Lewis I Baach pile Bruce R. Grace
202 659 6742
bruce.grace@lewisbaach.com
April 26, 20 13
The Honorable Andrew W. Klein
Chief Clerk and Legal Counsel to the Court
State ofNew York Court of Appeals
20 Eagle Street
Albany, New York 12207
Re: Mashreqbank PSC v. Ahmed Hamad AI Gosaibi & Bros. Co.,
No. APL-2013-00007
Dear Mr. Klein:
Pursuant to Rule 500.11(c)(2), third-party plaintiff Ahmed Hamad AI
Gosaibi & Bros. Co. ("AHAB") respectfully submits this letter in opposition to the
appeal by third-party defendant Maan Abdul Wahed AI Sanea ("AI Sanea") from
the decision of the Appellate Division reversing Supreme Court's dismissal of this
action on grounds offorum non conveniens. 1
AI Sanea argued from the outset in favor of a forum dismissal of AHAB' s
third-party complaint, and only that complaint. He was able to make his forum
arguments, however, only by grossly mischaracterizing the nature of the action
against him. Both Mashreq and AI Sanea now double down by mischaracterizing
the basis for the Appellate Division's rejection of Al Sanea's forum arguments. An
appreciation of these mischaracterizations is critical to this appeal.
1 As defendant-counterclaimant, AHAB responds by separate letter to the letter submitted by
plaintiff-counterclaim defendant Mashreqbank PSC ("Mashreq"), which voluntarily elected to
file this action against AHAB in New York. Before Supreme Court, Mashreq actively defended
its choice of a New York forum. ARAB's separate letter addresses Mashreq' s abandonment of
its former position in order to argue the exact opposite.
To avoid duplication, this letter addresses the contentions of both Mashreq and AI Sanea on the
merits of a forum non conveniens dismissal. In its response to Mashreq, AHAB addresses the
argument that the Appellate Division improperly refused to uphold Supreme Court's sua sponte
dismissal of the first-party claims.
lewisbaach.com 1899 Pennsylvania Avenue, NW, Suite 600 I Washington, DC 20006 I t 202 833 8900 I f 202 466 5738
WASHINGTON NEW YORK LONDON BUENOS AIRES
.l,j
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April 26, 2013
Page2
While AHAB 's counterclaim and third-party complaint describe the
contours of the vast Ponzi scheme that AI Sanea orchestrated in misusing AHAB 's
good name and credit to borrow funds from lenders around the world, AHAB 's
claim here does not seek relief for the totality of AI Sanea's fraud. It seeks
recovery only in respect of the one aspect of that fraud put at issue by Mashreq's
initial claim: Al Sanea's scheme to raise funds through phony foreign exchange
("f/x") transactions conducted with Mashreq. Al Sanea and Mashreq engaged in
nearly $5 billion dollars of New York based transactions over several years with
the last $150 million stolen by Al Sanea in New York. The use ofNew York banks
was not a tangential or inconsequential component of these deals; it provided the
essential structure that allowed Al Sanea to obtain and roll over a series of ever-
increasing short-term loans by disguising them as mere currency swaps. It was not
a coincidence that Al Sanea's f/x fraud happened here. In order to succeed, it had
to happen in New York. This state is not just a proper forum for litigating this f/x
fraud; it has a uniquely compelling interest in doing so. Furthermore, it is well-
suited to litigate it due to its ability to obtain and hear the evidence. Lastly, it is the
only single forum that has jurisdiction over all the parties and the entire dispute. In
rejecting a forum non conveniens dismissal, the Appellate Division majority
correctly recognized the centrality of New York to the instant dispute.
There is no basis for this Court to hold that the Appellate Division abused its
discretion, which it must do in order to reverse its decision. Contrary to appellants'
assertions, the panel majority broke no new legal ground; it simply applied well-
recognized and long-established principles and precedents governing forum non
conveniens to the specific facts in the actual case before it, and it refused to be
distracted by AI Sanea's attempt to misportray this case as centered in "the Middle
East" with tentacles reaching around the world. Also contrary to appellants'
portentous warnings of "disastrous consequences" if this decision is allowed to
stand, the majority's approach represents no departure from settled precedent, and
it does not threaten any onslaught of new cases in New York's courts.
WASHINGTON NEW YORK LONDON BUENOS AIRES
D
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April26, 2013
Page 3
BACKGROUND FACTS
AHAB is a Saudi business partnership whose partners are members of the Al
Gosaibi family. For over fifty years, AHAB has been engaged in a range of
successful business ventures in Saudi Arabia, including oil field servicing, hotels,
food service, soft drink bottling, and shipping. In 1981, Maan AI Sanea married
into the family and became head of a division of AHAB known as the Money
Exchange, which provided remittance and foreign exchange services to foreign
workers in Saudi Arabia. From this position of trust, he fraudulently and
systematically usurped ARAB's credit in order to finance his own separate
business empire.
AI Sanea's scheme to bilk AHAB was complex and multifaceted, but was
based on a simple principle. He used the Money Exchange to enter into thousands
of unauthorized financial transactions, all purportedly in AHAB's name and all
based on its credit. He used new money to pay off old debts, all the while
siphoning off as much as possible to accounts that he directly or indirectly
controlled. When his scheme finally unraveled, it left AHAB exposed to nearly
$10 billion in claims from banks and other creditors worldwide.
