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welcome to dorsey and whitney's bank council roundtable banks at the supreme court i'd like to introduce nick felixtra a partner and co-chair in dorsey's financial services regulatory group take it away nick thank you good afternoon everyone this is nick flytstra welcome to our october session of dorsey's band council roundtable thank you very much for joining us today i'd like to start by mentioning a few housekeeping items uh first please remember to sign in on the attendance sheet we've provided and return it to attendance dorsey.com if you are looking for your attendance sheet or for today's presentation materials they're available for download from the dorsi webinar reminder email sent to you on friday from events at dorsey.com finally i wanted to mention we're not planning a formal q a session at the end of the panel presentation but if you have questions for our speakers you may submit them via the chat function and our speakers speakers will try to respond to those questions during the presentation if time allows or they will respond to them afterward alternatively you may contact any one of our speakers later using the contact information provided at the end of the presentation materials or you can get in touch with your usual dorsey relationship contact uh okay next slide please all right we've planned a 60-minute presentation which we have entitled banks at the supreme court on the docket and on the horizon and we have three speakers on our panel tim drosky margot serrano and eric sherman by way of introduction tim droste co-chairs dorsey's appellate practice group and his litigated appeals around the country including for banking clients his appellate experience extends to the u.s supreme court where tim has written briefs successfully petitioning the court for review and resulting in unanimous victories from the court tim also teaches appellate advocacy at the university of minnesota law school as an adjunct professor tim's based in the firm's minneapolis office margo serrano is an associate in dorsey's trial group her litigation experience includes complex federal litigation commercial litigation financial services litigation and securities litigation and margot is based in our seattle office finally eric sherman is a partner in the firm's securities and financial services litigation practice group eric has more than a decade's experience representing banks corporate trustees and other financial services firms in a variety of complex and class action litigation in courts throughout the country more detailed bios of our speakers are in your materials as is their contact information and with that i'll hand it over to my tally my colleague tim drosky thanks tim well thank you nick and thank you everyone for participating in this cle today the general overview for what we're going to discuss over the next hour is we'll first talk a little bit about the supreme court last term where it is right now revisit a couple of cases from the last term that part that pertain to banking uh the banking industry and then the bulk of our time is going to focus on where the court is going from here we'll discuss some cases that are on the court's docket and are going to be decided this upcoming term and we'll also look at some petitions for review for certiorari that are currently pending before the court and based on current current indications seem to have gotten some traction at the supreme court where review is likely to be granted in the future either on this case or potentially on those issues down the road so let's first talk about the current state of the us supreme court the supreme court as an institution generally tries to keep a relatively low profile in the public compared to the other branches of the federal government but it's been anything but that over the past couple of months in particular largely due to the sad and surprising passing of justice ginsburg in late september the supreme court started its october 2020 term in the first week of october like it does every year and has started that term with only eight members on the court now while the court has tried to proceed like its business as usual that to some degree is just not the reality the court has already heard arguments in about 10 cases or so over the early weeks of october and those cases are going to be decided by the state by the same eight members of the court who sat for oral argument so while judge amy barrett from the 7th circuit has been nominated by president trump and is actually expected later this evening to be confirmed by the senate and become justice amy barrett as early as tomorrow if she's sworn in by the chief justice for the 10 cases or so that have already been argued she will not sit and help decide those cases that raises the possibility of a 4-4 split on those decisions if the court can't come to a majority decision and if that were to happen on any of those cases the court will issue simply a one-line summary order saying that by reason of an equally divided court the lower court's opinion is summarily affirmed it's a non-presidential decision and frankly it's a pretty unfulfilling result for the number of hours and the length of time and the amount of money that's poured into this kind of litigation and unsatisfying for the american public as well that the supreme court who only decides about you know 70 or 75 cases a term on average would have a number of cases that would result in that kind of 4-4 split so we'll see if that in fact happens with any of the 10 cases but the main point is that regardless of um whether judge barrett becomes justice justice barrett as of tomorrow there are going to be some cases that are going to be decided just by an eight-member court all eyes have certainly been on judge amy barrett over the past few weeks since her nomination she has been a seventh circuit judge for the past three years and a long time a constitutional law scholar at the university of notre dame law school before that she was a former clerk of justice scalia and has touted him as her mentor and role model so the question then for courts for all sorts of cases but and in particular for the banking industry is what kind of impact will having judge barrett on the court have for the court it's a little bit unclear the practical the practical reality is that very few cases before the supreme court are decided on a 5-4 split this past term it was only 23 of the court's cases that were decided on that kind of voting alignment the majority are decided most cases are actually decided unanimously or you know in a far less split manner and many of those five four