Abu Nahl v. Abou Jaoude ( 2020 )

19-1467
Abu Nahl v. Abou Jaoude
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2019
Argued: April 28, 2020 Decided: July 30, 2020
Docket No. 19-1467
GHAZI ABU NAHL, ON BEHALF OF LEBANESE CANADIAN BANK, NEST INVESTMENTS
HOLDING LEBANON SAL, ON BEHALF OF LEBANESE CANADIAN BANK,
Plaintiffs-Appellees,
— v. —
GEORGES ZARD ABOU JAOUDE, MOHAMAD HAMDOUN, AHMAD SAFA,
Defendants-Appellants,
LEBANESE CANADIAN BANK,
Nominal-Defendant.*
B e f o r e:
WALKER, POOLER, and LYNCH, Circuit Judges.
*
The Clerk of the Court is respectfully directed to amend the caption as set forth
above.
Defendants-Appellants bring this interlocutory appeal from an order of the
United States District Court for the Southern District of New York (Schofield, J.),
granting Plaintiffs-Appellees’ (“Plaintiffs”) motion to amend their complaint. The
district court held that the prohibition against financing terrorism is a universal,
specific, and obligatory norm of international law, allowing Plaintiffs to proceed
with this suit brought under the Alien Tort Statute. Assuming arguendo that the
district court was correct in holding that the prohibition could in some
circumstances support a cause of action, we nevertheless conclude that Plaintiffs’
effort to amend their complaint is futile, because any such international norm
prohibiting terrorist financing cannot support a cause of action for the harm
allegedly suffered by Plaintiffs. The order of the district court is therefore
REVERSED and the case REMANDED.
Judge WALKER concurs, and files a concurring opinion.
CHRISTIAN J. PISTILLI (Anthony Herman, Dennis B. Auerbach,
Andrew E. Siegel, on the brief), Covington & Burling
LLP, Washington, DC, for Plaintiffs-Appellees.
MITCHELL R. BERGER, Squire Patton Boggs (US) LLP,
Washington, DC, for Defendants-Appellants.
_______
GERARD E. LYNCH, Circuit Judge:
The Alien Tort Statute (“ATS”) is a jurisdictional statute authorizing
foreign nationals to bring suit in federal court for torts committed in violation of
international law. See 28 U.S.C. § 1350. International law “does not stem from any
single, definitive, readily-identifiable” authority, but rather emerges from a
2
number of sources, including treaties and the widespread practices and legal
beliefs of states (i.e., customary international law). Flores v. S. Peru Copper Corp.,
343 F.3d 140, 154 (2d Cir. 2003). When the rules produced by these various
sources are specifically defined and widely accepted among nations, such rules
may be added to the collection of international law principles violations of which
are actionable under the ATS. In this appeal, the parties ask us to consider
whether the prohibition against financing terrorism has reached such a status in
international law, and thus confers a cause of action on the plaintiffs under the
circumstances alleged in the complaint.
Plaintiffs-Appellees are Ghazi Abu Nahl (“Abu Nahl”), a Jordanian
businessman, and Nest Investments Holding Lebanon SAL, a Lebanese
corporation principally owned by Abu Nahl (collectively “Plaintiffs”). Plaintiffs
bring this suit as shareholders on behalf of Lebanese Canadian Bank (“LCB” or
“the Bank”), in which Plaintiffs owned a 24 percent stake. Defendants-Appellants
held management positions at LCB. Georges Zard Abou Jaoude (“Abou Jaoude”)
was the chairman and general manager of the Bank, Mohamad Hamdoun
(“Hamdoun”) was the deputy general manager, and Ahmad Safa was the
3
assistant general manager (collectively “Defendants”). Abou Jaoude and
Hamdoun owned approximately 76 percent of LCB.
LCB, at one time the eighth-largest bank in Lebanon, was liquidated in
2011 after the United States designated it “a financial institution of primary
money laundering concern.” J. App’x 688 ¶95. Plaintiffs allege that Defendants
used LCB to facilitate a money-laundering scheme benefitting Hezbollah, the
Lebanese militant organization, which used the laundered funds to carry out
terror attacks on civilians. See, e.g., Designation of Foreign Terrorist
Organizations, 62 Fed. Reg. 52,650, 52,650 (Oct. 8, 1997) (designating Hezbollah a
terrorist organization). Plaintiffs bring this shareholder derivative suit against
Defendants to recover compensation for damages suffered by the Bank when
Defendants’ money laundering in support of terrorism came to light, including
the imposition of financial sanctions by the United States. Plaintiffs contend that
Defendants’ conduct violated an actionable norm of international law that
confers a cause of action on them over which the federal courts have jurisdiction
under the ATS. The district court (Schofield, J.) held that the prohibition against
financing terrorism is a viable basis for an ATS claim. Assuming, without
deciding, that under some circumstances it may be, we REVERSE and REMAND
4
this case because any such international norm prohibiting financing terrorism
does not confer a cause of action on Plaintiffs for the harm they allege.
BACKGROUND
I. The Money-Laundering Operation
Plaintiffs allege that Defendants engaged in the money-laundering scheme
at issue in collaboration with Ayman Saied Joumaa (“Joumaa”) and Oussama
Salhab (“Salhab”).1 Joumaa directs an international drug trafficking and money-
laundering network, with roots in South America and West Africa; Salhab is a
Hezbollah operative running a network of money couriers out of West Africa.
The scheme worked as follows. From 2007 to 2011, Joumaa, Salhab, and
Mahmoud Hassan Ayash, another Hezbollah operative, sent hundreds of
millions of dollars from LCB accounts to thirty used car purchasers in the United
States. The purchasers used the funds to buy cars that were then shipped to
various locations in West Africa for sale. Upon arrival, Joumaa and Salhab’s
networks purchased the cars using money from narcotics sales in Europe and
1
We draw the facts presented in this opinion from the second amended
complaint and its appended documents, assuming their truth for the purposes of
this appeal. See Cohen v. Rosicki, Rosicki & Assocs., P.C., 897 F.3d 75, 80 (2d Cir.
