## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 12

- 2724 M AT T HE W T HO M AS e tal ., on th eir ow n be h alf a nd tha to fa l l o the r s s i mi l a r l y s i t ua t e d, P laint if fs -App el lants , v . UBS AG, D efend a nt-A pp ellee

.

A pp eal from the United S t ates Di strictC our t fo r the N o rthernDi stricto f Illino is, Eas tern Div isi on. No . 11 C4798

—Jo hn W. Darrah, Judge .
A RG UE D D ECE MBE R 7, 2012

— D ECI DE D F EB RU AR Y 7, 2013

Befo re P OSNER, W OO D , a nd W I L L I A MS, Circ uit Ju dg es . P OSNER, Cir cu i tJudg e . T h e th r e e a p p e l l a n t s ar e th e nam ed p l ai nti ff s in a c l ass act i on s uitthatse eks dam age s f ro m U BS , Sw i tze rl and’s l ar ges t ba nk, wh i ch speci al i zes i n m anaging the as set s o fw ea lth y perso ns fro m al l o ver the w or l d. Feder al j uri sdic ti on i s base d on th e al i enage br an cho fthe di ve r si tyj ur i sdi ct i o n.2 N o. 12

- 2724 The parti es have not m ade cle arthe sour ce orso urces o f the l aw appli cabl e to the case . The pla i nti ff s a d vance a va r i ety o fc o m m on l aw c l ai m s wi th o uti ndi ca tingthe sta te ornati on w h os e l aw gi ves ri se to them

. They m ainly cite l aw from states in w hich the th ree plaintiff s re si de ( A ri zona, Cal i f or ni a, and N ew Yor k) , b ut they al so ci te I l l i noi s ca ses ( w i thout ex pla i ni ng wh y)
. W hen the par ti es t o a di ver si ty case do notm enti on wh at sta te’ s l aw appli es, the cour t a pp lies the l aw o fthe sta te in w h ich t h e c ou rtis loc at ed

. San t a’s Be s tCr af t, LL C v. St
. Paul Fi r e& M ar i neIns . Co. , 611 F.3d 339 , 345 (7t h C ir. 2010 )
. But thes e parties, byci ti ng ca ses bo th fro m I l l i noi s ( w hi ch i s t h at s tate) and fro m the thre e s tat es i n w hi ch a pla i nti ffr es id es , i m plythatthe l aw o f al l f o urs ta te s appl i es . T hi s i s qua dr upl y s tr an g e: The parti es don’tsugg estthat all the c l a s s me mbers r e s i de i n thos e three o r f our sta tes o r that al l the al l ege dlywrongful acts oc c u rr ed i n thos e s tat es. They don’ t ind i cate wh e th e r th e r e a r e r el ev a n td i ffe r e n c e s a mo n gth e l a ws o f th e f o ur st at es . The y do n’ t ex pl ain why th e l aw of the sta te ofa pla i nti ff’ s o r unnam ed cl ass m em ber ’ s r esi dence shoul d contr olunder appl i cabl e confl i ct ofl aw s princi ple s ra therthan, fo r ex am ple , the l aw o fS w i tze rl and, w hi ch i s U B S ’ s d o mi c i l e a n d a l s o th e p l a c e i n w h i c h U B S c o mm i tted the com pla i ned ofact s o r om i ssi ons. A nd they don’tdi scuss the pos sibi l i ty that federa l co m m on l aw m ay apply i nstea d o f sta te l aw because , as w e’ll se e, the p lain tiffs re l y in parto n a c ontr act w i th the federa l gov er nm ent. Th e p r o b l e m o fc ho i c e o flaw cre a t e d b y a n a t i o nwi de cl ass act i on g ove rned byl aw s o fdiffere nt st ate s o r othe rN o. 12