cases are often dealing with hot button social issues or constitutional questions you think of abortion cases or religious rights things of that nature that doesn't mean that 5-4 cases can't involve the financial industry or general civil litigation u.s bank was actually before the court last term in a case and one on a 5-4 split along traditional conservative and liberal lines in terms of how judge barrett's place on the court will change compared to where justice skins compared to when justice ginsburg was on the court will partially depend on looking at cases where there was something other than the traditional 5-4 split on the court again this is there's already been a conservative majority on the court and so justice ginsburg's replacement by judge barrett isn't going to swing the court in a new way unless there is some sort of different kind of voting alignment in cases and so that really requires looking at chief justice roberts and where are cases where he as kind of the new pivotal swing vote has been willing to depart from his conservative colleagues instead join the liberal members of the court i think one area where this could be significant to the banking industry is with respect to agency cases administrative action you know certainly banks live in that regulatory state with heavy agency regulation supervision and things like that and there have been a number of challenges to the trump administrative trump administration's administrative actions and whether they're arbitrary and capricious and some significant rulings from the last term involving for example the census questionnaire or the immigration daca program chief justice roberts joined with the four more liberal members of the court to find that the agency action there was arbitrary and capricious now again there's a question of whether that something similarly contentious could arise in the banking area but that at least would be a possibility where judge barrett's confirmation on the court could have an impact another thing that continues to impact the court is kovit 19. the supreme court is historically a reactionary body it waits to see what the lower courts do before it takes any action but with respect to covid it has really been on the front lines it was one of the first courts to modify its procedures in related decoded 19 pandemic and it's done so in a couple of ways that can impact litigants including banks who are practicing in litigation the first is that it extended the time frame for petitioning the court for rid of certiorari from the usual 90 days out to 150 days so close to half a year what that means is that if you receive any sort of adverse decision from the court of appeals it gives you that much more time to consider whether you want to petition the supreme court if so who you want to have represent you whether you stay with trial counsel or bring in new new attorneys and to put that petition together try to solicit amiki to come on on board there's just more time for that whole process right now conversely if you're successful at the court of appeals it's going to take you that much longer before you can finally say that case is complete um again even after you win before the court of appeals you'd have to wait 150 days almost almost a half a year before you can say that litigation is completely finished copa 19 has also impacted just simply how the court does oral arguments as opposed to it live and in person with rapid fire questioning from the justices it's all being done telephonically right now each justice is given a certain allocated number of minutes to ask their questions and that has resulted in a different dynamic at the court for example justice thomas has been historically silent over his tenure on the bench but now with these kind of fixed allocated minutes to him and him by seniority being one of the first people given an opportunity to ask questions he's taking advantage of that regularly and so we'll continue to see as the as the term moves forward um how the supreme court manages its business but that is kind of the general overview of where the court is right now so before we preview what's coming up for the court in the future we want to do some follow-up from last term there were two cases that we've discussed in prior banking roundtable events talking about the supreme court that were decided by the term last year one was the case rotkisk versus clem and this was a fair debt collection practices act case dealing with the statute of limitations the the statute says that an action to enforce any liability created by the sub chapter must be brought in the u.s district court within one year from um from when the event occurred and the question before the court was whether this is an occurrence rule or a discovery rule is it from within one year from when the occurrence occurred or one year from when the violation is discovered showing that these kind of procedural uh procedurally discrete questions involving the financial industry often aren't that controversial all nine justices agreed that the occurrence rule should be the doctrine that applies here the only place where there was a narrow limited dissent actually came from justice ginsburg who would have remanded the case to determine whether the application of an equitable doctrine that would have effectively not had the statute limitations begin to run based on an allegation of fraud would have remanded for that to be considered where the rest of the court deemed that waived the other case that was decided last term that we've talked about previously is written group inc v jackson masonry llc this is a bankruptcy related case again so kind of a discrete area of law dealing again with discrete kind of procedural issues this case dealt with the question of when you could appeal uh the holding here was that a bankruptcy court's order unreservedly denying relief from an automatic stay constitutes a final immediately appealable order the question there was whether an automatic relief denied really from an automatic stay is what should trigger your right to appeal or whether you should instead have to wait until the bankruptcy court's entire proceedings should wrap up and something that would be more analogous to the final judgment rule in general civil litigation the supreme court in the unanimous opinion again authored by justice ginsburg here said that bankruptcy court is different you have a lot of kind of discrete actions that are all brought within this bankruptcy umbrella and therefore it made sense for there to be final appealable orders along the way rather than needing to wait for the whole bankruptcy proceeding to wrap up the practical