Daou v. BLC Bank, S.A.L.

Background

Joseph A. Daou and Karen M. Daou sued BLC Bank, S.A.L.; Credit Libanais S.A.L.; Al-Mawarid Bank, S.A.L.; and Banque du Liban, Lebanon’s central bank. The plaintiffs alleged that the banks conspired to deprive them of millions of U.S. dollars deposited in Lebanese accounts. Their claims included issuance of a dishonored check, conspiracy, fraud, breach of contract, conversion, unjust enrichment, promissory estoppel, claims under the federal Racketeer Influenced and Corrupt Organizations Act, and a Florida statute concerning negotiable instruments.

The plaintiffs alleged that they transferred money between U.S. and Lebanese accounts from 2016 through 2018, using transactions completed through New York correspondent accounts. After Lebanon experienced a political and economic crisis in 2019, the banks imposed withdrawal and overseas-transfer restrictions. The plaintiffs said their requests to transfer funds to the United States were rejected and that checks offered instead could not be deposited at U.S. banks.

BLC Bank and Al-Mawarid Bank: Forum Selection Clauses

BLC Bank and Al-Mawarid Bank moved to dismiss based on contract provisions requiring disputes to be litigated in Beirut. The court treated enforcement of those provisions as a question of forum non conveniens, a doctrine allowing a court to dismiss when another forum is more appropriate.

The court found that the clauses were reasonably communicated to the plaintiffs, mandatory, and broad enough to cover the claims. The plaintiffs argued that litigation in Lebanon would be unreasonable because of corruption, political instability, mistreatment of U.S. litigants, and the Lebanese banks’ political influence. The court held that these general concerns did not provide particularized evidence that the plaintiffs specifically would be unable to receive a fair hearing or would otherwise be denied their day in court.

The court also held that the public-interest factors favored Lebanon. New York had minimal interest because none of the parties were domiciled there and almost none of the relevant events occurred there. Lebanon, by contrast, had a significant interest in a dispute involving Lebanese plaintiffs, Lebanese banks, and transactions conducted in Lebanon. The court therefore dismissed the action against BLC Bank and Al-Mawarid Bank on forum non conveniens grounds.

Banque du Liban: Sovereign Immunity

Banque du Liban moved to dismiss under the Foreign Sovereign Immunities Act, which generally protects a foreign state and its agencies or instrumentalities from lawsuits in U.S. courts unless an exception applies. The plaintiffs did not dispute that Banque du Liban was an agency or instrumentality of Lebanon.

The plaintiffs relied on the Act’s commercial-activity exception. They argued that Banque du Liban engaged in commercial conduct by issuing and refusing to pay checks drawn on its accounts, and that the rejected checks had a direct effect in the United States. The court rejected that argument. It held that the plaintiffs’ claims were based on their relationships with the commercial banks, which accepted their deposits, refused to authorize transfers, and issued the checks. The plaintiffs had no contractual or other direct relationship with Banque du Liban, and the checks were issued by the commercial banks without approval or authorization from Banque du Liban.

The court also held that any effect in the United States was not direct because it depended on independent events, including the commercial banks’ decision to issue the checks and the plaintiffs’ decision to try to deposit them in the United States. The court therefore granted Banque du Liban’s motion to dismiss for lack of subject-matter jurisdiction.

Credit Libanais: Personal Jurisdiction

Credit Libanais moved to dismiss for lack of personal jurisdiction, meaning that the court lacked legal authority over that defendant. The plaintiffs relied on New York’s statute allowing jurisdiction over a defendant that transacts business in New York when the claim arises from that business.

The court held that the plaintiffs had not shown that Credit Libanais transacted sufficient business with them in New York. The plaintiffs identified only four uses of Credit Libanais’s New York correspondent account connected to them. The court found that number insufficient, particularly because cases supporting jurisdiction involved substantially more transactions.

The court also found no sufficient connection between the New York transactions and the plaintiffs’ claims. The claims centered on Credit Libanais’s alleged failure in 2019 to return the plaintiffs’ funds, while the relevant New York correspondent-account transactions occurred from 2016 through 2018. The court noted that the events at the core of the complaint occurred in Lebanon. It therefore granted Credit Libanais’s motion to dismiss for lack of personal jurisdiction.

Disposition

The court granted the defendants’ motions to dismiss. It directed the Clerk of Court to enter judgment for the defendants and close the case. The court denied as moot all other pending motions, including the plaintiffs’ motion for attachment and motion to strike.