Brennan v. Concord EFS, Inc. (In re ATM Fee Antitrust Litig.)

• Decision Date: 12 July 2012
• Docket Number: No. 10–17354.,10–17354.
• Citation: 2012 Daily Journal D.A.R. 9572,2012 Trade Cases P 77969,12 Cal. Daily Op. Serv. 7847,686 F.3d 741
• Parties: In re ATM FEE ANTITRUST LITIGATION. Pamela Brennan; Terry Crayton; Darla Martinez, Plaintiffs–Appellants, v. Concord EFS, Inc.; Bank One Corporation; Bank One, N.A.; J.P. Morgan Chase & Co.; Citibank (West), F.S.B.DE; Suntrust Banks, Inc.; Wachovia Corporation; Wells Fargo Bank, N.A.; Servus Financial Corp.; Citibank, N.A.; First Data Corporation; Bank of America, N.A., Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

686 F.3d 741

2012-1 Trade Cases P 77,969

12 Cal. Daily Op. Serv. 7847

2012 Daily Journal D.A.R. 9572

In re ATM FEE ANTITRUST LITIGATION.

Pamela Brennan; Terry Crayton; Darla Martinez, Plaintiffs–Appellants,

v.Concord EFS, Inc.; Bank One Corporation; Bank One, N.A.; J.P. Morgan Chase & Co.; Citibank (West), F.S.B.DE; Suntrust Banks, Inc.; Wachovia Corporation; Wells Fargo Bank, N.A.; Servus Financial Corp.; Citibank, N.A.; First Data Corporation; Bank of America, N.A., Defendants–Appellees.

No. 10–17354.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted Dec. 6, 2011.

Filed July 12, 2012.

Joseph R. Saveri, Brendan P. Glackin, and Andrew S. Kingsdale, Leiff Cabraser Heimann & Bernstein, LLP, San Francisco, CA; Merrill G. Davidoff (argued), Bart D. Cohen, and Michael J. Kane, Berger & Montague, P.C., Philadelphia, PA, for the plaintiffs-appellants.

W. Stephen Smith and Deanne E. Maynard (argued), Morrison & Foerster LLP, Washington, D.C.; Robert S. Stern and Sylvia Rivera, Morrison & Foerster LLP, Los Angeles, CA, for defendant-appellee J.P. Morgan Chase Bank, N.A., successor-in-interest to Bank One, N.A.

Sonya D. Winner (argued) and Anita F. Stork, Covington & Burling LLP, San Francisco, CA, for defendant-appellee Bank of America, N.A.

Stephen V. Bomse, Orrick, Herrington & Sutcliffe, LLP, San Francisco, CA, for defendant-appellee Suntrust Bank, Inc.

David F. Graham and Eric H. Grush, Sidley Austin LLP, Chicago, IL, for defendants-appellees Citibank, N.A. and Citibank (West), FSB.

Jack R. Nelson, Reed Smith LLP, San Francisco, CA, for defendant-appellee Wachovia Corp.

Daniel M. Wall and Joshua N. Holian, Latham & Watkins, San Francisco, CA, and Donald I. Baker, Baker & Miller, Washington, D.C., for defendants-appellees Wells Fargo Bank, N.A. and Servus Financial Corp.

Peter E. Moll and Brian D. Wallach, Cadwalader, Wickersham & Taft LLP, Washington, D.C., for defendants-appellees Concord EFS, Inc. and First Data Corp.

Appeal from the United States District Court for the Northern District of California, Charles R. Breyer, District Judge, Presiding. D.C. No. 3:04–cv–02676–CRB.

Before CARLOS F. LUCERO,^*CONSUELO M. CALLAHAN, and N. RANDY SMITH, Circuit Judges.

OPINION

N.R. SMITH, Circuit Judge:

Plaintiffs–Appellants (Plaintiffs) are automated teller machine (ATM) cardholders, who allege horizontal price fixing of fees paid to the ATM owners by the banks (issuing the ATM cards to the cardholders) when cardholders retrieve cash from an ATM not owned by their bank. Plaintiffs do not directly pay the allegedly fixed fee; therefore, as indirect purchasers, Supreme Court precedent prohibits Plaintiffs from bringing this suit. See Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). Further, Plaintiffs do not qualify for the narrow exceptions to the Illinois Brick rule, because (1) they do not allege a conspiracy to fix the price paid by the Plaintiffs and (2) the banks are not controlled by each other or by the ATM network. Therefore, Plaintiffs do not have standing under § 4 of the Clayton Act to proceed with their § 1 Sherman Act suit. We thus affirm the district court's summary judgment dismissal of this suit for lack of antitrust standing.

We limit our discussion in this opinion to the issues relevant to standing. Because Plaintiffs lack antitrust standing, we do not address Plaintiffs' appeal regarding the district court's (1) determination that the rule of reason, and not the per se rule, applies here; (2) rejection of the single-brand, derivative aftermarket alleged in the complaint; and (3) determination that Plaintiffs' claim against Bank of America, N.A., did not relate back to the filing of the original complaint under Rule 15(c) of the Federal Rules of Civil Procedure.

