Changing Anti-Terrorism Act Jurisprudence Increases Litigation Exposure

In Short  

The Situation: Following the 2016 enactment of the Justice Against Sponsors of Terrorism Act ("JASTA"), courts construed aiding-and-abetting liability narrowly, disallowing claims against defendants that did not deal directly with a terrorist organization or its proxy. Over the last year, however, courts have permitted claims that previously might have been dismissed to proceed to discovery. Plaintiffs meanwhile are increasingly filing JASTA claims against businesses whose services or products are further removed from any close connection to terrorist parties. 

The Result: More lawsuits can be expected against companies conducting business in parts of the world where terrorism occurs or that have customers connected to these regions, and a greater percentage of these cases are likely to survive motions to dismiss and move into discovery.  

Looking Ahead: Companies should review their due diligence practices with respect to existing customers and new business opportunities to account for changing litigation exposure to Anti-Terrorism Act ("ATA") liability moving forward. Banks and other private companies drawn into litigation must diligently defend themselves with proactive strategies to avoid secondary liability under the ATA.

JASTA's stated intention is to provide litigants "with the broadest possible basis" for relief against entities that have "provided material support, directly or indirectly, to foreign organizations or persons that engage in terrorist activities against the United States." Pub. L. No. 114-222, 130 Stat. 852, 853 (2016). Recent cases have moved away from interpretations of JASTA that permitted early dismissal of cases. As a result, more terrorism complaints have survived motions to dismiss, and an increasing number of cases are headed to discovery.  

Legal Framework and Early Caselaw 

JASTA expressly added aiding-and-abetting liability to the ATA. It provides a private right of action for plaintiffs who suffer an "injury arising from an act of international terrorism committed, planned, or authorized by an organization that had been designated as a foreign terrorist organization" against "any person who aids and abets, by knowingly providing substantial assistance." 18 U.S.C. § 2333(d)(2). To state a claim, a plaintiff must plausibly allege facts showing: (i) an injury caused by an act of international terrorism; (ii) the act was committed, planned, or authorized by a designated Foreign Terrorist Organization ("FTO"); and (iii) the defendant aided and abetted the FTO by knowingly providing substantial assistance.  

As to the last element, Congress expressly adopted the framework of Halberstam v. Welch, 705 F.2d 472 (D.C. Cir. 1983). JASTA, § 2(a)(5). Under Halberstam: (i) "the party whom the defendant aids must perform a wrongful act that causes an injury"; (ii) "the defendant must be generally aware of his role as part of an overall illegal tortious activity at the time he provides the assistance"; and (iii) "the defendant must knowingly and substantially assist the principal violation." 705 F.2d at 477.  

In the earliest JASTA aiding-and-abetting cases, courts issued opinions affirming early dismissals of these cases. First, the Second Circuit required that a defendant be "'generally aware' that it was … playing a 'role' in [the terrorist party's] violent or life-endangering activities," in contrast to other statutes requiring only "knowledge of the organization's connection to terrorism." Linde v. Arab Bank, PLC, 882 F.3d 314, 329-30 (2d Cir. 2018) (affirming jury verdict). Second, the Second Circuit held that merely alleging that a defendant helped its customer violate applicable regulations knowing that the customer supported terrorist organizations was insufficient to establish that the defendant provided substantial assistance, "even on [an] expansive view of JASTA." Siegel v. HSBC N. Am. Holdings, Inc., 933 F.3d 217, 225-26 (2d Cir. 2019).  

Following these decisions, courts routinely dismissed secondary liability claims, indicating a "decided trend toward disallowing ATA claims against defendants who did not deal directly with a terrorist organization or its proxy." Freeman v. HSBC Holdings PLC, 413 F. Supp. 3d 67, 73 n.2 (E.D.N.Y. 2019); see, e.g., Kaplan v. Lebanese Canadian Bank, SAL, 405 F. Supp. 3d 525 (S.D.N.Y. 2019); Honickman v. BLOM Bank SAL, 432 F. Supp. 3d 253 (E.D.N.Y. 2020); Atchley v. AstraZeneca UK Ltd., 474 F. Supp. 3d 194 (D.D.C. 2020).  

Recent Cases Rejecting Dismissals 

Both the Second and D.C. Circuits recently have revisited the standard for pleading a JASTA aiding-and-abetting claim.  

Kaplan v. Lebanese Canadian Bank, SAL. In Kaplan v. Lebanese Canadian Bank, SAL, plaintiffs alleged that the bank aided and abetted Hezbollah—an FTO—by processing wire transfers for Hezbollah affiliates. 999 F.3d 842, 846 (2d Cir. 2021). Relying on the Second Circuit's opinions in Linde and Siegel, the district court dismissed the complaint. 405 F. Supp. 3d at 535 (S.D.N.Y. 2019). Plaintiffs failed to plead the general awareness prong sufficiently because there were no allegations that the bank was aware of public sources tying its customers to Hezbollah. Id. And the bank's "failure to perform due diligence on clients or to adhere to sanctions and counter-terrorism laws d[id] not, on their own, equate to knowingly playing a role in terrorist activities." Id. Nor did allegations that the bank processed wire transfers for terrorist-affiliates rise to the level of "substantial assistance" because plaintiffs failed to allege that any of the money actually reached the terrorist organization. Id. at 536. And the allegation that the bank had been accused by the U.S. government of laundering funds for Hezbollah did not provide a "sufficient factual basis" for the claim that the bank supported the organization's terrorist agenda. Id.  

