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Media Alerts - Rothstein v. UBS AG - Second Circuit
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February 14, 2013
  Rothstein v. UBS AG - Second Circuit
Headline: Second Circuit Affirms Dismissal of Claim Against UBS for Facilitating Terrorism

Area of Law: International

Issue(s) Presented: Whether American victims of terrorist attacks in Israel plausibly stated a claim under the Anti-Terrorism Act against UBS for furnishing U.S. currency to Iran

Brief Summary: Plaintiffs-appellants, United States citizens who were physically or psychologically injured in terrorist attacks in Israel, brought suit under the Anti-Terrorism Act ("ATA"), alleging that defendant-appellee UBS, a financial institution, had facilitated terrorist attacks in Israel by furnishing United States currency to Iran. The United States District Court for the Southern District of New York granted UBS's motion to dismiss plaintiffs' complaint. On appeal, the Second Circuit ruled that although the plaintiffs had standing to assert their ATA claim, their complaint failed to state a claim on which relief could be granted because they had not plausibly claimed that UBS's transfers of U.S. currency to Iran plausibly caused their injuries. Accordingly, the Second Circuit affirmed the dismissal of their complaint.

To read the full opinion, please go to:

Extended Summary: The Plaintiffs' complaint alleged that since 1979, Iran has pursued an official policy to cause the murder and/or expulsion of Jewish residents of Israel, bring about the eradication of the State of Israel, and cause Israel's replacement with an Islamic state through the use of terrorism. It further alleged that in the 1980s, Iran began providing extensive monetary support to the Hamas terrorist organization to enable it to carry out terrorist attacks. Since 1984, the United States Department of State has designated Iran a state sponsor of terrorism under the ยง 6(j) of the Export Administration Act of 1979. The United States' Office of Foreign Asset Control ("OFAC") regulations provide that after Aug. 22, 1996, no U.S. person shall knowingly engage in a financial transaction with the government of a country so designated.

In 1996, defendant UBS entered into an Extended Custodial Inventory ("ECI") agreement with the Federal Reserve in Zurich, Switzerland. In the EIC agreement, UBS agreed not to engage in financial transactions with the government of any country designated a state sponsor of terrorism. In 2003, on concealed property of Saddam Hussein in Iraq, American soldiers discovered approximately $650 million in U.S. currency in Federal Reserve wrappers. After investigation, documents produced by UBS revealed that UBS had transferred U.S. currency to the Iran government in violation of the OFAC regulations and UBS's contract with ECI. Other evidence indicated that UBS had engaged in forbidden U.S. currency transactions with Iran, as well as Cuba, Libya, and the former Yugoslavia. In 2003, the Federal Reserve terminated UBS's ECI agreement and fined UBS $100 million.

Plaintiffs were injured or killed in five bombings and several rocket attacks in Israel conducted by Hamas or Hizbollah between July 30, 1997 and July 22, 2006. Plaintiffs alleged that the receipt of cash from Iran substantially increased the terrorist organizations' ability to purchase weapons, train their terrorist operatives, and carry out those attacks. In 2008, the plaintiffs brought suit under the ATA alleging that UBS aided and abetted international terrorism by providing Iran with hundreds of millions of dollars in cash between 1996 and 2004 to finance these terrorist attacks. The United States District Court for the Southern District of New York subsequently granted UBS's motion to dismiss. The court found that the complaint failed to allege that UBS had any direct relationship or involvement in any of the attacks that caused the plaintiffs' injuries, and that the plaintiffs could therefore not establish standing. Also, for the same reason, the court held that the complaint failed to state a claim on which relief can be granted under the ATA.

The Second Circuit held that plaintiffs had standing to assert their ATA claims but affirmed the district court's dismissal of the complaint for failure to state a claim on which relief can be granted. The court explained that the complaint failed to plausibly allege a "proximate causal relationship between the cash transferred by UBS to Iran and the terrorist attacks by Hizbollah and Hamas that injured plaintiffs. The court acknowledged that it was "more likely that the moneys would be used for terrorism than if the transfers were to a state that did not sponsor terrorism," but concluded that there was no "nonconclusory allegation in the Complaint that plausibly shows that the moneys UBS transferred to Iran were in fact sent to Hizbollah or Hamas or that Iran would have been unable to fund the attacks by Hizbollah and Hamas without the cash provided by UBS."

To read the full opinion, please go to:

Panel: Judges Kearse, Lohier, and Droney

Argument (if known): 03/01/2012

Date of Issued Opinion: 02/14/2013

Docket Number: 11-0211-cv

Decided: Affirmed

Case Alert Author: Lauren Bachtel

Counsel : NATHANIEL A. TARNOR, Washington, D.C. (Robert J. Tolchin, Jaroslawicz & Jaros, New York, New York, on the 9 brief), for Plaintiffs-Appellants. JONATHAN ROSENBERG, New York, New York (Daniel L. Cantor, Jacqueline V. Roeder, O'Melveny & Myers, New York, New York; Jonathan D. Hacker, Anton Metlitsky, O'Melveny & Myers, Washington, D.C.; Andrew J. Pincus, Marc R. Cohen, Alex C. Lakatos, Paul W. Hughes, Mayer Brown, Washington, D.C., on the brief), for Defendant-Appellee. PILLSBURY WINTHROP SHAW PITTMAN, New York, New York (Frederick A. Brodie, of counsel), filed a brief for Amicus Curiae Government of Switzerland, in support of Appellee. DECHERT, New York, New York (Linda C. Goldstein, of counsel; Brian D. Ginsberg, Covington & Burling, New York, New York, of counsel), filed a brief for Amici Curiae Institute of International Bankers, Association of German Banks, economiesuisse, European Banking Federation, Federation of German Industries, French Banking Federation, Mouvement des Entreprises de France, and Swiss Bankers Association, in support of Appellee.

Author of Opinion: Judge Kearse

Supervisor: Emily Gold Waldman

    Posted By: Emily Waldman @ 02/14/2013 08:25 PM     2nd Circuit  

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