In re Griffin Trading Co. (Appeal of Leroy G. Inskeep), No. 10-3607 (7th Cir. 2012), reviewed a District Court application of Illinois law in a breach of fiduciary duty claim in which those in control of Griffin Trading were alleged to have breached their fiduciary duties by allowing segregated customer funds to be used to help cover a customer’s losses.  The transactions involved banks in England, Canada, France, and Germany.

In applying Illinois law, the District Court believed that the non-U.S. choice of law issue was raised too late.  This, the Circuit found, amounted to an abuse of discretion.  The Notes to Fed. R. Civ. P. 44.1 require “reasonable” notice of the reliance on non-U.S. law — in order to avoid “unfair surprise”.  The Circuit found that reliance on non-U.S. law was timely raised.

It then found that the U.C.C., relied on by the District Court, “cannot provide the operative rule of law”.  At the same time, all the potentially applicable rules of law were in essence the same.  None attaches significance to the “moment of acceptance”, as does the U.C.C. (so presumed the Court); rather, each applicable law required “a causal link between the challenged activity (or inactivity) and the alleged injury.  It was the inaction of the principal controlling persons of Griffin that led to the loss; that was sufficient under the law of each potentially relevant jurisdiction for the imposition of liability.  Damages in the full amount of the improper transfer were then imposed (after another correction of the choice of law approach).

It is noteworthy that, in deciding the choice of law issue, the Court of Appeals appeared to relied on general reviews of non-U.S. law, including a law review article and The Encyclopaedia of Banking Law.  The Seventh Circuit has in the past written quite vigorously on the limitations of using expert evidence in the proof of non-U.S. law.

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