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Merchants that elected not to take a share of the $5.7 billion settlement to resolve a massive credit card interchange case against Visa Inc., MasterCard Inc. and some banks will be given a chance to opt back into a share of the damages under a plan being crafted by lawyers.
The unusual development in the case known as MDL 1720 is meant to address any concerns that some of the opt-out merchants made their decisions based on misinformation they obtained from Web sites dedicated to the case other than the official one, according to K. Craig Wildfang, an attorney for the class of approximately 8 million card-accepting merchants eligible for damages. According to Wildfang, the idea came from the presiding judge in the case, John Gleeson of U.S. District Court in Brooklyn, N.Y.
“Some of the merchant Web sites…he thought were misleading,” says Wildfang, a partner with Robins, Kaplan, Miller & Ciresi L.L.P. in Minneapolis.
In fact, at a hearing in April 2013, Gleeson called one Web site, MerchantsObject.com, “completely misleading.” That site, since taken down, and others added disclaimers and a link to the case’s court-approved Web site for merchants, PaymentCardSettlement.com.
The settlement, the result of retailer and merchant trade-group claims that the card networks for years overcharged on interchange and hamstrung businesses with restrictive acceptance rules, provoked intense controversy when it was announced nearly two years ago. Some merchants, mostly large ones, opted out of the damages partly because they disagreed with a provision that in return for damages, they would give Visa and MasterCard immunity from future lawsuits over interchange and card-acceptance terms. In all, about 8,000 merchants representing 25% of the combined Visa and MasterCard charge volume opted out.
The most likely candidates for opting back into a share of the damages would be small businesses with little prior information about the complex and lengthy case that dates back to 2005, not bigger merchants with legal staffs that monitored the case continually. Wildfang says he doesn’t have an estimate about the number of merchants that might opt back in, but says he has talked to some that are interested. “It’s probably going to be a small number, but not negligible,” he says.
Lawyers are working on the details of how to execute such a plan, according to Wildfang. A final draft may be months away.
The total amount of the settlement originally was pegged at $7.25 billion, including $6.05 billion in damages and $1.2 billion in temporary interchange relief. The amount later was reduced because of the opt-outs. Still, Wildfang believes there will be enough money in the settlement pool to cover any merchant that rejoins the case without reducing payments to the original opt-ins. “The way the math works, it really doesn’t affect the amount the other class members are going to get,” he says.
Visa and MasterCard reportedly have not objected to the re-opt-in idea. Visa declined to comment, and MasterCard did not respond to a Digital Transactions News inquiry.
Preliminary information about the new opt-in option is contained in a June 20 case status report signed by various lawyers. That report also addresses other issues, including actions by so-called third-party filers that handle settlement paperwork for class merchants in return for a cut of their damages.
Some filers have run afoul of Gleeson, including Toledo, Ohio-based Managed Care Advisory Group Inc. (MCAG). That company, working for independent sales organizations and some big merchant acquirers such as Global Payments Inc. and Heartland Payment Systems Inc., earned a rebuke from Gleeson when he learned that MCAG was automatically filing settlement claims for its clients’ merchants, with fees and commissions deducted, unless the merchants took action to opt out of the service.
Gleeson has held several of what Wildfang calls “mini-hearings” to learn about the third-party filers, and more may be pending. It’s unclear what the judge may do when they are completed.
Meanwhile, some parties continue to challenge the settlement itself, to which Gleeson gave final approval last December. The National Retail Federation and the Retail Industry Leaders Association this month filed a joint brief with the 2nd U.S. Circuit Court of Appeals in New York in support of their separate appeals to have the settlement overturned.
