Keren Elmaliach,, et al., Respondents,v.Bank of China Limited,, Appellant.BriefN.Y.January 5, 2015APL-2014-00030 New York County Clerk’s Index No. 102026/09 Court of Appeals STATE OF NEW YORK KEREN ELMALIACH, as an individual, as statutory representative of the Estate of EMI ELMALIACH and as natural guardian of plaintiff, JAN ELMALIACH, et al., Plaintiffs-Respondents, against BANK OF CHINA LIMITED, 410 Madison Avenue, New York, New York 10017, Defendant-Appellant. >> >> BRIEF FOR PLAINTIFFS-RESPONDENTS THE BERKMAN LAW OFFICE, LLC Attorneys for Plaintiffs-Respondents 111 Livingston Street, Suite 1928 Brooklyn, New York 11201 718-855-3627 Of Counsel: Robert J. Tolchin Meir Katz (admitted pro hac vice) Date Completed: July 14, 2014 To Be Argued By: Robert J. Tolchin Time Requested: 30 Minutes STATEMENT ON RELATED LITIGATION Six distinct cases have been filed arising from the nexus of facts that form the basis of this litigation, Elmaliach v. Bank of China. The remaining five: Zamalloa v. Bank of China, Index Number 101244 / 2010, has been consolidated with the instant litigation and is before this Court. Rot v. Bank of China, Index Number 157475 / 2012, is currently pending before the Supreme Court for New York County (assigned to the same judge) and is “on hold” pending final disposition of this appeal. Viflic v. Bank of China, Index Number 651294 / 2013, is currently pending before the Supreme Court for New York County (assigned to the same judge) and is “on hold” pending final disposition of this appeal. Moriah v. Bank of China, 12-cv-1594 (S.D.N.Y.) (SAS), is currently in discovery in the United States District Court for the Southern District of New York. Wultz v. Bank of China, 11-cv-1266 (S.D.N.Y.) (SAS), is currently in discovery (in tandem with Moriah) in the United States District Court for the Southern District of New York. -ii- Table of Contents STATEMENT ON RELATED LITIGATION ........................................................... i TABLE OF AUTHORITIES .................................................................................... iv QUESTIONS PRESENTED ...................................................................................... 1 PRELIMINARY STATEMENT ............................................................................... 2 COUNTER-STATEMENT OF FACTS .................................................................... 4 A. BOC Provides Services to Terrorist Organizations ............................. 4 B. BOC Had Notice that its Services Were Being Used to Facilitate Terrorism ............................................................................. 8 C. BOC’s Services Facilitate Terror Attacks Against the Plaintiffs ............................................................................................... 9 D. The Plaintiffs’ Claims in This Case ................................................... 11 E. BOC Alters its Position Before this Court, Now For the First Time Arguing for the Application of Chinese Law .................. 20 F. The Second Circuit’s Contrary Decisions in the Licci Litigation ............................................................................................ 22 G. The Wultz and Moriah Litigation in Federal Court ........................... 24 ARGUMENT I. THIS COURT’S PRECEDENT COMPELS THE CONCLUSION THAT THE LAW OF THE PLACE OF THE INJURY APPLIES IN THIS CASE .......................................................... 30 A. This Court Has Consistently Held that the Law of the Place of the Injury Almost Always Applies in Conduct- Regulating Cases ............................................................................... 30 B. The Law of the Place of the Injury—Israel—Governs Here ............. 48 -iii- II. NUMEROUS APPELLATE DIVISION DECISIONS HAVE APPLIED THE LAW OF THE PLACE OF INJURY UNDER SIMILAR CIRCUMSTANCES ................................................................. 56 III. INTEREST ANALYSIS COMPELS THE APPLICATION OF ISRAELI LAW .......................................................................................... 61 IV. APPLYING THE LAW OF THE PLACE OF THE CONDUCT, AS BOC REQUESTS, COULD SEVERELY INJURE THIS STATE’S INTERESTS IN THE FUTURE ...................... 74 V. ALTERNATIVELY, THIS COURT SHOULD APPLY NEUMEIER-LIKE RULES IN CASES SUCH AS THIS ......................... 76 VI. EVEN IF THIS COURT DOES NOT APPLY ISRAELI LAW, PLAINTIFFS’ BREACH OF STATUTORY DUTY CLAIM SHOULD GO FORWARD ........................................................................ 81 VII. UNDER NEW YORK LAW, BOC HAD A DUTY NOT TO ACT OBJECTIVELY UNREASONABLY AND TO AVOID FORESEEABLE HARM TO THE PLAINTIFFS .................................... 83 A. New York Law Imposes a Duty of Care Upon Parties Who Knowingly Facilitate Terrorism ............................................... 83 B. Notwithstanding that New York Law Permits Recovery, There Remains a Conflict of Laws .................................................... 88 VIII. NOTWITHSTANDING BOC’S SUGGESTIONS TO THE CONTRARY, CHINA’S REGULATORY MECHANICS ARE INADEQUATE TO PREVENT BOC FROM COMMITTING NEGLIGENT HARM AGAINST THE PLAINTIFFS AND OTHERS SIMILARLY SITUATED ......................................................... 90 CONCLUSION ........................................................................................................ 95 -iv- Table of Authorities Cases Ackerman v. Price Waterhouse, 252 A.D.2d 179 (1st Dep’t 1998) .................. 23, 57 Matter of Allstate Ins. Co., 81 N.Y.2d 219 (1993) ............................................ 40, 60 Arabie v. CITGO Petroleum Corp., 89 So.3d 307 (La. 2012) ................................. 43 Babcock v. Jackson, 12 N.Y.2d 473 (1963) ......................................................passim Baron v. Galasso, 83 A.D.3d 626 (2d Dep’t 2011) ................................................. 84 Bernhard v. Harrah’s Club, 16 Cal.3d 313 (1976) ................................................. 70 Bischoff v. Yorkville Bank, 218 N.Y. 106 (1916) .................................................... 84 Bonded Waterproofing Servs., Inc. v. Anderson-Bernard Agency, Inc., 86 A.D.3d 527 (2d Dep’t. 2011) .......................................................................... 87 Bull v. Kimball, 2 A.D.3d 283 (1st Dep’t 2003) ...................................................... 59 Burnett v. Columbus McKinnon Corp., 69 A.D.3d 58 (4th Dep’t 2009) ................ 58 Caribbean Const. Servs. & Assocs., Inc. v. Zurich Ins. Co., 267 A.D.2d 81 (1st Dep’t 1999) ............................................................................................... 87 Carlenstolpe v. Merck & Co., Inc., 638 F. Supp. 901 (S.D.N.Y. 1986) ............ 56-57 Cooney v. Osgood Mach., 81 N.Y.2d 66 (1993) ..............................................passim Cousins v. Instrument Flyers, Inc., 44 N.Y.2d 698 (1978)................................ 39, 47 DaSilva v. C & E Ventures, Inc., 83 A.D.3d 551 (1st Dep’t 2011) ................... 58-59 Devore v. Pfizer Inc., 58 A.D.3d 138 (1st Dep’t 2008) ............................... 23, 56-57 Dym v. Gordon, 16 N.Y.2d 120 (1965) ............................................................. 32-33 Edwards v. Erie Coach Lines Co., 17 N.Y.3d 306 (2011) .......................... 38, 44, 78 Elliott v. City of New York, 95 N.Y.2d 730 (2001) .................................................. 12 Endurance Financial Intern., LLC v. Patton Boggs LLP, Index No. 652834 / 2013, 2014 WL 1868740 (Sup. Ct., N.Y. Cty. May 9, 2014) ......... 55-56 Espinal v. Melville Snow Contrs, Inc., 98 N.Y.2d 136 (2002) ................................ 82 -v- Estates of Ungar ex rel. Strachman v. Palestinian Auth., 715 F. Supp. 2d 253 (D.R.I. 2010) ............................................................................................. 64 Farber v. Smolack, 20 N.Y.2d 198 (1967) .............................................................. 32 Finance One Public Co. v. Lehman Bros. Special Financing, 414 F.3d 325 (2d Cir. 2005) .......................................................................................... 86-87 Fireman’s Fund v. Structural Systems Technology, Inc., 426 F. Supp. 2d 1009 (D. Neb. 2006) ........................................................................................ 43 Genen v. Metro-North Commuter R.R., 261 A.D.2d 211 (1st Dep’t 1999) ..................................................................................................................... 82 Global Fin. Corp. v. Triarc Corp., 93 N.Y.2d 525 (1999) ...................................... 40 Greater Iowa Corp. v. McLendon, 378 F.2d 783 (8th Cir. 1967) ........................... 12 Hartford Fire Ins. Co. v. California, 509 U.S. 764 (1993) ....................................... 3 Heide v. Seven Springs Farm, Inc., 2009 WL 1346035 (W.D. Pa. 2009) ............... 43 Home Sav. of America, FSB v. Amoros, 233 A.D.2d 35 (1st Dep’t 1997) .............. 84 HSA Residential Mortg. Servs. of Texas v. Casuccio, 350 F. Supp. 2d 352 (E.D.N.Y. 2003) ............................................................................................ 28 J. Zeevi & Sons v. Grindlays Bank, 37 N.Y.2d 220 (1975) ..................................... 41 Kirschenbaum v. Islamic Rep. of Iran, 572 F. Supp. 2d 200 (D.D.C. 2008) ..................................................................................................................... 64 Kniery v. Cottrell, Inc., 59 A.D.3d 1060 (4th Dep’t 2009) ..................................... 59 K.T. v. Dash, 37 A.D.3d 107 (1st Dep’t 2006) .................................................. 47, 65 Licci v. Lebanese Can. Bank, SAL, 20 N.Y.3d 327 (2012) ..................................... 22 Licci v. Lebanese Canadian Bank, SAL, 672 F.3d 155 (2d Cir. 2012) .................... 23 Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161 (2d Cir. 2013) .................... 22 Licci v. Lebanese Canadian Bank, SAL, 739 F.3d 45 (2d Cir. 2013) ...............passim Locke v. Aston, 31 A.D.3d 33 (1st Dep’t 2006) ................................................. 57-58 Long v. Pan Am. World Airways, 16 N.Y.2d 337 (1965) ....................... 32-33, 45-46 -vi- Macey v. Rozbicki, 18 N.Y.2d 289 (1966) ............................................................... 32 Mashreqbank PSC v. Ahmed Hamad A1 Gosaibi & Bros. Co., 2014 WL 1356220, 2014 N.Y. LEXIS 705 (N.Y. Apr. 8, 2014) ............................. 41-42, 52 In re Mayer, 2011 WL 3299053 (9th Cir BAP 2011) ............................................. 43 McLean v. City of New York, 12 N.Y.3d 194 (2009) ............................................... 79 Miller v. Miller, 22 N.Y.2d 12 (1968) ..................................................................... 32 Moriah v. Bank of China Ltd., No. 12-cv-1594, Order, Nov. 15, 2013, Doc. No. 25 ........................................................................................................... 28 Nallan v. Helmsley-Spear, Inc., 50 N.Y.2d 507 (1980) ........................................... 83 Ndunguru v. Kone, Inc., 2008 WL 53603 (D. Neb. 2008) ...................................... 43 Neumeier v. Kuehner, 31 N.Y.2d 121 (1972) ................... 1, 34-36, 46, 50, 75, 77-79 Oveissi v. Islamic Rep. of Iran, 573 F.3d 835 (D.C. Cir. 2009) ........................ 64-65 Padula v. Lilarn Props. Corp., 84 N.Y2d 519 (1994) ......................................passim Palka v. Servicemaster Mgt. Svs. Corp., 83 N.Y.2d 579 (1994) ....................... 84-85 Perez v. City of New York, 298 A.D.2d 265 (1st Dep’t 2002) ................................. 83 Poplar v. Bourjois, Inc., 298 N.Y. 62 (1948) .......................................................... 39 Proforma Partners, LP v. Skadden Arps Slate Meagher & Flom, LLP, 280 A.D.2d 303 (1st Dep’t 2001) ......................................................................... 60 P.V. ex rel. T.V. v. Camp Jaycee, 197 N.J. 132 (2008) ........................................... 43 Roni, LLC v. Arfa, 18 N.Y.3d 846 (2011) ............................................................... 49 Schultz v. Boy Scouts of Am., 65 N.Y.2d 189 (1985) .......................................passim Smith Barney, Harris Upham & Co., Inc. v. Luckie, 85 N.Y.2d 193 (1995) .................................................................................................................... 40 Strassheim v. Daily, 221 U.S. 280 (1911) ................................................................. 2 Tenuto v. Lederle Laboratories, 90 N.Y.2d 606 (1997) .......................................... 86 Tooker v. Lopez, 24 N.Y.2d 569 (1969) ............................................................ 32-33 -vii- T.W. v. City of New York, 286 A.D.2d 243 (1st Dep’t 2001) .................................. 83 Wultz v. Islamic Republic of Iran, 755 F. Supp. 2d 1 (D.D.C. 2010) ...............passim Wultz v. Islamic Rep. of Iran, 762 F. Supp. 2d 18 (D.D.C. 2011) ........................... 25 Wultz v. Bank of China Ltd., 811 F. Supp. 2d 841 (S.D.N.Y. 2011) ................. 28, 46 Wultz v. Bank of China Ltd., 860 F. Supp. 2d 225 (S.D.N.Y. 2012) ....................... 25 Wultz v. Bank of China Ltd., 865 F. Supp. 2d 425 (S.D.N.Y. 2012) ....................... 29 Wultz v. Bank of China Ltd., 910 F. Supp. 2d 548 (S.D.N.Y. 2012) ...................... 26 Wultz v. Bank of China Ltd., 942 F. Supp. 2d 452 (S.D.N.Y. 2013) ................. 25-26 Wultz v. Bank of China Ltd., 979 F. Supp. 2d 479 (S.D.N.Y. 2013) ....................... 26 Wultz v. Bank of China, Ltd., ___ F.R.D. ___, 2014 WL 2257296 (D.D.C. 2014) ....................................................................................................... 27 Yeboah v. Snapple, Inc., 286 A.D.2d 204 (1st Dep’t 2001) .................................... 83 Youngman v. Robert Bosch LLC, 923 F. Supp. 2d 411 (E.D.N.Y. 2013) ............... 55 Statutes and Regulations CPLR § 202 .............................................................................................................. 60 CPLR § 327 .............................................................................................................. 14 CPLR § 3211 ............................................................................................................ 14 31 U.S.C. § 5318 ................................................................................................ 49-50 CAL. CIV. CODE § 1714 ............................................................................................ 70 Israeli Authority Defense Regulations (Emergency Period), 1945 ..................................................... 13 Penal Law, 5737-1977 ....................................................................................... 13, 80 Prevention of Terrorism Ordinance, 5708-1948 .................................................... 13 -viii- Other Authority H. Res. 657, 113th Cong. (July 14, 2014) ............................................................... 64 New York Department of Financial Services, Cuomo Administration Announces RBS to Pay $100 Million for Violations of Law Involving Transactions with Iran, Sudan, Other Regimes (Dec. 11, 2013), http:// www.dfs.ny.gov/about/press2013/pr1312111.htm .............................................. 67 New York Department of Financial Services, Governor Cuomo Announces Bank of Tokyo-Mitsubishi UFJ to Pay $250 Million to State for Violations of New York Banking Law Involving Transactions with Iran and Other Regimes (June 20, 2013), http:// www.dfs.ny.gov/about/press2013/pr1306201.htm .............................................. 67 New York Department of Financial Services, Statement from Benjamin M. Lawsky, Superintendent of Financial Services, Regarding [$340 Million Fine Paid by] Standard Chartered Bank (Aug. 14, 2012), http://www.dfs.ny.gov/about/press/pr1208141.htm ............................................. 67 United States Census Bureau, Country Rank, http://www.census.gov/ population/international/data/countryrank/rank.php ............................................ 62 UNITED STATES DEPARTMENT OF STATE, COUNTRY REPORTS ON HUMAN RIGHTS PRACTICES FOR 2013: CHINA (2014) ........................................................ 89 UNITED STATES DEPARTMENT OF STATE, COUNTRY REPORTS ON TERRORISM 2013 (2014) ......................................................................................... 6 Yale Law School, Hamas Covenant 1988, http://avalon.law.yale.edu/ 20th_century/hamas.asp (2008) .............................................................................. 6 Letter from Uzi Shaya to Lee Wolosky, Robert Tolchin, and Mitchell Berger, Mar. 20, 2013 ........................................................................................... 27 Letter from Uzi Shaya to Nitsana Darshan-Leitner and Lee Wolosky, August 29, 2013 .................................................................................................... 27 -ix- Patrick J. Borchers, Conflict of Laws, 49 SYRACUSE L. REV. 333 (1999) ......... 43-45 Patrick J. Borchers, The Return of Territorialism to New York’s Conflicts Law: Padula v. Lilarn Properties Corp., 58 ALB. L. REV. 775 (1995) ............................................................................................................. 76 WILLIAM PROSSER, HANDBOOK OF THE LAW OF TORTS § 3 at 15 (1971) ................ 51 Symeon C. Symeonides, Choice of Law in the American Courts in 2013: Twenty-Seventh Annual Survey, 62 AM. J. COMP. L. 223 (2014) ........ 71-72 Aaron D. Twerski, A Sheep in Wolf’s Clothing: Territorialism in the Guise of Interest Analysis in Cooney v. Osgood Machinery, Inc., 59 BROOK. L. REV. 1351 (1994) ................................................................................ 77 Bank of China, Oversea Branch Certifications, http://www.boc.cn/en/ aboutboc/ab8/201201/t20120131_1687520.html ................................................. 48 Bank of China, Bank of China Overview, http://www.boc.cn/en/ aboutboc/ab1/200809/t20080901_1601737.html ........................................... 47-48 Yaacov Benmeleh, Israel’s Tech Industry Is Becoming All About ‘China, China, China’, BLOOMBERG, May 29, 2014 ........................................... 27 China’s Big Banks: Giant Reality-Check, THE ECONOMIST, Aug. 31, 2013 ...................................................................................................................... 91 Afton L. Hassett & Leonard H. Sigal, Unforeseen Consequences of Terrorism: Medically Unexplained Symptoms in a Time of Fear, 162 ARCHIVES INTERN. MED. 1809 (2002) .................................................................. 63 HUMAN RIGHTS WATCH, ROCKETS FROM GAZA: HARM TO CIVILIANS FROM PALESTINIAN ARMED GROUPS ROCKET ATTACKS (2009) ........................... 63 Jewish Virtual Library, Rocket Threat to Israel: Palestinian Rocket & Mortar Attacks (February 2009 - Present), http:// www.jewishvirtuallibrary.org/jsource/Terrorism/rockets2011.html ................... 61 WM. ROBERT JOHNSTON, DEATH RATES FROM TERRORISM, UNITED STATES AND ISRAEL, 1985-2013 (May 5, 2013), http://www.johnstonsarchive.net/terrorism/terror-rate.html .......................... 62-63 -x- Herb Keinon, PM to Christie: Israel, New Jersey are Similar, JERUSALEM POST, Apr. 2, 2012 ............................................................................ 61 HE WEI PING, BANKING REGULATION IN CHINA: THE ROLE OF PUBLIC AND PRIVATE SECTORS (2014) ........................................................................ 91-92 John Reed, Israeli Prime Minister Netanyahu Gets Flak for Yielding to China, FIN. TIMES, July 15, 2013 ......................................................................... 27 Ido Rosenzweig & Yuval Shany, A Decade of Palestinian Terrorism – Report by the Israeli Security Agency, 14 TERRORISM & DEMOCRACY (2010), http://en.idi.org.il/analysis/terrorism-and-democracy/issue-no- 14/a-decade-of-palestinian-terrorism-%E2%80%93-report-by-the- israeli-security-agency .......................................................................................... 61 David Shamah, Israel, China to Open $300 Million Research Center, TIMES OF ISRAEL, May 19, 2014 ........................................................................... 27 Wikipedia, Regulatory Capture, http://en.wikipedia.org/wiki/ Regulatory_capture ............................................................................................... 92 BRIEF FOR PLAINTIFFS-APPELLANTS QUESTIONS PRESENTED 1. When injury-causing conduct occurs in one jurisdiction and predictably (both when assessed objectively and in the subjective mindset of the actor) results in injury in another jurisdiction, which jurisdiction’s laws ought to apply? 