Lelchook et al v. Islamic Republic of Iran et al

Filing 156

ORDER granting 154 Motion for Default Judgment Ordered by Judge I. Leo Glasser on 6/27/2019. (Perlman, Alexa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------------------------x
ESTER LELCHOOK, individually and as personal
representative of the Estate of David Martin Lelchook,
MICHAL LELCHOOK, YAEL LELCHOOK,
ALEXANDER LELCHOOK, and DORIS LELCHOOK,
Plaintiffs,

MEMORANDUM AND ORDER
16-CV-07078

- against THE ISLAMIC REPUBLIC OF IRAN, THE
CENTRAL BANK OF THE ISLAMIC REPUBLIC
OF IRAN (a/k/a Bank Markazi Jomhouri Islami Iran),
BANK SADERAT IRAN, and BANK SADERAT, PLC,
Defendants.
---------------------------------------------------------x
GLASSER, Senior United States District Judge:
Plaintiffs Ester Lelchook, individually and as representative of the Estate of David Martin
Lelchook (“Lelchook”), Michal Lelchook, Yael Lelchook, Alexander Lelchook, and Doris
Lelchook1 (collectively, “Plaintiffs”) brought claims pursuant to the Anti-Terrorism Act, 18 U.S.C.
§ 2331, et seq., Israeli negligence laws, and Massachusetts tort law against Defendants Islamic
Republic of Iran, Central Bank of the Islamic Republic of Iran, Bank Saderat Iran (“BSI”), and
Bank Saderat, PLC (“BSPLC”). (ECF No. 81 “Amended Complaint”). On August 10, 2018,
BSPLC’s attorney moved to withdraw from this action on the basis that BSPLC discharged him.
(ECF No. 135-1). After finding that the same attorney is representing BSPLC in another matter
and BSPLC “simply directed it to cease working on the Lelchook case,” Chief Magistrate Judge
Mann warned BSPLC that should its counsel withdraw, the Court will enter a default judgment

1

Doris Lelchook, the late mother of David Lelchook, was alive when this action was filed but died
on December 5, 2018. On February 24, 2019, the Court substituted Alexander Lelchook, the
Executor of Doris Lelchook’s estate, as plaintiff.
1

against the unrepresented entity. (ECF No. 143). On August 30, 2018, BSPLC’s counsel
confirmed its withdrawal. (ECF No. 147). On September 28, 2018, the Clerk of the Court entered
a Certificate of Default. Pending now before the Court is Plaintiffs’ motion for default judgment
against BSPLC pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure. (ECF No. 154).
For the reasons explained below, Plaintiffs’ motion is GRANTED as to liability, and in
accordance with Rule 55(b)(2) and 28 U.S.C. § 636(b)(1)(A), the issue of damages is respectfully
referred to Chief Magistrate Judge Mann to hear and determine.
BACKGROUND
On August 2, 2006, Lelchook was riding his bicycle on a kibbutz in Israel when he was
struck and killed by a rocket fired by the Hezbollah terrorist organization, which was established
by the Islamic Republic of Iran in 1982. (Amended Complaint ¶¶ 1, 26). Since 1982, Hezbollah
has been operated, controlled, and funded by Iran through Iran’s wholly-owned banks, including
Defendant BSI and its subsidiary BSPLC. (Id. at ¶¶ 13-15, 27). Hezbollah requires financial
support to (a) build and maintain its operational infrastructure for the planning and execution of
terrorist attacks, (b) purchase and store weapons, explosives, and other material used to commit
terrorist attacks, (c) pay, train, transport, and shelter its terrorists, and (d) carry out specific terrorist
attacks. (Id. at ¶ 110). Between 2001 and 2006, Defendants, including BSPLC, provided
Hezbollah with over 50 million United States Dollars (“USD”) in the following manner: the
Central Bank of Iran transferred Iran’s USD funds to BSI, BSI transferred those funds to BSPLC
in London, BSPLC transferred the funds to BSI’s branches in Lebanon, which are controlled by
Hezbollah, and Hezbollah received the funds from there. (Id. at ¶¶ 110-11). The purpose of those
transfers was to accomplish the objectives listed above, which advances Iran’s policy and goal of
intimidating and influencing the United States government and the public at large. (Id.).

