Matthew Thomas v. UBS AG, 706 F.3d 846

Appellants are named plaintiffs in a class action against UBS over penalties and taxes alleged to be caused by UBS’s conduct relating to U.S. tax reporting on foreign accounts.
Jurisdiction lies under the alienage branch of diversity; the suit involves American plaintiffs with foreign-bank accounts in UBS in 2008.
Plaintiffs rely on diverse sources of “common law” claims without identifying a single governing law or jurisdiction for those claims.
The plaintiffs cite laws from Arizona, California, New York, and Illinois; the court questions applying multiple state laws without a clear conflict-of-laws framework.
The district court dismissed on the merits before any class certification; the Seventh Circuit discusses choice-of-law, class certification sequencing, and potential sanctions at the end of the analysis.
UBS had participated in the IRS Qualified Intermediary Program and allegedly instructed the plaintiffs to avoid U.S. securities or reporting; the contract with the IRS may or may not create a third-party beneficiary right for the plaintiffs.
The plaintiffs seek to recover penalties, interest, and inferred profits from UBS’s alleged acts that allegedly induced them to evade taxes.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the court should apply a single governing law for the class action	Plaintiffs imply multiple states’ law applies	UBS argues no clear choice-of-law framework is presented	Court declines to certify law-specific questions and avoids varied-state conflict analysis
Whether plaintiffs can state a third-party beneficiary claim under the IRS Qualified Intermediary contract	Plaintiffs could be third-party beneficiaries	Contractual terms do not confer beneficiary status	No third-party beneficiary status; claim rejected
Whether plaintiffs have viable breach-of-contract or implied-contract claims against UBS	There were implied, oral, and/or written tax-advice contracts	Complaint lacks necessary term specifics	Claims dismissed for failure to plead essential contract terms
Whether there is a fiduciary duty or unjust enrichment claim viable against a bank for assisting tax evasion	UBS owed fiduciary duties; unjust enrichment alleged	Bank is a creditor, not a fiduciary; unjust enrichment theory inadequately pleaded	Fiduciary duty and unjust enrichment claims rejected
Whether remaining negligence/malpractice claims are viable	Negligence/malpractice alleged	Claims are frivolous and lack basis	All remaining claims deemed frivolous; affirmed dismissal

Erie R.R. v. Tompkins, 304 U.S. 64 (1938) (no federal general common law; respect state authority in conflicts)
In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995) (limits on federal common law in diversity)
Central Soya Co. v. Epstein Fisheries, Inc., 676 F.2d 939 (7th Cir. 1982) (principles of choice-of-law in diversity actions)
Adams v. Raintree Vacation Exchange, LLC, 702 F.3d 436 (7th Cir. 2012) (American law can govern interpretation without selecting a specific state law)
Lloyd v. Loeffler, 694 F.2d 489 (7th Cir. 1982) (implied/implicit choice of law in contracts)
Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) (due process concerns in class-action certification and notice)
Hansberry v. Lee, 311 U.S. 32 (1940) (class action concerns; res judicata implications)
Astra USA, Inc. v. Santa Clara County, 131 S. Ct. 1342 (2011) (no third-party beneficiary status where government contract lacks negotiable terms)
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard; plausibility requirement)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standards; plausibility)
ConFold Pacific, Inc. v. Polaris Industries, Inc., 433 F.3d 952 (7th Cir. 2006) (unjust enrichment; remedial vs. substantive)
Murdock-Bryant Construction, Inc. v. Pearson, 703 P.2d 1197 (Ariz. 1985) (Arizona unjust enrichment/tort principles)
Corsello v. Verizon New York, Inc., 967 N.E.2d 1177 (N.Y. 2012) (New York law on related claims)