Limits of New York’s Long-Arm Jurisdiction in Correspondent Banking Transactions

Introduction

Raad v. Bank Audi S.A.L., 24-840-cv (2d Cir. Apr. 28, 2025), presents a dispute between three New York residents (Patricia, Stephanie, and David Raad) and Bank Audi S.A.L., a Lebanese bank. The Raads claimed that Bank Audi breached their account-opening agreements and subsequent “Transfer Orders” by refusing to move over $17 million from their Lebanese accounts into their U.S. dollar accounts in New York. The dispositive issue on appeal was whether a New York court could exercise specific personal jurisdiction over a foreign bank based solely on its use—or intended use—of New York correspondent bank accounts under N.Y. C.P.L.R. § 302(a)(1).

Summary of the Judgment

The Second Circuit unanimously affirmed the Southern District of New York’s dismissal for lack of specific personal jurisdiction. The court held that:

Under N.Y. C.P.L.R. § 302(a)(1), a defendant must both “transact business” in New York and have the cause of action “arise from” that transaction.
The Raads failed to allege any specific transaction through Bank Audi’s New York correspondent accounts that gave rise to their breach-of-contract claim.
Promises or contractual obligations made in Lebanon to route funds through New York—even if unfulfilled—do not substitute for an actual transaction “within the state.”
Allowing jurisdiction on these facts would vastly expand the reach of New York courts and contradict prior decisions such as Daou v. BLC Bank, S.A.L., 42 F.4th 120 (2d Cir. 2022).

Analysis

Precedents Cited

The court relied heavily on three lines of authority:

Daou v. BLC Bank, S.A.L. (2d Cir. 2022): Established that mere use or promise of a correspondent account is insufficient; the plaintiff must identify an actual New York transaction forming part of the wrongful conduct.
Kreit v. Byblos Bank S.A.L. and Moussaoui v. Bank of Beirut (summary orders 2024–2025): Reaffirmed Daou’s requirement that an operative complaint allege a concrete correspondent-bank transaction linked to the harm.
American Girl v. Zembrka (2d Cir. 2024): Distinguished an interactive e-commerce and shipping scenario, where the defendant had actively processed orders and payments through New York, from passive or uncompleted contractual promises abroad.

Legal Reasoning

The Second Circuit applied New York’s two-pronged test for § 302(a)(1):

Transactional nexus: The defendant must have “transacted business within the state.” Bank Audi’s only connection was the theoretical use of a correspondent account; there was no allegation of an actual dollar transfer through New York.
Causal nexus: The claim must “arise from” that transaction. Here, the alleged injury stemmed from the absence of any New York transaction—i.e., Bank Audi’s refusal to execute the promised transfers.

The Raads offered variants of these theories—residency-based jurisdiction, contractual obligation to transmit to New York, and “supplying services in New York”—but each was rejected as a matter of law:

Forum contacts must be created by the defendant (Waldman v. PLO, 835 F.3d 317, 335).
The unfulfilled promise to send money does not equate to a transaction “within” New York.
Recognizing jurisdiction on these facts would reduce § 302(a)(1) to a general venue rule, contrary to precedent and legislative intent (American Recreation Grp., 448 N.Y.S.2d 51, 52).

Impact

Raad v. Bank Audi solidifies limitations on personal jurisdiction in cross-border banking disputes:

Foreign banks cannot be haled into New York courts based solely on unexecuted promises or internal instructions to use New York correspondent accounts.
Plaintiffs must plead—and later prove—a discrete transaction routed through the New York correspondent bank that materially contributes to their injury.
Parties drafting international transfer agreements should be mindful that contractual forum-selection and jurisdiction provisions remain critical for predictability.

Complex Concepts Simplified

Personal Jurisdiction: A court’s authority over a defendant. Specific jurisdiction requires that the plaintiff’s claim “arise from” the defendant’s contacts with the forum.
Long-Arm Statute (N.Y. C.P.L.R. § 302): Allows New York courts to reach out-of-state defendants who transact certain types of business “within” New York.
Correspondent Bank Account: A U.S. bank account maintained by a foreign bank through which it can clear and settle U.S. dollar transactions.
Forum Non Conveniens: A doctrine allowing dismissal if another forum is substantially more appropriate, an alternative ground Bank Audi preserved but which the Second Circuit did not reach.

Conclusion

Raad v. Bank Audi reaffirms the rule that unexecuted contractual promises or general banking relationships, without an actual transaction through New York correspondent accounts, do not establish specific personal jurisdiction under N.Y. C.P.L.R. § 302(a)(1). This decision maintains the critical nexus requirement between the defendant’s forum contacts and the plaintiff’s claim, providing clarity for litigants and practitioners in the international banking arena.