AHAB' s third-party complaint and counterclaim do not seek relief for the
entirety of Al Sanea's scheme. There is litigation around the world on different
aspects of it. The claims here concern only one aspect of the overall scheme: Al
Sanea's use of bogus f/x transactions with Mashreq, executed through banks in
New York. For four years, Al Sanea and Mashreq engaged in hundreds of these
transactions, each of which involved the purchase of U.S. dollars from Mashreq in
New York, with payment made into a New York bank account held in AHAB's
name (but controlled by Al Sanea), balanced by a payment in Saudi riyals made, at
a later date, to a Mashreq account in Saudi Arabia. These deals with Mashreq were
not true foreign exchange transactions. Instead they were high-cost short-term
loans, made possible by a gap of up to twelve days between what was effectively a
U.S. dollar loan and a Saudi riyal repayment. The huge volume of transactions -
WASHINGTON NEW YORK LONDON BUENOS AIRES
D
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April 26, 2013
Page4
totaling more than $5 billion - had no genuine currency exchange purpose for
AHAB' s comparatively meager remittance business.
In the last of these f/x transactions, Mashreq paid $150 million into an
account at Bank of America ("BOA") in New York. Knowing that the scheme was
finally crumbling, Al Sanea stole the funds in the BOA account and diverted them
to an account in the name of Awal Bank BSC ("Awal") held at HSBC's New York
branch. A wal is a Bahraini bank wholly owned by Al Sanea and completely under
his control. This bank-to-bank transfer in New York was intended to and did put
those funds beyond AHAB' s access. As the First Department correctly concluded,
all of the f/x transactions were executed in New York, and Al Sanea's theft of the
funds that are the specific subject of the instant action took place in New York.
In Supreme Court, Al Sanea moved to dismiss AHAB' s third-party claim
against him on grounds of forum non conveniens, portraying AHAB 's claim as one
that turned on his internal dealings with the AHAB board and partners in Saudi
Arabia. Supreme Court agreed, adopting without analysis AI Sanea's false thesis
that the pivotal question for forum purposes was "whether or not Mr. AI Sanea was
authorized to do what he did" (R. 24) and rejecting AHAB's well-pleaded
allegations that the core dispute at issue in this action concerns: (i) the misuse of
New York banks to structure and execute bogus f/x deals to disguise extraordinary,
high-interest, short-term lending, and (ii) the theft by AI Sanea of $150 million in
f/x proceeds from one of those New York bank accounts.
The Appellate Division reversed, correctly focusing on the central New
York nexus that the f/x deals represent and the compelling interest New York has
in policing misuse of its native banking system. Examining each of the factors
recognized by this Court in Islamic Republic of Iran v. Pahlavi, 62 NY2d 474
(1984), and rejecting AI Sanea's attempt to reformulate AHAB's claims into ones
that he had a better chance of contesting, the Appellate Division ruled that this
action should remain in its New York forum. Its decision is not merely a proper
exercise of discretion; it is demonstrably correct, and it should be affirmed.
WASHINGTON NEW YORK LONDON BUENOS AIRES
.(,)
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April 26, 2013
Page 5
ARGUMENT
AHAB has fully briefed the issues raised on this appeal in its pleadings and
briefs in Supreme Court, in its briefs before the Appellate Division on initial
hearing, and in its brief in opposition to reargument before the Appellate Division,
and it relies upon and will not repeat those arguments in any detail in this Rule
500.11 submission. There are several blatant mischaracterizations by Al Sanea and
Mashreq, however, of both the evidentiary record and the Appellate Division's
decision itself that cannot go unanswered. We respond briefly to each of them in
tum.
I. The Appellate Division Decision Does Not Constitute An Abuse of Its
Discretion.
As this Court held in Pahlavi, "[t]he application of the doctrine of forum non
conveniens is a matter of discretion to be exercised by the trial court and the
Appellate Division." 62 N.Y.2d at 478. That discretion is exercised through the
application and weighing of a number of factors identified by this Court. So long
as a lower court "takes these various factors into account in making its decision,
there has been no abuse of discretion reviewable by this court." Jd. at 479. As
shown below, Supreme Court failed to weigh each of the Pahlavi factors in
reaching its decision to dismiss the entire case. The Appellate Division did so, and
therefore its decision cannot constitute a reversible abuse of discretion.
II. The Appellate Division Properly Recognized That the Forum Non
Conveniens Factors Must Be Assessed in Light of the Nature of the
Dispute Actually Alleged in the Instant Action.
This action concerns the misuse of New York banks to conduct fraudulent
f/x transactions, ultimately leading to Al Sanea's theft of $150 million in funds
from an AHAB bank account in New York. In order to discourage focus on the
New York nexus of the f/x fraud, Al Sanea and Mashreq mischaracterize the
dispute as turning on issues of Al Sanea's general authority to act for AHAB and
WASHINGTON NEW YORK LONDON BUENOS AIRES
D
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April26, 2013
Page 6
on dealings between Al Sanea and the AHAB partners concerning his overall
Ponzi scheme, which took place in numerous countries, including Saudi Arabia
and other countries in the Middle East.
