Wal-Mart Stores, Inc. v. Visa U.S.A., Inc.
| Decision Date | 04 January 2005 |
| Docket Number | No. 04-1052.,No. 04-1055.,No. 04-0514.,No. 04-0344.,04-0344.,04-1052.,04-0514.,04-1055. |
| Citation | 396 F.3d 96 |
| Parties | WAL-MART STORES, INC., The Limited, Inc., Sears Roebuck and Co., Safeway Inc., Auto-Lab of Farmington Hills, Bernie's Army-Navy Store, Burlington Coat Factory Warehouse Corporation, Circuit City Stores, Inc., The Coffee Stop, Inc. d/b/a Torreo Coffee & Tea Company, Computer Supplies Unlimited, Denture Specialists, Inc., Payless Shoesource, Inc., Shoes Etc., Inc. d/b/a Arnold's Shoes, Scrub Shop, Inc., Sportstop, Inc., Geneva White, D.M.D., UCC Kwik Doc., Inc., f/k/a UCC Express, Inc., International Mass Retail Association, National Retail Federation, and Food Marketing Institute, Plaintiffs-Appellees, Constantine & Partners PC, et al., Class Counsel-Appellees-Cross-Appellants, Dow Jones and Company, Inc., Intervenor-Plaintiff-Appellee, v. VISA U.S.A. INC. and MASTERCARD INTERNATIONAL, INC., Defendants-Appellees, Citigroup, Inc., Pulse EFT Association, and Edgar, Dunn and Company, Interested Parties, v. Reyn's Pasta Bella LLC, Jeffrey Ledon DeWeese, M.D., Barry Leonard d/b/a Critter Fritters, Hat-In-The-Ring, Inc. d/b/a Eddie Rickenbacker's, Objectors-Appellants, Nucity Publications, Inc., Objector-Appellant, Lupita Llamas Martinez d/b/a Del Yaqui Restaurant, Armenta's Mexican Food, Inc., Objectors-Appellants, Leonardo's Pizza By The Slice, Inc., 710 Corp., Objectors-Appellants-Cross-Appellees, Roman Buholzer d/b/a The Continental Garden Restaurant, Objector-Cross-Appellee, Preston Center Personal Training, Inc., UCC Kwik Doc., Inc., f/k/a UCC Express, Inc., Duke Products, Inc., Southern Network Services, Inc., Sound Deals, Inc., Digital Solutions, Inc., Village Fabrics and Furnishings, Inc., Rental Solutions, Inc., Rent Tech, Inc., G & G Enterprises, NSG Enterprises, Inc., S & GJ Enterprises, Inc., Jac Vaca, Inc., John Wenturine, Y.P.I., Inc., Mobil Town USA, Inc., Young Pioneers, Inc., Digital Playroom, Inc., Wagner's Bakery, Inc., Beaches N Cream, Kickers' Corner of the Americas, Inc., MSV Records & Production, Inc., Southern Lady Flowers, Round House, Inc., Ron Jen, Inc., d/b/a The Boathouse, and Ron Fred, Inc., Objectors. |
| Court | U.S. Court of Appeals — Second Circuit |
Richard J. Archer, Archer & Hanson, Occidental, CA (James A. Kopcke, Golden Kopcke, LLP, San Francisco, CA, on the brief) for Objectors-Appellants Reyn's Pasta Bella, LLC, Jeffrey Ledon DeWeese, M.D., Barry Leonard d/b/a Critter Fritters, and Hat-In-The-Ring, Inc. d/b/a Eddie Rickenbacker's.
Stanley M. Grossman (H. Adam Prussin, John Balestriere, Murielle J. Steven Walsh, on the brief), Pomerantz Haudek Block Grossman & Gross, LLP, New York, N.Y. (Howard Langer, John Grogan, Langer and Grogan, P.C., Philadelphia, PA, on the brief; Joseph Goldberg, Sara Berger, Alexandra Freedman Smith, Zachary Ives, Freedman Boyd Daniels Hollander Goldberg & Cline, P.A., Albuquerque, NM, on the brief) for Objector-Appellant Nu-City Publications, Inc.
John Rasmussen (Dale W. Robinson, on the brief), Johnson, Rasmussen, Robinson & Allen, P.L.C., Mesa, AZ for Objectors-Appellants Armenta's Mexican Food, Inc. and Lupita Llamas Martinez d/b/a Del Yaqui Restaurant.
M. Laurence Popofsky (Stephen V. Bomse, Marie L. Fiala, Peggy J. Williams, Russell P. Cohen, on the brief), Heller Ehrman White & McAuliffe LLP, San Francisco, CA (Philip H. Curtis, Robert C. Mason, Arnold & Porter LLP, New York, NY, on the brief; Kevin J. Arquit, Joseph F. Tringali, Mariya S. Treisman, Simpson Thacher & Bartlett LLP, New York, NY, on the brief; Kenneth A. Gallo, Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, NY, on the brief; Keila D. Ravelo, Clifford Chance U.S. LLP, New York, N.Y. on the brief) for Defendants-Appellees.
