On April 20, 2026, the United States Supreme Court declined to hear appeals from a group of global financial institutions, effectively allowing a $12 billion class-action lawsuit to move forward in lower courts. The litigation, brought by municipal entities including the cities of Baltimore, Philadelphia, and San Diego, accuses Bank of America, JPMorgan Chase, Citigroup, Goldman Sachs, Barclays, Wells Fargo, Royal Bank of Canada, and BMO Capital Markets of conspiring to inflate interest rates on Variable Rate Demand Obligations (VRDOs).
VRDOs are long-term municipal bonds with interest rates that reset on a daily or weekly basis. Under the terms of these securities, the defendant banks serve as remarketing agents responsible for resetting the rates at the lowest levels necessary to sell the bonds at par value. The plaintiffs allege that between 2008 and 2016, the banks coordinated their rate-setting activities rather than competing. By keeping rates artificially high, the banks allegedly ensured the bonds remained attractive to investors, thereby reducing the likelihood that the banks would be forced to use their own funds to purchase unsold securities as part of their roles as liquidity providers.
The Supreme Court’s decision to deny certiorari leaves in place a previous ruling by the 2nd U.S. Circuit Court of Appeals. That court had overturned a lower court's dismissal of the case, finding that the plaintiffs provided sufficient evidence of a conspiracy to justify a trial. The appellate court noted that the banks allegedly shared proprietary information regarding their rate-setting intentions through a third-party pricing service, which facilitated the alignment of interest rates across the market.
The lawsuit seeks damages for what the cities describe as hundreds of millions of dollars in excessive interest payments made over nearly a decade. Total estimated damages across the class of municipal issuers are valued at approximately $12 billion. In their petition to the Supreme Court, the banks argued that the appellate court’s standard for proving a conspiracy was too low and could lead to meritless litigation against financial institutions. However, the Supreme Court’s refusal to intervene means the case will now return to the U.S. District Court for the Southern District of New York for discovery and further proceedings.
Legal representatives for the cities stated that the decision marks a significant step toward recovering funds for taxpayers. The banks have consistently denied the allegations, maintaining that their rate-setting practices were independent and influenced by broader market conditions rather than collusion. With the Supreme Court's rejection of the appeal, the defendants will now face the prospect of a trial or a potential settlement.