New brief heats up fight over $7 billion credit card settlement

July 25, 2012

Last Friday, when lawyers from three firms – Robins, Kaplan, Miller & Ciresi, Robbins Geller Rudman & Dowd and Berger & Montague – asked to withdraw as counsel to the National Association of Convenience Stores in the proposed $7 billion antitrust class action settlement with Visa and MasterCard, they said that they only learned of NACS’s opposition to the deal right before the settlement was filed with U.S. District Judge John Gleeson in Brooklyn. That’s not what NACS’s new lawyers at Constantine Cannon said in a brief filed Tuesday night. If there was any doubt that there’s going to be a battle royal over this settlement, the new brief should remove it.

Constantine Cannon asserted that the convenience store trade group – one of 19 name plaintiffs in the litigation over the swipe fees Visa and MasterCard charge merchants – has consistently agitated against the settlement. “Contrary to class counsel’s representation,” the new brief said, “NACS began expressing to class counsel its serious concerns about the proposed settlement long before the settlement was filed. Indeed, NACS expressed its concerns to class counsel repeatedly.” Constantine Cannon said that NACS formally asked to have its name removed from the settlement three days before it was filed, which is two days before the law firm showed up in the docket as NACS’s new counsel.

What’s particularly interesting about the brief is its reference to the rules imposed by the mediation process that helped produce the settlement. NACS said it intends to abide by those confidentiality rules, so Gleeson should permit it to continue as a class representative and order class counsel to continue to provide the trade group with work product. Mediation usually carries strict confidentiality rules, though. You can bet that Robins Kaplan, Robbins Geller and Berger & Montague are scrutinizing the Constantine Cannon filing to see if they can assert that NACS’s disclosure of its long-standing objection to the settlement is a breach of confidentiality. (Craig Wildfang of Robins Kaplan declined to comment; Constantine Cannon was very careful not to mention any specific details of the mediation in discussing NACS’s problems with the proposed settlement.)

Something else to expect: Wal-Mart joining forces with the NACS. On Tuesday, the nation’s biggest retailer put out a statement that it is “disappointed” in the settlement because the deal doesn’t impose structural, market-wide changes that would bar the credit card companies from imposing swipe fees. “As Walmart continues to seek reform that will provide transparency and true competition among financial institutions, we encourage all merchants to put consumers first and reject the settlement,” the statement said. As the Litigation Daily noted in a terrific post Tuesday, Wal-Mart and Constantine Cannon go back a long way. Wal-Mart was the lead plaintiff and Constantine Cannon was lead counsel in an antitrust class action against Visa and MasterCard that ended with a $3 billion settlement in 2003. (That case successfully challenged the credit card companies’ insistence that merchants accept both debit and credit cards.) Wal-Mart hasn’t made a formal appearance in the swipe-fee case, and NACS counsel Jeffrey Shinder of Constantine Cannon declined to comment, but it would be a big surprise if the retail giant didn’t turn to its old friends at the firm.

A coalition of Wal-Mart and NACS would be formidable, given NACS’s involvement in this case and Wal-Mart’s size and experience as an antitrust plaintiff. Supporters of the settlement also have to contend with objections from Target, although Target’s statement opposing the deal was not as strongly worded as Wal-Mart’s.

For class action geeks (I count myself a proud member of this band), the case is procedurally interesting. The class seeks to be certified for both injunctive relief and damages. Class action rules don’t permit opt-outs from injunctive classes, which means that if the settlement is approved, Wal-Mart and others will be bound by its injunctive terms regardless of whether they decide to opt out of the damages class. It’s the opposite of take the money and run: Give up the money and stay tied to the other terms of the settlement.

On Wednesday afternoon, U.S. Magistrate Judge James Orenstein granted class counsel’s motion to withdraw as counsel to the National Association of Convenience Stores. He said Constantine Cannon’s concern about disputes between NACS and its former lawyers is premature, and he’ll decide those problems when they arise.

Nevertheless, I have a feeling we’re going to learn a lot more about how this settlement came together before this fight is over.


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