Wultz et al v. Bank of China Limited

Filing 149

OPINION AND ORDER: #101844 This Court's August 3, 2011 ruling is withdrawn. Plaintiffs are instructed to inform the Court, by June 12, 2012, whether briefing on Chinese tort law is necessary. (Signed by Judge Shira A. Scheindlin on 5/25/2012) (ft) Modified on 5/30/2012 (jab).

I

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

USDC S.DNY

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DOcuMF.J\lT
BLEcrROl ~lCALLY FILED

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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 tile
natural guardian of plaintiff Abraham
Leonard Wultz, AMANDA WULTZ, and:
ABRAHAM LEONARD WUL TZ, minor, :
by his next friends and guardians
Sheryl Wultz and Yekutiel Wultz,

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OPINION AND ORDER
11 Civ. 1266 (SAS)

Plaintiffs,
- againstBANK OF CHINA LIMITED,
Defendant.

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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 bring this suit against Bank of China ("BOC" or "the
Bank"), alleging acts of international terrorism and aiding and abetting

1

I

international terrorism under the Antiterrorism Act1 as well as negligence, breach
of statutory duty, and vicarious liability under Israeli law. Last year, the Bank
moved to apply New York law, rather than Israeli law, to plaintiffs’ non-federal
claims. On August 3, 2011, I denied the Bank’s motion, holding that although
there were strong arguments favoring the application of New York law, there were
slightly stronger arguments favoring the application of Israeli law.2 This March, in
Licci v. Lebanese Canadian Bank, the Second Circuit was presented with facts
similar to the ones here and held that New York common law, not Israeli law,
should apply.3 Because Licci governs this case, I must reconsider my earlier
decision.
II.

BACKGROUND
The facts of this case were laid out in Wultz I and familiarity with

them is assumed. In short, the Palestinian Islamic Jihad (“PIJ”) carried out a
suicide bombing in Tel Aviv, Israel in 2006, killing Daniel Wultz and severely
injuring Yekutiel Wultz, both Florida residents.4 The Wultz family sued the Bank,

1

See 18 U.S.C. § 2333.

2

See Wultz v. Bank of China, Ltd., 811 F. Supp. 2d 841 (S.D.N.Y.
2011) (Wultz I).
3

See Licci v. Lebanese Canadian Bank, 672 F.3d 155 (2d Cir. 2012).

4

See First Amended Complaint (“FAC”) ¶¶ 1-3.
2

along with other defendants, alleging that between 2003 and the 2006 attack, the
Bank facilitated dozens of wire transfers, totaling millions of U.S. dollars, for the
PIJ.5 Most of the transactions were initiated by the PIJ leadership in Iran, Syria,
and elsewhere in the Middle East, executed by and through the Bank’s branches in
the United States, and received at one of the Bank’s branches in Guangzhou,
China.6 The money was then transported to the PIJ in Israel, the West Bank, and
Gaza through routes that are irrelevant to this case. Plaintiffs allege that the wire
transfers were instrumental in helping the PIJ plan and execute terrorist attacks,
including the 2006 suicide bombing.7
Plaintiffs allege that based on the suspicious nature of the transfers
and on warnings that it received from Israeli officials, the Bank “knew or should
have known that the PIJ transfers were being made for illegal purposes.”8 Under
Israeli negligence law, the Bank would be liable for facilitating these wire transfers
if the facts established that it could have and should have known that the money

5

See id. ¶ 69.

6

See id. See also Plaintiffs’ Memorandum of Law in Response to Order
to Show Cause Issued March 6, 2012 (“Pl. Mem.”) at 4-5 and n.1.
7

See FAC ¶ 74.

8

Id. ¶¶ 74-80.
3

would be used to fund terrorist attacks.9
In order to determine whether plaintiffs’ non-federal claims could
survive, I instructed the parties to submit “a motion on whether Israeli law or New
York law applies.”10 The parties submitted briefs, comparing the relative interests
that Israel and New York had in this litigation. Plaintiffs argued that Israeli law
should apply; the Bank argued that New York tort law should apply and added that
“China has a more significant interest in regulating BOC’s conduct than does
Israel” and that “among the three interested jurisdictions [China, United States,
Israel], Israel has the least significant connections with the claims.”11
I found that “meaningful considerations” favored both Israeli and
New York law and that “the interest analysis does not conclusively point in favor
of only one choice.”12 I noted that “China too has an interest in having its law
applied,”13 but concluded that “the weight of the particular precedent [] suggests
that when conduct-regulating rules are at issue, and when the suit arises out of
9

See Wultz v. Bank of China, No. 11 Civ. 1266, 2012 WL 70341, at *6
(S.D.N.Y. Jan. 9, 2012).
10

4/4/11 Conf. Tr. at 35:21-22.

11

Memorandum in Support of Bank of China’s Motion Concerning the
Choice of Law Governing Plaintiffs’ Non-Federal Claims [Docket No. 111] at 22.
12

Wultz I, 811 F. Supp. 2d at 852.