2018).
5
Africa. After the cars were sold, Salhab’s money couriers would transport the
payments from West Africa to Lebanon for deposit into LCB accounts, often
paying a fee to Hezbollah to provide security during transport.
For their part, Defendants established systems within LCB to ensure that
these transactions would not be detected, for example, by exempting certain
accounts from the requirement that cash deposits in excess of $10,000 disclose the
source of the funds. Defendants also allowed Hezbollah to maintain LCB bank
accounts and ignored “requirements that would have prohibited LCB from
conducting fund transfers on behalf of Hezbollah.” J. App’x 680 ¶68. In total,
Defendants “permitted government-identified terrorists and terrorist
organizations to deposit at least $200 million in cash per year without disclosing
the source of the funds.” Id. at 679 ¶64. During the relevant period, Hezbollah
carried out numerous terror attacks on civilians and served as the “muscle” for
the Syrian government in the Syrian civil war that broke out in early 2011.
In February 2011, the United States Department of the Treasury (“Treasury
Department”) identified LCB as “a financial institution of primary money
laundering concern” and found that Hezbollah “derived financial support from
the criminal activities” of the drug-trafficking and money-laundering networks
6
operating through LCB. Id. at 559-60. The Treasury Department further
concluded that LCB management, including Abou Jaoude and Hamdoun, were
“complicit” in the laundering. Id. at 560. In March 2011, shortly after the Treasury
Department designation, LCB’s board of directors agreed to sell all of its assets
and liabilities to another Lebanese bank, the Société Générale de Banque au Liban
S.A.L. Upon execution of the sale, LCB placed itself into liquidation proceedings.
Pursuant to the sale agreement, $150 million was deposited into an interbank
account in the United States to be held in escrow. In December 2011, the United
States Attorney for the Southern District of New York initiated civil forfeiture
proceedings against LCB and seized the escrow funds. Acting as trustees for the
liquidated bank, Abou Jaoude and Hamdoun eventually settled the action with
an agreement to forfeit $102 million to the United States.
In the years preceding LCB’s liquidation, Abu Nahl repeatedly raised
concerns about the bank’s compliance practices, both internally and with the
Central Bank of Lebanon, to no avail. After liquidation, Plaintiffs and Defendants
engaged in a significant amount of litigation in the Lebanese courts, including a
shareholder action brought by Abu Nahl seeking damages related to the gross
7
mismanagement of the Bank. In 2016, a Lebanese trial court ruled in favor of
Defendants in the shareholder action, a decision that is currently on appeal.2
II. Procedural History
In addition to seeking relief in the Lebanese courts, Plaintiffs initiated the
instant proceedings in the Southern District of New York. Their first amended
complaint (“FAC”) raised an ATS claim, alleging that Defendants’ money
laundering aided and abetted Hezbollah’s violations of international law, i.e., its
targeting of civilians in violent attacks. The district court granted Defendants’
motion to dismiss the FAC, reasoning that because Plaintiffs had not been victims
of Hezbollah’s violations of international law they could not establish tort
liability using those attacks as the primary substantive violation of international
law. See Abu Nahl v. Abou Jaoude, No. 15-cv-9755, 2018 WL 2994391, at *4-5
(S.D.N.Y. June 14, 2018).
The district court allowed Plaintiffs to replead, suggesting that it might be
amenable to a claim that alleged a primary violation of international law by
Defendants. Plaintiffs availed themselves of the opportunity and filed a second
2
So far as the record before us reflects, none of the cases litigated in the Lebanese
courts have been resolved in favor of Plaintiffs, though several remain pending.
8
amended complaint (“SAC”). Abandoning the aiding and abetting theory, the
SAC names Defendants as primary tortfeasors, who violated international law in
their own right by laundering money in support of terrorism. The district court
found that this revised ATS claim established a cause of action because it alleged
the violation of a sufficiently universal, specific, and obligatory norm of
international law: the prohibition against financing terrorism. Concluding that
the proposed amendment was not futile, the court granted Plaintiffs’ motion to
amend their complaint. See Abu Nahl v. Abou Jaoude, 354 F. Supp. 3d 489, 508
(S.D.N.Y. 2018).
At Defendants’ request, the district court certified for interlocutory appeal
the portion of its order finding that the prohibition against financing terrorism is
an actionable norm of international law under the ATS. A motions panel of this
Court subsequently granted leave to appeal.
DISCUSSION
When a district court certifies a question of law for interlocutory appeal,
“we assume jurisdiction over the entire order, not merely over the question as
framed by the district court” and may “review any issue fairly included within
the certified order.” Donohue v. Milan, 942 F.3d 609, 615 (2d Cir. 2019) (internal
9
quotation marks omitted). We review de novo a district court’s decision that a
proposed amendment to a complaint is not futile. See Nielsen v. Rabin, 746 F.3d 58,
62 (2d Cir. 2014). Whether an alleged norm of international law provides a basis
for jurisdiction under the ATS is also subject to de novo review. See Kiobel v. Royal
Dutch Petroleum Co., 621 F.3d 111, 124 (2d Cir. 2010).
I. Legal Framework
The ATS was enacted by the first Congress as part of the Judiciary Act of
1789 and has remained largely unchanged since that time. See id. at 125 n.27. In its
entirety, the ATS reads:
The district courts shall have original jurisdiction of any
civil action by an alien for a tort only, committed in
violation of the law of nations or a treaty of the United
States.
28 U.S.C. § 1350. The ATS is a jurisdictional statute, creating no new cause of
action in its own right but empowering courts to hear cases brought by foreign
nationals based on violations of international law. Kiobel, 621 F.3d at 125.
