The 2nd U.S. Circuit Court
of Appeals in New York said on Thursday that some of the retailers were
inadequately represented in the litigation, which began in 2005. It also
decertified the case as a class action.
A Visa spokeswoman said the
company is reviewing the decision. MasterCard had no immediate comment.
Thursday's decision upends
an accord resolving claims that the card networks overcharged merchants on
interchange fees, or swipe fees, when shoppers used credit or debit cards, and
banned them from nudging customers toward cheaper means of payment.
The settlement had been the
largest all-cash antitrust accord in U.S. history.
One class of merchants that
accepted Visa or MasterCard from January 2004 to November 2012 was to share in
up to $7.25 billion, while a second class accepting the cards from then on was
to get injunctive relief in the form of rule changes.
But many retailers,
including Amazon.com and Target, objected, saying the accord, among other
things, forced members of the second class to give up their right to sue over
various policies and practices.
Writing for the appeals
court, Circuit Judge Dennis Jacobs said the two classes should not have been
represented by the same lawyers, who were awarded $544.8 million of fees.
He said the lawyers suffered
from a "fundamental conflict," having been in position to negotiate
terms that could simultaneously benefit one class and harm the other.
"We have reason to
think that that occurred here," and in the end "sapped class counsel
of the incentive to zealously represent" the class obtaining injunctive
relief, Jacobs said.
U.S. District Judge John
Gleeson in Brooklyn, who has since left the bench, had approved the settlement
in 2013. The case is In Re: Payment Card Interchange Fee and Merchant Discount
Antitrust Litigation, 2nd U.S. Circuit Court of Appeals, No. 12-4671.
On Thursday afternoon,
MasterCard's stock was down nearly 2 percent. Visa's stock was trading down
more than 2 percent.
Credit:Reuters
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