In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation
Docket Nos. 12‐4671‐cv(L); 12‐4708(CON); 12‐4765(CON); 13‐4719(CON); 13‐4750(CON); 13‐4751(CON); 13‐4752(CON); 14‐32(CON); 14‐117(CON); 14‐119(CON); 14‐133(CON); 14‐157(CON); 14‐159(CON); 14‐192(CON); 14‐197(CON); 14‐219(CON); 14‐241(CON); 14‐250(CON); 14‐266(CON); 14‐303(CON); 14‐331(CON); 14‐349(CON); 14‐404(CON); 14‐422(CON); 14‐443(CON); 14‐480(CON); 14‐497(CON); 14‐530(CON); 14‐567(CON); 14‐584(CON); 14‐606(CON); 14‐663(CON); 14‐837(CON)
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
Decided: June 30, 2016
August Term, 2015 (Argued: September 28, 2015)
This antitrust class action was brought on behalf of approximately 12 million merchants against Visa and MasterCard, which are the two largest credit card issuing networks in the United States, as well as against various issuing and acquiring banks, alleging a conspiracy in violation of
Vacated, reversed, and remanded.
Judge Leval concurs in a separate opinion.
THOMAS C. GOLDSTEIN (Eric F. Citron, on the brief), Goldstein & Russell P.C., Washington, DC; Stephen R. Neuwirth, Sanford I. Weisburst, Steig D. Olson, and Cleland B. Welton II, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY; Jeffrey I. Shinder, Gary J. Malone, and A. Owen Glist, Constantine Cannon LLP, New York, NY; Michael J. Canter, Robert N. Webner, and Kenneth J. Rubin, Vorys, Sater, Seymour and Pease LLP, Columbus
PHILIP C. KOROLOGOS, Boies, Schiller & Flexner LLP, New York, NY, for Objectors‐Appellants American Express Company, et al.
JENNIFER M. SELENDY (William H. Pratt, on the brief), Kirkland & Ellis LLP, New York, NY, for Objectors‐Appellants Discover Bank, et al.
JASON A. YURASEK (Anahit Samarjian, on the brief), Perkins Coie LLP, San Francisco, CA, for Objectors‐Appellants First Data Corporation, et al.
Andrew G. Celli, Jr. and Debra L. Greenberger, Emery Celli Brinckerhoff & Abady LLP, New York, NY, for Objectors‐Appellants (Merchant Trade Groups).
Jerrold S. Parker and Jay L.T. Breakstone, Parker Waichman, LLP, Port Washington, NY; Thomas P. Thrash and Marcus N. Bozeman, Thrash Law Firm, P.A., Little Rock, AR; Phillip Duncan and Richard Quintus, Duncan Firm, P.A., Little Rock, AR, for Appellant Retailers and Merchants Objectors.
Anthony F. Shelley, Adam P. Feinberg, Laura G. Ferguson, Michael N. Khalil, and Katherine E. Pappas, Miller & Chevalier Chartered, Washington, DC, for Appellants Blue Cross and Blue Shield Entities and Wellpoint Entities.
Steve A. Miller, Denver, CO, for Appellant The Iron Barley Restaurant LLC.
John J. Pentz, Sudbury, MA, for Appellants Unlimited Vacations and Cruises, Inc., et al.
N. Albert Bacharach, Jr., Gainesville, FL, for Appellant Optical Etc. LLC.
Christopher A. Bandas, Corpus Christi, TX, for Objectors‐Appellants 1001 Property Solutions, LLC, et al.
