United States: New York Court Of Appeals Answers Questions On When Jurisdiction Can Be Established Based On New York Correspondent Accounts

Keywords: New York Court of Appeals, non-US banks, Licci decision

The New York Court of Appeals has issued an opinion that could have significant implications for non-US banks that have limited operations in the United States. In Licci v. Lebanese Canadian Bank, SAL, the Court of Appeals confirmed that maintaining a correspondent banking account will not support the exercise of jurisdiction over a non-US bank in matters unrelated to the non-US bank's use of the correspondent bank account, but further held that correspondent banking transactions could establish New York jurisdiction over banks in cases with a close nexus to those transactions.

In the Licci case, jurisdiction was proper over the defendant because "[the defendant] did not route a transfer for a terrorist group once or twice by mistake. Rather, plaintiffs allege that [the defendant] deliberately used a New York account again and again to effect its support of [the financial arm of Hezbollah] and allegedly shared terrorist goals." The decision comes in response to questions certified by the Second Circuit.1

The Licci plaintiffs alleged that the defendant banks facilitated financial transactions by Hizballah, and that Hizbollah is responsible for their injuries in rocket attacks against Israel. One defendant, Lebanese Canadian Bank, SAL (LCB), is a now-defunct Lebanese bank, which had no branches, offices or employees in the United States. LCB's only alleged point of contact with the United States was a correspondent account in New York, maintained at co-defendant American Express Bank (Amex).

Plaintiffs brought claims in the Southern District of New York against LCB under the Anti- Terrorism Act (ATA), both as a primary violator and for aiding and abetting; under the Alien Tort Statute (ATS), for aiding and abetting genocide, war crimes and crimes against humanity in violation of international law; and under Israeli law, for negligence and alleged breaches of statutory duty.

The plaintiffs asserted specific jurisdiction2 under CPLR 302(a)(1), which applies when a defendant transacts business in the state of New York and the cause of action arises from that transaction.

On appeal from the district court order granting LCB's motion to dismiss, the Second Circuit certified two questions to the New York Court of Appeals relating to each prong of CPLR 302(a)(1):

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 wire transfers on behalf of a foreign client, constitute a transaction of business in New York within the meaning of CPLR § 302(a)(1); and

2. Do the plaintiffs' claims "arise from" LCB's transaction of business in New York within the meaning of CPLR § 302(a)(1)?

The Court of Appeals held that where a complaint alleges a foreign bank's repeated use of a correspondent account in New York on behalf of a client, the complaint alleges "purposeful availment of New York's dependable and transparent banking system." Thus, according to the Court of Appeals, the Licci complaint alleged sufficiently purposeful activity to constitute a "transaction of business" in New York. In so holding, the Court of Appeals distinguished Tamam v. Fransabank SAL, in which the US District Court for the Southern District of New York dismissed similar terrorism-related ATS claims against several Lebanese banks for lack of personal jurisdiction. The Court of Appeals explained that, in Tamam, "the Lebanese banks did not transact business in New York because the plaintiffs (unlike plaintiffs here) did not allege actual transfers from Hizballah front group accounts in Lebanon through correspondent banks in New York."

The Court of Appeals then considered whether plaintiffs' claims "arise from" LCB's transaction of business in the state of New York. The court held that the inquiry is "relatively permissive" and that all that is required is that the claims at issue are "in some way arguably connected to the transaction [in New York]." The court - noting that it must accept the allegations in the complaint as true, including that LCB engaged in terrorist financing by using its account in New York to transfer the funds needed to support the terrorist activity - held that the pleadings established the "articulable nexus" needed to survive a motion to dismiss on the basis of personal jurisdiction.

In the wake of Licci, plaintiffs likely will try to exploit the decision to subject non-US banks to the jurisdiction of New York courts in cases that have little connection to New York. We anticipate seeing allegations framed to connect defendants' use of New York accounts to plaintiffs' injuries in non-US jurisdictions.We also expect to see more aggressive requests for discovery into the use of correspondent accounts by non-US institutions. Plaintiffs may find it relatively simple to make conclusory allegations that a defendant bank has a correspondent account that was used, somehow, in connection with the events at issue; it remains to be seen how much specificity courts will require before permitting discovery into those accounts.

Defendants, meanwhile, can point out that the New York Court of Appeals held, in Licci, that the jurisdictional determination is "nuanced" and fact specific, which suggests that a defendant bank's maintenance of a New York correspondent account does not always, or automatically, confer jurisdiction.

The Licci decision left a number of questions open.

The precise meaning of "repeated" use of an account is one such open question: how many transactions are necessary to raise the inference that the use of a New York correspondent account was purposeful? The implication that banks may route dollar transactions through New York "once or twice by mistake" seems at odds with usual bank practice, and it is not clear whether repetition is necessary if intent can be shown more directly.

Another question arises from the court's suggestion that the repeated use of a New York account on behalf of the same customer indicates that routing transactions through New York posed some particular intended benefit. It is unclear how the courts will treat a repeated course of conduct on behalf of different bank customers. The court also seemed to suggest that receiving transfers from New York might be less purposeful than sending them through New York.

A final issue is whether the holding is limited to claims such as terror financing, where the wire transfer itself is the alleged tort, or whether it extends to commercial cases in which the transactions are more ancillary to the alleged wrong. As the Court of Appeals noted, in Licci itself, "the alleged breaches occurred when LCB used the New York account."


1 For more information, see our April 4, 2012 Legal Update at http://www.mayerbrown.com/New-York-High-Court- May-Consider-Whether-Use-of-a-New-York- Correspondent-Account-Can-Create-Personal-Jurisdiction- Over-Non-US-Bank-04-04-2012/ .

2 If LCB had a branch or another office in New York, then LCB could be sued in New York for any type of claim, even a claim with no relationship to New York, based on LCB's presence in New York (this is known as "general jurisdiction"). But LCB had no New York branch or office, and New York courts have long held that the maintenance of a correspondent account is not the equivalent of maintaining a branch or office. Accordingly, LCB could not be subject to "general jurisdiction" in New York.

Previously published on January 11, 2013.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2013. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions