Antitrust Law Daily Wrap Up, ANTITRUST—2d Cir: Dismissal of collusion suit against credit card issuers upheld, (Nov 19, 2015)

By Linda O’Brien, J.D., LL.M.

A ruling that a group of payment card holders failed to prove an antitrust injury by showing that three card-issuing banks colluded in adopting class action-barring arbitration provisions in their card member agreements was upheld by the U.S. Court of Appeals in New York City in a summary order (Ross v. American Express Company, November 19, 2015, per curiam.).

Robert Ross and other individuals were cardholders of payment cards issued by American Express, Discover, and Citibank. In 1998, American Express adopted a mandatory class action-barring arbitration provision in its card member agreements. From 1999 to 2003, counsel for American Express and various other credit card firms conducted numerous formal and informal meetings to discuss the adoption of arbitration clauses in card member agreements in the financial services industry. By 2003, seven issuing banks had adopted class action-barring arbitration clauses in their cardholder agreements.

The cardholders filed a class action suit in the federal district court in New York City, claiming that the issuing banks, in violation of Section 1 of the Sherman Act, conspired to require their cardholders to take all legal disputes to arbitration and give up their rights to participate in class actions against the banks. The cardholders sought injunctive relief invalidating the arbitration clauses in the card member agreements. Settlement was reached with four of the defendant banks, and the cardholders’ claims against American Express, Discover, and Citibank proceeded to trial.

Following a bench trial in April 2014, the district court dismissed the cardholders’ antitrust claims on the grounds that the plaintiffs failed to prove an antitrust injury from the defendant banks’ alleged collusion in adopting and maintaining the class action-barring arbitration clauses. The plaintiffs timely appealed.

The appellate court found the district court’s conclusion that the defendant banks did not collusively adopt the class action-barring arbitration clauses was not clearly erroneous. An antitrust conspiracy in violation of Section 1 of the Sherman Act requires proof of concerted action, as opposed to unilateral action. In the absence of direct evidence of a conspiracy, unlawful collusion can be inferred on the basis of parallel conduct, the court explained.

In this case, the district court found there was “conscious parallel action” in the adoption and maintenance of the arbitration clauses and conducted a thorough analysis of various “plus factors,” including motive to collude, the quantity and nature of the banks’ communications, acts of self-interest, documentation and recollections of the banks’ meetings, and whether the arbitration clauses were “artificially standardized.” After weighing the evidence of the “plus factors,” the district court found that the “final decision” to adopt class-action-barring clauses was made individually by the issuing banks. That conclusion was well supported by the record and plausible in light of the evidence viewed in its entirety, the appellate court determined.

The cases are Nos. 14-1610 and 14-1616.

Attorneys: Merrill G. Davidoff (Berger & Montague, P.C.) for Robert Ross. Rowan D. Wilson (Cravath, Swaine, & Moore LLP) for American Express Company. Elizabeth P. Parez (Winston & Strawn LLP) for Discover Financial Services. Eamon P. Joyce (Sidley Austin LLP) for Citigroup Inc.

Companies: American Express Company; Discover Financial Services; Citigroup Inc.

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