2. Has this Court abandoned its statement in Cooney v. Osgood Mach., 81 N.Y.2d 66, 74 (1993), and in other cases, that when assessing conduct- regulating tort rules, “the traditional rule of lex loci delicti [(applying the law of the place of the injury)] almost invariably obtains”? 3. Has this Court abandoned its statement in Schultz v. Boy Scouts of Am., 65 N.Y.2d 189, 195 (1985), that “when the defendant’s negligent conduct occurs in one jurisdiction and the plaintiff’s injuries are suffered in another, the place of the wrong is considered to be the place where the last event necessary to make the actor liable occurred...; [t]hus, the locus [for choice of law purposes] is determined by where the plaintiffs’ injuries occurred”? -2- 4. Has this Court abandoned its appeal in Neumeier v. Kuehner, 31 N.Y.2d 121, 127 (1972), for “a greater degree of predictability and uniformity” in the application of its choice of law rules? 5. Does Israel have a paramount interest in protecting its residents and citizens from future acts of terrorism; does Israel have a paramount interest in gaining redress for past acts of terrorism against its residents and citizens attacked on Israeli soil? 6. May the Defendant advocate for the application of the law of China for the first time before this Court, despite presenting below absolutely no evidence as to the content of Chinese law or the nature of its relevant policies, and despite having given the Plaintiffs no fair adversarial opportunity to develop and debate the content and policy underlying Chinese law? PRELIMINARY STATEMENT Acts done outside a jurisdiction, but intended to produce and producing detrimental effects within it, justify a state in punishing the cause of the harm as if [it] had been present at the [time of the] effect[.] Strassheim v. Daily, 221 U.S. 280, 285 (1911) (Holmes, J.). Plaintiffs were injured by terrorists in a jurisdiction that (like the United States) criminalizes the provision of material support to terrorists—whether the -3- supporter is local or abroad. That jurisdiction (like the United States) permits victims of terrorism to rely on its law to hold accountable those who materially support terrorists. As Justice Holmes aptly said over 100 years ago, that state—in this instance, the State of Israel—has the right to apply its law to the terrorist supporter and a paramount interest in the application of its law to regulate and to prevent (through tort liability or otherwise) the tortious conduct that caused injuries within that state. Indeed, it is not controversial that “foreign conduct that was meant to [or was foreseeably likely to] produce[,] and did in fact produce[,] some substantial effect in the United States” is subject to the laws of the United States “even where the foreign state has a strong policy to permit or encourage such conduct.” See Hartford Fire Ins. Co. v. California, 509 U.S. 764, 796 (1993). Where similar conduct predictably results in injury outside the United States, it follows that the law of the place of injury ought to apply. Accordingly, it is unsurprising and uncontroversial that where conduct-regulating tort rules of multiple jurisdictions are in conflict, the law of the place of the injury generally controls. This Court so held as recently as 1994, the last time it addressed a conflict of laws involving conduct-regulating rules, when it applied the law of Massachusetts, the place of a plaintiff’s injuries; it did so immediately after noting and relying upon the fact that the relevant laws in conflict were “primarily -4- conduct-regulating rules.” Padula v. Lilarn Props. Corp., 84 N.Y2d 519, 523 (1994). Since revolutionizing the application of choice of law in Babcock v. Jackson, 12 N.Y.2d 473 (1963), this Court has not decided a case involving a conflict of conduct-regulating tort rules involving a cross-border tort (where the tortious conduct and the injury occur in different jurisdictions). But, as will be shown infra, this Court’s subsequent statements plainly indicate that where the location of the injuries was predictable to the defendant and where the forum of the injuries has a legitimate (or better) interest in having its laws apply to the adjudication of the claims arising from those injuries, the law of that forum applies. Here, the Defendant knew or should have known that it was providing banking services to a terrorist operative with ties to Palestinian terror organizations and, therefore, that much of those resources would help facilitate deadly attacks against civilians in Israel. Accordingly, Israeli law should be applied. COUNTER-STATEMENT OF FACTS This case arises from a series of terrorist attacks in Israel by two Palestinian terror organizations, Hamas and the Palestinian Islamic Jihad (“PIJ”). The attacks were executed with the openly stated goal of killing and maiming hundreds of Israeli civilians. Unfortunately, the terrorists were successful. -5- A. BOC Provides Services to Terrorist Organizations Defendant Bank of China Limited (“BOC”) began providing extensive banking services—services of great value—to Hamas and PIJ in July 2003. BOC facilitated dozens of dollar-denominated wire transfers for the benefit of Hamas and PIJ that totaled several million dollars. The transfers were initiated by the leadership of Hamas and PIJ (operating within Iran, Syria, and elsewhere) and routed through BOC’s branches in New York,1 terminating in BOC accounts in China. Many of the transfers were made to a single account in the name of “S.Z.R. Alshurafa.” The owner of that account, Said al-Shurafa, is a known terrorist and senior operative and agent of both Hamas and PIJ. Other wire transfers were made to another account owned by Shurafa. (4, 53*). After receiving the funds from BOC, Shurafa transferred them to leaders and operatives of Hamas and PIJ within and around Israel so that they could carry out terrorist attacks against Israeli civilians. (4, 53). 1 BOC has three branches in the United States, two of which are in Manhattan. * Unless otherwise noted, parenthetical page references refer to the Appendix. “Opening” refers to BOC’s opening brief on appeal. “SA” refers to BOC’s Supplementary Appendix. -6- Hamas2 and PIJ3 are notorious terrorist organizations, designated by the United States Department of State as Foreign Terrorist Organizations and as Specially Designated Global Terrorists. (52). Their openly-declared goal is the destruction of the State of Israel and the creation of a fanatical Islamic theocracy in its stead. To achieve that political objective, the organizations deliberately maim 2 The Covenant of the Islamic Resistance Movement (often referred to as the “Hamas Charter”), available at Yale Law School, Hamas Covenant 1988, http://avalon.law.yale.edu/ 20th_century/hamas.asp (2008), declares: Israel [(i.e. the Jewish People)] will exist and will continue to exist until Islam will obliterate it, just as it obliterated others before it. * * * [The Jews] were behind the French Revolution, the Communist revolution and most of the revolutions we heard and hear about, here and there.… With their money they were able to control imperialistic countries and instigate them to colonize many countries in order to enable them to exploit their resources and spread corruption there…. They were behind World War I, when they were able to destroy the Islamic Caliphate... They were behind World War II, through which they made huge financial gains...and paved the way for the establishment of their state [etc.]. * * * The Day of Judgement will not come about until Moslems fight the Jews (killing the Jews), when the Jew will hide behind stones and trees. The stones and trees will say O Moslems, O Abdulla, there is a Jew behind me, come and kill him. * * * The day that enemies usurp part of Moslem land, Jihad becomes the individual duty of every Moslem. In face of the Jews’ usurpation of Palestine, it is compulsory that the banner of Jihad be raised. * * * There is no solution for the Palestinian question except through Jihad. Id. (some paragraphs re-ordered). 3 According to the U.S. Department of State, the “PIJ is committed to both the destruction of Israel through attacks against Israeli military and civilian targets and the creation of an Islamic state in all of historic Palestine, including present day Israel.... The group is thought to be behind a large number of the record-setting 2,300 plus rockets launched from Gaza towards [mostly civilian targets in] Israel in 2012.” UNITED STATES DEPARTMENT OF STATE, COUNTRY REPORTS ON TERRORISM 2013, 298-99 (2014), available at http://www.state.gov/documents/organization/ 225886.pdf. -7- and kill innocent Israeli civilians. Further, they deliberately inflict psychological and emotional trauma on surviving victims and the family members of their victims. Since their founding, they have carried out thousands of terrorist attacks and have murdered scores of Israeli and U.S. citizens. Hamas and PIJ cannot operate without money. Wire transfers, like those facilitated by BOC, are essential for their operations. Were it not for such wire transfers, Hamas and PIJ would not be able to maim, kill, and otherwise inflict terror on innocent people. (109-10). As a result of their designation as Foreign Terrorist Organizations and as Specially Designated Global Terrorists, Hamas and PIJ are subject to a strict sanctions regime, which excludes them from banking and financial services around the world and deprives them of the funds they need for their terrorist activities. (4, 114-15, 132-33). This sanctions regime would have been more effective if it were not for the very few banks and financial institutions, like BOC, that disregarded the sanctions regime and continued to provide banking services to terrorist operatives. (52, 115-17, 132-35). The few banks, such as BOC, that did not observe the sanctions regime provided terrorist organizations, such as PIJ and Hamas, with a lifeline. -8- B. BOC Had Notice that its Services Were Being Used to Facilitate Terrorism BOC had every reason to be aware that the wire transfers that it was facilitating were being used for illegal purposes in light of all the telltale signs that characterized the transfers. For example, they were in cash, typically in the $100,000 range, were often withdrawn on the same or next day, the intervals between the transfers were often short, they continued for years, there was no apparent business purpose for them, and they emanated from Iran and Syria. (115, 118, 133, 135-36). The Shurafas themselves (several members of the Shurafa family had accounts at BOC) hailed from Gaza, a well-known epicenter of terrorism and lawlessness. Moreover, BOC was obligated under United States law4 to investigate suspicious wire transfers and, had it complied with United States law, would have figured out that there was something untoward about these transfers involving terrorist operatives with strong ties to notorious terrorist organizations operating in and around Israel, particularly including Gaza. (117-19). In addition to and aside from these red flags, and BOC’s duty to investigate, BOC had been informed explicitly, by highly credible sources, that their client was 4 BOC claims, for the first time before this Court, that Chinese law similarly constrains it. If so, the point being made here is stronger. Infra, Plaintiffs address BOC’s arguments regarding Chinese law. -9- a terrorist operative and that by participating in the wire transfers, they have been and/or would be facilitating terrorism. In April 2005, officials of the counterterrorism division of the Office of the Prime Minister of Israel met with officials of China’s Ministry of Public Security and China’s central bank. In that meeting, the Israeli officials informed the Chinese officials of the wire transfers to Shurafa and of Shurafa’s close ties to Hamas and PIJ. The Israeli officials further informed the Chinese officials that BOC wire transfers were being used to facilitate acts of terrorism within Israel. The Israeli officials also explicitly demanded that the Chinese officials compel BOC to cease providing banking services to Shurafa and to cease providing all other banking services on behalf of terrorist organizations. Later that month, Chinese officials indeed informed BOC of all of the above, including Israel’s demands. But BOC, being aware of or willfully blind to the ramifications, persisted in conducting its profitable banking activities. BOC chose to ignore Israel’s demands and continued, until at least January 2007, providing banking services to terrorists and facilitating terrorism. (5, 117). C. BOC’s Services Facilitate Terror Attacks Against the Plaintiffs The Plaintiffs-Respondents (“Plaintiffs”) complain of each of the following attacks—each facilitated by BOC—in which innocent people were killed, maimed, -10- and subjected to severe emotional and psychological pain: 1) On January 15, 2005, Hamas fired a rocket from Gaza into the civilian population in the city of Sderot; 2) On November 15, 2006, Hamas fired another rocket from Gaza into the civilian population in the city of Sderot; 3) On November 21, 2006, Hamas fired a rocket from Gaza into a poultry factory in Shaar HaNegev; 4) On December 26, 2006, Hamas fired yet another rocket from Gaza into the civilian population in the city of Sderot; 5) On April 17, 2006 (during the Jewish holiday of Passover), PIJ bombed a crowded restaurant in Tel Aviv; 6) On January 29, 2007, PIJ bombed a bakery in Eilat. (110-14, 131-32). These attacks killed an injured a great many innocent civilians, id., including the Plaintiffs in this action. Sadly, the deaths and injuries from the attacks reported above were all preventable. Had BOC not negligently and illegally facilitated wire transfers to the terrorist groups that targeted Plaintiffs, the terrorists would have been less-able to execute their attacks. (116, 134). Plaintiffs brought these consolidated5 actions to 5 Elmaliach v. Bank of China, Index No. 102026 / 2009, and Zamalloa v. Bank of China, Index No. 101244 / 2010, were consolidated as Elmaliach and under Elmaliach’s index number. (4 n.3). There are several other actions asserting similar claims pending before the same judge in Supreme Court, New York County, which are not formally consolidated, but in which the parties are represented by the same counsel, and which have been in a “holding pattern” pending the final disposition of this appeal. There are also two cases asserting similar claims pending in federal court. Those cases are listed in the Statement on Related Litigation at the beginning of this brief. -11- recover from BOC—as a result of its negligent and illegal actions—for their severe injuries. D. The Plaintiffs’ Claims in This Case The Plaintiffs are victims and the family members of victims of terrorist activities facilitated and materially supported by BOC. They have sued BOC in this action to recover for their injuries suffered in the terrorist attacks described supra and facilitated with money obtained from BOC. At the time of the attacks all the plaintiffs were citizens and/or domiciliaries of Israel. (3, 52, 55, 104, 129). The Plaintiffs allege that BOC is liable for its negligence (defined pursuant to the laws of the State of Israel) and for an Israeli cause of action known as “Breach of Statutory Duty” (121-25, 138-43). Israeli negligence law is addressed at length in the comprehensive opinion of Chief Judge Lamberth in Wultz v. Islamic Republic of Iran, 755 F. Supp. 2d 1 (D.D.C. 2010) (reproduced in the Appendix at (1303-72)), which was subsequently adopted by Justice Barbara Kapnick (then sitting as an IAS judge) (60-61) and the Appellate Division, First Department (14-16) below. Plaintiffs address the decision more fully infra. In the interests of brevity, Plaintiffs incorporate (but do not fully adopt) that decision for the purposes of illustrating the content of Israeli law. A -12- more complete treatment of Israeli substantive law is available in the Appendix. (121-25, 138-43, 524-50, 720-27, 730-33, 754-980). While Israeli negligence law is somewhat distinct from New York negligence law, the concepts and elements are nonetheless familiar to this Court. Accordingly, Plaintiffs will refrain from describing Israeli negligence law and instead rely on what appears in the Appendix and, in particular, the Appellate Division’s excellent, albeit brief, discussion of Israeli negligence law. (14-15). The claim for Breach of Statutory Duty may appear less familiar to this Court and needs some explanation. Breach of Statutory Duty under Israeli law is a civil private right of action “for the violation any enactment of the Knesset,6 including certain penal enactments, so long as certain elements are met.” Wultz, 755 F. Supp. 2d at 67. The relevant portion of the statute reads (in translation): Breach of a statutory duty consists of the failure by any person to perform a duty imposed upon him by any enactment other than this Ordinance, being an enactment which,…was intended to be for the benefit or protection of any other person, whereby such other person suffers damage of a kind or nature contemplated by such enactment.... Id. This provision thus creates a statutorily-based civil duty of care, akin to New York’s negligence per se standard, cf. Elliott v. City of New York, 95 N.Y.2d 730, 6 The Knesset is Israel’s legislature. -13- 734 (2001), for violations of Israeli statutes imposing safety obligations. See also Greater Iowa Corp. v. McLendon, 378 F.2d 783, 789-90 (8th Cir. 1967) (discussing “a [common law] private right of action for a violation of a statutory duty or a liability” and noting its roots in an English decision of 1854). Plaintiffs allege the violation of three underlying “enactments”: 1) Section 4 of the Prevention of Terrorism Ordinance, 5708-1948 (which prohibits the provision of material support to terrorist organizations); 2) Sections 145 and 148 of the Penal Law, 5737-1977 (same); and 3) Section 85 of the Defense Regulations (Emergency Period), 1945 (which prohibits the provision of services and other material support to terrorist organizations). (124-25, 142). To be clear, Plaintiffs do not claim that BOC is civilly liable to Plaintiffs for violating any of these enactments. Rather, BOC is civilly liable to Plaintiffs for Breach of Statutory Duty, which, in turn, incorporates these enactments, subject to certain conditions. In order to demonstrate liability for Breach of Statutory Duty, Plaintiffs must demonstrate that: 1) BOC is under a duty provided by particular enactments (such as the three mentioned above), 2) the enactments “must be intended for the benefit of either the plaintiff specifically, the group to which the plaintiff belongs, or the public as a whole,” 3) BOC has breached the duty or duties provided by the enactments, 4) BOC’s breach caused Plaintiff’s injuries, and 5) the -14- particular injury suffered by Plaintiffs was the type of injury that the enactments were intended to prevent. Wultz, 755 F. Supp. 2d at 67. The Plaintiffs expressly pled the application of Israeli law to the entirety of this action (including the negligence claims). (121, 123, 139, 141). By notice dated June 10, 2010, BOC sought to dismiss the complaint pursuant to CPLR § 3211(a)(7) (for failure to state cause of action) or, alternatively, pursuant to CPLR § 327(a) (dismissal for forum non conveniens), arguing that: 1) under Israeli substantive law BOC owed no duty of care to the Plaintiffs and therefore cannot be held liable for its negligent provision of banking services to terrorists; 2) Israeli substantive law does not grant recovery; and 3) the action should be dismissed in its entirety because New York is not a convenient forum to litigate these claims and that China provides a more convenient forum. (146-47, 604-05, 613, 616-32). BOC did not argue in its initial motion papers for the application of New York law and did not even suggest that New York law might apply. Significantly, BOC argued that this case lacks “a sufficient connection to New York” and “a substantial nexus to New York.” (625).7 The Plaintiffs, however, noted that there 7 When BOC finally hit upon the choice of law issue that now dominates this litigation, in its memorandum in reply to the IAS court, BOC devoted approximately just four pages to the issue, and spent all of that space addressing whether Israeli and New York law substantively conflict. (1833-37). BOC did not cite to Babcock, Schultz, Padula or any of this Court’s other major cases relevant on this appeal. (See 1822-23). -15- was a choice of law to be made and advocated for the application of Israeli law. (718-19, 727). The IAS Court (Kapnick, J.) did not perform the requisite choice of law analysis and, de facto, applied New York law. (13 & n.5). It held, pursuant to New York law, that “the specific allegations regarding BOC’s actual knowledge of Shurafa’s terrorist activities...takes [this case] outside the usual rule that ‘[b]anks do not owe non-customers a duty to protect them from the intentional torts committed by their customers.’” (61 (internal citation omitted) (citing Lerner v. Fleet Bank, N.A., 459 F.3d 273, 286 (2d Cir. 2006)). The court also rejected BOC’s arguments regarding forum non conveniens. (62-64). BOC timely appealed. Its brief to the Appellate Division, First Department, again refrained from arguing for the application of Chinese law. BOC devoted pages 9 through 34 of its opening brief to discussing relevant New York substantive law and pages 35 through 44 to re-assert its forum non conveniens arguments. It relegated its discussion of choice of law to pages 44 – 49, most of which were devoted not to arguing for the application of New York law, but rather to arguing that applying Israeli law would violate New York public policy.8 While 8 BOC’s reply brief to the Appellate Division is similarly constructed. Pages 2 – 15 of that brief are dedicated to relevant New York substantive law. BOC addressed choice of law (continued next page) -16- BOC did suggest in those five pages that China had a greater interest in the application of its law than does Israel, it never went so far as to argue for the application of Chinese law. Indeed, in its discussion on forum non conveniens, BOC requested that the Appellate Division “vacate and remand to allow Supreme Court to determine if Chinese law governs plaintiffs’ claims[.]” It apparently recognized then that, given its failure to raise the matter before the IAS court, BOC could not argue for the application of Chinese law before the Appellate Division. In its reply brief, BOC admitted that its choice of law arguments rest entirely upon a finding that the relevant laws are conduct-regulating, as opposed to loss- allocating.9 The Plaintiffs devoted pages 27 – 30 of their first brief to the Appellate Division noting that BOC argues that New York law is actually loss-allocating rather than conduct-regulating because it constitutes an absolute immunity from liability.10 BOC responded on page 21 of its reply brief, admitting that if the rules at issue in this litigation would be construed to be loss-allocating, that would necessitate application of “the law of the place of injury.” second, devoting approximately seven pages to that discussion, but never advocating the adoption of Chinese substantive law. 9 This Court draws a clear distinction between conduct-regulating and loss-allocating rules in Padula, 84 N.Y.2d at 522. 