PAUL D. CLEMENT (Jeffrey M. Harris and Candice C. Wong, on the brief), Bancroft PLLC, Washington, DC; K. Craig, Wildfang, Thomas J. Undlin, Ryan W. Marth, and Bernard Persky, Robins Kaplan, Miller & Ciresi L.L.P., Minneapolis, MN; H. Laddie Montague, Merrill G. Davidoff, and Michael J. Kane, Berger & Montague, P.C., Philadelphia, PA; Bonny E. Sweeney,
CARTER G. PHILIPS (David F. Graham, Robert N. Hochman, Benjamin R. Nagin, Eamon P. Joyce, and Mark D. Taticchi, on the brief), Sidley Austin LLP, Washington, DC; Robert C. Mason, Arnold & Porter LLP, New York, NY; Robert J. Vizas, Arnold & Porter LLP, San Francisco, CA; Mark R. Merley and Matthew A. Eisenstein, Arnold & Porter LLP, Washington, DC; Richard J. Holwell, Michael S. Shuster, and Demian Ordway, Holwell Shuster & Goldberg LLP, New York, NY; Matthew Freimuth and Wesley R. Powell, Willkie Farr & Gallagher LLP, New York, NY; Kenneth A. Gallo, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Washington, DC; Mark P. Ladner and Michael B. Miller, Morrison & Foerster LLP, New York, NY; Andrew J. Frackman and Abby F. Rudzin, O=Melveny & Myers LLP; James P. Tallon, Shearman & Sterling LLP, New York, NY; Richard L. Creighton and Drew M. Hicks, Keating Muething & Klekamp PLL, Cincinnati, OH; John P. Passarelli and James M. Sulentic, Kutak Rock LLP, Omaha, NE; Peter E. Greene, Boris Bershteyn, and Peter S. Julian, Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY; Jonathan S. Massey and Leonard A. Gail, Massey & Gail,
OPINION
DENNIS JACOBS, Circuit Judge:
This antitrust class action was brought on behalf of approximately 12 million merchants against Visa U.S.A. Inc. (“Visa”) and MasterCard International Incorporated (“MasterCard”), which are the two largest credit card issuing networks in the United States, as well as against various issuing and acquiring banks (collectively with Visa and MasterCard, the “defendants”), alleging a conspiracy in violation of
BACKGROUND
Detailed information about how the credit card industry operates is set out in the district court opinion approving the settlement in this case, In re Payment Card Interchange Fee and Merchant Discount Antitrust Litig. (“Payment Card I”), 986 F. Supp. 2d 207, 214‐15 (E.D.N.Y. 2013), and in our previous opinions dealing with past antitrust lawsuits against Visa and MasterCard, Wal‐Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 101‐02 (2d Cir. 2005); United States v. Visa U.S.A., Inc., 344 F.3d 229, 234‐37 (2d Cir. 2003); In re Visa Check/MasterMoney Antitrust Litig. (“Visa Check”), 280 F.3d 124, 129‐31 (2d Cir. 2001). This section of the opinion lays out only the facts and procedural history needed to explain our analysis and result.
In a given transaction, the interchange fee that the acquiring bank pays (and is in turn paid by the merchant) varies depending on the credit card network and the type of credit card. Thus, the American Express credit‐card network generally charges a higher interchange fee than the Visa or MasterCard networks. And Visa and MasterCard have different product levels within their credit card portfolios, such as cards that give consumers generous rewards, and typically charge a higher interchange fee than cards that offer few rewards or none. The difference in interchange fee between American Express and Visa or MasterCard
Plaintiffs are all merchants who accept Visa‐ and MasterCard‐branded credit cards and are therefore bound by the issuers’ network rules. Plaintiffs challenge as anti‐competitive several of the following network rules (which are effectively identical as between Visa and MasterCard). The “default interchange” fee applies to every transaction on the network (unless the merchant and issuing bank have entered into a separate agreement). The “honor‐all‐cards” rule requires merchants to accept all Visa or MasterCard credit cards if they accept any of them, regardless of the differences in interchange fees. Multiple rules prohibit merchants from influencing customers to use one type of payment over another, such as cash rather than credit, or a credit card with a lower interchange fee. These “anti‐steering” rules include the “no‐surcharge” and “no‐discount” rules, which prohibit merchants from charging different prices at the point of sale depending on the means of payment.
