Family of American killed on Malaysian Airlines flight can sue Russian bank, US court rules

By Jonathan Stempel

NEW YORK (Reuters) - The family of an American killed when a Malaysian Airlines plane was shot down over Ukraine in 2014 can sue Russia's largest bank for allegedly providing money transfers to a group blamed for downing the plane, a U.S. appeals court ruled on Tuesday.

In a 3-0 decision, the 2nd U.S. Circuit Court of Appeals in Manhattan said state-controlled Sberbank was not entitled to sovereign immunity, after being accused of using the U.S. banking system to funnel donor money to the Russia-backed separatist group Donetsk People's Republic.

A U.S.-based lawyer for Sberbank had no immediate comment. Sberbank was not immediately available for comment after business hours in Moscow.

The case was brought by the family of Quinn Schansman, who was 18 when he boarded Malaysian flight MH17 to Kuala Lumpur from Amsterdam on July 17, 2014, for a planned family vacation.

The flight was shot down over DPR-controlled territory in eastern Ukraine by a surface-to-air missile, killing all 298 people on board.

Russia has denied involvement. Ukraine had previously declared the DPR a terrorist organization, while the United States had imposed sanctions on the group.

Schansman's family sued Sberbank, another Russian bank and two U.S. money transfer companies in April 2019, saying they should be liable for doing business with the DPR.

A year later, Russia's Ministry of Finance bought a majority stake in Sberbank from the country's central bank.

In Tuesday's decision, Circuit Judge Joseph Bianco called Sberbank's alleged handling of money transfers "quintessentially commercial activity," triggering an exception to protections under the federal Foreign Sovereign Immunities Act (FSIA).

Sberbank had argued it deserved a presumption of immunity as a state agency or instrumentality.

The bank also said another U.S. law, the Anti-Terrorism Act, provided immunity regardless of when it came under state control, with no exception for commercial activity.

Bianco disagreed. He said the FSIA comprehensively governed sovereign immunity in civil cases, and its framework was not "silently repealed" by the anti-terrorism law.

Adopting Sberbank's position, the judge wrote, would negate Congress' intent to give civil litigants the "broadest possible" legal basis to sue entities that materially support foreign entities that engage in terrorism against the United States.

Jenner & Block, a law firm representing the Schansman family, welcomed the court's rejection of what it called Russia's effort to immunize Sberbank by "strategically acquiring" a majority stake.

"We look forward to pursuing further evidence of Sberbank's wrongdoing in the district court and finally achieving justice for the Schansman family," the firm said.

The case is Schansman et al v Sberbank of Russia PJSC, 2nd U.S. Circuit Court of Appeals, No. 22-3097.

(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)