Licci v. Lebanese Canadian Bank, SAL

10-1306-cv
Licci v. Lebanese Canadian Bank, SAL
UNITED STATES COURT OF APPEALS 1
FOR THE SECOND CIRCUIT 2
August Term, 2010 3
(Argued: February 25, 2011 Decided: March 5, 2012) 4
Docket No. 10-1306-cv 5
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YAAKOV LICCI, a minor, by his father and natural guardian, 7
ELIHAV LICCI, and by his mother and natural guardian, YEHUDIT 8
LICCI, et al., 9
Plaintiffs-Appellants, 10
- v - 11
LEBANESE CANADIAN BANK, SAL; AMERICAN EXPRESS BANK LTD., 12
Defendants-Appellees.*
13
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Before: KEARSE, SACK, and KATZMANN, Circuit Judges. 15
Appeal from a judgment of the United States District 16
Court for the Southern District of New York (George B. Daniels, 17
Judge) granting the motion to dismiss filed by defendants- 18
appellees American Express Bank Ltd. ("AmEx"). The plaintiffs, 19
all Israeli residents, were allegedly injured, or their family 20
members killed or injured, by rockets fired by Hizballah, a 21
Lebanese terrorist organization, into northern Israel in July 22
* The Clerk of Court is directed to amend the official
caption as shown above.

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and August 2006. The district court dismissed the plaintiffs' 1
negligence claim against AmEx, evaluating the claim under New 2
York state law. Because we conclude that New York law would 3
apply even if a conflict between the laws of the relevant 4
jurisdictions existed, and that the plaintiffs do not have a 5
viable claim against AmEx under New York law, the judgment of 6
the district court insofar as it is in favor of AmEx is hereby 7
AFFIRMED. 8
The district court's dismissal of a separate claim 9
against Lebanese Canadian Bank SAL is considered in a separate 10
opinion filed today. 11
Appearances: ROBERT J. TOLCHIN, Jaroslawicz & 12
Jaros, New York, NY, for Plaintiffs- 13
Appellants. 14
JONATHAN D. SIEGFRIED (Lawrence S. 15
Hirsh, on the brief), Dewey & LeBoeuf 16
LLP, New York, NY, for Defendant- 17
Appellee Lebanese Canadian Bank, SAL. 18
MARK P. LADNER (Mark David McPherson, 19
Michael Gerard, on the brief), 20
Morrison & Foerster LLP, New York, NY, 21
for Defendant-Appellee American 22
Express Bank Ltd. 23
PER CURIAM : 24
The plaintiffs-appellants, Yaakov Licci et al., 25
appeal from a March 31, 2010, decision and order of the United 26
States District Court for the Southern District of New York 27
(George B. Daniels, Judge) granting the motions to dismiss 28
2

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filed by defendants-appellees Lebanese Canadian Bank, SAL 1
("LCB") and American Express Bank Ltd. ("AmEx"). 2
This opinion addresses only the plaintiffs' 3
negligence claim against AmEx. The plaintiffs' claims against 4
LCB are addressed in an accompanying opinion. See Licci v. 5
Lebanese Canadian Bank, SAL, __ F.3d __ (2d Cir. March 5, 6
2012). A full account of the underlying facts is set forth in 7
that opinion. 8
This case concerns a series of rocket attacks 9
launched by Hizballah, a Lebanese terrorist organization, at 10
targets in northern Israel in July and August 2006. The 11
plaintiffs are American, Canadian, and Israeli civilians who 12
were injured, or whose family members were injured or killed, 13
during the rocket attacks. They allege that LCB knowingly 14
maintained bank accounts for an alleged Hizballah affiliate, 15
the Shahid (Martyrs) Foundation ("Shahid"), and carried out 16
dozens of international wire transfers on Shahid's behalf. 17
These wire transfers, which totaled several million dollars, 18
were conducted using LCB's correspondent bank account at AmEx 19
in New York. The plaintiffs assert that AmEx, by facilitating 20
these wire transfers on behalf of LCB and Shahid, breached a 21
legal duty of care to the plaintiffs and thereby caused the 22
plaintiffs' injuries. 23
3

