I Overview

The US is an extremely active forum for banking-related litigation, where recent developments have significantly changed the legal landscape affecting claims against foreign banks. In particular, the Supreme Court's 2014 Daimler decision has markedly reduced the jurisdictional power of US courts in civil actions against foreign banks over their non-US activities, a development that affects both amenability to suit and exposure to non-party discovery and other remedies. Moreover, amendments to federal procedural rules have altered the civil discovery obligations of all litigants, in some cases potentially decreasing the number of documents banks may need to produce under the wide-ranging US disclosure regime, while simultaneously heightening the potential for sanctions for non-production.

While securities class action litigation against financial institutions as a group is down compared to the heyday of post-financial crisis litigation,2 financial institutions continue to experience litigation exposure to financial product-related suits, as well as anti-trust and other claims arising out of an active regulatory investigation landscape. Litigation derived from international sanctions violations has also been on the rise. Given the increasingly global nature of governmental investigations, banks must be attuned to privilege laws in multiple jurisdictions to guard against the potential disclosure of confidential information in private litigation in the US.

Shifting standards for establishing causation may limit liability in civil suits, though settlement remains the predominant method of resolving US claims, and much of the financial crisis litigation has settled in recent years. Class action waivers in arbitration agreements have become widely used by financial institutions to control dispute resolution arising out of consumer contracts and limit exposure to costly class actions; however, recent proposed rule-making by the Consumer Financial Protection Bureau (CFPB) seeks to prohibit this practice. The rule's future, and its implications for financial institutions, is unclear under the new Donald Trump presidency. As in so many other areas, it remains to be seen whether the Trump administration will actually be able to enact legislation that changes the banking legal landscape and affects banking litigation.

II LEGISLATION

i The federal system

The United States legal system is divided into federal and state jurisdictions. The federal government consists of three branches: legislative, executive and judicial. The majority of regulators that oversee financial matters (e.g., the Department of Justice, the Federal Reserve, and the Securities and Exchange Commission) are parts of the federal government, broadly defined, although states also have their own bank regulatory regimes.

The federal government and the state governments are considered to be separate sovereignties, and, accordingly, have concurrent legal regimes. Each of the 50 states has an independent court system and its own body of law. As a result, banks are subject to both federal and state law, which apply with equal force, but may differ in their requirements, with federal law taking precedence where applicable. Some states take a particularly active role in bank regulation; for example, as would be expected, New York and its Department of Financial Services maintain a dynamic presence in US banking regulation.

ii Recent legislation

Due to partisan gridlock at the federal level, no significant banking legislation has been enacted in the past 18 months. Continuous debate persists over potential financial legislation, and recently empowered Republicans have agitated for a repeal or reform of the Dodd-Frank Act, which was passed in the wake of the 2008 financial crisis. Similarly, at the state level, little legislative activity has occurred in recent months - though this is generally attributable to the secondary role of the states in banking regulation.

III JURISDICTIONAL MATTERS

In 2014, the Supreme Court substantially limited the power of the US courts over foreign entities in Daimler AG v. Bauman.3 In the US, personal jurisdiction - or the power of a particular court to hale in an entity to answer for a claim - is either general, meaning that a court can hear any claim against that entity, or specific, meaning that the court can hear only claims ‘arising out of or related to the defendant's contacts with the forum'.4 Previously, courts were permitted to exercise general personal jurisdiction over an entity with ‘systematic and continuous contacts' to the state where the court was located. In practice, this meant that foreign banks were routinely subject to suit wherever they had a branch or representative office, regardless of whether the plaintiff or the claim itself had any relation to the United States subject only to discretionary rules of forum non conveniens.

The Daimler decision dramatically altered this position. The Supreme Court ruled that general personal jurisdiction only could be exercised over a company if the forum court is within the company's state of incorporation, or the state of the company's principal place of business.5 The Court also noted that only ‘an exceptional case' would warrant deviation from this new rule, and that in all cases, the company must be ‘essentially at home' for a court to exercise general personal jurisdiction.6 Thus, the majority of US courts now do not have general personal jurisdiction over foreign banks. If the bank is not incorporated in the US, and does not have its headquarters there, plaintiffs almost certainly will not be able to maintain suit in the US under a theory of general personal jurisdiction.

