required under this theory is

that the elements of the cause of action regarding the defendant’s illegal

activities relate to its transaction in New York.

Longines22 involved negligence and breach of warranty claims

for an injury to a ten-year-old boy. Id. at 455, 464-65. He was attempting to

split a rock with a geologist’s hammer that was labeled “[u]nbreakable

[t]ools.” Unfortunately, a piece of the hammer broke off and penetrated his

right eye. Id. at 464-65. At issue in the case was whether the manufacturer,

an Illinois corporation that had shipped the hammer F.O.B. Illinois, was

subject to personal jurisdiction in New York pursuant to CPLR § 302.

Longines, 15 N.Y.2d at 465. The Court held that because the manufacturer’s

22 Longines addressed three consolidated cases. The one we

discuss here is Singer v. Walker.

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tortious act had occurred in Illinois and not in New York, CPLR § 302(a)(2)

did not apply. Longines, 15 N.Y.2d at 465-66. This Court nevertheless found

CPLR § 302(a)(1) applicable, explicitly stating that “[i]t is clear that

paragraph 1 is not limited to actions in contract; it applies as well to actions

in tort when supported by a sufficient showing of facts.” For example, a

foreign manufacturer that ships a substantial quantity of goods into the

state has transacted business in the state for the purposes of CPLR

§ 302(a)(1) and is thus liable for the torts that occur as a result. Longines, 15

N.Y.2d at 466. This is so despite that there is no clear nexus between the

manufacturer’s shipments and other interstate transactions with customers

in New York (the transaction(s)) and the impalement of a young New

Yorker’s right eye (the plaintiff-focused element of the cause of action).

Rather, operating under this theory, the nexus limitations demand that the

transaction relate to the defendant-focused elements of the cause of action

(for example, the defendant’s negligence and false advertising).

There is an alternative to splitting the cause of action into

pieces. The “cause of action” referred to in the statute is not elements of the

plaintiff’s legal theory, but their basis for seeking judicial intervention. It

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refers, quite literally, to the cause (the impetus) of their action (entering into

the trial court to file a complaint). Reading the statute this way is both

more consistent with the statutory language than is attempting to divide

the elements of a legal claim and it comports with the statute’s intent and

purpose (as discussed above).

Plaintiffs in this action have alleged various facts that give

them cause to seek judicial intervention against LCB pertaining to LCB’s

illegal funds transfers to Hizballah. Those facts all grow out of (i.e., arise

from) LCB’s various transactions in New York with AmEx. The Plaintiffs

thus easily meet this standard.23

23 If this Court opts to adopt the Second Circuit’s claim-splitting

approach and requires the Plaintiffs to show a nexus between the legal elements pertaining to LCB’s illegal funds transfers to Hizballah (the cause of action) and their transactions with AmEx in New York (the transaction), Plaintiffs can meet that standard as well. The precise nature of the legal elements, however, are still in dispute and will likely have to be resolved in subsequent litigation in the Second Circuit and the district court.

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POINT VII

PLAINTIFFS’ POSITION IS MODEST AND DOES NOT OPEN THE PROVERBIAL “FLOODGATES OF LITIGATION”

Whenever a plaintiff argues for a jurisdiction in a case of first

impression or where prior precedent is not obviously controlling as to the

question of jurisdiction, defendants almost invariably retort that the

plaintiffs’ arguments will open the “floodgates of litigation.” However,

Plaintiffs do not believe that the position they advance here will lead to any

significant increase in the workload of New York’s courts.

Plaintiffs’ requests are both consistent with—indeed, drawn

from—prior precedent, careful statutory textual analysis, and an

exploration of the legislative history. Plaintiffs’ requests are also modest.

They ask this Court to grant jurisdiction only where a plaintiff’s cause of

action originates from the New York transactions of the defendant, while

defining the word “transactions” in a manner consistent with prior

precedent and common sense.

If this Court rules in Plaintiffs’ favor, the universe of cases that

would then be able to be brought in New York courts, but which could not

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otherwise be brought in New York Courts under some other jurisdictional

ground, is quite small.

We are dealing here with plaintiffs injured outside of New

York as a result of the conduct of others which was actively sought out by

the defendant and facilitated or funded by wire transfers through a New

York bank. While the Plaintiffs’ arguments are not limited to the specific

facts of this case, many cases that might seem to fall within the bounds of

the theories that the Plaintiffs here advance actually already are subject to

jurisdiction pursuant to other aspects of the long arm statute. Further,

many of those cases that would be granted jurisdiction solely on the basis

of the arguments presented here will likely be unable to meet causation

standards embedded in substantive law.

Granting jurisdiction in this case will do a great deal to clarify

the State of New York’s jurisdictional law, its definition of “transaction”

pursuant to CPLR § 302(a)(1), and the nature of the nexus limitations. It

will also facilitate just actions by a limited number of parties harmed who

wish to legitimately seek redress in New York. It will not open the

floodgates of litigation.

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CONCLUSION

For the foregoing reasons, this Court should answer the Second

Circuit’s certified questions affirmatively and rule definitively that the

courts of New York have personal jurisdiction over the Defendant in this

litigation.

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Dated: Brooklyn, New York July 5, 2012

Respectfully submitted,

THE BERKMAN LAW OFFICE, LLC Attorneys for the Petitioners-Appellants

by: Robert J. Tolchin

111 Livingston Street, Suite 1928 Brooklyn, New York 11201 (718) 855-3627

Of counsel: Robert J. Tolchin, Esq. Attorney of record Meir Katz, Esq. pro hoc vice (pending) Law student interns Aviva Vogelstein and Glen Argov assisted in the

preparation of this brief