Can ex-Willkie partner’s emails undo $5.7 bln MasterCard settlement?

March 19, 2015

Remember the strange, sad tale of Keila Ravelo, once a Willkie Farr & Gallagher partner representing MasterCard in retailers’ gigantic swipe-fee class action and now a federal criminal defendant accused of defrauding Willkie, MasterCard and her former firm, Hunton & Williams? When I first wrote about Ravelo last month, Willkie had just informed lawyers involved in the $5.7 billion swipe-fee settlement with MasterCard and Visa that documents from Ravelo’s files at the firm needed to be disclosed to the court overseeing the case.

As new details have emerged – and as Willkie, Hunton and lead class counsel in a parallel antitrust case against American Express finalize logs of documents to be distributed to parties in the credit card litigation – critics of the controversial MasterCard deal are hoping the Ravelo documents will help them show the settlement was tainted. The Ravelo materials are also going to be scrutinized in the American Express case, which the class agreed to settle in 2013 for injunctive relief only, after the U.S. Supreme Court ruled that merchants couldn’t sue for damages as a group. That settlement has received preliminary court approval but the class motion for final approval, filed back in April 2014, hasn’t yet been decided.

The potentially problematic Ravelo documents are communications between her and antitrust plaintiffs’ lawyer Gary Friedman of the Friedman Law Group – who was involved in the MasterCard/Visa case and was lead counsel in the Amex merchants’ class action. Friedman, Ravelo and their families have been good friends for more than 20 years, going back to when Friedman and Ravelo were both associates at Sidley & Austin and worked together on a pro bono criminal case. Ravelo subsequently married the pro bono client, Melvin Feliz, who is a co-defendant in the New Jersey federal court case against her and pleaded guilty last month to a separate charge of conspiring to smuggle cocaine into New Jersey.

Friedman and Ravelo emailed one another regularly. Many of their communications were apparently the mundane correspondence of friendship, based on oblique public descriptions of the documents. A few seem to have involved legal advice Friedman gave to Ravelo when she left Hunton & Williams.

But Ravelo’s files also show that she possessed confidential documents from Friedman’s Amex case, according to the transcript of a Feb. 26 hearing before U.S. Magistrate Judge James Orenstein, who is overseeing proceedings over the Ravelo documents in the MasterCard case. Friedman gave at least some of the documents to Ravelo, according to statements by one of his lawyers, Samuel Issacharoff of New York University, at the hearing before Orenstein. Issacharoff said it’s not yet clear how Ravelo obtained other Amex documents. In a followup letter to the judge, Issacharoff and co-counsel Brune & Richard said that Friedman had no knowledge of Ravelo’s alleged fraud against MasterCard and her former law firms.

Based on Issacharoff’s public statements, it seems that Friedman’s explanation for sharing confidential Amex documents with Ravelo will be that he and Ravelo were conducting “back channel” talks to test each side’s negotiating position in the credit card antitrust cases. Issacharoff said at the hearing before Orenstein that such talks are common in big class actions.

Neither Friedman nor Ravelo were at the heart of the negotiations that led to the $5.7 billion class settlement with MasterCard and Visa. Robins Kaplan and Robbins Geller Rudman & Dowd were lead class counsel. MasterCard’s lead attorney was Kenneth Gallo of Paul Weiss Rifkind Wharton & Garrison. Nevertheless, Ravelo also represented MasterCard and Friedman advised lead class counsel on structuring injunctions against Visa and MasterCard. Friedman’s lodestar billings in the MasterCard case were $9 million.

Hundreds of retailers, including giants such as Wal-Mart and even some of the original name plaintiffs in the class action, opted out of the $5.7 billion settlement with Visa and MasterCard, choosing instead to bring their own suits for damages for the credit card companies’ swipe fees. The injunctive part of the settlement, however, binds all merchants in the class. Various class members have challenged approval of the settlement at the 2nd U.S. Circuit Court of Appeals.

They are hoping the soon-to-be-circulated logs of communications between Friedman and Ravelo provide them with ammunition to undermine the settlement. At the hearing last month before Judge Orenstein, Steig Olson of Quinn Emanuel Urquhart & Sullivan, who represents merchants that opted out of the damages piece of the MasterCard settlement but are appealing the deal’s injunctive provisions, said class members want to know if the documents will reveal that Friedman’s ability to represent class members was compromised. If the documents show, for instance, that Ravelo knew American Express’ negotiating position on whether merchants could charge consumers extra for using a particular type of card, opponents of the MasterCard settlement will likely argue that her knowledge affected MasterCard’s willingness to settle.

It’s a very long stretch, of course, from inference and allegations to establishing that a gigantic settlement negotiated over the course of two years under the close supervision of a mediator, a U.S. district judge and a U.S. magistrate was the product of fraud or collusion. Class counsel Craig Wildfang of Robins Kaplan told me that any suggestion of fraud or collusion in the MasterCard and Visa settlement would be flat-out “ludicrous.” At the hearing last month, Judge Orenstein was notably skeptical that communications between Ravelo and Friedman could undermine the entire deal.

Proponents of the American Express settlement will surely also argue that any breach of the protective order by Friedman did not affect the proposed deal that’s up for final approval before U.S. District Judge Nicholas Garaufis of Brooklyn. As MasterCard’s lawyer, Ravelo wasn’t involved in the Amex litigation. And Friedman isn’t the only lawyer for the class that sued Amex, which is also represented by Squire Patton Boggs and Reinhardt Wendorf & Blanchfield. (Amex is represented by Boies Schiller & Flexner.) Friedman’s lawyer, Issacharoff, said at the hearing before Judge Orenstein that it will be up to Judge Garaufis to deal with the consequences of Friedman’s disclosures to Ravelo.

There’s going to be much more to come in this unfortunate – but irresistibly intriguing – saga after the parties have a chance to see formal logs of documents from Willkie, Hunton and Friedman. Even Judge Orenstein, who seemed dubious that the email exchanges would ultimately impact approval of the MasterCard and Visa settlement, said as much at the hearing last month.

“There’s a legitimate area of concern here where the court has to sign off on the independence of and on the arm’s length nature of the negotiations that produced the settlement that’s under review,” Orenstein said. “I think there is a great deal more to the story of how that settlement (was) produced.”

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