- 2724 3 j urisd ictions is us ua ll y solved by the district cou rt’s c erti fyi ng a differ ent s ubcl ass f orcl ass m em ber s in each j uri sdic ti on w hose l aw di ffer s in so m e r el evantr espect from that of th e othe r j urisd ictions in w h ic h m em bers of th e class reside or th e all eged ly un law ful acts w ere com m i tte d. The parti es h ave not propos ed that sol uti on and anyw ay the c ase was dis m iss ed on the m er i ts b e f o r e a nyc l a s s o r s ub c l a s s e s we r e c e r t i fi e d. W e’ r e no t atl ibe r tyt o de cid e a di ve r si tyc as e o n the b asis o fthe “ge nera l co m m on l aw . ” In reR h o n e - Po ul e nc Rore r Inc. , 51 F .3d 12 93 , 130 0-0 1 (7 th C ir. 19 95 ); Cen t r al Soya Co
. v. Ep st ei n Fis her ie s, Inc. , 67 6 F
. 2d 939, 94 1 ( 7th Cir
. 1 9 8 2 )
. Th e t e r m d e no t e d the c o mm o n l aw pri nci ples cre ate d by federa l j ud ges f oruse i n div er si ty case s

— pr i nc i pl es th at m i g ht di ffer f r o m th e l aw th at th e v a r i o u s s t a t e c o u r t s w o u l d ha v e a p p l i e d t o th e s a me cases ifl i ti gat ed i n sta te ra therthan federa l co urts
. I n the E ri e cas e the S up r e me Co ur th e l d tha tt o de c i de dive rs i ty case s o n the basi s o fco m m on l aw cr eat ed by federa l j ud ges was an unconsti tuti onal usurpati on o fst ate a u th o r i t y . “The r e i s n o fe d e r a l g e n e r a l c o mmo n l a w. Congre ss has no pow erto decl ar e substanti ve rul es of com m on l aw appli cabl e in a s tat e. ” Eri eR. R. v. Tom pki ns , 304 U
. S. 64 , 78 ( 1938 )
. But part i es still ar e a l l owed to sp ec i fy ( w i thi n re aso n, se e Llo yd v. Lo effler, 6 9 4 F
. 2 d 4 89, 49 5 (7 th C ir. 19 82 )) w h at law sh al l g o v er n a law su it between them , and the speci fi cati on ca n be i m pli ci t. M any c om m on la w pri nci ple s a re the sam e, o r m at er ial lythe s ame, i n manyo r e ve n a l l U. S
. s ta te s, a nd w h en a ca se tu rn s on su c h a p rin c ip le th e pa r t i e s w ill4 N o. 12

- 2724

o fte n c i te de ci si o ns a r ti cul at i nga nd a ppl ying i t wi th o ut w or ry i ng ab out w hi ch st ate the deci si ons com e fr om , as in our recen t case of A d a m s v . Ra intree V a ca tio n E xc ha ng e, LLC, 70 2 F
. 3d 436, 43 8 ( 7th Ci r. 20 12); t o th e sam e e ffect see P hill ips v. A udio A cti ve Lt d

. , 4 9 4 F
. 3 d 3 7 8 , 3 8 6 ( 2d Ci r . 2 00 7)
. I n A d a ms the parti es had i m pli ci tl y a gr eed th at “A m erican l aw ” w ou ld govern th e interp retation ofa f o r um sel ec t i o n c l a us e i n a c o nt r a c ttha th a d b e e n mad e i n M exi co, but they did n ot speci fy a st ate ’ s l aw to g o ve r n the i ss ue

—j ust Am er i can r atherthan M exi c an l aw . T h is c ase i s s i m i l ar . A nd since there i s no i nd i cati on that the c om m on l aw p rincipl es i nvoke d by the par ti es var y a cro ss the stat es that m i ght ha ve j uri sdic ti on o f claim s in the com p lai nt or th at fed eral la w m ight govern i nstea d ofst ate l aw o r Swiss l aw ins te ad of A m er i can l a w, we ’ l l n o two r r y fu r th e r ab o u tc h o i c e o fl a w. The d ist ri ct j ud ge dism i sse d the s uito n the m er i ts w ithou t, as w e said, first consid ering w he th er to certify a cl ass . N or m al l y the i ssue of cer ti fi cati on s houl d be re so lve d first, Thom as v. City of P eori a , 58 0 F
. 3d 633, 63 5 (7t h C ir. 20 09 ); Ber t r and ex r e l
. Ber t r and v. M aram , 49 5 F.3 d 45 2, 45 4-5 6 (7 th C ir. 20 07 ), be c au se if a c las s is certifi e d this sets th e stage for a settlem en t and i f certifi cati on i s deni ed the sui t i s l i kel y t o b e ab an d oned, as t h e s ta ke s o f th e n am ed p lain tiffs u su ally are to o s m all to j usti fy the exp en se o f sui t, tho ugh thatm ay not be tr ue i n thi s ca se. But deci ding w hetherto cer tify a cl ass ca n t ak e a l o ngt i m e. Rul e 23 ( c) ( 1) ( A) r equi r es tha t the dec i sion be made a t “a n e ar l y pr ac ti cabl e ti m e, ” but ea r l y i s o fte n n o t pr ac ti cabl e. So w he n as i n thi s ca se theN o. 12

