S.D.N.Y. Allows Discovery from Correspondent Banks under Section 1782

On December 30, 2024, Judge Ho of the U.S. District Court for the Southern District of New York granted in part a renewed application under Section 1782 seeking evidence for use in proceedings before the High Court of the Hong Kong Special Administrative Region Court of First Instance (the "Hong Kong Proceeding"). In the same opinion, Judge Ho denied the intervenors'--defendants in the Hong Kong Proceeding--motion to vacate the Court's earlier order partially granting an original application.

The opinion attracted our attention because petitioners sought discovery from correspondent banks in order to trace misappropriated funds which were part of certain transactions made by the intervenors. In relation to the original application, the Court allowed discovery as to seven banks, but denied it as to other seven banks (the "Challenged Banks"). The latter are the subject of the renewed petition.

The Court had originally found that it lacks jurisdiction over the Challenged Banks. In the renewed application, petitioner argued that the Court had general jurisdiction over four of the Challenged Banks and, in any event, had specific jurisdiction over all of them.

The Court agreed that it has general jurisdiction over three of the four Challenged Banks, which admitted to maintaining their headquarters in the Southern District of New York. As to the fourth bank, the Court found that petitioner had failed to show that the Court had general jurisdiction because it was a foreign bank with a branch in New York and the petitioner did not present any evidence that this is an exceptional case where the bank's "operations in [this] forum ... [are] so substantial and of such a nature as to render the corporation at home.”

The Court moved on to analyzing petitioner's argument that the Court had personal jurisdiction over the remaining Challenged Banks because the "discovery material sought proximately resulted from the respondent[s'] forum contacts." Under SDNY precedent, from In re del Valle Ruiz, 939 F.3d 520, 530 (2d Cir. 2019), the respondent "purposefully avail[ing] itself of the forum must be the primary or proximate reason that the evidence sought is available at all." The Court found that to be the case as to the banks which cleared U.S. dollar transactions through their New York office and where the intervenors held an account. To the contrary, the Court found that it lacked jurisdiction over the remaining correspondent banks where the only allegations were that "their New York branches serve as correspondent banks for [a bank in China] and because 'major banks in HK use [their branches] in New York as their correspondents for U.S. dollar transfers." Petitioner's general allegations, without identifying any actual transactions where the remaining correspondent banks' branches served as intermediaries, were not sufficient for a finding of specific jurisdiction.

The Court summarized:

Put differently: (1) Applicant identifies no transaction where Wells Fargo and/or Bank of America served as an intermediary in a transaction to or from Industrial and Commercial Bank of China, and (2) while it is true that some banks in Hong Kong use New York branches of Wells Fargo and Bank of America as correspondents for U.S. dollar transfers, Applicant points to no specific alleged transactions where these banks’ New York branches may have served as intermediaries.

The Court also reminded the litigants of other SDNY precedent that should have warned them of their weak basis for specific personal jurisdiction when lacking any evidence that the respondents are the correspondent banks for any banks at which the foreign defendants had accounts. See  In re Litasco SA, 2023 WL 8700957, at *2 (S.D.N.Y. Dec. 15, 2023).

The opinion will serve as a guide for future petitioners in crafting their application and bringing it in a venue with jurisdiction over the correspondent banks.

The case is In re Application of, Golden Meditech Holdings Ltd., No. 24 MISC. 24 (DEH), 2024 WL 5247285 (S.D.N.Y. Dec. 30, 2024). The petitioner was represented by Kellner Herlihy Getty & Friedman, LLP. The intervenors were represented by Quinn Emanuel Urquhart & Sullivan LLP.