WASHINGTON, April 20 - The U.S. Supreme Court on Monday declined to take up an appeal from Bank of America and seven other large financial institutions that sought to prevent a group of American cities from proceeding as a class in a $12 billion antitrust-style lawsuit. The banks had asked the high court to review a lower court ruling that upheld a judge's certification of the litigation as a class action.
The decision by the justices means the litigation can continue to move forward on a class-wide basis. The action leaves in place a ruling by the New York-based 2nd U.S. Circuit Court of Appeals that affirmed the certification of a nationwide class of municipal bond issuers.
Allegations and scope
The complaint, brought by municipalities that include Baltimore, Philadelphia and San Diego along with other city governments, accuses the eight banks of colluding over an eight-year span, from 2008 to 2016, to drive up interest rates on thousands of long-term municipal securities called variable-rate demand obligations, or VRDOs. These bonds carry short-term interest rates that typically reset on a weekly basis.
The cities say the alleged conduct caused higher interest expenses on those VRDOs, reducing available municipal funding for public services such as hospitals and schools and other outlets funded by municipal borrowing.
Parties and positions
Named in the litigation alongside Bank of America were Barclays, Citigroup, JPMorgan Chase and Goldman Sachs, among others, bringing the total to eight financial institutions. The banks have denied that they engaged in any unlawful behavior.
In Manhattan federal court, the defendants argued that the municipalities should be required to pursue damage claims individually, rather than as a collective class action. Central to the banks' appeal was a contention about the timing of expert disputes and the class certification inquiry.
The banks urged that district judges must first resolve conflicts among third-party experts who address whether common issues predominate across putative class members before certifying a case as a class action. They argued the 2nd Circuit erred when it upheld the certification of a nationwide class of municipal bond issuers and warned that leaving that ruling intact could encourage overly broad class actions, substantially increase potential liability and coerce settlements.
Municipal plaintiffs pushed back, contending the banks sought to convert class certification into an early mini-trial on the merits. The cities and other municipal issuers said there was no split among appellate courts on how to approach certification and argued that the appropriate focus at the certification stage is whether common questions can be resolved for the class as a whole, not whether the plaintiffs will ultimately prevail on the merits.
Implications and next steps
With the Supreme Court declining review, the certification decision remains in effect and the case may proceed through the class-action process. The banks' appeal and the positions they advanced are preserved in the record, but the immediate procedural barrier to class treatment has been removed.
Beyond that, the course of the litigation - including discovery, expert testimony and motions on the merits - will determine how the matter unfolds going forward.