- 2724 5 sui t ca n quick l y b e s how n to b e gr ou nd l ess , i t m ay m ake se ns e f o r the di st r i ctc o ur t to s k i p c er ti fi catio n a nd p ro c ee d d ire c t l y t o th e m er its
. Cowen v. Bank Unit e d of Texa s , FS B , 70 F. 3d 937, 941-42 (7th Cir. 1995). UB S o ppo se d c er ti fi cat i o n e ve n tho ug h a de fen dan t w ith a w in n in g c as e h a s m u c h to ga in from it

— the j ud gm en t fo r th e d efe n d an t w ill be r e s ju d ica ta in a n y s u it by a cl ass m em berwh o had n ot opted out o fthe cl ass , provi ded “that th e n am ed pl ai nti ffatal l ti m es adeq u a t e l y r e p r e s e n tth e i n t e r e s t s o fth e ab s e n tc l a s s me mber s. ” P h il li p s P et role um Co
. v. Shutts , 47 2 U.S
. 79 7, 81 2 ( 1985 ) ; se e a l so Ha nsb e r ry v . L ee, 311 U
. S. 32, 45 (1940). Bu t e ven a defend an t w i th a w i nning case m ay not have m uch to gain, i fan op t ou t c an be expected to fi l e a nothercl ass act i on a gains t the defendant. That po ss ibi l i tyt o o ne s i de, a v ery r i sk

- av er se de fen dan t w ill op p os e c er tific at ion e v e n in a w ea k c as e le st it l ose the case ( aga i nst the o dd s) and, bec ause the c ase w as l i ti gated as a cl ass act i on, be or dered to pay ver y hea vy dam age s. The pla i nti ff s, and the othe r m em ber s ofthe cl ass

— who nu mbe r i n the tho us a nd s

— ar e Am er i ca n c i ti ze ns who ha d b an ka cc o unt s i n UBS in 2 008 w he n the UBS ta xevas i on s candal ( ofwh i ch m or e s hor tl y) br oke

. The accounts ofthe thre e pl ai nti ff s were l ar ge

— $500 ,00 0 t o $2 mil l i o n e ac h. T he p la i nt i ff s ha d no t di sc l o se d the e x i s t e n c e o fth e a c c o u n t s o n th e i r fe d e r a l i n c o me tax r etur ns, as theywere re quir ed to do byFo rm 10 40, Schedul e B , wh i ch on l i ne 7a as ked ( the c urr ent v er si on i s m ate ri al l y the sam e): “A t a ny ti m e duri ng [ 2002

- 2008 ]6 N o. 12

- 2724 did yo u have an inte re st i n orsignature or othe r author i ty ove r a fi nanci alacc ount in a for ei gn co untry, such as a ba nk ac coun t, securi ti es acco unt, o r othe r fi nanci al ac c o un t ? ” Th e y a l s o di d no t di s c l o s e the i nc o m e t hey ea rn ed i n thos e a ccounts. N ei therdi d they pay federa l i nc o m e ta x o n tha t i nc o m e, th o ug h i t was t ax ab l e. Ev en tu
al l y the y ‘ fes se d up a nd pa i d the t ax es they ow ed pl us i nter eston t h os e taxes and a 20 per cent penal ty. They did thi s pursuan t to an I RS am nestypro gr am , adopted in the w ake of the sca nd al, call ed the “O ff sh ore Vo l unt ar y Di sc l o s u r e P r o g r am. ” I nt er na l Re ve nue Se rv ice , 2009 O

f f s horeVol unt ary Dis cl os urePr ogram , w w w . i rs . gov /uac/ 2009

- Off shor e- Vol untary
- Disc los u rePr o g r a m, a nd D isclo sure: Q ues t i ons an d Answers , www. i r s . g o v /ua c / Vo l un t a r y - Di s c l o s ur e : - Qu e s t i o ns - a nd

