On February 29, 2024, the First Department issued a decision in Bangladesh Bank v. Rizal Commercial Banking Corp., 2024 NY Slip Op. 01112, analyzing conspiracy jurisdiction:
CPLR 302(a)(2) provides for long-arm jurisdiction over a nondomiciliary who in person or through an agent commits a tortious act within the state. As relevant here, the agency requirement of section 302(a)(2) does not require a formal agency relationship to establish jurisdiction. Rather, plaintiff must convince the court that the in-state actor engaged in purposeful activities in this State in relation to the transaction for the benefit of and with knowledge and consent of the out-of-state co-conspirator and that the out-of-state co-conspirator exercised some control over the in-state actor in the matter.
This Court has long recognized that a conspiracy is a type of agency and that the acts of a co-conspirator may, in an appropriate case, be attributed to a defendant for the purposes of obtaining personal jurisdiction over that defendant under CPLR 302(a. Here, however, the RCBC defendants not only argue that plaintiff has failed to allege a prima facie conspiracy, but also that Supreme Court erred in finding that an agency relationship existed between them and the alleged co-conspirators when determining that it had personal jurisdiction under a conspiracy-based theory of jurisdiction.
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[T]o establish personal jurisdiction over a co-conspirator based on a conspiracy theory of jurisdiction under CPLR 302(a)(2), plaintiff must also sufficiently allege that the conspiracy involved the commission of an overt tortious act in New York and that defendants were part of the conspiracy.
As relevant here, plaintiff contends that the theft of $81 million from its bank account at the NY Fed constitutes a tortious act within this state. In SOS Capital v Recycling Paper Partner of PA, LLC (220 AD3d 25, 33, 37 [1st Dept 2023]), we reiterated that personal jurisdiction under CPLR 302(a)(2) requires that a defendant’s act or omission occur while a defendant or its agent was physically present in the state. However, we maintained a narrow exception to this rule, and reaffirmed that a financial fraud tort can be deemed to have occurred within this state, when neither a defendant nor its agents had physical contacts within the boundaries of New York where an out-of-state defendant uses a modern-day financial system and a New York based bank account to commit a financial fraud tort within the boundaries of New York. Therefore, there is no question that the theft of the funds from an account plaintiff has held in New York for nearly 50 years and through which it conducts the majority of its international monetary transactions is a financial fraud tort within this state.
However, as noted above, for the purposes of conspiracy-based personal jurisdiction in New York, plaintiff must also allege specific facts warranting the inference that each defendant was a member of the conspiracy that resulted in the tortious act in New York. That is, the complaint must sufficiently allege the requisite relationship between the defendant and its New York co-conspirators by showing that (a) the defendant had an awareness of the effects in New York of its activity; (b) the activity of the co-conspirators in New York was to the benefit of the out-of-state conspirators; and (c) the co-conspirators acting in New York acted at the direction or under the control, or at the request of or on behalf of the out-of-state defendant. As to the third requirement, to make a prima facie showing of control, a plaintiff’s allegations must sufficiently detail the defendant’s conduct so as to persuade a court that the defendant was a primary actor in the specific matter in question; control cannot be shown based merely upon a defendant’s title or position within the corporation, or upon conclusory allegations that the defendant controls the corporation.
With regard to RCBC, the complaint sufficiently states its involvement in the conspiracy to establish conspiracy based personal jurisdiction under CPLR 302(a)(2). First, the allegations support the inference that RCBC was aware of the effects of its activity in New York. Specifically, the complaint alleges that RCBC’s correspondent accounts in New York were used in the initial theft, that the funds were transferred from RCBC’s New York correspondent accounts to RCBC’s fictitious accounts, and despite RCBC having notice of the suspicious activity, the funds were sent to co-conspirators to be laundered. Second, the complaint plausibly alleges that the North Korean hackers acted to benefit RCBC. It alleges that the stolen funds were sent from RCBC’s correspondent accounts to the fictitious accounts, whereby RCBC’s treasury department, through its department head, Raul Tan, converted the funds from dollars to pesos, thereby benefitting RCBC by virtue of transaction fees. Third, the complaint not only alleges that RCBC was aware of the tortious acts in New York, but it is also reasonable to infer that the hackers were working at its direction or on its behalf based on the allegations that RCBC was an integral part of, and direct participant in, the theft.
