Opinion ID: 697268
Heading Depth: 2
Heading Rank: 2

Heading: The Preparation and Filing of the New York Complaint

Text: 7 Thereafter, Sussman and Guilden retained Lewin, a partner in the Washington, D.C. law firm of Miller, Cassidy, Larroca & Lewin, to investigate the circumstances underlying the Israeli suit and to evaluate the prospects for further litigation against BOI and other Israeli officials involved in the events at NAB. In 1991, as the Israeli action was nearing its scheduled trial date, Lewin drafted a complaint to be filed in New York (the New York complaint), naming as defendants BOI; the Ministry; three BOI officials, including the two named as third-party defendants in the Israeli action; and Bank Hapoalim, Ltd. (Bank Hapoalim), an Israeli bank with a branch office in New York. 8 The New York complaint substantially repeated Sussman and Guilden's assertions in the Israeli action that BOI and its officials had helped NAB managers to manipulate the price of NAB stock following the Bank Shares Crisis. It also alleged that the secrecy of the scheme was maintained by routing the Ministry's clandestine $10 million loan to NAB through Bank Hapoalim's New York office; that BOI and Ministry officials contemporaneously assured Sussman that NAB was well-managed and financially stable, thereby inducing him not to sell his NAB shares; that BOI knew that the directorships held by NAB's foreign investors were largely honorary and that the investors were relying on BOI to monitor NAB's Israeli operations; and that Sussman and Guilden had relied on the representations of BOI and the Ministry in not taking action to protect their investments. The complaint also alleged that the filing of the Israeli action was itself part of BOI's continuing scheme to force Sussman and Guilden to bear the costs of BOI's failure to rectify the fraud and mismanagement at NAB. Sussman and Guilden sought, inter alia, damages totaling $17 million for the lost value of their investments in NAB. 9 Before filing the complaint, Lewin sent identical letters dated May 30, 1991 (the May 1991 warning letter), to several Israeli government officials, including then-Prime Minister Yitzchak Shamir, then-Minister of Finance Yitzchak Moda'i, and BOI Governor Michael Bruno, warning them of Sussman and Guilden's intention to bring the present suit, and proposing settlement discussions. After describing the general nature of the charges contained in the draft complaint, the letter stated: 10 This is a matter of extreme urgency because, in the absence of any satisfactory resolution of our differences, the lawsuit will be filed in New York within the next ten days. The agencies of the Government of Israel that are engaged in an effort directed against our clients are also pressing a trial in the Jerusalem District Court that is scheduled to begin shortly. 11 If this controversy erupts into public view with the filing of our lawsuit and the inception of the Israeli proceeding, it will not only result in a grave injustice to individuals who have been among Israel's most constant and generous supporters, but will seriously damage foreign investment in Israel in the future. 12 (May 1991 warning letter at 1.) The letter further asserted that Sussman and Guilden were, at most, honorary directors of [NAB] (id.), and that they had had no involvement in the improper activities of NAB's managers and had relied on [BOI] and its inspectors to supervise [NAB] and to insure that its business was run properly (id. at 2). It then concluded: 13 The case now pending in Jerusalem is the culmination of years in which improprieties at North American Bank were overlooked or deliberately ignored by the Bank of Israel. It is grossly unjust for the Bank of Israel now to shift the blame for its own conduct to individuals who have always supported Israel emotionally and financially and seek to hold these foreign supporters liable, in an amount exceeding 200 million shekalim, for the losses caused by the failure of [NAB]. 14 In addition to the loss of their investments, which amounted to millions of dollars, our clients estimate that they have been forced to spend in excess of one million dollars fighting baseless claims made in the Israeli courts. Our lawsuit in federal court in New York will seek recovery against the Ministry of Finance, the Bank of Israel and individual government officials for these losses and for other harm caused to our clients. 15 Our clients have heretofore been reluctant to take the step of filing suit because a full airing of this outrageous conduct by the Government of Israel will surely deter many potential foreign investors who might otherwise be interested in lending financial resources to Israel. However, the enormity of this injustice and the relentless prosecution of the case in Jerusalem leaves them no option. 16 If you believe that discussions on this subject can lead to a fruitful and mutually satisfactory resolution, I am prepared to come to Jerusalem promptly to meet with you. 17 (Id. at 2-3 (italics in original).) 18 In response to the letter, Amihud Ben-Porath, an Israeli attorney representing BOI, telephoned Lewin and requested a copy of the draft complaint. Lewin sent a copy with a June 3, 1991 covering letter (the June 1991 letter) stating, I have not, in our conversation, overstated my clients' anger at how shabbily they have been treated in Israel, and I hope you appreciate it and are able to communicate this feeling.... Maybe we can save both our clients much travail. Ben-Porath thereafter met with Lewin, Sussman, and Guilden in New York and talked with Lewin several times by telephone. After Ben-Porath advised Lewin that Israeli officials were unwilling to settle the dispute and withdraw the Israeli action, Lewin filed the New York complaint on June 17, 1991.C. The District Court Proceedings