The Appellate Division recognized that under Ehrlich-Bober & Co. v. Univ.
of Houston, 49 NY2d 574, 579 (1980), Supreme Court was obliged to accept a
claimant's well-pleaded factual allegations as true on any preliminary motion to
dismiss. Appellants criticize the Appellate Division's reliance on Ehrlich-Bober
because it arose in the context of a motion to dismiss on comity grounds and for
lack of personal jurisdiction. But in Ehrlich-Bober itself this Court instructed that,
although issues like comity and long-arm jurisdiction "are analytically distinct,
there is no reason in law or logic why they may not overlap, or even coincide." !d.
at 582. The same is true of the issue offorum non conveniens, as the court held in
Ancile Inv. Co. v. Archer Daniels Midland Co., No. 08 Civ 9492 (PAC), 2009 WL
3049604, at *1 n.1 (SDNY Sept. 23, 2009), which ruled that a claimant's
allegations must be accepted as true on a forum non conveniens motion. To be
sure, the parties are entitled to adduce evidence on such factors as the location of
witnesses and documents or other matters that may not be fully addressed in the
complaint. But this does not permit the movant to ignore the claim actually alleged
and argue that some other claim should be litigated elsewhere. Here, as the
Appellate Division concluded, AHAB 's claim concerns only the fraudulent f/x
transactions with Mashreq that Al Sanea conducted through New York banks,
concluding withAl Sanea's theft of funds in New York from one of those banks.
II. The New York Nexus was Integral to the Concept, Structure, and
Implementation of this Bogus Foreign Exchange Scheme.
A major factor that guided the Appellate Division's decision was the
compelling and predominant public interest New York courts have in protecting
the integrity of this state's preeminent banking system, and the central nexus
between ARAB's claims and that New York interest. AI Sanea continues to press
the argument that New York has no genuine interest in this dispute because the
WASHINGTON NEW YORK LONDON BUENOS AIRES
J;;j
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April 26, 2013
Page 7
sole contact with this state was what he characterizes as the ministerial use of New
York bank accounts to process the f/x transactions. This argument could not be
more wrong. These New York bank accounts were misused by Al Sanea, with
Mashreq's complicity, both to structure and conduct these fraudulent f/x
transactions and to disguise the fact that they actually constituted highly unusual
short-term loans, which, had they been structured as loans, would have exposed
their fraudulent purpose. These loans, which were ostensibly the purchase in New
York of billions of U.S. dollars, could only be accomplished by disguising them as
mere currency trades that would pass undetected through the misuse of New York
banks. The New York nexus was anything but incidental to the scam; it was
indispensable to it.
To appreciate the centrality of the New York banks to this scheme, it is
essential to understand how these f/x deals were designed by Al Sanea and
Mashreq to work. Indeed, a proper understanding of how these f/x deals worked
and how they served AI Sanea's Ponzi scheme purposes is critical to this appeal.
• Ordinarily, a currency exchange involves almost no commercial risk.
Since the exchange is simultaneous, there is no credit risk that one party
might default on payment and no currency risk due to fluctuations in the
rate of exchange.
• Here, however, Al Sanea and Mashreq engaged in "split value" f/x deals,
whereby the two currencies are not exchanged simultaneously. Such
deals accommodate the different weekends observed in Muslim and non-
Muslim countries, so that a payment made during a work day in one
country can be matched on the other country's next work day, resulting
in a delay of only two or three days. For example, a payment from a
Western country made on a Friday is typically matched by a payment
from a Middle Eastern country on the following Sunday.
WASHINGTON NEW YORK LONDON BUENOS AIRES
J;)
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April26, 2013
Page 8
• Where an exchange is U.S. dollars for Saudi riyals, this brief delay
entails no currency risk because the riyal is pegged to the U.S. dollar,
precluding any fluctuation between the two currencies during the interim.
• Because they appeared to be low-risk, Al Sanea could engage in these
split value f/x transactions without attracting the attention that a bank like
Mashreq would be obliged by its own risk managers to give to true
lending. This lack of scrutiny was critical to AI Sanea's scheme, since he
knew that this volume of short-term lending could not be justified under
banking standards as necessary for AHAB 's business.
• Critically, Al Sanea could accomplish this massive, scrutiny-free
borrowing through split-value f/x deals only by using New York banks,
because f/x deals are the purchase or exchange of currencies as
commodities. The structure of the deals was the purchase of U.S. dollars,
which can only be done in this volume using banks in New York.
• AI Sanea's scheme was to introduce much longer split-value dates than
usual for f/x transactions, even up to twelve days, and to offer Mashreq
an exchange rate not pegged to the fixed riyal-dollar rate, but higher than
would have been usual even for commercial short-term loans.
• This allowed Al Sanea to engage in ever-expanding, short-term
borrowing, conducted without attracting the scrutiny given to such
extensive borrowing. And it allowed Mashreq to extract profits far in
excess of what it could command for genuine split-value f/x transactions.
All of this would have been entirely opaque to relevant regulators.