2

The United States government confirmed those money transfers and in September 2006,
BSI and BSPLC were sanctioned and banned from accessing the United States financial system.
One year later, in October 2007, then-President George W. Bush designated the banks as Specially
Designated Global Terrorists based on “grave acts of terrorism” and an “unusual and extraordinary
threat . . . to the national security, foreign policy, or economy of the United States.” (Amended
Complaint ¶¶ 45-55). Plaintiffs, who are Lelchook’s Estate and family members, claim that the
$50 million transfer facilitated the Hezbollah rocket attack that killed Lelchook in August 2006,
which caused them financial and emotional harm. (Id. at ¶¶112-14).
LEGAL STANDARD
In deciding whether a default judgment should be entered following entry of a certificate
of default, a court may accept as true all well-pleaded allegations in the unanswered complaint but
must still satisfy itself that the plaintiff has established a sound legal basis upon which liability
may be imposed. Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981) (“[A] district
court has discretion under Rule 55(b)(2) once a default is determined to require proof of necessary
facts and need not agree that the alleged facts constitute a valid cause of action.”). A fact is not
“well-pleaded” if it is inconsistent with other allegations in the complaint or is “contrary to
uncontroverted material in the file of the case.” Chuchuca v. Creative Customs Cabinets Inc., No.
13-CV-2506 (RLM), 2014 WL 6674583, at *5 (E.D.N.Y. Nov. 25, 2014). Further, a pleading’s
legal conclusions are not assumed to be true. Id. Consequently, the factual allegations in the
complaint must themselves be sufficient to establish a right to relief. Id.
DISCUSSION
Plaintiffs aver that because BSPLC’s default is deemed an admission of all well-pleaded
factual allegations and a waiver of its personal jurisdiction defense, “all that remains . . . is to

3

determine plaintiffs’ damages.” (ECF No. 155 at 2-4). While BSPLC conceded the truth of
Plaintiffs’ allegations and waived its defenses, the Court must still protect the integrity of its
judgments and satisfy itself that Plaintiffs have established a sound legal basis upon which liability
may be imposed. Au Bon Pain Corp., 653 F.2d at 65. Further, Plaintiffs’ Amended Complaint
contains many legal conclusions, which are not taken as true for purposes of this motion.
Chuchuca, 2014 WL 6674583, at *5. Accordingly, the Court will address BSPLC’s liability as to
each of Plaintiffs’ claims below.
I.

Plaintiffs’ International Terrorism Claims Under 18 U.S.C. § 2333(a)
The Antiterrorism Act (“ATA”) provides that “[a]ny national of the United States injured

in his or her person, property, or business by reason of an act of international terrorism, or his or
her estate, survivors, or heirs, may sue therefor in any appropriate district court of the United States
. . . .” 18 U.S.C. § 2333(a). The ATA defines “international terrorism” to mean activities that
(A) involve violent acts or acts dangerous to human life that are a violation of the
criminal laws of the United States or of any State, or that would be a criminal
violation if committed within the jurisdiction of the United States or of any
State;
(B) appear to be intended—
(i)

to intimidate or coerce a civilian population;

(ii)

to influence the policy of a government by intimidation or coercion;
or

(iii)

to affect the conduct of a government by mass destruction,
assassination, or kidnapping; and

(C) occur primarily outside the territorial jurisdiction of the United States, or
transcend national boundaries in terms of the means by which they are
accomplished, the persons they appear intended to intimidate or coerce, or the
locale in which their perpetrators operate or seek asylum.

4

18 U.S.C. § 2331(1). Initially, the ATA afforded relief only against the principal perpetrators of
acts of international terrorism (“primary liability”), not against secondary actors who facilitated
such acts by others. Linde v. Arab Bank, PLC, 882 F.3d 314, 320 (2d Cir. 2018). However, on
September 28, 2016, Congress enacted the Justice Against Sponsors of Terrorism Act (“JASTA”),
which expanded liability under the ATA to include “any person who aids and abets, by knowingly
providing substantial assistance, or who conspires with the person who committed such an act of
international terrorism.” 18 U.S.C. § 2333(d)(2) (“secondary liability”). JASTA expressly states
that such aiding and abetting claims are not temporally limited to acts of international terrorism
occurring after the statute’s enactment, but can be asserted “as of the date on which such act of
international terrorism was committed, planned, or authorized.” Id. The amendment applies to
any civil action “(1) pending on, or commenced after the date of JASTA’s enactment; and (2)
arising out of an injury . . . on or after September 11, 2001.” Linde, 882 F.3d at 320.
Plaintiffs assert primary and secondary liability claims under the ATA.

