VISACHECK/MASTERMONEY ANTITRUST LITIGATION

Recent Developments: On Feb. 22, 2000, United States District Court Judge John Gleeson for the Eastern District of New York issued an order in this antitrust litigation. The order granted class status to "all persons and business entities who have accepted Visa and/or MasterCard credit cards and therefore have been required to accept VisaCheck and/or MasterMoney debit cards under the challenged tying arrangements." The bank card associations appealed this decision to the Second Circuit Court of Appeals and NYBA filed a motion along with the American Bankers Association (ABA), the Consumer Bankers Association and the Financial Services Roundtable, seeking leave to file an amicus curiae brief with respect to the issue of class certification. While plaintiffs filed a motion in opposition to this filing, NYBA's motion was granted on Aug. 24, 2000. Oral arguments took place on Feb. 5, 2001.

On Oct. 17, 2001, the Second Circuit affirmed the District Court's decision, holding that at this stage, the District Court should not engage in a battle of experts and that the class allegations should be taken to be true for purposes of the certification issue unless the defendant could show that the expert testimony is fatally flawed and would not be admissible as a matter of law. Therefore, the Second Circuit affirmed the District Court's decision to grant class status to the plaintiffs. The Second Circuit stated that the question for the District Court at the class certification stage with respect to expert testimony is whether plaintiffs' expert evidence "is sufficient to demonstrate common questions of fact warranting certification of the proposed class, not whether the evidence will ultimately be persuasive." Thus, it upheld the District Court's rejection of defendants' claim that plaintiffs' expert testimony regarding the appropriateness of class certification was inadmissible. The Second Circuit also affirmed the lower Court's determination that the existence of injury and causation can be proven on a class-wide basis and also found that the District Court's conclusion that the action will be manageable as a class action did not constitute an abuse of its discretion. Visa and MasterCard filed a Petition for Rehearing and Rehearing en banc on October 31st. The Petition for Rehearing was denied, but the Petition for Rehearing en banc is still pending.

KEY POINT: In time, the issue of whether the card associations' pricing of their debit card products violated Federal antitrust laws will become the focus of this legislation. The current issue, however, is the appropriateness and legality of certifying a class of virtually every retailer in the nation. The class action suit would potentially seek a multi billion dollar damage award against two bank card associations that play key roles in administering payment systems through which approximately $1 trillion in transactions are conducted annually. Given the interrelation of the components of the payment system, upholding the class certification could have a significant impact on the banking industry and the overall economy. There is concern, too, that upholding the class certification may coerce the defendants into a settlement long before the merits of the case are tested. The effect of this decision as a precedent could also make it easier for other plaintiff classes to win certification against financial institutions that are often targets of class action litigation.

Background: In this case, several of the nation's largest retailers, including Wal Mart Stores, Sears Roebuck, Safeway and Circuit City, along with a number of smaller merchants and three retail associations, have challenged rules issued by Visa and MasterCard that require stores accepting their credit cards to also accept their debit cards. The plaintiffs allege that this is a tying arrangement and that the defendants have attempted and conspired to monopolize the debit card market, all in violation of the Sherman Antitrust Act.

Plaintiffs moved for certification of their case as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure, with the proposed class being comprised of all individuals and businesses that have accepted Visa and/or MasterCard credit cards, and have therefore been required to accept the debit cards, within the statute of limitations period. The class includes in total approximately four million merchants. The district court granted class certification, rejecting the defendants' argument that plaintiffs' expert testimony regarding the appropriateness of class certification was inadmissible. He also rejected defendants' claim that class certification was inappropriate because members of the proposed class would not be able to show injury and because the injuries of others would vary in ways not "susceptible to resolution by a class wide formula."

In its amicus curiae brief, NYBA challenged whether the court engaged in the "rigorous analysis" necessary to ensure that the requirements of Rule 23 allowing class certification were met. NYBA stated that the court wrongly failed to address any conflicts posed by the opposing parties' experts and also failed to consider the issue of manageability, noting that the court wrongly put off for another day the question of whether the damages issues in this case could end up requiring four million individual trials to resolve the question of damages.