Daimler has spawned much litigation. Plaintiffs have sought to push the boundaries of what might be considered an ‘exceptional case', arguing that a range of corporate activities renders the defendant ‘at home' and thus subject to general personal jurisdiction. Courts have largely resisted this reading of Daimler, and declined to find that ‘an exceptional case' exists.7 Plaintiffs have also sought to broaden the scope of consent to jurisdiction - specifically by arguing that obtaining a business licence to operate within a state, as banks must to operate a local branch, should constitute a consent to general jurisdiction there. States have issued conflicting opinions on this point.8 In New York, courts have not determined whether a licence to do business in the state will function as consent to personal jurisdiction, and legislation is pending to impose this requirement.9 At the time of writing, the question remains unresolved.

Plaintiffs have also sought to compensate for the loss of general jurisdiction in cases where it would previously have existed as a matter of course by broader assertions of specific jurisdiction, which requires that the claims arise out of the defendants' forum-related contacts, arguing that their suits ‘arise out of or relate to' what are sometimes relatively minimal actions by the defendant company within the forum.10 This strategy was envisioned by the Daimler court itself, which noted that ‘specific jurisdiction has become the centrepiece of modern jurisdiction theory.'11 Specific jurisdiction can be heavily fact-dependent. For example, in New York, prior to the Daimler decision, courts held that maintaining a correspondent account to clear dollar transactions within the state can provide a basis for specific personal jurisdiction - at least where clearing transactions form part of the plaintiff's claim.12 This rule was revisited recently by the New York state courts, which have introduced a requirement that the bank knowingly make use of the correspondent account (i.e., the bank must act with knowledge of the nature of the underlying transaction for which the correspondent account is used to move dollars as payment) in order for specific personal jurisdiction to lie.13 This area of law continues to evolve, as courts grapple with the extent to which routine banking contacts, such as use of New York correspondent accounts, are sufficient to create specific jurisdiction over otherwise non-US-related claims.

IV PROCEDURAL ISSUES

i December 2015 revisions to the Federal Rules of Civil Procedure

Recent revisions to the Federal Rules of Civil Procedure, which govern litigation in federal courts, primarily affected discovery obligations. The revisions are targeted at controlling e-discovery in particular, and the ‘explosion' of information e-discovery has generated.14 As commentators have noted, the 2015 revisions did not constitute a sea change; rather, the revisions ‘left the status quo largely in place'.15 Nonetheless, a few key changes merit mention for their potential effect on banking litigation.

Rule 26, which governs disclosure obligations, now provides that discovery must be ‘proportional to the needs of the case.' A proportionality requirement had long been observed in the discovery process, but often more in theory than in practice. The now explicit proportionality principle reemphasises the need to circumscribe unduly burdensome discovery requests, and may, unlike earlier reforms, actually curb some of the more far-reaching document disclosure demands that banks often confront. The drafters also underscored ‘the need for continuing and close judicial involvement', prompting the courts to actively oversee unruly discovery.

Rule 37, which governs violations of discovery obligations, was revised to strengthen spoliation sanctions. The drafters removed language that prohibited sanctions for routine deletion of information. Now, courts can order curative measures for any loss of information that results in prejudice to another party - regardless of whether that loss was the product of mere oversight or an intentional act. Thus, litigants are under increased pressure to review automatic deletion policies and actively maintain all information that may be discoverable.

ii Injunctions and attachment

An injunction is an order from the court that compels or restrains action. Injunctions may be issued at the outset of litigation, in the form of a temporary restraining order or preliminary injunction, or as the final relief awarded by the court. Attachment of an asset restrains the asset pending the outcome of the litigation, allowing the plaintiff access to the asset to satisfy any judgment that results.