The ATS was originally addressed to “the modest number of international
law violations with a potential for personal liability” existing in 1789, namely,
offenses against ambassadors, violations of safe conduct, and cases of piracy. See
10
Sosa v. Alvarez-Machain, 542 U.S. 692, 724 (2004). But the content of international
law is not stagnant, and the ATS is not a statute frozen in time. When considering
whether an alleged norm of international law provides a cause of action under
the ATS, “courts must interpret international law not as it was in 1789, but as it
has evolved and exists among the nations of the world today.” Filartiga v. Pena-
Irala, 630 F.2d 876, 881 (2d Cir. 1980).
In Sosa v. Alvarez-Machain, the Supreme Court laid out the framework
under which we decide whether a norm has attained sufficient stature in
international law to provide a cause of action for an ATS claim. See 542 U.S. at
732-33. Under Sosa, a norm is actionable once it obtains the same “definite
content and acceptance among civilized nations [as] the historical paradigms
familiar when § 1350 was enacted.” Id. at 732. Thus, “[c]ourts are obligated to
examine how the specificity of the norm compares with 18th-century paradigms,
whether the norm is accepted in the world community, and whether States
universally abide by the norm out of a sense of mutual concern.” Abdullahi v.
Pfizer, Inc., 562 F.3d 163, 176 (2d Cir. 2009). This last requirement ensures that the
ATS encompasses only those “wrongs that are of mutual, and not merely several,
concern to States.” Flores, 414 F.3d at 249 (internal quotation marks and
11
alterations omitted). Broadly stated, matters of mutual concern are those that
might arise between “States in their dealings with each other” (such as war
crimes), id. at 253 n.28, while matters of several concern are actions with which
many states are independently concerned (such as murder). Id. at 249.
Our work is not done, however, once we conclude that a norm is
sufficiently universal, specific, and obligatory. Before recognizing a norm, Sosa
also requires courts to consider whether any prudential concerns counsel against
doing so. Such prudential concerns might include, for example, “the practical
consequences of making th[e] cause available to litigants in the federal courts” or
foreign policy concerns raised by the executive branch regarding the recognition
of a new norm. Sosa, 542 U.S. at 728, 732-33. While courts may recognize new
norms as international law continues to develop, this second step of Sosa
emphasizes the need for “great caution in adapting the law of nations to private
rights.” Id. at 728. Under this framework, we have recognized several norms of
international law as actionable under the ATS, including the prohibitions against
war crimes, torture, slavery, and genocide. Abdullahi, 562 F.3d at 172-73; Kadic v.
Karadžiæ, 70 F.3d 232, 241-44 (2d Cir. 1995).
12
Defendants argue that in the years since Sosa was decided, the Supreme
Court has restricted the power of the courts to recognize new norms of
international law. Relying primarily on Jesner v. Arab Bank, PLC, 138 S. Ct. 1386
(2018), Defendants contend that “absent express legislative authorization, courts
are not free to imply . . . a new international-law remedy under the ATS.”
Appellant’s Br. at 32 (emphasis omitted). Defendants considerably over-read
Jesner. The Supreme Court in that case indeed put significant emphasis on Sosa’s
second step, even going so far as to suggest that “the foreign-policy and
separation-of-powers concerns inherent in ATS litigation” could be argued to
mean that “a proper application of Sosa would preclude courts from ever
recognizing any new causes of action under the ATS.” 138 S. Ct. at 1403. But the
Court expressly declined to reach such a broad conclusion. See id. (“[T]he Court
need not resolve that question in this case.”). While Jesner augments Sosa’s call for
judicial restraint, it does not go so far as to “overrule Sosa’s framework or treat it
as optional.” Id. at 1414 (Gorsuch, J., concurring in part and concurring in the
judgment).
II. Prohibition Against Financing Terrorism
13
Plaintiffs’ ATS claim is based on Defendants’ alleged violation of the
prohibition against financing terrorism, as expressed in Article 2.1(b) of the
International Convention for the Suppression of the Financing of Terrorism, Dec.
9, 1999, T.I.A.S. No. 13,075, 2178 U.N.T.S. 197 (the “Convention”). Article 2.1(b)
provides:
1. Any person commits an offence within the meaning of
this Convention if that person by any means, directly or
indirectly, unlawfully and wilfully, provides or collects
funds with the intention that they should be used or in
the knowledge that they are to be used, in full or in part,
in order to carry out:
...
(b) Any other act intended to cause death or serious
bodily injury to a civilian, or to any other person
not taking an active part in the hostilities in a
situation of armed conflict, when the purpose of
such act, by its nature or context, is to intimidate a
population, or to compel a government or an
international organization to do or to abstain
from doing any act.
The district court found that the prohibition against financing terrorism is
an actionable norm under the ATS, noting that a significant majority of nations
were party to the Convention during the relevant time period and that Article
2.1(b) specifically defines the prohibited conduct. See Abu Nahl, 354 F. Supp. 3d at
499-503; see also Kiobel, 621 F.3d at 137 (confirming that a treaty may constitute
14
sufficient proof of a norm “if an overwhelming majority of States have ratified
the treaty, and those States uniformly and consistently act in accordance with its
principles”) (emphasis omitted)).
On appeal, the parties focus their arguments on the universality,
specificity, and scope of the norm.3 Defendants contend that the norm is not
sufficiently universal or specific, pointing out that a number of states joined the
Convention with reservations and arguing that because “terrorism” is not well
defined, a norm based on financing terrorism cannot be specific. Plaintiffs
respond by noting that 173 nations were party to the Convention at the relevant
time, that the vast majority of reservations were addressed to other provisions of
the Convention, and that Article 2.1(b) explicitly describes the prohibited conduct
and does not rely on a loosely defined concept of “terrorism.”
