Monday, June 11, 2007

State Court Asked If Long Arm Reaches to Party in U.K. Suit

By Joel Stashenko
06-11-2007

ALBANY - The U.S. Court of Appeals for the Second Circuit asked the New York Court of Appeals on Friday for guidance on whether the state's long-arm statute confers to the federal court personal jurisdiction over a Saudi businessman who was named as a supporter of terrorism in a New York author's book.

The author, Rachel Ehrenfeld, is seeking in Ehrenfeld v. Mahfouz, 06-2228-cv, to have the federal court declare that a libel judgment secured by Khalid Salim Bin Mahfouz against her in a British court in 2005 is not enforceable in the United States on constitutional and public policy grounds. She also is
seeking a declaration by the court that Mr. Mahfouz's libel action could not succeed against her in New York or the United States, where the plaintiffs' burden of proof is far more stringent than under English law.

The decision will be published Thursday.

Ms. Ehrenfeld did not appear in the British court. She explained that she lacked the money to travel to the United Kingdom to defend herself and that British libel laws were favorable to plaintiffs. At any rate, she said that she disagreed with her adversary's tactic as a matter of principle.

A British High Court judge ordered that Ms. Ehrenfeld and her publisher, Bonus Books, excise passages from her 2003 book "Funding Evil: How Terrorism is Financed and How to Stop It" that link Mr. Mahfouz to al Qaeda, Osama Bin Laden and the activities of other terrorists. The British court also ordered her to pay 60,000 British pounds, about $120,000 at today's exchange rate, as a "downpayment" on damages.

Southern District Judge Richard C. Casey granted Mr. Mahfouz's motion to dismiss Ms. Ehrenfeld's action, finding a lack of personal jurisdiction. Ehrenfeld v. Mahfouz, 2006 WL 1096816 S.D.N.Y. (April 26, 2006).

But the Second Circuit ruled Friday that a New York state statute, CPLR § 302(a)(1), might provide for personal jurisdiction. In a ruling by Circuit Judge Wilfred Feinberg, it certified the question to the New York Court of Appeals whether the statute applies to someone who "sued a New York resident in a non-U.S. jurisdiction" and "whose contacts with New York stemmed from the foreign lawsuit and whose success in the foreign suit resulted in acts that must be performed by the subject of the suit in New York?"

Prior New York court decisions "do not yield a clear answer" about the scope of CPLR §302(a)(1) in a case like Ms. Ehrenfeld's, Judge Feinberg wrote.

CPLR §302(a)(1) confers jurisdiction over a non-New York resident who "in person or through an agent . . .transacts any business within the state" if the cause of action arises out of the defendant's New York transactions. Ms. Ehrenfeld argues that Mr. Mahfouz's contact with New York has entailed the
serving of numerous papers and documents on her during the course of the libel trial and an overall plan to secure the libel judgment against her as a means of chilling the writing and research she does in New York.

The Court of Appeals is not obligated to answer certified questions from the Second Circuit, but it almost always does.

Important Policy Issues

Judge Feinberg wrote that the Second Circuit believes the public policy issues involved in Ehrenfeld v. Mahfouz warrant guidance by the Court of Appeals.

"The question is important to authors, publishers and those, like Mahfouz, who are the subject of books and articles," Judge Feinberg wrote.

He went on, "The issue may implicate the First Amendment rights of many New Yorkers, and thus concerns important public policy of the state. Because the case may lead to personal jurisdiction over many defendants who successfully pursue a suit abroad against a New York citizen, the question before us is also likely to be repeated."

The Second Circuit did uphold Judge Casey's finding that another part of the CPLR, §302(a)(3), does not provide for personal jurisdiction and also the judge's refusal to grant Ms. Ehrenfeld request for jurisdictional discovery. Judge Casey died in March.

Circuit Judges Pierre N. Leval and Jose A. Cabranes joined Judge Feinberg in the ruling.

Ms. Ehrenfeld's attorney Daniel J. Kornstein of Mr. Kornstein of Kornstein Veisz Wexler & Pollard said Friday he was "looking forward to presenting our arguments on the jurisdiction issue to the New York Court of Appeals.

The bringing of libel actions in foreign courts by non-U.S. citizens against American authors and publications has been on the increase and is an alarming trend, Mr. Kornstein said.

"It is a vitally important issue for the publishing industry and for authors because of the concerns it raises about the chilling effect on free speech," he said.

Amicus curiae briefs supporting Ms. Ehrenfeld have been filed by a coalition of writers groups and communications associations, including the American Society of Newspaper Editors, the Authors Guild, Association of American Publishers and the Online News Association.

Ms. Ehrenfeld is head of the New York City-based American Center for Democracy, a group that researches terrorism, primarily in the Middle East. Her other books include "Evil Money" and "Narcoterrorism."

Mr. Mahfouz is a former president and chief executive officer of the National Commercial Bank of Saudi Arabia. His personal wealth has been estimated by Forbes magazine in excess of $3 billion.

Mr. Mahfouz has insisted that he condemns terrorism and has never assisted Osama Bin Laden or other terrorists.

Timothy J. Finn of Bonner, Kiernan, Trebach & Crociata in Washington, D.C., represented Mr. Mahfouz. Mr. Finn did not return a call seeking comment.

- Joel Stashenko can be reached at jstashenko@alm.com
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