On 7 December 2004, Sheikh Khalid Bin Mahfouz and his two sons obtained by default a judgment from the High Court of London enjoining Rachel Ehrenfeld, author of "Funding Evil," from further publishing certain defamatory statements regarding Sheikh Khalid contained in her book and providing for damages in an amount to be determined.

On 8 December 2004, Ehrenfeld filed a complaint in the United States District Court for the Southern District of New York seeking declarations that the default judgment obtained by Sheikh Khalid in the English High Court is unenforceable in the United States and that her statements about Sheikh Khalid in "Funding Evil" would not give rise to liability for defamation under the laws of the United States. On 25 April 2006, Judge Richard Casey dismissed Ehrenfeld's action because the U.S. District Court lacked personal jurisdiction over Sheikh Khalid under New York law.

Ehrenfeld appealed the dismissal of her action to the U.S. Court of Appeals for the Second Circuit. The Second Circuit found that Sheikh Khalid was not subject to jurisdiction under a provision of New York law relating to foreign torts because Ehrenfeld "has shown no basis for considering defendant's actions to be tortious." The Court declined to determine and referred to the State of New York Court of Appeals (New York's highest state court) whether Sheikh Khalid was subject to jurisdiction under a provision of New York law concerning claims arising from the transaction of business in New York. Specifically, the Second Circuit asked the New York Court of Appeals to determine "whether § 302(a)(1) of New York's long-arm statute confers personal jurisdiction over a person (1) who sued a New York resident in a non-U.S. jurisdiction; and (2) whose contacts with New York stemmed from the foreign lawsuit and whose success in the foreign suit resulted in acts that must be performed by the subject of the suit in New York."

On 20 December 2007, the New York Court of Appeals decided, consistent with Judge Casey's decision in the U.S. District Court, that Sheikh Khalid's actions did not constitute the transaction of business in New York and that, accordingly, he was not subject to personal jurisdiction under New York law.