takeaway for litigators here is that it's important and always better to appeal early and be told by the court of appeals you appealed too soon and should bring your appeal later on and to find yourself in the converse situation of not appealing right away thinking that your right to an appeal isn't triggered until later on and then being found to be without any sort of appellate relief that's what happened to the litigant here they thought that the denial from relief of the automatic stay was not something that was appealable waited until the end and then the district court court of appeals and then the supreme court all ultimately found no you had to bring your appeal earlier on and now you're time barred from bringing it at this point so that's just a litigation pointer and with that i think we're now going to turn to cases that are currently on the court's docket eric thanks tim well good afternoon everybody and thanks for joining us uh next on our supreme court menu uh we have some alphabet soup we're going to talk about a case that concerns the fhfa the fnma and the fhlmc the last two of which are probably better known to you as fannie mae and freddie mac now these cases collins versus mnuchin and mnuchin versus collins both come really from the same case out of the fifth circuit and uh the case had a bit of a tortured uh history there uh the case was first heard by a three judge panel which split three ways that decision was vacated when the case went on bank and the on bank court produced six separate opinions two of which drew different majorities neither the plaintiffs nor the defendants were very happy with that result so both sides petitioned for cert and both petitions were granted yielding four issues for the court to decide that we'll dig into in more detail as we go along now those of you who work with residential mortgages or residential mortgage-backed securities are likely already very familiar with the fhfa uh those who followed the 2008 financial crisis probably know a bit about it as well but for those who don't know or may have forgotten congress created fhfa as an independent agency in the housing and economic recovery act of 2008 in the midst of the financial crisis congress gave it statutory powers to act as conservator of fannie and freddie which powers it quickly exercised fannie and freddie are of course government-sponsored entities that purchase securitize and guarantee home loans that was 2008. today it's 2020 and more than 12 years later fannie and freddie are still in that conservatorship and they are still controlled by fhfa and though they are government-sponsored entities fannie and freddie have shareholders just like any other corporation many of those shareholders aren't all that excited that fhfa's conservatorship continues it was supposed to be a temporary situation to make it through the crisis but here we are and it's still in place and a lot of that unhappine s has to do with the fact that while fannie and freddie have been the beneficiary of more than 190 billion dollars worth of outlays from treasury they've sent back more than 300 billion dollars and the basic structure that's brought us to the point at this point is this when the conservatorship was established treasury pledged to provide fannie and freddie with the capital they needed in return for senior preferred stock initially that preferred stock paid treasury a 10 dividend that changed in 2012 in something known as the third amendment now we're not talking of course about the third amendment that prevents soldiers from moving into your spare bedroom this is the third amendment to the preferred stock purchase agreements between fannie and freddie on the one hand and treasury on the other in the third amendment the 10 dividend was eliminated and replaced by a structure in which fannie and freddie turn over basically all of their net earnings to treasury something known as the net worth sweep and this network sweep sets the stage for our discussion of collins versus mnuchin collins vs mnuchin is a shareholder challenge to that network sweep and there were two broad grounds really for the shareholders challenge first that treasury and the fhfa exceeded their statutory powers by agreeing to the net worth sweep and two that the fhfa is unconstitutionally structured now let's talk about the statutory claims at least we'll talk about the one statutory claim that found traction in the court below in a nine seven on bank decision the fifth circuit held that the net worth sweep exceeded fhfa's statutory powers as a conservator and the argument that one is a fairly easy one to follow the fifth circuit held that it was at least plausible because this was presented on a motion to dismiss it was at least plausible in an iqbal twambley sort of way for the shareholders to allege that handing over the entirety of fannie and freddie's net worth is inconsistent with the purposes of the conservatorship which it held were to restore fannie and freddie's solvency and to conserve their assets giving away assets is not conserving assets and you fhfa are a conservator so said the fifth circuit the government has uh two defenses to this both of which the thefts the fifth circuit rejected first the government points to an anti-injunction clause in the recovery act that clause prevents a court from taking any action that would restrain or affect the exercise of powers or functions of the agency that is the fhfa as a conservator the fifth circuit looked at that clause and it says well you know fhfa when you're giving away the entire net worth of your awards fannie and freddie that is not one of your powers as conservator so the anti-injunction clause which only extends as far as the fha's legitimate powers as a conservator doesn't apply said the fifth circuit second the government points to a succession clause in the recovery act and the succession clause provides that fhfa as conservator succeeds to certain shareholder rights including the right to bring shareholder derivative actions the fifth circuit concluded that the shareholders claims are direct not derivative and so it determined that this succession clause was of no help to fhfa now on to the constitutional claim the constitutional claim that the shareholders brought is essentially a separation of powers claim the fhfa is an independent agency that exercises executive authority the president appoints the director of the fhfa with the advice and consent of the senate but under the statute can only remove the director for cause and the court that held that that for cause restriction violated the president's removal power under article ii and the separation of power's