The key litigated issue in Linde v. Arab Bank, PLC was whether the district court's discovery sanction, in the form of an adverse jury instruction, was immediately reviewable on appeal.

In 2004, plaintiffs sued Arab Bank, PLC under the Anti-Terrorism Act and the Alien Tort Claims Act alleging that the bank knowingly and purposefully supported foreign terrorist organizations between 1995 and 2004 by providing financial services to those organizations.

While the case was in discovery, the district court issued a series of orders requiring Arab Bank to turn over specific banking information concerning known or suspected terrorists. Arab Bank refused to produce some of these documents, claiming their production would violate foreign bank secrecy laws.

The district court ultimately sanctioned Arab Bank under Federal Rule of Civil Procedure 37(b) for not complying with its discovery orders. The court's sanction took the form of a jury instruction allowing (but not requiring) the jury to conclude that Arab Bank knowingly and purposefully provided financial services to foreign terrorist organizations.

Arab Bank took an immediate appeal to the US Court of Appeals for the Second Circuit invoking the collateral order doctrine. Alternatively, Arab Bank sought a writ of mandamus from the Second Circuit.

On January 18, 2013, the Second Circuit issued a 56-page opinion in Linde v. Arab Bank, PLC, dismissing Arab Bank's appeal for lack of jurisdiction and denying the petition for a writ of mandamus. Accordingly, the bank's appeal must wait until after final judgment is entered in the case.

In denying appellate review under the collateral order doctrine, the Second Circuit held that the district court's sanctions order was "inextricably intertwined" with the merits of the action and was not "effectively unreviewable on appeal" from a final judgment. If the case went to trial and Arab Bank lost, the court reasoned, Arab Bank could seek to have the verdict reversed due to the allegedly defective jury instruction proposed by the district court. In reaching its decision, the Second Circuit rejected Arab Bank's argument that immediate appellate review was required because it would be too late to reverse the substantial financial consequences resulting from the reputational harm the bank would sustain as a consequence of an adverse jury finding.

In denying Arab Bank's petition for a writ of mandamus, the Second Circuit held that the bank was not clearly entitled to the writ and that review after final judgment would provide adequate relief. Among other things, the Second Circuit rejected Arab Bank's argument that the district court's decisions ordering production and imposing sanctions should be vacated on comity grounds because they effectively required the bank to violate foreign bank secrecy laws. The appeals court found no clear abuse of discretion in the district court's conclusion that the interests of other sovereigns in enforcing bank secrecy laws were outweighed by the need to impede terrorism financing.

The Arab Bank decision is indicative of a trend among federal appeals courts to limit the scope of the collateral order doctrine. When counseling clients on their appellate rights in federal cases, litigators should be cautious about over-selling the chances of successfully obtaining appellate review before entry of final judgment. Moreover, Arab Bank highlights that claims of immediate reputational harm may not be sufficient to persuade a federal appeals court to grant immediate review of a case.