By Dawn Causey, Tom Pinder and Andrew Doersam
Lost in the media swirls surrounding the elections is the fact that the Court still lacks a ninth justice. The possibility of a 4-4 deadlock hangs over three cases with repercussions for the banking industry when the Court convenes in October, because when the Court is evenly divided, it affirms the lower court opinion and sets no national precedent.One of the banking cases likely to generate a 4-4 decision is Microsoft Corp. v. Baker, a case examining whether a federal court has jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismissed their claims. Disgruntled Xbox 360 owners sued Microsoft for breach of contract, alleging the Xbox drives scratched the game disks. Class certification was denied and the case was subsequently dismissed after the plaintiffs settled.
Years later, the same pugnacious plaintiffs’ attorneys filed another lawsuit with a new proposed class of gamers asserting similar claims. Once again, the district court denied class certification, and the Ninth Circuit denied interlocutory review. This time, the gamers threw a Hail Mary by voluntarily dismissing their claims and then filing a notice of appeal with the Ninth Circuit. Surprisingly, the gamers’ strategy paid off and the Ninth Circuit granted the appeal.
The Ninth Circuit ruled that because the parties agreed to dismiss the case without a settlement, the parties “retained sufficient adversity to sustain an appeal.” Other circuits have rejected this tactic, which held that plaintiffs, rather than defendants, have the right to appeal a denial of class certification. Cases involving class certification tend to be contentious and close; for this reason, an eight-justice Court may make consensus difficult.
Visa v. Osborn, the antitrust appeal from Visa, MasterCard and several banks addressing the requirements for pleading a conspiracy under the Sherman Act, should be nearly as contentious. Sherman Act cases are notoriously easy to plead but very difficult to prove. The Court will decide which facts beyond membership in a trade association trigger Sherman Act liability.
In 2011, consumers and independent ATM contractors claimed that banks and payment networks conspired to stifle competition and inflate ATM fees. The D.C. Circuit overturned a district court ruling and held that banks “used the bankcard associations to adopt and enforce a supra-competitive pricing regime for ATM access fees.” On appeal to the Supreme Court, the banks and payment networks argued the D.C. Circuit split from the Third, Fourth and Ninth Circuits. These circuits held that membership in a business association was not enough to prove a conspiracy under the Sherman Act. ABA filed an amicus brief in this case in support of the banks and payment networks.
The last case on ABA’s watch list is a consolidated appeal from Bank of America and Wells Fargo that will examine whether a municipality can sue banks under the Fair Housing Act. Despite the recent disparate impact decision in Texas v. Inclusive Communities Project, this issue may still be divisive. The city of Miami claimed the banks’ alleged discriminatory lending practices caused unprecedented foreclosures and sought damages for reduced property tax revenues. The Eleventh Circuit allowed Miami to pursue its FHA claims because the city demonstrated a nexus between its alleged injuries and the banks’ conduct.
The banks countered that Miami did not suffer an injury under the FHA because the city did not buy a house, take out a mortgage, nor experience any racial discrimination or disparate impact. ABA also argued in its amicus brief that the Eleventh Circuit adopted an overbroad view of FHA standing to allow municipalities to sue over economic injuries.
In the British courts, when the justices are deadlocked, the junior-most justice, as a matter of courtesy, declines to vote. Unless the Supreme Court suddenly adopts a similar tradition, several judgments in the 2016 term may be affirmed by an equally divided court, thereby satisfying no one.
Dawn Causey is general counsel at ABA, where Thomas Pinder is SVP for litigation and Andrew Doersam is a paralegal.
