Ross v. Am. Express Co.

• Decision Date: 10 April 2014
• Docket Number: 05 Civ. 7116WHP.,Nos. 04 Civ. 5723WHP,s. 04 Civ. 5723WHP
• Citation: 35 F.Supp.3d 407
• Parties: This Document Relates to: Robert ROSS, et al., Plaintiffs, v. AMERICAN EXPRESS COMPANY, et al., Defendants. Robert Ross, et al., Plaintiffs, v. Bank of America, N.A. (USA), et al., Defendants.
• Court: U.S. District Court — Southern District of New York

35 F.Supp.3d 407

This Document Relates to:

Robert ROSS, et al., Plaintiffs

v.AMERICAN EXPRESS COMPANY, et al., Defendants.

Robert Ross, et al., Plaintiffs

v.Bank of America, N.A. (USA), et al., Defendants.

Nos. 04 Civ. 5723WHP

05 Civ. 7116WHP.

United States District Court, S.D. New York.

Signed April 10, 2014.

Merrill G. Davidoff, Esq., David A. Langer, Esq., Charles P. Goodwin, Esq., Berger & Montague, P.C., Philadelphia, PA, Christopher M. Burke, Esq., Scott + Scott LLP, San Diego, CA, for Plaintiffs.

Evan Chesler, Esq., Gary Bornstein, Esq., Rowan Wilson, Esq., Cravath, Swaine & Moore LLP, New York, NY, for Defendants American Express.

Robert Y. Sperling, Esq., Malcom Cox, Esq., Ronald S. Betman, Esq., Winston & Strawn LLP, Chicago, IL, for Defendants Discover.

David Graham, Esq., Theodore R Scarborough, Jr., Esq., Patrick E. Croke, Esq., Sidley Austin LLP, Chicago, IL, for Defendants Citigroup.

OPINION & ORDER

WILLIAM H. PAULEY III, District Judge:

The Plaintiffs' class actions allege that credit card issuers collusively adopted class-action-barring arbitration clauses in violation of the Sherman Act to prevent cardholders from redressing their injuries collectively through the courts. They seek injunctive relief prohibiting such clauses in cardholder agreements. Following the denial of summary judgment, these class actions were consolidated for trial. That trial is the latest milestone in this long-running multidistrict litigation in which all of the Defendants settled foreign currency conversion fee claims for hundreds of millions of dollars in damages and attorneys' fees. Thereafter, many of the Defendant banks also agreed to eliminate class-action-barring arbitration clauses from their cardholder agreements. But Defendants American Express, Citibank, and Discover refused to yield that issue.

Counsel for the parties navigated an ocean of documents and electronic discovery, conducted hundreds of depositions, and litigated numerous motions and appeals. This complex dispute was distilled first in motions to dismiss, then in motions for summary judgment, and finally, because the issues were so nuanced, at trial. Through the diligence and consummate professionalism of counsel, the facts and legal arguments were marshalled to a point of equipoise, but the law does not permit a Solomon-like resolution. While all counsel are commended for their efforts, this Court concludes that the Plaintiffs have not sustained their burden.

BACKGROUND

The first class action, Ross v. American Express, is brought on behalf of “[a]ll VISA and MasterCard general purpose cardholders of cards issued by [Bank of America, MBNA, Citibank, or Chase].” See Ross v. American Express, No. 04 Civ. 5723(WHP), 2005 WL 2364969, at *13 (S.D.N.Y. Sept. 27, 2005).

The second class action, Ross v. Bank of America, is brought on behalf of all persons holding a credit or charge card under a United States cardholder agreement containing an arbitration provision during the class period with the Banks that were defendants in the multidistrict litigation In re Currency Conversion Litigation, No. 01–MD–1409 (WHP)¹ (the “Currency Conversion multidistrict litigation”) (including cards originally issued under the MBNA, Bank One, First USA, and Providian brands). See Ross v. Bank of America, No. 05 Civ. 7116(WHP), Order dated Oct. 6, 2009 (Dock. No. 158) at 11; see also In re Currency Conversion Fee Antitrust Litig., MDL No. 1409, 2009 WL 3444920, at *3 (S.D.N.Y. Oct. 6, 2009).

These class actions were consolidated for a bench trial. This Court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52.

FINDINGS OF FACT

I. The Parties

Robert Ross and Randal Wachsmuth are the Class Representatives in Ross v. American Express. Robert Ross, Richard Mandell, Matthew Grabell, S. Byron Balbach, Jr., Woodrow Wilson Clark, Jr., Andrea Kune, and Paul Impellezzeri are the Class Representatives in Ross v. Bank of America. These eight representatives are holders of Discover, Diners Club, MasterCard, and/or Visa branded general purpose credit cards. Richard Mandell also represents a certified subclass of “all persons holding during the class period a credit card under a United States cardholder agreement with Discover Bank, which cardholders have not previously successfully exercised their right to opt-out of the Arbitration of Disputes provision.”² Ross v. Bank of America, No. 05 Civ. 7116(WHP), Order dated Oct. 6, 2009 (Dock. No. 158) at 11.

