(Jan. 2, 2019) The US Court of Appeals for the Seventh Circuit recently affirmed a lower court’s decision to dismiss plaintiff Rhonda Kemper’s complaint against Deutsche Bank (the Bank) for failure to state a claim under 18 U.S.C. § 2333, commonly referred to in judicial opinions as the Anti-Terrorism Act (ATA). (Kemper v. Deutsche Bank AG, No. 18-1031 (7th Cir. 2018) (Kemper), US Court of Appeals for the 7th Circuit website; 18 U.S.C. § 2333; see also Wultz v. Islamic Republic of Iran, 755 F. Supp. 2d 1, 19 n.1 (D.D.C. 2010).)
Plaintiff’s son, US Army Specialist David Schaefer, Jr., was killed by a roadside explosive device in Iraq in 2009. (Kemper at 1.) The explosive device was distinctive and could be traced to those supplied by Iran to Iraqi agents. (Id. at 3.) The Court stated, “[b]ut for Iran, the technical sophistication and explosive power found in [such devices] would be unavailable to Iraqi militias.” (Id.)
The US had long imposed sanctions prohibiting nearly all trade with Iran because of Iran’s sponsorship of terrorism. (Id.; see also Kenneth Katzman, Cong. Research Serv., RS 20871, Iran Sanctions (2018).) However, until 2008, legitimate Iranian entities could partially access the US financial system through an exception to the sanctions called the “U-Turn” exemption. (Kemper at 3; see also Press Release, U.S. Dep’t of the Treasury, Treasury Revokes Iran’s U-Turn License (Nov. 6, 2008), Treasury Dept. website.) Iranian entities could use a non-Iranian bank (such as Deutsche Bank) with a corresponding US bank account to process transactions that passed through the US. (Kemper at 4.) Importantly, banks servicing a U-Turn transaction were required to identify and disclose the involved parties to confirm that the transaction would not benefit a sanctioned entity. (Id.)
The Bank skirted US sanctions by offering “premium” banking services to certain Iranian clients, including Iranian banks and government entities concurrently engaged in both legitimate and terroristic activities. (Id. at 6, 10.) In exchange for concealing the entities’ names from U-Turn transactions, the Bank charged sanctioned or potentially-sanctioned entities higher processing fees. (Id. at 4–5.) After its sanctions-avoiding activities were discovered, the Bank agreed to pay a multimillion dollar civil penalty in a settlement with the New York State Department of Financial Services. (Id. at 5; see also Consent Order, Deutsche Bank AG, NYS Dep’t of Fin. Serv. (Nov. 3, 2015).) The Bank’s improper activities were described in great detail in the consent order, which provided many of the facts for the Kemper complaint. (Kemper at 6.)
Lower Court Proceedings
Plaintiff brought an action under the ATA, alleging that the Bank’s sanctions-avoiding practices were part of a larger conspiracy to fund terrorism. (Id.) She alleged that the Bank’s activities on behalf of sanctioned Iranian entities enabled the entities to directly perpetrate terroristic acts, and that the Bank knew about—or was deliberately indifferent to—the terroristic aims of its clients. (Id. at 6–7.) The complaint implicated the Bank, the state of Iran, and sanctioned Iranian banks and businesses in the conspiracy. (Id. at 6.)
The district court granted the Bank’s motion to dismiss the complaint for failure to state a claim. (Id. at 7–8.) The lower court found that there were “too many steps in the hypothesized causal chain” between the Bank’s actions and the act of terrorism that killed plaintiff’s son. (Id.) Further, to the extent that plaintiff pleaded a conspiracy, her facts supported only a conspiracy to circumvent US sanctions, not to engage in terroristic activities. (Id. at 8.) Plaintiff appealed the dismissal to the Seventh Circuit.
The ATA sets forth that any US national may sue for injuries caused by an act of international terrorism. (18 U.S.C. § 2333(a).) Any person who aids, abets, or conspires to commit an act of international terrorism is liable for damages under the ATA. (18 U.S.C. § 2333(d).) An act of international terrorism is defined in the statute as an act that is violent or dangerous to human life and intended to intimidate or coerce civilians, influence a government’s policy, or affect a government’s conduct. (18 U.S.C. § 2331(1)(A)–(C).) In addition to showing the occurrence of an injury and an act of international terrorism, a plaintiff bringing an ATA action must also prove fault, state of mind, causation, foreseeability, and intentional misconduct. (Kemper at 9.)
In dismissing the complaint for failure to state a claim under the ATA, the Seventh Circuit first addressed whether the Bank’s acts could be considered acts of international terrorism. The court determined that while the Bank’s business interactions on behalf of Iranian entities violated US sanctions, this violation did not convert the business interactions into terrorist acts, particularly where the “great majority of these business interactions did not actually violate any sanctions, and the sanctions at issue cover more than terrorism-related transactions.” (Id. at 10.) Nor were the Bank’s actions violent, dangerous, or designed to intimidate, coerce, or influence a civilian population or government. (Id.) Accordingly, the appellate court found that plaintiff failed to plausibly allege that the Bank’s acts were acts of international terrorism as defined by the ATA.
The Seventh Circuit also found that plaintiff failed to sufficiently allege that the Bank’s actions caused the ultimate terrorist act. Plaintiff claimed that the Bank provided financial services to Iranian entities, which in turn provided both legitimate services and services to terrorist groups. (Id. at 15.) The court focused on plaintiff’s assertions that the Bank’s Iranian clients provided a variety of nonterroristic services in addition to supporting terrorism. (Id. at 15.) Plaintiff’s facts failed to support a claim that the Bank’s acts were in furtherance of funding terrorism as opposed to increasing the Bank’s profits. (Id. at 19.) The court found that there were too many “criminal intervening acts” between the Bank’s acts and the attack that killed plaintiff’s son to support causation. (Id. at 16.)
Moreover, the court found that the complaint did not set forth the requisite elements of a conspiracy. A conspiracy requires an agreement. (Id. at 19.) The facts in the complaint did not support plaintiff’s claim that the Bank agreed to provide material support for terrorism. (Id. at 20.) At most, the Bank was apathetic to how its Iranian clients spent funds processed through the improper U-Turn transactions. (Id.) Plaintiff’s facts indicated that the Bank may have “incidentally assisted” a conspiracy to commit acts of terrorism, but not that it agreed to join the conspiracy. (Id.) Therefore, the complaint failed to sufficiently set forth the required elements of a conspiracy claim.