10 Plaintiffs explain this argument infra. -17- The Appellate Division unanimously affirmed the IAS Court’s decision on alternative grounds, applying Israeli law. (22, 30). It adopted the comprehensive discussion on Israeli substantive law in Wultz, 755 F. Supp. 2d at 57-81 (reproduced in the Appendix, without the F. Supp. reporter page numbers, at (1347-71)), written after full briefing, expert affidavits, and argument from the Wultz plaintiffs and Defendant BOC (BOC is a defendant in Wultz and Moriah, infra, as it is here). (14-15, 26 (noting and expressly relying upon Wultz’s analysis of Israeli law)). The Appellate Division concluded that the breach of statutory duty claim has no cognate under New York and that Israeli negligence law “differs slightly” from New York negligence law. (12, 14-15 (citation omitted) (noting that duty under Israeli negligence law is defined, in part, by foreseeability whereas, under New York law, foreseeability does not define duty but might alter its scope)). It thus held that there is an actual conflict of law in that the substantive law of Israel and New York provide “different substantive rules” that are “relevant” and could “have a significant possible effect on the outcome at trial,” even if the choice of law question does not prove to be dispositive. (13 (internal citation and quotation marks omitted), 15 (“the differences between the New York and Israeli laws of negligence could affect the trial’s outcome”)). -18- The Appellate Division then engaged in the interest analysis described by Padula, 84 N.Y.2d at 521, by asking two questions: (1) what are the significant contacts and in which jurisdiction are they located; and, (2) whether the purpose of the law is to regulate conduct or allocate loss[,] (16 (quoting id.)), and noting, in reliance on Schultz, that “[t]he significant contacts...are, ‘almost exclusively, the parties’ domiciles and the locus of the tort.’” (16 (quoting Schultz, 65 N.Y.2d at 197)). After noting that the tort rules in question are conduct-regulating,11 the Appellate Division observed: It has long been held that when the conflict pertains to a conduct- regulating rule, the law of the place where the tort occurs will generally apply, with the locus of the tort generally defined as the place of the injury.... This is because the jurisdiction where the tort occurred...will almost always have the greatest interest in regulating conduct within its borders[.] (17 (emphasis added)). The Appellate Division added, in reliance on Schultz, that the locus of the tort is “the place where the last event necessary to make the actor liable[.]” In other words, the locus of the tort is generally the place “where the plaintiffs’ injuries occurred.” (17-18 (quoting Schultz, 65 N.Y.2d at 195)). The injuries in this case obviously occurred in Israel. Noting the general rule that the 11 The Appellate Division had previously rejected Plaintiffs’ “intriguing” argument that New York law, as construed by BOC, ought to be deemed loss-allocating. (17 n.16). -19- law of the place of injuries generally controls, and identifying that “Israel has a very strong interest in protecting its citizens and residents, who were the intended targets of the terrorist attacks inside Israeli territory,” the Appellate Division applied Israeli law. (18, 22 (“[W]e hold that Israel, the location of the plaintiffs’ injuries, has the greater interest in seeing its laws enforced, and Israeli law should govern this action.”). The Appellate Division additionally rejected BOC’s argument that applying Israeli law would somehow be repugnant to New York public policy, noting in part that BOC has misstated New York law: We do not find case law to support the argument that except for trusts and fiduciary accounts, a bank can never be held liable to non- customers[, ]particularly when addressing allegations such as those before us in this action.... [A] tortfeasor’s compliance with relevant laws and regulations will not insulate it from liability if it fails to act objectively reasonably (see Lerner, 459 F3d at 289, citing Restatement [Second] of Torts § 288C [1965]...). (23-24) (emphasis in original). It added that BOC’s relevant acts (knowingly or blindly providing services terrorist operatives) are “[c]learly outside the scope of ‘routine’ banking services” that are generally the subject of the New York common law decisions relating to bank immunity from injuries to third parties. (24-25 (“BOC’s argument that it was doing nothing more than [providing] ‘routine’ banking services is unpersuasive.”)). The First Department thus offered a fairly -20- clear indication that if it were asked to rule on the merits pursuant to New York substantive law, it would have found BOC liable. Finally, the court rejected BOC’s forum non conveniens arguments. (29). BOC subsequently sought and received leave to appeal to this Court. (Opening 10). E. BOC Alters its Position Before this Court, Now For the First Time Arguing for the Application of Chinese Law Before this Court, BOC has abandoned its arguments related to public policy and forum non conveniens and devotes very little space, at the very end of its brief, to debating the content of New York substantive law. (See Opening 57-67). Instead, it focuses for the first time in this litigation on briefing the significant conflict of laws raised by this case. (Opening 1 (“This appeal presents a New York choice-of-law issue[.]”)). And, for the first time, after acknowledging that the Appellate Division (just like the IAS Court) “did not examine Chinese law,” (Opening 2 n.5), BOC requests the application of Chinese law. (Opening 3, 31-34, 40, 49-51). The Record contains no evidence as to the content of Chinese law, aside from some documents dehors the record submitted by BOC for the first time before this Court. The Plaintiffs have never had the opportunity to debate the content of Chinese law or submit their own affidavits and evidence as to that -21- content. Nonetheless, BOC argues that Chinese law imposes no duty of care on BOC. (See, e.g., Opening 2, 7). That may be true. Given that the Chinese government maintains full control over BOC,12 it would not be surprising if the Chinese government sought to immunize BOC from liability for the latter’s tortious acts. But, because BOC failed to place in the record evidence as to the content of Chinese law, the Plaintiffs do not know. Nor does this Court, the Appellate Division panel that heard this case, or the IAS court. Notwithstanding BOC’s new posture, its basic position remains unchanged: BOC has no duty of care—and is thus absolutely immune from liability—to anyone that is not its customer, regardless of the circumstances, regardless of its culpability, regardless of the extent to which it could have, should have, or actually did foresee the possibility of injury in another jurisdiction, and regardless of any sense of common morality and shared responsibility. In other words, BOC asserts a license to act negligently. 12 “The BOC is virtually an arm of the Chinese Government[.]” (1053 (stating that the Chinese government would “never countenance a judgment by a Chinese court finding that the BOC has been knowingly laundering money for terrorist purposes”)). -22- F. The Second Circuit’s Contrary Decisions in the Licci Litigation Licci v. Lebanese Canadian Bank, SAL is in some ways factually similar to, but also in significant material ways different from,13 this case. In Licci, several Israeli residents were injured or killed in Israel by Hizbollah. The Licci plaintiffs allege that the Lebanese Canadian Bank processed dollar denominated wire transfers of great value through its correspondent account with American Express Bank in New York. (7). They named both banks as defendants. After dismissal by the district court, the Second Circuit bifurcated the claims and certified questions to this Court related to the assertion of personal jurisdiction over Lebanese Canadian Bank—this Court unanimously held, upon considering the specific facts, that the courts of New York may assert jurisdiction over the Lebanese bank. Licci v. Lebanese Can. Bank, SAL, 20 N.Y.3d 327 (2012). The Second Circuit later 13 The Second Circuit expressly recognized that there exist significant differences between this case and Licci “that become obvious upon a reading of the [Appellate Division’s decision].” It “emphasize[d] that [it] offer[s] no views as to the law affecting or the proper outcome of [Elmaliach] and should not be understood to imply any. Licci v. Lebanese Canadian Bank, SAL, 739 F.3d 45, 51 (2d Cir. 2013). Simply restating the essential facts highlights the differences between the cases. In this case, BOC failed to exercise due care with respect to wire transfers, thus enabling its customer to receive funds from Syria and Iran and transfer those funds to terrorist operatives in Israel, the West Bank, and the Gaza Strip who used the funds to carry out acts of terrorism in Israel. In contrast, American Express Bank in Licci was just a correspondent bank that received instructions from the Lebanese Canadian Bank and merely followed those instructions to allow, improperly (but with an unknown state of mind), money to get into the hands of terrorists. -23- confirmed that jurisdiction rests as a matter of federal law. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161 (2d Cir. 2013). The Second Circuit declined, however, to certify questions related to choice of law that proved dispositive with regard to the other defendant, American Express Bank. Instead, it attempted to apply New York choice of law rules and held, relying principally on its own precedent, that “New York has the greatest interest in this litigation”14 and thus applied New York law. It dismissed as essentially irrelevant the fact that “the plaintiffs’ injuries occurred in Israel, and Israel is also the plaintiffs’ domicile.” And it made no attempt to assess the interests that Israel has in “this litigation.” Licci v. Lebanese Canadian Bank, SAL, 672 F.3d 155, 158 (2d Cir. 2012). This first decision in Licci preceded the Appellate Division’s analysis in this case. The Appellate Division subsequently expressly rejected the Second Circuit’s analysis. It noted that “the Second Circuit...did not address the rule that when the conduct takes place in one jurisdiction and the plaintiff suffers injury in another, the locus of the plaintiff’s injury will have a greater interest.” (20). 14 It appears that the Second Circuit might have failed to distinguish between “this litigation” (in the whole) as opposed to the specific issue in conflict. Infra, Plaintiffs explain this distinction and why it may be significant here. -24- Upon a motion for rehearing, the Second Circuit panel was unmoved, matching the Appellate Division’s rejection with one of its own. The Second Circuit similarly rejected Devore v. Pfizer Inc., 58 A.D.3d 138 (1st Dep’t 2008), and Ackerman v. Price Waterhouse, 252 A.D.2d 179 (1st Dep’t 1998). Licci v. Lebanese Canadian Bank, SAL, 739 F.3d 45, 50 (2d Cir. 2013). Again, it appears that the Second Circuit did not consider Israel’s interests in the application of its substantive law to the issue in conflict. Instead, it appears to have held that New York follows a per se rule that the jurisdiction in which the negligent conduct (as opposed to the injury) occurred always controls. Id. On October 31, 2013, the Licci plaintiffs petitioned the Second Circuit for rehearing en-banc. On November 13, 2013, the Second Circuit requested a response from American Express Bank. And on December 2, 2013, the Licci plaintiffs filed a motion for leave to reply in support of their petition for rehearing en banc. The plaintiffs’ petition and motion for leave to reply are still pending before the Second Circuit. G. The Wultz and Moriah Litigation in Federal Court Some United States citizens who were injured by the same acts of terrorism that gave rise to this litigation filed a parallel action in the federal district court for the District of Columbia, naming BOC as a defendant. Wultz, 755 F. Supp. 2d 1. In -25- addition to making various federal claims, the Wultz complaint also asserted claims under Israeli law, like those in the instant action. In a comprehensive decision, Chief Judge Lamberth sustained the Wultz complaint in its entirety and ruled in favor of the Wultz plaintiffs on many of the legal questions at issue in this litigation. Chief Judge Lamberth later determined that his court lacked personal jurisdiction over BOC, so he severed the claims against BOC, and transferred the case against BOC to the Southern District of New York, where there is personal jurisdiction, given that the bank has two branches in Manhattan. See Wultz v. Islamic Rep. of Iran, 762 F. Supp. 2d 18 (D.D.C. 2011). Upon transfer to the Southern District of New York, the case was assigned to Judge Shira Scheindlin, who issued a decision finding that she would adhere to Chief Judge Lamberth’s decision determining the substance of Israeli law. Wultz v. Bank of China Ltd., 860 F. Supp. 2d 225, 229-30 (S.D.N.Y. 2012). Subsequently, additional United States citizens filed a companion case, Moriah v. Bank of China Ltd., No. 12-cv-1594 (SAS). Wultz v. Bank of China Ltd., No. 11-cv-1266 (SAS), and Moriah are now pending in the Southern District of New York. Discovery in both is on-going and is being conducted in tandem. BOC has taken every opportunity to obstruct that discovery. As Judge Scheindlin explained: -26- BOC has not only shown bad faith in its interactions with plaintiffs, it has also shown bad faith in its responses to this Court’s orders. On more than one occasion, BOC has failed to comply with an order, said nothing to the Court, waited for plaintiffs to bring BOC’s noncompliance to the Court's attention, and then, when confronted with its noncompliance, claimed to believe that the Court intended something other than what the Court clearly said. Wultz v. Bank of China Ltd., 942 F. Supp. 2d 452, 468-69 (S.D.N.Y. 2013) (footnote, which offers an example of BOC’s bad faith, omitted); see also id. at 470 (formally finding that “BOC has engaged in discovery at least partly in bad faith). For example, the Wultz plaintiffs’ first set of requests for the production of documents was submitted on June 16, 2011. BOC responded by, among other things, involving the Chinese government, causing delay. As a result, the Wultz Court needed to step in three times, each time rejecting most of BOC’s arguments. See Wultz v. Bank of China Ltd., 910 F. Supp. 2d 548, 551-52 (S.D.N.Y. 2012) (describing the matter in far greater detail); Wultz v. Bank of China Ltd., 942 F. Supp. 2d at 455; Wultz v. Bank of China Ltd., 979 F. Supp. 2d 479, 485, 497 (S.D.N.Y. 2013) (giving BOC “one final opportunity to amend its privilege logs” or “it will have waived any claims of privilege over those documents”). That last decision was rendered October 25, 2013, over 28 months after the documents were first requested. -27- As noted, discovery in Wultz and Moriah is ongoing. The Wultz plaintiffs recently subpoenaed former Israeli national security officer Mr. Uzi Shaya to provide testimony on the meetings conducted between Israeli and Chinese officials that form much of the basis of this litigation. If Shaya testifies, his testimony will likely provide the plaintiffs in Wultz, Moriah, and Elmaliach with all that they need to prove their cases.15 As BOC notes in its brief, Israel, presumably influenced by its considerable financial interests in maintaining good relations with China,16 moved to quash that subpoena. Of course, BOC’s prediction that Israel’s efforts will prove successful and that Shaya will never testify (see, e.g., Opening 14) should be taken for the partisan advocacy that it plainly is; the Plaintiffs could respond with similar zealous confidence, but obviously, until the court decides the issue, nobody knows what the court will decide.17 By motion of the Moriah 15 By agreement of the parties and order of the IAS Court, discovery had in Wultz and Moriah will be useable in Elmaliach. 16 See, e.g., John Reed, Israeli Prime Minister Netanyahu Gets Flak for Yielding to China, FIN. TIMES, July 15, 2013, available at http://www.ft.com/cms/s/0/c99b9938-ed56-11e2- 8d7c-00144feabdc0.html; David Shamah, Israel, China to Open $300 Million Research Center, TIMES OF ISRAEL, May 19, 2014, http://www.timesofisrael.com/israel-china-to-open-300-million- research-center/; Yaacov Benmeleh, Israel’s Tech Industry Is Becoming All About ‘China, China, China’, BLOOMBERG, May 29, 2014, http://www.bloomberg.com/news/2014-05- 29/israel-s-tech-industry-is-becoming-all-about-china-china-china-.html. 17 BOC states that “this Court can take judicial notice[ that] Plaintiffs do not expect to prove their Israel-PRC “meeting” allegation, let alone the dependent allegation that BOC was informed of anything that the two governments purportedly discussed.” (Opening 14 (footnote omitted)). This false statement (accompanied with a request for judicial notice of the false (continued next page) -28- plaintiffs, Israel’s motion was recently transferred to the Southern District and is being considered by Judge Scheindlin. Wultz v. Bank of China, Ltd., ___ F.R.D. ___, 2014 WL 2257296 (D.D.C. 2014). Given that: 1) Shaya did not move to quash the subpoena, 2) Shaya previously agreed to testify,18 and 3) Judge Scheindlin previously expressed that she would allow Shaya to testify, subject to some significant restrictions,19 Israel’s motion to quash may well be denied and the Shaya deposition may soon occur. There is certainly no basis to assume otherwise. The Wultz Court addressed choice of law initially in 2011. Judge Scheindlin, relying principally upon Cooney v. Osgood Mach., Inc., 81 N.Y.2d 66, 72 (1993), and HSA Residential Mortg. Servs. of Texas v. Casuccio, 350 F. Supp. 2d 352, 364 (E.D.N.Y. 2003), held that the “law of the place of the tort—commonly known as lex loci delicti—will generally apply” and the “place of the tort” is generally “the statement!) must be understood in the context of BOC’s continuing efforts to obstruct discovery and prevent a just resolution of this litigation. 