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Second Circuit affirms dismissal of civil lawsuit against bank that was instrumentality of Turkish government because, under Foreign Sovereign Immunities Act, negligence that allegedly took place in Turkey did not have direct effect in U.S.

Theresa Guirlando (Plaintiff) filed a lawsuit against T.C. Ziraat Bankasi A.S. bank (Defendant), claiming that Defendant was negligent and enabled the theft of money from her Turkish bank account. It was Mevlut Cicek , Plaintiff5s own husband who withdrew most of her life savings from the Turkish bank account. Plaintiff is a 67-year-old U.S. citizen, who in 2006 had married Cicek apparently within the U.S. Cicek, however, was an illegal alien at the time and the U.S. had deported him to Turkey in 2007. Upon Cicek's request, Plaintiff had sold her house and car and followed him to Turkey, carrying a check for $251,156.63.

Cicek took Plaintiff to a Defendant's branch bank to deposit the check. The bank employees allegedly made Plaintiff put the money into a joint account with Cicek thus enabling him to withdraw $200,000 later on. Plaintiff also found out that Cicek was already married to another woman. Upon her return to the U.S., Plaintiff filed the present lawsuit against Defendant in a New York federal court.

All parties agree that Defendant bank is an instrumentality of the Turkish Government. The District Court dismissed for lack of subject matter jurisdiction under section 1605(a)(2) of the Foreign Sovereign Immunities Act (FSIA), because the Defendant's alleged actions did not cause a direct effect in the U.S. Plaintiff noted a timely appeal. The Second Circuit affirms.

The "commercial activity exception" of FSIA section 1605 provides that a foreign state or its instrumentality shall not be immune from the jurisdiction of the U.S. courts if the action is based upon an act outside the U.S. that caused a direct effect in the U.S. The mere fact that a foreign state's commercial activity outside the U.S. caused physical or financial injury to a U.S. citizen, however, does not amount to producing a direct effect in the U.S.

"Plaintiff's complaint alleges principally that, in Turkey, Defendant's employees [1] told her, falsely, that she could not open an individual checking account into which to deposit her Citibank check, [2] caused her to open a disjunctive joint account from which funds could be withdrawn by one joint owner without the consent of the other, rather than an account for which the consent of both owners would be required for a withdrawal, and [3] notified Cicek, rather than Plaintiff, when the funds had arrived in the new account with Defendant.

She asserts that these acts had a direct effect in the United States both because they resulted in the payment of $251,156.63 from her New York Citibank account and because she, who was an American citizen, lost more than $200,000. Regardless of how the 'legally significant act' test is formulated, we cannot conclude that either event constituted a direct effect in the United States within the meaning of [section] 1605(a) (2)."

"Plaintiff's contention that the requisite direct effect occurred because she 'returned to the United States where she lives in much reduced circumstances' ... is quickly disposed of for two reasons...'[T]he fact that an American individual ... suffers some financial loss from a foreign tort cannot, standing alone, suffice to trigger the [commercial activity] exception.' ... Second, Plaintiff's financial loss was not a direct result of the Bank's denying her the right to open an individual account, for between that conduct and her impoverishment there was an intervening element, to wit, Cicek's larcenous withdrawals." [...]

"Plaintiff's contention that the requisite direct effect in the United States consisted of the transfer of the funds out of her New York Citibank account requires somewhat more discussion, but it suffers from multiple flaws. First, we note that her complaint that Defendant caused her to open a disjunctive joint account, rather than a two-signature account from which withdrawals could not be made without the consent of both owners, loses considerable significance upon scrutiny."

"Although the latter type of account would have prevented Cicek from withdrawing funds without Plaintiff's knowledge and consent, it would also have given him control over Plaintiff's own ability to withdraw the funds. Thus, the two-signature joint account that Plaintiff purports to have preferred would have deprived Plaintiff of independent access to her money. Her more logical complaint is that Defendant did not allow her to open an individual account."

"Even as to Defendant's refusal to allow Plaintiff to open an individual account, however, there are several flaws in the contention that that conduct had a direct effect in the United States. First, if Plaintiff had deposited her check into an individual account as she wished, her money still would have left the United States. And while she argues that the transfer of her money from New York had a direct effect in the United States, it is clear from the face of the Complaint that that transfer is not what caused Plaintiff's injury. [As of] the arrival of Plaintiff's funds in Turkey, Plaintiff had lost nothing. What caused her loss were the acts of Cicek--after the money had left the United States--in withdrawing most of the money from the Turkish account without Plaintiff's consent."

"Second, as held in the Antares litigation, although the breach of an agreement 'to pay [money] ... in New York' has the requisite direct effect in the United States, see Antares Aircraft, L.P. v. Federal Republic of Nigeria, 948 F.2d 90, 95 (2d Cir. 1991)] ... '[t]he transfer of funds out of [a] New York bank account ... [is] not [itself] sufficient to place the effect of [a] defendant's] conduct "in the United States' within the meaning of [section] 1605(a) (2),' ... Having engaged Defendant for the express purpose of depositing her New York check into a new Turkish account, an act that by its nature would result in her money leaving the United States, Plaintiff is not entitled to have the courts deny immunity to Defendant on the theory that it was the conduct of Defendant that caused that effect." [Slip op. 20-25]

Finally, the Court notes that the dismissal for lack of jurisdiction here does not leave Plaintiff without recourse. Defendant stated at the hearings that it is amenable to suit in the Turkish courts and will not challenge the appropriateness of Turkey as the forum for litigating this action.

CITATION: Guirlando v. T.C. Ziraat Bankasi A.S., No. 09-0478-cv (2d Cir. April 8, 2010).
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Publication:International Law Update
Geographic Code:1USA
Date:Apr 1, 2010
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