                              In the

United States Court of Appeals
               For the Seventh Circuit

No. 12-2724

M ATTHEW T HOMAS et al., on their own behalf
   and that of all others similarly situated,

                                                Plaintiffs-Appellants,
                                  v.

UBS AG,
                                                 Defendant-Appellee.


             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
               No. 11 C 4798—John W. Darrah, Judge.



   A RGUED D ECEMBER 7, 2012—D ECIDED F EBRUARY 7, 2013




 Before P OSNER, W OOD , and W ILLIAMS, Circuit Judges.
  P OSNER, Circuit Judge. The three appellants are the
named plaintiffs in a class action suit that seeks damages
from UBS, Switzerland’s largest bank, which specializes
in managing the assets of wealthy persons from all over
the world. Federal jurisdiction is based on the alienage
branch of the diversity jurisdiction.
2                                                No. 12-2724

   The parties have not made clear the source or sources of
the law applicable to the case. The plaintiffs advance
a variety of common law claims without indicating the
state or nation whose law gives rise to them. They
mainly cite law from states in which the three plaintiffs
reside (Arizona, California, and New York), but they
also cite Illinois cases (without explaining why). When
the parties to a diversity case do not mention what
state’s law applies, the court applies the law of the state
in which the court is located. Santa’s Best Craft, LLC v.
St. Paul Fire & Marine Ins. Co., 611 F.3d 339, 345 (7th Cir.
2010). But these parties, by citing cases both from
Illinois (which is that state) and from the three states
in which a plaintiff resides, imply that the law of
all four states applies. This is quadruply strange: The
parties don’t suggest that all the class members reside
in those three or four states or that all the allegedly wrong-
ful acts occurred in those states. They don’t indicate
whether there are relevant differences among the laws
of the four states. They don’t explain why the law of the
state of a plaintiff’s or unnamed class member’s residence
should control under applicable conflict of laws principles
rather than, for example, the law of Switzerland, which
is UBS’s domicile and also the place in which UBS com-
mitted the complained of acts or omissions. And they
don’t discuss the possibility that federal common law
may apply instead of state law because, as we’ll see,
the plaintiffs rely in part on a contract with the federal
government.
  The problem of choice of law created by a nationwide
class action governed by laws of different states or other
No. 12-2724                                               3

jurisdictions is usually solved by the district court’s
certifying a different subclass for class members in each
jurisdiction whose law differs in some relevant respect
from that of the other jurisdictions in which members
of the class reside or the allegedly unlawful acts were
committed. The parties have not proposed that solution
and anyway the case was dismissed on the merits
before any class or subclasses were certified.
  We’re not at liberty to decide a diversity case on the
basis of the “general common law.” In re Rhone-Poulenc
Rorer Inc., 51 F.3d 1293, 1300-01 (7th Cir. 1995); Central
Soya Co. v. Epstein Fisheries, Inc., 676 F.2d 939, 941 (7th
Cir. 1982). The term denoted the common law
principles created by federal judges for use in diversity
cases—principles that might differ from the law that the
various state courts would have applied to the same
cases if litigated in state rather than federal courts.
In the Erie case the Supreme Court held that to decide
diversity cases on the basis of common law created by
federal judges was an unconstitutional usurpation of state
authority. “There is no federal general common law.
Congress has no power to declare substantive rules of
common law applicable in a state.” Erie R.R. v. Tompkins,
304 U.S. 64, 78 (1938). But parties still are allowed to
specify (within reason, see Lloyd v. Loeffler, 694 F.2d 489,
495 (7th Cir. 1982)) what law shall govern a lawsuit
between them, and the specification can be implicit.
 Many common law principles are the same, or
materially the same, in many or even all U.S. states, and
when a case turns on such a principle the parties will
4                                               No. 12-2724