doctrine and unlike the statutory claim which was presented in the context of a motion to dismiss the constitutional claim was presented on cross motions for summary judgment so by agreeing with the shareholders the fifth circuit uh basically handed the shareholders a win on the constitutional claim that in turn led the court to examine what the remedy should be for this constitutional violation and again a 9 7 on bank majority a different one that had delivered the judgment on the merits determined that the proper remedy was to sever the portion of the removal act that makes the director removable only for cause the court refused to undo the net worth sweep for a couple of reasons first the sweep was only a single part of the third amendment and the overall funding arrangement between treasury and the fhfa it wouldn't be fair essentially the fifth circuit decided to allow the shareholders to get rid of the net worth sweep while they still get the benefit of a multi-billion dollar line of credit from treasury if they you know like the contract they have to take the whole contract and the other reason is that you know the third amendment was a bilateral agreement and even if the fhfa director was unconstitutionally appointed his counterparty was the treasury secretary and the treasury secretary doesn't suffer under the same constitutional infirmity as the fhfa director he indisputably serves at the pleasure of the president so the fifth circuit reasoned article two doesn't require the court to undo the third amendment because if the president exercising his article ii powers had wanted to stop it he could have he could have simply told his treasury secretary not to agree to it so the fifth circuit hands down its six opinions and of course neither side likes the result the government doesn't like that the fifth circuit didn't give effect to the anti-injunction provision in the recovery act it doesn't want courts interfering with what the fhfa is doing as conservator it doesn't like that the fifth circuit held that the shareholders claims were direct instead of derivative on the other hand the shareholders uh really hate the remedy they've gotten they think it's no remedy at all because the network sweep is still there so both sides petition for cert and both petitions are granted merits briefing in the case is ongoing argument is set for december 9th probably at some point next year we'll find find out if the high court can find a consensus on the issues that yields fewer than the six opinions that the on bank fifth circuit turned out uh the result you know is bound to be interesting i think if judge barrett has is confirmed as it appears that she will be as as soon as uh this evening the fhfa structure is very similar to the cfpb structure and the dodd-frank act contains a similar removal restriction or contained rather because you'll recall that just this last june the court took up the constitutionality of the cfpb and chief justice roberts crossed over to join the court's four liberal justices including the late justice ginsburg to produce the result that the cfpb could continue to exist but the forecast limitation of the dodd-frank act on removal of its director had to go what will a newly constituted conservative majority do i don't know i guess we'll have to wait and see thank you eric yes so facebook incorporated versus do good this case came out of the northern district of california to the ninth circuit now it is um going to be heard in front of the supreme court this december oral argument scheduled for december 8th um and it's an interesting case that's really the culmination of years of disputes over the definition of an automatic telephone dialing system as interesting as it sounds but if the automatic telephone dialing system is kind of the heart of the telephone consumer protection act um the tcpa which was enacted in 1991 so it's just about 30 years old and a little history of the tcpa kind of sets up this conversation um it was enacted to really combat these automatically dialed calls that were made from a machine a piece of equipment that could go through numbers um sequentially and just keep trying trying different combinations of numbers and they would end up tying up whole regions of phone lines and there was a particular concern about emergency lines being tied up and there was some testimony in front of congress about how these automatically dialed calls and would tie up multiple rooms in a hospital and people couldn't get through so that's kind of the background of where it comes from and it's really a um it's a non-partisan issue people hate robocalls they still hate them today so it had a lot of support when it passed and it really addressed the problem and it was by all means successful the problem is it's been a while since it was enacted and technology has really advanced so now we have the courts have dealt with i'd say over the past 10 years but really the last five years um trying to figure out what an automatic telephone dialing system means um in the modern age the um tcpa applied to fax messages um back around was it was enacted so it was a kind of a natural progression to apply it to text messages so that was established and so now we have a situation where you know lots of companies are using text message notifications to quickly um get important information to consumers so getting back to the facebook case what we have in the facebook case is noah do good filed a lawsuit against facebook because he alleged he received messages that his facebook account had been accessed so they were security alert text messages he didn't have a facebook account so that was part of the problem um and and that goes to another issue with the you know modern technology and cell phone usage there's a lot of recycled numbers um the television consumer production act has an exception that you can companies of course can contact individuals when they've um received express consent for the individuals to be contacted at a specific phone number but now um you know that was back when pretty much there were only residential lines and phone numbers didn't change nearly as much so now we're in a you know a situation where people recycle uh cell phone numbers all the time so in this particular case um mr duke would likely had a recycled number from a user who um had at one point signed up for facebook using the cell phone number he received these messages um he filed a class action lawsuit against facebook and the tcpa has pretty harsh penalties five hundred dollars per telephone call that violates the act um her negligent call fifteen hundred dollars per uh willful call and it's a pretty low standard