19 In lieu of an answer, BOI moved to dismiss the New York complaint on numerous substantive and procedural grounds, but principally argued the ground of forum non conveniens. In opposition to the forum non conveniens motion, plaintiffs argued, inter alia, that some evidence available to them in the New York action, including Sussman's own testimony, would be unavailable in Israel. They stated that Sussman could not travel to Israel to testify without the risk of being detained there by the Israeli government; Sussman stated in an affidavit that his prior requests of defendants and other Israeli government officials for a guarantee of safe passage into and out of Israel for that purpose had been denied. 20 In an opinion reported at 801 F.Supp. 1068 (S.D.N.Y.1992), aff'd 990 F.2d 71 (2d Cir.1993) (per curiam), the district court dismissed on the forum non conveniens ground. While acknowledging that the forum preferences of Sussman, a United States resident, and Guilden, a deceased American citizen whose estate was being administered in New York, were entitled to some degree of deference, the court held that other factors pointed to Israel as the more appropriate forum. It noted principally that all of the claims in the New York complaint would be governed by Israeli law; that Sussman and Guilden had voluntarily elected to invest in Israel; and that parallel litigation arising out of the same alleged conduct was already proceeding there. The court rejected Sussman and Guilden's contention that their claims arose out of the alleged secret $10 million loan transmitted through Bank Hapoalim's branch in New York, concluding that the New York conduct cannot be regarded, in the overall scheme of things, as other than peripheral to alleged acts and omissions occurring entirely in Israel. 801 F.Supp. at 1074. The court also rejected the contention that an Israeli court would be predisposed against Sussman and Guilden's claims. It concluded that, in light of the complexity of the case and the interests of international comity, the claims in the New York complaint presented a quintessential case for application of the forum non conveniens doctrine. Id. at 1079. The court did not otherwise address the substance of Sussman and Guilden's allegations; rather, it conditionally dismissed the New York complaint without prejudice to the merits of plaintiff[s'] claims. Id. 21 The court imposed two conditions on the grant of dismissal. First, it required defendants to waive any statute-of-limitations defense under Israeli law that might have become available after the commencement of the New York action. Second, the court required the Israeli government to provide Sussman with written assurances that he would not be detained in Israel should he travel there for the purpose of defending the Israeli action or of asserting claims covered by the New York complaint. Id. Defendants complied with the court's conditions, and the complaint was dismissed. An appeal by Sussman and Guilden from the dismissal was rejected in a per curiam opinion. See 990 F.2d 71. 22
23 Following this Court's affirmance of the forum non conveniens dismissal, BOI moved in the district court for an award of sanctions pursuant to Fed.R.Civ.P. 11, 18 U.S.C. Sec. 1927 (1988), and the court's inherent power. They argued (a) that the New York lawsuit had been instituted for an improper purpose, and (b) that the New York complaint and other papers filed by Sussman and Guilden contained numerous arguments lacking factual and legal basis. 24 In an opinion reported at 154 F.R.D. 68 (S.D.N.Y.1994), the district court granted the motion to the extent of imposing sanctions of $50,000 against Lewin pursuant to Rule 11 and the court's inherent power to deal with abusive litigation. 154 F.R.D. at 69. The court declined to rule on BOI's contention that the allegations of the complaint were unsubstantiated, noting that it did not reach the merits in dismissing the complaint on forum non conveniens [grounds], and declin[ing] to expend more judicial resources in exploring them now. Id. at 72 n. 3. Rather, it imposed its sanctions based solely, id., on what the court described as the manifestly improper purpose which played a significant part in plaintiffs' motivation for filing their complaint, id. at 69. 25 In finding an improper purpose, the court quoted extensively from Lewin's May 1991 warning letter and his June 1991 letter to Ben-Porath and found that they were designed to force the withdrawal of the Israeli action by threatening the Israeli government with negative publicity that would result in economic damage to Israel. Id. at 69. While acknowledging that Rule 11 sanctions may be imposed only for an abusive pleading, motion, or other paper, see Fed.R.Civ.P. 11, and that prelitigation letters do not fall within the scope of the Rule, the court stated that Lewin's strategy constituted an abuse of the litigation process, and that the letters provided powerful evidence of the improper purpose for which th[e New York] complaint was filed. 154 F.R.D. at 69. In addition, the court found that Lewin's prediction of adverse publicity came to pass with Mr. Lewin as a participant. Id. at 70. The court cited an article in the June 18, 1991 edition of the Jerusalem Post, quoting Lewin as saying that NAB's foreign investors  'were very badly treated by the Israeli court system,'  id., and an October 31, 1991 New York Times article quoting Lewin as saying,  'The message is that if you lend your name to anything in Israel, you can no longer be sure that some lawyer and court won't come after you with huge liabilities.'  Id. The district court stated that 26 the filing of a complaint in a highly doubtful venue, for the express purpose of putting pressure on a foreign government to drop or compromise that government's action against the plaintiffs in the foreign nation's courts, furnishes a stark example of improper and oppressive litigation. That proposition seems to me self-evident. I see no need to discuss the many cases cited in the voluminous briefs on this motion. The issue is intensely fact-oriented. 27 Plaintiffs protest that their purpose in filing the complaint was to secure an American forum for their fraud claims against defendants. They say the purity and fixity of their purpose should be inferred from the vigor with which they litigated their right to do so in this Court and the Court of Appeals. I accept that plaintiffs were also motivated by their forum preference, and that they did not go gently from it. It is commonplace, however, that the law recognizes multiple motives in human behavior. In this case plaintiffs had two motives. One was to pressure the Israeli Government to cease prosecution of the Jerusalem action against them by threatening to file, and eventually filing, a sensational complaint against the Government in New York. The other motive was to obtain American jurisdiction if the threats failed, as in fact they did. The conduct inspired by the first motive was improper. 28 Id. at 70-71. 29 After noting that the decision as to where an action is to be filed is essentially a legal decision typically made by a plaintiff's attorney, id. at 71, the court declined to sanction plaintiffs themselves and imposed the sanctions solely against Lewin. The court also indicated that the amount of the sanction was not intended to compensate defendants for the expense of defending the action in New York but rather was meant to deter similar filings. 30 Lewin has appealed the award of sanctions. Defendants have cross-appealed, contending that the amount of the award should have been higher.