Wultz et al v. Bank of China Limited
Filing
145
OPINION AND ORDER: re:#101286 #132 MOTION Concerning the State of Mind Required for Imposition of Liability Under Plaintiffs' Israeli Law Claims. The Court will apply Israeli law as construed above. The Clerk of the Court is directed to close this motion [Docket No. 132]. (Signed by Judge Shira A. Scheindlin on 1/9/2012) (pl) Modified on 1/9/2012 (pl). Modified on 1/12/2012 (jab).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------------------- )(
SHERYL WUL TZ, individually, as
personal representative of the Estate of
Daniel Wultz, and as the natural
guardian of plaintiff Abraham Leonard
Wultz, YEKUTIEL WUL TZ,
individually, as personal representative
of the Estate of Daniel Wultz, and as the
natural guardian of plaintiff Abraham
Leonard Wultz, AMANDA WUL TZ, and :
ABRAHAM LEONARD WUL TZ, minor, :
by his next friends and guardians
Sheryl Wultz and Yekutiel Wultz,
IUSOCSDNY
.
.
DOCUMENT
, ELFCfRONlCALLY FlLEDj~
DOC#:
DATE FI-l.f-;D-: ;-'17J1~9lL-:::_
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OPINION AND ORDER
11 Civ. 1266 (SAS)
Plaintiffs,
- againstBANK OF CHINA LIMITED,
Defendant.
----------------------------------------------------- )(
SHIRA A. SCHEINDLIN, U.S.D.J.:
I.
INTRODUCTION
This suit arises out of the death of Daniel Wultz and the injuries of
Yekutiel Wultz, suffered in a 2006 suicide bombing in Tel Aviv, Israel. Four
members of the Wultz family brought suit against Bank of China ("BOC" or "the
Bank") and other defendants, alleging acts of international terrorism and aiding and
1
I
abetting international terrorism under the Antiterrorism Act (“ATA”),1 as well as
negligence, breach of statutory duty, and vicarious liability under Israeli law.
Plaintiffs have filed a motion requesting that the Court determine the state of mind
required for the imposition of tort liability under Israeli law.
II.
BACKGROUND
The complaint contains the following factual allegations: On April
17, 2006, the Palestinian Islamic Jihad (“PIJ”) carried out a suicide bombing in Tel
Aviv, Israel,2 severely injuring sixteen-year-old Daniel Wultz and his father,
Yekutiel Wultz, both Florida residents.3 Daniel Wultz died of his injuries on May
14, 2006.4 The attack killed ten others and injured many more.5
The PIJ, an organization founded in the Gaza Strip in the early 1980s,6
seeks “the creation of an Islamic state in the territory of Israel, the West Bank and
the Gaza Strip, and the destruction of the state of Israel and the murder or
1
See 18 U.S.C. § 2333.
2
See First Amended Complaint (“FAC”) ¶¶ 1-2.
3
See id. ¶ 3.
4
See id.
5
See id. ¶ 85.
6
See id. ¶ 26.
2
expulsion of its Jewish residents.”7 Since its founding, the PIJ has killed numerous
American and Israeli civilians.8 Consequently, the PIJ had been designated by the
United States Government as a Foreign Terrorist Organization continuously since
1997 and as a Specially Designated Global Terrorist continuously since 2001,9 and
is therefore subject to stringent economic sanctions.10
The American-imposed sanctions regime seeks to “prevent PIJ from
conducting banking activities and thereby limit its ability to plan, prepare and [ ]
carry out terrorist attacks.”11 According to plaintiffs, however, the Bank has not
complied with those regulations.12 Between 2003 and the 2006 attack, BOC
facilitated dozens of wire transfers, totaling several million dollars, for the PIJ.13
Most of the transactions were initiated at a BOC branch in Guangzhou, China, in
the name of “S.Z.R[.] Alshurafa,” from an account owned by a PIJ leader named
7
Id. ¶ 27.
8
See id. ¶¶ 28-30.
9
See id. ¶ 31.
10
See id. ¶ 63.
11
Id. ¶ 64.
12
See id. ¶ 68.
13
See id. ¶ 69.
