Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Supreme Court will not hear Visa, MasterCard challenge to method of class certification, (Apr 15, 2024)

By Jeffrey H. Brochin, J.D.

Petitioners argued that class certification rulings below did not engage in a “rigorous analysis” of the proposed method to prove class-wide impact.

The U.S. Supreme Court has denied a petition for certiorari filed by ATM network operators Visa, Inc. and MasterCard, Inc. in their ongoing legal battle with groups of cardholders and ATM machine operators (Respondents) over alleged Sherman Act violations related to network rules and fees. Visa and Mastercard (Petitioners) filed their petition for certiorari following rulings by both the federal district court in the District of Columbia and the District of Columbia Circuit holding that each of the three proposed classes satisfied the requirement under Rule 23(b)(3) that common questions of law or fact predominate over individual ones. The petitioners argued that the class certifications did not comply with Rule 23(b)(3) and cannot be reconciled with Supreme Court precedents holding that, under Rule 23(b)(3), a court must engage in a “rigorous analysis” of the proposed method to prove classwide impact. Further, they asserted that the certifications were inconsistent with the decisions of other courts of appeals applying a more stringent approach to the Rule 23(b)(3) inquiry. The Supreme Court denied the petition, with Justice Kavanaugh taking no part in the consideration or decision of the petition, on April 15, 2024 (Visa, Inc. v. National ATM Council, Inc., Dkt. No. 23-814).

In 2011, two groups of individual consumers and one group of independent ATM operators filed separate class actions in the United States District Court for the District of Columbia, alleging that Visa’s and MasterCard’s non-discrimination rules violated Section 1 of the Sherman Act. According to the complaints, in the absence of those rules, bank and independent ATM operators would have charged lower surcharges on transactions processed over networks with higher net interchange, and ATM networks, in turn, would have supposedly responded by increasing net interchange, to avoid discrimination in the form of higher surcharges on their network transactions. Collectively, the complaints sought treble damages totaling over $9 billion and an injunction barring the enforcement of the Petitioners’ rules (while leaving in place the rules of competing networks).

Classes certified. After the parties engaged in discovery for over a year, all three groups of Respondents moved for class certification, and the district court certified all three classes. Significantly, the court acknowledged the Petitioners’ argument that the methods offered to prove class-wide impact were “hopelessly flawed,” because they failed to identify and exclude substantial numbers of uninjured class members. Yet, the district court declined to resolve that dispute, instead holding that at the class-certification stage, the Respondents only needed to demonstrate a “colorable” method by which they intended to prove class-wide impact—and, according to the court, they had achieved that.

Appeal to circuit court. The court of appeals also concluded that the certification of the classes complied with Rule 23(b)(3), despite the Petitioners’ unresolved challenge that the classes swept in at least tens of thousands of uninjured plaintiffs who could not be excluded through common proof. The court of appeals upheld the class certification-- comprising hundreds of millions of putative class members and seeking billions of dollars in damages--based on an articulation of the pre-dominance standard under Federal Rule of Civil Procedure 23(b)(3) that—as the court of appeals conceded—was copied from outdated decisions and “arguably” at odds with the Supreme Court’s precedent. The court of appeals characterized the district court’s misstatements of law as “surprising and unfortunate,” and described its analysis as “terse”, however, the court of appeals nevertheless deemed that effort sufficient. According to the court of appeals, as long as a district court concluded that the proposed method through which the Respondents intended to prove class-wide impact was “colorable,” any “material factual disputes” over class-wide impact could be deferred to the merits.

Question presented. The Petition framed the question presented to the Supreme Court as: “Whether a district court validly certifies a class under Federal Rule of Civil Procedure 23(b)(3) where it deems the proposed method through which plaintiffs intend to prove class-wide antitrust impact to be “colorable” and where it defers “material factual dispute[s]” on class-wide impact to the merits.”

Petition arguments. According to the Petition, the lower courts’ rulings were erroneous and could not be reconciled with the Supreme Court’s precedents holding that under Rule 23(b)(3), a court must engage in a “rigorous analysis” of the proposed method to prove class-wide impact, so as to ensure that class action plaintiffs have affirmatively demonstrated that common issues predominate over individualized ones. The lower court rulings raised serious due process concerns, and ignored the reality that the outcome at class certification typically results in a settlement, thereby dictating the ultimate resolution of the litigation.

The Petition then proceeded to recite the “disarray” among the circuits regarding Rule 23(b)(3), noting that the D.C. Circuit sides with courts (including the Eighth and Ninth Circuits) holding that the Rule 23 requirements are satisfied as long as plaintiffs’ proposed method appears to be valid, even if there are unresolved material disputes among the parties relevant to those requirements. Conversely, the Second, Third, Fifth, and Eleventh Circuits have taken a stricter approach, holding that a class cannot be certified if the district court fails to resolve material disputes among the parties that bear on the Rule 23 requirements. Had the stricter approach been followed, the outcome of the instant case would have been different.

The Petition sought the Supreme Court’s resolution as to whether the aforementioned “rigorous analysis” required to establish predominance had occurred even though, as quoted from the court of appeals, the district court had engaged in record analysis that was “notably terse” and had deferred resolution of “material factual disputes” over the Respondents’ ability to prove class-wide impact to the merits. The appellate court opinion went on to find further fault with the district court’s certification opinion: “The district court quoted older, nonbinding district court decisions, and failed to cite the Supreme Court’s most recent case analyzing when common issues predominate over individualized ones under the pertinent class action provision,” yet it affirmed the district court’s ruling.

The Petition further characterized the district court’s purported “rigorous analysis” to certify the three classes as spanning a “handful of sentences” and contended that the method approved below was one that flew in the face of the Supreme Court’s decisions interpreting Federal Rule of Civil Procedure 23(b)(3). The D.C. Circuit’s approach relaxes the predominance inquiry beyond recognition, argued the Petitioners, claiming it reduced Rule 23(b)(3)’s required “rigorous analysis” to a prima facie showing, and improperly allows a court to punt serious concerns bearing on the propriety of class certification to the merits stage. Indeed, the Supreme Court’s ruling in Comcast Corp. v. Behrend, 569 U.S. 27 (2013), does not permit affirming a certification order that contains “notably terse” analysis on the issue of classwide impact, let alone one holding, as the district court did, that whether the proposed classes contain and can exclude “unharmed members” is “the kind of material factual dispute that is better suited for adjudication of plaintiffs’ injury and damages on the merits.”

Finally, the question presented should be granted, Petitioners argued, because it is of profound importance to federal civil procedure and class actions; it affects multi-billion-dollar litigation; and it raises fundamental questions concerning the powers of Article III courts.

The case is Dkt. No. 23-814.

Attorneys: Mitchell D. Webber (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for Visa Inc., Visa USA Inc., Visa International Service Association, Plus System, Inc., Mastercard, Inc., and Mastercard International Inc.

Companies: Visa Inc.; Visa USA Inc.; Visa International Service Association; Plus System, Inc.; Mastercard, Inc.; Mastercard International Inc.; National ATM Council, Inc.

News: Antitrust GCNNews