I. BACKGROUND

A. Facts

A “foreign ATM transaction” occurs when ATM cardholders withdraw money from their bank account using an ATM not owned by their bank (which issued them

the card). Such foreign ATM transactions involve four parties: (1) the cardholder, i.e., the person using the ATM to retrieve money from his or her bank account; (2) the card-issuing bank, i.e., the bank at which the cardholder holds an account and who issues the cardholder an ATM card; (3) the ATM owner, i.e., the entity that owns the machine used by the cardholder; and (4) the ATM network, i.e., the entity that connects the ATM owners with card-issuing banks. Of all these parties, the ATM network plays a particularly important role in this fact situation. The network administers agreements between card-issuing banks and ATM owners to ensure that customers can withdraw money from network member ATMs.

Foreign ATM transactions generate four fees. The cardholder must pay two of these fees—one to the ATM owner for use of the ATM (known as a “surcharge”) and one to the card-issuing bank (known as a “foreign ATM fee”). The card-issuing bank also pays two of these fees—one to the ATM network that routed the transaction (known as a “switch fee”) and one to the ATM owner (known as an “interchange fee”). At issue in this case are the interchange fee and the foreign ATM fee. The ATM network (not the card-issuing bank nor the ATM owners) establishes the interchange fee. Individual card-issuing banks set their own foreign ATM fees.

The STAR Network (STAR) is the ATM network at issue in this case. STAR has thousands of members who collectively own hundreds of thousands of ATMs nationwide. These members can be roughly divided into three groups. The first group includes so-called Independent Service Organizations (“ISOs”). ISOs own ATMs, but they are not banks and do not issue ATM cards (e.g., grocery stores or gas stations). The second group consists of financial institutions that accept deposits and issue ATM cards, but do not own any ATMs (e.g., credit unions or internet banks). The third and largest STAR member group includes financial institutions that both issue ATM cards and own ATMs. The defendant banks (or Bank Defendants) named in this case, which include all defendants except for Concord EFS, Inc. (Concord) and First Data Corporation, fit into this category. Until February 1, 2001, STAR was a member-owned network. As a member-owned network, member banks (including Bank Defendants), controlled STAR and set the interchange fees paid by the members. On February 1, 2001, Defendant–Appellee Concord, a publicly traded Delaware corporation, acquired STAR. After the acquisition by Concord, Bank Defendants lacked control of STAR based on ownership and board member appointment, because Concord was not owned by the member banks of STAR.

Some Bank Defendants were concerned about the acquisition by Concord, because Concord was not owned by the member banks and thus Bank Defendants would likely lose influence over policies and pricing decisions (such as interchange fees). To moderate this concern, before the acquisition STAR revised its agreement with its members to include language that indicated that it would not change fees arbitrarily and that it would consider the interests of its members before implementing any changes. Additionally, to allegedly quell the reluctance by the Bank Defendants, Concord agreed to retain the pre-acquisition Chief Executive Officer of STAR (who has no formal affiliation with the Bank Defendants) to run the new network and agreed to elect him to Concord's board of directors to give a voice to the Bank Defendants. Concord also agreed to establish a Network Advisory Board (comprised of the larger member banks including Bank Defendants) to advise Concord concerning the interests of the large financial institutions. The Network Advisory Board would provide input to Concord's board as to policy and pricing decisions, but had no authority to determine or veto interchange fee changes.

In February 2004, First Data Corporation (another Delaware corporation) acquired Concord. As such, after February 2004, First Data owned and operated STAR.¹

B. Procedural History

On July 2, 2004, Plaintiffs filed suit. On behalf of themselves and all those similarly situated, Plaintiffs alleged that Defendants engaged in horizontal price fixing, a per se violation of § 1 of the Sherman Act. They alleged that Defendants colluded to fix the STAR interchange fee, which is then passed on to Plaintiffs as part of the foreign ATM fee. Plaintiffs sought damages dating back to July 2, 2000.

Defendants filed a motion to dismiss arguing that Plaintiffs, as indirect purchasers, lacked standing to allege an antitrust violation pursuant to Illinois Brick.In re ATM Fee Antitrust Litig., 768 F.Supp.2d 984, 990 (N.D.Cal.2009). On September 4, 2009, the district court denied the motion to dismiss. Id. at 994. Accepting all of Plaintiffs' allegations as true and construing the pleadings in the light most favorable to Plaintiffs, the district court found that Plaintiffs' suit could not be dismissed for lack of standing. Id. at 992–94. The court found that there was no realistic possibility that the Bank Defendants would sue STAR and that Plaintiffs alleged that they were “purchasing directly from the price-fixing conspirators....” Id. at 992. On October 19, 2009, Plaintiffs filed their third amended complaint.

Subsequently, “Defendants ... moved for summary judgment, [again] arguing that the Illinois Brick rule barring indirect purchasers from recovering monetary damages in an antitrust suit applies here and precludes Plaintiffs from seeking such damages.” In re ATM Fee Antitrust Litigation, No. C 04–02676 CRB, 2010 WL 3701912, at *4 (N.D.Cal. Sep. 16, 2010). On September 16, 2010, the district court granted Defendants' motion for summary judgment and dismissed Plaintiffs' claim on the ground that Plaintiffs lack standing under Illinois Brick's direct purchaser rule. Id. at *11. Finding no genuine issue of material fact, the district court found Plaintiffs to be indirect purchasers. Id. at *12. Plaintiffs did not directly pay the alleged fixed...