to me um willfulness you just have to demonstrate that the person calling or the entity calling had knowledge that this person had not consented so say you call one time the first time it's negligent okay the person answers the phone oh this is i know i'm not that you know i'm not joe schmo sorry so any call after that when the first call would it would be a willful violation because there are some grounds to argue that the company or the person calling should have known that it wasn't um the intended recipient so it's a tough uh lots of tough penalties under the statute which makes it a very popular plaintiff's attorney action in a popular class action so a lot of companies are looking at this uh case the facebook case and from the supreme court to get some clarity um on this law that really has some harsh penalties um so mr do wood um allegedly facebook had contacted him at the facebook file the motion dismissed in the northern district california stating that um among other things the general nature of the allegation they don't stand up to the definition of automatic telephone dialing system because facebook had um messaged mr dugout's phone but it was an individualized message prompted by this access to a facebook account so inherently it just does not meet the definition of an automatic telephone dialing system because it was these messages weren't produced using um a random or sequential number generator they were rather targeted messages and at one point they had received consent to contact this message so facebook kind of raised a couple issues in his motion business which um uh which at facebook the court granted facebook's motion um and mr dewey appealed to the ninth circuit um at the ninth circuit they argued about the definition of automatic telephone dialing system um and facebook argued that based on then uh tim you can go ahead and go to the next slide which shows the statutory language at issue yep so facebook argued and the whole case in front of the supreme court really is a um statutory text kind of interpretation argument facebook argues that the to store or produce um telephone numbers using an a random or sequential number generator and to dial such numbers it reads that that storm produce or excuse me using a random or sequential number generator applies to storing and producing so it you have to use a random or sequential number generator to bring the equipment within the scope of the tcpa whereas mr do good argues that it's fine for equipment to have the capacity to store phone numbers and even if it's not using a random or sequential number generator this the capacity to store and produce those numbers and then automatically dial them up those numbers would bring the equipment within the scope of the tcpa and the ninth circuit um while acknowledging certain issues with uh mr dugout's definite the broad definition argued by mr dubois it found that just based on our statutory reading that it it that tcpa would apply to any equipment that has that capacity when on appeal to the um supreme court facebook is arguing that that is a too broad of a a definition of a t of automatic telephone dialing system and it's inconsistent with the purpose of um the act um let's see um and um mr dewitt argues that applying a prohibition to um so getting back to the the text message to a targeted number as was the case in the this facebook case um mr dewick argues that that's the whole purpose of the telephone consumer protection act is to block these kind of annoying calls that are automatically generated so if if the supreme court takes agrees with facebook's argument that its equipment does not fall into the definition of atds kind of uh it makes the tcpa um just lacks any kind of enforcement or teeth and so uh you know that's generally mr dewa's argument is a more of a policy position and the argument that facebook has which is that you know the scope of this statutory language to include an odd you know the way that mr doug argues that the text should be read so broadly to include basically an iphone which everyone has today um mr dewey's only kind of response to that is that you know the supreme court shouldn't rob the statute of its teeth uh but really this has been going on for five years starting with the going back to the purpose of the tcpa and the issue with the statutory definition of an automatic telephone dialing system back in 2015 acknowledging the issues with this statute fcc which has the authority to issue regulations um related to the tcpa they issued a definition an automatic telephone dialing system that was very broad and then there are challenges to that decision that the dc circuit um in a ruling called the aca ruling the dc circuit overruled the fcc's definition um and the third circuit has also weighed in on this issue and has kind of agreed with the dc circuit and has not found such a broad reading of an atds to include any equipment that just has the capacity to store numbers but rather um the dc circuit and the third circuit have agreed with the judge's decision out of the northern district of california in this facebook case that you know that would be way too broad of a reading rather the subpart b of the statute must also apply and um in essentially a plaintiff must be able to demonstrate that the defendant they've sued not only used equipment with the capacity to store and produce numbers automatically but must have used a random or sequential number generator to dial the numbers um so when the ninth circuit here um kind of disagreed with the dc circuit in the third circuit causing a circuit split which is ultimately probably why you know this case has made it to the supreme court and supreme court granted um the petition facebook's petition to resolve this issue because it's been it's been a good five years of a l t of inconsistent rulings around the country and now there's a circuit split and a lot of different parties are weighing in a lot of companies are filing amicus briefs talking about the issue as i said on the outset the tcpa has harsh penalties and um it's generally kind of an outdated statute but um so we'll see what the supreme court does with uh this definition thanks margo the last case that is currently on the cords docket that we're going to discuss is ford motor company the bandemeer and it's a consolidated case ford motor company the montana a judicial district court now obviously ford motor company is not a bank but the issue that that's arising in this case is one that banking that banking institutions especially those that have a nationwide presence certainly one beyond a single state you have to wrestle with all the time and litigation and