A lawsuit that charges a Lebanese bank with using a New York account to transfer millions of dollars the bank knew would benefit Hezbollah can go forward in New York, the state's highest court ruled on Tuesday.

The suit was brought by several dozen U.S., Canadian and Israeli citizens who live in Israel and who allege that both Lebanese Canadian Bank and American Express Bank (AXP) violated U.S. and international law by facilitating transactions through a foundation that allegedly functioned as the finance arm of Hezbollah, which the U.S. State Department has designated as a terrorist organization.

The plaintiffs charge that they or their family members were killed or injured in rocket attacks by Hezbollah while in Israel over a two-month period in July 2006 that coincided with hostilities between Israel and Lebanon.

Though Lebanese Canadian, whose assets were purchased last year by another Lebanese bank, had no offices in the U.S., the lawsuit says it used a correspondent account it maintained with Amex in New York to transfer several million dollars on behalf of the foundation the bank knew would benefit Hezbollah.

Lebanese Canadian use of the account subjects the bank to New York law, according to the state Court of Appeals.

"LCB did not route a transfer for a terrorist group once or twice by mistake," Judge Susan Read wrote for the court. "Presumably, using the Amex account was cheaper and easier for LCB than other options, and whatever financial and other benefits LCB enjoyed as a result allowed the bank to retain [the foundation] as a customer and to support its allegedly terrorist activities and programs."

"In sum, repeated use of the correspondent account shows not only transaction of business, but an articulable nexus or substantial relationship between the transaction and the alleged breaches of statutory duties," Read added.

A lawyer for Lebanese Canadian did not respond immediately to a request for comment. A spokeswoman for Amex declined to comment on the ruling.

Though the bombing victims brought their suit in state court, Amex later transferred the case to the U.S. District Court for the southern district of New York.

In March 2010, the district court granted Lebanese Canadian's motion to dismiss the case after ruling the bank's use of the correspondent account created insufficient ties to Hezbollah's attacks in Israel to establish jurisdiction based solely on wire transfers through New York.

The plaintiffs appealed the ruling to the U.S. Court of Appeals for the 2nd Circuit, which sent the case to New York's highest court to decide whether the bank's use of the correspondent account in New York to send wire transfers on behalf of an overseas client subjected the bank to state law.

Last year, the Treasury Department proposed to prohibit U.S. financial institutions from maintaining correspondent accounts for Lebanese Canadian, which the government says laundered money on behalf of drug traffickers and terrorists. In August, the Justice Department seized $150 million in connection with the alleged money laundering scheme.

The ruling coincides with a string of lawsuits by victims of attacks that charge banks with processing transactions that aided terrorist groups. A federal judge in the eastern district of New York recently dismissed a lawsuit brought by an American man against Arab Bank after finding the man had failed to show the bank knew transactions it processed could aid the Islamic resistance movement known as Hamas or would result in the man's injury.

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