2nd Circuit tosses $7.25B swipe-fee settlement; concurring judge calls it a 'confiscation'
A federal appeals court has overturned a $7.25 billion antitrust settlement because some retailers got a bad deal in a suit challenging swipe fees charged by Visa and MasterCard.
The New York-based 2nd U.S. Court of Appeals tossed the deal in a Thursday opinion (PDF) after so many retailers opted out of the settlement that its value shrank to about $5.7 billion, Reuters, Bloomberg News and the Wall Street Journal (sub. req.) report.
Lawyers representing plaintiffs would have received legal fees of $544.8 million in the settlement.
The deal allowed merchants who had already accepted credit cards to share in the recovery and opt out of the settlement, but didn’t give the opt-out option to retailers who would accept the cards “onwards forever,” including retailers that didn’t yet exist.
The appeals court concluded that the second group of retailers was inadequately represented in violation of the due-process clause and federal rules governing class actions.
The appeals court said retailers in both groups were represented by the same class counsel who “stood to gain enormously if they got the deal done.” The lawyers got more money for each dollar secured for the first group.
“We expressly do not impugn the motives or acts of class counsel,” the court said in an opinion by Circuit Judge Dennis Jacobs. But structural defects caused by combining the two groups into one class “sapped class counsel of the incentive to zealously represent” the second group, Jacobs said.
Circuit Judge Pierre Leval wrote a concurring opinion. “This is not a settlement; it is a confiscation,” he wrote.
Hat tip to How Appealing.
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