3
Said al-Shurafa.14 Other transfers were made by way of BOC’s branches in the
United States to another of al-Shurafa’s accounts.15 Plaintiffs allege that these
transfers were instrumental in helping the PIJ to plan and execute terrorist
attacks.16
In April 2005, Israeli security officers told Chinese security and bank
officials why the PIJ transfers were being made and described the impact the
transfers had on the PIJ’s terrorist activities.17 Later that month, Chinese officials
alerted BOC’s leadership that Israeli officials had requested that the Bank halt the
transfers.18 Plaintiffs claim that the Bank ignored these warnings and demands.19
Plaintiffs allege that “[a]t all times, BOC had actual knowledge that the PIJ
transfers were being made by the PIJ for the purpose of carrying out terrorist
attacks.”20 Further, plaintiffs contend that regardless of the warning from Israeli
officials, BOC “knew or should have known that the PIJ transfers were being made
14
Id.
15
See id.
16
See id. ¶ 74.
17
See id. ¶¶ 74, 77.
18
See id. ¶ 77.
19
See id.
20
Id.
4
for illegal purposes because BOC had and has statutory duties,”21 specifically to
follow rules promulgated by the United States’ Financial Action Task Force.22
The Wultz family originally filed suit in the United States District
Court for the District of Columbia, against the Islamic Republic of Iran and several
of its leaders, the Syrian Arabic Republic and several of its leaders, as well as the
Bank.23 That court denied BOC’s motion to dismiss,24 but on reconsideration,
acknowledged that it lacked personal jurisdiction over BOC, severed the claims
against BOC from the others, and transferred the case here.25 I denied the Bank’s
request to reconsider its motion to dismiss26 and later held that it is appropriate to
apply Israeli tort law to this action.27 Plaintiffs seek construction of that law.
III.
APPLICABLE LAW
21
Id. ¶ 80.
22
See id.
23
See generally FAC.
24
See Wultz v. Islamic Republic of Iran, 755 F. Supp. 2d 1 (D.D.C.
2010) (“Wultz I”).
25
See Wultz v. Islamic Republic of Iran, 762 F. Supp. 2d 18, 20 (D.D.C.
26
See Transcript of 4/04/11 Conference (“4/04/11 Tr.”) at 7, 36.
2011).
27
See Wultz v. Bank of China, No. 11 Civ. 1266, — F. Supp. 2d —,
2011 WL 3423792 (S.D.N.Y., Aug. 03, 2011).
5
“Foreign law, though formerly treated as an issue of fact, is now
recognized as an issue of law, to be established by any relevant source, including
testimony.”28 In Wultz I, Chief Judge Royce C. Lamberth presented a thorough
explication of Israeli tort law in order to adjudicate the Bank’s motion to dismiss.
With the exception of a jurisdictional question not at issue here, neither party
claims that his ruling was clearly erroneous or that there has been a change in
governing law. Therefore, his interpretations are law of the case.
Plaintiffs allege that the Bank had actual knowledge that the alShurafa transfers were facilitating PIJ’s terrorist acts. In the alternative, plaintiffs
argue, the Bank had “constructive knowledge” – i.e., it could have and should have
made inquiries regarding al-Shurafa’s suspicious transactions, and those inquiries
would have given it actual knowledge. Because he was ruling on a motion to
dismiss in Wultz I, Chief Judge Lamberth assumed the veracity of plaintiffs’
allegations, including the allegation that BOC actually knew the nature of the alShurafa transactions. The Bank argues that “the D.C. Court relied exclusively on
the ‘actual knowledge’ allegations because plaintiffs and their Israeli law experts
28
United States v. Peterson, 812 F.2d 486, 490 (9th Cir. 1987). Federal
Rule of Civil Procedure 44.1 establishes that “[t]he court’s determination [of
foreign law] must be treated as a ruling on a question of law.” Except where noted
otherwise, my quotations of Israeli case law come from unofficial translations
provided by the parties.
6
argued for the sufficiency of their Israeli law claims for Negligence, Breach of
Statutory Duty, and Vicarious Liability based solely on those ‘actual knowledge’
allegations.”29 I therefore reiterate Chief Judge Lamberth’s rulings and expand
upon them as necessary to fill in the gaps regarding liability based on constructive
knowledge.
A.
