Friday, 31 July 2015 13:28
US merchants challenge antitrust settlement after lawyer revelations
Lawyers representing around 100 US merchants involved in the US interchange anti-trust settlement have formally notified MasterCard Inc and Visa Inc that lawyer collusion has been sufficient for the US$6bn class action deal to be thrown out.
The lawyers served the card networks with legal papers outlining their plans, setting in motion a process to potentially unravel the pact that was approved by a federal judge in late 2013 and which the majority of merchants involved thought was insufficient.
According to court procedures, the papers served to the card networks won’t be filed in court until the networks respond. The documents are expected to be filed under seal at that point, meaning they won’t be available to the public.
The Wall Street Journal is reporting that the challenge stems from communications from lawyer Keila Ravelo, who represented MasterCard in the antitrust case when she was a partner at Willkie Farr & Gallagher. She resigned from the firm in November and shortly afterwards, she and her husband, Melvin Feliz, were charged by the U.S. attorney’s office in New Jersey with conspiracy to commit wire fraud by setting up two dummy companies to fraudulently obtain more than $5 million from Willkie Farr, law firm Hunton & Williams—where Ravelo had also worked—and MasterCard, according to authorities and court filings.
While investigating the alleged theft, Willkie Farr discovered emails and documents that were exchanged between Ravelo and Gary Friedman, who represented merchants through his own law firm Friedman Law Group.
In a conference call to discuss second-quarter earnings, MasterCard Chief Executive Ajay Banga on Wednesday reiterated the company’s position filed in previous court papers that it believes the conduct of the lawyers shouldn’t affect the outcome in the case.
Banga said the conduct exhibited by the lawyers was “disappointing,” but also said they didn’t play principal roles in the case. “We’re pretty confident that the settlement will stand. We’ll see how it goes,” he said.
A spokesman for Visa declined to comment.
The case dates back to 2005 when large retailers, including Kroger, Safeway and Walgreen, began filing price-fixing suits against Visa and MasterCard. The lawsuits challenged Visa’s and MasterCard’s long-standing rules that prohibited merchants from charging customers more when they used a credit card over other forms of payment.
Lawyers representing the merchants are also seeking to upend a pending $79 million similar settlement with American Express . In a court filing made this week, AmEx said that none of the communications between the lawyers “detracts from the conclusion that this settlement represents the best feasible settlement for the merchant class, and is fair and adequate by any measure.”
Roy Simon, a Hofstra University legal ethics professor, in a court filing supporting the objecting retailers, said Friedman crossed a line by passing important information to Ravelo, whose firm should in turn have been disqualified.
"In my three decades studying professional responsibility for lawyers," Simon wrote, "I cannot recall ever seeing such repeated and serious violations of professional duties by an attorney representing a class, or such willing participation in those violations by an attorney for a defendant in a class action."
The cases are In re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, U.S. District Court, Eastern District of New York, No. 05-md-01720; and In re: American Express Anti-Steering Rules Litigation Antitrust Litigation in the same court, No. 11-md-02221.