13

Id. at 852 n.76.
4

personal injury, the locus of the tort controls.”14 I therefore chose to apply the law
of Israel. Although the Bank had not conducted any activity in Israel, the terrorist
attack that caused plaintiffs’ injuries occurred there. Under the doctrine that the
law of the place where the tort occurred should govern – lex loci delicti – I applied
Israeli law because Israel was the location of the last event necessary to create
liability.
The plaintiffs in Licci were injured (or were the family members of
people injured or killed) by rockets launched by the Lebanese organization
Hizballah at targets in northern Israel in July and August of 2006. The Licci
plaintiffs sued American Express Bank Ltd. (“AmEx”) and other defendants.
Plaintiffs alleged that AmEx, serving as a correspondent bank for the Lebanese
Canadian Bank, had facilitated wire transfers on behalf of a Hizballah affiliate and
that the transfers had helped fund the rocket attacks. As in this case, Licci
presented the question of whether Israeli or New York negligence law should apply
to AmEx’s conduct. The Second Circuit held that
[t]he alleged conflict [of law] in this case concerns a
conduct-regulating rule: the scope of a bank’s duty to protect third
parties against intentional torts committed by the bank’s
customers. “‘If conflicting conduct-regulating laws are at issue,
the law of the jurisdiction where the tort occurred will generally
apply because that jurisdiction has the greatest interest in
14

Id.
5

regulating behavior within its borders.’” [GlobalNet
Financial.com, Inc. v. Frank Crystal & Co., 449 F.3d 377, 384
(2d Cir. 2006) (quoting Cooney v. Osgood Mach. Inc., 81 N.Y.2d
66, 72 (1993)).]
Applying the interest-analysis test, we conclude that New York
has the greatest interest in this litigation. All of the challenged
conduct undertaken by AmEx occurred in New York, where
AmEx is headquartered and where AmEx administers its
correspondent banking services. Although the plaintiffs’ injuries
occurred in Israel, and Israel is also the plaintiffs’ domicile, those
factors do not govern where, as here, the conflict pertains to a
conduct-regulating rule. Cf. GlobalNet, 449 F.3d at 384-85. We
conclude that New York, not Israel, has the stronger interest in
regulating the conduct of New York-based banks operating in
New York. See, e.g., [Schultz v. Boy Scouts of Am., 65 N.Y.2d
189, 198 (1985)] (noting the “locus jurisdiction’s interests in
protecting the reasonable expectations of the parties who relied on
it to govern their primary conduct”).15
III.

DISCUSSION
The facts of Licci are not identical to those here. As plaintiffs argue,
the essence of the plaintiffs’ allegations against BOC is that BOC
in China failed to exercise due care with respect to wire transfers
received at a branch in China, thus enabling a customer in China
to receive funds from Syria and Iran and transfer it to terrorist
operatives in Israel, the West Bank, and the Gaza Strip who used
the funds to carry out acts of terrorism in Israel.16
In contrast, in Licci AmEx “was simply a correspondent bank that

received funds in New York” from the Lebanese Canadian Bank, followed
15

Licci, 672 F.3d at 157.

16

Pl. Mem. at 5-6 (emphasis in original).
6

instructions regarding what to do with those funds, had no contact with the
originator or beneficiary of the transfers, “and did nothing at all outside of New
York.”17 Although New York had the strongest interest in Licci because all of
AmEx’s conduct occurred in New York, plaintiffs argue, New York has no interest
in seeing its law apply in this case because BOC’s conduct occurred primarily in
China. “Perhaps Chinese law might have been an option,” plaintiffs argue, “but
BOC did not plead Chinese law in its Answer” or argue for it in its choice of law
motion, and that argument has been waived.18
The Bank responds with the following arguments: First, plaintiffs
have repeatedly asserted the importance of the Bank’s presence and actions in New
York in processing the wire transfers, particularly in their nearly-identical state
court action.19 Second, plaintiffs’ arguments about the Bank’s actions in fact
suggest that China, not Israel, has the strongest interest in seeing its law apply to
this case. Because the parties did not submit evidence regarding Chinese law, the

17

Id. at 6.

18

Id. at 8.

19

See Reply of Defendant Bank of China Ltd. to Plaintiffs’ Response to
Order to Show Cause (“Def. Mem.”) at 2 (citing to FAC and to arguments of
plaintiffs’ counsel in Elmaliach v. Bank of China, No. 102026/09 (Sup. Ct. N.Y.
Co.)).
7

Bank argues, the Court should apply the law of the forum state, i.e., New York.20
Third, and most importantly, the Bank argues that New York has an “‘overriding
and paramount interest’ in litigation involving banking transactions processed in
New York.’”21 Like AmEx in Licci, the Bank has relied upon the laws of New
York in conducting its affairs and has never sought to do any business in Israel. It
should therefore not be held liable because its third-party customer committed
violent crimes in Israel using money that was withdrawn from its Chinese
branches.
In Licci, the Second Circuit held that “[a]lthough the plaintiffs’
injuries occurred in Israel, and Israel is also the plaintiffs’ domicile, those factors
do not govern where, as here, the conflict pertains to a conduct-regulating rule.”22
Rather, the applicable law is that of the place where the conduct occurred.
Although the rocket attacks and terrorist bombing in these cases took place in
Israel, as plaintiffs acknowledge “the relevant conduct of BOC took place in

