Class certification
City of Philadelphia v Bank of America, et al.
Date: April 20, 2026
Issue: Whether, when putative class-action plaintiffs offer expert evidence to prove predominance under Federal Rule of Civil Procedure 23(b)(3) and the defendants present expert evidence disputing that the plaintiffs’ evidence proves predominance, the district court must resolve that dispute, or instead may certify a class based only on a finding that a reasonable juror could credit the plaintiffs’ evidence.
Case Summary: The U.S. Supreme Court declined to review a Second Circuit decision upholding class certification for American cities and others alleging that eight banks inflated interest rates on VRDOs.
Rule 23 requires a proposed class to prove predominance. For damages classes under Rule 23(b)(3), the court must decide whether common legal or factual questions outweigh individual ones. The rule ensures the class is cohesive enough for one trial. Plaintiffs must show they can prove their core claims with common evidence and measure damages on a class-wide basis without extensive individual determinations.
In August 2021, the city of Philadelphia, the San Diego Association of Governments, the mayor and city council of Baltimore, and other investors (Plaintiffs) sued several banks, including Bank of America, Citigroup, and Merrill Lynch, claiming they conspired to avoid competition and agreed to keep VRDO interest rates artificially high to prevent investors from exercising a “put” option on the bonds and tendering them back to the banks. Plaintiffs paid interest on VRDOs, which the banks reset weekly or daily under remarketing agreements. Those agreements required the banks to set the lowest possible rates to keep the bonds trading at face value.
In 2020, Judge Jesse Furman of the Southern District of New York refused to dismiss most claims. Judge Furman determined the Plaintiffs satisfied the predominance requirement of Rule 23(b)(3) and granted a motion to certify a nationwide class composed of all persons and entities that paid interest on VRDOs reset by the banks between Feb. 1, 2008, and Nov. 30, 2015.
On appeal, the banks challenged the district court’s finding that the proposed class met their burden of showing commonality and predominance. Specifically, the banks contended the district court failed to conduct the requisite “rigorous analysis” when determining whether the Rule 23(b)(3) predominance requirement had been met. The banks also argued the district court improperly discounted their individualized defenses to injury and causation in assessing predominance. However, in a unanimous decision, a Second Circuit panel affirmed the district court’s order granting class certification.
In their petition, the banks argued that a split exists among the circuits over whether district courts must resolve expert disputes at class certification when those disputes bear on predominance. According to the banks, the Third and Seventh Circuits require courts to weigh competing expert evidence and make findings at that stage. By contrast, the Second Circuit allows certification if a reasonable juror could credit the plaintiff’s evidence. The Ninth and D.C. Circuits take a middle approach. This split creates inconsistent standards that affect whether courts certify classes, according to the banks.
The banks also argued that the Second Circuit’s decision conflicts with U.S. Supreme Court precedent. The banks explained the Second Circuit’s decision relieves courts of their duty to assess all evidence rigorously. It also allows courts to avoid deciding, under a preponderance standard, whether Rule 23’s requirements are met before certification. Finally, the banks argued that courts’ handling of expert disputes in class certification is a significant and recurring issue, as class certification often turns on expert evidence and creates strong pressure to settle. However, the U.S. Supreme Court declined to review without providing additional commentary.
Bottom Line: The U.S. Supreme Court left in place the Second Circuit’s decision that upheld class certification in the VRDO lawsuit despite the banks’ arguments about a circuit split and conflict with precedent.
