On January 13, 2023, the New York State Commercial Division issued a decision in Bangladesh Bank v. Rizal Commercial Banking Corp., et al., Index No. 652051/2020, that continued New York courts’ tendency to assert personal jurisdiction over foreign banks, even if their only relationship with New York is having correspondent bank accounts.
In Bangladesh Bank, Judge Andrea Masley denied defendant Rizal Commercial Banking Corporation’s (“RCBC”) motion to dismiss the complaint pursuant to CPLR 3211(a)(7) and (8) and CPLR 327(a). The plaintiff alleged that defendants stole more than $101 million from an account plaintiff maintains at the Federal Reserve Bank of New York (“FRBNY”). Plaintiff alleged that North Korean hackers infiltrated its computer network in Bangladesh and issued multiple unauthorized payment orders to transfer funds from plaintiff’s FRBNY account to various bank accounts in Philippines and elsewhere. Most of the funds went through fictitious accounts opened by RCBC in Philippines and passed through RCBC’s correspondent U.S. accounts. Plaintiff brought various claims against RCBC, including but not limited to: (1) conversion/theft/misappropriation; (2) aiding and abetting conversion/theft/misappropriation against all defendants; (3) conspiracy to commit conversion/theft/misappropriation; (4) aiding and abetting fraud; and (5) conspiracy to commit fraud.
In the motion to dismiss, RCBC argued that the New York State Court did not have personal jurisdiction over it because correspondent bank accounts cannot support jurisdiction unless their use is purposeful and repeated. The Court found that it had personal jurisdiction over RCBC under CPLR 302(a)(1) because by maintaining correspondent relationships with various banks in New York, RCBC is considered to be conducting business in New York and the action related to that business. (NYSCEF Doc. No. 316 at 4.) The Court stated that RCBC’s contact with New York were “repeated and related” when RCBC continuously used correspondent banking services in New York. (Id. at 5.)
The Court also found that it had personal jurisdiction over RCBC pursuant to CPLR 302(a)(2), which establishes jurisdiction for a tort action, since the funds were “transferred out of the [FRBNY] account, without plaintiff’s authorization . . .”. (Id. at 6.) The Court held that a co-conspirator’s actions in New York as the agent for an out-of-state co-conspirator can provide a basis for CPLR 302(a)(2) jurisdiction. (Id.) The Court also held that plaintiff’s allegations of RCBC’s actions and inactions in allowing the funds to be stolen could serve as a basis for plaintiff’s claim that RCBC participated in the alleged. Using a New York bank account for a fraudulent scheme was found to be sufficient to constitute a tort within New York. (Id. at 9.)
Because plaintiff alleged that the North Koreans’ hacking in Bangladesh was the event that caused the injury, RCBC also argued that the Court did not have personal jurisdiction pursuant to CPLR 302(a)(3)(ii) because the act that caused the injury was outside of New York. The Court disagreed with RCBC by holding that fulfillment of the payment orders in New York caused the harm to plaintiff’s account. (NYSCED Doc. No. 316 at 10.)
Relying on the Court of Appeals’ decision on Al Rushaid v. Pictet & Cie, 28 NY3d 316 (2016), the Court found that personal jurisdiction over RCBC comports with due process since defendants’ intentional and repeated use of New York correspondent bank accounts to launder funds constitutes “purposeful transaction of business substantially related to plaintiff’s claims.” (Id. at 11.)
Finally, the Court rejected RCBC’s argument that the complaint should be dismissed on forum non conveniens grounds when RCBC argued that Philippines, not New York, was the proper forum. The Court weighed all factors in considering the proper forum and found the factors to be in favor of having the dispute resolved in New York. Specifically, the Court considered the following factors and determined New York to be the proper forum: (1) the Commercial Division of New York State Supreme Court “was created to host complex international cases”; (2) the location and documentary evidence is mostly in New York; (3) Philippines was not a proper alternative forum due to local privacy laws; and (4) the locations of the event giving rise to the action was New York.
This decision is notable for all foreign banking organizations that have correspondent bank accounts in New York since it is a reminder that New York courts can assert personal jurisdiction over foreign banks, even if they do not have a presence in New York, i.e., a branch or an agency located in New York, depending on the facts and circumstances of the particular case.