"Rushaid v. Pictet & Cie.: New York Court of Appeals Decision Has Important Implications for Foreign Banks with New York 'Correspondent' Accounts"

On November 22, 2016, the New York Court of Appeals handed down a decision in Rushaid v. Pictet & Cie., which will have important implications for foreign banks with New York “correspondent” accounts.  This Stroock Special Bulletin provides an overview of the litigation, in which the plaintiffs had alleged that some of plaintiffs’ faithless employees, located in Saudi Arabia, had accepted bribes and kickbacks – totaling many millions of dollars – from vendors, in exchange for paying inflated prices, and ignoring various deficiencies in the vendors’ products and services. 

Plaintiffs sued Pictet & Cie., a private bank located in Geneva, Switzerland, and Pierre-Alain Chambaz, Pictet’s Vice President, claiming that defendants aided and abetted the employees’ fraud, by knowingly laundering the money paid by the vendors through Pictet’s New York correspondent account with Citibank.  Pictet moved to dismiss the complaint, contending that the New York courts lacked personal jurisdiction over it under CPLR 302(a)(1). 

The Appellate Division held that “defendants merely carried out their clients’ instructions and have not been shown to have “purposefully availed themselves of the privilege of conducting activities in New York.”

A closely-divided Court of Appeals reversed, concluding that “defendants’ intentional and repeated use of New York correspondent bank accounts to launder their customers’ illegally obtained funds constitutes purposeful transaction of business substantially related to plaintiffs’ claims, thus conferring personal jurisdiction within the meaning of CPLR 302(a)(1).”