A Manhattan federal judge has, for the second time, ordered the government-owned Bank of China to produce documents in a lawsuit accusing the bank of providing financial services to a terrorist group that killed an American teenager in 2006.
Judge Shira Scheindlin (See Profile) ruled on May 1 in Wultz v. Bank of China, 1:11-cv-01266, that various Chinese laws do not shield the bank from having to turn over records of its communications with its Chinese government regulator, the People’s Bank of China.
She ruled that Bank of China may redact documents produced by the Chinese government to remove non-factual materials, but that it must produce the documents unredacted for in camera review.
The lawsuit was filed in 2008 by the family of Daniel Wultz, a Florida teenager who was killed by a bomb in a restaurant in Tel Aviv in 2006 while on a school trip. Daniel’s father, Yekutiel Wultz, was also injured. The Palestinian Islamic Jihad, a terrorist group, took credit for the bombing.
The suit was originally filed in federal court in the District of Columbia. It accused Iran, Syria, several of their leaders and Bank of China of abetting terrorism, in violation of the Antiterrorism Act. Because the bank has no branch in Washington, D.C., the suit against it was severed and transferred to New York.
In July 2011, the plaintiffs, represented by Lee Wolosky, a partner at Boies, Schiller & Flexner, sought discovery of documents related to a bank account at Bank of China belonging to Said al-Shurafa, a leader of the Palestinian Islamic Jihad. They also sought information about any sanctions imposed on the bank by any government and the bank’s communications with any government about its anti-money-laundering procedures.
Bank of China refused, claiming that China’s bank secrecy laws prevented it from handing over the requested documents.
The bank said, if the American court made a request to the Chinese government pursuant to the Hague Convention, Bank of China would be allowed to produce the documents. The court made that request, but the Chinese government never responded.
On Oct. 29, 2012, Scheindlin ordered Bank of China to comply anyway. But instead of producing documents, the bank asserted that it was barred from complying under still other Chinese laws, including laws on money laundering and a law intended to protect state secrets.
Bank of China is represented by Lanier Saperstein, a partner at Dorsey & Whitney, and by Mitchell Berger, a partner at Patton Boggs.
The plaintiffs moved again to compel production and on May 3, Scheindlin granted that motion.
"If BOC is not ordered to produce plaintiffs’ requested materials in contravention of PRC law, there may be no alternative source of evidence for establishing one of the central elements of plaintiffs’ claim—that BOC had notice that the Shurafa accounts were being used to fund the terrorist organization whose attack on April 17, 2006 killed Daniel Wultz and injured Yekutiel Wultz," Scheindlin ruled.
The judge acknowledged that "ordering production of materials designated by PBOC as state secrets, to the extent that such documents were properly designated, would risk infringing China’s sovereignty and violating the spirit of international comity in a way that this Court has sought to avoid."
However, she said that it was "deeply troubling" that Bank of China waited until a year after the original discovery request to mention the Chinese state secret law that purportedly prevents it from complying.
"If the ‘state secret’ that [People's Bank of China] wishes to keep confidential is that BOC received warnings regarding the Shurafa accounts and may be liable under the [Antiterrorism Act] for a terrorist attack on American citizens, then the U.S. interest in deterring terrorist attacks and seeing justice done between the parties would strongly outweigh even this Court’s respect for the Chinese government’s interest in preserving the confidentiality of its state secrets," she wrote.
Scheindlin added that Bank of China had acted in "bad faith" throughout the litigation.
"On more than one occasion, BOC has failed to comply with an order, said nothing to the Court, waited for plaintiffs to bring BOC’s noncompliance to the Court’s attention, and then, when confronted with its noncompliance, claimed to believe that the Court intended something other than what the Court clearly said," she wrote.
"This Court recognizes the seriousness of this Order, yet views it as compatible with the goals of international comity, including the notion of reciprocity," Scheindlin wrote.
"If the circumstances were reversed, and a U.S. bank operating in China were accused of funding a terrorist organization responsible for the death of a Chinese citizen, it would be appropriate in the wake of an ineffective Hague request for a Chinese court to order the U.S. bank to produce equally sensitive documents—appropriately redacted and under protective order, as here," she wrote.
If the bank does not comply, it will be subject to sanctions, the judge wrote.
Wolosky, the plaintiff’s attorney, said Scheindlin’s order was "forward-leaning" because it "requires a foreign bank to produce communications with its own government."
"As a result of this ruling, Bank of China will no longer be able to thumb its nose at U.S. citizens and U.S. courts, and will finally be compelled to produce documents concerning its alleged provision of financial services for operatives of terrorist groups that have murdered our citizens," Wolosky said.
Neither counsel for the bank could be reached for comment.
The Wultzes already have won a judgment against Iran, Syria and their leaders in May 2012 for $323 million. Because both countries are hostile to the United States, it is unlikely that the judgment will be paid.
@|Brendan Pierson can be reached at email@example.com.