A nsw er s (both vi si ted J an. 31 , 20 13)
. The su it see ks to rec over f ro m U BS the penal ti es, i nter est, and other cos ts that the pl ai nti ff s a nd the othe r m em ber s o fthe cl ass i ncurr ed fro m thei r scr ape with th e I RS, pl us the profi ts ( i n the hund r e ds o fmi l l i o ns o fdo l l a r s ) the y c l a i m UBS m ade fro m the cl as s a s a r esul t o fthe f ra ud and other w ro ngful acts thattheyal l ege U BS co m m i tte d by i nd uci ng the m to m ai ntai n thei r acco unts with i t. The pla i nti ff s a re ta x cheat s, and i t i s v er y odd, to say the l eas t, f orta x cheat s t o see k t o re cove r theirpenal ti es ( l eta l o ne i nt er es t, whi chmights i m pl y c o m pen sa te the I RS f orthe ti m e v al ue o fm on ey r ightfully b el ongi ng to it ra th er th an to th e t ax p ay er s) fro m th e s ou r c e, inth is ca se UBS, o fthe i nc om e c onc ea l ed f r o m the I RS
. One m i ght ha ve expected the pl ai nti ff s t o try to show thatN o. 12

- 2724 7 they had fo rg ott en the y had accounts w i th U BS ( though th atwoul d b e pr epo st er o us , f o r the se wer e si gni fi ca nt i nvest m ents for e ac h o fthe pla i nti ff s)
. Or that UB S had tol d them thati ncom e e ar ned i n thos e a ccounts w as som ehow tax e x em pt and m or eov erthatthe acco unts them sel ves w er e s om ehow not f or ei gn ba nk acc ou nts w ithin th e m ean ing of th e t ax cod e and so the p lai nt iffs d idn ’t have to ac kn ow ledge hav ing acc ou nt s w ith U B S. Th e y do n’ tma k e a nyo fthe s e feebl e argume nt s . T he y do ar gue, as we’ll se e, that U BS w as obl i gat ed to gi ve them acc urat e t ax advi ce a nd f ai l ed to do so, but not that i t g ave them i naccurat e, as di stinct fro m no, advi ce. There ar e g ro und s foravo i ding penal ti es f oradm i tte d viol ations of fed eral tax law , see, e.g. , 2 6 U
. S. C
. § 6664(c), ( d) ; 3 1 U. S
. C § 5 3 2 1 ( 5 ) ( B) ( i i ) , s uc h a s r e l i ance o n pla usibl e a dvic e fro m a r eputabl e- see m i ng l aw yero r ac c ou n ta n t. U nite d State s v . B oyle, 46 9 U.S
. 24 1, 25 0- 52 (19 85 ); M ul c a h y, P a uritsch , Salv a do r & C o ., Ltd . v. Co m m issio ner, 680 F.3d 8 67, 8 72 (7 th C ir. 20 12 ); K im v. C o m m ission er, 6 7 9 F
. 3 d 6 2 3 , 6 2 6

- 2 7( 7 th Ci r . 2 0 1 2 ) ; 1 4 A M e r t e ns La w of Fe de r al Inc om eTaxat i on § 5 5 : 8 9 ( 2 0 1 2 )
. Bu tthe p l a i nt i ff s do not i nvoke any oftho se gr ounds orar gue that they a ske d UB S t o a dvi se the m on U
. S
. t ax l aw o r tha t th e ba nk vol unteer ed such advi ce. W ha t’ s true i s th at in2 00 9 UB S a dm i tt ed ha ving he lped tens of th ou s an d s of its cl ients to eva d e U
. S. i nc o m e ta xe s, a nd pa i d a $ 78 0 m i l l i o n fi ne . ( Tha t was the s c a nd a l we r ef er r e d t o ; i ti s s e pa r a t e fr o m t he LI BOR sc an d al in w h ich U B S h as be en inv o l ve d rec en tly .) M aybe this help i nc lud ed tax a d vice, bu t our p lai nt iffs8 N o. 12