18 See, e.g., Letter from Uzi Shaya to Lee Wolosky, Robert Tolchin, and Mitchell Berger, Mar. 20, 2013, available at the Southern District of New York’s ECF system, Case No. 11-cv- 1266 (SAS), Doc. No. 539-2 (filed June 20, 2014); Letter from Uzi Shaya to Nitsana Darshan- Leitner and Lee Wolosky, August 29, 2013, available at the Southern District of New York’s ECF system, Case No. 11-cv-1266 (SAS), Doc. No. 539-3 (filed June 20, 2014) (“[I]n light of my moral and national obligation and my commitment to the war on terror, I am inclined to give a deposition[.]”). 19 Moriah v. Bank of China Ltd., No. 12-cv-1594, Order, Nov. 15, 2013, Doc. No. 25. The order provides, inter alia, that the deposition will occur in Judge Scheindlin’s courtroom and that “[t]he courtroom will be closed for the entirety of the deposition and courtroom access will be restricted to counsel of record [and specified others].” Id. at 3-4. -29- state where the injury is suffered, rather than the state where the negligent conduct occurred.” Wultz v. Bank of China Ltd., 811 F. Supp. 2d 841, 846 (S.D.N.Y. 2011) (internal citations and quotation marks omitted). She added that “in tort cases involving personal injury and property damage, the doctrine of lex loci delicti governs except in extraordinary circumstances.” Id. at 847 (internal citation and quotation marks omitted) (emphasis added). She nevertheless proceeded to carefully balance the interests of the competing jurisdictions, noting in particular Israel’s interests in combatting terrorism. Id. at 852. Thereafter, she concluded: [B]ecause the interest analysis does not conclusively point in favor of only one choice, I defer to the weight of the particular precedent that suggests that when conduct-regulating rules are at issue, and when the suit arises out of personal injury, the locus of the tort controls. I therefore choose to apply the law of Israel. Id. The Second Circuit subsequently rendered its first decision in Licci. Judge Scheindlin found that the Licci decision was binding authority on her court and that she “must reconsider [her] earlier decision.” Wultz v. Bank of China Ltd., 865 F. Supp. 2d 425, 425 (S.D.N.Y. 2012). And in so reconsidering, Judge Scheindlin felt compelled, per Licci, to apply the law of the place of the negligent conduct rather than the place of the injury. Id. at 429. Wultz is thus nothing more than a repeat of -30- Licci’s application of New York law and is not independent authority for the proposition that the law of the place of the conduct controls.20 ARGUMENT POINT I THIS COURT’S PRECEDENT COMPELS THE CONCLUSION THAT THE LAW OF THE PLACE OF THE INJURY APPLIES IN THIS CASE A. This Court Has Consistently Held that the Law of the Place of the Injury Almost Always Applies in Conduct-Regulating Cases 1. In Babcock v. Jackson, 12 N.Y.2d 473 (1963), this Court altered the process by which New York courts resolve a conflict of laws. “The question presented [in Babcock] is simply drawn. Shall the law of the place of the tort invariably govern the availability of relief for the tort or shall the applicable choice of law rule also reflect a consideration of other factors...?” Id. at 477 (emphasis in original) (footnote omitted). The rule at the time in every (or almost every) state was that “the law of the place of the tort [shall] invariably govern.” This Court stopped that. It referenced “increasing criticism,” “dissatisfaction with the 20 BOC devotes two pages in its brief to arguing that Wultz held “that Israel’s law cannot apply and that Chinese law must govern.” (Opening 50-51). Those arguments are greatly misleading in that they present Wultz as independent authority for BOC’s position. However, the Wultz Court, as illustrated in the text, originally believed that the Plaintiff’s position is correct. -31- mechanical formulae of the conflicts of law,” and the “unjust and anomalous results which may ensue from application of the traditional rule in tort cases.” Id. at 478-79. And it applied the law of New York, rather than Ontario, to adjudicate a tort that occurred in Ontario. Id. at 482, 484. In so doing, it launched what contemporary legal commentators have deemed a “revolution.” The significant majority of states have since followed suit. Babcock noted, however, that “[w]here the issue involves standards of conduct [(in modern parlance, conduct-regulating rules)], it is more likely that it is the law of the place of the tort which will be controlling.” Id. at 484. The Court was very clear that in abrogating the old rule, it was merely stating that the law of the place of the tort does not always apply. It does, however, usually apply, at least when conduct-regulating rules are involved. The Court went out of its way to note that in its discussion of the law of the “place of the tort,” it was not differentiating between the place of the injury and the place of the negligent conduct. Id. at 477 n.2. In most cases, those places are the same. Accordingly, the Court was comfortable saving for another day the question that controls here. Contrary to BOC’s statements peppered throughout its brief, Babcock (and all of its progeny) does not hold that the law of the place of the negligent conduct -32- invariably applies. Indeed, for the same reason that it rejected the old rule, it could not have adopted the rigid rule that BOC seeks to impose. The analysis in Babcock is far more nuanced. Babcock replaced the rigid old rule, invariably applying the law of the place of the injury, with a more fluid “interest analysis.” Id. at 483-84.21 Because the interest analysis was so fluid, it gave courts a great deal of leeway to both identify the relevant interests and then assign weights to them. For the next nine years, this Court and the lower courts of this State attempted to engage in this very open- ended and poorly-defined balancing test that, due largely to the absence of rules and structure, almost always resulted in the application of New York law.22 In doing so, members of this Court expressed strong disapproval. Indeed, the desire to avoid asserting New York’s law on every party who happens to litigate here motivated the Court in Dym v. Gordon, 16 N.Y.2d 120 (1965), to author one of the very few decisions during this nine-year period to apply the law of a state other 21 Subsequently, this Court would note that Babcock contains language suggesting that an analysis on the “grouping of contacts” is also necessary. See Schultz, 65 N.Y.2d at 196. Whether or not Babcock actually meant to insist upon a grouping of contacts analysis is immaterial as this Court later expressly abandoned that part of the analysis. Tooker v. Lopez, 24 N.Y.2d 569, 577 (1969) (“The fact that the deceased guest and driver were in Michigan for an extended period of time is plainly irrelevant.”); id. at 587 (Burke, J., concurring); Schultz, 65 N.Y.2d at 197. 22 See, e.g., Macey v. Rozbicki, 18 N.Y.2d 289 (1966); Farber v. Smolack, 20 N.Y.2d 198 (1967); Miller v. Miller, 22 N.Y.2d 12 (1968); Tooker, 24 NY.2d 569. (It is noteworthy that Babcock itself applied New York law.) -33- than New York in a tort dispute.23 Dym described this fluid approach as one that “blithely applies the public policy of the forum under the denomination of ‘governmental interests.’” Id. at 126. The Court added: However appealing it might seem to give effect to our own public policy on this issue, merely because the negligent driver of the car in the collision, and his guest, are domiciled here, to do so would be to totally neglect the interests of the jurisdiction where the accident occurred, where the relationship arose and where the parties were dwelling, and to give an overriding significance to a single factor reminiscent of the days when British citizens travelled to the four corners of the world secure in the belief that their conduct would be governed solely by the law of England. Id. at 127. However, Dym was overruled just a few years later. Tooker v. Lopez, 24 N.Y.2d 569, 575 (1969); see also Schultz, 65 N.Y.2d at 197. The decision to overrule Dym in Tooker drew some harsh criticism from Judge Breitel, dissenting: In modern theories in the field of conflicts, the analysts have generally posited, or in fact assumed, as a significant factor the place where the 23 As noted shortly, Dym was overruled a few years later. The only other such decision by this Court that Plaintiffs are aware of is Long v. Pan Am. World Airways, 16 N.Y.2d 337, 342 (1965). At issue in Long was whether to apply the substantive loss-allocating rules of Pennsylvania (allowing an estate to recover in a wrongful death action) or Maryland (not allowing an estate to so recover). Id. at 340. There was no serious contention that New York substantive law ought to apply. Id. at 342 (“The present case differs from most that reach the courts in that here the forum is, so to speak, a neutral state, disinterested in the possible conflict between the policies which underlie the statutes of Maryland and Pennsylvania. New York, it is true, is the State of the defendant’s incorporation, but that circumstance is insufficient to warrant either application of our substantive law or interposition of our public policy.” (internal citations omitted)). -34- transaction occurred. What has happened of course, is that lip service is paid to the factor of place, and promptly ignored thereafter, if the forum prefers its own policy preconceptions and especially if it requires denial of recovery to a plaintiff in a tort case. Tooker, 24 N.Y.2d at 596-97 (Breitel, J., dissenting) (internal citations omitted). 2. The free-form balancing suggested by Babcock (as interpreted by later decisions) was finally given structure in Neumeier v. Kuehner, 31 N.Y.2d 121 (1972). The Court candidly acknowledged that its prior choice of law decisions “lacked consistency” in their legal analysis (notwithstanding their nearly uniform application of New York law) presumably because “it is frequently difficult to discover the purposes or policies underlying the relevant local...rules.” Id. at 127. The Neumeier Court noted that while Babcock “wisely” rejected the old “mechanical place of injury rule,” it is necessary to develop alternative rules that are “more narrow than those previously devised,” but that nonetheless constrain the decision-making process, in order to ensure “a greater degree of predictability and uniformity.” Id. The alternative, and the Court’s prior practice, it candidly acknowledged, might be characterized “as an ad hoc case-by-case approach.” Id. The Court went on to adopt a three-part test designed to offer some flexibility but simultaneously “promising a fair level of predictability.” That three-part test would -35- subsequently be adopted for all choice of law cases involving loss-allocating rules. Schultz, 65 N.Y.2d at 198-200.24 Schultz continued that trend. Schultz involved the sexual abuse of Boy Scouts by their troop master and teacher, a person whom they trusted. The abuse and related injuries occurred in both New York and New Jersey.25 Id. at 192-93. Indeed, it is possible that “most of [the scout leader and teacher’s] acts were committed here.” Id. at 195. In light of the detestable conduct, the severity of the injuries (one of the victims later committed suicide, id. at 192), and the fact that at least some (or most) of the tortious conduct and the injury occurred in New York, it would have been very easy for this Court to evoke its interest analysis, articulate New York’s strong interest in protecting young boys from molestation on New York soil by people whom they trust, and apply New York law. But the Court did not do so. Instead, recognizing that Schultz involved a conflict of loss-allocating laws (New Jersey had a charitable immunity statute and New York did not), this 24 Notably, BOC does not once cite Neumeier in its brief, apparently in the hope of sweeping its appeal for additional predictability and uniformity under the rug. Instead, BOC cites to cases from the 1960’s, operating under the Babcock framework as it was originally understood, and argues that New York eschews choice of law rules that have any structure. (Opening 37). Perhaps BOC correctly stated the law circa 1968. But BOC failed to state the law circa 1978—and it certainly failed to state the law currently in force. 25 Contra (Opening 41 (erroneously stating that, in Schultz, the “injur[ies] and tortious conduct occur in New York, but [the] parties are domiciled in New Jersey[.]”)). -36- Court applied the three-part test asserted in Neumeier, id. at 201, determining that New Jersey law must apply. Schultz additionally revisited the distinction drawn in Babcock between loss- allocating rules and conduct-regulating rules. Quoting Babcock, Schultz stated that “when 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[,]” outweighing even the interests of a common-domicile jurisdiction. Id. at 198 (internal quotation marks omitted) (emphasis added). By contrast, Schultz stated that when the conflicting rules are loss-allocating the “locus jurisdiction has at best a minimal interest” and the respective domiciles of the parties takes precedence. Id. This, said Schultz, both explains the Neumeier test and explains why it only applies to loss-allocating rules. Id. at 198-99. Schultz additionally defined the “locus” of the tort as the place of the injury: [W]hen the defendant’s negligent conduct occurs in one jurisdiction and the plaintiff’s injuries are suffered in another, the place of the wrong is considered to be the place where the last event necessary to make the actor liable occurred. Thus, the locus in this case is determined by where the plaintiffs’ injuries occurred. Id. at 195 (emphasis added). -37- The Second Circuit in Licci, among others, has argued that this block quote from Schultz must be disregarded because it is preceded by the words “Under traditional rules the law of the place of the wrong governs all substantive issues in the action....” Licci, 739 F.3d at 49; Schultz 65 N.Y.2d at 195. As the Second Circuit put it, “Schultz’s reference to the place of injury rule occurred in the context of discussing the traditional rule[] of lex loci delicti” and Schultz itself noted that this Court “has refused to invariably apply that rule to determine the availability of relief for commission of a tort.” Licci, 739 F.3d at 49 (emphasis added) (internal quotation marks omitted). The Second Circuit’s primary error lies in failing to acknowledge this Court’s use of the word “invariably” in Schultz, Babcock, and just about every other relevant case. As noted supra, Babcock held that lex loci delicti does not always apply, but it usually applies in adjudicating a choice of conduct-regulating rules. Schultz said precisely the same thing. Schultz 65 N.Y.2d at 198 (“[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[,]” outweighing even the interests of a common-domicile jurisdiction (internal quotation marks omitted) (emphasis added)). And given that lex loci delicti usually applies in such cases, the -38- “traditional rules” governing how to define the locus of the tort likewise usually apply.26 Additionally, it seems that the Second Circuit failed to recognize that Schultz itself applied the “traditional rules.” Immediately after noting that the law of the place of the tort is defined as the place of the injury, Schultz said that the injuries at issue occurred in New Jersey while the tortious conduct occurred in New York. It went on to apply New Jersey law on that basis. Id. at 195-96. More recently, in Edwards v. Erie Coach Lines Co., 17 N.Y.3d 306 (2011), this Court clarified the significant distinction in the case law between conduct- regulating and loss-allocating rules and how they each address multi-state torts: Nearly a half-century ago, in Babcock v. Jackson, we abandoned what had long been our choice-of-law rule whereby the law of the place of the tort invariably governed. Because in nearly all such cases, the conduct causing injury and the injury itself occurred in the same jurisdiction, this rule offered the advantages of certainty, ease of application and predictability.... To accomodat[e] the competing interests in tort cases with multi-State contacts, we adopted [a new 26 This theme would be repeated years later in Cooney v. Osgood Mach., 81 N.Y.2d 66 (1993). The Court wrote: If conflicting conduct-regulating laws are at issue, 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.... Had conduct regulating [rules] been at issue here, our analysis would be greatly simplified, for the traditional rule of lex loci delicti almost invariably obtains. Id. at 72, 74 (emphasis added). -39- approach] which gave the controlling effect to the law of the jurisdiction which, because of its relationship or contact with the occurrence or the parties, ha[d] the greatest concern with the specific issue raised in the litigation. This new method of analysis, however, was limited to competing loss-allocation—not conduct-regulating— rules. Id. at 318-19 (internal citations, quotation marks, and footnote omitted) (alterations in original) (emphasis added). Edwards indicates that “the law of the place of the tort” will generally govern in conduct-regulating cases and makes clear that, in such cases, the disruption to the lex loci delicti rule was minimal. Id. at 319. The “traditional rules,” continue to apply in nearly every conduct-regulating case. Cooney, 81 N.Y.2d at 74 (in cases involving conduct-regulating rules, “the traditional rule of lex loci delicti almost invariably obtains.” (emphasis added)); Cousins v. Instrument Flyers, Inc., 44 N.Y.2d 698, 699 (1978) (“[L]ex loci delicti remains the general rule in tort cases to be displaced only in extraordinary circumstances[.]” (all italics added)). Schultz’s recitation of the “traditional rules” relies, in part, upon Poplar v. Bourjois, Inc., 298 N.Y. 62 (1948). Poplar involves an injury to the recipient of a gift from her husband containing perfumes and cosmetics. The box containing the perfumes and cosmetics was adorned with a metal star that was allegedly inadequately fastened to the box. The plaintiff pricked her finger on one of the -40- corners of the star and, as a result, contracted streptococcus and “became gravely ill,” necessitating that the infected finger be amputated. Id. at 65. The plaintiff sued the manufacturer in New York for injuries suffered in Maryland. The Court expressly and unambiguously applied the conduct-regulating laws of the state of the injury, rather than the negligent conduct: Whether defendant, as manufacturer...owed a duty of care to any one [sic] other than its immediate purchaser is the problem for determination, and since the wrong occurred—that is, plaintiff was injured and the harmful force took effect—in the State of Maryland, decision must be made according to the law of that jurisdiction. Poplar is significant not simply because it applied the law of the place of injury, but because it described that place as the place where “the wrong occurred.” It appears, therefore, that Schultz’s “traditional rules” provide a very clear answer to the principal question in this appeal. Where a conflict of conduct-regulating laws arises in a cross-border tort, the law of the place of injury generally applies, regardless of where the negligent conduct occurred.27 27 This Court has applied the same rule in analogous contexts. For example, see Smith Barney, Harris Upham & Co., Inc. v. Luckie, 85 N.Y.2d 193, 207 (1995) (using New York’s borrowing statute, CPLR § 202, to apply to an investment fraud action the statute of limitations of the “jurisdictions where the injury occurred—generally, the place where the investors resided and sustained the economic impact of the loss” and not that of the jurisdiction where the allegedly fraudulent conduct occurred) and Global Fin. Corp. v. Triarc Corp., 93 N.Y.2d 525, 529 (1999) (“When an alleged injury is purely economic, the place of injury usually is where the plaintiff resides and sustains the economic impact of the loss.”). -41- 3. One might reasonably wonder how the language in Schultz and Cooney, making clear that lex loci delicti generally continues to apply in conduct- regulating cases, “almost invariably,” Cooney, 81 N.Y.2d at 74, and absent “extraordinary circumstances,” Cousins, 44 N.Y.2d at 699, is consistent with the language in Babcock, signaling a departure from rigid and inflexible rules. This Court answered that question in 1993: [I]n a typical court case—a car accident, for example—strong governmental interests may underlie the choice of law issue. The place where the accident occurred, for example, has an overriding interest in regulating conduct within its borders. Matter of Allstate Ins. Co., 81 N.Y.2d 219, 225 (1993) (citing Babcock, 12 N.Y.2d at 483) (emphasis added). Matter of Allstate makes clear that the “traditional rules” are consistent with the interest analysis of Babcock precisely because, in conduct- regulating cases, the interest analysis almost always points to the law of the place of the injury. That state almost always has the greatest interests in the application of its law. 4. For its contrary position, BOC relies extensively upon dicta in this Court’s recent decision in Mashreqbank PSC v. Ahmed Hamad A1 Gosaibi & Bros. Co., 2014 WL 1356220, 2014 N.Y. LEXIS 705 (N.Y. Apr. 8, 2014). This is puzzling as Mashreqbank is about forum non conveniens. Id., 2014 N.Y. LEXIS -42- 705 at *11.28 (BOC has forfeited its arguments related to forum non conveniens and could not have been relying on Mashreqbank to advance those arguments.) Indeed, Mashreqbank distinguished itself from J. Zeevi & Sons v. Grindlays Bank, 37 N.Y.2d 220 (1975), by saying that “[J. Zeevi] was a choice of law case, not a forum non conveniens case.” (italics added).29 This Court in Mashreqbank wrote that “in the typical case” the “jurisdiction having the greatest interest in resolving the particular issue” will be either “the jurisdiction where the tort occurred or the domicile of one or more of the parties[.]” Id., 2014 N.Y. LEXIS 705 at *10-11. Mashreqbank does not discuss whether the “tort occurred” in the place of the injury or the place of the negligent conduct because, in that case, both the injury and the negligent conduct occurred in Saudi Arabia. Accordingly, there was no reason to distinguish between those two locales. However, because Schultz defines the locus of the tort as the place of the injury, supra, it stands to reason that Mashreqbank did not mean to suggest anything to the contrary. Mashreqbank continued, using language that was accurate, but 28 BOC’s statement that “[a]t issue in Mashreqbank was New York’s choice-of-law interest in regulating wire transfers” is nothing but a misrepresentation. (See Opening 5). 