often cite decisions articulating and applying it without
worrying about which state the decisions come from, as
in our recent case of Adams v. Raintree Vacation Exchange,
LLC, 702 F.3d 436, 438 (7th Cir. 2012); to the same effect
see Phillips v. Audio Active Ltd., 494 F.3d 378, 386 (2d
Cir. 2007). In Adams the parties had implicitly agreed
that “American law” would govern the interpretation of a
forum selection clause in a contract that had been made
in Mexico, but they did not specify a state’s law to
govern the issue—just American rather than Mexican
law. This case is similar. And since there is no indication
that the common law principles invoked by the parties
vary across the states that might have jurisdiction of
claims in the complaint or that federal law might govern
instead of state law or Swiss law instead of American
law, we’ll not worry further about choice of law.
  The district judge dismissed the suit on the merits
without, as we said, first considering whether to certify
a class. Normally the issue of certification should be
resolved first, Thomas v. City of Peoria, 580 F.3d 633, 635
(7th Cir. 2009); Bertrand ex rel. Bertrand v. Maram, 495
F.3d 452, 454-56 (7th Cir. 2007), because if a class is
certified this sets the stage for a settlement and if certif-
ication is denied the suit is likely to be abandoned, as
the stakes of the named plaintiffs usually are too small
to justify the expense of suit, though that may not be
true in this case. But deciding whether to certify a class
can take a long time. Rule 23(c)(1)(A) requires that the
decision be made at “an early practicable time,” but
early is often not practicable. So when as in this case the
No. 12-2724                                             5

suit can quickly be shown to be groundless, it may make
sense for the district court to skip certification and
proceed directly to the merits. Cowen v. Bank United of
Texas, FSB, 70 F.3d 937, 941-42 (7th Cir. 1995).
   UBS opposed certification even though a defendant
with a winning case has much to gain from it—the judg-
ment for the defendant will be res judicata in any suit
by a class member who had not opted out of the class,
provided “that the named plaintiff at all times ade-
quately represent the interests of the absent class mem-
bers.” Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812
(1985); see also Hansberry v. Lee, 311 U.S. 32, 45 (1940).
But even a defendant with a winning case may not
have much to gain, if an opt out can be expected to
file another class action against the defendant. That
possibility to one side, a very risk-averse defendant
will oppose certification even in a weak case lest it
lose the case (against the odds) and, because the case
was litigated as a class action, be ordered to pay
very heavy damages.
  The plaintiffs, and the other members of the class—who
number in the thousands—are American citizens who
had bank accounts in UBS in 2008 when the UBS tax-
evasion scandal (of which more shortly) broke. The ac-
counts of the three plaintiffs were large—$500,000 to
$2 million each. The plaintiffs had not disclosed the
existence of the accounts on their federal income
tax returns, as they were required to do by Form 1040,
Schedule B, which on line 7a asked (the current version
is materially the same): “At any time during [2002-2008]
6                                               No. 12-2724

did you have an interest in or signature or other authority
over a financial account in a foreign country, such as
a bank account, securities account, or other financial
account?” They also did not disclose the income they
earned in those accounts. Neither did they pay federal
income tax on that income, though it was taxable. Eventu-
ally they ‘fessed up and paid the taxes they owed plus
interest on those taxes and a 20 percent penalty. They
did this pursuant to an IRS amnesty program, adopted
in the wake of the scandal, called the “Offshore
Voluntary Disclosure Program.” Internal Revenue
Service, 2009 Offshore Voluntary Disclosure Program,
www.irs.gov/uac/2009-Offshore-Voluntary-Disclosure-
Program, and Disclosure: Questions and Answers,
www.irs.gov/uac/Voluntary-Disclosure:-Questions-and-
Answers (both visited Jan. 31, 2013). The suit seeks to
recover from UBS the penalties, interest, and other costs
that the plaintiffs and the other members of the class
incurred from their scrape with the IRS, plus the profits
(in the hundreds of millions of dollars) they claim UBS
made from the class as a result of the fraud and other
wrongful acts that they allege UBS committed by
inducing them to maintain their accounts with it.
   The plaintiffs are tax cheats, and it is very odd, to say
the least, for tax cheats to seek to recover their penalties
(let alone interest, which might simply compensate the
IRS for the time value of money rightfully belonging to
it rather than to the taxpayers) from the source, in this
case UBS, of the income concealed from the IRS. One
might have expected the plaintiffs to try to show that
No. 12-2724                                                  7