that's the question of personal jurisdiction so this is a specific jurisdiction case distinguished from a general jurisdiction case a quick 30 second primer on the distinction between the two is that the due process clause has been interpreted as allowing a defendant to be sued in whatever state is kind of its home base and so regardless of what the plaintiff's claims relate to they can always sue where the defendant is where the defendant defendant's home is where their headquarters is for example but outside of that you have to deal with specific jurisdiction and the principle here is what is fair to the defendant in terms of where they can be hailed into court and so the international shoe decision and a long line of personal jurisdictions the cases establish that specific jurisdiction requires that the defendant have done something to purposely avail themselves of a particular jurisdiction and then generally there's been understood to be this requirement that the lawsuit in question relates to the defendant's conduct in that jurisdiction and that's really the issue here ford is certainly a company that does business all around the country right i mean they're advertising everywhere selling cars everywhere here you cars that were bought used so secondhand used ford vehicles were involved in car crashes in minnesota and montana for different product issue products liability claims coming out of that coming out of each case you know suit was brought where the accident occurred and the argument is you know ford advertises here forward selling cars here including the model that's at issue in the suit they can certainly be hailed into court here ford said hold on you know these the specific car at issue here wasn't sold in minnesota or wasn't sold in montana it was bought somewhere else sold somewhere else and therefore with respect to specific jurisdiction for this case we can't be hailed into court here minnesota the state of minnesota so this went up to the minnesota supreme court also the montana supreme court they both said ford you can be sued here and now the supreme court is taking that issue up you know over the past number of terms the supreme court had narrowed the scope of where jurisdiction can occur in a number of different cases and so uh the general trajectory of the court has been again to narrow where the cl where a defendant can be sued and ford motor company in fact is relying on the bristol myers squibb case which involved kind of a mass tort action from a few years ago to say that there needs to be kind of this causation requirement as part of the jurisdictional analysis here and so that's ford's point is that there needs to be some sort of proximate cause relationship here oral arguments occurred earlier this month so this is one of those cases where you have an eight-member court deciding the case and there were a lot of different hypotheticals asked the the court the court seemed to be concerned about how advertising especially in this internet age could impact this kind of analysis and i think one question for how much this holding when it's ultimately issued can directly apply to the banking industry is how much the decision just kind of revolves around products liability area and towards as opposed to let's say contract related actions but um i don't think you need to think too hard to see how this could potentially play out in the banking industry let's say that there's someone who with the same bank that has a national presence has a first mortgage in let's say north dakota got a car loan in in north dakota for their vehicle drives it only in north dakota but also has a second home using the same bank for their mortgage in let's say arizona and let's say an issue arose with the car with the car loan and they think that they might get a more favorable venue in arizona which would go to the ninth circuit then let's say the very conservative eighth circuit can they bring a suit against the bank in arizona for their car loan when that car has only been driven and all the all the financial statements are going to the north dakota address it's those kind of questions that i think this case may tease out in the future and so again by the end of june we should have a decision here and i think it's just helpful when you're thinking about litigation in cases to always remember that personal jurisdiction is one of those arrows in the quiver that you can use it's an argument that if you don't raise it right away um on the pleadings in a 12b2 motion you lose it so it's different than subject matter jurisdiction in that respect but it is something to be thinking about when you're about when you're involved in complex litigation eric thanks tim we actually do have one more case to talk about that has been the subject of a grant and this is a henry shine inc versus archer and white sales inc and this case is going to take us into the realm of the federal arbitration act which may be of interest to many of you especially those of you who work in consumer banking or for card issuers because really since about the 2011 decision in concepcion and especially with some of this progeny arbitration clauses in customer and cardholder agreements have been an important tool in neutralizing consumer class actions now this case which is actually back at the court for the second time addresses the question of who is between the court and the arbitrator gets to decide whether a claim stays in court or sent to arbitration something we call arbitrability say that three times fast and this case arises in the context of an agreement where you have two things first you have a clause that says we agree to arbitrate under aaa rules the american arbitration association those aaa rules say that the arbitrator decides questions of arbitrability second in the middle of that arbitration clause you have the word accept and certain types of cases that the parties agree should stay in court and here the carve-outs are for action seeking injunctive relief and intellectual property disputes to fairly common carve-outs in commercial arbitration agreements now archer and white sales sues henry shine and it brings antitrust claims and it makes a prayer for injunctive relief so archer in white points at the prayer for injunctive relief and argues that the case falls squarely in the carve out and that it doesn't have to arbitrate the district court in texas agrees and this is back in 2016. so the case goes up to the fifth circuit for the first time in 2017 and it affirms it looks at the arbitration clause carve out for action seeking injunctive relief it looks at the complaint seeking conjunctive relief and it says yep defendant