These are complex issues that we need not decide to resolve this case. We
thus take no position on whether the prohibition against financing terrorism, as
expressed in Article 2.1(b) of the Convention, is sufficiently universal, specific,
3
Defendants also argue that Plaintiffs were required to plead state action but
failed to do so, and that the enactment of the Anti-Terrorism Act, see 18 U.S.C.
§ 2333, implicitly “shut the door” on ATS claims for injuries caused by acts of
terrorism. Appellant’s Br. at 24. We do not reach those questions because their
resolution is not necessary to our disposition of the case.
15
and obligatory to give rise to civil liability that may be obtained under the ATS in
some circumstances. Assuming arguendo that the prohibition is sufficient to
support a civil cause of action under some circumstances, we conclude that the
ATS claim in Plaintiffs’ amended complaint is nevertheless futile. Whether or not
a cause of action might lie, for example, in favor of victims of terrorist acts
against persons who financed those acts by a money-laundering scheme of the
sort alleged in Plaintiffs’ complaint, we conclude that the prudential concerns
emphasized in Sosa and Jesner militate strongly against recognizing a cause of
action for Plaintiffs here. Plaintiffs ask us to establish a civil remedy for those
who suffered a purely financial injury, inflicted not by the terrorist acts that are
the target of the Convention, but by the mismanagement of a corporation by
corporate officers who engaged in criminal activities that resulted in crippling
financial sanctions. The ATS cannot and should not be stretched so far.
III. Plaintiffs’ Cause of Action
The ATS authorizes foreign plaintiffs to bring suit to recover for a tort
committed in violation of the law of nations. See 28 U.S.C. § 1350. As discussed
above, this is not a broad jurisdictional grant, and historically covered only the
“narrow set of violations of the law of nations” that could be committed by
16
individuals, were amenable to judicial remedy, and “threaten[ed] serious
consequences in international affairs.” Sosa, 542 U.S. at 715. The ATS allows
foreign nationals access to United States courts precisely because of the
international flavor of the harm they have suffered – hence the requirement that
the norm be of mutual, rather than several, concern to the nations of the world.
See Abdullahi, 562 F.3d at 176.
Implicit in this limited jurisdictional statute is the requirement that the tort
alleged be grounded in the international norm claimed to be violated. It is a
general principle of tort law that “[a]n actor’s liability is limited to those harms
that result from the risks that made the actor’s conduct tortious.” RESTATEMENT
(THIRD) OF TORTS: LIABILITY FOR PHYSICAL AND EMOTIONAL HARM § 29 (AM . LAW
INST. 2010); see Otal Invs. Ltd. v. M.V. Clary, 494 F.3d 40, 60 (2d Cir. 2007). In this
case, the international community came together to prohibit terrorist financing to
curtail the risks of terrorism, seeking to prevent harm to those who might
otherwise fall victim to violent attacks that could destabilize international
relations. The Convention preamble emphasizes that terrorism “jeopardize[s] the
friendly relations among States and peoples” and identifies the financing of
terrorism as a “matter of grave concern to the international community as a
17
whole” because “the number and seriousness of acts of international terrorism
depend on the financing that terrorists may obtain.” Any norm arising from the
Convention and its precise implementation seeks to eradicate the harms of acts of
terrorism, by cutting off the funding needed to perpetrate violence. Accordingly,
it is the harms caused by terrorism that fall within the scope of any conceivable
liability for violations of this norm. Cf. 18 U.S.C. § 2333(a), (d) (creating a cause of
action for terrorist financing when a U.S. national suffers “an injury arising from
an act of international terrorism”).
The inescapable problem with Plaintiffs’ case is that their cause of action is
not related to the risks and harms of terrorist acts that are addressed by any
international prohibition against financing terrorism. Plaintiffs proceed on the
theory that “Defendants had actual knowledge that providing banking services
to or on behalf of Hezbollah was not permitted under U.S. law and would subject
LCB’s assets to forfeiture by the U.S. government.” J. App’x 706 ¶154. The SAC
alleges that LCB, and Plaintiffs consequently, “suffered a substantial loss as a
direct result of Defendants’ acts to finance Hezbollah’s terror attacks on civilians
[when] . . . LCB was required to forfeit $102 million of Bank funds in settlement
18
of the claims asserted in the Civil Forfeiture Complaint[.]”4 Id. at 660 ¶10. Those
forfeited funds were “the proceeds from a sale of LCB assets that had been placed
in escrow, and which the Bank and its shareholders would have received but for
Defendants’ scheme.” Id. at 661 ¶10.
The economic harm suffered by shareholders of banks used to finance
terrorism, while real, is not the harm that animated the development of any
international prohibition of terrorist financing. Plaintiffs make no claim that they
were injured by an act of terrorism that was committed by Hezbollah and
facilitated by Defendants. Rather, they allege only harm arising from the
mismanagement of LCB that left its assets vulnerable to forfeiture. To be sure,
Plaintiffs correctly point out that the ultimate basis of the civil forfeiture action
and costly settlement of that action was Defendants’ money laundering in
support of terrorism. But the same harm would have resulted had Defendants
used the Bank to engage in any number of other unlawful activities – say,
widespread fraud or the rigging of interest rate standards – that could result in
financial penalties, or any other misapplication of corporate funds that resulted
4
Plaintiffs also allege that they have been harmed by the inability of Abu Nahl,
his family, and employees of Nest Investments to get visas to travel to the United
States as a result of their association with LCB.