The Second Circuit reversed, finding that the district court demanded too much. Despite language in Linde suggesting that the defendant must intend to further terrorist activities to have "general awareness," Kaplan suggested that a defendant need only have been aware that it was playing a role in unlawful activities from which terrorist attacks were foreseeable. 999 F.3d at 858-61. The Second Circuit also rejected the bank's argument that substantial assistance must be rendered directly to the principal for liability to attach. Id. at 855-56. The court explained that JASTA permits "an aiding-and-abetting claim where the defendant's acts aided and abetted the principal even where his relevant substantial assistance was given to an intermediary." Id. at 856, 862. 

The Kaplan panel further noted that plaintiffs had adequately alleged the "general awareness" element in part because they cited numerous, detailed media reports in which Hezbollah "openly, publicly, and repeatedly acknowledged" that the bank's customers were among its "integral constituent parts." Id. at 864. And because plaintiffs alleged that the bank circumvented sanctions by granting special exceptions to its Hezbollah-related customers, allowing them to deposit millions of dollars without disclosing the source of the funds, plaintiffs adequately alleged the "substantial assistance" element as well. Id. at 865-66. 

Shortly thereafter in Honickman v. BLOM Bank SAL, 6 F.4th 487 (2d Cir. 2021), the Second Circuit reaffirmed the Kaplan approach, although it upheld the lower court's dismissal. The Honickman plaintiffs alleged that the bank aided and abetted Hamas, a designated FTO, by providing financial services to Hamas-affiliated customers. The court opined that although plaintiffs did not need to allege that a defendant "knew or should have known" of public sources connecting the bank's customers to an FTO, the public sources cited in the complaint did not suffice because they were undated or post-dated the attacks. Id. at 501-02. The court did not address the substantial-assistance element.  

Atchley v. AstraZeneca UK Ltd. In Atchley v. AstraZeneca UK Ltd., the D.C. Circuit offered a broad interpretation of another element of JASTA aiding-and-abetting. 22 F.4th 204 (D.C. Cir. 2022). As previously noted, a JASTA plaintiff's injury must be caused by an act "committed, planned, or authorized" by a designated FTO. 18 U.S.C. § 2333(d)(2). Many of the Atchley plaintiffs were injured in attacks carried out by Jaysh al-Mahdi ("JaM"), which is not and has never been an FTO. Plaintiffs attempted to plead around this requirement by alleging that JaM was so intertwined with Hezbollah—which is an FTO—that Hezbollah was responsible for "planning" or "authorizing" the attacks. Id. at 216-19. In support, plaintiffs pointed to historical connections between JaM and Hezbollah, including evidence that Hezbollah helped establish, train, and arm JaM. Id. The court concluded that these "allegations of close integration and allegiance" were sufficient to plead plausibly that Hezbollah planned or authorized the attacks. Id. at 219.  

Having cleared that hurdle, the D.C. Circuit applied the pleading standards set out in Kaplan and Honickman. Plaintiffs alleged that defendants—medical-supply and manufacturing companies—secured contracts with the Iraqi Ministry of Health through corrupt payments and gifts to JaM, aware that JaM controlled the Ministry. General awareness was sufficiently pled based on allegations that "defendants were aware of reports extensively documenting both Jaysh al-Mahdi's domination of the Ministry and its mission to engage in terrorist acts." Id. at 221. Moreover, defendants' agents attended in-person meetings to finalize contracts with the Ministry at which armed fighters, the JaM flag, and terrorist propaganda were on display. Id. at 221. Finally, plaintiffs sufficiently alleged "substantial assistance" based on allegations that defendants' illegal kickbacks and cash bribes provided significant funding to JaM over the course of several years. Id. at 221-24. A petition for rehearing en banc is currently pending. 

These cases have led some district courts to reject motions to dismiss, interpreting Kaplan and Honickman to have "lowered the bar to state a JASTA aiding-and-abetting claim." Mem. & Order, at 7, Bartlett v. Société Générale de Banque au Liban, No. 19-cv-0007 (E.D.N.Y. June 17, 2022), ECF No. 291 (hereinafter "Bartlett Mem. & Order"). Should the D.C. Circuit deny the petition for rehearing en banc in Atchley, it too could be seen as having the same effect. 