Plaintiff has also sufficiently alleged Raul Tan’s and Lorenzo Tan’s membership in the conspiracy. As to the first requirement, the complaint alleges in detail how, as senior management, the Tans were aware of the conspiracy based on Lorenzo Tan’s contacts with defendant Wong. Specifically, it alleges that Lorenzo Tan was a longtime friend of Wong and advised RCBC personnel to take care of Wong as a client of RCBC. The complaint further alleges Lorenzo Tan was not only aware the fictitious accounts were opened, but also chose to take no action, despite knowing that large amounts of money would be placed into these accounts. Similarly, it is alleged that Raul Tan knew the funds had come from New York because he discussed the transfers and the respective holds with senior personnel.
Turning to the second requirement, whether the activities in New York benefitted the Tans, we find that the complaint contains factual allegations from which such benefit can be inferred. Namely, it alleges that managers and officials at RCBC were motivated by the prospect of significant fees and commissions, including those earned through the foreign exchange transactions completed by RCBC’s Treasury Department. Thus, it follows that Lorenzo Tan, as President and CEO, stood to benefit financially from the fees RCBC generated through the exchange transactions, and Raul Tan, who was directly involved with the conversion of the funds to pesos, also stood to benefit.
As to the third requirement, it is also reasonable to infer that the hackers were working at the Tans’ direction, under their control, or on their behalf. As noted above, the complaint alleges that the Tans were aware of the torts being committed by the hackers in New York (see Lawati, 102 AD3d at 428). It further alleges that Lorenzo Tan was aware there were going to be large infusions [*13]of funds into the fictitious accounts and that Raul Tan, as a member of senior management, directed the hold on plaintiff’s funds be lifted shortly after it was put in place and despite being advised of the suspicious transactions from the Deputy Head of RCBC’s Operations Group, thereby allowing plaintiff’s funds to be routed through the fictitious accounts.
While the complaint also contains more generalized allegations that senior RCBC personnel signed-out RCBC’s SWIFT server to prevent the timely receipt of the Bank’s stop payment instructions, it specifically alleges that Raul Tan was involved with the misleading SWIFT message which indicated that RCBC had frozen the accounts in question but which failed to disclose that the funds had already been transferred to other RCBC accounts. Lastly, the complaint alleges that Raul Tan was involved with the conversion of the stolen funds to pesos noted above, despite knowing of the suspicious nature of the funds and the bank’s request to recall them.
Based on the foregoing, we find that sufficient facts warranting the inference of a conspiracy and RCBC and the Tans’ membership therein, have been demonstrated. However, the complaint does not sufficiently allege conspiracy jurisdiction over Reyes, Pineda, Capina, and Agarrado because there is no basis to infer that the theft in New York was to their benefit or that the hackers acted at their behest. Rather, the complaint simply alleges that Reyes, Pineda, and Capina allowed the hold on plaintiff’s funds to be lifted at Raul Tan’s direction and consulted with Deguito about the fictitious accounts. Similarly, the complaint only alleges that Agarrado signed off on the opening of the fictitious accounts created by Torres and Deguito prior to the theft occurring.
While plaintiff attempts to read the control element out of the conspiracy membership analysis, our holding in Wimbledon Fin. Master Fund, Ltd. v Weston Capital Mgt. LLC (160 AD3d 596 [1st Dept 2018]) does not stand for the proposition that conspiracy membership can be established without showing some extent of control over the in-state actor. Rather, in Wimbledon we simply found that the control element could be met by an out-of-state defendant’s receipt of hush money, because it allowed for the reasonable inference that they exerted control to the extent that the fraud could not have been completed without their acquiescence to the misconduct.
However, no such inference can be made here with respect to the individual defendants. Simply put, plaintiff failed to allege facts sufficient to support New York conspiracy jurisdiction for these defendants under CPLR 302(a)(2).
(Internal quotations and citations omitted).