Second Circuit Denies Interlocutory Appeal of Discovery Sanctions Requiring Foreign Defendant to Violate Bank Secrecy Laws
Duval, J. Daniel, Suffolk Transnational Law Review
Linde v. Arab Bank, PLC, 706 F.3d 92 (2d Cir. 2013).
The Federal Rules of Civil Procedure assure all litigants that legal actions will be determined in a legitimate and uniform fashion. (1) During discovery, bank secrecy laws protect the private information of foreign banks and their clients, and United States courts frequently have considered what information is protectable in litigation involving American plaintiffs and foreign bank defendants. (2) In Linde v. Arab Bank, PLC,3 the United States Court of Appeals for the Second Circuit considered whether foreign bank secrecy laws should protect documents allegedly linking Arab Bank (Bank) to multiple terrorist organizations. (4) The Second Circuit held that Arab Bank's interlocutory appeal challenging an order for sanctions was not within its jurisdiction, and refused to vacate the district court's order. (5)
Early in 2005, thousands of victims and family members of victims who had been injured or killed in terrorist attacks in Israel and Palestinian Territories brought a class action suit against the Bank. (6) The plaintiffs alleged that the Bank unlawfully provided financial resources to foreign terrorist organizations to engage in various acts of terror and crimes against humanity in an attempt to rid the Middle East of any Israeli presence. (7) The plaintiffs' allegations rested on two theories. (8) The first was that the Bank administered a "death and dismemberment benefit plan," by distributing cash payments to terrorists and their families. (9) The plaintiffs alleged that the Bank provided cash incentives for suicide bombers who killed or injured plaintiffs and their relatives. (10) Furthermore, the plaintiffs claimed that families of terrorists could claim rewards from the Bank by obtaining official certification that the deceased terrorist was a martyr, which included an official martyr identification number. (11)
The plaintiffs' second theory was that the Bank provided various financial services to terrorist entities and individuals acting on behalf of Hamas and similar organizations. (12) Because the plaintiffs were comprised of U.S. citizens and foreign nationals, they asserted claims under two different U.S. laws. (13) Based on their two theories, the plaintiffs requested the production of certain documents regarding specified accounts kept at the Bank. (14) The Magistrate Judge assigned to the case issued specific production orders requiring the Bank to turn over banking information linked to suspected terrorists. (15) In response to the order, the Bank asserted that such information was protected from disclosure under numerous bank secrecy laws, and that permission was necessary from regulatory authorities in those countries in order to release the information. (16) In 2006, the Bank received permission from the proper authorities, and produced the documents requested by the plaintiffs. (17)
Problems arose when the district court granted plaintiffs' motion to compel previously requested documents allegedly linking the Saudi Committee to terrorist organizations, and which the Bank again claimed were protected by bank secrecy laws. (18) Relevant authorities denied the Bank's release request, and the Bank subsequently refused to produce the materials, prompting the plaintiffs to move for sanctions against the Bank. (19) The Magistrate Judge granted the motion, and provided jury instructions to the district court should the case go to trial. (20) The Bank appealed the order for sanctions to the Second Circuit, claiming that the jury instruction would inevitably result in a finding for the plaintiffs, and notwithstanding the Bank's right to appeal, result in irreparable financial consequences for the Bank by virtue of the verdict alone. (21) The Bank also claimed that the district court abused its discretion when it issued the sanctions, and requested a writ of mandamus to direct the district court to correct its erroneous order. …