Tuesday, July 5, 2016
The unraveling of the multi-billion-dollar class action lawsuit filed by 12 million retailers against Visa Inc., MasterCard Worldwide and their issuing banks, has created a new kind of cashless experience for retailers, leaving millions of claimants with nothing to show after a decade of litigious activities. In a unanimous decision issued Jun. 29, 2016, a three-judge panel in New York's 2nd U.S. Circuit Court of Appeals declared the 2013 settlement null and void.
The settlement was hammered out to resolve disputes over interchange fees and card brand rules. It was reduced from $7.25 billion to $5.7 billion after several major retailers opted to pursue their own claims against the card brands.
Judges Pierre Leval, Dennis Jacobs and Ralph Winter assailed plaintiffs' attorneys for being overpaid and underincented due to conflicts of interest that prohibited them from effectively representing clients. "Class representatives had interests antagonistic to those of some of the class members they were representing," stated Judge Dennis Jacobs in the opinion. "The fault lines were glaring as to matters of fundamental importance."
Judge Jacobs added that the panel did not intend to impugn the dignity or integrity of class counsel, but wanted to point out structural flaws that doomed proceedings from the start. The judges introduced previous, precedent-setting class actions that failed to appropriately represent the interests of all defendants, due to the magnitude of class populations.
"From day one, this class action settlement has been a train wreck that reflects a growing disconnect between payment service providers and retailers," said a payments industry source familiar with the filing. "Retailers complain; card brands cave in without attempting to defend their value proposition; attorneys have been the only winners so far, but the debacle is far from over."
The court ruling leaves many unanswered questions among retailers and payments industry stakeholders alike. Following are several of the open issues yet to be addressed:
The case is In Re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 2nd U.S. Circuit Court of Appeals, No. 12-4671. More information on the background and legal ramifications of the retail class action suit and subsequent decision to dismiss and start over can be found at: www.paymentcardsettlement.com/Content/Documents/Defendants-Appellees%20Brief%20As-Filed.pdf .
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