Construction of Israeli Negligence Law
The basic elements of negligence – duty of care, breach, causation,
and injury – are the same under New York and Israeli law.30 Israel’s law of
negligence is codified its Civil Wrongs Ordinance (CWO).31 The parties have not
sought construction of the law regarding breach, causation, and injury, but instead
focus their briefs on the scope of the duty of care. Under Israeli jurisprudence,
29
Memorandum of Bank of China Limited in Opposition to Plaintiffs’
Motion Concerning the State of Mind Required for Imposition of Liability Under
Israeli Law (“Def. Mem.”) at 4.
30
See Declaration of Professor Ariel Porat (“Porat Decl.”) in support of
Plaintiffs’ Memorandum of Law in Opposition to Defendant’s Motion to Dismiss ¶
20.
31
See Wultz I, 755 F. Supp. 2d at 57-58, (citing Civil Wrongs Ordinance
(New Version) § 35, 2 LSI (New Version) 14-15 (1972)) (“When 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 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.”).
7
according to BOC’s expert on tort law, determining whether a duty of care exists is
a two-step process:
First, a court considers whether there is a notional duty of care of a class
of actors in the position of the defendant vis-a-vis a class of persons to
which the plaintiff belongs, with respect to a given danger; second, if
there is a notional duty of care, the court considers whether there was a
duty of care in fact (also called the ‘concrete duty of care’ in Israeli
jurisprudence), i.e., whether a duty of care was owed as between the
specific defendant and the specific plaintiff in the concrete circumstances
of the case.32
As explained by one of the plaintiffs’ tort law experts, “[t]he test
regarding both the notional duty of care and the duty of care in fact is one of
foreseeability. Two questions must be asked regarding each of these duties: the
first concerns ‘technical’ foreseeability, and the second concerns ‘normative’
foreseeability.”33 In essence, in order to find liability under Israeli law, the court
must be able to answer “yes” to the following four questions: (1) Could this
category of defendant have foreseen the type of damage suffered by this category
of plaintiff? (2) Should this category of defendant have foreseen the type of
damages suffered by this category of plaintiff? (3) Could this specific defendant
have foreseen the damages suffered by this specific plaintiff? (4) Should this
32
Further Declaration of Peter Gad Naschitz (“Third Naschitz Decl.”) ¶
2.
33
Porat Decl. ¶ 26, (citing to CA 125/80 Vankin v. Local Council of Bet
Shemesh, 37(1) PD 113 [1982]).
8
specific defendant have foreseen the damages suffered by this specific plaintiff?
The “could” questions are technical and largely fact-based; the “should” questions
are normative and driven by questions of fairness, justice, and policy, including:
“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.”34
There is a presumption that where injury could have been foreseen,
the injury also should have been foreseen.35 However, the existence of notional
duty “‘is never derived automatically from a finding of technical foreseeability,’ . .
. . Rather, the presumption of notional duty can be ‘negated when there are reasons
to do so as a matter of legal policy.’”36
Thus, as Chief Judge Lamberth explained, “the Court will not
extrapolate a general rule of Israeli negligence jurisprudence that banks will never
34
Wultz I, 755 F. Supp. 2d at 59 (quoting Ariel Porat, Tort Law, in
Introduction to the Law of Israel 127, 128-32 (Amos Shapira & Keres C.
DeWitt-Arar eds., 1995).
35
See Porat Decl. ¶ 27 (quoting CA 243/83 The City of Jerusalem v.
Gordon 39(1) PD 113, 129 [1983]).
36
Wultz I, 755 F. Supp. 2d at 59 (quoting CA 915/91 State of Israel v.
Levy 48(3) PD 45, 65-66 [1994]).
9
be placed under a notional duty in a case with facts such as the ones pled here . . .