your argument for arbitrability here is well it's really pretty bad in fact it is quote wholly groundless end quote and because it is wholly groundless we don't even have to bother sending this case to an arbitrator to decide arbitrability even though the contract says by electing aaa rules questions of arbitrability are supposed to be decided by the arbitrator henry shine doesn't like that result it petitions for cert cert is granted and the supreme court reverses the fifth circuit in 2019. it says look the faa makes the question of who decides arbitability a matter of contract and when the contract says an arbitrator is to decide arbitrability arbitrability then the arbitrator has to decide that no matter how bad or how groundless the argument may be there's no wholly groundless exception anywhere in the faa but the court says to the fifth circuit you know you really didn't decide what the contract says about who decides arbitability so take the case back look at the contract and figure out whether it contains quote clear and unmistakable evidence end quote that the arbitrator was to decide arbitrability so the fifth circuit takes up the case for the second time archer in white argues that the carve out for injunctive relief means there's no agreement to arbitrate and if there's no agreement to arbitrate there's no agreement to apply triple a rules and if there's no agreement to apply triple a rules then you don't even get to the delegation rule that is embedded in those aaa rules henry shine on the other hand argues that the carve out does not trump the selection of aaa rules and the incorporation of its rule on delegation the fifth circuit rules for archer and white a second time and it holds that you don't get to the point of looking at the triple a rules when you have a claim for injunctive relief because you haven't agreed to arbitrate that claim in accordance with the aaa rules so there's no clear and unmistakable intent to delegate arbitrability and the claims stay in court because injunctive relief is being requested henry shine against his excuse me henry shine is once again unhappy and again petitions for cert and cert is granted once again uh briefing in this case is still underway uh argument has been set for december 8th it'll be interesting to see how it turns out you know on the one hand it would seem impractical in the face of an unambiguous carve out to send a case to arbitration just to decide arbitrability and assumably have the case sent right back to court you know but who knows i guess we'll all find out next year now we're going to turn to petitions to watch um petitions uh that haven't been granted yet but in each of these cases uh we know that at least one justice has called for a response to the petition not every petition gets a response of course so that's a sign that you know these are issues that the court might look to address uh the first is another federal arbitration act case omen versus milliman the issues presented in that case come out of the insurance world but at least one of the questions presented the first one has somewhat broader implications omen is an insurance company liquidator appointed under an iowa statute he's charged with winding up the affairs of a health insurance company that went under in his capacity as liquidator he sued out some tort claims in iowa state court against an actuarial firm that did some consulting work for the failed insurer relying on an arbitration clause in its consulting agreement the actuary moved to compel arbitration in response the liquidator says not so fast i'm going to use my statutory authority as liquidator to disavow the consulting agreement because if i disavow the consulting agreement the arbitration clause goes with it and the faa can't stand in my way because my statutory power to disavow the contract containing the arbitration clause doesn't discriminate against arbitration all of the contracts provisions arbitration clause included stand on an equal footing in this scenario and i'm going to disavow all of them now this gets appealed up to the iowa supreme court and that court holds essentially that the liquidator is too clever by half the court notes that the consulting contract had already been fully performed leaving the arbitration clause is really the only unfulfilled promise left in the entire contract and in that context to allow the liquidator to disavow the contract is effectively allowing the liquidator to disavow the arbitration clause only because it's the only part left and under the faa state law cannot discriminate against arbitration agreements and so the liquidator has to arbitrate so says the iowa supreme court cert petition uh as we noted went to conference and it came out with a request for a response from the actuary it only takes that one justice to call for that sort of response so we don't uh just yet know how interested the court is in the case but we think it's one to watch uh now margot is going to talk about a couple of petitions in receivership cases eric these are two um linked receivership cases zechariz versus jnb and then rupert versus jan b and these cases uh both stem from the same litigation filed by the securities and exchange commission in the northern district of texas against uh robert allen stanford in the stanford international bank and other stanford entities and it was related to a massive ponzi scheme that kind of came to head during the 2008 financial crisis um in the district northern district of texas appointed a receiver ralph gnv to oversee these entities and pursue claims on behalf of the defrauded investors and then going about these efforts um entered into certain settlements that are now being challenged by um defrauded investors challenged generally for the uh they're arguing that you know if the state receivership estate didn't suffer the individualized injury then they shouldn't be able to settle these claims so these cases raise interesting um standing issues interesting article three issues that have the potential to impact the authority a receiver has over winding up an estate and pursuing claims and they'll generally be interesting for banks just because banks do engage receivers and our creditors sometimes so it'll be interesting to watch and figure out what kind of authority the supreme court thinks these receivers have under article 3 and with that given the time i'm going to turn it to him to talk about an interesting petition to watch thanks margo the last case we're going to discuss is deutsche bank trust company america's the robert r mccormick foundation now this case has moved a little bit farther along in terms of the petition to watch process