In short, misuse of the split-value, dollar-for-riyal f/x structure, which could
only be accomplished through New York banks, both to carry out and disguise this
scheme, was critical to its success. Contrary to the contentions of AI Sanea and
Mashreq- and to the dissenters' misunderstanding- New York's banks were not a
WASHINGTON NEW YORK LONDON BUENOS AIRES
JJ
FSC
Lewis I Baach puc
The Honorable Andrew W. Klein
April26, 2013
Page9
mere conduit to pass through funds, incidental or peripheral to the fraud; they were
the critical component of an elaborate fraud that could not be carried out through
any other banking system.
Apart from the essential role of New York banks in making this f/x scheme
possible, the New York nexus is also palpable as to ARAB's claim that AI Sanea
converted $150 million in funds advanced by Mashreq in the final fix transactions.
This conversion occurred when Mashreq paid funds into a New York bank account
held in AHAB' s name and AI Sane a then directed the transfer of the funds to
another New York account to the credit of Awal Bank, the Bahraini bank which AI
Sanea owned and controlled. Seeking to reframe the allegations to ones he prefers,
Al Sanea contends that ARAB was deprived of these funds only by virtue of Awal
Bank's refusal to allow AHAB to withdraw them in Bahrain. But AHAB alleges a
theft of funds in New York from accounts at New York banks, not a theft in
Bahrain, and this is quintessentially conduct that justifies New York in serving as
the forum for an action on such allegations. Once AI Sanea converted these funds
in New York, they were gone from any possible AHAB control.
III. Appellants Mischaracterize the Appellate Division's Decision as
Adopting a Bright-Line Rule Precluding a Forum Dismissal in Any
Action that Touches on the Use of New York Banks.
Al Sanea and Mashreq take mischaracterization to a new level when they
charge that the Appellate Division's decision turned on its adoption of a novel
"bright-line rule" "that will compel," (AI Sanea Ltr. At 11), New York courts to
hear every case "that in any way touched New York's banking system." (Id. at 5).
They breathlessly predict "disastrous consequences" from adoption of such a rule,
venturing that it "surely would dissuade foreign business interests from continuing
to look to New York as a global financial center." (I d. at 11 ). The Appellate
Division has done no such thing.
WASHINGTON NEW YORK LONDON BUENOS AIRES
J;j
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April 26, 20 13
Page 10
Tellingly, Al Sanea and Mashreq are unable to quote any statement in the
Appellate Division's decision that adopts a bright-line rule, much less one so
sweeping, because there are none. The decision simply applies established
precedent identifying a compelling New York interest in cases that allege
fraudulent transactions that depend at their very core on misuse of bank accounts in
this state for their structure and implementation, including use of such accounts to
make transfers that unlawfully convert the transferred funds. It did not in any way
sanction use of New York courts to adjudicate every dispute with any tangential
connection to a New York bank. Instead the panel majority concluded that, here,
the connection was anything but tangential; it was central to the bogus foreign
currency, split-value trading scheme that Al Sanea devised and was the very
vehicle by which Al Sanea stole more than $150 million from AHAB. While the
dissenting justices disagreed with the disposition by the panel majority, they never
accused the majority, as appellants do here, of adopting a radical new rule of law
that would open the forum floodgates to the courts of this state.
Nor did AHAB ever advocate the adoption of such a radical new bright-line
rule. Indeed, at every juncture in these proceedings, AHAB disclaimed any
argument in favor of a rule that would preclude a forum dismissal whenever the
dispute had even a tangential connection to New York banks. AHAB expressly
acknowledged the continuing force of Amigo Foods Corp. v. Marine Midland
Banc-NY., 39 NY2d 391, 396 (1976), where this Court held in the personal
jurisdiction setting that "a correspondent bank relationship, without any other
indicia or evidence to explain its essence, may not form the basis for long-arm
jurisdiction." As AHAB concedes, that sort of relationship also will not support
New York as the more appropriate forum. Instead, AHAB has consistently
contended, based on the longstanding jurisprudence of this state, that New York's
compelling interest in disputes over transactions like the f/x deals here represents a
substantial factor favoring keeping this dispute in a New York forum.
WASHINGTON NEW YORK LONDON BUENOS AIRES
.J,j,
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April 26, 2013
Page 11
Al Sanea spills much ink in arguing that the Appellate Division improperly
relied on cases establishing New York's compelling interest in protecting the
integrity of its banking system because those cases did not arise in the forum non
conveniens setting. Yet the Appellate Division understood that J Zeevi & Sons,
Ltd. v. Grindlays Bank (Uganda) Ltd., 37 NY2d 220 (1975), and Ehrlich-Bober,
like Amigo Foods, express New York's interest in protecting this state's
correspondent bank accounts from misuse in settings other than forum non
conveniens. In relying on these cases, the court properly focused on the strength of
New York's interest in safeguarding its banking system and on the degree to which
the conduct alleged impaired that interest. The Appellate Division correctly
concluded that this overarching public interest consideration is just as important to
the analysis of forum non conveniens as it is to personal jurisdiction, comity, or
choice of law. Indeed, it should apply even more strongly in a case like this one
where jurisdiction is clear, and there can be no reasonable basis to abdicate
protection of the New York financial system purely as a matter of discretion.
Al Sanea also argues that J Zeevi is inapposite because the letter of credit at
issue there was dishonored in New York, whereas here "the nefarious aspect" of Al
Sanea's f/x transactions was "not hinged to the fact that one leg of those
transactions called for a payment in dollars" in New York. (Al Sanea Ltr. at 13).
