166 F. Supp. 3d 242
E.D.N.Y2016Background
- Plaintiffs (cardholders) brought a putative nationwide antitrust class action alleging issuers, networks, and affiliates conspired to fix interchange fees paid in card transactions; they asserted federal Clayton Act claims and a California Cartwright Act claim.
- The district court originally dismissed federal claims under Illinois Brick (indirect-purchaser bar) and declined supplemental jurisdiction over the Cartwright Act claim; judgment entered December 2014.
- Plaintiffs moved for reconsideration of the dismissal of the federal claim; defendants cross-moved seeking reconsideration that the court erred in declining original jurisdiction over the state claim (CAFA) and asking dismissal of the Cartwright Act claim on the merits.
- Plaintiffs alleged cardholders directly pay interchange fees (they argued funds withdrawn from cardholder accounts include the interchange fee kept by issuers); the court found this assertion contradicted more specific allegations that interchange is set and exchanged among financial institutions in the card-network services market.
- The court denied Plaintiffs’ reconsideration (no overlooked controlling law or facts) and granted Defendants’ cross-motion: it concluded CAFA supplies original jurisdiction and, on reconsideration of the merits, dismissed the Cartwright Act claim for lack of antitrust standing under the AGC factors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Court overlooked pleading facts and should reinstate federal Clayton Act claim (Illinois Brick standing) | Cardholders allege they are direct payors of interchange fees (funds withdrawn from their accounts include interchange) and the complaint must be accepted as true | Interchange is set/paid among issuers/networks in the card-network services market; cardholders are indirect purchasers | Reconsideration denied; court held Plaintiffs’ direct‑payer allegation was conclusory and contradicted by more specific complaint allegations, so Illinois Brick bar remains dispositive |
| Whether CAFA provides original federal jurisdiction over the Cartwright Act claim | (Plaintiffs did not contest jurisdiction) | Defendants argued CAFA gives original jurisdiction and court should have addressed state claim on the merits | Court concluded it overlooked CAFA on initial disposition, granted reconsideration, and proceeded to address the Cartwright Act claim on merits |
| Whether Plaintiffs have antitrust standing under California law (Cartwright Act) — application of AGC factors | Cardholders assert they directly suffered by having interchange fees taken from their accounts; injuries are traceable and not pass‑through | Plaintiffs are not participants in the card-network services market where interchange is set; injury is derivative/remote, speculative, and risk of duplicative recovery exists | Court applied AGC factors (liberally, recognizing California law broader than federal), found Plaintiffs lack antitrust standing: injury not in the restrained market, too indirect, speculative, and risks duplicative/complex damages; Cartwright Act claim dismissed |
| Whether Plaintiffs may assert alternative theory as indirect purchasers on reconsideration | (Raised for first time on reconsideration) Plaintiffs suggested indirect‑purchaser standing under California repealer doctrine could save state claim | Defendants argued Plaintiffs waived new theory by not pleading it earlier and cannot amend via briefs | Court declined to consider the late‑raised indirect‑purchaser argument as untimely and procedurally improper |
Key Cases Cited
- Illinois Brick Co. v. Illinois, 431 U.S. 720 (United States 1977) (indirect purchasers lack standing under §4 of the Clayton Act)
- Associated General Contractors v. California State Council of Carpenters, 459 U.S. 519 (United States 1983) (factors for antitrust standing analysis)
- United States v. Visa U.S.A., Inc., 344 F.3d 229 (2d Cir. 2003) (describing separate markets for payment cards and card‑network services)
- Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979 (9th Cir. 2000) (applying antitrust‑standing principles under California law and noting broader state standing)
- In re ATM Fee Antitrust Litig., 686 F.3d 741 (9th Cir. 2012) (Ninth Circuit consideration of interchange/ATM fee antitrust issues)