Raad v. Bank Audi S.A.L.

Raad v. Bank Audi S.A.L.

No. 21-2612, United States Court of Appeals for the Second Circuit (December 15, 2022). Before Leval, Raggi, and Pérez, Circuit Judges. Summary order. Appeal from the U.S. District Court for the Southern District of New York (Nathan, J.).

Relevant Facts

• Patricia, Stephanie, and David Raad held bank accounts with Bank Audi S.A.L., a leading Lebanese bank. To open their accounts, the Raads signed General Agreements containing choice of law and forum selection clauses.

• Due to financial instability in Lebanon, the Raads requested in October 2019 that the Bank transfer their funds to their American bank accounts. The Bank did not comply, allegedly depriving the Raads of access to millions of U.S. dollars.

• In December 2020, the Raads filed breach of contract claims under Lebanese law in New York Supreme Court. The Bank removed the case to federal court and moved to dismiss on forum non conveniens grounds based on the forum clause.

• The forum selection clause provided that 'Beirut courts shall have jurisdiction' over disputes. The clause also contained a 'carve-out' provision allowing the Bank to 'take legal actions against the Client ... before any other courts in Lebanon or abroad.'

• The district court granted the Bank's motion and dismissed the case, finding the forum clause was mandatory (exclusive) and conferred exclusive jurisdiction on Beirut courts.

Legal Issues

• Whether the forum selection clause providing that 'Beirut courts shall have jurisdiction' was mandatory (exclusive) or permissive (non-exclusive).

• Whether the carve-out provision allowing the Bank to sue elsewhere implied that the Raads could not sue outside Beirut.

• Whether the district court properly dismissed the case for forum non conveniens based on the forum clause.

Positions of the Parties

• The Raads argued the forum selection clause was permissive, not exclusive, because it merely granted jurisdiction to Beirut courts without explicit language of exclusion, and that even if enforced, dismissal should not occur without consideration of reasonableness.

• Bank Audi argued that the word 'shall' created mandatory exclusive jurisdiction in Beirut courts and that the carve-out provision (allowing the Bank to sue elsewhere) would be superfluous if the Raads could also sue outside Beirut.

Decision of the Court and Reasons

The Second Circuit vacated the district court's judgment and remanded for further proceedings.

The court held that the forum selection clause was non-exclusive, not exclusive. The use of 'shall' constitutes mandatory language but 'mandates nothing more than that the [selected fora] have jurisdiction'—it does not demonstrate exclusivity. An exclusive forum clause requires that disputes must be brought in the designated forum 'to the exclusion of all other fora,' either by conferring exclusive jurisdiction or incorporating obligatory venue language. Neither condition was met here.

On the carve-out provision, the court found it did not render the clause exclusive. The alternative reading—that the carve-out explicitly entitles the Bank to sue elsewhere but does not prevent the Raads from doing so—does not render the carve-out superfluous.

Because the forum clause was non-exclusive, the strong presumption of enforceability applicable to mandatory clauses did not apply. The district court erred in relying on this presumption to dismiss for forum non conveniens. The case was remanded for further proceedings, including consideration of whether Patricia Raad's claim was governed by her 2014 Arabic-language version of the General Agreement.