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Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, No. 10-1306 (2d Cir. 2014)Annotate this Case
This opinion or order relates to an opinion or order originally issued on March 5, 2012.
10 1306 cv Licci ex rel. Licci v. Lebanese Canadian Bank, SAL UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2010 (Argued: February 25, 2011 Decided: October 18, 2013 Amended: January 9, 2014) Docket No. 10 1306 cv YAAKOV LICCI, a minor, by his father and natural guardian, ELIHAV LICCI, and by his mother and natural guardian, YEHUDIT LICCI, et al., Plaintiffs Appellants Movants Petitioners, v LEBANESE CANADIAN BANK, SAL; AMERICAN EXPRESS BANK LTD., Defendants Appellees Respondents Respondents. Before: KATZMANN, Chief Judge, and KEARSE and SACK, Circuit Judges. The plaintiffs have made a motion for the Court to permit them to file a petition for rehearing at this time despite the fact that a judgment had yet 1 to issue in this appeal. We grant the motion only insofar as it regards the filing of a petition for panel rehearing and deny the petition. Appearances: ROBERT J. TOLCHIN (Meir Katz, of counsel), The Berkman Law Office, LLC, Brooklyn, NY, for Plaintiffs Appellants Movants Petitioners. MARK P. LADNER, Morrison & Foerster LLP, New York, NY, for Defendant Appellee Respondent Respondent American Express Bank Ltd. PER CURIAM: On March 5, 2012, this Court filed an opinion affirming the judgment of the United States District Court for the Southern District of New York (George B. Daniels, Judge) insofar as it dismissed that portion of the complaint that asserted claims against the defendant American Express Bank Ltd. (ÊºAmExÊº).1 Licci ex rel. Licci v. Lebanese Can. Bank, SAL and Am. Express Bank, Ltd., 672 F.3d The Court simultaneously certified a question to the New York Court of Appeals with respect to the district courtÊ¹s in personam jurisdiction over the co defendant Lebanese Canadian Bank, SAL. Licci ex rel. Licci v. Lebanese Can. Bank, SAL, 673 F.3d 50 (2d Cir. 2012). On November 20, 2012, the New York Court of Appeals responded to the certification, Licci v. Lebanese Can. Bank, SAL, 20 N.Y.3d 327, 960 N.Y.S.2d 695, 984 N.E.2d 893 (2012), and the question of jurisdiction over that co defendant remains pending before this court. This opinion does not deal with that portion of these proceedings regarding jurisdiction over the Lebanese Canadian Bank. 1 2 155 (2d Cir. 2012) (ÊºAmExÊº). On January 7, 2013, the appellants filed what they styled as a motion for leave to file a petition for rehearing and rehearing en banc prior to entry of judgment against them. They appended to the motion a copy of the petition they sought to file. On September 18, 2013, the appellants filed a letter pursuant to Federal Rule of Civil Procedure 28(j) calling to our attention a decision by the New York Supreme Court, Appellate Division, First Department, in Elmaliach v. Bank of China Ltd., __A.D.2d__, 971 N.Y.S.2d 504 (1st DepÊ¹t 2013) (ÊºBank of ChinaÊº). At our request, AmEx responded to the 28(j) letter on September 27, 2013, and the appellants responded to that letter on October 16, 2013. We now grant the appellantsÊ¹ motion for leave to file a petition for panel rehearing, even though a judgment in this appeal had yet to issue, and we deny that petition.2 On October 30, 2013, the appellants filed a petition for rehearing en banc, arguing, inter alia, that our opinion, which conflicts with Bank of China and employs an interest analysis approach, is erroneous because the New York Court of Appeals has stated that interest analysis is Êºlimited to competing loss allocation not conduct regulating rules.