29 BOC additionally relies directly on J. Zeevi. Perhaps BOC finds some of J. Zeevi’s dicta to be helpful. But the holding of J. Zeevi, just as every other contract choice of law case, is irrelevant. The rules governing choice of law in tort cases and choice of law in contract cases, while sometimes overlapping, are distinct and governed by separate policy concerns and case law. BOC’s contract choice of law cases, including J. Zeevi, provide nothing to the analysis here that warrants response. -43- perhaps not precise: “Here, Saudi Arabia is the domicile and residence of both parties and the place where the allegedly tortious conduct occurred.” Id., 2014 N.Y. LEXIS 705 at *11 (emphasis added).30 Based on that, BOC argues that Mashreqbank somehow abrogated Schultz and progeny. (See Opening 39-40). One needs only to read the relevant portion of Mashreqbank to appreciate the error in BOC’s analysis. Saudi Arabia was indeed the place where the tortious conduct occurred. It was also the place where the injury occurred. And for Mashreqbank, writing in dicta after having already resolved the case before it, that was a distinction without a difference. 5. It appears that since deciding Babcock in 1963, this Court has adjudicated only one case involving a conduct-regulating rule. That came in 1994 with Padula, which involved a dispute between New York domiciliaries over an injury that occurred in Massachusetts. Padula, 84 N.Y.2d at 520-21. The Court held (entirely consistent with prior precedent) that, notwithstanding the existence of a common-domicile jurisdiction, the law of the place of the tort, the lex loci 30 BOC quotes this language entirely out of context to the Court that wrote it just a few months ago. Not only does BOC fail to quote the language discussed earlier in this paragraph, BOC also fails to quote the word that starts this sentence, “Here,” or otherwise note that the relevant language was intended to apply establish law to the specific facts at issue, not to create a new rule of law, overruling Schultz. Moreover, BOC fails to acknowledge that the facts of this case and those of Mashreqbank are remarkably different. (See Opening 39-40). -44- delicti, governs. Id. at 523. Padula did not provide guidance on how to deal with a cross-border tort as it did not need to. However, its fidelity to precedent, particularly Schultz—Schultz is cited five times and quoted at length in the majority opinion in Padula, id. at 521-22—suggests that Padula found Schultz persuasive, including its application of the “last event necessary” test, through which Schultz defined the locus of the tort as the place of the injury. In 1999, following Padula, Professor Patrick J. Borchers31 concisely restated the choice of law rules governing tort disputes in New York: If the conflict is between conduct regulating rules, then the law of the place of the tort governs; [citing Padula, 84, N.Y.2d at 520] if the conflict is between loss distributing rules, then the Neumeier rules apply. Despite all the ink spilled over them, the Neumeier rules are mostly a common domicile exception to the old place-of-the-injury rule. [Footnote omitted.] Therefore, all of New York tort choice-of-law can be reduced essentially to a single Rule and Exception. The Rule and Exception might be written as follows: 31 Professor Borchers is widely regarded as one of the nation’s leading experts on choice of law. His impact upon the development of the law in this area is unmistakable. See, e.g., Arabie v. CITGO Petroleum Corp., 89 So.3d 307, 327 (La. 2012); In re Mayer, 2011 WL 3299053 at *3 (9th Cir BAP 2011); Heide v. Seven Springs Farm, Inc., 2009 WL 1346035 at *5 (W.D. Pa. 2009); P.V. ex rel. T.V. v. Camp Jaycee, 197 N.J. 132, 141 (2008); Ndunguru v. Kone, Inc., 2008 WL 53603 at *1 n.1 (D. Neb. 2008); Fireman’s Fund v. Structural Systems Technology, Inc., 426 F.Supp.2d 1009, 1023 n.7 (D. Neb. 2006). -45- Rule: In tort cases in which the parties or events are connected with more than one State, the law of the State in which the plaintiff is injured governs. Exception: If the laws of the connected States conflict as to an issue of loss distribution and each party contesting that issue is domiciled (or, in the case of business entities, has its principal place of business) in the same State and that State is not the injury State, the law of the State of the contesting parties’ common domicile (or principal place of business) governs as to the contested issue. For purposes of the Exception, “the same State” includes States that are distinct but have identical laws on the issue being contested. Patrick J. Borchers, Conflict of Laws, 49 SYRACUSE L. REV. 333, 347 (1999) (emphasis added). Borchers is not alone; virtually every commentator who has opined on New York law has construed it similarly. Very little has changed since Borchers’ restatement in 1999, at least with regard to conduct-regulating rules (this Court has not since resolved a case involving conduct-regulating rules).32 To be sure, and notwithstanding Borchers’ restatement of the law, this Court’s cases make clear that the law of the place of the injury does not always apply in choice of law cases involving conduct-regulating rules. Cases may arise in which applying the law of the place of the injury would make no sense and the state of the injury would have no interest in the application of its law. But such 32 But see Edwards, 17 N.Y.3d 306, announcing in 2011 what was arguably a significant change related to loss-allocating rules in cases involving multiple defendants (a fact not present here). -46- cases can be expected to be quite rare. Indeed, Plaintiffs are not aware of any such cases, and BOC cited to none. Long v. Pan Am. World Airways, 16 N.Y.2d 337, 342 (1965), while involving a loss-allocating rule, provides a good hypothetical in which application of lex loci delicti in a conduct-regulating case might be inappropriate. In Long, negligent conduct occurred resulting in an explosion on a plane mid-flight. The plane’s wreckage fell in Maryland. Refusing to apply Maryland law, this Court noted that the situs of the accident was merely “fortuitous[]” and noted that, given that the plane fell near Maryland’s boarders with Pennsylvania and Delaware, it cannot be certain that the explosion occurred in Maryland rather than Pennsylvania or Delaware. Id. at 342 & n.3. To render Long a conduct-regulating case, we must alter the facts a bit. Imagine that the pilot in Long was responsible for the crash by negligently flying the plane. Imagine further that Maryland had enacted a statute defining the standard of care applicable to pilots in such situations and the statute would have exempted the pilot under the facts of this hypothetical case.33 If this plane had taken off from Miami International Airport, destined for LaGuardia Airport, and carried as passengers no domiciliaries of Maryland, it is difficult to 33 Plaintiffs recognize that such a statute might run afoul of the federal commerce clause and federal preemption pursuant to the Federal Aviation Act and other statutes. But those issues, obviously, are not relevant to our hypothetical or to this case. -47- understand what interest Maryland could possibly have in the application of its law. The fact that the pilot’s negligent activities and resulting crash occurred just south of Maryland’s border with Pennsylvania and Delaware (such that had the negligent conduct occurred a minute or two later, the plane would have no longer been over Maryland) is merely “fortuitous” and would not be a reason to apply Maryland law. There may arise more difficult cases in which it is less obvious whether courts should apply the law of the place of the injury, as they “almost invariably” do, Cooney, 81 N.Y.2d at 74, or the law of some other state. But that question will only arise when the state of the place of the injury does not possess legitimate and significant interests in the application of its own law. See Wultz, 811 F. Supp. 2d at 852. Where the state does possess legitimate and significant interests in the application of its own law, as it almost always will, that is the end of the inquiry (at least where the location of the injury was foreseeable to the defendant).34 34 Defining the inquiry as such, with reference to rules rather than open-ended fluid balancing, is well nigh mandated by Neumeier, 31 N.Y. at 127, which appealed for “a greater degree of predictability and uniformity,” as discussed supra. -48- B. The Law of the Place of the Injury—Israel—Governs Here 1. Israel’s interests in the application of its law to the instant conflict is discussed in further detail infra. At the moment, it is sufficient to note that the plaintiffs and the deceased were residents and domiciliaries of Israel and were targeted because they were residents and domiciliaries of Israel. It goes without saying that Israel has a significant interest in the application of its domestic law to the case at bar. K.T. v. Dash, 37 A.D.3d 107, 114 (1st Dep’t 2006) (Israel “has a strong interest in seeing that its aggrieved citizens [and residents] obtain redress for wrongs committed upon them ….”). Given that the law of the place of the injury applies “almost invariably,” Cooney, 81 N.Y.2d at 74, and absent “extraordinary circumstances,” Cousins, 44 N.Y.2d at 699, and given that there is good reason to apply the law of the place of the injury here, that law must be so applied. 2. BOC cannot complain of prejudice associated with being subject to the law of Israel. BOC is not a neighborhood savings-and-loan. It is an enormous global bank, controlled by the Chinese government,35 operating in a vast number of jurisdictions. Indeed, its global website declares that the “Bank [of China] provides a comprehensive range of financial services to customers across the Chinese mainland, Hong Kong, Macau, Taiwan and 37 countries.” Bank of China, Bank of 35 “The BOC is virtually an arm of the Chinese Government[.]” (1053). -49- China Overview, http://www.boc.cn/en/aboutboc/ab1/200809/t20080901_ 1601737.html (last visited July 9, 2014). It has a physical presence in Australia, Hungary, Indonesia, Luxembourg, Malaysia, Panama, Russia, Singapore, South Africa, the United States, Zambia, and other countries. Bank of China, Oversea Branch Certifications, http://www.boc.cn/en/aboutboc/ab8/201201/t20120131_ 1687520.html (last visited July 9, 2014). Compliance with the laws of such a broad range of jurisdictions necessarily entails an enormous range of obligations, some more predictable than others. That is one of the risks that BOC assumed by electing to operate globally. BOC has a large compliance department designated for the purpose of navigating its obligations around the world and ensuring compliance with those obligations. Its compliance department presumably monitors relevant laws in the 37 countries in which it operates and in many other countries around the world, advising bank officers to alter BOC’s conduct to ensure global compliance and anticipating the possible application of foreign law against BOC. In light of that reality, BOC cannot be heard to complain that New York’s choice of law rules may expose it to unexpected liabilities. Moreover, given the volume and scope of its operations, BOC has access to cost-efficient liability insurance to spread some of the risks to which it might be exposed should its compliance department err or the warnings of that department -50- go inadvertently unheeded. The notion that BOC was not aware of relevant Israeli law, could not anticipate that application, and would be prejudiced by that application is tremendously doubtful. More importantly, the case at bar involves a defendant that knowingly36 or with struthious willful blindness provided services to terrorist operatives with ties to terrorist organizations operating in and around Israel. Severe injuries resulted in Israel entirely predictably and the fact that they did was in no way “fortuitous.”37 That Hamas and the PIJ, two organizations hell-bent on killing Israelis and Jews, might use money that they received from BOC’s client to launch an attack on Israel was entirely foreseeable. Equally foreseeable was the possibility of the application of some law prohibiting the provision of banking services to terrorists. Indeed, such conduct is plainly forbidden by the United States. See 31 U.S.C. § 5318 and regulations thereunder. To the extent that BOC did not anticipate and did not plan for the possible application of Israeli law (or alternatively, the possible 36 At this stage in the litigation, the allegations in the Complaints must be deemed true and Plaintiffs’ have the benefit of every favorable inference from the complaints. Roni, LLC v. Arfa, 18 N.Y.3d 846, 848 (2011). One can certainly infer from the Complaints that BOC did not just hear about the connections between their client and terrorism, but actually understood that it was providing banking services to terrorist operatives. 37 Contra (Opening 45-47 (attempting to compare this case to the actual (not hypothetical) facts in Long, notwithstanding that Long was a loss-allocating case and involved very different concerns)). -51- application of § 5318 or a similar statute) to adjudicate its provision of services to terrorist operatives, it has only itself to blame. 3. BOC’s protests that applying the law of the place of injury would “threaten[] the stability and predictability of New York’s banking system” are unsound. (Opening 7 (internal quotation marks omitted)). The rule mandated by this Court’s prior cases and sought by the Plaintiffs is exceptionally simple and predictable, as mandated by Neumeier, supra: If you provide services to terrorist operatives, and that money causes injury in a locale in which those terrorists operate, you will be subject to the laws of that foreign jurisdiction. 4. Contrary to BOC’s protests that applying the law of the place of the injury in nearly all conduct-regulating cases would subject BOC to liability on a mere fortuity (or on “an ad hoc basis,” (Opening 47), whatever BOC intends by that), it is BOC that seeks to stand the law on the head of a needle. BOC’s arguments about fortuity cut both ways. Why should the Plaintiffs—many (or all) of whom have never set foot in China, have no relations in China, are not controlled by the Chinese government, and would have preferred to have nothing to do with China—be subject to Chinese law based on the mere fortuity that a Chinese bank decided to facilitate an attack on them? The Plaintiffs are Israeli domiciliaries and residents who were attacked in Israel because of their presence in -52- Israel. They expected that the laws of Israel would be there to protect them and Israel has an exceptionally strong interest (discussed infra) in ensuring that those laws indeed provide that protection. Applying the law of China based upon this mere fortuity would undermine those interests and expectations. In any event, there is nothing fortuitous or ad hoc about applying Israeli law in this case. As noted supra, BOC facilitated terrorist organizations operating in and around Israel. BOC had to have known that injury in Israel was likely to result. 5. BOC additionally argues that the law of the place of the negligent conduct should control because that jurisdiction is best able to prevent the negligent conduct from repeating. BOC’s argument ignores the ability of lawsuits like the present one to force negligent actors to reform their habits. There is a wealth of literature describing how tort law influences behavior. For example, Dean William Prosser famously described tort law as “social engineering.” WILLIAM PROSSER, HANDBOOK OF THE LAW OF TORTS § 3 at 15 (1971). It is likely that this litigation has reformed BOC’s willingness to service terrorists. And, if the Plaintiffs are ultimately victorious, that fact will almost certainly have an even greater impact on BOC’s operations. Where the law of the place of injury provides rules that are more likely to yield recovery than the law of the place of conduct, -53- applying the law of the place of injury will do much to vindicate the interests of that forum. Again, this litigation is a case in point. Admittedly, some of this Court’s cases have suggested, in dicta, that the law of the “place of the tort” (without further specification) governs because that jurisdiction has the greatest ability to influence conduct. But a close analysis of each use of that language reveals that: 1) the Court intended to make a point entirely different from the one that BOC derives, and 2) the language used by the Court was perhaps not precise. Supra, Plaintiffs addressed Mashreqbank’s reference to the “place where the allegedly tortious conduct occurred.” Mashreqbank, 2014 N.Y. LEXIS 705 at *11. The most notable other example appears in Schultz. In its discussion on Babcock, the Schultz Court wrote: Thus, when 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...because the locus jurisdiction’s 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. Conversely, when the jurisdictions’ conflicting rules relate to allocating losses that result from admittedly tortious conduct,... considerations of the State’s admonitory interest and party reliance are less important. Under those circumstances, the locus jurisdiction has at best a minimal interest in determining the right of recovery or the extent of the remedy in an action by a foreign domiciliary for injuries -54- resulting from the conduct of a codomiciliary that was tortious under the laws of both jurisdictions. Schultz, 65 N.Y.2d at 198 (internal citations omitted). While taking Schultz’s references to “the parties who relied” on local law and their “primary conduct” might lead one to believe that applicable law is that where the negligent conduct occurred, the error in doing so becomes clear upon reviewing the entire section. The objective in that portion of Schultz was simply to distinguish the choice of law rules governing conduct-regulating torts from those governing loss-allocating torts. And, in so doing, Schultz meant to show that that the law of the “place of the tort,” wherever that might be, is significant with regard to conduct-regulating rules but will often be less significant with regard to loss-allocating rules. Schultz’s references to conduct, while misleading here, were never intended to suggest that the law of the place of the tortious conduct, as opposed to the place of the injury, controls. Additionally, as noted supra, it is incorrect to assume that there are no reliance interests in the place of the injury and no regulation of conduct being performed by the jurisdiction in which the injury occurs. That jurisdiction’s substantive law has a regulatory effect whenever the negligent actor is subject to that substantive law. It is quite possible that Schultz’s discussion of conduct regulation meant to refer to those reliance and regulatory interests (i.e., that the -55- jurisdiction of the injury has an interest in regulating the conduct of the negligent actor, which will be vindicated upon the forum court’s application of that law). In any event, Schultz, just like all of this Court’s decisions, should not be read piecemeal. The decision stands as a whole and needs to be read as a whole. As discussed supra, Schultz is quite clear that the “place of the tort” is defined as the place where the “last event necessary” to create liability occurred. In a typical tort case, that is the place where the injuries occur. (Schultz’s use of the word “conduct” elsewhere cannot negate its explicit statement that the law of the place of the injury controls.) In this case, the “place of the tort” is Israel. See Schultz, 65 N.Y.2d at 195. 