Case of the Day: Wultz v. Bank of China

The case of the day is Wultz v. Bank of China (S.D.N.Y. 2012). In 2006, Daniel Wultz was killed, and Yekutiel Wultz injured, in a suicide bombing in Tel Aviv. Members of the Wultz family sued the Bank of China, alleging that the bank had violated the Antiterrorism Act, 18 USC [section] 2333, and that it was guilty of negligence etc.

In 2011, the Wultzes served a request for production of documents on the bank seeking documents relating to acounts relating to Said al-Shurafa, allegedly the leader of the Palestinian Islamic Jihad, the group responsible for the bombing, and other documents. The bank refused to comply, citing China’s bank secrecy laws. The Chinese bank regulator, the People’s Bank of China, indicated, however, that Chinese judicial authorities would provide reasonable assistance in response to a proper request under the Hague Evidence Convention.

Accordingly, the bank asked the court to issue a letter of request, and the judge agreed. However, more than a year passed and the court received no response from the Chinese central authority. After several more months of delay, the judge issued an order setting a deadline for production of all documents. Ultimately the Wultzes moved to compel.

The judge conducted an Aerospatiale analysis to determine whether discovery from the Bank had to be taken pursuant to the Convention rather than the FRCP. The judge undertook this analysis in the shadow of cases such as Tiffany v. Qi, in which the court ordered the Bank of China to produce documents under the FRCP over a claim that production would violate Chinese law and where the Bank was not a party. “The fact that in the instant case [the Bank] is a party doing business in the United States, and that some of the requested discovery may be physically present in the United States at [the Bank’s] New York branches, makes the case for compelling production even stronger.” The judge also noted that in the earlier cases such as Qi, it appeared that China had not sanctioned the Bank for obeying US discovery orders, though the Chinese government did, the Bank claimed, give a “severe warning.”

With these thoughts in mind, the judge turned to the Aerospatiale factors. The importance to the action of the categories of documents requested was undisputed, though the judge agreed with the Bank that certain requests were overbroad. In particular, the judge held that the requests were overbroad “to the extent [they] call for the production of confidential regulatory documents created by the Chinese government whose production is clearly prohibited under Chinese law.” Such documents raise particular sovereignty and comity concerns. Overall, the first and second factors—the importance of the documents to the case and the specificity of the requests—weighed in favor of production once the requests were suitably narrowed.

At least some of the documents originated in China. Thus the third factor weighed against production.

The fourth factor considers the availability of alternate means of obtaining the information. The Bank pointed to a consensus between the United States government and the Chinese government that bilateral means such as the Hague Evidence Convention were in general to be preferred to unilateral means. The judge agreed in general with the governments’ consensus view, but he concluded that China was construing its obligations under the Convention too narrowly and failing to produce documents relevant to US litigation. Moreover, the long delay in this case—more than a year—made it difficult to see the Convention as a reasonable alternative. This factor thus weighed in favor of production.

The fifth factor weighs the competing national interests. The United States had a compelling interest in combating terrorism by disrupting the financial networks that finance terrorism. China asserted an interest in the development of its banking industry through the enforcement of its banking secrecy laws. But the judge concluded that “the Chinese interest in building confidence in its banking industry does not encompass an interest in protecting the confidentiality of those who participate in the funding of international terrorism.” Thus the judge held that this factor weighed in favor of production.

The Second Circuit considers additional factors not present in Aerospatiale itself, namely hardship and the good faith of the party resisting discovery. In light of the lack of sanctions for violation of the Chinese bank secrecy law and the fact that the New York offices of the Bank are branches rather than separate corporations and thus that the Bank has control of the documents held by the branches, the judge found no hardship. The judge found that the bank, by refusing to undertake a search of its electronic records until the requests were narrowed, had acted wrongly, but she refused to find that the bank had acted in bad faith.

Weighing all these factors, the judge ordered discovery. Although the judge’s discussion was thorough and detailed, in the end, this case seems to be just another example of the general US approach to document discovery of foreign parties notwithstanding foreign bank secrecy laws.

One response to “Case of the Day: Wultz v. Bank of China”

  1. […] case of the day is Wultz v. Bank of China Ltd. (S.D.N.Y. 2013). We first considered this case in November 2012. Here was my description of the facts from the prior […]

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