In re Currency Conversion Fee Antitrust Litigation
| Decision Date | 09 March 2005 |
| Docket Number | MDL No. 1409.,No. M 21-95.,M 21-95. |
| Citation | 361 F.Supp.2d 237 |
| Parties | In re CURRENCY CONVERSION FEE ANTITRUST LITIGATION This Document Relates to all Actions. |
| Court | U.S. District Court — Southern District of New York |
Merrill G. Davidoff, Edward W. Millstein, Berger & Montague, P.C., Philadelphia, PA, Bonny E. Sweeney, Christopher Burke, Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, LLP, San Diego, CA, Dennis Stewart, Hulett, Harper, Stewart, San Diego, CA, for Plaintiffs.
Peter E. Greene, Mitchell Schwartz, Skadden, Arps, Slate, Meagher & Flom, LLP, New York, NY for J.P. Morgan Chase & Co., Chase Manhattan Bank USA, N.A., and The Chase Manhattan Bank.
Jay N. Fastow, Fiona Schaeffer, Weil, Gotshal Manges, LLP, New York, NY, for MasterCard International Corp.
Charles E. Buffon, Robert D. Wick, Covington & Burling, Washington, D.C. for Bank One Corp. and First USA Bank, N.A.
Brian P. Brosnahan, Heller, Ehrman, White & McAuliffe, LLP, San Francisco, CA, for Visa U.S.A., Inc.
Randall A. Hack, Lord, Bissell & Brook, LLP, Chicago, IL, for Visa International Service Association.
Theodore R. Scarborough, David F. Graham, Sidley, Austin, Brown & Wood, LLP, Chicago, IL, for Citigroup Inc., Citibank (South Dakota), N.A., Citibank (Nevada), N.A., Universal Financial Corp., Universal Bank, N.A., and Citigroup Diners Club, Inc.
Edward Rogers, Ballard, Spahr, Andrews & Ingersoll, LLP, Philadelphia, PA for Providian Financial Corp., Providian National Bank Inc. and Providian Bank.
George A. Cumming, Jr., Morgan, Lewis & Bockius, LLP, San Francisco, CA, for Household Credit Services, Inc.
Mark Ladner, William Wade-Grey, Morrison & Foerster, LLP, New York, NY, for Bank of America Corp. and Bank of America N.A. (USA).
Christopher Lipsett, Noah A. Levine, Wilmer, Cutler & Pickering, New York, NY, for MBNA Corporation and MBNA America Bank, N.A.
These class actions, consolidated for pretrial proceedings, assert violations of the Sherman Act, 15 U.S.C. § 1 et seq., the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., and the South Dakota Deceptive Trade Practices Act ("DTPA"), arising from an alleged price-fixing conspiracy among VISA, MasterCard and their member banks (collectively "defendants") concerning foreign currency conversion fees. Defendants move for reconsideration of this Court's October 15, 2004 Memorandum and Order on class certification. Defendants also move to stay this litigation pending arbitration. For the reasons set forth below, defendants' motions are granted in part and denied in part.
The factual background underlying these actions are set forth in this Court's prior opinions, familiarity with which is presumed. See In re Currency Conversion Fee Antitrust Litig., 224 F.R.D. 555 (S.D.N.Y.2004) ("Currency Conversion II"); In re Currency Conversion Fee Antitrust Litig., 265 F.Supp.2d 385 (S.D.N.Y.2003) ("Currency Conversion I"). The salient facts for these motions are summarized below.
VISA and MasterCard (collectively, the "network defendants") facilitate the purchase of goods and services in foreign countries in local currency. The purchase price is converted to U.S. dollars and then billed to the United States cardholder. Currency Conversion II, 224 F.R.D. at 559. As part of that process, cardholders are charged a currency conversion fee that ranges between one and three percent of the total cost of the purchase. Currency Conversion II, 224 F.R.D. at 559. Plaintiffs allege that these fees are assessed regardless of whether defendants convert or exchange the currency. Currency Conversion II, 224 F.R.D. at 559. VISA and MasterCard automatically impose this currency conversion fee on cardholders at the network level. Currency Conversion II, 224 F.R.D. at 559.
There are two tranches of currency conversion fees charged by VISA and MasterCard. The first tier is charged by either VISA or MasterCard at one percent of the purchase price and retained by the respective credit card association. Currency Conversion II, 224 F.R.D. at 560. The second tranche, typically two percent on top of the one percent fee, is retained by the cardholder's issuing bank. Currency Conversion II, 224 F.R.D. at 560.