6. Ultimately, BOC’s arguments resolve into a very dogmatic and inflexible rule (an approach that Babcock expressly rejected and that no subsequent decision of this Court has embraced): The law of the place of the negligent conduct invariably applies because that jurisdiction is the only one that has an interest in regulating that negligent conduct. As noted, it is simply not true that the place of the conduct is the only jurisdiction with a regulatory interest. But even if BOC’s assumption relating to regulatory interests were correct, modern choice of law rules are more flexible than BOC would like to believe. And given that, as BOC -56- must admit, the law of the place of injury must sometimes control, BOC’s rigid arguments must fail. Rather, the law of the place of injury will control (particularly where injury in that jurisdiction was foreseeable to the defendant), unless that jurisdiction has no substantial interest in the application of its law. Here, because Israel unquestionably has a substantial interest in the application of its law, and because the injuries in Israel were easily foreseeable to BOC, Israeli law must control. POINT II NUMEROUS APPELLATE DIVISION DECISIONS HAVE APPLIED THE LAW OF THE PLACE OF INJURY UNDER SIMILAR CIRCUMSTANCES BOC would have this Court believe that the Appellate Division’s decision in this case was an outlier. Nothing could be further from the truth. Indeed, numerous decisions of the Appellate Division and other courts have applied the law of the place of injury when faced with a choice. “Virtually every pertinent case confirms that a tort ‘occurs’ for purposes of choice-of-law analysis at the location of the accident.” Youngman v. Robert Bosch LLC, 923 F. Supp. 2d 411, 418 (E.D.N.Y. 2013); see also Endurance Financial Intern., LLC v. Patton Boggs LLP, Index No. -57- 652834 / 2013, 2014 WL 1868740 (Sup. Ct., N.Y. Cty. May 9, 2014).38 In the interests of brevity, the Plaintiffs address a sampling of the Appellate Division cases in summary fashion: • Devore v. Pfizer Inc., 58 A.D.3d 138 (1st Dep’t 2008), was a tort action for injuries allegedly caused by pharmaceuticals manufactured by a New York corporation and ingested in Michigan. The conflicting laws were held to be conduct-regulating and, accordingly, the First Department explicitly applied “the law of the jurisdiction of the tort,” which it defined, relying on Schultz, as “the place of the injury.” Id. at 141.39 It then expressly rejected a federal decision, Carlenstolpe v. Merck & Co., Inc., 638 F. Supp. 901 (S.D.N.Y. 1986), that had applied the law of the place of the conduct: To the extent plaintiffs rely on Carlenstolpe…for the proposition that the locus of the tort is the place where the tortious conduct occurred, their reliance is misplaced. The District Court..., while acknowledging controlling New York law…nevertheless applied a different rule, treating the place of the wrong as that where the defendant is present 38 Ironically, Patton Boggs LLP (now Squire Patton Boggs LLP), the defendant in the cited case, is counsel to BOC here. Patton Boggs argued for the application of Virginia law because the negligent conduct occurred there. Supreme Court rejected that argument and applied New York law on the ground that the injury happened in New York, giving New York the greater interest in the application of its law. Endurance Financial, 2014 WL 1868740. 39 Irresponsibly, BOC cites Devore throughout its brief as holding that the law of the place of the negligent conduct applies. The next footnote explains the likely reason for BOC’s construction of Devore, but BOC’s failure to note explicit language in the decision that clearly applied the law of the place of the injury is inexplicable. -58- and where its allegedly wrongful behavior occurred (at 910). Not only is this reasoning unsupported in other cases, but in addition, the case the Carlenstolpe court cited in support, Long v Pan Am. World Airways (16 NY2d 337 [1965]), involved circumstances that rendered the usual “place of the injury” rule incongruous. Devore, 58 A.D.3d at 141-42.40 • Ackerman v. Price Waterhouse, 252 A.D.2d 179 (1st Dep’t 1998), involved a conflict of conduct-regulating tort rules related to the allegedly negligent provision of tax advice. Id. at 183, 192. Ackerman explicitly holds that the law of the place of the tort applies and that “[t]he place of occurrence of the tort will be where the plaintiff suffered the injury sued upon[.]” Id. (citing Schultz, 65 N.Y.2d at 195). • Locke v. Aston, 31 A.D.3d 33 (1st Dep’t 2006), is likewise explicit in its resolution of a conflict of conduct-regulating tort rules involving an alleged 40 The Second Circuit expressed uncertainty as to precisely what Devore meant, noting that Devore quoted dicta from another case that relied on the location in which the relevant products were sold. Licci, 739 F.3d at 50 n.5 (noting Devore’s statement that “the law of the forum in which the products are sold should govern.”). The Second Circuit’s uncertainty is misplaced. The language it cites appears in a block quotation (taken from another federal case) in a supporting paragraph in Devore (beginning with the word “Moreover”) and is offered to show loosely analogous authority in support of Devore’s decision to abrogate Carlenstolpe. Id. at 142. Nothing in Devore suggests that the place of the sale is dispositive. Rather, Devore explicitly states that the law of the “place of the injury” will control. Id. at 141. In any event, Elmaliach, a decision by the same court that wrote Devore, interpreted Devore and resolved any doubt that might have existed otherwise when it relied on Devore as holding that the place of injury controls. (21-22). -59- invasion of privacy through the surreptitious recording of telephone calls: “Under New York’s choice of law rules, where the plaintiff and defendant are domiciled in different states, the applicable law in an action where civil remedies are sought for tortious conduct is that of the situs of the injury[.]” Id. at 34, 37-38 (emphasis added).41 • Burnett v. Columbus McKinnon Corp., 69 A.D.3d 58, 59-60 (4th Dep’t 2009), explicitly resolved a conflict of tort rules relating to the allegedly negligent manufacture of a product holding that “the situs of the tort in this matter is the place of the injury, rather than the location where the [negligent conduct occurred].” Burnett, moreover, endorses the “last event necessary” test articulated by Schultz. Id. at 62. • DaSilva v. C & E Ventures, Inc., 83 A.D.3d 551, 552, 554 (1st Dep’t 2011), involved claims for lead poisoning brought by lead abettors for injuries suffered while working on the George Washington Bridge and a conflict of 41 Some have attempted to quarrel with the First Department’s suggestion in Locke that the negligent conduct occurred in California. To do so, however, would have no effect on the instant analysis because the First Department expressly stated that the “situs of the injury” controls, regardless of where the conduct took place. Additionally, the First Department, which was closer to the facts than a casual reader of the Locke decision is, was in a better position to assess those facts. Its factual conclusions should not be disturbed. Finally, viewing the negligent conduct as having occurred in New York would be odd given that the illegal activity (pushing the “record” button to start the process of recording the telephone conversations) occurred in California. Id. at 34. -60- conduct-regulating tort rules. The parties argued whether the plaintiffs were injured while working in New Jersey or New York. The First Department described that question as “dispositive.” Id. at 552. In performing its choice of law analysis, the court relied heavily on its finding that the plaintiffs suffered injuries in New York. Id. at 554. Absolutely absent from its analysis is the question of where the conduct (i.e., permitting the plaintiffs to be exposed to lead) occurred. If BOC’s theory of the case were correct, it is the place of the negligent party’s conduct that is dispositive. DaSilva is plainly to the contrary. • Kniery v. Cottrell, Inc., 59 A.D.3d 1060, 1061 (4th Dep’t 2009), held that in performing an interest analysis for choice of law purposes, “the significant contacts are, almost exclusively, the parties’ domiciles and the locus of the tort” and that the locus of the tort is the place where the plaintiff was injured. Id. The Fourth Department went on to apply the law of Ohio, where the plaintiff was injured, rather than the law of Georgia, where the negligent conduct undoubtedly occurred. Id. • Bull v. Kimball, 2 A.D.3d 283, 284 (1st Dep’t 2003), applied New York law, after conducting an interest analysis, on the grounds that “both parties -61- are domiciled in this state and any economic injury to plaintiff would be sustained here.” Id.42 • Proforma Partners, LP v. Skadden Arps Slate Meagher & Flom, LLP, 280 A.D.2d 303, 303-04 (1st Dep’t 2001), held that the place “where the claim arose” is the “place of the injury.” Id. (emphasis added).43 POINT III INTEREST ANALYSIS COMPELS THE APPLICATION OF ISRAELI LAW 1. Initially, Plaintiffs note that, in light of what they wrote in the prior sections, performing any additional interest analysis here is not necessary. This Court and other courts following its lead have wisely determined that, when conduct-regulating tort rules are at issue, the place of the injury almost always has the greatest interest in the application of its law. See Matter of Allstate, 81 N.Y.2d 42 It is clear from both the construct of the quoted sentence and the fact that Bull cites Padula, supra, as its primary authority, that while the First Department relied on both the fact of common domicile and the place of the injury, the place of the injury was its primary focus. The fact that there was a common domicile is the reason that the place of the injury will be in New York. In any event, Bull gives no attention to the place of the negligent conduct, which was presumably in Illinois. 43 While Proforma is a borrowing statute (CPLR § 202) case, it is unclear why the analysis under that statute and the analysis for choice of law purposes would differ. If the place of the tort is deemed the place of the injury, rather than the place of the negligent conduct, for the purposes of the borrowing statute, why would a different rule obtain for the purposes of assessing choice of law? Either the tort “happened” in the place of injury or it did not. -62- at 225. Perhaps this is because this Court recognizes that the victim state has a significant interest in preventing negligence and illegal activity that was deliberately targeted at in and to ensure the safety, security, and financial recovery of its citizens. Given that Israel here actually has significant interests in the application of its law and that BOC could foresee the application of Israeli law, there is no reason not to apply Israeli law. The remainder of this section is offered in the alternative, in the event that this Court concludes that a more searching interest analysis is required. 2. Israel is currently fighting a war against Hamas—the same Hamas that benefited from BOC’s knowing and negligent provision of services. It has been dealing with terrorism—politically motivated violence directed at innocent civilians for no reason other than to cause pain and suffering—since its declaration of independence 1948. In the decade ending 2009, there were 146 suicide attacks in Israel (i.e., more than one per month, on average), a country that is roughly equivalent in size and population to New Jersey. Ido Rosenzweig & Yuval Shany, A Decade of Palestinian Terrorism – Report by the Israeli Security Agency, 14 TERRORISM & DEMOCRACY (2010), http://en.idi.org.il/analysis/terrorism-and-democracy/issue- no-14/a-decade-of-palestinian-terrorism-%E2%80%93-report-by-the-israeli- -63- security-agency; Herb Keinon, PM to Christie: Israel, New Jersey are Similar, JERUSALEM POST, Apr. 2, 2012. Moreover, since January 1, 2012, approximately 2,530 rockets and mortar shells fired from Gaza “have hit Israeli civilian areas.” Jewish Virtual Library, Rocket Threat to Israel: Palestinian Rocket & Mortar Attacks (February 2009 - Present), http://www.jewishvirtuallibrary.org/jsource/ Terrorism/rockets2011.html (last visited July 10, 2014).44 It is fair to say that nearly every Israeli civilian knows someone who has been directly affected by terrorism. From January 1985 through May 2013, there were 2,061 fatalities from homeland terrorist attacks in Israel. That compares with 3,487 fatalities in the United States for that period (the vast majority of those occurring on a single day, September 11, 2001). During the same period, there were 11,438 injuries from terrorism in Israel and 11,318 in the United States. WM. ROBERT JOHNSTON, DEATH RATES FROM TERRORISM, UNITED STATES AND ISRAEL, 1985-2013 (May 5, 2013), http://www.johnstonsarchive.net/terrorism/terror-rate.html. (The U.S. population is roughly forty-one times larger than the Israeli population. United States Census Bureau, Country Rank, http://www.census.gov/population/international/data/ 44 It is not clear whether this data includes a barrage of rockets fired in July 2014. The website suggests that the data is current through March 13, 2014. If that is true, the quoted figure will be adjusted significantly in the coming weeks. -64- countryrank/rank.php (last visited July 10, 2014) (US population: 318,892,103; Israeli population: 7,821,850).) During the years in question, the terrorism-related annual fatality rate in the U.S. was approximately 0.44 per million. In Israel, it was approximately 11.9 per million. The annual casualty rate in the U.S. was approximately 1.89 per million. In Israel, it was approximately 74.8 per million. Israel’s annual casualty rate, if applied to a county the size of the United States, would yield almost 24,000 terrorism-related casualties each and every year. (That is more than double the number of terrorism-related casualties in the United States in 2001.) JOHNSTON, supra. Again, it is fair to assume that nearly every Israeli civilian knows someone who has been directly affected by terrorism. Terror takes a major toll on the Israeli population. Obviously, those who are killed and injured, and their loved ones, like the Plaintiffs here, suffer most intensely. But everyone else suffers as well. Afton L. Hassett & Leonard H. Sigal, Unforeseen Consequences of Terrorism: Medically Unexplained Symptoms in a Time of Fear, 162 ARCHIVES INTERN. MED. 1809 (2002), available at http:// archinte.jamanetwork.com/article.aspx?articleid=212551; HUMAN RIGHTS WATCH, ROCKETS FROM GAZA: HARM TO CIVILIANS FROM PALESTINIAN ARMED GROUPS ROCKET ATTACKS 17 (2009) (“The psychological toll of years of rocket attacks has affected a far greater number of Israeli civilians than those who suffered physical -65- wounds. The trauma can be severely debilitating…”) (“The problem for most people was not being hit, but the fear, uncertainty and stress…. You had to plan your daily life by considering how long it would take you to get to a bomb shelter from every point on your route.” (quoting Yonatan Yagodovsky of Magen David Adom)). It is with that backdrop that one must consider Israel’s interests in the application of its law to terrorism-related cases. Israel’s interests in the prevention of terrorism and to compensate the victims of terrorism on its soil are second to none. Israel has a truly compelling interest in the application of its domestic law to 1) gain compensation for the Plaintiffs, 2) prevent future acts of terrorism by making it unprofitable to facilitate terrorism, and 3) reform BOC to hopefully prevent it from committing future knowing negligent and grossly harmful acts. American courts have recognized the tremendously strong interest in preventing and adequately responding to terrorism.45 When a U.S. citizen becomes the victim of a terror attack, “the United States has a ‘unique interest’ in having its domestic law apply.” Kirschenbaum v. Islamic Rep. of Iran, 572 F. Supp. 2d 200, 210 (D.D.C. 2008). Indeed, the prosecution of the war on terror, utilizing various 45 The United States House of Representatives recently did so as well as it “[r]eaffirm[ed its] support...for Israel’s right to defend itself and its citizens.” H. Res. 657, 113th Cong. (July 14, 2014). -66- methodologies, including the use of the American legal system to seize and distribute the assets of state sponsors of terrorism is “an extremely strong [U.S.] interest.” Estates of Ungar ex rel. Strachman v. Palestinian Auth., 715 F. Supp. 2d 253, 268 (D.R.I. 2010). By the same rationale, when Israeli citizens become the victim of a terror attack, Israel has a “‘unique interest’ in having its domestic laws apply.” See Kirschenbaum, 572 F. Supp. 2d at 210; Oveissi v. Islamic Rep. of Iran, 573 F.3d 835, 842-43 (D.C. Cir. 2009) (implying that when the domiciliaries of a particular locale are targeted, that locale has the greatest interest in having its laws apply).46 Given the severe national crisis faced by Israel at the hands of terrorists (greater than the American crisis by orders of magnitude), Israel’s interests in applying its law in terrorism-related cases is undoubtedly stronger than New York’s—particularly where the terrorism occurred on Israeli soil. 3. Israel’s interests in the application of its law here go beyond the general interest in the prevention and response to terrorism. Israel is 1) the place of the plaintiff’s injuries, and 2) the place where BOC’s negligent acts were felt (not just by the Plaintiffs, but by the entire country). (Israel “has a strong interest in 46 Israel’s interests in have its law applied is heightened if, as BOC contends, New York provides absolute immunity to banks that facilitate terrorist operatives. -67- seeing that its aggrieved citizens [and residents] obtain redress for wrongs committed upon them ….” See K.T., 37 A.D.3d at 114.) Israel can 3) reasonably anticipate being the site of future similar terror attacks facilitated by BOC and other banks. And 4) Israel is the domicile of the Plaintiffs and the place of their residence. Each of those interests, which have animated this Court’s choice of law cases, see Padula, 84 N.Y.2d at 523 (holding that the being the place of injury is a sufficient interest in a conduct-regulating tort case), is sufficient for this Court to apply Israeli law. 4. By contrast, almost no activity happened in New York. BOC resides in New York, but it is not clear how much of the negligent conduct, if any, actually took place in New York. It is likely for that reason that BOC previously conceded that New York’s interests in this litigation are “indiscernible or non-existent.” (630). While Plaintiffs would not have gone quite that far absent an express concession from BOC, it is certain that New York’s interests in the application of its law are considerably less than those of Israel. New York undoubtedly has an interest in protecting its banks from ruinous unpredictable liability. But the desire to protect banks from ruinous unpredictable liability has absolutely nothing to do with protecting banks from limited predictable liability. Here, BOC has acted knowing that its behavior would likely -68- result in the death and debilitation of members of an identifiable class. It is inconceivable that BOC did not realize that it might one day be held to account for such gross negligence and/or malice. And the class of potential plaintiffs is not, as BOC would have this Court believe, the entire world. It is those who were deliberately targeted by BOC’s customer with BOC’s knowledge. New York also has a strong interest in ensuring that banks operating within its jurisdiction obey laws designed to prevent assistance to terrorists. As part of its expression of that interest, New York’s Department of Financial Services exercises rigorous supervision over foreign entities using the New York banking system for illegal purposes.47 Moreover, it is not New York policy to become the equivalent of the Liberian ship registry, where “no questions asked” is the norm for unscrupulous banks. If this court desires to ensure the financial stability of banks, it should ask 47 See, e.g., New York Department of Financial Services, Cuomo Administration Announces RBS to Pay $100 Million for Violations of Law Involving Transactions with Iran, Sudan, Other Regimes (Dec. 11, 2013), http://www.dfs.ny.gov/about/press2013/pr1312111.htm; New York Department of Financial Services, Governor Cuomo Announces Bank of Tokyo- Mitsubishi UFJ to Pay $250 Million to State for Violations of New York Banking Law Involving Transactions with Iran and Other Regimes (June 20, 2013), http://www.dfs.ny.gov/about/ press2013/pr1306201.htm; New York Department of Financial Services, Statement from Benjamin M. Lawsky, Superintendent of Financial Services, Regarding [$340 Million Fine Paid by] Standard Chartered Bank (Aug. 14, 2012), http://www.dfs.ny.gov/about/press/ pr1208141.htm. -69- itself: which banks? Does this Court want to protect the financial stability of all banks, regardless of the extent of their moral responsibility (or lack thereof), or just the ones that are willing to hold themselves to common standards of decency and responsible citizenship? Announcing a rule of absolute immunity for all non- trust/fiduciary funds would have the effect of encouraging banks do to whatever they want, regardless of the moral implications of their willful negligence. Indeed, in cases involving terrorism, New York—ground zero of the terror attacks of 9/11 and a symbol of the fight against terrorism—might have an interest in applying Israeli law to the extent that Israeli law will, as BOC contends, do a better job of fighting the “war on terror.” 