62 F.4th 704
2d Cir.2023Background:
- Putative class of ~12 million U.S. merchants sued Visa, MasterCard, and issuing/acquiring banks alleging antitrust injury from supracompetitive interchange fees and network rules (honor-all-cards, anti-steering).
- Parties reached a renewed post-remand settlement (after the 2016 vacatur) providing about $5.6 billion (net after opt-outs) for a damages class covering card acceptance from Jan 1, 2004 to Jan 24, 2019; releases include claims accruing up to five years after appeals become final.
- District court granted final approval, awarded Class Counsel ~9.31% (~$523M) in fees, $39M expenses, and $900,000 in service awards to lead plaintiffs; district appointed a special master to resolve franchisor–franchisee disputes over who “accepted” card payments.
- Objectors (various merchants/franchisees) challenged class certification, ascertainability, adequacy of representation, notice/claims administration, scope of the release, legitimacy/amount of service awards, and attorneys’ fees.
- Second Circuit affirmed the district court in all material respects but directed reduction of service awards to the extent they were increased by time spent lobbying; left factual allocation between oil companies and service stations for the special master and further district-court review.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Class ascertainability (meaning of “accepted”) | Ambiguous class term; unresolved franchisor/franchisee dispute makes class unascertainable | Class definition is objectively bounded by antitrust law (direct payor standard); identification is possible | Affirmed: definition meets ascertainability — membership is objectively determinable under federal antitrust standards |
| Adequacy / intra-class conflict (franchisees vs franchisors) | Franchisees lacked adequate representation because representatives didn’t share franchisees’ interests over allocation | Dispute is over class membership, not between class members; losing outsiders are not bound | Affirmed: no intra-class adequacy problem; district should ensure adversarial presentation to the special master if needed |
| Use of special master and timeliness of resolving payor status | Must resolve payor/standing before certification; process vague and may be unfair | Referral to a special master with de novo court review is permissible; logistics can be worked out | Affirmed: referral appropriate; special-master findings subject to de novo review; procedural protections required |
| Scope of release (future claims; newer merchants’ representation) | Future five‑year release unfairly binds newer merchants and may violate Rule 23(a)(4) and 23(e)(2)(D) | Release is qualified "to the fullest extent permitted by federal law" and severable; legality can await an actual dispute | Court declined to decide now; severability clause preserves settlement while leaving scope question for future litigation |
| Service awards (permissibility and amount) | Greenough forbids such awards; amounts were excessive relative to class recovery | Service awards are permissible under circuit precedent; district properly exercised discretion | Affirmed in principle but directed district to reduce awards to the extent attributable to lobbying time that did not benefit the damages class |
| Attorneys’ fees (common-fund, lodestar cross-check, pre-remand hours) | Pre-remand hours should be excluded or reduced due to conflicted representation; multiplier unreasonable | Class Counsel’s work largely benefitted the damages class; lodestar cross-check supports percentage award and contingency risk justifies multiplier | Affirmed: district acted within discretion to award 9.31% (~$523M); inclusion of pre-remand hours appropriate given interwoven claims; final multiplier (≈2.45) acceptable |
Key Cases Cited
- TBK Partners, Ltd. v. Western Union Corp., 675 F.2d 456 (2d Cir. 1982) (permits release of claims sharing an "identical factual predicate")
- In re Petrobras Sec., 862 F.3d 250 (2d Cir. 2017) (ascertainability requires objective class definition with definite boundaries)
- Denney v. Deutsche Bank AG, 443 F.3d 253 (2d Cir. 2006) (class must be defined so that members would have Article III standing)
- Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (U.S. 2011) (Rule 23 adequacy and commonality principles for class representatives)
- Goldberger v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000) (factors and methods for awarding common-fund attorneys’ fees and lodestar cross-check)
- Hensley v. Eckerhart, 461 U.S. 424 (U.S. 1983) (allocation of attorney time where claims involve common core of facts)
- Trustees v. Greenough, 105 U.S. 527 (U.S. 1881) (historical prohibition on payments to plaintiff-counsel for personal services)
- Illinois Brick Co. v. Illinois, 431 U.S. 720 (U.S. 1977) (limits recovery to direct purchasers in antitrust pass-on contexts)
- Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (U.S. 1968) (direct purchaser bears the antitrust injury even if it passes on overcharge)
- Wal‑Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96 (2d Cir. 2005) (megafund antitrust fee precedent; multiplier guidance)
- Brecher v. Republic of Argentina, 806 F.3d 22 (2d Cir. 2015) (administrative feasibility not required for ascertainability)
- Victor v. Argent Classic Convertible Arbitrage Fund L.P., 623 F.3d 82 (2d Cir. 2010) (common fund doctrine entitlement to reasonable attorney compensation)
- Fresno County Emp. Ret. Ass’n v. Isaacson/Weaver Family Trust, 925 F.3d 63 (2d Cir. 2019) (contingency risk and lodestar considerations)