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"We review the district court's grant of a Rule 1
12(b)(6) motion to dismiss de novo, accepting all factual 2
claims in the complaint as true, and drawing all reasonable 3
inferences in the plaintiff's favor." Famous Horse Inc. v. 5th 4
Ave. Photo Inc., 624 F.3d 106, 108 (2d Cir. 2010). In so 5
doing, we ascertain whether the complaint "contain[s] 6
sufficient factual matter, accepted as true, to state a claim 7
to relief that is plausible on its face." Ashcroft v. Iqbal, 8
129 S. Ct. 1937, 1949 (2009) (internal quotation marks 9
omitted). "Because our review is de novo, we are free to 10
affirm the decision below on dispositive but different 11
grounds." Chase Grp. Alliance LLC v. City of N.Y. Dep't of 12
Fin., 620 F.3d 146, 150 (2d Cir. 2010) (internal quotation 13
marks omitted). 14
This case presents a threshold question of choice of 15
law. Plaintiffs assert that Israeli law governs their 16
negligence claim, while AmEx maintains that New York law 17
governs. "We review the district court's choice of law de 18
novo." Finance One Pub. Co. v. Lehman Bros. Special Fin., 19
Inc., 414 F.3d 325, 331 (2d Cir. 2005), cert. denied, 548 U.S. 20
904 (2006). 21
"A federal court sitting in diversity or adjudicating 22
state law claims that are pendent to a federal claim must apply 23
the choice of law rules of the forum state." Rogers v. 24
4

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Grimaldi, 875 F.2d 994, 1002 (2d Cir. 1989). Accordingly, New 1
York choice-of-law rules apply in adjudicating the plaintiffs' 2
negligence claim. 3
Under New York choice-of-law rules, "'[t]he first 4
step in any case presenting a potential choice of law issue is 5
to determine whether there is an actual conflict between the 6
laws of the jurisdictions involved.'" Wall v. CSX Transp., 7
Inc., 471 F.3d 410, 415 (2d Cir. 2006) (quoting In re Allstate 8
Ins. Co., 81 N.Y.2d 219, 223, 597 N.Y.S.2d 904, 905, 613 N.E.2d 9
936, 937 (1993)). A choice-of-law analysis need not be 10
performed unless there is "an 'actual conflict' between the 11
applicable rules of two relevant jurisdictions." Finance One, 12
414 F.3d at 331. If no actual conflict exists, and if New York 13
is among the relevant jurisdictions, the court may simply apply 14
New York law. See Wall, 471 F.3d at 422; Int'l Bus. Machs. 15
Corp. v. Liberty Mut. Ins. Co., 363 F.3d 137, 143 (2d Cir. 16
2004). 17
The district court determined that "no actual 18
conflict exists between the applicable substantive law of 19
negligence in New York and Israel." Licci v. Am. Express Bank 20
Ltd., 704 F. Supp. 2d 403, 409 (S.D.N.Y. 2010). It therefore 21
proceeded to evaluate the plaintiffs' negligence claim against 22
AmEx under New York state law. Id. at 410. The district court 23
observed that under New York law, "[b]anks do not owe non- 24
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customers a duty to protect them from the intentional torts 1
committed by [the banks'] customers." Id. (citing Lerner v. 2
Fleet Bank, N.A., 459 F.3d 273, 286 (2d Cir. 2006)). The 3
district court also determined that the plaintiffs had failed 4
plausibly to allege that AmEx's conduct was the proximate cause 5
of the plaintiffs' injuries. Id. at 410-11. For those 6
reasons, the district court dismissed the plaintiffs' 7
negligence claim against AmEx. 8
On appeal, the plaintiffs contend that there is an 9
actual conflict between Israeli law and New York law, and 10
therefore the district court erred in declining to conduct a 11
choice-of-law analysis. The plaintiffs further argue that 12
Israeli law, not New York law, governs their negligence claim 13
against AmEx. 14
We use New York conflict of laws principles to 15
determine whether New York or Israeli law governs. See Rogers, 16
875 F.2d at 1002. Even if the plaintiffs are correct and an 17
actual conflict exists between the relevant substantive laws of 18
New York and Israel, New York conflicts law directs that 19
"'[t]he law of the jurisdiction having the greatest interest in 20
the litigation will be applied.'" GlobalNet Financial.Com, 21
Inc. v. Frank Crystal & Co., 449 F.3d 377, 384 (2d Cir. 2006) 22
(quoting Schultz v. Boy Scouts of Am., Inc., 65 N.Y.2d 189, 23
197, 491 N.Y.S.2d 90, 95, 480 N.E.2d 679, 684 (1985)). 24
6