they had forgotten they had accounts with UBS (though
that would be preposterous, for these were significant
investments for each of the plaintiffs). Or that UBS had
told them that income earned in those accounts was
somehow tax exempt and moreover that the accounts
themselves were somehow not foreign bank accounts
within the meaning of the tax code and so the plaintiffs
didn’t have to acknowledge having accounts with UBS.
They don’t make any of these feeble arguments. They do
argue, as we’ll see, that UBS was obligated to give
them accurate tax advice and failed to do so, but not
that it gave them inaccurate, as distinct from no, advice.
  There are grounds for avoiding penalties for admitted
violations of federal tax law, see, e.g., 26 U.S.C. § 6664(c),
(d); 31 U.S.C § 5321(5)(B)(ii), such as reliance on
plausible advice from a reputable-seeming lawyer or
accountant. United States v. Boyle, 469 U.S. 241, 250-52
(1985); Mulcahy, Pauritsch, Salvador & Co., Ltd. v. Commis-
sioner, 680 F.3d 867, 872 (7th Cir. 2012); Kim v. Commissioner,
679 F.3d 623, 626-27 (7th Cir. 2012); 14A Mertens Law of
Federal Income Taxation § 55:89 (2012). But the plaintiffs do
not invoke any of those grounds or argue that they asked
UBS to advise them on U.S. tax law or that the bank
volunteered such advice.
  What’s true is that in 2009 UBS admitted having
helped tens of thousands of its clients to evade U.S.
income taxes, and paid a $780 million fine. (That was the
scandal we referred to; it is separate from the LIBOR
scandal in which UBS has been involved recently.)
Maybe this help included tax advice, but our plaintiffs
8                                               No. 12-2724

do not argue that they (or other members of the class)
received tax advice from UBS. They argue rather that
the bank should have prevented them from violating
the law. This is like suing one’s parents to recover tax
penalties one has paid, on the ground that the parents
had failed to bring one up to be an honest person who
would not evade taxes and so would not subject himself
to penalties.
  There is in general no common law duty to prevent
another person from violating the law. At worst, UBS, as
we’re about to see, violated an agreement with the IRS
designed to prevent the kind of evasion that the
plaintiffs engaged in. That might conceivably make UBS
an aider or abettor of the plaintiffs’s tax evasion and so
make this case a distant relative to Everet v. Williams
(Ex. 1725), better known as The Highwayman’s Case and
eventually reported under that name in 9 L.Q. Rev. 197
(1893). A highwayman had sued his partner in crime for
an accounting of the illegal profits of their criminal
activity. The court refused to adjudicate the case, and
both parties were hanged. Minus the hanging and with
certain exceptions (such as contribution and indemnity)
irrelevant to this case, the principle enunciated in
The Highwayman’s Case applies to accomplices in civil
wrongdoing, as noted in our recent decision in
Schlueter v. Latek, 683 F.3d 350, 355-56 (7th Cir. 2012). In
The Highwayman’s Case one accomplice was seeking a
bigger share of the profit from the crime from the other
one; here one accomplice is seeking a smaller share of
the costs of the crime from the other one. The principle
is the same; the law leaves the quarreling accomplices
where it finds them.
No. 12-2724                                                                                9

