Antitrust Law Daily Wrap Up, ANTITRUST—E.D.N.Y.: Fact issues preclude summary judgment in American Express anti-steering rules suit, (Jan 7, 2016)

By Linda O’Brien, J.D., LL.M.

In multidistrict litigation against financial services company American Express over the inclusion of “anti-steering” rules in its merchant acceptance agreements, genuine issues of material fact precluded the grant of summary judgment on the merchant plaintiffs’ claims and the financial services company’s statute of limitation and laches defenses, the federal district court in Brooklyn found (In re American Express Anti-Steering Rules Antitrust Litigation, January 7, 2015, Garaufis, N.).

Beginning in 2008, merchants filed a series of class action suits against financial services company American Express (AmEx), alleging that AmEx included “anti-steering” rules in its merchant acceptance agreements that expressly prohibited merchants from steering transactions to less costly payment cards. In 2013, the actions were consolidated for trial. Before the court was AmEx’s motion for summary judgment on the issues that its no-surcharge rule was not an antitrust violation and on its statute of limitations and laches defenses.

No-surcharge rule. In denying AmEx’s motion for summary judgment, the court found there was ample evidence in the record from which a reasonable jury could fine that AmEx’s no-surcharge rule had an adverse effect on competition, had a form for maintaining monopoly power, and had no valid business justification. The no-surcharge rule prevented AmEx-accepting merchants from imposing a surcharge on any credit card transaction thereby eliminating any incentive for network service providers to compete on price. Here, the merchants offered evidence showing that they paid higher prices as a result of AmEx’s merchant agreements’ prohibition on price competition through the no-surcharge rule and the costs of network services were passed through to consumers. Thus, there was a genuine factual dispute as to whether the no-surcharge rule was an antitrust violation.

Statute of limitations, laches defenses. AmEx was not entitled to summary judgment with respect to its statute of limitations and laches defenses. The merchants contended that AmEx’s limitation defense only defined the time frame for which they could seek damages on their claims but did not preclude AmEx’s liability. AmEx responded that the timeliness of the merchants’ claims could turn on the factual record of whether their damages were speculative. According to the court, there were genuine issues of material fact as to both the speculative damages and continuing violation exceptions. The merchants presented evidence that in 2002, when the merchant agreements were signed, their then-future damages were speculative and they had no ability to accurately estimate variables, such as charge volume and AmEx’s discount rate, for any damages projections. Furthermore, with respect to the continuing violations exception, the merchants offered evidence that AmEx’s unilateral changes to the effective discount rate could be sufficient overt acts to restart the limitations period.

Finally, there were genuine issues of material fact as to whether there was any excuse for the merchants’ delay in bringing suit or whether that delay caused any prejudice to AmEx for the laches doctrine to apply. Since the only equitable relief sought by the merchants was prospective in nature, AmEx’s continuation of the challenged conduct was not the type of activity that the laches doctrines was designed to protect in equity, the court concluded.

The case is No. 11-MD-2221.

Attorneys: Philip C. Korologos (Boies, Schiller & Flexner LLP) for American Express Anti-Steering Rules Antitrust Litigation NO II. David P. Germaine (Vanek Vickers & Masini, PC) and Eric Bloom (Hangley Aronchick Segal Pudlin & Schiller) for Rite Aid Corp., Rite Aid HDQTRS Corp. and Walgreen Co. Peter T. Barbur (Cravath Swaine Moore LLP) and Alanna Rutherford (Boies, Schiller & Flexner LLP) for American Express Travel Related Services Company, Inc. and American Express Co. Kim Elaine Miller (Kahn Swick & Foti, LLC) for Susan Burdette.

Companies: Rite Aid Corp.; Rite Aid HDQTRS Corp.; Walgreen Co.; American Express Travel Related Services Company, Inc.; American Express Co.

Cases: Antitrust NewYorkNews