Plaintiffs allege that these Visa and MasterCard network rules, working in tandem, allow the issuing banks to impose an artificially inflated interchange fee that merchants have little choice but to accept. The argument is that the
The first consolidated complaint in this action was filed in 2006. Developments since then have altered the credit card industry in important ways. Both Visa and MasterCard conducted initial public offerings that converted each from a consortium of competitor banks into an independent, publicly traded company. The “Durbin Amendment” to the
Notwithstanding these pro‐merchant industry developments, the plaintiffs pressed on. Discovery included more than 400 depositions, 17 expert reports, 32 days of expert deposition testimony, and the production of over 80 million pages of documents. The parties fully briefed a motion for class certification, a motion to dismiss supplemental complaints, and cross‐motions for summary judgment. Beginning in 2008, the parties participated in concurrent settlement negotiations assisted by well‐respected mediators. At the end of 2011, the district judge and the magistrate judge participated in the parties’ discussions with the mediators. In October 2012, after several more marathon negotiations with the mediators (including one more with the district court and magistrate judges), the parties executed the Settlement Agreement. The district court granted preliminary approval of the proposed settlement on November 27, 2012, and final approval on December 13, 2013. Payment Card I, 986 F. Supp. 2d at 213, 217.
The Settlement Agreement divides the plaintiffs into two classes: one – the
The most consequential relief afforded the (b)(2) class was the ability to surcharge Visa‐ and MasterCard‐branded credit cards at both the brand and product levels. That is, a merchant could increase the price of a good at the point of sale if a consumer presents (for example) a Visa card instead of cash, or a Visa rewards card instead of a Visa card that yields no rewards. The incremental value and utility of this relief is limited, however, because many states, including New York, California, and Texas, prohibit surcharging as a matter of state law. See, e.g., Expressions Hair Design v. Schneiderman, 808 F.3d 118, 127 (2d Cir. 2015) (upholding the New York ban on credit‐card surcharges); Rowell v. Pettijohn, 816 F.3d 73, 80 (5th Cir. 2016) (upholding the Texas ban on credit‐card surcharges). But see Dana’s R.R. Supply v. Attorney Gen., Florida, 807 F.3d 1235, 1249 (11th Cir. 2015) (striking down Florida ban on credit‐card surcharges). Moreover, under the most‐favored‐nation clause included in the Settlement Agreement, merchants that accept American Express cannot avail themselves of the surcharging relief because American Express effectively prohibits surcharging, and the Settlement Agreement permits surcharging for Visa or MasterCard only if the merchant also surcharges for use of cards issued by competitors such as American Express.
Visa and MasterCard also agreed to modify their network rules to reflect that they will: negotiate interchange fees with groups of merchants in good faith, lock‐in the benefits of the Durbin Amendment and Department of Justice consent decree, and permit a merchant that operates multiple businesses under different names or banners to accept Visa or MasterCard at fewer than all of its businesses. The Settlement Agreement provides that all of the injunctive relief will terminate on July 20, 2021.
In return, the plaintiffs are bound by a release that waives any claims they would have against the defendants for: all of the conduct challenged in the operative complaint, all other policies and practices (concerning credit card transactions) that were in place as of November 27, 2012, and any substantially
If, after July 20, 2021, the Visa or MasterCard networks rules are changed such that they are no longer substantially similar to their form as modified by the Settlement Agreement, then merchants are freed from the release as to claims arising out of that new network rule – but only as to such claims. For example, if Visa or MasterCard revert to their pre‐Settlement Agreement rules by forbidding merchants from surcharging, then the release will not bar future merchants included in the (b)(2) class from bringing antitrust claims arising out of the
Appellants, including those that opted out from the (b)(3) class and objected to the (b)(2) class, argue that the (b)(2) class was improperly certified and that the settlement was inadequate and unreasonable.
DISCUSSION
Certification of a class is reviewed for abuse of discretion, i.e., whether the decision (i) rests on a legal error or clearly erroneous factual finding, or (ii) falls outside the range of permissible decisions. In re Literary Works in Elec. Databases Copyright Litig. (“Literary Works”), 654 F.3d 242, 249 (2d Cir. 2011). The district court’s factual findings are reviewed for clear error; its conclusions of law are reviewed de novo. Charron v. Wiener, 731 F.3d 241, 247 (2d Cir. 2013).