(Amended

Complaint ¶¶ 184-202). In connection with their primary liability claim, they allege that BSPLC
itself committed an “act of international terrorism” by providing $50 million to a known terrorist
organization, which violated Sections 2339A, 2339B, and 2339C of Title 18 of the United States
Code. (Amended Complaint ¶¶ 184-92). They claim that BSPLC did so with the specific intent
to “intimidate or coerce a civilian population or to influence the policy of a government by
intimidation or coercion” to further Iran’s policy and goals by enabling Hezbollah to commit
specific terrorist attacks, including the August 2, 2006 rocket attack in Israel. (Id. at ¶¶ 110, 188).
The question here is whether providing financial assistance to known terrorist
organizations is a “violent act[] or act[] dangerous to human life” within the meaning of 18 U.S.C.
§ 2331(1). While the Second Circuit noted that providing routine financial support to terrorist

5

organizations is not “so akin to providing a loaded gun to a child,” it did not preclude this Court
from finding that such conduct is an act of “international terrorism.” Linde, 882 F.3d at 327 (“We
need not here decide whether we would . . . conclude that a jury could find that direct monetary
donations to a known terrorist organization satisfy § 2331(1)’s definitional requirements for an act
of terrorism.”). This Court has made such a finding before, reasoning that when banks such as
BSPLC route payments and maintain accounts for terrorist organizations to enhance their ability
to commit terrorist attacks, they are committing “acts dangerous to human life.” Miller v. Arab
Bank, PLC, 372 F. Supp. 3d 33, 45 (E.D.N.Y. 2019). The Court applies the same reasoning here.
Further, BSPLC acted with the specific intent to “intimidate or coerce a civilian population or to
influence the policy of a government by intimidation or coercion” and enabled Hezbollah to
commit attacks primarily outside the territorial jurisdiction of the United States. Accordingly,
BSPLC committed an act of “international terrorism” within the meaning of 18 U.S.C. § 2331(1).
Plaintiffs must also establish that the unlawful act of international terrorism was the
proximate cause of their injuries. Freeman v. HSBC Holdings PLC, No. 14-CV-6601 (DLI) (CLP),
2018 WL 3616845, at *12 (E.D.N.Y. July 27, 2018); 18 U.S.C. § 2333(a) (limiting recovery to
injuries sustained “by reason of an act of international terrorism.”); Crosby v. Twitter, Inc., 921
F.3d 617, 623 (6th Cir. 2019) (noting that “when Congress uses the phrase ‘by reason of’ in a
statute, it intends to require a showing of proximate cause.”). Probable cause in this context means
the conduct was a “substantial factor in the sequence of responsible causation” and the Court must
determine “whose injury was reasonably foreseeable or anticipated as a natural consequence.”
Rothstein v. UBS AG, 708 F.3d 82, 92 (2d Cir. 2013). Without monetary support from BSPLC
and the other Defendants, it is unlikely that Hezbollah would have had the means to plan for and
carry out the August 2, 2006 rocket attack that resulted in Lelchook’s death. Accordingly,

6

BSPLC’s conduct was a substantial factor in the sequence of carrying out that attack and it was
reasonably foreseeable that the attack would cause injury to him and his family. Therefore, the
Court finds that BSPLC’s act of international terrorism was the proximate cause of Plaintiffs’
injuries and BSPLC is primarily liable under the ATA.
Even if the Court concluded that BSPLC’s monetary support is not considered an act
dangerous to human life, the Court finds that BSPLC is liable under JASTA’s secondary aiding
and abetting provision.2

JASTA defines an act of “international terrorism” as one that is

“committed, planned, or authorized by an organization that had been designated as a foreign
terrorist organization under section 219 of the Immigration and Nationality Act . . . as of the date
on which such act of international terrorism was committed, planned, or authorized.” 18 U.S.C. §
2333(d)(2). Since 1997, the United States government has continuously designated Hezbollah as
a foreign terrorist organization, (Amended Complaint ¶ 31), and Hezbollah committed an act of
international terrorism through its rocket attack. Under JASTA, “any person who aids and abets,
by knowingly providing substantial assistance” to the organization who committed an act of
international terrorism can be found liable under the ATA. 18 U.S.C. § 2333(d)(2).
The proper legal framework for determining aiding and abetting liability under the ATA is
set forth in Halberstam v. Welch, 705 F.2d 472 (D.C. Cir. 1983), which described three elements
needed to establish liability: (1) “the party whom the defendant aids must perform a wrongful act
that causes an injury,” (2) “the defendant must be generally aware of his role as part of an overall
illegal or tortious activity at the time that he provides the assistance,” and (3) “the defendant must