   In 2001 UBS had signed a contract with the Internal
Revenue Service in which it agreed to participate in
the IRS’s Qualified Intermediary Program, 26 U.S.C.
§ 1441; 26 C.F.R. § 1.1441-1(e)(5), a program designed to
encourage foreign banks to help the IRS collect income
tax on income earned by American taxpayers abroad.
Among other things the program required participating
banks to report to the IRS tax information about
depositors who were U.S. taxpayers and to withhold “U.S.-
source income,” such as income on securities of
American companies, and pay it over to the IRS. Two of
the three named plaintiffs claim that the bank told them
not to hold U.S. securities in their accounts. Had they
obeyed the instructions they would not have earned
any US-source income, but the bank would still have
had to report to the IRS tax information about them
if it knew or should have known that they were U.S. tax-
payers. See Internal Revenue Service, Qualified Intermediary
Frequently Asked Questions, www.irs.gov/Businesses/
I n t e r n a t i o n a l - B u s i n e s s e s / Q u a li f i e d - In t e r m e d i a r y -
Frequently-Asked-Questions#2 (visited Jan. 31, 2013). The
third plaintiff has not disclosed what was in his account.
  Supposing the bank failed to comply with the
reporting requirements in its agreement with the IRS
with respect to any of the plaintiffs (or unnamed class
members)—so what? The plaintiffs argue that they are
third-party beneficiaries of the agreement and so entitled
to enforce it and thus to obtain damages for the breach
by UBS, assuming there was a breach. Their theory is
that had UBS complied with its reporting requirements
they would have known they had to pay taxes on earnings
10                                                 No. 12-2724

in their accounts at the bank—known because the
program required the bank to inform depositors what it
was reporting to the IRS about their earnings on their
deposits. The Supreme Court held recently that a gov-
ernment contract that involves no negotiable terms
but merely brings the other party to the contract under
a statute (or, we can assume, a regulation) does not
confer third-party beneficiary status on anyone. Astra
USA, Inc. v. Santa Clara County, 131 S.Ct. 1342, 1348 (2011).
But there are negotiable terms in Qualified Inter-
mediary agreements, so maybe (we needn’t decide) the
plaintiffs could be third-party beneficiaries: could be,
but aren’t.
  A third-party beneficiary is someone whom the con-
tracting parties wanted to have the right to enforce
the contract. Vidimos, Inc. v. Laser Lab Ltd., 99 F.3d 217, 219-
20 (7th Cir. 1996); Sioux Honey Ass’n v. Hartford Fire Ins.
Co., 672 F.3d 1041, 1056-59 (Fed. Cir. 2012); Hess v. Ford
Motor Co., 41 P.3d 46, 51 (Cal. 2002); Fourth Ocean Putnam
Corp. v. Interstate Wrecking Co., 485 N.E.2d 208, 211-13 (N.Y.
1985). It’s unlikely that the IRS would want the tax
cheats that the contract was intended to deter, by
requiring foreign banks to report their income to it, to be
able to shift the burden of the penalties that the IRS
imposes on tax cheats to the foreign banks. True, that
would increase the banks’ incentives to comply with
the contract. But offsetting this effect would be the reduc-
tion in the taxpayers’ incentive to honor their tax obliga-
tions if they could shift the cost of cheating on their
taxes to the foreign banks.
No. 12-2724                                             11

  And what would UBS, the other party to the contract,
gain from being made potentially liable to its depositors
for failing to prevent them from evading taxes? Less
than nothing. It’s not surprising that there’s no evidence
or even suggestion of an intention by the parties to the
Qualified Intermediary agreement to make the tax-
payers third-party beneficiaries of it.
  The plaintiffs have a second breach of contract claim:
that they “entered into implied, oral and/or written
contracts with UBS to provide [the plaintiffs] with profes-
sionally competent tax advice” and that the contracts
contained “unreasonable and oppressive terms” and “are
unenforceable and void due to lack of mutuality.” Even
before Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007),
and Ashcroft v. Iqbal, 556 U.S. 662 (2009), such an allega-
tion would have failed to state a claim because it
doesn’t provide the minimum information that the de-
fendant would need in order to be able to answer
the complaint. Higgs v. Carver, 286 F.3d 437, 439 (7th Cir.
2002); Ryan v. Mary Immaculate Queen Center, 188 F.3d
857, 859-60 (7th Cir. 1999). The complaint does not tell
the defendant what communications formed the basis
of any of the supposed implied contracts and what their
terms were.
  The plaintiffs also charge fraud: that the bank inveigled
them into continuing to invest with it (they had opened
their accounts before the bank joined the Qualified Inter-
mediary Program) by concealing its agreement with the
IRS and the obligation entailed by the agreement to
report tax information about the plaintiffs to the IRS.
12                                              No. 12-2724