Banks will frequently encounter asset freezing orders - injunctions or attachment orders requiring restraint of assets held by the bank - in connection with litigation to which the bank is not a party. There is variation among US jurisdictions as to the extent of a financial institution's obligation to freeze assets held outside the US in response to such orders. In New York, for example, the ‘separate entity rule' allows banks in receipt of such an order from New York courts to freeze only those assets located within the US - leaving assets in other countries unaffected by the restraint.16

With regard to post-judgment execution on assets or injunctions in aid of such execution, recent changes to personal jurisdiction law, discussed in greater detail in Section III.i, supra, have limited the power of US courts to enforce such orders against non-parties for assets located outside the forum. Following the Daimler decision, a court ‘need not preliminarily establish personal jurisdiction over a nonparty bank to restrain … assets … [but the] court can enforce an injunction against a nonparty [bank] only if it has personal jurisdiction over that nonparty.'17 Thus, financial institutions wishing to resist the enforcement of third-party enforcement orders now may be able to assert a personal jurisdiction defence that was not available in prior years.

iii Class actions

Financial institutions will frequently encounter litigation in the form of a class action brought on behalf of numerous plaintiffs. Class actions are frequently driven by plaintiffs' attorneys, since recovery by individual plaintiffs may be limited, while attorneys' fees for a successful class action can be substantial. The Class Action Fairness Act of 2005 facilitated removal of class actions from state to federal court, and contained certain additional measures that were widely seen as preferential to corporate defendants, including banks. Class actions have nonetheless remained popular vehicles for litigation against banks, and are frequently used in high-profile litigation - for example, claims arising from loan practices implicated in the 2008 financial crash have been the repeated subject of class action suits against numerous financial institutions.

Class actions in the US are largely governed by Federal Rule of Civil Procedure 23. Under Rule 23, plaintiffs must affirmatively demonstrate several requirements: numerosity of parties, commonality of questions of law or fact, typicality of the representative plaintiffs' claims relative to the class, and fair and adequate representation of the class. A court must affirmatively approve a class action, by ‘certifying' the class. In many cases class certification, by magnifying the defendants' potential exposure, helps drive settlement, especially if the case survives summary judgment after discovery is completed. This is largely a function of the existence of civil jury trials in the United States, which magnify uncertainty for corporate defendants, especially those that are generically ‘unpopular', such as banks.

iv Choice of law

Choice of law considerations within the US can be particularly complex, and even more so in cases involving global banks, as courts must decide whether to use foreign, federal or state law - and if state law is applicable, which of the 50 states' laws will apply. Different US jurisdictions apply different tests to resolve choice of law questions, in some instances looking to which body of law bears the most ‘significant relationship' to the suit, while in other instances rigidly applying formulas that require, for example, a contract dispute to be adjudicated under the law of the place where the contract was formed.

V PRIVILEGE AND DISCLOSURE

i Bank examination privilege

In the US, banks benefit from a privilege protection for confidential information shared with their bank regulators, known as the bank examination privilege. Banks are heavily regulated by a patchwork of state and federal agencies, which frequently obtain confidential information related to a bank's operations and performance in the exercise of their oversight duties. Such confidential information is often sought in litigation by third parties against banks, and the bank examination privilege may be used to protect this information from disclosure.

The bank examination privilege belongs to the regulatory agency. The privilege may be invoked only by bank regulators and supervisory bodies, such as the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank, the Federal Deposit Insurance Corporation and the Consumer Financial Protection Board, as well as state banking agencies. The privilege does not extend to non-banking agencies, such as the Department of Justice or Securities and Exchange Commission. The bank examination privilege protects a broad swathe of information, under the rationale of preserving the candour necessary to the effective supervision of banks, and may include bank examination reports, communications with bank regulators, information gathered in the course of an investigation by the bank regulator, and documents prepared for the use of the bank regulator.

It is up to the bank and its outside counsel to preserve the privilege when responding to subpoenas or discovery requests for documents covered by the privilege. Documents covered by the privilege should not be produced in parallel private litigation or to requests from non-banking agencies, unless the privilege has been waived by the applicable regulator or production has been ordered by a court following its review. In practice, outside counsel should notify the regulator of the request, and typically file under seal documents over which the privilege is being asserted for in camera court review. Outside counsel should be attuned to the bank examination privilege to minimise the risk of unnecessary disclosure, particularly in the current environment where banks are investigated and sued in myriad forums, by a multitude of agencies and private litigants.

ii Attorney-client privilege
Privilege over documents prepared during internal investigations

In the wake of enforcement actions against banks since the financial crisis of 2008, there has been an uptick in internal investigations as banks increasingly play the role of deputised enforcers. Given the concurrent rise in private parallel litigation, there is a greater risk that private litigants will seek discovery of materials prepared in the course of an internal investigation. It is important that a bank's counsel, internal or outside, ensure their communications and records concerning the internal investigation remain privileged.

