Raad v. Bank Audi S.A.L.

Background

Patricia Raad and her late husband had been Bank Audi customers for more than 30 years. Patricia Raad had accounts with the bank in Lebanon and New York. In 2006, her late husband established a trust at Bank Audi in Lebanon for the benefit of their children, Stephanie Raad and David Raad. In 2016, Stephanie and David opened accounts with Bank Audi in Lebanon to receive the trust’s principal when the trust ended. They also opened accounts at Interaudi Bank in New York for the purpose of transferring the trust funds there.

The trust expired in 2018, and Bank Audi distributed its principal to Stephanie and David through their Lebanese accounts. In October 2019, the plaintiffs requested that Bank Audi transfer $17,494,000 to their New York accounts. They alleged that Bank Audi agreed and issued transfer orders, but the transfers never occurred. The plaintiffs later alleged that Bank Audi was required to transfer $17,623,674, which remained in Lebanon.

The alleged nonpayment occurred during Lebanon’s financial crisis. According to the opinion, Lebanon’s central bank restricted banks’ ability to transfer funds abroad. The plaintiffs brought a breach-of-contract action. The case was first dismissed on forum non conveniens grounds, but the Second Circuit vacated that judgment because the relevant forum-selection clause was permissive rather than clearly requiring litigation in Beirut. Bank Audi then renewed its motion to dismiss on three grounds: lack of personal jurisdiction, forum non conveniens, and failure to state a claim.

Personal Jurisdiction

The court addressed jurisdiction first because it was a threshold issue. The plaintiffs relied on two theories: specific personal jurisdiction under New York’s long-arm statute, and quasi in rem jurisdiction based on possible attachment of Bank Audi funds in New York.

For specific personal jurisdiction under New York Civil Practice Law and Rules § 302(a)(1), the plaintiffs had to make a preliminary showing that Bank Audi transacted business in New York and that their claim arose from that New York business. The plaintiffs pointed to Bank Audi’s use of New York correspondent banks and to their alleged understanding that funds would be transferred to New York.

The court held that these allegations were insufficient. Although the plaintiffs identified several earlier transactions involving New York correspondent accounts, they did not allege that a specific New York transaction formed part of the conduct that caused their claimed injury. The court concluded that the claim instead concerned measures taken by Lebanese banks in Lebanon during the financial crisis to keep U.S.-dollar deposits there. The prior New York transactions and Bank Audi’s possession of correspondent accounts in the United States did not cause the alleged failure to transfer the funds.

The court also rejected the argument that an agreement to send funds to New York itself established jurisdiction. The account agreements did not state that Bank Audi was contractually required to send payments to New York. In addition, the service at issue—the attempted transfer of funds—was alleged to have occurred, and failed to occur, in Lebanon rather than New York.

The court separately rejected quasi in rem jurisdiction, which is jurisdiction based on property located in the state. The plaintiffs did not show that funds in Bank Audi’s New York correspondent accounts were connected to their claim. The court also noted that no current attachment or seizure of the relevant New York property was in place. An attachment of funds in France did not provide a basis for jurisdiction in New York.

Other Arguments and Disposition

The court stated that Bank Audi presented persuasive arguments that New York would be an improper forum under the forum non conveniens doctrine, including that the agreements were signed in Lebanon, the relevant events occurred there, many witnesses and documents were likely there, and the dispute implicated Lebanese law and financial regulations. But because the court found that it lacked personal jurisdiction, it did not decide whether the forum-selection clauses applied or whether forum non conveniens dismissal was warranted.

The court also did not address Bank Audi’s argument that the complaint failed to state a claim under Federal Rule of Civil Procedure 12(b)(6). Judge Mary Kay Vyskocil granted the motion to dismiss the Amended Complaint for lack of personal jurisdiction and directed the Clerk to terminate docket entry 64 and close the case. The opinion does not state that the dismissal was with or without prejudice.