Êº Edwards v. Erie Coach Lines Co., 17 N.Y.3d 306, 319, 929 N.Y.S.2d 41, 43, 952 N.E.2d 1033, 1035 (2011). Again at our request, AmEx responded to the appellantsÊ¹ petition on November 25, 2013. We conclude that Edwards, itself a loss allocation case, did not overrule Padula v. Lilarn Properties Corp., 84 N.Y.2d 519, 620 N.Y.S.2d 310, 644 N.E.2d 1001 (1994), 2 3 BACKGROUND The facts and history of this litigation insofar as it involves the defendant AmEx are set forth in our opinion in AmEx, 672 F.3d at 156, which in turn refers to a more complete version of the facts contained in Licci ex rel. Licci v. Lebanese Can. Bank, SAL, 673 F.3d 50 (2d Cir. 2012). We wrote in AmEx: This case concerns a series of rocket attacks launched by Hizballah, a Lebanese terrorist organization, at targets in northern Israel in July and August 2006. The plaintiffs are American, Canadian, and Israeli civilians who were injured, or whose family members were injured or killed, during the rocket attacks. They allege that [Lebanese Canadian Bank (ÊºLCBÊº)] knowingly maintained bank accounts for an alleged Hizballah affiliate, the Shahid (Martyrs) Foundation (ÊºShahidÊº), and carried out dozens of international wire transfers on ShahidÊ¹s behalf. These wire transfers, which totaled several million dollars, were conducted using LCBÊ¹s correspondent bank account at AmEx in New York. The plaintiffs assert that AmEx, by facilitating these wire transfers on behalf of LCB and Shahid, breached a legal duty of care to the plaintiffs and thereby caused the plaintiffsÊ¹ injuries. AmEx, 672 F.3d at 156. The parties disagreed as to whether New York or Israeli law governs the plaintiffsÊ¹ claims against AmEx. Assuming there is an actual conflict between New York and Israeli law, we applied New YorkÊ¹s interest analysis test to determine which law should apply and concluded that which instructs courts to engage in interest analysis in conduct regulating cases, 84 N.Y.2d at 521, 620 N.Y.S.2d at 311, 644 N.E.2d at 1002. 4 New York has the greatest interest in this litigation. All of the challenged conduct undertaken by AmEx occurred in New York, where AmEx is headquartered and where AmEx administers its correspondent banking services. Although the plaintiffsÊ¹ injuries occurred in Israel, and Israel is also the plaintiffsÊ¹ domicile, those factors do not govern where, as here, the conflict pertains to a conduct regulating rule. Id. at 158. We further concluded that New York, not Israel, has the stronger interest in regulating the conduct of New York based banks operating in New York. See, e.g., [Schultz v. Boy Scouts of Am., Inc., 65 N.Y.2d 189, 198, 491 N.Y.S.2d 90, 96, 480 N.E.2d 679, 684 85 (1985))] (noting the Êºlocus jurisdictionÊ¹s interests in protecting the reasonable expectations of the parties who relied on it to govern their primary conductÊº). Accordingly, even assuming that the district court was mistaken in deciding that there was no actual conflict between New York law and Israeli law, . . . a choice of law analysis would nonetheless require application of New York law to the plaintiffsÊ¹ negligence claim against AmEx. Id. The parties agreed (as do we) that under New York law, AmEx has no liability to the appellants for the harm to them that is the subject of this action. See Lerner v. Fleet Bank, N.A., 459 F.3d 273, 286 (2d Cir. 2006). We therefore decided that the case against Amex must be dismissed. We entered no judgment, however, because the appeal regarding the district courtÊ¹s in personam jurisdiction over the other defendant, Lebanese Canadian Bank, SAL, 5 remains pending following our certifying and the New York Court of Appeals responding to questions vital to that issue. DISCUSSION The appellants now principally argue that under New York law as recently expressed by the Appellate Division, First Department, in Bank of China, we must withdraw our AmEx opinion applying New York law and conclude instead that Israeli law governs their claims against AmEx. We decline to do so. I. The Binding Nature of the Bank of China Decision We are bound, of course, by the law of New York as interpreted by the New York Court of Appeals. See CommÊ¹r of Internal Revenue v. Estate of Bosch, 387 U.S. 456, 464 (1967); 28 U.S.C. § 1652. We Êºconsider the language of the state intermediate appellate courts to be helpful indicators of how the stateÊ¹s highest court would rule.