Plaintiffs continue to invoke the use of U.S.-based correspondent banking accounts as a foothold for personal jurisdiction in actions against foreign defendants. This theory has gained traction in large part because nearly every international bank and corporation flows money through such accounts, often incidentally. A recent summary order from the Second Circuit Court of Appeals, however, reinforces that the mere use of a U.S.-based correspondent bank, without more, is unlikely to subject foreign banks doing business with American customers to personal jurisdiction in U.S. courts. Given the prevalence of correspondent banking, multinational corporations and banks are wise to continue monitoring developments in this area.
On April 28th, the Second Circuit affirmed the dismissal of a Lebanese-American family’s breach of contract claim against Bank Audi S.A.L for lack of personal jurisdiction. See Raad v. Bank Audi S.A.L., 2025 WL 1214139 (2d Cir. Apr. 28, 2025). Construing New York’s long-arm jurisdiction statute, N.Y. C.P.L.R. § 302, the Second Circuit reasoned that the exercise of personal jurisdiction must be based on conduct taking place within the jurisdiction. While the use of correspondent banking accounts may suffice in certain circumstances, there still must be a nexus between the conduct underlying the claim and the use of the correspondent account.
Background: Raad v. Bank Audi S.A.L.
Plaintiffs, three members of the Raad family, sued Bank Audi S.A.L., one of Lebanon’s largest financial institutions, for breach of contract. The Raads collectively placed almost $18 million in Bank Audi accounts in Lebanon. In October 2019, the Raads requested that Bank Audi transfer the sum to their Bank Audi USA account in New York. Plaintiffs claimed the transfer never occurred and sued the bank.
Personal Jurisdiction
The plaintiffs alleged four bases for the exercise of personal jurisdiction over Bank Audi in New York. First, plaintiffs alleged that they were residents of New York and held bank accounts with Bank Audi in the state. Second, plaintiffs alleged Bank Audi subjected itself to jurisdiction by contractually obligating itself to do business with plaintiffs in New York. Third, plaintiffs alleged that the Transfer Order pursuant to which Bank Audi allegedly promised to transact in New York provided the relevant nexus to New York despite being signed in Lebanon. Finally, plaintiffs made the broad assertion that Bank Audi contracted to provide services in the state by agreeing to transfer the Raad’s assets from Lebanon to New York, essentially consenting to jurisdiction under the long-arm statute.
The court rejected each of plaintiffs’ theories because the jurisdictionally relevant conduct underlying the breach of contract claim took place solely in Lebanon.
Plaintiffs’ Residency Does Not Establish Bank’s New York Connections
Relying on the Second Circuit holding in Waldman v. Palestine Liberation Org., 835 F.3d 317 (2d Cir. 2016), the Second Circuit reasoned that plaintiffs’ residence in New York and holding of New York-based bank accounts, could not suffice to establish jurisdiction. It did not matter that Bank Audi previously had used correspondent bank accounts in New York to transfer assets for plaintiffs. Those past transfers from Bank Audi to New York were jurisdictionally irrelevant because the plaintiffs’ claim did not arise from those earlier transactions.
An Unfulfilled Transaction in New York Does Not Establish Contacts
The Raads also alleged that Bank Audi transacted in New York by failing to send the money to New York despite promising to do so. The Second Circuit found that plaintiffs alleged injury arose from the absence of a transaction in the New York, which did not give rise to personal jurisdiction. And while Bank Audi may have had contractual obligations to fulfill in New York, all the conduct that caused the alleged breach (and consequently Raads’ injury) took place in Lebanon.
Conduct Relating to the Transfer Orders Did Not Take Place in New York
Plaintiffs also alleged that the relevant transaction for jurisdictional purposes was Bank Audi’s entry into the Transfer Order agreements that promised the funds would be moved to New York. But the alleged promise to transfer funds to New York could not overcome the dispositive fact that all conduct surrounding the Transfer Order took place in Lebanon. In particular, all the plaintiffs visited Bank Audi in Lebanon where they completed and signed the orders. Additional oral promises by bank employees to effectuate the transfer also took place in Lebanon. Thus, the court concluded, even if the Transfer Order could be a jurisdictionally relevant transaction, all “material events related” to the transaction only occurred in Lebanon. Id.
A Contract to Supply Hypothetical Services in New York Is Insufficient to Establish Jurisdiction
Finally, the plaintiffs creatively alleged that Bank Audi’s alleged promise to transfer money to New York constituted a contract to supply services in the state. Under N.Y. C.P.L.R. 302(a)(1), they argued, such a contract serves to establish personal jurisdiction.
The court rejected this argument, citing both the facts of the case and the practical implications of such a broad reading of New York’s long-arm statute. First, the court reiterated that (1) all conduct related to the transaction causing the injury took place in Lebanon, and (2) the actual New York transaction was hypothetical, since the transfer never took place.
Second the Second Circuit was guided by a state appellate court decision that cautioned against such an interpretation of New York’s long-arm statute.[1] Endorsing the plaintiffs’ view would allow any customer of a foreign bank to sue that bank in New York simply by directing funds from the bank into the state. Similarly, it would allow New York companies to manufacture personal jurisdiction by designating New York as the point of payment.
Takeaways
Raad reinforces that foreign financial institutions transacting through U.S. correspondent banks may face a heightened risk of U.S. litigation. Plaintiffs continue to argue for creative and expansive interpretations of U.S. jurisdictional statutes to extend their reach. While the theories advanced in Raad failed to carry the day, plaintiffs’ strategies can meet mixed success when actually litigated in U.S. courts depending on the particular facts surrounding the alleged transactions.
Foreign financial institutions, especially those with correspondent banking relationships, should continue to monitor how U.S. courts analyze whether to assert jurisdiction over foreign entities and be on notice of the new ways plaintiffs are advocating for an expansive view of personal jurisdiction.
[1] The court relied on Am. Recreation Grp., Inc. v. Woznicki, 448 N.Y.S.2d 51, 52 (2d Dept. 1982).