To the contrary, a close analysis . . . implies that Israeli courts would entertain such
a claim.”37
The Bank argues that the Court’s ruling was based only on plaintiffs’
allegation of actual knowledge and did not address whether and when an Israeli
court would impose liability on the basis of constructive knowledge. The Bank
argues that “[a] bank’s knowledge of questionable, and therefore suspicious,
banking transactions does not give rise to a duty of care under Israeli law to protect
non-customers from the intentional torts of a bank customer,”38 but the cases that it
cites contradict that generalization: for example, in Ayalon Insurance Co. v. The
Executor of the Estate of Haya Ofelger, which dealt with allegations of
embezzlement by an executor, the Israeli Supreme Court ruled that a bank could
have an obligation to know that an account holder is violating her fiduciary duties
to a third party, but only in the limited circumstances
where suspicious, unusual and exceptional circumstances exist to such
an extent that the bank cannot remain indifferent to them, cannot turn a
blind eye. In such cases, the bank is subject to the obligation of
investigating the matter, provided that the means which the bank shall be
required, as a “reasonable bank,” to take in these circumstances shall be
37
Id. at 60.
38
Def. Mem. at 8.
10
simple and clear.39
Thus, banks will have a duty of care to protect third parties against the
torts of account holders if sufficient suspicious, unusual, and exceptional
circumstances exist to warrant a reasonable investigation of the matter by the bank.
As Chief Judge Lamberth explained, Ayalon Insurance stands for the proposition
that a “‘bank is subject to the duty of foreseeing that its negligence would cause
damage to a third party, even if said third party is not its customer’” but that “‘the
boundaries of the duty [to third parties] should be extremely limited.’”40 Other
statements of the Israeli Supreme Court reiterate this general principle: “A bank
owes an enhanced duty of care not only to its clients, but also to third parties, in
cases where it could have foreseen that a third party would be harmed if the bank
did not take reasonable precautions;”41 “As a matter of policy I believe that
banking entities also have a notional duty of care towards non-customers, and this
duty can, in the appropriate cases (and if a concrete duty of care is recognized),
39
CA 8068/01 Ayalon Ins. Co. v. The Executor of the Estate of Haya
Ofelger, 59(2) PD 349, 372-75 [2004] (quoted in Def. Mem. at 8).
40
Wultz I, 755 F. Supp. 2d at 61 (quoting Ayalon Insurance, 59(2) PD at
371, 372.)
41
CA 5379/95 Sahar Ins. Co. v. Israel Discount Bank, PD 51 (4) 464,
477-78 [1997].
11
obligate them to take active steps. . .”42 The Bank attempts to distinguish these
cases by arguing that they dealt with the third parties’ property interests related to
the bank account in question,43 but it does not point to evidence that Israeli courts
have imposed a categorical prohibition on liability not related to property interests.
Rather, it points out the novelty of this case: no Israeli precedent has imposed a
duty of care such as the one plaintiffs seek here.44 Plaintiffs do not dispute that
there is no on-point authority.45 Rather, they argue that “the clear principles of
existing case law,” when applied to the facts of this case, would impose liability on
the Bank “if it is shown to have had constructive knowledge.”46 The Bank’s legal
expert comes close to conceding that liability is possible if “a reasonable banker
knew, should have known, or could have known on inquiry in the circumstances,
that the account owner was supporting terrorism.”47
42
CA 2142/07 Tziring v. Mishkan at 17-18 (not yet published) [2010]
(Danziger, J., concurring) (quoted in Declaration of Dr. Boaz Shnoor (“Shnoor
Decl.”), in support of plaintiffs, ¶ 6).
43
See Def. Mem. at 8 n. 12.
44
See id. at 9.
45
See Porat Decl. ¶ 49; Reply Declaration of Dr. Boaz Shnoor (“Shnoor
Rep. Decl.”) ¶ 21.
46
Shnoor Rep. Decl. ¶ 22.
47
Third Naschitz Decl. ¶ 11.
12
The core of the Bank’s argument is not that constructive knowledge
will never suffice to establish liability, but rather that in order to be liable in a case
such as this one, a bank must have constructive knowledge of the fact that alShurafa “was providing funds to a terrorist organization in the Middle East, using
money wired to his BOC accounts in China.”48 Plaintiffs cannot establish liability,
the Bank argues, simply by showing that it had “generalized notice” of “suspicious
activity by a customer.”49 Rather, it argues, Israeli case law consistently holds that
the “‘requisite foreseeability is . . . foresight of the type of damage that actually
occurred’”50 or “‘of harm of a like general character.’”51 The Bank’s argument
boils down to this: “[R]easonable foreseeability of the relevant danger requires that
a bank ‘could and should’ have foreseen that its account-holder was providing
funds to support terrorist activity.”52
Plaintiffs’ expert Professor Boaz Shnoor disagrees, arguing that “it is
sufficient if the defendant could have foreseen that his conduct will enable some
48
Def. Mem. at 10.