Êº DiBella v. Hopkins, 403 F.3d 102, 112 (2d Cir. 2005). ÊºAlthough we are not strictly bound by state intermediate appellate courts,Êº we will look to their decisions unless Êºconvinced by other persuasive data that the highest court of the state would decide otherwise.Êº Id. (quoting West v. Am. Tel. & Tel. Co., 311 U.S. 223, 237 (1940)); see also Estate of Bosch, 387 U.S. at 465 6 (Êº[E]ven in diversity cases [the Supreme] Court has . . . held that while the decrees of lower state courts should be attributed some weight . . . the decision is not controlling . . . where the highest court of the State has not spoken on the point.Êº) (second and third ellipses in original; citation, internal quotation marks, and some alterations omitted). We conclude that we are not bound by the First DepartmentÊ¹s decision in Bank of China. The New York Court of Appeals has already prescribed the choice of law rules applicable to the case at bar in Schultz v. Boy Scouts of America, Inc., 65 N.Y.2d 189, 491 N.Y.S.2d 90, 480 N.E.2d 679 (1985). Bank of China is thus not a statement of an unsettled or ambiguous rule, but rather an application of a previously established rule. Because we are persuaded that it is a mistaken application, as explained below, we decline to follow it. II. The Persuasiveness of the Bank of China Opinion The crucial New York Court of Appeals decision relevant to this proceeding, and the one on which we principally relied in reaching our earlier conclusion, explicitly establishes an interest analysis approach: ÊºThe law of the jurisdiction having the greatest interest in the litigation will be applied . . . .Êº Schultz, 65 N.Y.2d at 197, 491 N.Y.S.2d at 95, 480 N.E.2d at 684 (internal 7 quotation marks and alterations omitted). As we pointed out in AmEx, interest analysis is a Êºflexible approach intended to give controlling effect to the law of the jurisdiction which, because of its relationship or contact with the occurrence or the parties, has the greatest concern with the specific issue raised in the litigation.Êº AmEx, 672 F.3d at 157 58 (quoting Cooney v. Osgood Mach., Inc., 81 N.Y.2d 66, 72, 595 N.Y.S.2d 919, 922, 612 N.E.2d 277, 280 (1993) (intermediate citation to Second Circuit authority omitted)). Under Schultz, the interest analysis is applied differently depending on whether the rules in question are conduct regulating rules that Êºpeople use as a guide to governing their primary conduct,Êº or loss allocating rules that Êºprohibit, assign, or limit liability after the tort occurs.Êº AmEx, 672 F.3d at 158 (internal quotation marks omitted). All parties and we agree that the law with which we are dealing is Êºconduct regulating.Êº And as we further observed in AmEx, Êº[i]f conflicting conduct regulating laws are at issue, the law of the jurisdiction where the [allegedly tortious acts] occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders.Êº AmEx, 672 F.3d at 158 (quoting Cooney, 81 N.Y.2d at 72, 595 N.Y.S.2d at 922, 612 N.E.2d at 8 280) (intermediate citation to Second Circuit authority omitted).3 As we concluded in AmEx, ÊºNew York, not Israel, has the stronger interest in regulating the conduct of New York based banks operating in New York.Êº Id. It seems to be without question that the conduct of AmEx that appellants allege was tortious occurred in New York. New York has the greatest interest in regulating conduct within its borders, and consequently its law applies. We think that in Bank of China, the Appellate Division misapplied the Schultz rule by failing to give effect to the distinction between the two different kinds of tort law rules for choice of law purposes. It cited Schultz for the proposition that Êº[w]here a defendantÊ¹s negligent conduct occurs in one jurisdiction and the plaintiff suffers injuries in another, Ê¹the place of the wrong is considered to be the place where the last event necessary to make the actor liable occurred,Ê¹ that is, Ê¹where the plaintiffsÊ¹ injuries occurred.