But that is precisely what it was hinged to. Only by disguising the expanding short-
term loans as ordinary split-value f/x trades -transactions that are unremarkable
when one leg of the transaction is conducted in dollars through a New York bank-
was Al Sanea able to pull off this fraudulent loan scheme. It worked solely because
one leg of these trades required payment of dollars in New York. And Al Sanea
then stole that money- surely "a nefarious aspect" -in New York.
Al Sanea takes aim as well at the Appellate Division's reliance on Ehrlich-
Bober, where this Court dealt with issues of comity, personal jurisdiction, and
forum non conveniens. While the Court there addressed New York's compelling
interest in protecting the integrity of its banking system in the comity context, it
WASHINGTON NCW YORI< LONDON BUENOS AIRES
.J,;j
FSC
Lewis I Baach puc
The Honorable Andrew W. Klein
April 26, 20 13
Page 12
did not suggest that this interest is of no moment in the forum non conveniens or
personal jurisdiction settings. Indeed, it was at pains to point out that such an
interest may logically be of importance in multiple settings. 49 NY2d at 582.
In Banco Nacional Ultramarino, SA. v. Chan, 169 Mise 2d 182, 185 (Sup
Ct NY Cnty 1996), aff'd 240 AD2d 253 (1st Dept 1997), Supreme Court applied
precisely this factor when it refused to dismiss, on both personal jurisdiction and
forum non conveniens grounds, an action involving money laundering through
financial transactions that, like this one, involve the misuse of a New York
correspondent bank account. The scheme in Banco Nacional "span[ned] two
oceans and four continents," 169 Mise 2d at 184, but Supreme Court recognized
that, wherever the scheme had been planned, it ultimately and necessarily was
implemented through misuse of a New York bank account to convert funds stolen
in one country in order to transfer them to another. The money laundering scheme
in Banco Nacional had numerous spokes, but the hub of the illegal activity was in
New York, just as the hub of the phony f/x trades was here and could not have
been elsewhere. And in focusing on the f/x trades, Al Sanea ignores the concluding
event of the scheme - the theft of the final $150 million, accomplished by transfer
of the funds from an AHAB account in New York to an AI Sanea-controlled
account in New York. Thus, not only was the fraudulent f/x scheme integrally
connected to New York but the theft of proceeds happened in New York.
Finally, this Court's decision in Licci v. Lebanese Canadian Bank, SAL, 20
NY3d 327 (2012), reiterates this state's compelling public interest in assuring the
integrity and transparency of the New York financial system. 2 In Licci, this Court
focused on the fact the defendant did not just maintain a correspondent account in
New York but used it '"dozens' of times" in wiring funds that were intended to
support terrorist attacks against Israel. 20 NY3d at 340. Rejecting the defendant's
2 In its letter-brief, Mashreq is understandably defensive about Licci because its pertinence to the
instant case is inescapable.
WASHINGTON NEW YORK LONDON BUENOS AIRES
J;;j
FSC
Lewis I Baach puc
The Honorable Andrew W. Klein
April 26, 2013
Page 13
contention that the mere use of a New York correspondent bank account is an
unimportant and incidental contact with this state, this unanimous Court held:
[C]omplaints alleging a foreign bank's repeated use of a
correspondent account in New York on behalf of a client- in effect, a
'course of dealing' ... show purposeful availment of New York's
dependable and transparent banking system, the dollar as a stable and
fungible currency, and the predictable jurisdictional and commercial
law ofNew York and the United States.
Id. at 339. The Court further ruled that this "repeated use of the correspondent
account shows not only transaction of business, but an articulable nexus or
substantial relationship between the transaction" and the plaintiffs' claims. !d. at
340. The same considerations that informed the jurisdictional analysis in Licci
underlie the forum analysis here. In structuring his bogus fix deals, AI Sanea
counted on this very transparency and commercial predictability offered by the
New York banking system to pull off his fraud.
Licci is a personal jurisdiction case; yet the strength of New York's interest
in the impact of a massive fraudulent transfer scheme on the dependability and
transparency of the banking system informs both the quality of a defendant's
contacts for jurisdictional purposes and the degree of state's interest in the dispute
as weighed against any burden the litigation would place on its courts for purposes
of a forum analysis. Efforts to confine this interest to the personal jurisdiction
context were repudiated in Ehrlich-Bober, 49 NY2d at 582, as cited with approval
in Licci. Id. at 335-337.
In sum, the Appellate Division did not transform J. Zeevi and Ehrlich-Bober
into cases approving a novel, technical rule of forum analysis. It relied on these
authorities' articulation ofNew York's compelling interest in adjudicating disputes
that involve at their core the fundamental misuse of this state's banking system, an
interest that informs forum analysis just as much as it does jurisdictional, comity,
WASHINGTON NEW YORK LONDON BUENOS AIRES
J;;j
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April26, 2013
Page 14
and choice of law analyses. And it focused on that compelling interest, not to
promulgate a bright-line rule, but simply to apply longstanding New York
jurisprudence in assessing one of the key factors in forum non conveniens analysis:
the public interest of the forum in adjudicating the dispute.
IV. The Appellate Division Properly Applied the Pahlavi Factors, Including
Factors Supreme Court Ignored.