- 2724 do not ar gue that they ( or o therm em ber s o fthe cl ass ) re cei ved tax advi ce f ro m U BS. They ar gue ra therthat th e ba nks ho ul d ha ve pr ev en te d the m fr o m v i o l at i ng the l aw . Thi s i s l i ke sui ng o ne’ s par ents to re cove r tax p en alti es one has pai d, on the gr ound that the par ents ha d f ai l ed to b r i ngo ne up to b e a n h o ne stpe r so n who w ou ld n otev ad e t ax es an d so w ou ld n otsu bjec t h im se lf to penal ti es. The r e i s i n g en er alno c o m m o n l aw dutyto pr ev en t anothe r perso n fr om vio l ati ng the l aw . A t wors t, U BS, as we’ r e ab o utt o see, v i o l at ed ana g r ee m en t wi ththe I RS des i g ne d t o pr ev en t th e kind o fe va si o n tha t th e pl ai nti ff s e ng a g e d in. T ha tmi g htc o nc e i v ab l y ma k e UBS an ai der o r abet toro fthe pla i nti ff s’ s t ax ev asi on a nd so m ake thi s ca se a di sta nt r el ati ve to E v e r e tv . Wi l l i a ms (E x. 17 25) , bet terkno w n as The H igh w a ym a n’s C a sea nd e v e ntua l l y r e po r t e d un de r tha t na me i n 9 L .Q . Rev
. 19 7 ( 1893 )
. A hi ghw aym an had sued hi s par tneri n cr i m e for an acc ounti ng o fthe i l l egal pro fi ts ofthei r cri m i nal ac ti vi ty
. The c o ur t r efus ed to a dj udi ca te the c as e, a nd both pa rt i es w er e hang ed. M i nus the hangi ng and w i th cer tai n excepti ons ( such as contr ibuti on and indem ni ty) irre l e v an t t o th is c as e, th e p rin c ip le e n u n c iat ed in The H igh w a ym a n’s C a se ap p lie s t o a c c om p lice s in civ il w ro n gdoi ng, as not ed i n ourr ecentdeci si on in Sc hl u e t e rv . L a tek, 683 F.3d 35 0, 35 5-5 6 (7 th C ir. 20 12 ). In The H igh w a ym a n’s C a seo ne acc om pli ce was s eekin g a bi g g e r s ha r e o fthe p r o fi tfr o m the c r i me f r o m t he o ther one; her e o ne acc om pli ce i s se ekinga sm al l ershar e o f th e c os ts of th e c rim e fro m th e oth er on e. T h e p rin c ip le i s the sa m e; the l aw l eave s the quarr el i ng ac com pli ces wh e r e i tfi n d s th e m.N o. 12

- 2724 9 I n 200 1 UB S had si gned a c on tr act w i th the I nter nal R eve nue Se rv i ce i n w hi ch i t agr eed to parti ci pat e in the I RS ’ s Qu a l i fi e d Int e r medi ar y P r o g r a m, 2 6 U. S
. C. § 1 441; 26 C. F. R. § 1. 1441

- 1( e)(5), a prog ra m desi gned to e n c o u r a g e f o r e i g n b a n k s t o h e l p th e I R S c o l l e c ti n c o me t a x o n i nc o me e a r ne d b y A mer i c a n t a xp a y e r s ab r o a d. Am ong othe r thi ng s th e pr o g r am r equi r ed par ti ci pat i ng ba nk s to r epo r t to the I RS t ax i nform ati o n abo ut d ep os ito rs w h o w er e U .S. ta x p ay er s an d to w ith h old “U .S.- sour ce incom e, ” s uch as i ncom e o n sec urit ies of A m er i can co m panie s, an d p ay i t o verto the I RS. Tw o of the th r e e n a med p l a i nt i ff s c l a i m t ha tthe b a nkt o l d them not to hol d U

