Anti-Terrorism Act Liability for Financial Institutions: Second Circuit Holds That Plaintiffs Seeking to Bring Anti-Terrorism Act Claims Against a Financial Institution Failed to Adequately Allege Proximate CausationSullivan & Cromwell LLP - February 21, 2013
The past decade has seen a surge in the number of cases brought against financial institutions and other major corporations under the Anti-Terrorism Act, 18 U.S.C. § 2331 et seq. (“ATA”). Plaintiffs alleging injuries by acts of international terrorism have sought to recover treble damages for their injuries from financial institutions on the theory that the financial institutions supplied, directly or indirectly, financial services to the terrorist groups. The frequency with which such suits are filed is unlikely to diminish, particularly because Congress recently extended the statute of limitations for ATA claims from four to ten years, and in some circumstances even longer. On February 14, 2013, the United States Court of Appeals for the Second Circuit issued a significant opinion with respect to the ATA’s causation requirements. In Rothstein v. UBS AG, the Court held that the plaintiffs had failed adequately to allege that UBS’s transfers of funds for the government of Iran were the proximate cause of the plaintiffs’ injuries suffered in terrorist attacks by Hamas and Hizbollah in Israel. Rothstein will be an important precedent for financial institutions and other companies in defending themselves against ATA lawsuits.