Wamai v. Industrial Bank of Korea
Second Circuit Oral Argument
Wamai v. Industrial Bank of Korea
Second Circuit Oral Argument
Joe Palmore successfully argued for affirmance of forum non conveniens dismissal of fraudulent conveyance claims against foreign bank. Joe's argument begins at 10:51.
Unofficial transcript for users of mofo.com
Speaker 1 (00:00):
All right. The next case on the calendar is Wairimu et al. vs. Industrial Bank of Korea. We have Mr. Travers for the Appellants. I see you’ve reserved two minutes for rebuttal. And you can begin, Mr. Travers, whenever you’re ready.
Jeffrey Travers (00:53):
Thank you, your Honor. May it please the court. My name is Jeffrey Travers on behalf of the Appellant Plaintiffs. As you’re aware, our case has many similarities with the Halkbank case. So I don’t want to repeat any of the arguments. But the Court did ask what were the errors of law in the District Court’s Opinion. Number one, I wanted to highlight, under Norex—Norex I think is very applicable to this case because it further explains step one in the Iragorri analysis. And under Norex, the Court noted that the District Court erred by sort of importing the step three analysis into the step one. So I think the District Court here also did that. And I think that’s a clear error of law. If you read the District Court’s Opinion on step one, part of that analysis is comparing whether, where the evidence is located between Korea and between New York. But under Norex, a proper analysis is to determine whether there’s more evidence in New York versus plaintiff’s home forum. And clearly there’s more evidence in New York in this case.
Speaker 1 (02:15):
Explain that. How is there more evidence in New York? Again, assuming you have to prove for fraudulent conveyance claim the underlying fraud. How would that evidence be in United States versus Korea?
Jeffrey Travers (02:28):
Well, we have the benefit of the deferred prosecution agreement in this case. And the deferred prosecution agreement to which IBK was required to stipulate to, explains how the U.S. government gathered the evidence to support the criminal action. And it—
Speaker 1 (02:47):
Again, it’s the question I asked in the last argument. What makes you think that whatever evidence the government gathered is going to be available in the United States to civil plaintiffs? What basis is there for believing that that file’s going to be produced so that you’re not going to get those documents in Korea?
Jeffrey Travers (03:03):
Well, because IBK gathered the—it was IBK that gathered the documents and produced them to the prosecutors in New York. So IBK has that evidence, so I think it’s just going to be in the course of normal discovery.
Speaker 1 (03:16):
How about witnesses?
Jeffrey Travers (03:18):
Well, there’s employees of IBK New York that are still in the U.S. There’s a number of other banks that IBK funneled money through in New York.
Speaker 1 (03:30):
I know that—the transfers into the United States I don’t think are the disputed part of the case. It’s whether or not there was some intent to defraud, right? I don’t think, although obviously there being witnesses in the United States, you could say, “yes, these transfers occurred into the United States on these dates.” That’s not what the underlying case would be about, right?
Jeffrey Travers (03:50):
Well, I think that’ll be—
Speaker 1 (03:51):
That doesn’t prove any fraud. That just proves that the transfers went through the banks, right?
Jeffrey Travers (03:56):
Well, I think it’ll be important to find out how those transfers managed to slide through the detection of the other U.S. banks as well. I think that would provide some evidence of the fraud, but also—
Speaker 3 (04:10):
The New York State Department of Financial Services was involved as well. What was that investigation?
Jeffrey Travers (04:15):
It was parallel to the U.S.’s investigation, basically. You know, the—
Speaker 3 (04:25):
The state must have felt there was some New York connection.
Jeffrey Travers (04:30):
Oh, yeah. Certainly.
Speaker 3 (04:32):
What is the New York connection that the DFS was looking into, is what I’m asking you?
Jeffrey Travers (04:36):
Oh, yes. So yeah, for branch banks in New York, they’re required to set up a system, an adequate system that’s able to detect terrorism funds flowing through the U.S. And if those terrorism funds are detected, they’re supposed to be seized and held and held specifically for attachment by judgment creditors of the plaintiffs. And so it was an eight-year investigation by New York and just repeated findings of IBK’s New York failure to set up an adequate system to detect these fraudulent transfers. And that goes to New York’s interest in this case. You know, the District Court found New York had no interest in this case, but clearly an eight-year investigation I think signals a strong interest in this case.