Ê¹Êº Bank of China, 3 For additional cases in this Circuit applying the law of the jurisdiction where the allegedly tortious act occurred when conduct regulating rules conflict, see AroChem Int l, Inc. v. Buirkle, 968 F.2d 266, 270 71 (2d Cir. 1992); LaSala v. Lloyds TSB Bank, PLC, 514 F. Supp. 2d 447, 465 66 (S.D.N.Y. 2007); HSA Residential Mortg. Servs. of Tex. v. Casuccio, 350 F. Supp. 2d 352, 365 66 (E.D.N.Y. 2003); Cromer Fin. Ltd. v. Berger, 137 F. Supp. 2d 452, 492 93 (S.D.N.Y. 2001); Sussman v. Bank of Israel, 801 F. Supp. 1068, 1075 (S.D.N.Y. 1992), aff d, 990 F.2d 71 (2d Cir. 1993). 9 __A.D.2d__, 971 N.Y.S.2d at 514 (quoting Schultz, 65 N.Y.2d at 195, 491 N.Y.S.2d at 94, 480 N.E.2d at 683). Put simply, Bank of China read Schultz to require a Êºplace of injuryÊº rule. But SchultzÊ¹s reference to the Êºplace of injuryÊº rule occurred in the context of discussing the Êºtraditional ruleÊº of lex loci delicti, which equates the Êºplace of the wrongÊº with the place of the injury. Schultz, 65 N.Y.2d at 195, 491 N.Y.S.2d at 93 94, 480 N.E.2d at 682 83. And, as the court went on to point out, it has Êºrefused to invariably applyÊº that rule Êºto determine the availability of relief for commission of a tort.Êº Id. at 196, 491 N.Y.S.2d at 94, 480 N.E.2d at 683. Schultz was explicit: Êº[W]hen the conflicting rules involve the appropriate standards of conduct, rules of the road, for example, the law of the place of the tort will usually have a predominant, if not exclusive, concern.Êº Id. at 198, 491 N.Y.S.2d at 95, 480 N.E.2d at 684 (internal quotation marks omitted).4 The court went on to explain that the reason for this rule is that, in such cases, Êºthe locus jurisdictionÊ¹s interests in protecting the reasonable expectations of the parties who relied on it to govern their primary conduct and in the admonitory effect that applying its law will have on similar conduct in the future assume critical importance and outweigh any interests of the common domicile jurisdiction.Êº Schultz, 65 N.Y.2d at 198, 491 N.Y.S.2d at 96, 480 N.E.2d at 684 85. 4 10 The New York Court of Appeals has not been presented with this precise issue, i.e., a conflict between the conduct regulating rules of the place where the injury occurred and the conduct regulating rules of the place where the conduct of the defendant in question occurred and whose laws did not impose on that defendant a duty of care toward the plaintiffs. Several decisions of the Appellate Division appear to have read Schultz to stand for the proposition that, when there is a conflict between the conduct regulating rules of the place of the conduct and those of the place of the injury, it is the latter that generally apply. See Bank of China, A.D.3d , 971 N.Y.S.2d 504 (1st DepÊ¹t 2013); Devore v. Pfizer Inc., 58 A.D.3d 138, 141, 867 N.Y.S.2d 425, 427 28 (1st DepÊ¹t 2008), leave denied, 12 N.Y.3d 703, 876 N.Y.S.2d 704 (2009);5 Ackerman v. Price Waterhouse, 252 The degree to which Devore rests on this ground is unclear to us. In Devore, the First Department set forth accurately the Schultz rule that Êº[w]hen the purpose of the statute is to regulate conduct, the law of the jurisdiction where the tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders.Êº 58 A.D.3d at 141, 867 N.Y.S.2d at 427 28 (internal quotation marks omitted). While the Devore panel went on to state that the place of the tort is Êºgenerally defined as the place of the injury,Êº id. at 141, 867 N.Y.S.2d at 428 (citing Schultz, 65 N.Y.2d at 195, 491 N.Y.S.2d at 94, 480 N.E.2d at 683 (discussing the Êºtraditional ruleÊº of lex loci delicti)), the court apparently did not ultimately rely on a place of injury analysis but rather on case law that under Êºa true application of the interest analysis approach, the law of the forum in which the products are sold should govern. Devore, 58 A.D.3d at 142, 867 N.Y.S.2d at 428 29 (quoting Doe v. Hyland Therapeutics Div., 807 F. Supp. 1117, 1130 n.16 (S.D.N.Y. 1992)) (internal quotation marks omitted). 