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"Interest analysis is a 'flexible approach intended to give 1
controlling effect to the law of the jurisdiction which, 2
because of its relationship or contact with the occurrence or 3
the parties, has the greatest concern with the specific issue 4
raised in the litigation.'" Finance One, 414 F.3d at 337 5
(quoting Cooney v. Osgood Mach., Inc., 81 N.Y.2d 66, 72, 595 6
N.Y.S.2d 919, 922, 612 N.E.2d 277, 280 (1993)). 7
In tort-law disputes, interest analysis distinguishes 8
between two sets of rules: conduct-regulating rules and loss- 9
allocating rules. GlobalNet, 449 F.3d at 384. Conduct- 10
regulating rules are those that "people use as a guide to 11
governing their primary conduct," K.T. v. Dash, 37 A.D.3d 107, 12
112, 827 N.Y.S.2d 112, 117 (1st Dep't 2006), while "[l]oss 13
allocating rules . . . are laws that prohibit, assign, or limit 14
liability after the tort occurs," DeMasi v. Rogers, 34 A.D.3d 15
720, 721, 826 N.Y.S.2d 106, 108 (2d Dep't 2006) (internal 16
quotation marks omitted). 17
The alleged conflict in this case concerns a conduct- 18
regulating rule: the scope of a bank's duty to protect third 19
parties against intentional torts committed by the bank's 20
customers. "'If conflicting conduct-regulating laws are at 21
issue, the law of the jurisdiction where the tort occurred will 22
generally apply because that jurisdiction has the greatest 23
interest in regulating behavior within its borders.'" 24
7

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GlobalNet, 449 F.3d at 384 (quoting Cooney, 81 N.Y.2d at 72, 1
595 N.Y.S.2d at 922, 612 N.E.2d at 280). 2
Applying the interest-analysis test, we conclude that 3
New York has the greatest interest in this litigation. All of 4
the challenged conduct undertaken by AmEx occurred in New York, 5
where AmEx is headquartered and where AmEx administers its 6
correspondent banking services. Although the plaintiffs' 7
injuries occurred in Israel, and Israel is also the plaintiffs' 8
domicile, those factors do not govern where, as here, the 9
conflict pertains to a conduct-regulating rule. Cf. GlobalNet, 10
449 F.3d at 384-85. We conclude that New York, not Israel, has 11
the stronger interest in regulating the conduct of New York- 12
based banks operating in New York. See, e.g., Schultz, 65 13
N.Y.2d at 198, 491 N.Y.S.2d at 96, 480 N.E.2d at 684-85 (noting 14
the "locus jurisdiction's interests in protecting the 15
reasonable expectations of the parties who relied on it to 16
govern their primary conduct"). 17
Accordingly, even assuming that the district court 18
was mistaken in deciding that there was no actual conflict 19
between New York law and Israeli law, we conclude that a 20
choice-of-law analysis would nonetheless require application of 21
New York law to the plaintiffs' negligence claim against AmEx. 22
The plaintiffs do not dispute that that claim must fail if New 23
York law is applied. The district court therefore did not err 24
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in dismissing the plaintiffs' negligence claim against AmEx, 1
and we affirm on that ground. 2
For the foregoing reasons, the judgment of the 3
district court insofar as it is in favor of AmEx is affirmed. 4
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