It is undisputed that the credit card agreements of most class members now contain an arbitration agreement, requiring them to arbitrate against their issuing bank. Four card issuing banks — Bank of America, Bank One Delaware (f.k.a. First USA), Household and MBNA — amended their cardholder agreements to include arbitration agreements prior to the commencement of this litigation. (Plaintiffs' Consolidated Opposition to Defendants' Motions to Stay Litigation, dated Jan. 18 2005 ("Pl.Mem.") at 2.) The other card issuing banks — Chase, Citibank, Diners Club1 and Providian — similarly modified their cardholder agreements during the pendency of this litigation. (Pl. Mem. at 1 ().) By May 2002, all banks had incorporated arbitration clauses into their cardholder agreements. (Pl. Mem. at 13 n. 9.)
In its July 7, 2003 Memorandum and Order, this Court described the paradigm arbitration clause in cardholder agreements:
Arbitration: Any claim, dispute or controversy ("Claim") by either you or us against the other, or against the employees, agents or assigns of the other, arising from or relating in any way to this Agreement or your Account, including Claims regarding the applicability of this arbitration clause or the validity of the entire Agreement, shall be resolved by binding arbitration by the National Arbitration Forum, under the Code of Procedure in effect at the time the Claim is filed.... Any arbitration hearing at which you appear will take place at a location within the federal judicial district that includes your billing address at the time the Claim is filed. This arbitration agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16. Judgement upon any arbitration award may be entered in any court having jurisdiction.
This arbitration agreement applies to all Claims now in existence or that may arise in the future except for Claims by or against any unaffiliated third party to whom ownership of your Account may be assigned after default (unless that party elects to arbitrate). Nothing in this Agreement shall be construed to prevent any party's use of (or advancement of any Claims, defenses, or offsets in) bankruptcy or repossession, replevin, judicial foreclosure or any prejudgment or provisional remedy relating to any collateral, security or property interests for contractual debts now or hereafter owed by either party to the other under this Agreement.
IN THE ABSENCE OF THIS ARBITRATION AGREEMENT, YOU AND WE MAY OTHERWISE HAVE HAD A RIGHT OR OPPORTUNITY TO LITIGATE CLAIMS THROUGH A COURT, AND/OR TO PARTICIPATE OR BE REPRESENTED IN LITIGATION FILED IN COURT BY OTHERS, BUT EXCEPT AS OTHERWISE PROVIDED ABOVE, ALL CLAIMS MUST NOW BE RESOLVED THROUGH ARBITRATION.
Currency Conversion I, 265 F.Supp.2d at 398-99 (). All of the credit card issuing banks utilize similar arbitration clauses.2 See, e.g., Currency Conversion I, 265 F.Supp.2d at 399-400. (See also Memorandum in Support of Chase's Motion for Stay of Litigation, dated Jan. 7, 2005 ("Chase Mem.") at 12 ().)
On March 21, 2002, defendants Bank One Delaware (f.k.a. First USA), Bank of America, MBNA and their respective parent corporations moved to refer the claims against them to arbitration. See Currency Conversion I, 265 F.Supp.2d at 397. At that time, plaintiffs conceded that no named plaintiff used an MBNA credit card for foreign purchases. Currency Conversion I, 265 F.Supp.2d at 398. Because there were no MBNA cardholder plaintiffs, this Court did not consider whether any MBNA cardholder's claims belonged in arbitration.3 Currency Conversion I, 265 F.Supp.2d at 398. However, this Court reached that question with respect to the Bank One Delaware (f.k.a. First USA) and Bank of America cardholders' claims, and required those plaintiffs to proceed to arbitration. Currency Conversion I, 265 F.Supp.2d at 416.
On November 12, 2003, plaintiffs moved for class certification. In opposing the motion, defendants argued that "most putative class members voluntarily signed a binding arbitration agreement with their credit card issuers," and therefore were precluded from participating in this litigation. Currency Conversion II, 224 F.R.D. at 569. Consequently, defendants asked this Court to exclude cardholders who signed arbitration agreements from any certified class. This Court granted defendants' application in part and denied it in part:
In sum, this Court holds that arbitration clauses engrafted on cardholder agreements after this litigation commenced are not enforceable. Conversely, the arbitration agreements entered into before this action are enforceable between the signatories.
Currency Conversion II, 224 F.R.D. at 570. Defendants further requested that those cardholders who agreed to arbitrate disputes with their own credit card issuers be estopped from litigating against other card issuing banks or the network defendants. Currency Conversion II, 224 F.R.D. at 570. The Court ruled that cardholders with enforceable arbitration clauses may bring antitrust claims against non-issuing defendant banks "because the non-issuing defendant banks were not parties to those agreements, and the contract provisions did not extend to them." Currency Conversion II, 224 F.R.D. at 570.
On November 3, 2004, defendants filed a joint motion for reconsideration. They argue, inter alia, that this Court should reconsider its decision not to apply the estoppel doctrine to claims against the...
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