We conclude that class members of the (b)(2) class were inadequately represented in violation of both
I
Under
“Adequacy must be determined independently of the general fairness review of the settlement; the fact that the settlement may have overall benefits for all class members is not the ‘focus’ in ‘the determination whether proposed classes are sufficiently cohesive to warrant adjudication.’” Denney, 443 F.3d at 268 (quoting Ortiz, 527 U.S. at 858). The focus of the Rule 23(a) inquiry remains on “inequity and potential inequity at the precertification stage.” Ortiz, 527 U.S. at 858. So when (as here) the district court certifies the class at the same time it approves a settlement, the requirements of Rule 23(a) “demand undiluted, even heightened, attention.” Amchem, 521 U.S. at 620.
A
The Supreme Court wrote the ground rules for adequate representation in the settlement‐only class context in Amchem and Ortiz, two asbestos cases. Our recent decision in Literary Works contributed a gloss on the subject.
The single‐class proposed settlement in Amchem potentially encompassed millions of plaintiffs who had been exposed to asbestos, without distinction
Two years later, the Supreme Court again considered a settlement‐only class action that joined present and future claimants in a single class, and emphasized: “it is obvious after Amchem that a class divided between holders of present and future claims . . . requires division into homogenous subclasses under
Literary Works contained the same “ingredients of conflict identified in Amchem and Ortiz.” Literary Works, 654 F.3d at 251. The settlement divided class claims into three categories, capped defendants’ overall liability at $18 million, and used a formula for splitting this amount. The settlement was less generous to the third category, and required the holders of those claims to exclusively bear the risk of over‐subscription, i.e., their recovery alone would be reduced to bring the total payout down to $18 million. The class representatives of the single class included individuals with claims in each category; nevertheless, we held that (at a minimum) class members with claims only in the third category
Since some named representatives held claims across all three categories, the class did not encompass mutually exclusive groups as in Amchem; still, each impermissibly “served generally as representative for the whole, not for a separate constituency.” Id. at 251 (quoting Amchem, 521 U.S. at 627). Class representatives with claims in all three categories naturally would want to maximize their overall recovery regardless of allotment across categories, whereas class members with claims only in the third category would want to maximize the compensation for that category in particular. A great risk thus arose that class representatives would sell out the third category of claims for terms that would tilt toward the others. As it transpired, the resulting settlement awarded the third category less, and taxed that lesser recovery with all the risk that claim would exceed the liability cap.
We did not conclude that the third category‘s “inferior recovery [w]as determinative evidence of inadequate representation.” Id. at 253. The claims in third category were objectively the weakest. “The problem, of course, [wa]s that
B
Like the settlement-only classes in Amchem, Ortiz, and Literary Works, the unitary representation of these plaintiffs was inadequate. Class representatives had interests antagonistic to those of some of the class members they were representing. The fault lines were glaring as to matters of fundamental
The conflict is clear between merchants of the (b)(3) class, which are pursuing solely monetary relief, and merchants in the (b)(2) class, defined as those seeking only injunctive relief. The former would want to maximize cash compensation for past harm, and the latter would want to maximize restraints on network rules to prevent harm in the future. Amchem tells us that such divergent interests require separate counsel when it impacts the “essential allocation decisions” of plaintiffs’ compensation and defendants’ liability. Amchem, 521 U.S. at 627. The Settlement Agreement does manifest tension on an “essential allocation decision“: merchants in the (b)(3) class would share in up to $7.25 billion of damages, while merchants in the (b)(2) class would enjoy the benefit of some temporary changes to the defendants’ network rules. The same counsel represented both the (b)(3) and the (b)(2) classes. The class counsel and class representatives who negotiated and entered into the Settlement Agreement were in the position to trade diminution of (b)(2) relief for increase of (b)(3) relief. However, “it is obvious after Amchem that a class divided between holders of
Moreover, many members of the (b)(3) class have little to no interest in the efficacy of the injunctive relief because they no longer operate, or no longer accept Visa or MasterCard, or have declining credit card sales. By the same token, many members of the (b)(2) class have little to no interest in the size of the damages award because they did not operate or accept Visa or MasterCard before November 28, 2012, or have growing credit card sales. Unitary representation of separate classes that claim distinct, competing, and conflicting relief create unacceptable incentives for counsel to trade benefits to one class for benefits to the other in order somehow to reach a settlement.