2

Plaintiffs filed their Amended Complaint against BSPLC on September 9, 2016, approximately
three weeks before JASTA’s enactment. (ECF No. 81). Given that this action was “pending”
when JASTA was enacted and the claims arise out of a terrorist attack that occurred in 2006,
Plaintiffs’ claims are covered by JASTA. Freeman, 2018 WL 3616845, at *14 (noting that
Congress “intentionally enact[ed] JASTA to retroactively apply . . . .”).
7

knowingly and substantially assist the principal violation.” Freeman, 2018 WL 3616845, at *18.
To establish BSPLC’s “awareness” of its role, Plaintiffs need not establish the specific intent
required for criminal aiding and abetting or prove that BSPLC knew of a specific terrorist attack.
Id. at *19. The Court need only find that BSPLC was “generally aware” that it was playing a
“role” in Hezbollah’s violent or life-endangering activities. Id. Applying those elements here, the
Court finds that Hezbollah performed a wrongful act that caused Plaintiffs’ injuries and BSPLC
was more than generally aware that it was playing a significant role in financing that wrongful act.
In determining the third element, whether BSPLC knowingly and substantially assisted
Hezbollah’s rocket attack, the Court looks to the following factors: “(1) the nature of the act
encouraged, (2) the amount of assistance given by defendant, (3) defendant’s presence or absence
at the time of the tort, (4) defendant’s relation to the principal, (5) defendant’s state of mind, and
(6) the period of defendant’s assistance.” Miller, 372 F. Supp. 3d at 47 (citing Halberstam, 705
F.2d at 483-84). Providing banking services, “in an unusual way under unusual circumstances for
a long period of time,” supports the inference that the defendant provided knowing assistance. Id.
For that reason, in addition to the reasons noted above, the circumstances indicate that BSPLC
knowingly and substantially assisted Hezbollah’s rocket attack that killed Lelchook. Accordingly,
the Court finds BSPLC liable under JASTA’s secondary aiding and abetting provision to the ATA.
II.

Plaintiffs’ Ester, Michal, and Yael Lelchook’s Negligence Claim Under Israeli
Law
Plaintiffs Ester, Michal, and Yael Lelchook, who are Lelchook’s wife and daughters,

respectively, bring this negligence claim under Section 35 of the Israeli Civil Wrongs Ordinance
(“CWO”), which provides, in relevant part
Where a person does some act which in the circumstances a reasonable prudent
person would not do, or fails to do some act which in the circumstances such a
8

person would do, . . . then such act or failure constitutes carelessness and a person’s
carelessness as aforesaid in relation to another person to whom he owes a duty in
the circumstances not to act as he did constitutes negligence. Any person who
causes damage to any person by his negligence commits a civil wrong.3
Israeli law imposes liability for negligence in a manner similar to American tort law, requiring a
duty and a breach of that duty which causes injury to another. Wultz v. Islamic Republic of Iran,
755 F. Supp. 2d 1, 57–58 (D.D.C. 2010). However, the question of foreseeability, which in
American tort law is asked only when considering legal causation, is asked in Israeli law when
considering both duty and causation. Id. at 58.
Whether a duty exists depends on foreseeability and judicial policy considerations. Id.
Section 36 of the CWO elaborates on the foreseeability requirement and provides that “[f]or the
purposes of Section 35, every person owes a duty to all persons whom . . . a reasonable person
ought in the circumstances to have contemplated as likely in the usual course of things to be
affected by an act, or failure to do an act, envisaged by that section.” CWO § 36 (New Version) §
36 (2015). The factors to consider for judicial policy considerations include “the freedom of
activity of potential defendants; the protection of both the personal integrity and the property of
potential plaintiffs; the financial burden that would be imposed upon potential defendants if a duty
of care were to be imposed; the possible influence of the court’s decision on social behaviour; the
extent to which the risk that resulted in the damage was unusual and unreasonable; the relative
ability of the parties to spread the losses; the fear of burdening the courts with excessive litigation;
and the fear of groundless or fraudulent claims.” Wultz, 755 F. Supp. 2d at 59.
The Court finds that BSPLC had a duty to Plaintiffs because it provided financial support
to Hezbollah with full knowledge that its support would be used to commit terrorist attacks against