Speaker 1 (05:29):
Do you concede that there’s a possibility that Korean law—under the conflicts of law principles—Korean law might have to be applied to this case? It’s certainly a possibility. It’s not certain, but that in a District Court’s analysis throughout to consider the possibility. Again, not dispositive, but that Korean law might end up being the applicable law, right?
Jeffrey Travers (05:53):
Yeah, I get there’s a possibility of that. But underlying our fraudulent conveyance schemes is the—it’s the violation of the TRIA. So even if it goes to Korea, if the fraudulent conveyance is Korean law, we’re still going to have—the Korean courts are still going to have to examine U.S. law under the TRIA.
Speaker 1 (06:16):
Why wasn’t the District Court entitled to credit Professor Kwan and Sook [?] that under Korean law, your clients will be able to enforce the judgment in Korea, and even if they couldn’t enforce the judgments in Korea, there are underlying causes of action in Korea that would allow them to still collect. Why couldn’t the District Court credit that?
Jeffrey Travers (06:37):
Well, I think, yeah, as we state in our brief, I think the way the experts phrased their belief, they only expressed their opinions in terms of possibilities, not probability. So we don’t think that got to the burden of proof necessary to show Korea’s an adequate alternative forum. And as we noted between their initial declarations and the reply brief, there was a—
Speaker 1 (07:05):
On paragraph 76, the expert says, “I believe the final judgment plaintiffs obtained is likely”—not possibly, likely—“to be recognized in Korea, considering the following factors,” and then goes through several factors. Is that a likelihood?
Jeffrey Travers (07:19):
So and were you—are you citing from the initial declaration?
Speaker 1 (07:24):
Paragraph 76 of the one that was filed on April 13, 2021? I don’t know what—
Jeffrey Travers (07:32):
Okay. Yeah. So between the initial declaration and the reply declaration, there’s a second Korean lower court decision that failed to find an exception to sovereign immunity. You know, where Japan invaded and abducted women, they found that you couldn’t sue Japan even under those facts. So this is the Comfort Women cases. So the first one occurred before the first declaration, and that one found that Japan did aggregate sovereign immunity through those acts. But after the first declaration, there was a second Comfort Women case. And that found that Japan was still entitled to sovereign immunity. So I think in the reply declaration, I think that both those experts, you know, they still, I think they mitigated their opinion somewhat.
Speaker 1 (08:36):
So they changed it to “possible” instead of “likely,” is that what you’re saying, in the supplemental declaration? Or is that what they—
Jeffrey Travers (08:40):
Yeah, I think they both acknowledge it’s going to be an issue that’s going to have to be decided by the Korean Supreme Court. Because there’s a split right now in Korea.
Speaker 4 (08:50):
I thought the District Court made an error of law in discrediting the plaintiff’s expert Professor Jang, that the District Court discredited him and preferred the defendant’s expert on the basis of her belief that Professor Jang had treated some proposed pending legislation as if it were past legislation. And it seems to me that’s just a misinterpretation of his testimony, that he didn’t—that it’s a misunderstanding to treat him as having believed that pending legislation was past legislation. I just don’t see a basis for that; it’s a misunderstanding. And that’s the basis upon which she discredited him and decided that she preferred the defendant’s expert. Do you want to address that?
Jeffrey Travers (09:44):
Yeah, I think it was a clearly erroneous finding of fact as well. I mean, it is difficult in the opinion because there’s no citation to what forms of basis of that will be. And we address it in our brief. But our experts cited the correct statutes, their experts acknowledge our experts cited the correct statute. They have a disagreement as to the import of that statute. But our expert didn’t make an error. And in fact, it’s their experts who are relying on proposed legislation, you know, to argue that punitive damages will be available in Korea. So, yeah. So I don’t understand the basis for that finding by the District Court.