19
in a similar decline in the economic value of the corporation. The economic loss
to Plaintiffs would have been the same had Defendants used corporate funds to
buy villas for themselves, to make utterly reckless investments in companies
owned by their relatives, or, for that matter, to make personal contributions to
their favorite charities without a corporate purpose. Indeed, Plaintiffs allege that
the money-laundering scheme that eventually caught the eye of the United States
was designed in substantial part to facilitate Abou Jaoude and Hamdoun’s
“looting [of] LCB assets” for their personal gain – a purpose extraneous to its
support of Hezbollah. J. App’x 698 ¶123; see id. at 698-700. Nothing about the
harm suffered by Plaintiffs is specific to the relevant norm of international law; it
is entirely disconnected from the mutual concern that undergirds any prohibition
on the financing of terrorism. See RESTATEMENT (THIRD) OF TORTS § 29 cmt. d
(directing consideration of “the risks that made the actor’s conduct tortious, and
. . . whether the harm for which recovery is sought was a result of any of those
risks”).
Though the SAC attempts to elide the distinction, its allegations describe
two separate tortious acts. Defendants violated the law of nations by funding
terrorism; Defendants also breached their fiduciary duty to Plaintiffs – and
20
perhaps committed other torts – by using the Bank for purposes that were in the
private interests of Defendants and were in derogation of the interests of the
shareholders. Those are distinct torts, risking distinct harms, with different
victims: the violence and instability wrought by terrorist acts harming innocent
civilians, versus the economic harms to shareholders resulting from
unscrupulous and self-interested acts by corporate managers.
Our conclusion that Plaintiffs’ cause of action is not viable under the ATS is
supported by the fact that the acts by which Defendants wronged Plaintiffs are a
matter of several, rather than mutual, concern. While a prohibition against
terrorist financing would be a matter of mutual concern among nations, the harm
that Plaintiffs actually suffered – essentially a breach of fiduciary duty in
mismanaging corporate assets – is as yet a matter of several or local concern, as
Plaintiffs themselves implicitly recognized by bringing a similar shareholder
action under domestic Lebanese law. That claims stemming from corporate
misfeasance cannot give rise to jurisdiction under the ATS is established by one
of our earliest ATS cases, IIT v. Vencap, Ltd., 519 F.2d 1001 (2d Cir. 1975), abrogated
on other grounds by Morrison v. Nat’l Australian Bank Ltd., 561 U.S. 247 (2010). In
IIT, a Luxembourgish investment trust brought suit against a Bahamian
21
corporation, alleging fraud, conversion, and corporate waste. We held that
plaintiffs had not alleged a violation of the law of nations, reasoning that while
virtually all nations prohibit theft in their domestic laws, “the Eighth
Commandment ‘Thou shalt not steal’ is [not] part of the law of nations” because
it does not address an issue of mutual concern among states. Id. at 1015. In a
similar case, the Ninth Circuit agreed that “looting of a bank by its insiders[] and
misrepresentations about the bank’s financial condition” are “garden variety”
violations of domestic law that do not give rise to an ATS claim because they “are
not of a kind affecting the relationship between states or between an individual
and a foreign state.” Hamid v. Price Waterhouse, 51 F.3d 1411, 1418 (9th Cir. 1995)
(rejecting claim for fraud, breach of fiduciary duty, and misappropriation of
funds).
Moreover, recognizing a cause of action under these circumstances would
raise exactly the kinds of concerns that troubled the Supreme Court in Sosa and
Jesner. Even assuming that the importance of enforcing a norm against financing
terrorism might in some cases outweigh the adverse consequences of making
“th[e] cause available to litigants in the federal courts” or the possible foreign
policy complications of recognizing such claims, Sosa, 542 U.S. at 733, the balance
22
of prudential concerns clearly weighs against permitting foreign plaintiffs to sue
foreign defendants for breaches of fiduciary duty in the management of foreign
corporations, duplicating similar commercial litigation in the domestic courts of
the country where the corporation operates.
In short, Plaintiffs’ SAC does not escape the same concerns that caused the
district court to dismiss their FAC. Any prohibition of financing terrorism
addresses the wrongs committed by secondary parties who support the primary
actors carrying out acts of terrorism or other abuses of human rights that present
issues of mutual concern to all nations and cause harm to the victims of the
primary terrorist acts. In its dismissal of the FAC, the district court correctly
concluded that Plaintiffs, not having been harmed by the primary violations
allegedly committed by Hezbollah and funded by Defendants, could not sue
Defendants on the theory that Defendants aided and abetted those violations.
Plaintiffs may not escape that holding by relabeling Defendants’ alleged
complicity in those primary violations as a separate violation of international
law, when the harm done to them stemmed not from the terrorist acts but from
the mismanagement of a corporation. The creation of an international convention
requiring nations to make specific forms of complicity in terrorist activity a
23
separate violation of law does not change the fact that financing terrorism,
whether or not defined as a separate form of wrongdoing, is prohibited to protect
the victims of the primary terrorist acts. The prohibition is not intended to protect
the shareholders of a bank that suffered losses not as a result of terrorism, but
because the involvement of its officers in supporting terrorism was detected and
punished.
We thus conclude that Plaintiffs’ effort to amend their complaint is futile,
because – even if “financing terrorism” violates a universal, specific, and
obligatory norm of international law – their cause of action is based on harm that
falls outside the scope of any such norm. Plaintiffs’ economic harm is
disconnected from the risks that would bring the financing of terrorism within
the purview of international law. The ATS does not confer federal jurisdiction
over the alleged violations of corporate law principles that ground Plaintiffs’
claim.
CONCLUSION
For the reasons set forth above, we find that Plaintiffs’ effort to amend their
complaint is futile. The order of the district court is therefore REVERSED and the
case is REMANDED for further proceedings consistent with this opinion.
24
1
JOHN M. WALKER, JR., Circuit Judge, concurring:
Judge Lynch’s opinion explores one appropriate basis on which to resolve
this case, and I concur in its reasoning and in its result. I write separately
because, apart from Judge Lynch’s reasoning, the complaint can be dismissed
upon a more traditional basis for resolving Alien Tort Statute (ATS) claims: the
absence of a violation of the law of nations.