AI Sanea undercuts his own contention that the Appellate Division adopted a
bright-line rule, making New York bank involvement the sole basis for refusal to
dismiss on forum grounds, when he criticizes how the Appellate Division dealt
with other forum factors. Presumably, if the Appellate Division deemed a New
York bank connection standing alone to be sufficient to retain forum, it would have
had no occasion even to consider other factors.
Ignoring the contradiction implicit in his arguments, AI Sanea criticizes the
Appellate Division for over-focusing on the availability of an alternative forum and
for addressing such factors as access to sources of proof. AI Sanea insists that the
former is determined solely by whether the defendant is subject to suit and the
subject matter in dispute can be litigated in the alternative jurisdiction. He argues
that the latter is a factor recognized by the federal courts but that it was not adopted
"wholesale" in Pahlavi. He stresses Pahlavi' s "flexible approach" to the issue of
forum, but, incongruously, he urges the narrowest possible focus for any forum
analysis here, effectively eliminating the significance of assessing an alternative
forum and ignoring whether it would permit genuine access to proof.
The dissenters in the Appellate Division asserted that Supreme Court
"correctly considered and balanced the appropriate [forum] factors." (Decision at
28). To the contrary, Supreme Court followed AI Sanea's lead by conducting the
narrowest possible analysis, assessing the case on AI Sanea's insupportable terms
and wholly failing to address numerous factors that this Court has ruled are
appropriate to consider. The majority below properly examined the issues more
WASHINGTON NEW YORK LONDON BUENOS AIRES
jj
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April 26, 20 13
Page 15
broadly and in context of the particular dispute that this case presents. Because it
did so, it did not abuse its discretion, and its decision should be affirmed.
We comment on several of these factors. 3
1. New York's Connection and Compelling Interest in this Dispute
In Pahlavi, the first factor this Court identified was "the burden on the New
York courts" that the litigation may impose, stressing that these courts have no
obligation to "entertain[] litigation which does not have any connection with this
State." Pahlavi, 62 NY2d at 478-79. As articulated, the test is not whether a
particular dispute will impose any burden on New York's court, since all cases
impose some burden, but whether that burden is justified when weighed against
this state's connection to the particular dispute. Supreme Court simply ignored an
essential part of this inquiry, when it gave no weight to this state's connection to
the instant dispute through its compelling interest in the integrity of its banking
system. In contrast, the Appellate Division properly concluded that this interest
weighs heavily in favor of retaining jurisdiction here.
2. The Availability of an Adequate Alternative Forum
Al Sanea and Mashreq both stress that the Pahlavi Court ruled that the
availability of an adequate alternative forum is not a prerequisite for dismissal on
forum grounds, and they insist that adequacy of a foreign forum turns solely on
whether the defendant can be sued in that forum and the particular dispute can be
litigated there. The first contention is irrelevant; the second is wrong.
3 There is no real dispute as to two factors. In its complaint, Mashreq describes itself as having "a
principal place of business ... at 50 Broadway, New York, New York." AHAB and Al Sanea are
non-residents. Any hardship that litigation in New York may pose for Al Sanea is not likely to be
excessive as he is (largely at AHAB' s expense) one of the richest men in the world. Mashreq,
which chose this forum and avers that it has a "principal place of business" here, can hardly
complain that litigating here would be a hardship.
WASHINGTON NEW YORK LONDON BUENOS AIRES
.J,j
FSC
Lewis I Baach puc
The Honorable Andrew W. Klein
April 26, 2013
Page 16
AHAB did not argue nor did the Appellate Division rule that identification
of an available alternative forum is an absolute prerequisite. The Pahlavi Court
was clear, however, that "[w]ithout doubt, the availability of another suitable
forum is a most important factor to be considered in ruling on a motion to
dismiss." Id. at 481 (emphasis added). The Appellate Division properly concluded
that Supreme Court's analysis of this factor was superficial and woefully
incomplete.
As Pahlavi recognizes, there is much more to this analysis than simply
whether the defendant is amenable to suit and the foreign court permits litigation of
disputes of the type in issue. Here, the fact that this dispute likely cannot be
litigated with all parties in a single forum other than New York was properly
considered by the Appellate Division as an important factor, although not
dispositive. As Pahlavi put it, the question is not just whether a foreign forum
would entertain the dispute but whether it "would be better adjudicated" in that
forum. I d. at 4 79. In making this nuanced determination, this Court frequently
invokes the various private and public interest factors recited in the United States
Supreme Court's decisions in Piper Aircraft Co. v. Reyno, 454 US 235 (1981), and
Gulf Oil Corp. v. Gilbert, 330 US 501, 508 (1947). ld. at 600-602; 605.
Al Sanea erects another straw man when he argues that there 1s no
requirement that the factors recognized in Piper and Gulf Oil "must be applied
slavishly by every New York court." (Al Sanea Ltr. at 25). The Appellate Division
adopted no rule of slavish application. It concluded, however, that Supreme Court
had simply ignored these "federal factors." In the circumstances here, the most
important of them is "access to sources of proof," id., and this factor turns on the
ability to obtain the testimony of witnesses so the dispute can be properly
adjudicated. By an uncontroverted affidavit of an expert in Saudi law, AHAB
showed that virtually all of the witnesses with pertinent testimony on the issues in
this dispute (i) could not be compelled to appear in Saudi Arabia, (ii) could not be
required to appear by deposition for use in Saudi proceedings, or (iii) would be
WASHINGTON NEW YORK LONDON BUENOS AIRES
D
FSC
Lewis I Baach puc
The Honorable Andrew W. Klein
April 26, 2013
Page 17
prohibited from testifying because of their personal interests in the dispute. (R.