Speaker 1 (10:32):
All right. Thank you. You reserved two minutes for rebuttal.
Jeffrey Travers (10:35):
All right. Thank you. Thank you, your Honor.
Speaker 1 (10:47):
And we have Mr. Palmore. Is that how you pronounce it?
Joseph Palmore (10:50):
It is. Thank you, your Honor. May it please the court. Joseph Palmore for Industrial Bank of Korea. The District Court did not abuse its broad discretion in concluding that this litigation about financial transactions that took place in Korea, and an attempt to take assets that are located in Korea, should be litigated in Korea. The reason that there’s so much deference afforded to district courts in this setting is they’re the ones who would actually have to try the case. And at the very beginning of the last argument, Judge Bianco, Judge Chen, you asked questions about this, and that reflects the Iragorri statement that when you look at forum non conveniens, you have to look at precisely what are the issues that would be tried? Here, these are principally fraudulent conveyance claims, which will require things like: Was there a fair consideration? What was the nature of the transactions?
Joseph Palmore (11:38):
What was the intent of those who were involved? And the plaintiff’s complaint here is chock full of allegations about things that happened in Korea. Talking about the Zong conspiracy to create fake accounts in Korea, fake documents in Korea, paid bribes in Korea. That’s paragraph 69 through 72. How Zong corrupted the government review process for these transactions. That’s paragraphs 49 and 123. Counsel said that, well, IBK has already produced all this evidence. That’s not correct. If you look at the Kim declaration, JA378, who’s the Chief Compliance Officer for IBK, he explains that the evidence that went to the S.D.N.Y. came through the Mutual Legal Assistance Treaty. So it went from parties in Korea to Korean prosecutors and government officials, and then over to the S.D.N.Y. And there are strict limits on what can be done with that. It can’t just be handed over as the court’s questions reflected.
Speaker 3 (12:41):
So the—just so I understand that—I mean, those documents came from Korea originally. They’re here now, but you’re saying it can’t be used by the plaintiffs in this case?
Joseph Palmore (12:52):
I can’t speak to where they are now. They were in the custody of the S.D.N.Y., and that case is over. There was a deferred prosecution agreement. The information was dismissed earlier this year because IBK complied with all its terms. So that’s a closed case. But the point is that it’s not so simple as plaintiffs would suggest that they can just go to the S.D.N.Y. and take the boxes out and use that.
Speaker 3 (13:14):
What about the state, the department—
Joseph Palmore (13:15):
That was the same—it was the same issues. It was all about—and this is a very important point, Judge Chen—it was all about the adequacy of the anti-money laundering protocols and procedures at the single IBK branch in New York. If you look at the information, that’s all it was about. That wasn’t about the broader claims about sanctioned violations or anything else. And the relevant witnesses and documents for those things, those allegedly fraudulent transactions, are in Korea. The Kim declaration at J380 through 381 actually lists the witnesses who might be relevant based on the allegations in the complaint and shows that they’re in Korea documents are there, they’re written in Korea. And Iragorri calls for an assessment even at step one of looking at the connection between not just the plaintiffs, but the case and the forum.
Joseph Palmore (14:11):
And the District Court here didn’t abuse its discretion by looking at both aspects in that step one. When we get to step two, I want to make clear that there was some discussion in the first case about the burden of proof on the fairness of the Turkish legal system. That’s not an issue in our case. Plaintiffs didn’t show—didn’t even argue that there was any unfairness in the Korean legal system. It’s very well regarded as the fourth most efficient in the world. So that aspect is not present here. Instead, there was a battle of the experts about the adequacy of remedies that would be available in Korea. And our expert had the better of that argument and explained that—two things. One, that the judgments would likely be enforced in Korea. And two, that enforcement of the judgments wasn’t actually even necessary for the fraudulent conveyance analog claims. Tort revocation subrogation.
Speaker 1 (15:09):
Can you address your adversary’s argument that due to the subsequent decisions that the likelihood was reduced—the likelihood that it would be enforced?