In general, the rule for the attorney-client privilege to apply is that the communication must have been made in confidence for the purpose of obtaining legal advice. US courts have conducted fact-intensive analyses to determine whether the privilege applies. One case illustrates the differing approach courts may take to the issue. At the district court level, the court ruled that because the internal investigation had been conducted ‘pursuant to regulatory law and corporate policy' rather than for the primary purpose of obtaining legal advice, the investigation was not protected by the attorney-client privilege.18 The trial court applied a novel ‘but for' test to ascertain the primary purpose of the investigation, reasoning that the primary purpose would have been to obtain legal advice only if the investigation would not have been conducted but for the fact that legal advice was sought. This controversial opinion was overturned by the court of appeals, which reasoned that the ‘but for' test was ‘not appropriate for attorney-client privilege analysis', finding instead that the correct test was whether ‘one of the significant purposes' of the investigation was to obtain or provide legal advice.19 In this context, a bank's counsel should ensure that internal investigations are led by attorneys and have adequate attorney oversight.

In addition, given the tendency of regulators, beyond the bank's primary supervisor, to vie with one another to take the lead in investigating potential wrongdoing, care should be taken when disclosing to regulators documents prepared by counsel during an internal investigation. When documents are disclosed to a regulator (e.g., the Department of Justice) that is not the bank's supervisory regulator, the bank examination privilege does not apply and such disclosure would constitute waiver of privilege for private litigation and other regulatory investigations.

Cross-border considerations

Maintaining attorney-client privilege becomes an even thornier issue when cross-border considerations enter the picture. Given the global nature of most banks, this issue will increasingly be encountered in banking litigation practice. Recent developments in the law have demonstrated that the relatively broad privilege protections afforded in the US are not universal. For example, in a December 2016 ruling, the English High Court found that transcripts, notes or other records taken during an internal investigation performed by a British bank's in-house and outside counsel in response to a subpoena by a US regulator, the Securities and Exchange Commission, were not privileged and therefore subject to disclosure to private litigants bringing claims against the bank.20 The English court also declined to apply US privilege laws in its analysis. Given the global scope of many investigations, banks should be conscious that documents prepared in the course of an investigation could end up being disclosed to foreign authorities and as a result be later subject to discovery in civil litigation in the US on waiver grounds, particularly in cases where the investigations touch jurisdictions with less expansive privilege protections than the US.

Moreover, in litigation in the US, depending on which country's privilege laws apply following a choice of law analysis, there is a possibility that attorney-client privilege may not attach at all. In a case related to a Chinese bank, the US district court determined that Chinese law would apply to the privilege analysis of certain documents.21 As China does not have a US-style attorney-client privilege, the court found that the bank was not entitled to assert attorney-client privilege over these documents and ordered their production.22

Given the limitations on attorney-client privilege in other jurisdictions, counsel should be attuned to the increased risk of exposure to disclosure of documents created during an investigation, both in litigation proceedings in the US and abroad.

iii Defending against subpoenas

The recent developments in personal jurisdiction case law post-Daimler, discussed in greater detail in Section III.i, supra, have provided banks with another tool to defend against subpoenas. While the Federal Rules of Civil Procedure permit the issuance of a subpoena to third parties anywhere in the US, settled law has established that a court must have personal jurisdiction over the target of a subpoena in order to enforce the subpoena. Given that Daimler restricted the principle of general personal jurisdiction to where an entity is ‘at home,' Daimler accordingly narrows the court's ability to enforce a subpoena because of lack of personal jurisdiction.

This issue is now being litigated and one appeals court has recently weighed in, finding that two foreign banks were not required to comply with the requested worldwide search in the subpoena, given the court's lack of general jurisdiction and specific personal jurisdiction over the banks. In March 2017, the appeals court affirmed an order granting a motion to quash subpoenas and Illinois citations (the Illinois state equivalent to a federal subpoena) served on the Chicago branches of two foreign banks, a French bank and a Japanese bank.23 The subpoenas and Illinois citations sought worldwide discovery of Iranian assets held by any branch of the two banks, of which there were over 7,500 branches worldwide, notwithstanding that none of their branches in Illinois, or the United States, held any such assets. The appeals court agreed, noting that plaintiffs had ‘no legal right to the information that they have demanded' from the two banks, because neither was subject to general jurisdiction in Illinois and the subpoenas did not relate to their Illinois activities as required for specific jurisdiction.