49
Id. at 11.
50
Naschitz Third Decl. ¶ 6 (quoting CA 350/77 Kitan Ltd. v. Weiss,
33(2) PD 785, 802-03 [1979]).
51
Id. ¶ 7 (quoting CA 576/81 Ben Shimon v. Barda, 38(3) PD 1, 8-9
[1984]).
52
Id.
13
sort [of] criminal conduct by a third party; there is no requirement that the
defendant be able to foresee the specific type of crime ultimately committed or the
specific type of harms ultimately caused.”53 Plaintiffs cite to two cases for this
proposition: Ben Shimon v. Barda54 and Wallace v. Egged.55
In Ben Shimon, the Supreme Court held that the operator of a prearmy training club was liable for injuries sustained by the plaintiff after two
teenagers broke into the club, stole weapons and ammunition, and several days
later used them to shoot the plaintiff in the head.56 The Court held that the club
operator was liable for not adequately securing the weapons. Ben Shimon
primarily stands for the proposition that the intentional criminal conduct of another
person does not break the chain of causation and relieve the defendant of liability,
if that conduct was foreseeable by the defendant.57 Plaintiffs have not explained
how the case supports their argument that “it is sufficient if the defendant could
have foreseen that his conduct will enable some sort [of] criminal conduct by a
third party.” The risk that weapons will be misused to injure somebody is not just
53
Shnoor Reply Decl. ¶ 10.
54
CA 576/81 Ben Shimon, 38(3) PD 1.
55
CA 3510/99 Wallace v. Egged, 45(5) PD 826 [2001].
56
See Shnoor Reply Decl. ¶ 7.
57
See Porat Decl. ¶ 61.
14
“some sort of criminal conduct.” It is precisely the type of foreseeable criminal act
that would impose on the weapons’ owner a duty to secure them.
In Wallace, the Supreme Court held that a bus operator was liable for
the injuries sustained by the plaintiff when he was randomly beaten up while
waiting in the defendant’s Jerusalem bus station. Wallace, which has been
officially translated by the Supreme Court into English, provides a thorough
explication of how the intentional criminal actions of third parties impact liability
under Israeli tort law and how that liability is broader than under American law.
The Court explained that liability exists “in those cases where the criminal act was
within the bounds of foreseeable risk.”58 When determining whether a duty of care
exists, the Supreme Court will inquire “whether the defendant was aware of the
impending occurrence of the criminal act . . . whether in the past similar incidents
occurred at the place of the incident . . . whether the criminal act that occurred is a
common event or exceptional in its character.”59 What must be foreseeable,
therefore, is not simply criminality in general, but the specific risk of a particular
type of crime. Thus, in Wallace, the question for trial was “whether the risk of
attack without prior provocation at the Central Bus Station is a reasonable risk,
58
Wallace, 45(5) P.D. 826 at 12 (emphasis added).
59
Id. at 14.
15
which is to be accepted as an integral part of said activity, or whether it is a risk
which society views with a heightened sense of severity, in a manner that it
requires that reasonable precauctionary measures must be taken to prevent it.”60
The specific nature of the criminal act matters.
As the Israeli Supreme Court put it in Kitan Ltd. v. Weiss, “the
foreseeability has to relate to the type of damage that occurred in fact and the
manner in which it occurred.”61 And, as explained in Ben Shimon, “the case law
rule is that the foreseeability does not have to refer to all particulars of the event, as
they occurred in fact, but to its general character, according to its main
characteristics.”62 For this proposition, the Supreme Court cited to J.G. Flemming,
The Law of Torts, which explains that common law jurisdictions require
foreseeability “not so much of the ‘particular’ injury as of ‘harm of a like general
character’ – and paying heed neither to the extent nor the precise manner of its
occurrence.”63
Plaintiffs’ first tort law expert, Professor Ariel Porat, indicated
60
Id. at 15 (emphasis added).