20

See Vishipco Line v. Chase Manhattan Bank, 660 F.2d 854, 860 (2d
Cir. 1981) (stating that “the law of the forum may be applied . . . even though the
forum’s choice of law rules would have called for the application of foreign law”
when parties did not submit evidence on the substance of foreign law).
21

Def. Mem. at 5 (quoting J. Zeevi & Sons, Ltd. v. Grindlays Bank
(Uganda) Ltd., 37 N.Y.2d 220, 227 (1975)).
22

Licci, 672 F.3d at 157.
8

Guangzhou, China”: a Chinese bank in China received multiple wire transfers from
abroad and its customer in China repeatedly withdrew the transferred money in
cash.23 Furthermore, according to plaintiffs’ allegations, Israeli government
officials traveled to China, told Chinese government officials that these transfers
were sponsoring terrorism, and demanded that the Bank stop the transfers. The
Chinese officials then conveyed the information and the demands to the Bank of
China. According to plaintiffs’ allegations, Bank of China officials in China made
the choice to ignore Israeli demands that they stop the transfers.24 Thus, according
to the allegations, both the decision to continue processing the transfers and the
bulk of the actual banking services occurred in China. In contrast, only a small
fraction of the relevant banking conduct occurred in New York: the wire transfers
to China “may have incidentally passed through BOC’s branch in New York”25 and
were “executed” by BOC’s branches in the United States, although it is not clear
which of the three United States BOC branches (two of which are in New York)
were responsible for that execution.26 None of the banking conduct occurred in

23

Pl. Mem. at 7.

24

See FAC ¶ 77.

25

Id. at 6.

26

See Def. Mem. at 3.
9

Israel.
My earlier decision to apply Israeli law turned on the notion that “the
locus of the tort controls.”27 The Second Circuit held that in this context, the
location of the injury does not control; instead, it is the location of the defendant’s
conduct that controls.28 The majority of the Bank’s conduct occurred in China. In
Licci, New York’s interest in regulating AmEx’s conduct within its borders was
dispositive of the choice of law question; similarly, here, China’s interest in
regulating bank conduct within its borders is dispositive. It outweighs the interest
of New York, through which the wire transfers passed only briefly, and the interest
of Israel, where no conduct by the defendant took place.
Defendant asserts that plaintiffs’ negligence claims cannot survive

27

Wultz I, 811 F. Supp. 2d at 852.

28

In arguing that the location of the injury controls, plaintiffs point to
Hunter v. Derby Foods, Inc., 110 F.2d 970 (2d Cir. 1940), which explained that
“[t]he fact that the defendant’s conduct occurred in New York does not oust the
law of Ohio. It sent the food into Ohio, where the harm was done. The case is like
that of shooting a firearm across the state line, starting a fire which passes the line,
or owning a vicious animal which strays over the line.” But Hunter and the
examples listed therein all involve the direct consequences of the defendants’
actions, with no intervening criminal act by a third party. The Second Circuit in
Licci held that the facts are materially different when a bank provides standard
banking services to a person who then transports money over international borders
and uses it to fund terrorist activities.
10

under Chinese law,29 but neither of the parties has submitted to the Court evidence
on that question. 30 Ifplaintiffs agree with the Bank, then their fourth, fifth, and
sixth claims will be dismissed. If plaintiffs disagree, then further briefing on the
substance of Chinese tort law will be necessary.3! Plaintiffs' federal Antiterrorism
Act claim is not affected by this ruling.

IV.

CONCLUSION
For the reasons stated above, this Court's August 3, 2011 ruling is

withdrawn. Plaintiffs are instructed to inform the Court, by June 12,2012, whether
briefing on Chinese tort law is necessary.

Dated:

29

New York, New York
May 25,2012
See Def. Mem. at 1.

30
Plaintiffs argue that the Bank has "waived" its right to argue for the
application of Chinese law. But the Bank did argue that China has a greater
interest than Israel in the litigation and, in light of Licci, the Bank should in any
event be permitted to take that position now.
3!
It would not make sense to simultaneously apply non-Israeli
negligence law and Israeli breach of statutory duty law, as plaintiffs' alternative
argument proposes. See PI. Mem. at 10; Def. Mem. at 7-10. Because the claims
apply to the same facts, doing so would eviscerate the non-Israeli negligence law in
favor of Israeli breach of statutory duty law, precisely the outcome that the Second
Circuit rejected in Licci.

11

- Appearances For Plaintiffs:
Robert J. Tolchin, Esq.
The Berkman Law Office, LLC
111 Livingston Street, Suite 1928
Brooklyn, NY 11201
[phone]
For Defendant:
Mitchell R. Berger, Esq.
Patton Boggs LLP
2500 M Street, N.W.
Washington, D.C. 20037
[phone]

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