Implications for Future Aiding-and-Abetting Liability 

What does this mean for potential defendants? Discovery, in more cases. Successful motions to dismiss allowed resolution of these cases without the burden of intrusive discovery, including compelled production of internal documents and testimony from company officers and employees. Following Kaplan and its progeny, however, district courts have denied motions to dismiss and allowed aiding-and-abetting claims to proceed to discovery. E.g., In re Terrorist Attacks on Sept. 11, 2021, No. 03-md-1570, ECF No. 7942 (S.D.N.Y. May 9, 2022) (recommending denial of motion-to-dismiss aiding-and-abetting claim); Averbach v. Cairo Amman Bank, No. 19-cv-0004, ECF No. 114 (S.D.N.Y. Apr. 11, 2022) (same); Bartlett Mem. & Order, at 3 (denying defendants' renewed motions to dismiss, noting that Kaplan and Honickman "alter the law in Plaintiffs' favor"). 

When these types of cases proceed to discovery, foreign bank secrecy laws often become important. One example: in Miller v. Arab Bank, No. 18‑cv-2192 (E.D.N.Y), the bank is seeking a protective order respecting documents located in Jordan, Lebanon, and the Palestinian Territories because each government has declined to authorize it to produce customer records. Absent authorization, foreign laws may prohibit disclosure of customer banking records. As more cases proceed to discovery, courts will increasingly adjudicate similar conflicts between foreign privacy and blocking statutes on the one hand, and U.S. discovery rules on the other. See, e.g., Mot. to Compel, Bartlett, No. 19-cv-0007 (E.D.N.Y. May 10, 2022), ECF No. 270; Linde v. Arab Bank, PLC, 269 F.R.D. 186 (E.D.N.Y. 2010) (awarding sanction of adverse inferences based on defendant's failure to produce documents subject to foreign bank secrecy laws).  

Reducing the Risk 

Entities doing business in countries where terrorist organizations operate, or with customers that have ties to those regions, should take steps to limit exposure. First, such entities should consider conducting a risk assessment. For any concerns that materialize, entities should engage qualified legal counsel to determine whether remediation is advisable. See, e.g., Siegel, 933 F.3d at 225 (noting that "[Defendant Bank] was not 'present' at the time of the [relevant] [a]ttacks" because "[it] had ceased transacting any business with [Other Bank] ten months prior").  

Second, banks and other entities should consider implementing due diligence procedures beyond ordinary benchmark "Know Your Customer" standards where appropriate. Banks and entities making regulatory disclosures or entering into administrative settlements with governmental agencies should also consider whether public statements contained therein may create ATA litigation risk.  

Third, digital assets may present another source of liability for financial services providers. As digital assets become increasingly accessible, financial institutions should ensure their risk assessment measures are sufficiently comprehensive to account for potential exploitation by terrorists and their supporters. Although most FTOs continue to move money via the traditional financial system, digital assets are not immune from abuse by these groups. See, e.g., U.S. Dep't Treas., National Strategy for Combating Terrorist and Other Illicit Financing 29-31 (2020) (announcing that Hamas had used social media to solicit Bitcoin donations). Law enforcement anticipates this practice will become more widespread.  

Fourth, financial institutions should take extra care in vetting third-party service providers such as payment providers and cash vault service providers. These third parties are not subject to AML/CFT obligations and therefore present heightened risk under JASTA.  

Finally, financial services providers should familiarize themselves with red flags indicative of terrorist funding. See Fin. Crim. Enforcement Network, Aspects of Financial Transactions Indicative of Terrorist Funding (2002). Sophisticated financial institutions have automated systems to perform transaction monitoring as part of their compliance programs and are more readily able to detect and scrutinize financial activity linked to high-risk jurisdictions.  

Other types of financial institutions, including banks not regulated by a federal functional regulator, and industry gatekeepers such as accountants, are not subject to extensive AML/CFT obligations. These industry participants should dedicate time and resources to ensuring staff are trained to manually detect high-risk transactions. Further, these entities and individuals should become and remain familiar with the lists of high-risk and noncooperative jurisdictions as determined by the Financial Action Task Force and the lists of known terrorists and terrorist groups designated by the Office of Foreign Assets and Control.

Four Key Takeaways 

  1. District courts have opened the door for plaintiffs to file more aiding-and-abetting claims against companies doing business in countries where terrorist organizations operate or with customers having ties to these regions. More cases are proceeding past the motion-to-dismiss stage and heading to discovery. 
  2. Plaintiffs are increasingly attempting to replace JASTA's requirement that a defendant act "knowingly" with a mere negligence—or "should have known"—standard, seeking to impute to companies any and all statements about customers and counter-parties published anywhere in the world. As a result, companies should consider the appropriateness of their existing due-diligence protocols with respect to customers and new business opportunities.
  3. Discovery disputes related to foreign blocking statutes and privacy laws are likely to proliferate as a greater number of aiding-and-abetting claims against foreign defendants proceed to discovery.
  4. JASTA remains a developing and unpredictable area of the law. Litigants should anticipate that the Courts of Appeals, and ultimately the Supreme Court, will weigh in on related issues in the near future.
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