Foley v. Union De Banques Arabes Et Francaises

Background

The plaintiffs are thirty victims and family members of victims of terrorism allegedly sponsored by Syria. They had obtained final, unpaid judgments against Syria in three earlier related proceedings. The plaintiffs sued Union de Banques Arabes et Françaises (UBAF), alleging that UBAF worked with Syria to evade United States sanctions and conceal Syrian assets that the plaintiffs could otherwise use to satisfy their judgments.

The complaint asserted four claims: constructive fraudulent conveyance under New York Debtor and Creditor Law § 273-a, actual fraudulent conveyance under § 276, turnover under New York Civil Practice Law and Rules § 5225, and turnover under the Terrorism Risk Insurance Act. The plaintiffs alleged that UBAF processed at least 127 transactions involving the New York banking system, totaling more than $2 billion, in violation of Syria-related sanctions.

UBAF moved to dismiss under Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), and 12(b)(6), arguing that the court lacked subject-matter jurisdiction over the turnover claims, lacked personal jurisdiction over UBAF, and that the fraudulent-conveyance claims failed or were untimely.

Personal Jurisdiction

The court held that it had personal jurisdiction over UBAF under New York’s long-arm statute and the constitutional requirement of due process. The court relied heavily on cases involving foreign banks that repeatedly used New York correspondent accounts to process transactions connected to alleged wrongdoing.

The court found that UBAF had acknowledged 127 transactions through New York correspondent accounts that violated U.S. sanctions. The plaintiffs also alleged that UBAF knowingly used those accounts to help Syria evade sanctions. The court concluded that UBAF’s repeated use of the accounts was purposeful and that there was a substantial connection between that activity and every claim asserted. The court also held that exercising jurisdiction in New York was constitutionally reasonable, citing the ease of modern communication and transportation and New York’s interest in monitoring its banking system.

Subject-Matter Jurisdiction Over Turnover Claims

The plaintiffs sought orders requiring UBAF to turn over Syrian assets in its possession or bring those assets into New York so they could potentially be used to satisfy the plaintiffs’ judgments. UBAF argued that the assets were held only at branches outside the United States and therefore could not be attached or executed against.

The court held that the foreign location of the assets did not eliminate subject-matter jurisdiction at this stage. Relying on the reasoning of the Second Circuit’s decision in a prior related proceeding, the court concluded that a New York court with personal jurisdiction over a non-sovereign bank may order the bank to bring foreign assets owned by a foreign sovereign into New York. The court noted that UBAF did not raise an argument requiring it to conduct the further analysis of whether the assets would ultimately be immune from execution once brought into New York.

The court therefore denied UBAF’s motion to dismiss the turnover claims.

Fraudulent-Conveyance Claims

The court dismissed the actual fraudulent-conveyance claim as untimely. The alleged transfers occurred from 2011 to 2013, but the plaintiffs alleged that they discovered them when the Treasury Department announced its settlement with UBAF on January 4, 2021. The court held that the Uniform Voidable Transactions Act, including its one-year discovery period, governed because the claim accrued upon discovery after that law’s April 4, 2020 effective date. Because the plaintiffs filed suit on February 28, 2022, the actual fraudulent-conveyance claim was untimely.

The court held that the constructive fraudulent-conveyance claim was timely. Under the applicable New York law, the limitations period for that claim began when the plaintiffs’ judgments were entered, rather than when the alleged transfers occurred. The court nevertheless dismissed the claim for a different reason: the plaintiffs had not adequately alleged that UBAF was a transferee or beneficiary of the challenged conveyances. The court found that allegations that UBAF received commissions, fees, revenues, additional business, and the use of Syrian funds were insufficient. It compared UBAF’s alleged conduct to cases holding that assisting a transfer in exchange for fees does not make a party liable as a fraudulent-conveyance transferee or beneficiary.

Because both fraudulent-conveyance claims were dismissed on these grounds, the court did not decide UBAF’s separate arguments about whether the transfers were fraudulent or whether they involved the proper transferors.

Disposition

Judge Ramos granted UBAF’s motion to dismiss in part and denied it in part. The fraudulent-conveyance claims were dismissed, while the turnover claims survived the motion. The court also denied UBAF’s request for oral argument as moot and directed the parties to appear for a telephonic conference.