In their briefing, the parties dispute whether a prohibition on terrorist
financing has passed into international law. This question, in my view, is not open
for debate. Nor is it the appropriate question to ask in this case.
In a recent judgment, the International Court of Justice (ICJ) pronounced
that “financing by a State of acts of terrorism” is prohibited under international
law. 1 The ICJ’s conclusion accords with U.N. Security Council Resolution 1373,
which created a binding obligation on all U.N. Member States to “[r]efrain from
providing any form of support, active or passive, to entities or persons involved
in terrorist acts.” 2 However, that States have an obligation to refrain from
financing terrorist acts has little bearing on whether Defendants violated
international law. These Defendants are not States.
Therefore, the appropriate question to ask in this case is whether
international law directly prohibits individuals from financing terrorist acts. It is
1 Application of the International Convention for the Suppression of the Financing of Terrorism
and of the International Convention on the Elimination of All Forms of Racial Discrimination (Ukr. v.
Russ. Fed.), Judgment, 2019 I.C.J. Rep. __, ¶¶ 59–60 (Nov. 8, 2019).
2 S.C. Res. 1373, ¶ 2(a), U.N. Doc. S/RES/1373 (Sept. 28, 2011) (“Decides also that all States
shall . . . Refrain from providing any form of support, active or passive, to entities or persons
involved in terrorist acts” (emphasis in original)); see also Michael C. Wood, The Interpretation of
Security Council Resolutions, 2 MAX PLANCK Y.B. UNITED NATIONS L. 74, 82 (1998) (explaining
that “Decides” is a term of art in U.N. Security Council resolutions that signals the obligatory
force of the resolution).
2
not enough for Plaintiffs to show that customary international law prohibiting
terrorist financing has crystallized. Most obligations of international law are
binding only on States, and “the existence of a customary rule outlawing [an act]
does not automatically mean that [the act] is a criminal offence under international
law,” 3 or an international law prohibition on individual conduct. 4
In this case, Plaintiffs have not shown that international law directly
prohibits individuals from financing terrorist acts. Although Article 4 of the
widely-ratified Terrorist Financing Convention 5 and U.N. Security Council
Resolution 1373 6 obligate States to criminalize terrorist financing under their
domestic laws, this obligation does not translate into the criminalization of
terrorist financing under international law. To illustrate, the widely-adopted
International Convention on the Regulation of Whaling provides that “infractions
against or contraventions of” that convention “shall” be punishable and
prosecuted under States’ domestic laws. 7 Yet no one would contend that illicit
whaling is an international crime or could sustain an ATS claim. Other treaties
that mandate the domestic criminalization of certain conduct, including treaties
3Prosecutor v. Ayyash et al., No. STL-11-01/I, Interlocutory Decision on the Applicable
Law: Terrorism, Conspiracy, Homicide, Perpetration, Cumulative Charging, ¶ 103 (Special
Tribunal for Lebanon Feb. 16, 2011).
4 International criminal law (a small subset of customary international law) regulates
individual, rather than State, conduct. As we have recognized previously, the Alien Tort
Statute establishes a civil remedy for victims of international crimes. See Kiobel v. Royal Dutch
Petroleum Co., 621 F.3d 111, 120 (2d Cir. 2010) (“[B]ecause customary international law imposes
individual liability for a limited number of international crimes . . . we have held that the ATS
provides jurisdiction over claims in tort against individuals who are alleged to have committed
such crimes.”)
5 Terrorist Financing Convention art. 4.
6 S.C. Res. 1373, ¶ 2.
7 International Convention for the Regulation of Whaling art. IX, Dec. 2, 1946, 63 Stat.
1716, 161 U.N.T.S. 72.
3
with language that is nearly identical to that in the Terrorist Financing
Convention, 8 have not been represented as the actual or aspirational international
criminalization of such conduct. It is more than noteworthy that the Council of
Europe (comprising 47 States) reported in 2017 that “none of its conventions
foresees the establishment of ‘universal’ criminal jurisdiction” despite the fact that
“such conventions contain provisions calling upon States to ensure that their
internal law establishes jurisdiction of their criminal courts to judge relevant
offences.” 9
Because the near-universal domestic criminalization of certain conduct is
insufficient to establish that conduct as an international crime, what does render
individual conduct the subject of international law warrants discussion. As I see
it, the essential quality of an international crime is universal jurisdiction over the
commission of that crime. 10 Indeed, we have already indicated as much in In re
Terrorist Attacks on September 11, 2001. 11 When a crime offends an international
rule that binds individuals across all States, rather than the domestic law of any
8 Compare Convention on Cybercrime art. 2, Nov. 23, 2001, Eur. T.S. No. 185, with
Terrorist Financing Convention art. 4.
9The Scope and Application of the Principle of Universal Jurisdiction, Report of the Secretary
General, ¶ 33, U.N. Doc. A/72/112 (June 22, 2017).
10 See Sosa v. Alvarez-Machain, 542 U.S. 692, 762 (2004) (Breyer, J., concurring) (“Today
international law will sometimes . . . reflect not only substantive agreement as to certain
universally condemned behavior but also procedural agreement that universal jurisdiction exists
to prosecute a subset of that behavior. . . . That subset includes torture, genocide, crimes against
humanity, and war crimes.” (emphasis added)).
11 714 F.3d 118, 125 (2d Cir. 2013) (rejecting an ATS cause of action for terrorism because
“‘terrorism—unlike piracy, war crimes, and crimes against humanity—does not provide a basis
for universal jurisdiction’” (quoting United States v. Yousef, 327 F.3d 56, 106–08 (2d Cir. 2003));
see also Kiobel, 621 F.3d at 140 (rejecting the logical extrapolation of new ATS causes of action
from existing causes of action because “[t]he strictly limited set of crimes subject to universal
jurisdiction cannot be expanded by drawing an analogy between some new crime . . . and
universal jurisdiction’s traditional subjects” (quoting Yousef, 327 F.3d at 103–04)).