In New York, the separate entity rule has also been a defence against subpoenas seeking information requests for accounts held outside of the US, though outcomes in the subpoena context have differed from the outcomes in the injunction and attachment context. Recent cases have left open the question of enforcement of information subpoenas on foreign banks with operations in New York.24 In a controversial decision, the district court in Vera disagreed that the separate entity rule or Daimler restrictions applied, and ordered a Spanish bank to comply with a subpoena for information from branches outside New York, reasoning that the bank had consented to general personal jurisdiction by registering as a foreign bank branch in New York in compliance with New York's statutory regime. The decision is on appeal to the Second Circuit - the federal appellate court that oversees New York federal courts, and has particular importance in the development of banking law - but no decision had been issued at the time of writing.

VI FREQUENT CAUSES OF ACTION

i Sanction violation suits

Recent years have seen a notable uptick in the number of civil suits brought in the wake of international sanctions violations. Thus a US government finding, or admission by a bank, typically in a guilty plea, deferred prosecution agreement or civil settlement with bank regulators, that a company has violated a prohibition on commerce with Iran, for example, may well lead to private litigation.

The Anti-Terrorism Act, as amended in 2016, allows private persons injured by a terrorist act to sue any entity that aids and abets, provides substantial assistance to, or conspires with the perpetrator of the terrorist act.25 Plaintiffs have used this provision to assert claims against banks for effecting wire transfers that either directly provide funds to terrorist groups, or that transfer funds to intermediaries who allegedly eventually provide funding to terrorist groups.26 Considerable litigation related to these claims is ongoing, and at least one jury has returned a verdict against a bank on an Anti-Terrorism Act claim27 - though appeals are pending.

Plaintiffs have also brought similar claims under the Alien Tort Statute, which provides a private right of action for torts that violate ‘the law of nations or a treaty of the United States' committed by persons who are not US citizens.28 Currently, the federal courts are divided as to whether an action may be maintained against a corporation under this provision, and the Supreme Court has recently agreed to hear arguments on this issue.29 A decision from the Supreme Court resolving the question will likely be issued in the next year.

ii Financial product-related suits
Mortgage-backed securities

In the wake of the 2008 financial crisis, lawsuits involving residential mortgage-backed securities proliferated. These lawsuits involved disputes arising from the securitisation of residential mortgage loans, and have mostly been class actions filed by investors bringing fraud or misrepresentation claims against financial institutions who issued or underwrote the toxic mortgage loans. Central to most allegations is the claim that the offering documents contained misrepresentations regarding the underlying loans. Much of the litigation has focused on whether plaintiffs have standing to sue.

New lawsuits are on the decline as many of these private cases have settled in recent years, with at least one case going to trial in which plaintiffs were successful. Banks have also settled with federal authorities. Settlements with the Department of Justice have been in the billions of dollars in a number of cases. Banks may also be subject to lawsuits by state attorneys general, as the New York Attorney General's office has also brought suits related to mortgage-backed securities. As recently as December 2016, the Department of Justice filed a lawsuit against an English bank, which also named two of its executives, under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, alleging that it had repeatedly misled investors about the quality of the mortgages backing the securities. The Act has an expansive 10-year statute of limitations, which foreshadows its continuing use in litigation in the years to come.

Derivatives

In addition to litigation related to mortgage-backed securities, banks have traditionally faced lawsuits related to the complex financial products they offer. The litigation in this sphere has grown as banks created increasingly sophisticated derivative instruments. Litigation usually occurs when one party to a transaction suffers losses and seeks to recoup these losses from its counterparty, by bringing suit alleging various forms of fraud, misrepresentation, breach of contract or breach of fiduciary duty, and in particular raising claims as to the suitability of the financial product. One threshold question in litigation is whether the product at issue is a ‘security,' which will determine which law applies to disputes involving the relevant derivative instrument. Recent lawsuits involving financial instruments have also focused on antitrust claims, as discussed in subsection iii, infra.

iii Antitrust violation suits: civil suits brought in the wake of antitrust investigations

The latest financial scandals involving antitrust investigations and regulatory settlements, from alleged London Interbank Offered Rate (LIBOR) fixing to alleged manipulation of the foreign exchange market, have spawned a new wave of private litigation by investors alleging antitrust violations against banks. The allegations in these class actions, many of which have been consolidated, center on collusive or anticompetitive behaviour by rate setters or counterparties to transactions, and many base their allegations on conduct described in regulatory settlements.

