Second Circuit Affirms Dismissal of Civil RICO Claims For Want of Subject-Matter and Personal jurisdiction

Daou v. BLC Bank, S.A.L., __4th__, 2022 WL 2948910 (2d Cir., July 26, 2022)

Second Circuit Affirms Dismissal of Civil RICO Claims For Want of Subject-Matter and Personal jurisdiction

Plaintiffs alleged that Defendants-Appellees (together, “the Commercial Banks”) engaged in a scheme to cheat them out of millions of U.S. dollars (“USD”) by inducing them to deposit dollars in Lebanese bank accounts with the promise that they would be able to withdraw that money in the United States, only to renege on that promise and keep the money trapped in Lebanon. The Court found the district court properly dismissed the claims against certain banks because the Daous’ agreements with those banks included valid, enforceable forum selection clauses specifying Beirut as the proper forum; those against Bank CL because it lacked personal jurisdiction over that bank; and those against Bank BDL because that bank is an agency or instrumentality of the Lebanese state and no exception applied under the Foreign Sovereign Immunities Act (“FSIA”).   

The FAC had asserted claims of civil conspiracy, fraud, issuance of dishonored checks, violations of Florida statutes on collection instruments, breach of contract, conversion, unjust enrichment, promissory estoppel, and civil RICO violations, all of which turn on alleged measures taken by Lebanese banks in Lebanon to ensure that USD deposits remained in that country. The FAC, unlike the complaints in Licci and Rushaid, does not include a single allegation that any defendant used an actual, specific transaction through a New York correspondent account in the course of bringing about the injuries on which the claims are predicated – namely, that the Daous’ USD remained in Lebanon.

The Court thus held that the district court lacked personal jurisdiction over AM, BLC, and CL (together, “the Commercial Banks”) under the relevant provision of New York’s long-arm statute because there was insufficient connection between the Daous’ claims against the Commercial Banks and those banks’ business transactions in New York. Having so held, the court had no occasion to consider the enforceability of the forum selection clauses. The Court held further that BDL, an agency or instrumentality of a foreign sovereign, is entitled to sovereign immunity. Contrary to the Daous’ argument, the FSIA’s commercial activity exception does not apply, because any commercial activity on BDL’s part that forms part of the gravamen of the Daous’ complaint did not have a direct effect in the United States.

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