Antitrust Law Daily Wrap Up, ANTITRUST—E.D. N.Y.: Premier Enterprises barred from filing class member claims in credit card fee litigation, (Oct 6, 2014)

By Linda O’Brien, J.D., LL.M.

In a class action against Visa U.S.A., Inc. and MasterCard International Corporation and their issuing and acquiring banks for conspiring to fix credit card interchange fees paid by merchants, the federal district court in Brooklyn, New York, has permanently enjoined a third-party claims filing company from engaging in claims filing services in relation to any settlement in the case (In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, October 3, 2014, Gleeson, J.).

A putative class of approximately 12 million merchants filed suit against Visa U.S.A., Inc. and MasterCard International Corporation, as well as their issuing and acquiring banks, alleging violations of Section 1 of the Sherman Act. The plaintiffs asserted that the companies conspired to fix interchange fees and merchant discount fees by adopting and enforcing practices relating to payment cards that unreasonably restrained trade and caused injury to the merchants.

The plaintiffs’ motion for approval of the settlement was granted in December 2013. The settlement had two components: (1) the creation of two cash fund of about $5.7 billion and (2) injunctive relief in the form of various credit card network rules changes. Before the final settlement approval was granted, counsel for the plaintiff class notified the court that misleading solicitations were being made to class members to induce them to sign up with a third-party claims filing company and sought injunctive relief to protect class members’ interest in the settlement funds.

Premier Enterprises Group. The court determined that Premier, as agent for Settlement Recovery Group (SRG), made materially false and misleading statements to merchants in an effort to solicit in their business and should be permanently enjoined from engaging in claims filing services in relation to any settlement in the case. SRG is a third-party claims filing company that completes claim forms and files claims on behalf of class members in class actions. Premier Enterprises Group, an independent sales organization that sells business products and services through a call center, entered into a referral agreement with SRG and solicited class members on SRG’s behalf.

Premier represented to class members in “official sounding” telephone messages and on a website that signing up with SRG was a perquisite to recovery. Those merchants that visited the website were able to download an “official looking” form that “buried in dense boilerplate language at the end of the form” disclosed that SRG services would cost class members 35 percent of any recovery they received, SRG was not affiliated with the class administrator, and class members did not need to sign up with SRG to file a claim against the settlement funds.

According to the court, numerous merchants who received the telephone messages from Premier contacted the claims administrator confused as to whether they needed to sign up with SRG to recover under the settlement. Premier’s use of “doing business as Merchant Claim Center” could easily have been interpreted by merchants as indicating an official entity associated with the administration of the settlement. Also, Premier’s telephone messages created an impression of authority by suggesting class members needed to obtain a form from Premier to begin the claims process and by mentioning a supposed deadline even though there was no such deadline. Thus, Premier’s conduct was sufficiently egregious to warrant a permanent injunction.

Settlement Recovery Group. The court found that SRG had a right to control its arrangement with Premier and Premier was its agent. The referral agreement between SRG and Premier provided the Premier was only acting as a referrer for introduction purposes and had no authority to enter into agreements on SRG’s behalf. The court noted that communications between company executives demonstrated an oral arrangement in which Premier would have expanded authority and would deliver to SRG contracts already signed by class members. Also, the claims recovery agreement and list of merchants’ commonly asked questions and responses informational material to merchants were provided by SRG. Additionally, even though SRG received telephone calls and emails from numerous merchants complaining about Premier’s solicitations, SRG did not investigate or object to the contents of Premier’s solicitations. However, once the plaintiffs’ class counsel moved for injunctive relief, SRG took corrective action by terminating its agreement with Premier, taking down the solicitation campaign’s website, disabling the campaign’s telephone number, and sending corrective letter notices to class members who signed up for its services. Therefore, the extreme remedy of a permanent injunction was not appropriate against SRG, the court noted.

The case is No. 05-MD-1720 (JG).

Attorneys: Laddie Montague, Jr. (Berger & Montague, PC), K. Craig Wildfang (Robins, Kaplan, Miller & Ciresi LLP), and Bonny E. Sweeney (Robbins Geller Rudman & Dowd LLP) for Plaintiff Class. Neil S. Binder (Binder & Schwartz LLP) for Settlement Recovery Group, LLC. Daniel L. Brown (Sheppard, Mullin, Richter & Hampton) for Premier Enterprises Group, Inc.

Companies: MasterCard International Corp.; Settlement Recovery Group LLC; Premier Enterprises Group, Inc.; Visa U.S.A., Inc.

Cases: Antitrust NewYorkNews