Class counsel stood to gain enormously if they got the deal done. The (up to) $7.25 billion in relief for the (b)(3) class was the “largest-ever cash settlement in an antitrust class action.” Payment Card I, 986 F. Supp. 2d at 229. For their services, the district court granted class counsel $544.8 million in fees. In re Payment Card Interchange Fee and Merchant Discount Antitrust Litig. (“Payment Card II“), 991 F. Supp. 2d 437, 440 (E.D.N.Y. 2014). The district court calculated these fees based on a graduated percentage cut of the (b)(3) class‘s
The trouble with unitary representation here is exacerbated because the members of the worse-off (b)(2) class could not opt out. The (b)(2) merchants are stuck with this deal and this representation. We do not decide whether providing these class members with opt out rights would be a sufficient “structural assurance of fair and adequate representation,” Amchem, 521 U.S. at 627, to overcome the lack of separate class counsel and representative. Cf. Visa Check, 280 F.3d at 147.
One aspect of the Settlement Agreement that emphatically cannot remedy the inadequate representation is the assistance of judges and mediators in the bargaining process. True, “a court-appointed mediator‘s involvement in pre-certification settlement negotiations helps to ensure that the proceedings were free of collusion and undue pressure.” D‘Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001). But even “an intense, protected, adversarial mediation, involving multiple parties,” including “highly respected and capable” mediators and associational plaintiffs, does not “compensate for the absence of independent representation.” Literary Works, 654 F.3d at 252-53. The mission of mediators is to bring together the parties and interests that come to them. It is not their role to advance the strongest arguments in favor of each subset of class members entitled to separate representation, or to voice the interests of a group for which no one else is speaking.
Nor is the problem cured by the partial overlap of merchants who get cash as members of the (b)(3) class and become members of the (b)(2) class as they continue to accept Visa or MasterCard. The force of Amchem and Ortiz does not
Moreover, whatever overlap presently exists is partial and shrinking with time. As of the September 12, 2013 fairness hearing, class counsel reported that the class was composed of about 12 million merchants. That figure of course does not include merchants that have come into being since then, or those that will come into being in the future, all of whom will be members of only the (b)(2) class. The membership of the (b)(3) class, on the other hand, is fixed and finite.
None of this is to say that (b)(3) and (b)(2) classes cannot be combined in a single case, or that (b)(3) and (b)(2) classes necessarily and always require separate representation. Problems arise when the (b)(2) and (b)(3) classes do not have independent counsel, seek distinct relief, have non-overlapping membership, and (importantly) are certified as settlement-only. The requirements of
Of course we have blessed multi-class settlements that were the product of unitary representation, but those were entered into after class certification. For example, we approved a settlement negotiated by unitary counsel in Charron; but before doing so, we “note[d] that unlike the situation in Amchem, Ortiz, and Literary Works, the settlement here was not being approved at the same time that the class was being certified.” Charron, 731 F.3d at 250. Accordingly, we were more skeptical of allegations that subclass conflicts required separate representation. Id. True, Charron observed “[a]ll class settlements value some claims more highly than others, based on their perceived merits, and strike compromises based on probabilistic assessments,” id., but that observation has less force in the settlement-only context. Charron also spoke of counsel trading one claim for another (which may be permissible); in the settlement-only class action, we are concerned that counsel will trade the interests of one class for another (which is not).
