H/T to Alison Frankel for the pointer to the oral arguments in Linde v. Arab Bank plc, which was heard in the Second Circuit earlier this week. The case is timely in light of the recent ABA resolution on Aérospatiale and foreign data protection laws.
The claim in the case is the the Arab Bank, a leading Jordanian bank with offices around the world (including in New York), is liable to the plaintiffs for injuries suffered in terrorist attacks in Israel and the Palestinian territories because, according to the complaint, the Bank acted as banker to the terrorists behind the attacks. In particular, the claim is that the Bank
knowingly and intentionally, both directly and indirectly, facilitated the attacks by the Islamic Resistance Movement (“HAMAS”), the Palestinian Islamic Jihad (“PIJ”), the Al Aqsa Martyrs’ Brigade (“AAMB”), and the Popular Front for the Liberation of Palestine (“PFLP”) by “soliciting, collecting, transmitting, disbursing and providing the financial resources that allowed those organizations to flourish and to engage in a campaign of terror, genocide, and crimes against humanity in an attempt to eradicate the Israeli presence from the Middle East landscape.”
The issue in the case was what sanction should be imposed on the bank for its failure to comply with the Court’s order to provide discovery. The bank justified its refusal on the grounds that it could not violate applicable foreign bank secrecy laws in Jordan, Lebanon, and the Palestinian territories. But Judge Gershon imposed a very harsh sanction, though short of a default judgment. She ruled that the jury would be instructed that it could infer that the bank provided financial services to foreign terrorist organizations and that the bank acted knowingly and purposefully. She also precluded the bank from making any argument or offering any evidence that would tend to prove its state of mind or any other fact “that would find proof or refutation in withheld documents.” Yikes!
The bank appealed and in the alternative, sought a writ of mandamus. Here are links to the Bank’s brief, the plaintiffs’ brief, the Bank’s reply, and a brief filed by Jordan as an amicus curiae.
The Bank’s case is that it made serious efforts to produce the requested records to the plaintiffs without violating the relevant bank secrecy laws. For example, the Bank obtained information from account holders in Lebanon and Saudi Arabia to produce documents, and that the Bank successfully obtained permission from Jordan to produce information, though that decision was reversed on appeal in Jordan. The Bank says that the sanctions order deprives it of a meaningful defense and violated both the Due Process Clause and the doctrine of comity. The plaintiffs responded that the Bank had not acted in good faith: it had, for example, not turned over suspicious activity reports it was required to file with the government, nor did it turn over documents it had previously turned over to the Office of the Comptroller of the Currency—without obtaining prior customer assent—when the OCC was investigating the bank (the investigation ultimately led to a $24 million fine). The plaintiffs’ brief is redacted, so it’s hard to say, but they seem to be suggesting that the Bank did not seriously seek foreign government approval to disclose the records. The Jordanian amicus brief is particularly interesting because it focuses on the political aspects of the case: the friendly relations between the United States and Jordan and the “grave risks to the region” that will arise if the Bank loses the case. (This argument may be a little much! Even if the Bank had disclosed everything, it still could lose the case, and the “grave risks” Jordan predicts would then still come to pass).
Note at the outset that neither Jordan nor Lebanon is a party to the Hague Evidence Convention, so the issue that sometimes arises about whether a party should have to make first resort to a letter of request under the Convention is not present as to the documents in Jordan and Lebanon. Israel, however, is a party to the Convention, and it’s not clear to me whether there was a path for obtaining documents located in the West Bank by letter of request to Israel’s central authority under the Convention. That’s just an aside, though.
Because of the procedural posture of the case, the issue for the Second Circuit is not whether the trial judge was right, in the first instance, to require production of the documents notwithstanding the bank secrecy laws. Instead, the issue is the severity of the sanction. Under Second Circuit precedent, the test for deciding whether to sanction a disobedient party is the same as the test for deciding whether to compel the discovery in the first place.
Leaving the due process issues to the side, the case does present the comity issue in a striking way. The United States would seem to have a very strong interest in protecting its citizens (the plaintiffs in the Linde case, one of several consolidated cases, are US citizens, citizens of Israel, or citizens of both the US and Israel) from terrorist attacks and in holding terrorist financiers to account. The requests seemed fairly specific. The documents were important to the case, as it is difficult to see how the plaintiffs could obtain evidence of the bank’s state of mind except from the bank. There appeared to be no alternative means of obtaining the information. Indeed, the only factor in the analysis that seemed to favor the bank was that the information originated in the foreign countries rather than in the United States. Suppose you take the view that the trial judge’s basic decision to require production despite the foreign statutes was an error. Then it seems to me you have to say that the origin of the information is entitled to special weight in the analysis or that the analysis (which is set out in § 442 of the Restatement (Third) of the Foreign Relations Law of the United States) is not really the right analysis after all. If the Restatement factors are the right factors, and if you dont’ give a special oomph to the geographic origin of the documents, then it is hard not to conclude that the judge’s balancing of the factors was within her discretion.
That is not to say, however, that the sanctions were appropriate. In Société Internationale pour Participations Industrielles et Commerciales, S.A. v. Rogers, 357 U.S. 197 (1958), the Court emphasized the weight that a court must give to a claim that a sanction is inappropriate because the non-disclosing party was prevented by foreign law from complying with the US court’s order. So if the Bank wins in the Second Circuit, perhaps it will be because the sanctions analysis is not the same as the underlying discoverability analysis after all.