Lloyd Constantine (Robert L. Begleiter, Matthew L. Cantor, Stacey Anne Mahoney, Michelle A. Peters, Amy N. Roth, Gordon Schnell, Jonathan Shaman, Jeffrey I. Shinder, on the brief), Constantine & Partners, New York, N.Y. for Class Counsel-Appellees-Cross-Appellants and for Class Plaintiffs-Appellees.
Lawrence W. Schonbrun, Law Offices of Lawrence W. Schonbrun, Berkeley, CA on submission for Objector-Cross-Appellee Roman Buholzer d/b/a The Continental Garden Restaurant.
Before: CABRANES and WESLEY, Circuit Judges.*
Appellants challenge the district court's approval of a class action settlement, including the award of attorneys' fees. The class action involved approximately five million merchants and alleged, inter alia, that defendants Visa U.S.A. Inc. and MasterCard International Inc. tied merchant use of defendants' debit products to use of defendants' credit cards, in violation of the Sherman Act. Plaintiffs contended that Visa and MasterCard used their power in the credit card market to force merchants to accept an artificially-inflated transaction fee when accepting payment from consumers using debit cards operated by Visa or MasterCard. Plaintiffs further alleged that defendants employed a scheme of anti-competitive conduct to bar competition in the debit card market. In this bitterly contested lawsuit fought by expert counsel on all sides, the parties agreed to settle just before trial commenced. The resulting settlement was the largest in the history of antitrust law. As part of the settlement, defendants agreed not to tie their debit and credit products together and to pay more than $3 billion to plaintiffs in exchange for the release of any and all claims that were or could have been filed against defendants or their member banks (non-parties in this action) based on the conduct alleged.
On appeal, appellants contest the validity of the settlement's release of non-parties, the adequacy of class representation, the adequacy of notice, the fairness of settlement, and the reasonableness of attorneys' fees. We AFFIRM the district court's order in all respects.
This case involves a clash of commercial titans. Plaintiffs, a class of merchants approximately five million strong led by Wal-Mart, the world's largest retailer, and several other large and sophisticated merchants, including The Limited, Sears, and Safeway, filed suit on October 25, 1996 against Visa U.S.A. Inc. and MasterCard International, Inc. ("Visa" and "MasterCard," respectively),1 seeking damages amounting to tens of billions of dollars for alleged violations of Sections One and Two of the Sherman Act, 15 U.S.C. §§ 1, 2.2 First, plaintiffs claimed that the defendants'"Honor All Cards" policy, which forced merchants who accepted Visa and MasterCard credit cards to accept Visa and MasterCard debit cards, was an illegal "tying arrangement" that violated Section One of the Sherman Act.3 Second, plaintiffs alleged that defendants used their Honor All Cards policy in conjunction with other anti-competitive conduct to monopolize the debit market, in violation of Section Two of the Sherman Act. As a consequence, plaintiffs claimed that they incurred supra-competitive "interchange fees" (described in the next subheading) during every debit and credit transaction made between October 1992 and June 2003.
Essentially, every debit or credit card transaction using a Visa or MasterCard product involves five entities: (1) Visa or MasterCard, (2) a "card-issuing" bank, (3) an "acquiring" bank, (4) a consumer, and (5) a merchant. At the outset, either Visa or MasterCard, each an association, grants a license to a member bank to issue credit and debit cards with its brand name. A "card-issuing" member bank then issues a credit or debit card to a cardholder with either the Visa or MasterCard brand name. An "acquiring" bank, a member of Visa and MasterCard, contracts with a merchant to accept payment through Visa and MasterCard. When a cardholder makes a purchase with either a Visa or MasterCard product, the acquiring institution reimburses the merchant for the cardholder's purchase, less a "discount fee." The discount fee is determined by the acquiring institution. The card-issuing bank charges an "interchange fee" each time it provides funds to the acquiring bank as payment to a merchant for the cardholder's purchase. Visa and MasterCard set the interchange fee that all card-issuing banks charge. Economics demands that the discount fee be greater than the interchange fee the acquiring institution must pay to the card-issuing institution. See Visa Check II, 192 F.R.D. at 72. The following illustrates this network of transactions:
Bank A issues a Visa credit card to Consumer X, who purchases a garment for $100 at Store Y, which was "acquired" for Visa by Bank B. Visa rules mandate that Bank B must pay Bank A an interchange fee of 1.25% of the amount of the transaction, i.e., $1.25. Bank B will charge Store Y a "discount fee" higher than $1.25 in order to recover the mandated interchange fee and other fees that Visa rules mandate Bank B to pay Visa on each and every Visa credit card (and debit card) transaction and to earn a profit for itself. Thus, Bank B may charge a discount fee of 1.60% of the transaction amount (or $1.60) to Store Y. When Store Y presents Consumer X's $100 Visa transaction to Bank B, the bank will credit Store Y's account for $98.40, send the Visa mandated $1.25 interchange fee to Bank A and retain the $.35 balance of the "discount fee."
Plaintiffs originally filed their complaint on October 26, 1996. The district court certified plaintiffs as a class in February 2000. See Visa Check II, 192 F.R.D. at 71. The class includes "all persons and business entities who have accepted Visa and/or MasterCard credit cards and therefore have been required to accept Visa[ ]Check and/or MasterMoney debit cards under the challenged tying arrangements during the...
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