In Mashreqbank PSC v. Ahmed Hamad Al Gosaibi & Bros. Co., 2014 N.Y. Slip Op. 02381, the New York Court of Appeals ruled that a court may sua sponte decide the issue of forum non conveniens so long as it allows the parties to brief and argue the matter. The Court of Appeals further found that the mere transfer of money through a New York-based bank account was not sufficiently compelling to keep an otherwise foreign case in a New York court.
The case arose out of a 2009 transaction between Mashreqbank PSC (“Mashreq”), a bank located in Dubai, United Arab Emirates, and Ahmed Hamad Al Gosaibi & Brothers Company (“AHAB”), a partnership with its headquarters in Khobar, Saudi Arabia. Mashreq wired $150 million to AHAB’s bank account in New York in exchange for the equivalent amount of Saudi Arabian riyals that AHAB allegedly agreed, but failed, to pay.
Mashreq sued AHAB in New York Supreme Court in order to collect the debt. AHAB responded, alleging that an AHAB employee set up the transfer, without AHAB’s knowledge, and siphoned the disputed money to another New York bank account that he controlled. During oral argument on another motion, Justice Richard B. Lowe III suggested that a forum non conveniens argument had merit, and directed the parties to brief the issue. Because Mashreq found that AHAB had no assets in New York, it favored a forum non conveniens dismissal. AHAB, however, desired to stay in New York because it filed a third-party complaint seeking the $150 million its employee supposedly absconded.
The Supreme Court found that although it could exercise jurisdiction over the parties, New York was not a convenient forum for the action, and it therefore dismissed the complaint and third-party complaint on forum non conveniens grounds. The Appellate Division, First Department reversed, holding that CPLR 327(a) prohibited dismissal on forum non conveniens grounds in the absence of a party’s motion seeking such relief. In addition, the Appellate Division found that the passage of funds through a New York bank “automatically implicates New York’s compelling interest in the protection of its banking system,” thereby making New York an appropriate forum in which to adjudicate the action.
The Court of Appeals disagreed and overturned the First Department’s decision and reinstated the Supreme Court’s holding. The Court of Appeals found no reason to read CPLR 327(a) as prohibiting a forum non conveniens dismissal where “only the formality of a document labeled ‘notice of motion’ was lacking . . . .” The Court held that because the Supreme Court gave each party a full opportunity to address the issue, AHAB was not “prejudiced by the omission of that formality.”
In addition, the Court of Appeals held that New York was not a convenient forum, reasoning that there were no New York residents, no New York witnesses or documents, no New York property related to the dispute, and no substantive New York law at issue. The Court found that while the integrity of its state’s banks is compelling, “it is not significantly threatened every time one foreign national . . . moves dollars through a bank in New York.” The Court even noted that, as a practical matter, any transaction comparable in size to the one at issue must go through New York.
When the court finds that in the interest of substantial justice the action should be heard in another forum, the court, on the motion of any party, may stay or dismiss the action in whole or in part on any conditions that may be just. The domicile or residence in this state of any party to the action shall not preclude the court from staying or dismissing the action.