. S. se curi ti es i n thei r ac c ou nts. H ad they obe yed t h e ins tr ucti ons they w oul d not hav e e ar ned any U S- sour ce i ncom e, but the bank w oul d s ti l l have had to re portto the IR S tax i nfo rm ati on about them i fi t k ne w ors ho ul d ha ve know n tha t th eywer e U. S
. t ax p ay er s. Se e In te rn al R ev en u e Se rv ice , Q ua lified Interm edia ry Fre q uen tly A sked Q ue s t i ons , ww w . i rs . gov/Busi nesse s/ I n te rn at ion al-B u sin es ses /Qual i f i ed-I nter m edi ar yF r eque nt l y - Ask ed- Que st i o ns #2 ( vi si te d J an . 3 1, 2 01 3)
. The thi rd pl ai nti ffhas not disc l ose d w hat was i n hi s a ccount. S uppo singthe b an kf ai l ed to c o m pl y wi th the r epo r tingr equi r ement s i n i ts a g r ee m en t wi ththe I RS w i th re spect to any of the pla i nti ff s ( or un n am ed cla ss m em ber s)

— so w ha t? T he plain tiffs argue th at th ey are thi rd- partybene fi ci ar i es ofthe agr eem en t and so enti tl ed to enf or ce i t a nd thus t o obt ai n dam age s forthe br each b y U B S, ass um i ng ther e w as a bre ach. Their theo ry is th at h ad U BS co m pli ed w i th i ts re port i ng r equi re m ents they w oul d have known theyhad to pay taxes o n earni ngs10 N o. 12

- 2724 i n theira cc o unt s atthe b an k

— k no wn be ca us e th e p ro gr am req u ire d th e b an k t o in for m d ep os ito rs w h a t it w as rep or tin g t o th e IR S a b ou t t h eir ea rn in gs on th eir deposi ts. The S up re m e Cour t hel d rec ently t h at a g ove r n me n t c o n t r a c t th a t i n v o l v e s n o n e g o t i ab l e t e r ms but m er el y b ring s the o therparty t o the c ontr act und er a s tatute ( or, we can assum e, a re gul ati on) does not c on fer th ird

- p a r ty be n efic iar y s ta tu s o n an yo n e. A stra U SA , Inc. v . Sa nta C lara Coun ty, 131 S. C t. 1342 , 1348 (2011). B ut th ere are ne gotiable term s in Q ua li fi ed Inte rm edi ar y a g r ee m en ts, s o mayb e ( we ne edn ’ t dec i de) the pla i nti ff s co uld be thi rd- partybene fi ci ar i es: co uld be , but ar en’ t. A thi r d- party be ne fi ci ar y i s so m eo ne who m the c o ntr acting par tie s w a nted to have the ri ght t o enf or ce th e c on tr ac t. Vid i m os , Inc . v. La s e rLa b Lt d. , 99 F. 3d 217, 21 9- 20 (7t h C ir. 19 96 ); Sio ux Ho ney A ss’n v . Ha rtfo rd F ire Ins. Co. , 672 F.3d 10 41 , 105 6-5 9 (F ed . C ir. 20 12 ); Hess v. Fo rd M ot orCo. , 41 P .3d 46 , 51 (C al. 20 02 ); Fou r t h Oce an Putn am C o rp. v. Intersta te Wreck ing C o ., 48 5 N
. E. 2d 20 8, 2 11

- 13 ( N
. Y. 1985 )
. I t’ s unl i ke ly that the I RS would want the t ax cheat s that the c ontr act w as i ntended to deter, by re quir i ng f or ei gn ba n ks to re portthei r i ncom e t o i t, to be ab l e to s hi ft th e bur deno fthe pena l ti es tha t th e I RS i m poses o n tax c heats to the f or ei gn ba nks. True, that w ou l d i ncre ase the banks’ i ncenti ves to com plywith the c ontr act. But off set ti ng thi s e ffect w oul d be the r educti on i n the taxp ay er s’ incenti ve to honorthei r tax obl i gatio n s if th ey co u ld sh ift t h e c os t o f ch ea tin g on th eir taxes to the f or ei gn ba nks.N o. 12