While litigation is ongoing for these cases, a number have also settled, most notably a $2 billion dollar settlement relating to claims by direct purchasers that defendant banks had manipulated the foreign exchange market. Not all banks participated in this settlement and litigation continues against the non-settling banks, which have moved to dismiss the claims. The banks secured a recent victory in the dismissal of certain claims arising from transactions executed outside the US, but claims under the Commodity Exchange Act were allowed to proceed.30 Additional classes of plaintiffs, this time indirect purchasers, have also filed new lawsuits in 2016, alleging collusion in the foreign exchange market. In the LIBOR sphere, federal antitrust claims that had previously been dismissed by a lower court for failure to plead antitrust injury were revived in 2016, following a reversal by the Second Circuit, which held that antitrust law did not require plaintiffs to show an injury causing harm to competition in order to allege a conspiracy among market participants when the conduct alleged constitutes a per se antitrust violation, as in the context of rate-setting.31 Earlier this year, the Supreme Court denied a petition from the banks requesting it to review the Second Circuit opinion, so the case will proceed, focusing on whether plaintiffs are efficient enforcers of the antitrust laws - a requirement for antitrust standing. Antitrust violations can potentially carry treble damages, so the resurrection of this claim and its eventual resolution is one to watch.

VII LIMITATIONS ON LIABILITY

i Causation

In order to hold a defendant civilly liable, plaintiffs must show that the defendant caused their injuries. This causal connection requirement frequently limits a defendant's exposure to damages. For example, in Rothstein v. UBS AG, the Second Circuit ruled that plaintiffs could not maintain a suit against a Swiss financial institution under the Anti-Terrorism Act for alleged financing of Hizbollah and Hamas, because the plaintiffs failed to allege that ‘moneys [the bank] transferred to Iran were in fact sent to Hizbollah or Hamas or that Iran would have been unable to fund the attacks by Hizbollah and Hamas without the cash provided by [the bank].'32 However, causation requirements will not always result in the early dismissal of claims. For example, in the securities fraud context, the Second Circuit recently ruled that a suit for investment losses, brought in the wake of the 2008 financial crash, could survive a motion to dismiss, where plaintiffs alleged only a ‘potential causal link'.33 As a result, the plaintiffs were not required to show, at the beginning stages of litigation, that the defendant caused the injury, independent of a broader market trend.

ii Arbitration agreements

Arbitration agreements have become increasingly common in consumer contracts, particularly in contracts used by large financial service providers offering credit cards, bank accounts, student loans and other financial products and services. Arbitration agreements allow providers to contract for this choice of dispute resolution, ensuring all claims will be adjudicated through arbitration rather than in the potentially more costly traditional court forum. In particular, the rise of class arbitration waivers can limit liability by shielding providers from onerous class litigation and arbitration, where costs and potential damages are much higher. In recent years, the Supreme Court has upheld the enforceability of provisions in arbitration agreements precluding class claims.34

The Dodd-Frank Act directed the CFPB, which was created by the Act, to study the use of arbitration agreements in consumer financial products contracts. A subsequent study by the CFPB found that approximately 90 per cent of these types of arbitration agreements include provisions for class arbitration waivers.35 In May 2016, the CFPB proposed a new rule that would prohibit providers of certain financial products and services to consumers from including in their contracts arbitration provisions that prohibit class action lawsuits.36 The comment period on the proposed rule closed in August 2016 and drew roughly 13,000 comments.37 Despite speculation that the CFPB would issue a final rule before the Trump inauguration, at the time of writing the final rule had not been issued. The rule would likely change the landscape of consumer contracts, potentially curtailing the use of arbitration agreements in consumer contracts and setting the scene for more class action litigation involving consumer financial product litigation, by making it easier for consumers to bring class actions. However, the proposed rule's future is uncertain given the change in administration and it remains to be seen how active the CFPB will be under the Trump administration.