5 11 A.D.2d 179, 192 93, 683 N.Y.S.2d 179, 189 (1st DepÊ¹t 1998). Respectfully, we do not agree with that interpretation. Although Schultz involved injuries some of which were experienced in a state different from the states in which the institutional tortfeasorsÊ¹ conduct (the allegedly negligent hiring, supervision, and retention of a child molesting employee) occurred, the state in which each defendant employerÊ¹s conduct occurred undeniably imposed a duty of care on that defendant, and the only question was whether to apply a loss allocation doctrine (charitable immunity) that was recognized by only one of the states in which injury occurred. The New York Court of Appeals has consistently explained that, for conduct regulating rules, Êºthe law of the jurisdiction where the [alleged] tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders.Êº Cooney, 81 N.Y.2d at 72, 595 N.Y.S.2d at 922, 612 N.E.2d at 280; see also In re Allstate Ins. Co. (Stolarz), 81 N.Y.2d 219, 225, 597 N.Y.S.2d 904, 907, 613 N.E.2d 936, 939 (1993) (ÊºStolarzÊº). This is because Êº[w]here the defendantÊ¹s exercise of due care . . . is in issue, the jurisdiction in which the allegedly wrongful conduct occurred will usually have a predominant, if not exclusive, concern.Êº Babcock v. Jackson, 12 N.Y.2d 473, 483, 12 240 N.Y.S.2d 743, 750, 191 N.E.2d 279, 284 (1963). In the ordinary tort case, Êºboth the wrong and the injury t[ake] placeÊº in the same jurisdiction. Id. at 477 n.2, 240 N.Y.S.2d at 746 n.2, 191 N.E.2d at 280 n.2. But where they do not, it is the place of the allegedly wrongful conduct that generally has superior Êºinterests in protecting the reasonable expectations of the parties who relied on [the laws of that place] to govern their primary conduct and in the admonitory effect that applying its law will have on similar conduct in the future.Êº Schultz, 65 N.Y.2d at 198, 491 N.Y.S.2d at 96, 480 N.E.2d at 684 85. We recognize decisions of the Appellate Division as Êºa basis for ascertaining state law . . . unless [we are] convinced by other persuasive data that the highest court of the state would decide otherwise.Êº DiBella, 403 F.3d at 112 (internal quotation marks omitted). To the extent that our decision in this case differs from that of Bank of China or other Appellate Division cases, it is because we are persuaded by the consistent rationale of the New York Court of Appeals as it has applied interest analysis. Here, we conclude that it is New York, and not Israel, that Êºhas an overriding interest in regulatingÊº the conduct of banks operating Êºwithin its borders,Êº Stolarz, 81 N.Y.2d at 225, 597 N.Y.S.2d at 13 907, 613 N.E.2d at 939. Therefore, we adhere to our conclusion that the law applicable to plaintiffsÊ¹ negligence claims against AmEx is that of New York. We therefore reject the view of Bank of China that the law of the place of injury ordinarily or always governs where conduct regulating rules are involved as inconsistent with the law as clearly established by New YorkÊ¹s highest court in Schultz. With respect to jurisdiction over the Lebanese Canadian Bank, we were unsure as to New YorkÊ¹s applicable law and therefore certified questions to the New York Court of Appeals in order to answer the question in a manner consonant with the StateÊ¹s jurisprudence. We harbor no similar doubts as to the issues we resolved by per curiam opinion in AmEx. III. Other Observations First, we recognize that the decision in Bank of China is subject to appeal. We issue this opinion nonetheless to make clear, in this complex set of proceedings, that the substance of the First Department opinion insofar as it is relevant to the appeal before us does not cause us to alter the conclusion we reached in our per curiam opinion in AmEx. 14 Second, for reasons that become obvious upon a reading of the Bank of China opinion, the facts in that case differ starkly from those before us. Beyond our conclusions as to its challenge to the soundness of AmEx, we emphasize that we offer no views as to the law affecting or the proper outcome of that case and should not be understood to imply any. CONCLUSION For the foregoing reasons, we GRANT the appellantsÊ¹ motion insofar as it asks us to hear their petition for panel rehearing prior to the entry of a final judgment in this appeal, and we DENY that petition. 15