950-51).4 Astonishingly, Supreme Court wholly ignored this affidavit submission,
notwithstanding that it established that this case would be difficult to adjudicate in
Saudi Arabia and that Supreme Court would have easier and more complete access
to the necessary testimony.
3. Other Pahlavi Factors Militating Against Dismissal
Supreme Court paid lip-service to other Pahlavi factors but did not seriously
analyze them. As required for any genuine analysis of these issues, AHAB
presented affidavit evidence concerning the location of key witnesses, the
languages they speak, the location and availability of key documents, the
languages in which they are written, and potential issues of foreign law. This
evidence is described in detail in AHAB' s briefs in the Appellate Division and will
not be repeated here. But several points should be stressed.
a. Location and Language of Witnesses. AHAB' s evidence showed
that the two most important non-party witnesses to the facts concerning the f/x
fraud- AI Sanea's principal henchmen at the Money Exchange and his Bahrain
banks- currently live in England and Los Angeles respectively. Of the other non-
party witnesses who ARAB identified as having knowledge of AI Sanea's fix
scheme, three live in England, two in India, and one each in Saudi Arabia, Bahrain,
Canada, and Jordan. (R. 939-40). The key witnesses with knowledge of AI Sanea's
f/x scam, including AI Sanea himself, all speak English. For many it is their first
language, and most do not speak Arabic. (R. 938). Despite being the movant, AI
4 Mashreq and its non-Saudi employees could not be compelled to come to Saudi Arabia for trial,
nor could the Saudi courts compel the testimony of BOA or HSBC employees or of the former
AHAB employees who have departed Saudi Arabia and returned to their home countries. In
contrast, New York permits such testimony to be taken by way of de bene esse depositions, and
the use of video links has become commonplace in this country's courts. Moreover, because their
bias is presumed as a matter of Saudi law, the parties themselves and their employees and agents
are not deemed competent to testify unless their statements are confirmed by independent
evidence. (R. 950-52).
WASHINGTON NEW YORK LONDON BUENOS AIRES
-0
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April 26, 2013
Page 18
Sanea submitted no list of witnesses with his motion and came up with one only in
response to AHAB's witness list. Al Sanea's belated, makeweight list was replete
with current and former AI Sanea employees in his various business ventures, but
he made no effort to show what knowledge, if any, most of these purported
witnesses have concerning the f/x fraud or show that they were available or even
competent to testify. The parties themselves remain under a travel ban, but, as
shown above, while they are deemed incompetent to testify in their home country,
they would be able to testify by deposition, and, in any event, if the travel ban were
still in place at the time of trial, they could testify by video link.
b. Location and Language of Documents. AI Sanea asserted that the
documents pertinent to AHAB' s claim are in Saudi Arabia and many are in Arabic,
but he proffered no list of documents in support of his assertion. In sharp contrast,
AHAB provided an affidavit listing the key documents actually pertinent to this
dispute and identifying the language in which they are written. The originals of
these documents are located in New York, Saudi Arabia, and the UAE, and at least
verified copies can be made available here. Moreover, AHAB's affidavit evidence
shows that virtually all of the relevant documents are written in English, the
language of international finance. (R. 668, 738-43, 941). These documents would
have to be translated into Arabic in order to litigate the claims in Saudi Arabia or
elsewhere in the Middle East.
Unable to contest these facts concerning witnesses and documents, AI Sanea
and Mashreq seek to discredit AHAB' s evidentiary submissions by referring to
AHAB 's concessions in unrelated proceedings in England on claims by certain
English banks. In those proceedings, AHAB produced certain corporate structural
documents that were written in Arabic and required translation and submitted that
various witnesses in those proceedings would testify in Arabic. Mashreq asserts,
without any evidentiary basis, that in the English proceedings the banks suing
WASHINGTON NEW YORK LONDON BUENOS AIRES
D
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April 26, 2013
Page 19
ARAB are "similarly situated to Mashreq." (Mashreq. Ltr. at 8).5 In fact, the two
proceedings are wholly dissimilar. The English action has nothing to do with bogus
f/x deals involving Mashreq or structured through New York banks; it concerns
loans procured by Al Sanea, with different parties, and in different circumstances.
Supreme Court did not base its decision on what was happening in the English
proceedings, and the Appellate Division did not reverse on this ground. Mashreq's
attempt here to seek support from these unrelated English proceedings is an
irrelevant sideshow.
c. Foreign Law. Both Al Sanea and Mashreq take mm at the
Appellate Division's conclusion that New York law will govern this dispute. That
conclusion is unassailable.6 Crediting ARAB's well-pleaded allegations that the
misuse ofNew York's banking system to structure and carry out the f/x fraud and
that ARAB suffered injury from this fraud and the subsequent conversion of funds
stolen from its New York bank account, and applying a traditional "interest
analysis," the Appellate Division's conclusion that New York law will apply to
these torts is patently correct. Appellants challenge this ruling only by improperly
contesting AHAB 's allegations concerning the centrality of the New York banking
system to this fraud. Tellingly, the Appellate Division dissenters did not take issue
with the majority's conclusion that New York law would apply to this dispute.