3

Plaintiffs cite to Civil Wrongs Ordinance (New Version) 1968 for its negligence claim, but the
Court will rely on the latest version from 2015 to determine BSPLC’s liability.
9

innocent victims like Lelchook. Therefore, BSPLC not only could have, but did, foresee the
injurious result of its monetary support to Hezbollah. Further, under Israeli law, “a duty attaches
to banks under a theory of negligence in cases where there is a direct relationship between the
bank’s functions and property interest.” Id. at 60. “Usually, such relationships exist directly
between a bank and its customers, but it can involve third parties who rely on the proper conduct
of a bank’s operations or whose financial interests may be directly affected by the bank’s conduct.”
Id. That reasoning applies here and BSPLC was under a duty to refrain from providing financial
support to Hezbollah when it knew that its support would result in violent terrorist attacks, injuring
the public at large. BSPLC acted unreasonably in providing that support, committing a breach,
which facilitated the August 2006 rocket attack and caused Plaintiffs’ injuries. Accordingly,
BSPLC is liable for negligence under CWO § 35.
III.

Plaintiffs’ Ester, Michal, and Yael Lelchook’s Aiding and Abetting Claim Under
Israeli Law
Plaintiffs Ester, Michal, and Yael Lelchook also bring an aiding and abetting claim under

Section 12 of the CWO, which provides that “any person who joins or aids in, authorizes, counsels,
commands, procures or ratifies any act done or to be done, or any omission made or to be made,
by any other person will be liable for such act or omission.” Having already found that BSPLC
intentionally aided Hezbollah in committing violent terrorist attacks, the Court finds that BSPLC
is liable under CWO § 12.
IV.

Plaintiffs Doris and Alexander Lelchook’s Intentional Infliction of Emotional
Distress Claim Under Massachusetts Law
Plaintiff Doris Lelchook, who was Lelchook’s mother, claims that BSPLC intended to

cause her emotional distress when it provided financial support to Hezbollah to carry out the

10

August 2006 rocket attack. Under Massachusetts law, “[t]o sustain a claim of intentional infliction
of emotional distress, a plaintiff must show (1) that the defendant intended to cause, or should have
known that his conduct would cause, emotional distress; (2) that the defendant’s conduct was
extreme and outrageous; (3) that the defendant’s conduct caused the plaintiff’s distress; and (4)
that the plaintiff suffered severe distress.” Roman v. Trustees of Tufts Coll., 461 Mass. 707, 717–
18, 964 N.E.2d 331, 341 (2012). Liability for “extreme and outrageous” conduct “cannot be
predicated upon mere insults, indignities, threats, annoyances, petty oppressions, or other
trivialities, nor even is it enough that the defendant . . . intended to inflict emotional distress, or
even that his conduct has been characterized by malice, or a degree of aggravation which would
entitle the plaintiff to punitive damages for another tort; rather, liability may be found only where
the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all
possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized
community.” Id.
The Court already found that BSPLC should have known that providing Hezbollah with
the necessary funds to plan for and commit violent acts of terrorism would cause emotional distress
to the attack’s victims and their family members. In reviewing the standing requirements under
the ATA, this Court noted that “[f]amily members do not need to be present for the terrorist attacks
to recover under the ATA, because a terrorist attack is precisely the sort of situation in which
presence at the time is not required in light of the severity of the act and the obvious range of
potential grief and distress that directly results from such a heinous act.” Miller, 372 F. Supp. 3d
at 41. It is that reasoning which leads the Court to conclude that BSPLC’s conduct was so
outrageous in character and was intended to cause severe emotional distress to Lelchook’s family

11

members. Because its rocket attack did cause such distress, (Amended Complaint ¶ 225), BSPLC
is liable for intentional infliction of emotional distress under Massachusetts law.
CONCLUSION
For the reasons set forth above, Plaintiffs motion for a default judgment against BSPLC is
GRANTED as to liability, and in accordance with Rule 55(b)(2) and 28 U.S.C. § 636(b)(1)(A),
the issue of damages is respectfully referred to Chief Magistrate Judge Mann to hear and
determine.
SO ORDERED.
Dated:

Brooklyn, New York
June 27, 2019
/s
___
I. Leo Glasser

12

U.S.D.J.