Bangladesh Bank v. Rizal Commercial Banking Corporation
- Lorna Schofield
- 1:19-cv-00983
- U.S. District Court · Southern District of New York
- 25
In Bangladesh Bank v. Rizal Commercial Banking Corporation, Judge Schofield granted dismissal of the federal RICO claim, declined state claims, and denied jurisdictional and forum challenges.
Bangladesh Bank’s federal RICO claim was dismissed, and the court declined to exercise supplemental jurisdiction over its remaining state-law claims. The defendants’ motions based on lack of subject-matter jurisdiction and forum non conveniens were denied.
What happened
Bangladesh Bank v. Rizal Commercial Banking Corporation arose from Bangladesh Bank’s allegations that hackers stole about $101 million from its New York Federal Reserve account and moved $81 million through Philippine banks and casinos. The Bank sued under federal racketeering law and state law.
The defendants argued that the federal claim was not properly pleaded, that the court lacked authority to hear it, and that the Philippines was the more appropriate forum. The court found that the federal claim was sufficient to establish jurisdiction, even though it ultimately failed as a claim for relief.
Judge Lorna G. Schofield granted the motion to dismiss the only federal claim, declined to exercise supplemental jurisdiction over the state-law claims, and denied the motions based on lack of subject-matter jurisdiction and forum non conveniens.
The detailed version
- Bangladesh Bank v. Rizal Commercial Banking Corporation · No. 1:19-cv-00983
- Lorna Schofield
- Mar. 20, 2020
Background
Bangladesh Bank alleged that North Korean hackers entered its computer system in 2015 and, in February 2016, issued fraudulent payment orders that removed approximately $101 million from the Bank’s account at the Federal Reserve Bank of New York. Four payment orders totaling $81 million were completed. The funds moved through correspondent accounts, four fictitious accounts at Rizal Commercial Banking Corporation (RCBC) in the Philippines, other accounts, and casinos operated by Bloomberry Resorts and Hotels Inc., doing business as Solaire Resort & Casino, and Eastern Hawaii Leisure Company, Ltd., doing business as Midas Hotel & Casino.
The Bank asserted a civil claim under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(c), and several state-law claims. Four defendants—RCBC, Bloomberry, Eastern Hawaii, and Eastern Hawaii’s owner Kam Sing Wong—moved to dismiss on various grounds. The opinion states that the other 16 named defendants had not appeared, including some who had not been served, and that 25 John Doe defendants had not been named or served.
Jurisdiction and RICO pleading
The court denied dismissal for lack of subject-matter jurisdiction. It held that the RICO claim was not “wholly insubstantial or frivolous,” because the complaint was detailed and alleged a series of crimes that could qualify as racketeering acts. The court therefore had federal-question jurisdiction to consider the claim.
The court nevertheless granted dismissal of the RICO claim for failure to state a claim. RICO requires allegations that defendants participated in an enterprise through a pattern of racketeering activity. The court held that the complaint did not adequately allege either required element.
First, the complaint did not establish the required continuity of racketeering activity. The alleged conduct lasted at most 14 months, from January 2015 through March 2016. The court found that period generally too short for continuity lasting over a substantial period, and concluded that the alleged scheme was focused and cohesive rather than unusually complex or multi-faceted. The court also found no specific allegations showing a threat that the defendants’ criminal activity would continue into the future. The court did not decide whether the alleged predicate crimes themselves were adequately pleaded.
Second, the complaint did not adequately allege a RICO enterprise. The court held that the allegations did not show that the alleged participants functioned as a continuing unit for a common purpose separate from the alleged racketeering acts. The court also rejected the Bank’s reliance on authorities concerning enterprise structure. The complaint did not expressly plead a RICO conspiracy claim under 18 U.S.C. § 1962(d), but the parties addressed whether one could be added. The court denied leave to amend because a conspiracy claim based on the same theory would also fail without adequately alleged continuity.
State-law claims and forum
After dismissing the only federal claim, the court declined to exercise supplemental jurisdiction over the remaining state-law claims because the case was at an early stage. The opinion does not state that those claims were decided on their merits.
The court denied dismissal under the forum non conveniens doctrine, which allows a court to decline an otherwise proper case in favor of a more appropriate foreign forum. The court found that the Philippines was an adequate alternative forum, but that the private-interest factors were neutral and the public-interest factors slightly favored New York. The court emphasized that the alleged theft targeted a Federal Reserve institution in New York, that important evidence was located in or near the district, and that the claims arose under U.S. federal and state law.
Disposition
The court granted the motion to dismiss Count VII, the only federal claim, and declined to exercise supplemental jurisdiction over the state-law claims. The motions to dismiss for lack of subject-matter jurisdiction and under the forum non conveniens doctrine were denied. The opinion does not add a “with prejudice” or “without prejudice” designation to these rulings.
Read the full 25-page opinion on CourtListener, the free public archive maintained by the Free Law Project.