Joseph Palmore (15:19):
Yeah, so Professor—
Speaker 1 (15:20):
Because I didn’t see that in the record.
Joseph Palmore (15:23):
Yes. So Professor Sook did address that. So a second opinion came down between the opening declaration and the second declaration. The first decision said Japan enjoyed no sovereign immunity in a Comfort Women case because there’s an exception for Crimes against Humanity. And our expert showed that that would be applied here. There was a second case that came out the other way, but critically—and Professor Sook explains this in his supplemental declaration, this is JA1001 to 1002—that the part of the rationale of that second Comfort Women case was that there was a diplomatic resolution between Japan and Korea that provided an alternative route to remedies. And what Professor Sook said is in a case like this one, where there is no diplomatic route, there is no alternative ground or a basis for a remedy, that Korean courts would find the waiver of sovereign immunity.
Speaker 1 (16:17):
So Professor didn’t switch the conclusion, it didn’t alter the ultimate conclusion.
Joseph Palmore (16:21):
He adhered to his conclusion. He recognized there was a disagreement and that the Korean Supreme Court would ultimately have to weigh in, but he didn’t change his view. And I don’t think legal certainty is required here. It’s that I think the courts talk about a justifiable belief and the experts gave much more than that. Judge Leval, you asked about the kind of the dust up about the Korean legislation and the availability of punitive damages. That was really just a minor part of the District Court’s analysis. What the core part was, the District Court credited our expert saying that the judgments would be enforced. There was a fight about whether you could collect punitive damages or not under Korean law. And that’s really neither here nor there. The law is quite clear that just because a foreign jurisdiction doesn’t make available, for instance, punitive damages—
Speaker 4 (17:13):
No, I don’t think that’s the point. I think the point is that the District Court discredited the plaintiff’s expert witness on the basis of having misunderstood part of his testimony. Not that the issue that it related to was of particular significance, but simply that the District Court made an error of law in the interpretation of his evidence and said he made a mistake that he in fact had not made, and used that as a basis for simply discrediting him and preferring the defendant
Joseph Palmore (17:48):
Two responses, Judge Leval. That’s not quite how I read the District Court’s opinion. You’re right that the District Court talked about the credibility, but it had already made the findings about who was right about the enforceability of the judgments. And that was the core. Second, there was no error on the part of the District Court. Our expert explained in a supplemental declaration that their expert was simply wrong in his reading of Korean law. And to the extent he suggested that Korean law would forbid all punitive damages, he was relying on a proposed law, not the one that was actually adopted. Because the one that was actually adopted reflected a more nuanced view where punitive damages, which have historically not been available in Korea, are increasingly available. And that that was—that that new law reflected that, and it opened the door to punitive damages in a case like this one. But of course, even if they weren’t available, that wouldn’t change the adequacy of the forum.
Speaker 1 (18:44):
Can I just ask you to address the same question I asked to the prior Halkbank counsel about why there shouldn’t potentially be—and Judge Leval asked some questions about this as well—a stronger preference shown to plaintiffs when they’re terrorism victims and they’re seeking to enforce a judgment related to a terrorist attack.
Joseph Palmore (19:06):
Well, a couple of points on that, your Honor. One is, as Mr. Williams said, in the first case, the, except the kind of cause of action and the exception to sovereign immunity is for actions against state sponsors of terrorism. So, that’s how they got into court on their underlying Iran actions. Of course, Korea is not bad, it’s a U.S. ally. Second, just because there’s an exception to sovereign immunity doesn’t change the analysis under forum non conveniens. This court made that point in the Energy case we submitted as a 28J
Speaker 1 (19:38):
I know, but that’s not—you could, for example, in the Wiwa case, they cite the fact in that case we said because it deals with, I think, international human rights abuses, that there should be some special deference shown for cases in that category of utilizing U.S. courts. So, I think it would be more along those lines. How would it be different if we, along the lines of Wiwa, say and in terrorism cases, we feel we could conclude the same thing?