61
Kitan Ltd., 33(2) P.D. 785, 802-03 (quoted in Naschitz Third Decl. ¶
62
Ben Shimon, 38(3) P.D. 1 at 8-9 (quoted in Naschitz Third Decl. ¶ 7).
63
J.G. Flemming, The Law of Torts 188 (1983).
6).
16
agreement with this proposition in his 2009 declaration, in which he wrote that
“the only question remaining for determining whether a duty of care existed is
whether, as a normative matter, the BOC should have foreseen that allowing the
PIJ Transfers would enable terrorist attacks of the type that harmed the
plaintiffs.”64 Plaintiffs are thus incorrect in their view that constructive knowledge
of unspecified criminal activity will suffice to create liability.65 Rather, to establish
liability, Israeli law requires that the Bank have constructive knowledge of the risk
of the type of injury that in fact occurred: that the money in al-Shurafa’s account
would be used to fund terrorist attacks and that injury and death were reasonably
foreseeable results of that funding. Plaintiffs may be able to show that the facially
suspicious nature of al-Shurafa’s transactions obligated BOC to make further
inquiry into his purposes, and that such inquiry would have established his support
for terrorism. That, however, is a fact-specific question for summary judgment
and/or trial.
B.
Construction of Israeli Breach of Statutory Duty Law
Chief Judge Lamberth held that plaintiffs had adequately pled that the
64
Porat Decl. ¶ 33.
65
Nor is it correct to say, however, that defendants would only be liable
if they had constructive knowledge of the particulars of the event – that Daniel and
Yekutiel Wultz would be attacked at a restaurant in Tel Aviv.
17
Bank breached its statutory duties under § 85 of the Defense (Emergency)
Regulations, § 4 of the Prevention of Terrorism Ordinance, and §§ 145 and 148 of
the Penal Law.66 Breach of statutory duty is codified in the Civil Wrongs
Ordinance § 63. Unlike in the negligence context, there is no independent state of
mind requirement for breach of statutory duty. Rather, “the state of mind that will
give rise to tort liability under CWO § 63 depends on the underlying statutory
obligation that was breached.”67 According to plaintiffs’ criminal law expert,
Professor Emanuel Gross, “in order to prevail on their Breach of Statutory Duty
claim, the plaintiffs will need to demonstrate that defendant Bank of China acted
with ‘criminal intent,’ as that term is defined in § 20 of the Penal Law.”68
66
See Wultz I, 755 F. Supp. 2d at 67-80.
67
Shnoor Decl. ¶ 14.
68
Supplemental Declaration of Professor Emanuel Gross (“Gross
Decl.”) ¶ 6. According to Professor Gross’ translation, Section 20 reads:
20.(a)
Criminal intent – awareness of the character of the
act, of the circumstances that constitute the particulars of the
offense, and of the possibility that the act will cause
consequences that constitute particulars of the offense and, in
respect to the consequences, also one of the following:
(1) Intent – with the goal of causing those results;
(2) Recklessness, which consists of one of the following:
(a)
Apathy – by indifference to the possibility that the
18
Defendant’s criminal law expert, Professor Kenneth Mann, agrees
with this description of the law, and explains that criminal intent requires either
actual awareness (under §20(a)) or willful blindness (under §20(c)).69 According
to Professor Mann,
willful blindness is a subjective standard by which the prosecution (or,
here, a civil plaintiff) must establish that the defendant actually and
rationally suspected that the prohibited (criminal) act might occur.
Suspicion judged by the objective standard of what a reasonable person
could or should conclude from any given set of facts is insufficient, and
cannot serve as a substitute for actual awareness.70
aforesaid consequences will be caused;
(b)
Incaution – by taking an unreasonable risk as to
the possibility that the aforesaid consequences will
be caused, with the hope of succeeding to prevent
them.
(b) For the purposes of intent, foreseeing the occurrence of the consequences
as a close to certain possibility is equivalent to intent to cause them.
(c) For the purposes of this section –
(1) a person who suspects the character of the conduct, or the
possibility that the circumstances exist, is deemed to have been
aware of them, if he refrains from clarifying them.
(2) It is immaterial whether the act was performed in respect to
a person or property different from than that [sic] in respect to
whom or which it was meant to have been performed.