Appellants' arguments on choice of law also founder on the absence of any
showing that there is a meaningful conflict between the laws ofNew York and the
laws of Saudi Arabia, the UAE, or any other candidate forum. They muse that
issues could arise concerning AI Sanea's agency and authority to act for ARAB
5 Mashreq makes no attempt to identify specific Arabic documents that it would be central to this
case. And it ignores the fact that, in light of the English proceedings, the documents to which it
points this Court have already been translated into English.
6 Indeed, when Mashreq filed its Complaint, it told the court that it was "entitled to the
protections of the laws of New York State." Affirmation of Adam Finkel, Esq., in Support of
Mashreqbank's Complaint,~ 14 (Docket No. 1).
WASHINGTON NEW YORK LONDON BUENOS AIRES
/;,)
FSC
Lewis I Baach pile
The Honorable Andrew W. Klein
April26, 2013
Page 20
that would be governed by Saudi law. They raise the possibility that construction
of the Mashreq loan documents might be required and assert that they would be
governed by UAE law. They even suggest that AHAB conceded that there may be
such issues. (Mashreq Ltr. at 21; AI Sanea Ltr. at 27). These arguments are
disingenuous. What AHAB actually said on these points was that they were
manufactured contentions. It is axiomatic that no choice of law issue arises unless
an actual conflict of law is identified. AI Sanea identified no Saudi rules of agency
law that would authorize an agent to defraud his principal and steal its funds.
Similarly, Mashreq made no attempt to identify peculiar UAE rules of contract
construction that would come into play in interpreting the loan documents under
which the f/x deals were purportedly conducted. (See AHAB Brief at 43; AHAB
Reply Brief at 16). In supporting his motion, it was incumbent upon Al Sanea to
show an actual conflict with New York law and that the New York court would
have to apply foreign law. He did not even attempt such a showing.
In short, there are no issues of foreign law that would provide support for
dismissal on grounds offorum non conveniens.
CONCLUSION
This appeal presents no novel issues of law. The decision below represents a
proper and straightforward application of longstanding forum non conveniens
jurisprudence to the circumstances of this case. Only by mischaracterizing the
central focus of this action can appellants identify false issues for review. Only by
mischaracterizing the Appellate Division's decision as promulgating a single
factor, bright-line rule of law for determining forum selection can these appellants
construct false criticisms of that decision.
WASHINGTON NEW YORK LONDON BUENOS AIRES
I)
FSC
Lewis I Baach puc
The Honorable Andrew W. Klein
April 26, 2013
Page 21
Appellant's contentions do not withstand analysis, and their appeal should
be denied.
cc: All counsel of record
Respectfully submitte ,
~
Bruce R. Grace
WASHINGTON NEW YORK LONDON BUENOS AIRES
.J,;j
FSC
NEW YORK STATE COURT OF APPEALS
--------------------------------X
MASHREQBANK PSC,
Plaintiff-Counterclaim-Defendant,
v.
AHMED HAMAD AL GOSAIBI &
BROTHERS COMPANY,
Defendant-Counterclaimant.
--- - --- ----- - - ----- ---- -------- - X
AHMED HAMAD AL GOSAIBI &
BROTHERS COMPANY,
Third-Party Plaintiff,
v.
MAAN ABDUL WAHEED AL SANEA,
Third-Party Defendant.
- - -- - ------ --- -- - ---- ---- ----- -- X
No. APL-2013-00007
AFFIRMATION OF
SERVICE
JOSEPH L. RUBY, an attorney duly admitted to practice in the courts of the State
of New York, hereby affirms, under penalty of perjury pursuant to CPLR 2106,
that the following statements are true and correct:
1. I am a partner in the law firm of Lewis Baach PLLC, 1899
Pennsylvania Ave, N.W., Suite 600, Washington, D.C. 20006, attorneys for
Ahmed Hamad Al Gosaibi & Brothers Company ("AHAB") in the above-
captioned action. I am over eighteen years of age, not a party to this action, and
reside in Silver Spring, Maryland.
2. On April 26, 2013, I served copies of third-party plaintiff I defendant-
counterclaimant AHAB 's letters in opposition to the appeal by third-party
defendant Maan Abdul Wahed Al Sanea and plaintiff-counterclaim-defendant
Mashreqbank PSC from the decision of the Appellate Division reversing Supreme
Court's dismissal of this action on grounds of forum non conveniens and
affirmation of service, served by Federal Express upon counsel identified below:
Robert F. Serio
GIBSON, DUNN & CRUTCHER LLP
200 Park A venue
New York, New York 10166
Attorneys for Maan Abdul Wahed Al Sanea
Carmine D. Boccuzzi
CLEARY GOTTLIEB STERN & HAMIL TON LLP
One Liberty Plaza
New York, New York 10006
Attorneys for Mashreqbank PSC
Dated: April 26, 2013
!T oseph L. Ruby
2