Joseph Palmore (20:04):
Well, Your Honor, a couple points about Wiwa. First of all, Wiwa then goes on to say, “we’re not saying that forum non conveniens can’t apply or is even significantly affected.” And then Energy gives exactly that reading to Wiwa. It says, “Wiwa doesn’t change the forum non conveniens analysis just because there’s an exception to sovereign immunity” because forum non conveniens assumes jurisdiction and asks is it possible to—is it convenient to litigate here and exercise that jurisdiction? But there’s a second really important point here, which is that the adequacy, because the court’s questions are, understandably, about will there be relief afforded to these plaintiffs, or is it possible for them to get it? And Energy makes this point too, that’s baked into the forum non conveniens analysis. That’s step two. Step two of the forum non conveniens analysis said, “is there an adequate remedy?” So if there is no adequate remedy for these plaintiffs or any other who’s a plaintiff in a forum non conveniens case, then the case simply won’t be transferred. But here, the District Court acted well within its discretion in concluding that there was a remedy in Korea.
Speaker 3 (21:09):
So some of the transactions took place in Korea, clearly. But there are allegations that the New York branch, and other New York banks were used to convert some of the disguised assets to U.S. Dollars. Are those, why aren’t those sufficient New York connections to—I mean, won’t there be some New York witnesses involved?
Joseph Palmore (21:34):
No, Your Honor, because the question isn’t, “isn’t there some tangential New York connection?” It’s “Where’s the gravamen of the evidence and the witnesses? What would they actually have to prove under the elements of the claims that they brought?” And nothing about those transactions—the fact that the money transited through New York as trillions of dollars transit, I think, every day through New York doesn’t have anything to do with what they need to prove that these underlying transactions, the transfers into the CBI Won account and out of the CBI Won account into other accounts in Korea were fraudulent. So there’s no—that doesn’t get them anywhere, in terms of what they have to prove. And the New York Court of Appeals in Mashreqbank that we cited our brief and the District Court cited, makes this very point, that just because of the happenstance that an allegedly fraudulent transfer passes through New York doesn’t give New York an interest in regulating that transaction and doesn’t implicate New York’s policy in favor of the integrity of its banking system. Here, the transactions, the witnesses, the allegedly forged documents, the conspirators, are all in Korea. And the District Court acted well within its discretion in concluding that the case should be litigated there as well.
Speaker 1 (22:45):
Thank You, Mr. Palmore and, Mr. Travers, you have two minutes in rebuttal.
Jeffrey Travers (22:52):
Thank you, Your Honor. First, I want to address the location of the evidence in the deferred prosecution agreement JA622, the U.S. government as stipulated to by IBK. First, a note that IBK hired a forensic accounting firm to conduct an extensive internal review, including a review of transactions involving IBK’s CBI Won account that was provided to the U.S. prosecutors. We don’t have to get that from the U.S. prosecutors. We’re going to issue discovery to IBK and ask them to produce that to us. They’ve already produced it in New York. It’s not a burden to just turn around and produce it to us. And it also goes on to say IBK produced documentary materials to the agencies in response to subpoena from the NY AG and a mutual legal assistance request.
Jeffrey Travers (23:48):
So IBK collected those documents and provided them to the U.S. attorney’s office. So we’re not going to ask the—we don’t have to ask the U.S. Attorney, we’re going to issue discovery to IBK. They already produced that document in New York. So, I want to quickly address the second declaration by IBK’s experts. And it’s on JA974, where the expert says, “I believe there is considerable possibility that Korean Supreme Court may recognize an exception to sovereign immunity.” So that’s where I believe the expert blessed or mitigated his opinion somewhat, and it doesn’t get them past that burden of proof. And I just want to end with the U.S. interest isn’t limited just to bringing compensation for our plaintiffs. These civil lawsuits, as stated by Congress, it advances and serves the national security interest of the United States by deterring the sponsorship of terrorism. And IBK, by laundering money, undermined that national security interest of the U.S. Thank you.
Speaker 1 (25:01):
Thank you, Mr. Travers. Thank you, Mr. Palmore. We’ll reserve decision. Have a good day. Bye.