4
one State, the crime is “thus triable by the courts of all States.” 12 Section 413 of the
Restatement (Fourth) of Foreign Relations, discussing universal jurisdiction,
explains that
International law recognizes a state’s jurisdiction to
prescribe law with respect to certain offenses of universal
concern, such as genocide, crimes against humanity, war
crimes, certain acts of terrorism, piracy, the slave trade,
and torture, even if no specific connection exists between
the state and the persons or conduct being regulated. 13
Universal jurisdiction is what distinguishes, say, murder, which is domestically
criminalized in all States, 14 from crimes against humanity, which are domestically
criminalized in just a handful of States. 15 Despite the universal criminalization of
murder, no State holds the legal belief that it or any other State can prosecute a
murder that lacks any connection to the State’s territory, nationals, or interests.
Indeed, no State has exercised its jurisdiction to legislate on, enforce against, or
adjudicate murders that occur in other States and are perpetrated by foreign
nationals against other foreign nationals. It follows that, as a matter of customary
12 ROSALYN HIGGINS, PROBLEMS & PROCESS: INTERNATIONAL LAW AND HOW WE USE IT 59
(1994) (quoting a 1956 British military law manual that described “war crimes” as “crimes ex
jure gentium” and declared that universal jurisdiction followed from that fact).
13 Restatement (Fourth) of Foreign Relations § 413 (Am. Law Inst. 2019).
14 A State’s domestic laws on murder are arguably a matter of international concern
under various human rights instruments. See Human Rights Comm., General Comment No. 36
(2018) on Article 6 of the International Covenant on Civil and Political Rights, on the Right to Life,
¶ 20, U.N. Doc. CCPR/C/GC/36 (Oct. 30, 2018). Accordingly, I would not distinguish between
murder and crimes against humanity on the basis that international law, as a descriptive matter,
has nothing to say on the former but much to say on the latter.
15 See Mia Swart, The Legal Foundation for Criminalizing International Crimes: A Response to
Kevin Jon Heller, HARVARD INT’L L.J. ONLINE 1, 2 (2018) (explaining that “the small [number] of
countries that have criminalized core international crimes [crimes against humanity, war
crimes, and genocide] points to the fact that the status of ‘international crime’ cannot depend on
the extent to which . . . states have criminalized” certain conduct).
5
international law, murder cannot be subject to universal jurisdiction and therefore
cannot be an international crime. 16 The opposite circumstance prevails for crimes
against humanity, the universal jurisdiction for which is confirmed by widespread
State practice and States’ beliefs about their legal obligations (referred to in
international law as “opinio juris”), including statutes pertaining to international
criminal tribunals and States’ exercises of their jurisdiction.
Plaintiffs have failed to marshal any State practice or evidence of opinio juris
suggesting that terrorist financing is an international crime or otherwise subject to
universal jurisdiction. And the State practice and evidence of opinio juris that
Plaintiffs could have marshaled is weak. Only one tribunal of an international
character, the Special Tribunal for Lebanon, has identified that customary
international law “addresses itself to individuals by imposing on them the strict
obligation to refrain from engaging in terrorism.” 17 That same Tribunal, without
any supporting analysis and outside the context of judicial proceedings, described
“the financing of terrorism” as “a crime per se under international law.” 18 These
broad pronouncements on terrorism and terrorist financing are undercut by the
fact that the Tribunal never exercised, and in fact could not exercise, universal
jurisdiction and was bound to apply Lebanese domestic law under its founding
statute. 19
16See North Sea Continental Shelf Cases (Fed. Rep. Ger. v. Den. & Neth.), 1969 I.C.J. 4, ¶ 77
(Feb. 20, 1969) (explaining that customary international law is the composite of State acts that
“amount to a settled practice” and “a belief that this practice is rendered obligatory [or
permissible] by the existence of a rule of law requiring [or allowing] it”).
17 See Ayyash et al., ¶ 105.
18 SPECIAL TRIBUNAL FOR LEBANON, ANNUAL REPORT 28 (2010).
Statute of the Special Tribunal for Lebanon, S.C. Res. 1757, Annex arts. 1–2, U.N. Doc.
19
S/RES/1757 (May 30, 2007).
6
The strongest evidence that terrorist financing is an international crime
subject to universal jurisdiction comes from the Terrorist Financing Convention
itself, albeit in a provision not cited by Plaintiffs. Article 7 of that treaty describes
the circumstances in which a State Party “shall” or “may” exercise jurisdiction
over terrorist financing. 20 Paragraph 4, in particular, provides:
Each State Party shall . . . establish its jurisdiction over
[terrorist financing] in cases where the alleged offender
is present in its territory and it does not extradite that
person to any of the States Parties that have established
their jurisdiction. 21
Because the Terrorist Financing Convention is widely ratified, this comes close to
an articulation of universal jurisdiction (despite the provision being operative only
among State Parties). But it still falls short because it conditions State Parties’
exercises of jurisdiction on at least one other State Party already having established
jurisdiction. 22 Paragraph 4, then, is best understood as an effort to prevent a State
Party from declining to extradite individuals subject to prosecution in another
State Party, rather than an articulation of universal jurisdiction. 23 Moreover, it
does not appear that State Parties have made efforts to update their criminal laws
to comply with Paragraph 4, much less to exercise pure universal jurisdiction over
terrorist financing. 24
20 Terrorist Financing Convention art. 7.
21 Id. at art. 7(4).
22Compare id. with International Convention on the Suppression and Punishment of the
Crime of Apartheid art. IV, Nov. 30, 1973, 1015 U.N.T.S. 243 (requiring States party to exercise
pure universal jurisdiction over the crime of apartheid).
