Tag Archives: Lebanon

Case of the Day: United States v. Lebanese Canadian Bank SAL

The case of the day is United States v. Lebanese Canadian Bank SAL (S.D.N.Y. 2012). Following a Drug Enforcement Agency investigation into an “alleged scheme to launder money through the U.S. financial system and the used car market, for the benefit of Hizballah, designated as a Foreign Terrorist Organization by the U.S. Department of State,” the government brought an in rem civil forfeiture action and and also brought a civil money laundering action against several used car purchasers and several foreign financial institutions: Lebanese Canadian Bank SAL, Ellissa Holding Company, and Hassan Ayash Exchange Co., each of which was located in Lebanon; Salhab Travel Agency and STE Marco SARL, located in Togo; and STE Nomeco SARL, located in Benin. Neither Lebanon, Togo, nor Benin is a party to the Hague Service Convention.

On the in rem forfeiture claim, Lebanese Canadian, Ayash, and Ellissa had filed claims to the property in question, as they was required to do under Rule E of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions if they wanted to contest the government’s claim that the property was subject to forfeiture. But under Rule E(8):

An appearance to defend against an admiralty and maritime claim with respect to which there has issued process in rem, or process of attachment or garnishment, may be expressly restricted to the defense of such claim, and in that event is not an appearance for the purposes of any other claim with respect to which such process is not available or has not been served.

Lebanese Canadian, Ayash, and Ellissa expressly restricted their appearances as provided in the rule, though as we shall see, the effect of their effort to restrict their appearance was not what they thought it would be.

The government then moved for leave to serve LCB, Ayash, and Ellissa by alternate means under FRCP 4(f)(3), namely, by mail directed to the US lawyers who had submitted the claims in the in rem action on their behalf. I’ve frequently reported on cases where a US lawyer surfaces for a foreign defendant in a lawsuit for one reason or another and then becomes the means for the plaintiff to effect service of process cheaply and easily. In the usual case, the lesson is that if you are a foreign defendant and you want to avoid service of process come what may, don’t have your US lawyer make an appearance in the case. In this case, the foreign defendants didn’t have a choice, at least as long as they were intent on challenging the forfeiture claims.

The defendants made an interesting argument, asserting that allowing service by alternate means would violate Rule E(8). There are several ways the judge could have responded to this challenge. The judge rejected the argument, supported by some precedent in the SDNY, that Rule E(8), which on its face applies only to admiralty and maritime cases, is simply inapplicable in civil forfeiture cases. I think another approach would have been to say that even if Rule E(8) did apply, making alternate service on the lawyers does not violate the rule, which simply provides that the act of entering an appearance for the purpose of asserting a claim to a res is not a general appearance for all purposes. The judge went on, as one would expect, to authorize service by alternate means. The judge also granted the motion, without discussion, for letters rogatory to Lebanon, Togo, and Benin for service on those defendants who had not filed claims in the in rem case.

Case to Watch: Linde v. Arab Bank

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.

Case of the Day: Nasr v. El-Harke

The case of the day, Nasr v. El-Harke (Minn. Ct. App. 2011), involves recognition and enforcement of a Lebanese child custody order. Ordinarily I do not cover the child custody cases my Westlaw query captures, which generally arise under the Hague Convention on the Civil Aspects of International Child Abduction. For one thing, there are a lot of them—on many that they might overwhelm the blog if I tried to keep up. For another thing, the Convention is more or less sui generis, and cases arising under it may not be of much interest to folks who don’t handle family law cases. But Nasr is interesting to me for two reasons. First, Lebanon is not a party to the Convention, and the case arises instead under the Uniform Child Custody and Jurisdiction Act. Second, most of the cases that get caught by my Letters Blogatory Westlaw query  are applying the Convention in the first instance. In Nasr, the issue is whether the US court should recognize and enforce the foreign court’s custody decision. So without any promise that I’ll be covering this area going forward: the Nasr case!

Marcelle El-Harke, the mother, married Khaled Nasr, the father, in Lebanon under the auspices of the Greek Orthodox Church. They had a child. The father was a Lebanese citizen. The mother and the child were citizens of both Lebanon and the US. Until 2009, the family resided in Lebanon and Kuwait.

In 2009, the mother took the child to the US without the father’s permission and sought a restraining order against the father, alleging that he was guilty of domestic abuse. The court issued the order, but the father sought to dismiss it on the grounds that the Minnesota court lacked personal jurisdiction over him. The court agreed and dismissed the order. The father then sought and obtained an order from the Greek Orthodox Holy Church in Lebanon compelling the mother to return the child to Lebanon and providing for shared custody of the child. After obtaining the order, the father sought recognition and enforcement in the Hennepin County (Minnesota) District Court. The District Court refused to recognize or enforce the order because the mother had not had notice of the Lebanese proceeding.

The father then sought a divorce in Lebanon, and this time the mother had notice and participated in the proceedings. The Lebanese court granted the divorce and reaffirmed its earlier order regarding return of the child to Lebanon and shared custody. The father again sought recognition and enforcement in the Minnesota court. This time, the Minnesota court ruled in favor of the father. The mother then appealed.

By way of background Section 105 of the Act provides that the court must recognize and enforce “a child-custody determination made in a foreign country under factual circumstances in substantial conformity with the jurisdictional standards” unless “the child custody law of a foreign country violates fundamental principles of human rights.” Under Section 201 of the Act, a court has jurisdiction of a child custody matter if several factors are present. The only factor at issue in Nasr is that the state where the court is located is the home State of the child on the date of the commencement of the proceeding, or was the home State of the child within six months before the commencement of the proceeding and the child is absent from this State but a parent or person acting as a parent continues to live in this State.” There was no question that Lebanon was the child’s home state within six months before the commencement of the proceeding in Lebanon. The mother, however, challenged the lower court’s finding that the father had continued to live in Lebanon. The mother had submitted an affidavit in the Lebanese proceeding stating that the father lived 70% of the time in Kuwait and 30% of the time in Lebanon. On the other hand, the Lebanese court had found that the father “reside[d]” in Kuwait. Given the mixed evidence, the court found that the lower court had not erred in finding that the father had continued to live in Lebanon, noting that “living” did not have the connotation of “residing” or “domiciled”, which require an intent to stay.

The mother also argued that the lower court had improperly excluded as hearsay evidence showing that “Lebanese law violates fundamental principles of human rights.” But the court pointed out that this evidence did not pertain to the Lebanese child custody laws, which must be the focus of the inquiry. The mother argued that the burden of explaining the Lebanese child custody laws should have been on the father for practical reasons, but she offered no authority for her assertion, and the court rejected it.

Last, the mother argued that the Lebanese order should not be recognized and enforced because Lebanon was not a party to the Hague Convention, but again, the court noted that the mother had offered no authority for that proposition.