We have reason to think that that occurred here. Structural defects in this class action created a fundamental conflict between the (b)(3) and (b)(2) classes
II
This opinion already concludes that class plaintiffs were inadequately represented. Accordingly, the settlement and release that resulted from this representation are nullities. See Stephenson v. Dow Chem. Co., 273 F.3d 249, 260 (2d Cir. 2001), aff‘d in part by an equally divided court and vacated in part, 539 U.S. 111 (2003) (“Res judicata generally applies to bind absent class members except where to do so would violate due process” and “[d]ue process requires adequate representation at all times throughout the litigation.“). This outcome is confirmed by the substance of the deal that was struck. Like the Supreme Court in Amchem, we “examine a settlement‘s substance for evidence of prejudice to the interests of a subset of plaintiffs” when “assessing the adequacy of representation.” Literary Works, 654 F.3d at 252. Here, the bargain that was
“It is familiar doctrine of the federal courts that members of a class not present as parties to the litigation may be bound by the judgment where they are in fact adequately represented by parties who are present” consistent with “the requirements of due process and full faith and credit.” Hansberry, 311 U.S. at 42-43 (emphasis added); see also Stephenson, 273 F.3d at 261 (“Part of the due process inquiry (and part of the
A
As discussed above, Literary Works concluded that inadequate representation was demonstrated by the relief afforded to a subset of the class.
Literary Works held that class members with claims in one of the categories were inadequately represented not only because they did not receive separate representation, but also because they solely bore the risk that the total amount claimed would exceed a preset liability cap. We observed that this feature of the settlement could not be justified by the relative weakness of those claims because that fact was already accounted for. Literary Works, 654 F.3d at 253. We could discern no reason for subjecting the single category of claims to the whole risk of over-subscription; nor could the settlement‘s proponents. Id. at 254. When “one category [of class members are] targeted for [worse treatment] without credible justification” it “strongly suggests a lack of adequate representation for those class members who hold only claims in this category.” Id.
In Stephenson, we considered a collateral attack on a class action that had established a settlement fund for individuals injured by exposure to Agent Orange. The underlying litigation provided compensation only for those who
A similar challenge was raised to the settlement release in Wal-Mart Stores, which foreclosed all claims arising from the same factual predicate as that alleged in the complaint. Objectors argued that they were inadequately represented because class representatives did not pursue certain claims as vigorously as others. We rejected this basis for objection because “adequate representation of a particular claim is determined by the alignment of interests of class members, not
B
Merchants in the (b)(2) class that accept American Express or operate in states that prohibit surcharging gain no appreciable benefit from the settlement, and merchants that begin business after July 20, 2021 gain no benefit at all. In exchange, class counsel forced these merchants to release virtually any claims they would ever have against the defendants. Those class members that
No one disputes that the most valuable relief the Settlement Agreement secures for the (b)(2) class is the ability to surcharge at the point of sale. To the extent that the injunctive relief has any meaningful value, it comes from surcharging, not from the buying-group provision, or the all-outlets provision, or the locking-in of the Durbin Amendment and DOJ consent decree. For this reason, it is imperative that the (b)(2) class in fact benefit from the right to surcharge. But that relief is less valuable for any merchant that operates in New York, California, or Texas (among other states that ban surcharging), or accepts American Express (whose network rules prohibit surcharging and include a most-favored nation clause). Merchants in New York and merchants that accept American Express can get no advantage from the principal relief their counsel bargained for them.
It may be argued that the claims of the (b)(2) class are weak and can command no benefit in settlement. However, that argument would seem to be foreclosed because other members of the same class with the same claims – those that do not take American Express and operate in states that permit surcharging –
This is not a case of some plaintiffs forgoing settlement relief. A significant proportion of merchants in the (b)(2) class are either legally or commercially unable to obtain incremental benefit from the primary relief negotiated for them by their counsel, and class counsel knew at the time the Settlement Agreement was entered into that this relief was virtually worthless to vast numbers of class members. Alternative forms of relief might have conferred a real and palpable benefit, such as remedies that affected the default interchange fee or honor-all-cards rule. This is not a matter of certain merchants (e.g., those based in New York and those that accept American Express) arguing that class counsel did not bargain for their preferred form of relief, did not press certain claims more forcefully, or did not seek certain changes to the network rule books more zealously. This is a matter of class counsel trading the claims of many merchants for relief they cannot use: they actually received nothing.