iii Settlement

Settlement is the predominant method of resolving litigation in the US, because of the costs of discovery, the absence of an English-style ‘loser pays' rule and the uncertainty of civil jury trials. Recent notable bank settlements include:

a The $29 million settlement in January 2017 between a US bank and a class action of homeowners alleging improper loan practices. The suit was initially brought in March 2016 - thus the settlement brought the class to a close in under a year, much more quickly than full litigation.

b The $60 million settlement in December 2016 between a German bank and a class action of investors alleging manipulation of gold prices. Suit was filed against multiple banks, and is ongoing against several domestic and foreign financial institutions.38 The settlement was preceded by a similar agreement in October 2016 to settle claims regarding silver price manipulations for $38 million.

c The $56.5 million settlement in December 2016 between a US financial institution and a class action of investors alleging manipulation of the ISDAfix rate. The settlement was preceded in May 2016 by a settlement by seven banks, both US and foreign, in the same suit, for a combined total of $324 million.

VIII OUTLOOK AND CONCLUSIONS

The US is currently experiencing a period of great political uncertainty, and it is unclear what the implications will be for financial institutions. The Trump administration and other Republicans have expressed great interest in overhauling the tax code, as well as repealing the Dodd-Frank Act, which would respectively lessen the taxation and regulatory obligations of banks - potentially significantly. However, the administration's legislative efforts thus far have proved unavailing and no clear outcome can be predicted at this time. Certainly, no legislation increasing regulatory burdens or financial oversight is likely to pass in the next year, but it also seems unlikely that in the near term the Trump presidency will have a direct impact on litigation in the banking area.

Similarly, while it is clear that the new administration will appoint conservative and pro-business judges to the US Supreme Court and lower federal courts, how such appointments will translate into judicial decisions in particular cases remains to be seen. There is also the possibility that state attorneys general in places like New York and California will take up the reins of investigatory activity previously conducted by federal regulators of financial institutions.


1 Jonathan I Blackman is a partner, Pascale Bibi is an associate and Abigail E Marion is a law clerk at Cleary Gottlieb Steen & Hamilton LLP.

2 See Stefan Boettrich and Svetlana Starykh, Recent Trends in Securities Class Action Litigation: 2016 Full-Year Review, NERA Economic Consulting, 12-23 (23 January 2017).

3 134 S. Ct. 746 (2014).

4 Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415 No. 9 (1984).

5 Daimler AG v. Bauman, 134 S. Ct. 746, 760 (2014).

6 Id. at 761.

7 See, e.g., Martinez v. Aero Caribbean, 764 F.3d 1062, 1070 (9th Cir. 2014) (holding that California did not have general personal jurisdiction over a corporation, as the company could not be said to be ‘at home,' despite operating ‘multiple facilities in California.'); Monkton Ins. Servs., Ltd. v. Ritter, 768 F.3d 429, 432 (5th Cir. 2014) (‘It is... incredibly difficult to establish general jurisdiction in a forum other than the place of incorporation or principal place of business.').

8 For example, courts in Delaware issued split decisions on whether registration operated as consent, before the Delaware Supreme Court - the state's highest court, and the final arbiter of Delaware state law - ruled that registration did not function as consent. Genuine Parts Co. v. Cepec, 137 A.3d 123, 148 (Del. 2016).

9 A6714, Reg. Sess. (N.Y. 2015), http://assembly.state.ny.us/leg/?default_fld=%0D%0A&bn=A6714&term=2015&Summary=Y&Actions=Y&Votes=Y&Memo=Y&Text=Y.

10 Much of the increase in specific personal jurisdiction litigation has centred on products liability and non-bank commercial activity-based jurisdictional fact patterns. See, e.g., Bristol-Myers Squibb Co. v. Super. Ct. of Cal., 137 S. Ct. 1773 (2017) (finding no specific personal jurisdiction where the product was not manufactured in state and out-of-state plaintiffs did not buy in state).