5. China, presumably the site of much of BOC’s negligent conduct in this case, undoubtedly has a significant interest in the application of its law to this dispute. But BOC grossly overstates that interest. BOC seems to believe that the significance of being the place of the negligent conduct rests in the ability and interest of the forum of the conduct to regulate the acts of the negligent actor. But, as noted supra, China is not the only jurisdiction that has the ability to regulate the acts of BOC. This litigation, just as any tort litigation, is impacting and will continue to impact BOC’s behavior. More to the point, even if Chinese law is applied in this case, it would not be China, but would rather be the courts of this -70- State that would be regulating BOC through the exercise of its tort system. That is true regardless of which substantive law applies. The relevant question is not which forum has the greater regulatory power. Indeed, the ability to regulate is irrelevant. The relevant question, rather, is which country has the greatest interest in the application of its law to the particular issue that is the topic of dispute. (Opening 25, 29 (“the [only] facts or contacts which obtain significance in defining State interests are those which relate to the purpose of the particular law in conflict.” (citing Schultz, 65 N.Y.2d at 197) (brackets in original)). 6. Rather myopically, BOC argues that the “particular issue here centers on whether BOC can be liable for providing banking services to its customer in China.” (Opening 4 (internal quotation marks omitted)). That is entirely false. The particular issue here is whether a “person,” such as BOC, can be liable for its negligent and not “objectively reasonabl[e]” (23-24) provision of services to a client in full knowledge that the client would use those services to kill and maim a foreseeable class of victims. Given that this foreseeable class is Israeli, it is very difficult to understand why China or New York could possibly be held to have a greater interest than Israel in having its substantive law apply to the resolution of that question. -71- 7. It appears to the Plaintiffs that this Court’s conflicts cases involving conduct-regulating rules have never addressed what the commentators often call a “true conflict.” Rather, in its prior cases in which this Court engaged in an open- ended policy analysis, this Court has explained how one of the jurisdictions really had no interest (or very little interest) in the application of its law. For example, in Babcock, this Court held that Ontario had no interest in applying its loss allocating rule simply as a result of the auto accident between two domiciliaries of New York having occurred in Ontario. Babcock, 12 N.Y.2d at 482 (“[T]he interest of Ontario is at best minimal.”). As a result, this Court’s cases provide very little guidance on how to conduct such an interest analysis when two or more jurisdictions maintain a significant interest in the application of their own law. While Plaintiffs have shown that the interests of New York and China are minimal relative to those of Israel, Plaintiffs nonetheless suggest two such approaches here to guide the resolution of “true conflicts”:48 First, this Court might adopt the doctrine of “comparative impairment,” by which a court attempts to determine which jurisdiction will suffer the greatest harm 48 This should not be taken as a concession that such an analysis is necessary or appropriate. Plaintiffs have already shown that, pursuant to this Court’s precedent as well as good sense, the place of the injury has the overriding interest. In the vast majority of cases, such as this case, no further interest analysis is necessary. -72- if its laws are not applied. See generally Bernhard v. Harrah’s Club, 16 Cal.3d 313 (1976) (abrogated on other grounds by CAL. CIV. CODE § 1714). If Israel’s laws are not applied, its efforts at using law to combat terrorism will be significantly harmed. For Israel’s efforts to thwart and retard terrorism originating from different locales around the world through its tort laws, those tort laws will need broad application in many jurisdictions around the world. Israel, after all, presumably does not have personal jurisdiction over BOC and cannot independently hold BOC accountable. By contrast, it is difficult to see where the interests of New York or China might suffer by this Court not applying their respective laws. Their relevant interests lie in avoiding vast and unpredictable expansions of liability. Applying Israeli law under these unusual facts in which the Defendant was well aware of the possibility of being subject to Israeli law will not undermine the efforts of New York and China to avoid vast and unpredictable liability. The doctrine of comparative impairment has much of intuitive appeal, is easy to apply, and seems to be rather consistent with this Court’s precedent. Second, this Court might adopt the approach of Dean Symeon C. Symeonides discussing the conflict between Licci and this case. Symeon C. Symeonides, Choice of Law in the American Courts in 2013: Twenty-Seventh -73- Annual Survey, 62 AM. J. COMP. L. 223, 255-259 (2014). Symeonides reasoned that where, as here, the law of the place of the injury imposes a higher standard of conduct, that jurisdiction’s interests are greater in light of its expressed policy to offer greater protection to its residents, provided, argued Symeonides, that “the tortfeasor should have foreseen the occurrence of the injury in that state and, thus, the possibility that its law may be applied.” (Presumably, Symeonides believes that if the possible application of the law of the place of injury was not foreseeable, the interests of the jurisdiction of the place of the conduct will be elevated by the need to protect its residents from unpredictable liability, hence his view that predictability is central to the analysis.) However, Symeonides states, where the law of the place of the negligent conduct imposes the higher standard, the law of the place of the injury has no interest in the application of its law at all. (Symeonides performed an empirical study and concluded that 87 percent of all cases involving the described pattern were resolved as Symeonides suggests they should be.) Symeonides, supra, 62 AM. J. COMP. L. at 258-259. While Symeonides’ arguments would appear to present a modest departure from this Court’s prior precedent, his formulation, just as the comparative impairment approach, would necessitate the application of Israeli law. Israel clearly imposes the highest standard of conduct and that that higher standard of -74- conduct was foreseeable to BOC. Therefore, according to Symeonides, Israel has the greatest interests in the application of that higher standard to protect its residents. Id. (“[A] proper choice-of-law analysis should focus on whether the circumstances were such that the bank should have foreseen the occurrence of the Israeli injuries. If the answer to that question is affirmative, then the application of Israeli law would be entirely defensible, indeed appropriate.”). 8. In any event, applying Chinese law would be a miscarriage of justice. BOC never requested the application of Chinese law below, no evidence has been presented as to the content of Chinese law or the nature of its relevant polices, and the Plaintiffs have never had a fair adversarial opportunity to develop and debate the content of Chinese law or its underlying policies.49 Arguably, BOC has waived the application of Chinese law.50 49 BOC might attempt to have this Court adopt the Wultz Court’s findings on the content of Chinese law. This Court may certainly take judicial notice of what the Wultz Court found. But those findings cannot be binding on the Plaintiffs and are certainly not binding on this Court or any court in this State. The content of Chinese law must be the subject of fact finding, after the submission of expert affidavits, before the IAS Court. 50 If this Court is inclined to consider the possible application of Chinese law, it may rule on the choice of law issues without remand for development as to the content of Chinese law— provided that it is able to do so without referencing the policies underlying Chinese law. BOC concedes in its brief to this Court that there is a conflict between Israeli and Chinese law, thus necessitating a conflicts analysis. Because Plaintiffs have shown that the law of the place of injury generally governs and that there is no reason to depart from that general rule here, Israeli law applies. -75- POINT IV APPLYING THE LAW OF THE PLACE OF THE CONDUCT, AS BOC REQUESTS, COULD SEVERELY INJURE THIS STATE’S INTERESTS IN THE FUTURE It is not difficult to see how BOC’s position, if adopted, could prove harmful to the State of New York in the future. To see why, all one must do is flip the facts. Suppose that a pharmaceutical company based oversees, in a jurisdiction that has not yet adopted modern products liability laws, negligently produces a medication. People in New York somehow obtain these pills and are killed or injured by them. Which law applies? According to the Plaintiffs, the matter is simple: the law of the place of the injury, New York, applies. According to BOC, it would seem that the foreign jurisdiction’s laws (or lack thereof) ought to apply as that jurisdiction has the greatest ability to regulate the negligent manufacturer. If BOC responds by saying that the law of New York will nevertheless apply because, in light of the extreme circumstances, applying the law of a foreign jurisdiction that does not have adequate rules to respond to the negligent behavior would violate New York public policy, the Plaintiffs agree entirely. So too here: It would violate public policy to apply the law of a jurisdiction that could not adequately respond to BOC’s knowing and callous behavior. -76- Similarly, suppose a Vermont domiciliary, while in Vermont, commits an environmental tort that renders drinking water unsafe in northeastern New York. According to the Plaintiffs, the law of the place of the injury, New York, applies. According to BOC, it would seem that Vermont’s laws ought to apply as that jurisdiction has the greatest ability to regulate the polluter. That result would render the New York Legislature (and the people who elect the Legislature) powerless to address severe public harm in this State. If BOC responds by saying that the law of New York will nevertheless apply because, in light of the extreme harm inflicted upon the State of New York, New York has the greatest interests in applying its law, the Plaintiffs agree entirely. So too here: Israel has the greatest interests in having its law apply in light of the extreme harm inflicted upon the people of Israel by BOC. POINT V ALTERNATIVELY, THIS COURT SHOULD APPLY NEUMEIER-LIKE RULES IN CASES SUCH AS THIS It is often very difficult to distinguish between conduct-regulating and loss- allocating rules. Consider, for example, the charitable immunity at issue in Schultz. Schultz, as noted supra, involved claims of sexual abuse by two young boys at the hands of their Boy Scout troop master and teacher. Schultz, 65 N.Y.2d at 192-93. -77- At issue in the case was whether to apply New Jersey’s charitable immunity rule or else, as the dissent put it, to apply New York’s rule of charitable non-immunity. Id. at 205. Under New Jersey’s rule of charitable immunity, the plaintiff’s claims were barred. Id. at 194. Under New York’s rule of non-immunity, the claims would move forward. This Court had no trouble calling Schultz a loss-allocating case. Id. at 198 n.2. But why is that so? It is obvious that a rule of immunity, or non- immunity, will impact the behavior (or regulate the conduct) of those subject to the rule. A charity existing in a charitable immunity state will be less careful about avoiding tortious acts than will a charity in a state that has a policy of charitable non-immunity. Indeed, that is likely the reason that New York had (and now nearly every state has) a policy of non-immunity.51 Similarly, conduct-regulating rules, such as rules related to assigning the duty of care, often simultaneously allocate losses. This case is a perfect example: According to BOC, under New York law, banks have no liability at all to non-customers, regardless of how objectively unreasonably the bank acts. By BOC’s standards, the posture of this appeal would be no different if Shurafa 51 See also Patrick J. Borchers, The Return of Territorialism to New York’s Conflicts Law: Padula v. Lilarn Properties Corp., 58 ALB. L. REV. 775, 777-78 (1995) (arguing that the guest statutes, described in Babcock and several of its early progeny, and assumed by this Court to be loss-allocating, are actually conduct-regulating because they define the standard of care from the perspective of the allegedly negligent driver). -78- (BOC’s customer) walked into a BOC branch in Manhattan and said to the branch manager and the teller with whom he was working “I want to wire some money from New York to my terrorist friends in Hamas so that they can blow up some more Jews and Americans.” A law that recognizes no duty to third-parties under any circumstances is, arguably, not conduct-regulating because it does nothing to incentivize good behavior or disincentivize negligent behavior. It is merely a “postevent remedial rule[] designed to allocate the burden of losses resulting from tortious conduct”; in other words, it is a loss-allocating rule. Schultz, 65 N.Y.2d at 195, 198-99; see also Padula, 84 N.Y.2d at 522 (noting that loss-allocating rules are those not designed to prophylactically “prevent injuries from occurring” but rather have their intended effect only after the injury). In light of the problem associated with distinguishing between conduct- regulating and loss-allocating rules, many commentators have called for this Court to abandon the distinction. For example, consider this analysis: An immunity rule grants the immunized party license to act in a tortious manner and often egregiously so. That a locus state has done so because it seeks to foster a loss-distribution goal does not change the reality that it has eased its conduct-regulating rule.... New York conflicts jurisprudence would be enhanced if the court were to rid itself of the conduct-regulating and loss-distribution dichotomy; it rings hollow and adds little to thoughtful analysis. In Schultz, it blocked the court from grappling with a very real and most serious -79- policy conflict. In Cooney, it led the court through a needless, circuitous route to resolving the conflict. Aaron D. Twerski, A Sheep in Wolf’s Clothing: Territorialism in the Guise of Interest Analysis in Cooney v. Osgood Machinery, Inc., 59 BROOK. L. REV. 1351, 1361-62 (1994). If this Court does decide to divorce itself of the distinction, or to minimize the impact of the distinction, it might consider adopting Neumeier-like rules in cases involving rules that ostensibly regulate conduct but have a considerable impact in loss allocation. The Neumeier rules are as follows: 1) if the parties share a common domicile, the law of their common domicile should govern; 2) if the parties have different domiciles and the law of each favors its domiciliary, the place of injury governs; and 3) in all other split-domicile cases, the governing law should usually be that of the place of injury, unless relevant substantive law objectives would be advanced by the other law. Edwards, 17 N.Y.3d at 321-22 (citing Neumeier, 31 N.Y.2d at 128). If we were to apply those rules to this case, we would arrive at precisely the same result that would apply under the current rules governing conduct-regulating -80- conflicts.52 The first Neumeier rule is clearly not applicable as Plaintiffs are domiciled in Israel and Defendant in China and/or New York. The second Neumeier rule, as noted above, functions as a “place of injury test” wherever the law of each party’s domicile would favor its domiciliary. Cooney, 81 N.Y.2d at 73 (internal quotation marks omitted). Here, BOC has long claimed that the law of its domicile (whether New York or China) favors it; and Plaintiffs, domiciliaries of Israel, have always claimed that Israeli law favors them. Accord Wultz, 755 F. Supp. 2d 1. Therefore, because the injuries occurred in Israel, the law of Israel applies. Alternatively, under the third Neumeier rule, the law of the place of injury (Israel) applies unless the other body of law (whether New York law or Chinese law) better advances the relevant substantive law objectives. Because BOC’s claim of absolute immunity does not advance legitimate substantive law purposes, Israeli law, as the law of the locus of the injuries, must govern. 52 In its reply brief to the Appellate Division, page 21, BOC admitted that if the rules at issue in this litigation would be construed as loss-allocating, the Court must apply “the law of the place of injury.” Portions of its brief to this Court can be read as affirming that concession, although perhaps not as explicitly. -81- POINT VI EVEN IF THIS COURT DOES NOT APPLY ISRAELI LAW, PLAINTIFFS’ BREACH OF STATUTORY DUTY CLAIM SHOULD GO FORWARD As the Plaintiffs described in the facts section, they have raised two claims against BOC. One is for negligence and the other is a civil statutory cause of action under Israeli law, known as Breach of Statutory Duty, that has no exact cognate in New York law.53 As explained more fully there, the cause of action for Breach of Statutory Duty claims that BOC is liable for violating certain pieces of duly- enacted legislation, provided that Plaintiffs can demonstrate not just that BOC violated that other legislation, but also that Plaintiffs can satisfy the other elements of the Breach of Statutory Duty claim. The legislative enactments described supra, as well as Israel’s Breach of Statutory Duty, are all intended to apply extraterritorially. Section 13 of Israel’s Penal54 Law55 provides: 53 New York law provides that in some circumstances statutes directed toward safety may impose an affirmative duty of care so as to give rise to a cognizable cause of action in negligence. McLean v. City of New York, 12 N.Y.3d 194, 242 (2009). 