Merchants that cannot surcharge, and those that open their doors after July 20, 2021, are also bound to an exceptionally broad release. The Settlement Agreement releases virtually any claim that (b)(2) class members would have had against the defendants for any of the defendants’ thousands of network rules. And unlike the relief, which expires on July 20, 2021, the release operates
That is because the only claims that merchants post-July 20, 2021 may have are ones relating to those network rules that are explicitly changed by the injunctive relief in the Settlement Agreement. Those claims will become actionable only if the defendants elect to revert to their pre-Settlement Agreement rules. Of course, it remains to be seen how much the mandated rules will cost the defendants or benefit the merchants, but either way, the defendants win. If the defendants see that permitting surcharging had little effect on their business, they can decide to maintain the rules changes provided for in the injunctive relief so that only merchants that do not accept American Express and do not operate in
This bargain is particularly unreasonable for merchants that begin accepting Visa or MasterCard after July 20, 2021. They will be deemed to have released all of their claims pertaining to a whole book of rules, including (perhaps most importantly) the honor-all-cards and default interchange rules, and in return have the chance that the defendants will permit surcharging. In substance and effect, merchants operating after July 20, 2021 give up claims of potential value and receive nothing that they would not otherwise have gotten. Since there was no independent representation vigorously asserting these merchants’ interests, we have no way to ascertain the value of the claims forgone. See Literary Works, 654 F.3d at 253.
In sum, this release has much in common with the releases in Stephenson, Amchem, and Ortiz. Like those, this release applies to future claims and
Merchants that cannot surcharge (by reason of state law or rules of American Express) and those that begin operating after July 20, 2021 suffer an unreasonable tradeoff between relief and release that demonstrates their representation did not comply with due process. We of course acknowledge that
CONCLUSION
For the foregoing reasons, we vacate the district court‘s certification of the class, reverse approval of the settlement, and remand for further proceedings not inconsistent with this opinion.
I concur in Judge Jacobs‘s thoughtful opinion. I write separately, however, to note another, perhaps deeper, problem with the settlement. Under its terms, one class of Plaintiffs accepts substantial payments from the Defendants, in return for which they compel Plaintiffs in another class, who receive no part of the Defendants’ payments, to give up forever their potentially valid claims, without ever having an opportunity to reject the settlement by opting out of the class. Opinions of the Supreme Court directly hold that this arrangement violates the due process rights of those compelled to surrender their claims for money damages.
Representatives brought this class action on behalf of approximately 12 million merchants against Visa and MasterCard, alleging that a number of the Defendants’ practices violate the antitrust laws, and seeking both damages for past injury and an injunction barring future violations. Eventually, the Defendants reached a proposed settlement with the Representatives. The settlement provides that the Defendants would pay approximately $ 7.25 billion to compensate merchants for damages suffered up to November 28, 2012 (when the district court granted preliminary approval of the settlement). The settlement
What is particularly troublesome is that the broad release of the Defendants binds not only members of the Plaintiff class who receive compensation as part of the deal, but also binds in perpetuity, without opportunity to reject the settlement, all merchants who in the future will accept Visa and MasterCard, including those not yet in existence, who will never receive any part of the
In Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), the Supreme Court reasoned that a claim for money damages—a “chose in action“— is “a constitutionally recognized property interest possessed by each of the plaintiffs” whose claims are represented in a class action. Id. at 807. In order for a court “to bind an absent plaintiff concerning a claim for money damages or similar relief at law, it must provide minimal procedural due process protection. . . . [D]ue process requires at a minimum that an absent plaintiff be provided with an
Following Shutts, the Court unanimously held in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2557 (2011), that claims for monetary relief cannot be certified under