11 Daimler AG, 134 S. Ct., 755 (citation omitted) (internal quotation marks omitted).

12 Licci ex rel Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 171 (2d Cir. 2013) (discussed and applied following Daimler in Gucci Am., Inc. v. Weixing Li, 135 F. Supp. 3d 87 (S.D.N.Y. 2015); see also Weiss v. Nat'l Westminster Bank PLC, 176 F. Supp. 3d 264, 286 (E.D.N.Y. 2016).

13 Rushaid v. Pictet & Cie, 28 N.Y.3d 316, 338 (2016), reh'g denied, 28 N.Y.3d 1161 (2017).

14 Fed. R. Civ. P. 26, notes.

15 Adam N Steinman, The End of an Era? Federal Civil Procedure After the 2015 Amendments, 66 Emory L.J. 1, 5 (2016).

16 Motorola Credit Corp. v. Standard Chartered Bank, 24 N.Y.3d 149, 156 (2014).

17 Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 134 (2d Cir. 2014) (emphasis added).

18 United States ex rel. Barko v. Halliburton Co., 37 F. Supp. 3d 1, 5 (D.D.C. 2014).

19 In re Kellogg Brown & Root, Inc., 756 F.3d 754, 759 (D.C. Cir. 2014).

20 RBS Rights Issue Litigation [2016] EWHC 3161 (Ch).

21 Wultz v. Bank of China Ltd., 979 F. Supp. 2d 479 (S.D.N.Y.), on reconsideration in part, No. 11 Civ. 1266(SAS), 2013 WL 6098484 (S.D.N.Y. 20 November 2013).

22 Id. at 493.

23 Leibovitch v. Islamic Republic of Iran, 852 F.3d 687 (7th Cir. 2017).

24 See, e.g., Vera v. Republic of Cuba, 91 F. Supp. 3d 561 (S.D.N.Y. 2015).

25 18 U.S.C.A. § 2333.

26 See, e.g., Weiss, 176 F. Supp. 3d; Wultz v. Bank of China Ltd., 32 F. Supp. 3d 486 (S.D.N.Y. 2014); Lelchook v. Islamic Republic of Iran, Civil Action No. 15-13715-PBS, 2016 WL 7381686 (D. Mass. 20 December 2016).

27 Linde v. Arab Bank, PLC, 97 F. Supp. 3d 287 (E.D.N.Y. 2015).

28 28 U.S.C.A. § 1350.

29 In re Arab Bank, PLC Alien Tort Statute Litig., 822 F.3d 34, 41 (2d Cir. 2016), cert. granted sub nom. Jesner v. Arab Bank, PLC, No. 16-499, 2017 WL 1199472 (2017).

30 In re Foreign Exch. Benchmark Rates Antitrust Litig., No. 13 Civ. 7789 (LGS), 2016 WL 5108131 (S.D.N.Y. 20 September 2016).

31 Gelboim v. Bank of Am. Corp., 823 F.3d 759 (2d Cir. 2016), cert. denied, 137 S. Ct. 814 (2017).

32 708 F.3d 82, 97 (2d Cir. 2013). Note however, that the ATA has been revised since the time of this suit to include ‘aiding and abetting' liability, which may affect this outcome. 18 U.S.C.A. § 2333(d)(2).

33 Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 188 (2d Cir. 2015).

34 See, e.g., DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015); Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013); AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).

35 See CFPB, ‘Arbitration Study: Report to Congress Pursuant to Dodd Frank Wall Street Reform and Consumer Protection Act § 1028(a)', at 10 (March 2015) http://files.consumerfinance.gov/f/201503_cfpb_arbitration-study-report-to-congress-2015.pdf.

36 CFPB, Notice of Proposed Rulemaking, Arbitration Agreements, 81 Fed. Reg. 32830 (proposed 24 May 2016) (to be codified at 12 C.F.R. pt. 1040).

37 See Yuka Hayashi, CFPB's Arbitration Proposal Draws 13,000 Comments, The Wall Street Journal (23 August 2016) www.wsj.com/articles/cfpbs-arbitration-proposal-draws-13-000-comments-1471983139.

38 In re Commodity Exch., Inc., No. 14-MD-2548 (VEC), 2016 WL 5794776 (S.D.N.Y. 3 October 2016) (denying motion to dismiss).