Antitrust Law Daily No reconsideration of dismissal of antitrust claims in Visa, MasterCard interchange fee suit
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Thursday, February 25, 2016

No reconsideration of dismissal of antitrust claims in Visa, MasterCard interchange fee suit

By Linda O’Brien, J.D., LL.M.

In a class action by individual credit cardholders against credit card issuers Visa U.S.A., Inc. and MasterCard International Corporation and their issuing and acquiring banks for conspiring to fix credit card interchange fees, the federal district court in New York City has denied reconsideration of its order dismissing the plaintiffs’ federal antitrust claim (Salveson v. JP Morgan Chase & Co., February 24, 2016, Brodie, M.).

Melvin Salveson, Edward Lawrence, Dianna Lawrence, and Wendy M. Adams are cardholders of Visa and MasterCard payment cards. JP Morgan Chase, Bank of America, Capital One, and HSBC Bank are issuing banks of Visa and MasterCard payment cards.

In December 2013, the cardholders filed suit in the Northern District of California, alleging that Visa and MasterCard and their issuing and acquiring banks conspired to fix credit card interchange fees paid by consumers to the issuing banks. The cardholders asserted claims for violations of Section 1 of the Sherman Act, Section 4 of the Clayton Act, and the California Cartwright Act. In June 2014, the case was transferred to the Eastern District of New York. The court granted the defendant banks’ motion to dismiss all claims in November 2014 and entered judgment in December 2014.

Before the court was (1) the plaintiffs’ motion to vacate the judgment and for reconsideration of the dismissal of their federal claim and (2) the defendants’ motion seeking reconsideration of the court’s refusal to exercise supplemental jurisdiction over the plaintiffs’ California state law claim.

Federal claim. First, the court determined that there was no basis to reconsider the dismissal of the plaintiffs’ federal claim for failure to state a claim because the plaintiffs did not show that the court overlooked critical facts or any relevant controlling decisions. It rejected the plaintiffs’ contention that the payments made by cardholders as part of each credit card transaction represented direct payments of the interchange fees to the defendants. The court noted that the plaintiffs’ argument that cardholders paid interchange fees directly was refuted by their allegations in the complaint about how transactions over the two networks occurred. In addition, the plaintiffs’ conclusory and contradictory pleadings did not plausibly allege that the cardholders were direct purchasers. Thus, the cardholders as indirect purchasers did not have standing to sue under the Clayton Act.

Cartwright Act. In granting the defendants’ motion for reconsideration, the court determined that it overlooked controlling law in declining to exercise supplemental jurisdiction over the plaintiffs’ state law claim. Specifically, the Class Action Fairness Act provided the court with original jurisdiction because the claim was asserted on behalf of a nationwide class against diverse defendants and sought damages of at least $5 million.

However, the plaintiffs failed to assert a direct antitrust injury that conferred standing to pursue a claim under the Cartwright Act, warranting dismissal of the claim. According to the court, the plaintiffs failed to plead that the anticompetitive behavior of the defendants was directed at or caused economic injury to cardholders, since the interchange fee was set and paid between financial institutions and the card network services market and not between issuing banks and cardholders. There was no chain of causation between the plaintiffs’ injury and the alleged restraint in the market. Finally, the plaintiffs’ damages were speculative and they failed to show that their claims—essentially identical to a certified class of merchants in similar litigation—could be litigated without expensive and duplicative efforts, the court concluded.

The case is No. 1:14-cv-03529-MKB-JO.

Attorneys: Jamie Lynne Miller (Alioto Law Firm) for Melvin Salveson. Boris Bershteyn (Skadden Arps Slate Meagher & Flom LLP) for JP Morgan Chase & Co. and J.P. Morgan Bank, NA. Jeffrey K. Rosenberg (Morrison & Foerster) for Bank of America Corp.

Companies: JP Morgan Chase & Co.; J.P. Morgan Bank, N.A.; Bank of America Corporation; Bank of America N.A.; Capital One F.S.B.; Capital One Financial Corporation; Capital One Bank; HSBC Finance Corporation; HSBC Bank USA, N.A.; HSBC North American Holdings, Inc.; HSBC Holdings, PLC

MainStory: TopStory Antitrust NewYorkNews

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