69
See Supplemental Declaration of Kenneth Mann (“Mann Decl.”) ¶ 4.
70
Id. ¶ 5 (emphasis removed).
19
Professor Gross does not dispute this construction and the parties
agree that “proof of awareness may be accomplished by charging and proving
circumstantial facts from which a court [i.e., a factfinder] could conclude that the
defendant must have suspected that its customer was a terrorist organization or
representative.”71
Professor Mann reiterates his opinion, made earlier in support of the
Bank’s motion to dismiss, that the constructive knowledge allegations in Sections
78 through 81 of the FAC, even if proved, “would not be sufficient to allow an
Israeli court to conclude that the defendant was aware that its account holder alShurafa was a representative or an agent of a terrorist organization.”72 But
plaintiffs have clearly alleged actual knowledge in a separate paragraph of their
complaint.73 Whether they are able to establish actual knowledge or willful
blindness is a question for summary judgment and/or trial.
71
Reply Declaration of Professor Emanuel Gross ¶ 5 (quoting Mann
Decl. ¶ 10).
72
Mann Decl. ¶ 11. Similarly, defendants argue that “[p]laintiffs’
constructive knowledge allegations cannot support extraterritorial application of
Israeli criminal law because the facts alleged in FAC ¶¶ 78-81 cannot establish the
requisite actual suspicion by BOC that al-Shurafa engaged in banking transactions
with the goal of injuring Israelis or Jews.” Def. Mem. at 22.
73
See FAC ¶ 77.
20
C.
Construction of Israeli Vicarious Liability Law
Plaintiffs’ Sixth Count, which they label “Vicarious Liability,” alleges
that the Bank is liable for aiding and abetting al-Shurafa under § 12 of the Civil
Wrongs Ordinance. The parties agree that in a recent decision, the Israeli Supreme
Court clarified that actual knowledge is necessary for liability under this section.74
The parties’ experts appear to disagree about just how specific that knowledge
must be: Professor Shnoor argues for the plaintiffs that the law “requires only
actual knowledge regarding the tortious behavior in general, and that knowledge
regarding each specific incident of tortious behavior is unnecessary,”75 and Mr.
Naschitz argues for the Bank that the law requires “knowledge of the specific
harmful activity.”76 This disagreement, however, may be more semantic than
substantive. Defendants conceded that the relevant tortious behavior by al-Shurafa
is “his alleged financial support for terrorist activity,”77 a position that appears to
correspond approximately to plaintiffs’ argument that liability can be found based
74
See Shnoor Decl. ¶ 22 and Naschitz Decl. ¶ 17, discussing CA
5977/07 Hebrew Universty v. Schocken Publ’g House Ltd. [June 12, 2011] (not yet
published).
75
Shnoor Decl. ¶ 23.
76
Naschitz Decl. ¶ 20.
77
Def. Mem. at 24.
21
on "actual knowledge regarding the tortious behavior in general." For the moment,
these areas of agreement create sufficient clarity regarding the scope of Israeli
aiding and abetting liability. If additional construction is necessary, it can be done
at a later stage in the litigation when the Court is presented with facts rather than
general allegations and denials.
IV.
CONCLUSION
The Court will apply Israeli law as construed above. The Clerk of the
Court is directed to close this motion [Docket No. 132].
SO ORDERED:
Dated:
New York, New York
January 9, 2012
22
- Appearances For Plaintiffs:
Robert J. Tolchin, Esq.
111 Livingston Street, Suite 1928
Brooklyn, NY 11201
(718) 855-3627
For Defendant:
Mitchell R. Berger, Esq.
Patton Boggs LLP
2500 M Street, N.W.
Washington, D.C. 20037
(202) 457-5601
David T. Case, Esq.
K&L Gates LLP
1601 K Street, NW
Washington, D.C. 20006
(202) 778-9100
Walter P. Loughlin, Esq.
Sarah P. Kenney, Esq.
K&L Gates LLP
599 Lexington Avenue
New York, NY 10022
(212) 536-3900
Siubhan J.E. Magee, Esq.
Hughes, Hubbard, and Reed LLP
One Battery Park Plaza
New York, NY 10004
(212) 837-6409
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