23See HIGGINS, PROBLEMS & PROCESS: INTERNATIONAL LAW AND HOW WE USE IT 64–65
(explaining that treaty extradite-or-prosecute provisions do not establish universal jurisdiction).
24 Laura Halonen, Catch Them If You Can: Compatibility of United Kingdom and United States
Legislation Against Financing Terrorism with Public International Law Rules on Jurisdiction, 26
EMORY INT’L L.REV. 637, 653 (2012) (reviewing State practice, as documented in country reports
7
In addition to the paucity of evidence supporting Plaintiffs’ position, the
failure of the international community to criminalize terrorist financing, despite
numerous efforts to do so, counsels against identifying terrorist financing as an
international crime. A draft of the Rome Statute included “crimes of terrorism,”
such as “sponsoring, ordering, facilitating, financing, encouraging or tolerating
acts . . . of such a nature as to create terror.” 25 All crimes of terrorism, however,
were removed from the draft because
there was no general definition of [terrorism;] . . . these
crimes were often similar to common crimes under
national law in contrast to the crimes listed in other
subparagraphs [like war crimes and crimes against
humanity]; the inclusion of these crimes would . . .
detract[] from the other core crimes; these crimes could
be more effectively investigated and prosecuted by
national authorities under existing international
cooperation agreements for reasons similar to those
relating to illicit drug trafficking; and the inclusion of the
crimes could lessen the resolve of States to conduct
national investigations and prosecutions and politicize
the functions of the court. 26
The closest the international community has come to criminalizing terrorist
financing since the drafting of the Rome Statute is the African Union’s 2014 Malabo
Protocol, which sought to form an African criminal court. The Malabo Protocol’s
statute for the African criminal court sought to criminalize terrorism and the
submitted to the United Nations and concluding that legislation providing for universal
jurisdiction over terrorist financing is uncommon among States).
Report of the Preparatory Committee on the Establishment of an International Criminal Court,
25
Addendum, at 27, U.N. Doc. A/CONF.183/2/Add.1 (1998).
26Summary of the Proceedings of the Preparatory Committee During the Period 25 March–12
April 1996, ¶ 67, U.N. Doc. A/AC.249/1 (1996).
8
“sponsoring” of or “contribution to” terrorist acts. 27 However, in the six years
since the African Union adopted the Malabo Protocol, not a single State has ratified
it, and international law is no closer to criminalizing terrorist financing.
Finally, UNODC, the United Nations office that oversees and assists the
global response to terrorist financing, currently disavows that “the UN’s 19
counter terrorism instruments,” including the Terrorist Financing Convention,
“extend to universal jurisdiction.” 28 While international law may criminalize the
aiding and abetting of terrorist acts that rise to the level of genocide, crimes against
humanity, or war crimes, 29 it imposes no criminal prohibition on terrorist
financing that does not lead to such atrocity crimes. UNODC’s view that universal
jurisdiction for terrorist financing has not yet crystallized as a part of customary
international law is shared by a broad swath of other international law authorities
and scholars.30
Our case law is resolute that, in the absence of congressional authorization,
district courts face a “high bar” for identifying new ATS causes of action and must
exercise “great caution in adapting the law of nations to private rights.” 31 A
prohibition on terrorist financing by individuals is not the kind of “clear and well-
established international-law rule” for which it may be appropriate to add to our
27 Draft Protocol on Amendments to the Protocol on the Statute of the African Court of
Justice and Human Rights art. 28G(B), A.U. Doc. No. STC/Legal/Min. 7(1) Rev. 1 (2014).
28 U.N. Office on Drugs and Crime, Counter-Terrorism: Criminal Justice Responses to
Terrorism, UNODC.ORG (July 2018), https://www.unodc.org/e4j/en/terrorism/module-4/key-
issues/criminal-justice-responses.html.
29 Id.
See, e.g., LORI F. DAMROSCH & SEAN D. MURPHY, INTERNATIONAL LAW: CASES AND
30
MATERIALS 779 (7th ed. 2019) (querying whether terrorist financing should be an international
crime).
31 Sosa, 542 U.S. at 727–28.
9
ATS jurisprudence. 32 For this reason, I would hold that the district court erred in
finding that Plaintiffs had plausibly alleged a violation of the law of nations based
on Defendants’ individual conduct.
Separately, I disagree with the district court’s alternative holding that
Plaintiffs plausibly alleged a violation of the law of nations based on Defendants’
conduct in concert with the State of Lebanon. Plaintiffs have not adequately pled
the Central Bank of Lebanon’s knowledge of Defendants’ terrorist financing.
Although Plaintiffs alleged that the Central Bank knew or should have known of
Defendants’ money-laundering scheme, nowhere did they plead that the Central
Bank was aware that Defendants’ money-laundering scheme was a
terrorist-financing scheme. To the contrary, Plaintiffs characterized Defendants’
scheme as “shrouded in secret” and designed “to allow money to be laundered
efficiently and without detection.” 33 Customary international law imposes
due-diligence obligations on States in but a handful of contexts. This is not one of
them. 34 Plaintiffs’ failure to allege Lebanon’s knowledge of Defendants’ terrorist
financing forecloses their State action argument.
Finding none of Plaintiffs’ arguments availing, I join the majority in
reversing the district court.
32 Jesner v. Arab Bank, PLC, 138 S. Ct. 1386, 1405 (2018).
33 App’x at 674, 680.
34 Application of the International Convention for the Suppression of the Financing of Terrorism
and of the International Convention on the Elimination of All Forms of Racial Discrimination (Ukr. v.
Russ. Fed.), Judgment, 2019 I.C.J. Rep. at ¶¶ 42, 49 (using the mens rea requirement from
Terrorist Financing Convention art. 2(1) to assess whether “Russian officials . . . ‘knowingly
provided’ to a terrorist organization” “the missile launching system that was used to shoot
down flight MH17”).