54 Notwithstanding that some of the legislative enactments are originally criminal enactments, the Breach of Statutory Duty claim is a civil claim that merely incorporates other law (including criminal statues) under certain circumstances. Accordingly, the law that Plaintiffs seek to apply here is civil, not criminal. 55 Judge Lamberth and others have referred to this enactment as the New Penal Code of the State of Israel. Wultz, 755 F. Supp. 2d at 68 n.12. -82- (a) Israeli penal law shall apply to foreign offences against: (1) the security,…of the State; … (b) Israeli penal law shall apply also to foreign offences against: (1) the life, person, health, freedom or property of an Israeli national, resident of Israel, or public servant as such; (2) the life, person,…or property of any Jew as such …. Wultz, 755 F. Supp. 2d at 68-69; (789-90). Additionally, § 14 of the Penal Law provides that “‘Israeli penal law shall apply to foreign offences against the life [or] person...of an Israeli national or resident of Israel,’ not as such, where the maximum punishment for such an offence is ‘imprisonment for one year or more,’” even “‘where the offence is committed within the territory under the jurisdiction of another state.’” Wultz, 755 F. Supp. 2d at 69-70 (citing Penal Law § 14(a)-(b)). Given that 1) New York does not permit the activities forbidden by these statutes (such that there is no conflict between the laws of New York and Israel), 2) these Israeli statutes are plainly intended to apply extraterritorially under the given facts, 3) applying the statutes would further Israel’s interests, and 4) applying them would violate no public policy of this State, the statutes should be applied without regard to standard choice of law principles. -83- POINT VII UNDER NEW YORK LAW, BOC HAD A DUTY NOT TO ACT OBJECTIVELY UNREASONABLY AND TO AVOID FORESEEABLE HARM TO THE PLAINTIFFS Even if this Court finds New York law applicable, it provides an alternative basis for Plaintiffs’ claims. A. New York Law Imposes a Duty of Care Upon Parties Who Knowingly Facilitate Terrorism BOC argues that banks have absolutely no duty to any non-customer, no matter how egregious the behavior of the bank. As the Appellate Division and Justice Kapnick correctly found, BOC provided financial services knowing that its client was a terrorist operative and agent of two terrorist organizations that are dedicated to the violent injury of innocent civilians and that, in so doing, BOC acted objectively unreasonably. (23-24, 61). Unsurprisingly, Plaintiffs are aware of no case in New York or anywhere else that would absolve BOC of liability under such circumstances. Plaintiffs do not challenge the general notion that under New York law, banks enjoy a limited immunity for injuries caused by the negligence of their customers. But, as Justice Kapnick noted: “BOC’s actual knowledge of [its client’s] terrorist activities sufficiently distinguishes the Complaints herein from the...usual rule that [banks] do not owe non-customers a duty to protect them.” (61 -84- (internal quotation marks omitted)). Banks may be held liable to third-parties that are part of a determinate class when the bank knowingly negligently facilitates injury to them. To the best of Plaintiffs’ knowledge, no court has ever extended New York’s limited bank immunity to cases where the bank had knowledge of physical harms that its customer intended to inflict against a finite and identifiable class. That is precisely what BOC asks this Court to do. It argues that, notwithstanding its knowledge that 1) its customer intended to use funds to commit acts of terrorism, and 2) the intended victims of that terrorism were Israeli Jews, BOC is immune from damages. By their rationale, BOC would be immune even if its customer had walked into a bank branch and explicitly declared his terroristic intent. It is well-established in New York “that an actor’s conduct may give rise [to] tort liability where none otherwise would exist.” Genen v. Metro-North Commuter R.R., 261 A.D.2d 211, 214-15 (1st Dep’t 1999); Espinal v. Melville Snow Contrs, Inc., 98 N.Y.2d 136, 142 (2002) (relying, in part, on § 324A(a) of RESTATEMENT (SECOND) OF TORTS, which says that anyone who undertakes to render services “which he should recognize as necessary for the protection of a third person or his things” owes a duty of reasonable care to the third person and may be liable if “his failure to exercise reasonable care increases the risk of such harm”). -85- The duty to third-parties applies to numerous categories of defendants for which courts have otherwise found a limited immunity. For example, an employer is generally not liable to third-parties for actions by employees taken outside the scope of employment. Yeboah v. Snapple, Inc., 286 A.D.2d 204, 204-05 (1st Dep’t 2001). Nevertheless, employers are liable to third-parties for those same actions where the employer “knew or should have known of [its] employee’s propensity to commit injury.” T.W. v. City of New York, 286 A.D.2d 243, 245 (1st Dep’t 2001); see also Perez v. City of New York, 298 A.D.2d 265, 265 (1st Dep’t 2002) (noting that “substantiated complaints” might render the employer liable for negligence). Similarly, a landowner is liable to non-customer visitors (i.e. even if they are not business invitees) who are on its premises when the landowner “knows or has reason to know from past experience that there is a likelihood of conduct on the part of third persons [that] is likely to endanger the safety of the visitor.” Nallan v. Helmsley-Spear, Inc., 50 N.Y.2d 507, 519 (1980) (internal quotation marks omitted) (citing RESTATEMENT (SECOND) OF TORTS §344)). The matter is no different with regard to banks. While banks are generally not liable to non-customers, they are liable when they have actual or constructive knowledge that a diversion of funds will occur or is on-going that has or will result in misappropriation of funds designated for the benefit of a third-party. Bischoff v. Yorkville Bank, 218 N.Y. 106, 112 (1916); Home Sav. of America, FSB v. Amoros, -86- 233 A.D.2d 35, 38-39 (1st Dep’t 1997); Baron v. Galasso, 83 A.D.3d 626, 628 (2d Dep’t 2011). There is no reason to assume, as BOC apparently does, that banks cannot be subject to other liabilities to third-parties as well. BOC cites to no precedent that compels or even suggests that banks are immune from liability under the present facts, in the face of actual knowledge, or willful blindness, on the part of the bank. Instead, it argues that it has no “duty to control Shuarfa.” (Opening 58). Perhaps. But it did have a duty not to give Shuarfa money upon learning that Shuarfa was likely to give that money to Hamas and the PIJ. The question of whether BOC has a duty to third-parties turns on common sense, not on strict formulae. As this Court has explained, Common-law experience teaches that duty is not something derived or discerned from an algebraic formula. Rather, it coalesces from vectored forces including logic, science, weighty competing socioeconomic policies and sometimes contractual assumptions of responsibility. These sources contribute to pinpointing and apportioning of societal risks and to an allocation of burdens of loss and reparation on a fair, prudent basis. Palka v. Servicemaster Mgt. Svs. Corp., 83 N.Y.2d 579, 585 (1994) (internal citation omitted). Further, “[c]ourts traditionally and as part of the common-law process fix the duty point by balancing factors, including the reasonable expectations of parties and society generally....” Id. at 586. In Palka, this Court held a contractor liable to an employee (a person with whom the contractor had no -87- relationship) of a public facility. It reasoned that because the contractor accepted upon itself a duty to maintain the premises, it therefore had a duty to ensure the safety of all people using the facilities. Id. at 585-87. The reasonable expectations of society are controlling. The citizens of New York expect that when a foreign bank opens a New York City branch and avails itself of the privilege of doing business here, it will not ignore applicable rules and regulations, a series of red flags, and specific warnings that it is being used as a vehicle for terrorist financing. They particularly expect that a bank doing business here will not knowingly facilitate acts of terrorism against civilians. BOC cannot claim surprise that it would be obligated to heed warnings, and investigate suspicious transactions pursuant to U.S. law. And it certainly cannot claim surprise for being held liable for facilitating acts of terrorism against a foreseeable targeted group of Plaintiffs, given Hamas’ and PIJ’s openly stated goals of severely harming Israeli and Jewish civilians. BOC argues that nothing less than absolute immunity is necessary to prevent the tort system from wrecking the “stability and predictability of New York’s banking and commercial system.” (Opening 68 (internal quotation marks omitted). That seems rather melodramatic. The issue here is whether the limited immunity granted to banks applies where the bank provides banking services to terrorists knowing that they intend to use those services to inflict deadly harm on a defined -88- class. This is an unusual case; terrorist financing is surely an “unusual[] and exceptional use of banking services.” Wultz, 755 F.Supp.2d at 61. Announcing that banks will be held liable when they fail to act “objectively reasonably” (24) under circumstances such as these will not undermine the stability of the banking system. Or perhaps that is wrong. Perhaps BOC’s concerns stem from its knowledge that it is regularly engaged in providing banking services to terrorists. If so, BOC’s actions reflect a level of moral vacuousness and lawlessness that law and policy cannot countenance, which therefore creates an independent basis for legal duty. See Tenuto v. Lederle Laboratories, 90 N.Y.2d 606, 612 (1997) (noting that “common concepts of morality” help to define legal duty). If a single act of facilitating terrorism would subject BOC to liability, as Plaintiffs have demonstrated, BOC cannot escape liability simply by repeating that behavior. B. Notwithstanding that New York Law Permits Recovery, There Remains a Conflict of Laws A conflict of laws exists regardless of whether that conflict is necessarily case determinative. The relevant question is whether there is an “actual conflict” of law as applied to the specific facts of this case (regardless of whether that conflict would yield a different result as to liability). Finance One Public Co. v. Lehman Bros. Special Financing, 414 F.3d 325, 331 (2d Cir. 2005) (quoting Tronlone v. Lac d’Amiante du Quebec, LTEE, 297 A.D.2d 528 (1st Dep’t 2002)). That is, -89- differences in substantive law conflict where there exists “a ‘significant possible effect on the outcome of the trial.’” Finance One, 414 F.3d at 331 (citation omitted) (emphasis in original). Accordingly, a conflict exists when the jurisdictions involved provide different substantive rules and those differences are “‘relevant’ to the issue at hand.” Id.; see also Caribbean Const. Servs. & Assocs., Inc. v. Zurich Ins. Co., 267 A.D.2d 81, 82-83 (1st Dep’t 1999) (finding actual conflict because in the Virgin Islands, punitive damages require no proof of egregious conduct); Bonded Waterproofing Servs., Inc. v. Anderson-Bernard Agency, Inc., 86 A.D.3d 527, 528-29 (2d Dep’t. 2011) (finding conflict because the special or privity-like relationship standard in New York differs from New Jersey law). While New York law imposes a duty of care upon BOC, as Plaintiffs explained supra, “the Israeli law of negligence ‘differs slightly’ from New York law in that duty is divided into fact and notional duty and depends of foreseeability.... This differs from New York law, where the foreseeability of harm does not define duty and, absent a duty running directly to the injured person, there is no liability in damages....” (14 (quoting Wultz, 755 F. Supp. 2d at 58)). That difference could have a significant possible effect on the outcome of the trial as it could impact the scope of the duty. The extent of BOC’s knowledge and the extent to which the injuries were foreseeable will be fleshed out during discovery and the -90- scope of the duty (under either Israeli or New York law) will likely be resolved on a motion for summary judgment. That determination will obviously depend upon the case law of each jurisdiction and will very likely depend to some extent upon which jurisdiction’s laws apply. Moreover, the standard for breach of duty under Israeli negligence law is more lenient than the corresponding standard under New York law. See Wultz, 755 F. Supp. 2d at 58-59. POINT VIII NOTWITHSTANDING BOC’S SUGGESTIONS TO THE CONTRARY, CHINA’S REGULATORY MECHANICS ARE INADEQUATE TO PREVENT BOC FROM COMMITTING NEGLIGENT HARM AGAINST THE PLAINTIFFS AND OTHERS SIMILARLY SITUATED BOC argues at length that this Court should leave well enough alone because China is on the job of making sure that BOC behaves. But this argument ignores the almost familial relationship that exists between China and BOC. There is no way that any person could ever succeed on a terrorism claim against BOC in Chinese courts, even on facts more egregious than those alleged here. As Plaintiffs’ expert opined, “BOC is virtually an arm of the Chinese Government...there is no way that the Chinese Government would allow a -91- Judgement in favour of a foreign party against a state bank.” (1053).56 Similarly, the Communist Party and the Chinese government “will never countenance a judgement by a Chinese court finding that the BOC has been knowingly laundering money for terrorist purposes.” Id. Any court that might hear such a case against the BOC would “be biased in favour of the BOC” and “would be instructed [by the Communist Party and/or the government] to dismiss the case[. T]here is virtually no chance at all that judgement could be given in favour of the plaintiffs.” (1054). Relatedly, such a person would not be able to obtain qualified Chinese counsel who could zealously and independently represent them. Given the highly sensitive nature of such a litigation, any Chinese attorney to take this case would face the danger of threats and intimidation from the government, and would be forced to coordinate his activities with the Communist Party and governmental authorities. E.g. (985). Indeed, BOC has already threatened Plaintiffs’ Israeli counsel in this litigation with criminal and civil liability for speaking publically about her clients’ case. (1236-44) (“[W]e opine that your behaviors have violated 56 Chinese courts are, for all practical purposes not independent of the government and, in politically sensitive cases, are directly controlled by the government. See, e.g., (1245-91); UNITED STATES DEPARTMENT OF STATE, COUNTRY REPORTS ON HUMAN RIGHTS PRACTICES FOR 2013: CHINA (2014), available at http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/ index.htm?year=2013&dlid=220186 (“Judges regularly received political guidance on pending cases, including instructions on how to rule, from both the government and the [Communist Party], particularly in politically sensitive cases.”). -92- [Chinese] laws and regulations, and you have damaged BOC’s business reputation and international image. Under Chinese law, such behaviors have constituted tortious acts against the reputation of BOC…. From the date you receive this letter, you shall cease and desist from committing any acts and making remarks that are intended to damage the business reputation or international image of BOC, and you shall guarantee not making any irresponsible remarks against BOC anytime in the future.”). If this is the treatment received by foreign counsel opposing BOC, imagine what might happen to Chinese counsel under the same circumstances. And, if somehow, such a person could sustain an action against BOC, and ultimately win, his damages would likely be greatly limited. In wrongful death cases, no lost wages are permitted; instead, the survivors are granted an allowance. In sum, the damages award would be “very low...relative to what is available in the United States.” (1005). If BOC is to be subject to any sort of legal restriction, that restriction would have to be imposed directly by government regulators rather than through tort law. But just as the fox cannot guard the hen house, the Chinese government cannot be expected to discipline BOC in terrorism-related cases. The Chinese government owns majority share in BOC. And while BOC is technically a private entity, it, like China’s three other major banks, is headed by a senior figure in the controlling Communist Party. China’s Big Banks: Giant Reality-Check, THE ECONOMIST, Aug. -93- 31, 2013, available at http://www.economist.com/news/finance-and-economics/ 21584331-four-worlds-biggest-lenders-must-face-some-nasty-truths-giant-reality- check. It is “so closely held by the state that [it is], in effect, [an arm] of the treasury.” Id. These party bosses move in and out of senior bank rolls and the government. Notably, Mr. Xiao Gang, BOC’s former chairman, is now the head of the China Securities Regulatory Commission, a public regulator. Id. China’s major banks are exceptionally profitable in large part because the Chinese government props them up and imposes oppressive rules on the Chinese population that gives the banks “a source of cheap funding.” In exchange, the banks devote their surplus resources to addressing governmental and Party needs and objectives. The major banks, such as BOC, thus serve a vital role for the government as both “the chief instruments of financial repression” and as a source of cash—literally, a bank—for the government. Id. The governmental control over BOC goes a step further still. “[T]he various levels of [the State-Owned Assets Supervision and Administration Commission (“SASAC”), a state regulator] manage senior personnel in banks at the corresponding level.” In other words, bank managers have a direct, individual, relationship with regulators who directly manage them. HE WEI PING, BANKING REGULATION IN CHINA: THE ROLE OF PUBLIC AND PRIVATE SECTORS 140 (2014). This is roughly the same as senior staff in the Federal Reserve or the Senate -94- Finance Committee calling senior officials at J.P. Morgan Chase, telling them what to do, and expecting them to listen. Perhaps the fact that it works in China is not entirely surprising given the remarkably volatile revolving door (or perhaps there is no door at all, just a space in the wall through which people can walk freely) between the Chinese banking industry and the regulatory agencies that oversee that agency. “Senior managerial personnel in Chinese banks are not merely executives of these commercial operations, they also possess high political rank.” Id. It is as if China has managed to merge regulator and banker. In light of this relationship between the BOC, the Communist Party, and the bank regulators, regulatory capture57 is not just a concern, it is a way of life. This is not to say that Chinese regulators do not regulate—they do, sometimes harshly— but would never do so in a manner that would cause embarrassment to the Communist Party. The Chinese government (controlled by the Communist Party) has expressed a commitment to stopping terrorism. Because of that public commitment, “the Party/Government will never countenance a [public pronouncement]...that the BOC has been knowingly laundering money for terrorist 57 See Wikipedia, Regulatory Capture, http://en.wikipedia.org/wiki/Regulatory_capture (last visited July 11, 2014) (“Regulatory capture is a form of political corruption that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or special concerns of interest groups that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure; it creates an opening for firms to behave in ways injurious to the public (e.g., producing negative externalities).”) -95- purposes.” (1053). Perhaps the government has taken measures to prevent such support for terrorism on a prospective basis, but it will not be able to admit or deal with the scope of a breach retrospectively. Accordingly, BOC’s request that this Court simply allow Chinese regulators to do their job must be taken with a grain of salt. CONCLUSION For the reasons set forth above, this Court should affirm the order of the Appellate Division in all respects and remand this case for discovery and trial. Dated: Brooklyn, New York July 14, 2014 Respectfully submitted, THE BERKMAN LAW OFFICE, LLC Attorneys for Plaintiffs-Respondents by: Robert J. Tolchin, Esq. Meir Katz, Esq. (pro hac vice) 111 Livingston Street, Suite 1928 Brooklyn, New York 11201 (718) 855-3627 rtolchin@berkmanlaw.com mkatz@berkmanlaw.com