- 2724 11 A nd wh at w oul d U BS, the ot h er p ar ty to the c ontr act, g ain from being m ad e po ten tially l iable to its dep ositors f orf ai l i ng to pre vent them fro m ev adingta xes? Less than nothi ng. I t’ s no t s urpri si ng t h at there’ s no ev i dence o r e ve n s ug g es ti o n o fa n int en ti o n b y the pa r ti es to th e Qua l i fi ed I nt er m edi ar y a g r ee m en t to make the t ax payer s thi rd- partybene fi ci ar i es ofi t. T h e p l a i n t i ff s h a v e a s e c o n d b r e a c h o fc o n t r a c tc l a i m: that they “ent er ed i nto i m pli ed, o ra l and/o r w ri tte n contr acts with UB S to provi de [ the pl ai nti ff s] with pr ofessi onal l y c om petent tax a dvic e” and tha t the c ontr acts con tained “un reason able and opp ressiv e term s” an d “are unenfo rce abl e a nd vo i d du e t o l ack ofm utual i ty. ” Even bef or e B el l Atlanti c Corp. v. Tw om bly, 550 U
. S. 544 (2007), a nd Ash crof

tv. Iq b al , 55 6 U.S
. 66 2 ( 2009 ) , such a n al l ega tio n w ou ld h av e fa i l e d to st at e a cla im be c au se it doesn’ t pr ov i de the m i ni m um i nfo rm ati on that the defendant w oul d need i n or der t o be abl e t o answ er th e c om p lain t. H iggs v. C a rver, 286 F.3d 437, 439 (7th C ir. 20 02 ); Ryan v
. M ary Im m ac ul at eQ ue e n Ce nter, 188 F. 3d 85 7, 85 9-6 0 (7 th C ir. 19 99 ). Th e c om p lain t d oe s n otte ll the defendant w hat co m m unica ti ons f or m ed the b as is of a n y of t h e s u p p os ed im p lied co n tr ac ts an d w h at th eir ter m s were. The pla i nti ff s a l so charg e f ra ud : that the b ank invei gl ed them i n to c on tinui ng to i nvestwith i t ( they had opened th eir acc ou nt s before the ba nk j oin e d the Q ua li fi ed I nt erm edi ar y Progra m ) b y c o nc ea l i ngi ts a g r ee m en t wi ththe I RS and the obl i gat i on en ta il ed by the a gr eem ent t o rep ort tax i nform ation ab ou t the plaintiff s to the IRS.12 N o. 12

- 2724 Thi s i s a pr i va te
- en tr ap m enta r g um en t: b y l et tingthe pla i nti ff s thi nk tha t k eepi ng the i r m oneyi n f or ei gn ac counts w oul d en ab l e them to ev ade federa l ta x l aw succ e s s ful l y, UBS c a us e d the p l a i nti ff s t o c o mm i tt a x f r a ud

. T h at is an ot h er frivo lou s t h eo ry of liab ility . F o r if it w er e ad op te d , n ot on ly w ou ld ev er yo n e ha ve a le ga lly enf or ceabl e duty to preve nt cr i m es an d otherwrongs w h en h e c ou ld ; a failu re to p er f o rm th e d u ty w ou ld gi ve the c ri m i nal o r othe r w ro ngdoera ri ght o fact i on agains t the f ail ed prote ctor. The pla i nti ff s furtherar gue th at U BS to uted the secr ecy ofthei r acco unts, co nsi ste nt with the S w i ss tr adit i on o f se cre t ba nka cc o unt s. The pl aint i ff s i nfer r ed th atthe b a n kw o u l d c o n c e a l th e i r a c c o u n t s n o to n l y fr o m c o mpet i to r s, r el ati ves , e x- spo us es , pr i va te c r edi to r s, a nd j ourn alist s, but al so f ro m the I nter nal Reve nue Se rv i ce, th u s e n ab l i n g th e m t o g e t a wa y wi th n o t p a y i ng a ny fed er al in c om e t ax th ey m igh t o w e o n th e e ar n in gs in th e ac counts. But such a schem e would o fco urse be i l l ega l, br i ngi ng us backto The H igh w a ym a n’s C a se . T he plaintiff s also argue th at U B S had a fidu ciary obl i gat i on t o them