This is a private-entrapment argument: by letting the
plaintiffs think that keeping their money in foreign ac-
counts would enable them to evade federal tax law suc-
cessfully, UBS caused the plaintiffs to commit tax fraud.
That is another frivolous theory of liability. For if it
were adopted, not only would everyone have a legally
enforceable duty to prevent crimes and other wrongs
when he could; a failure to perform the duty would
give the criminal or other wrongdoer a right of action
against the failed protector.
   The plaintiffs further argue that UBS touted the secrecy
of their accounts, consistent with the Swiss tradition of
secret bank accounts. The plaintiffs inferred that the
bank would conceal their accounts not only from com-
petitors, relatives, ex-spouses, private creditors, and
journalists, but also from the Internal Revenue Service,
thus enabling them to get away with not paying any
federal income tax they might owe on the earnings in
the accounts. But such a scheme would of course be
illegal, bringing us back to The Highwayman’s Case.
  The plaintiffs also argue that UBS had a fiduciary
obligation to them—the kind of duty that arises from
a gross disparity in knowledge between the provider
and the recipient of a service (a lawyer and a client, for
example, or a physician and a patient) and requires that
the provider treat the recipient as well as he would
want himself treated. E.g., Burdett v. Miller, 957 F.2d 1375,
1381-82 (7th Cir. 1992); In re Daisy Systems Corp., 97
F.3d 1171, 1177-79 (9th Cir. 1996). But a bank is not a
fiduciary of its depositors. It is merely a creditor. Bennice
No. 12-2724                                               13

v. Lakeshore Savings & Loan Ass’n, 677 N.Y.S.2d 842, 843
(App. Div. 1998); Copesky v. Superior Court, 229 Cal. App. 3d
678, 689-94 (1991). It has no duty to treat them like
children or illiterates, and thus remind them that they
have to pay taxes on the income on their deposits. It has
no duty to read aloud to them line 7a on Schedule B
of Form 1040.
  The plaintiffs further claim that UBS was unjustly
enriched at their expense. But the claim again lacks
the minimum specification that UBS would need to
prepare an answer. No doubt the bank “enriched” itself
by charging compensatory fees for its services to the
plaintiffs, but where was the “injustice”? No injustices are
alleged other than those alleged elsewhere in the com-
plaint, which we’ve already discussed, making the unjust
enrichment claim redundant. We explained in ConFold
Pacific, Inc. v. Polaris Industries, Inc., 433 F.3d 952, 957
(7th Cir. 2006), that the legal term “unjust enrichment”
“has two referents, a remedial and a substantive. The
remedial [referent] is to a situation in which a tort
plaintiff asks not for the damages he has sustained but
instead for the profit that the defendant obtained from
the wrongful act.” That has no relevance to this case, for
the plaintiffs haven’t gotten to first base in showing
that UBS committed a tort against them.
  “In its substantive sense, unjust enrichment or restitu-
tion refers primarily to situations in which either the
defendant has received something that of rights belongs
to the plaintiff (for example, he received it by mistake—or
he stole it), or the plaintiff had rendered a service to
14                                             No. 12-2724

the defendant in circumstances in which one would
reasonably expect to be paid (and the defendant refused
to pay) though for a good reason there was no contract.”
Id. at 957-58. Neither of these examples relates to this
case. See also Corsello v. Verizon New York, Inc., 967
N.E.2d 1177, 1185 (N.Y. 2012); Murdock-Bryant Construc-
tion, Inc. v. Pearson, 703 P.2d 1197, 1201-02 (Ariz. 1985).
  We needn’t discuss the plaintiffs’ remaining claims—of
negligence and malpractice—as they are frivolous
squared. This lawsuit, including the appeal, is a travesty.
We are surprised that UBS hasn’t asked for the imposi-
tion of sanctions on the plaintiffs and class counsel.
                                                A FFIRMED.




                           2-7-13