The Defendant American Express entities are American Express Company and its subsidiaries American Express Travel Related Services, Inc., American Express Centurion Bank, and American Express Bank, FSB (collectively, “American Express” or “Amex”). The Defendant Citigroup entities are Citigroup and its subsidiaries Citibank (South Dakota), N.A. and Citicorp Diners Club, Inc. (collectively “Citi”). The Defendant Discover entities are DFS Services LLC, Discover Financial Services, and Discover Bank (collectively, “Discover”). Bank of America (which merged with Defendant MBNA in 2006), Capital One, Chase (which merged with Defendant First USA/Bank One in 2004 and acquired Providian in 2008), and Household/HSBC (together with the Defendants, “the Issuing Banks”³ ) entered into court-approved settlement agreements with Plaintiffs in July 2010. Ross v. Bank of America, No. 05 Civ. 7116, Final Judgment and Order of Dismissal, dated July 22, 2010 (Dock. No. 251). The National Arbitration Forum (“NAF”) was also a settling defendant. Ross v. Bank of America, No. 05 Civ. 7116, Final Judgment and Order of Dismissal, dated Apr. 30, 2012 (Dock. No. 383).

II. Consumer Arbitration Agreements and Class Action Arbitration Agreements

In the late nineties, a wide array of firms and industries explored the prospect of using arbitration for consumer dispute resolution. (Trial Transcript (“TT”) at 4122:23–4123:1 (Elzinga).) At that time, such clauses proliferated in the automobile, financial services, brokerage services, cell phone, HMO, and online retailing industries. (TT at 4124:1–16 (Elzinga).) Consumer arbitration and class action waivers were also hot topics of discussion in the legal community. (See, e.g., TT at 2869:7–15 (Lipsett); TT at 3277:24–3278:5 (Heine); TT at 3607:7–10 (Nelson); PX–8661.)

III. American Express Adopts a Consumer Arbitration Clause

Against this backdrop, in the spring of 1998, Timothy Heine (Managing Counsel in Arnex's General Counsel's office) proposed that Amex include a mandatory class-action-barring arbitration provision in its card member agreements. (TT at 3270:9–14, 3276:9–12, 3277:13–16 (Heine).) By mid–1998, Heine assembled a team of Amex in-house counsel to study the arbitration issue. (TT at 3279:25–3281:9, 3286:4–8 (Heine); AX–9054.) In November 1998, Heine and Julia MacDermott (Group Counsel for Amex) pitched the adoption of an arbitration clause to Alfred Kelly (Amex's U.S. Consumer Card Services Group President). (TT at 2621:20–2622:2 (Kelly).) Kelly concurred with their proposal and considered the arbitration provision an “easy call” that would benefit Amex by “lowering litigation costs in the short term and [avoiding] very expensive class action suits in the medium to longer term.” (TT at 2604:6–17 (Kelly).) In late 1998, Kelly approved adoption of the arbitration clause. (TT at 3286:9–21, 3288:18–19, 3306:8–12 (Heine); TT at 2604:6–8, 2611:8–2612:5 (Kelly).) Amex notified cardholders of its arbitration provision in April 1999 and the provision became effective upon the card member's next use of the card, or no later than June 1999. (PX–5028.) Amex continues to maintain a class-action-barring arbitration clause. (See, e.g., PX–8439.)

IV. The May 25, 1999 WilmerHale Meeting of Senior In–House Credit Card Counsel

Some time before May 1999, Chris Lipsett and Ron Greene (two WilmerHale⁴ partners) spoke with Heine about Amex co-sponsoring an “informal meeting of senior in-house credit card counsel representing the various segments of the U.S. credit card business” on “issues of common concern,” including arbitration. (TT at 508:1–9 (Heine); PX–0042.). Lipsett and Greene, feeling “pressure from the firm to enlarge [their] practice” had conceived of the meeting as a marketing strategy at which they “could in substance show [their] stuff” to potential new clients. (TT at 2824:25–2827:24 (Lipsett).) WilmerHale hoped to enhance the meeting's credibility by having some of its sophisticated and diverse credit card firm clients serve as co-sponsors. (TT at 2827:13–24 (Lipsett).) A May 3, 1999 invitation sent to various credit card in-house counsel identified Amex, Citi, First USA, and Sears Roebuck & Co. as meeting co-sponsors, but neither Heine nor Joan Warrington (General Counsel to Citi Cards' North American cards business until June 1999, at which point she became Legislative and Regulatory Counsel to the Consumer Bank for Citigroup) recalled Amex or Citi playing any substantive role in meeting preparations. (PX–0042; TT at 3320:2–3321:19 (Heine); TT at 969:10–25 (Warrington).) The invitation noted, “[w]e recognize, of course, that the companies sending counsel to such a meeting are competitors, and that for legal reasons certain issues will need to remain off-limits” but that in talking to the sponsors, “a consensus quickly emerged that there was a need for a broader exchange of views and experiences.” (PX–0042.)

A May 14, 1999 invitation included a proposed agenda listing “the use of arbitration clauses in card agreements” as a topic. (PX–0672.) Lipsett testified that he included arbitration as an agenda item because it was “going to be important to retail financial services firms” and that he wanted “to show these folks that this was something on which we were at the leading edge.” (TT at 2833:4–22 (Lipsett).) The invitation also indicated that Chase, Discover, Household, MBNA, and Providian were likely attendees. (PX–0672.)

Lipsett and Green convened the May 25, 1999 meeting at WilmerHale's...