than the other two this case has had a call for the views of the solicitor general requested what that means is that four members of the court have asked for the united states government to give its perspective on this case and that's significant because the same because you also need four votes to grant cersei orient a case so you have four justices interested so this probably tilts the case to at least the 50 50 50 pile in terms of its likelihood of certiorari being granted now the u.s hasn't weighed in yet but we'll give a kind of an overview here of what the case is about the case involves 11 usc 546e and that's the safe harbor provision in the bankruptcy code which exempts from a bankruptcy trustee's avoidance powers certain transfers by or to financial institutions and this and this statutory provision comes up a lot in the context of leverage buyouts that then tilt into bankruptcy and that's what you had happen here so the factual context is that the tribune company which had media holdings from the chicago tribune and others was part of a leveraged buyout and the shareholders who received the payout from that leveraged buyout included the respondents here the robert r mccormick foundation and when the tribune company then tilted into bankruptcy its creditors wanted to bring fraudulent transfer claims because they were left uh left empty-handed and that includes the petitioners here deutsche bank trust company americas what what these creditors decided to do was to bring state law fraudulent transfer claims here under new york law to try to claw back some of that money there was a bankruptcy proceeding because the tribune company was in chapter 11. and when that bankruptcy case reached the second circuit the second circuit put the brakes on those state law fraudulent transfer actions it said it said that those claims were preempted by 11 usc section 546e and what's notable is it said that it was preempted even though there's no express preemption provision in 546e instead it relied on implied pree ption that it would frustrate the obstacles and the purpose of 546 e if the state law claims were allowed to continue and what the petitioners are arguing here is that there are a few problems with that preemption analysis first of all to try to i think kind of create a or show that there is some sort of circuit split they've raised the issue of the presumption against preemption now liberal liberal members of the court often invoke the presumption against preemption or traditionally conservative members of the court often show a certain disdain for the presumption against preemption but the basic principle behind it is that when a state is exercising its historic police powers there's a presumption against redemption applying in that case unless congress is really explicit about it and a number of other circuits have indicated at least according to the cert petition here have indicated that there is a presumption against preemption that applies in the bankruptcy context second circuit said no there's not and so that was part of what precipitated their finding of preemption here even if you get past the presumption against preemption you have the question of whether 546e really has this preemptive sweep here now again there's no express preemption provision in 546e the safe harbor there is really specific to what the bankruptcy trustee can or can't do that's they're based on the plain language of the of the statutory uh provision at issue and so the and so the petitioners are arguing well there's not no reason that a statutory provision specific to what the bankruptcy trustee can or can't do should preempt state law causes of action brought by creditors rather than the trustee the other argument they make is that the purpose the purpose that the second circuit relied on in terms of what 546e is about was held not to be the case by the u.s supreme court just a few years ago so the same statutory provision went before the supreme court just a couple years ago in the case merit management vfti consulting that's the case that we actually discussed at this banking roundtable a couple of years ago and there the court said that the safe harbor isn't quite as broad as what was being argued again the safe harbor applies when there is a transfer buyer to a financial institution and what merit management asked is when the financial institution is just a conduit between let's say company a and company b or shareholder b and company a does that count to trigger the safe harbor and the court said no and then the process of that rejected the idea that there's just this purpose of finality behind 546c well it's the same purpose of finality that the second circuit relied upon to say that these states of action should be preempted so it seems like the second circuit's reasoning may be on shaky footing or certainly probably enough to get the supreme court's interest in granting cert here and not just the call for the views of the solicitor general the other interesting thing about this case that i'll just talk about quickly is again the supreme court in merit management held that when a financial institution is operating as an intermediary that's not enough to trigger the safe harbor justice breyer when he was kind of doing one of his rambling trains of thought questions and hypotheticals pointed out that the definition of financial financial institution in the bankruptcy code is broad enough that arguably any uh any company that's using a financial institution as an intermediary that the that the company itself under the definition of the statute could be considered a financial institution essentially swallowing the whole rule that the supreme court was making that's again triggered here by this case whether whether the law can be read so far because the court here second circuit here in saying that 546e applies at all it was clear that the tribune company wasn't a financial institution you know as a general matter but looking at the definition said well it since it used a financial institution to get its payment it is a financial institution that for purposes of merits management so we'll see what happens with this case but this is one that i would expect certiorari to be granted in nick back to you thanks tim tim eric and margo thank you for that presentation and thank you audience for your time and attention a reminder please sign the attendance sheet and return it to attendance at dorsey.com also remember if you still have questions for our speakers contact them using the contact information uh in your materials or again get in touch with your usual dorsi relationship contact thanks again and have a great rest your day