— the k i n d o f d uty that a ri ses fro m a g ro ss dispar i ty i n knowle dge be tw een the pro vi der and the r eci pie nt o fa ser vi ce ( a l aw yerand a cl i ent, f or exam ple , o r a physi ci an and a pat i ent) and r equi re s that th e p ro vid er tre at th e r e c i p ien t a s w ell as h e w ou ld w an t h im se lf t re at ed . E .g., B urd ett v. M iller, 957 F. 2d 1375 , 13 81 -82 (7t h C ir. 19 92 ); In reD ai s y S ys t e m s Corp. , 97 F. 3d 117 1, 11 77 -79 ( 9th Ci r. 19 96)
. But a b ank i s no t a fid u c iar y of its d ep os ito rs . It is m er el y a c r ed ito r. B ennic eN o. 12

- 2724 13

v. Lak es hore Savings & Loan A ss ’n , 677 N .Y. S. 2d 842, 84 3 (A p p . D iv. 19 98 ); C o pesky v. Su perio r C o urt, 22 9 Cal

. A pp . 3d 678, 68 9- 94 ( 1991 )
. I t has no du ty to tr eatthem l i ke chi l dren o r i l l i ter ate s, and thus rem in d them thatthey have to pay taxes on the i ncom e on thei r deposi ts. It has no duty t o re ad a lou d to them l i ne 7a o n Sche du l e B ofFo rm 10 40. T h e p lain tiffs fu rt h er cla im th at U B S w as u nj u st ly enri ched at thei r expense. But the cl ai m ag ai n l acks the m i ni m um speci fi cati on that UB S w oul d need to p re p ar e a n an sw er . N o d ou b t t h e b an k “ en ric h ed ” it se lf byc ha r g i ngc om p en sa to r y fee s f o r i ts s er vi ce s to the p lai nt iffs, bu t w he re w as th e “inj us tice”? N o inj us tices are a l l e g e d o th e r th a n th o s e a l l e g e d e l s e wh e r e i n th e c o mpla i nt, wh i ch w e’ ve al re ady disc ussed, m aking the unj ust en r i ch m en t cl ai m r edu nda nt
. W e expl aine d i n C onFo ld P acifi c, Inc. v. Po laris Indust ri es, Inc. , 4 33 F. 3d 952, 95 7 ( 7th Ci r. 20 06) , thatthe l ega l te rm “unj ust en ric h m ent” “h as t wo r efer en ts , a r emedi ala nd a s ubs ta nt i ve . The rem ed ial[ referent] is to a situation i n w hich a tort pl aint i ffa sk s no t f o r the d am ages he ha s su st aine d b ut i nstea d for the profi t that the defe nd ant obt ain ed fro m the wrongful act. ” That has no r el evance to thi s c as e, f or th e pl aint i ff s ha ve n’ t g o tten to fi r stb as e i n s ho wi ng th a tU B S c o mmi t t e d a t o r ta g a i n s tth e m. “In i ts subst an ti ve s en se , unj us t en r i ch m en t o r r es ti tu
ti o n r efer s pr i m ar i l y t o si tu at i o ns i n whi che i th erthe defe nd ant has r ecei ved so m ethi ng tha t o fr i ghts bel ongs to the pla i nti ff ( f or exam ple , he re cei ved i t bym i sta ke

— or he st ol e i t) , o r the p lain tiffhad re nd er ed a s er vi ce t o14 N o. 12

- 2724 th e d efe n d an t in circ u m st an c es in w h ich on e w ou ld re aso nabl y expect to be pai d ( and the defe nd ant refused to p ay ) th ou gh for a goo d rea so n th er e w as n o c on tr ac t.” Id . at 9 57 -58 . N eit h er of th es e e x am p les rela te s t o th is case . S ee al so C orse ll o v. Verizon New York, Inc. , 96 7 N .E .2d 11 77, 118 5 (N .Y . 201 2); M urdock-B ryant Constr uct i on, Inc . v. Pe ars on , 703 P.2d 1197, 1201-02 (A riz. 1985). We n e e d n ’ td i s c us s th e p l a i n t i ff s ’ r e ma i n i n gc l a i ms

— of negl i gence and m al pract i ce

— as th eya r e f r i vo l o us square d. This l aw sui t, i ncl ud i ng the appeal, i s a tr aves ty. W e a re su rp ris ed th at U B S h a s n ’t a sk ed for t h e im p os itio n of sa n c tio n s o n th e p lain tiffs an d cla ss co u n se l. A FFI RMED .

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