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AmEx’s accord with merchants over fees rejected by judge |

AmEx’s accord with merchants over fees rejected by judge

| Wednesday, August 5, 2015 12:01 a.m

A federal judge rejected American Express Co.’s settlement with merchants over credit card fees, finding the plaintiffs’ lawyer tainted the deal by exchanging confidential information with an attorney for MasterCard Inc.

The rejection means merchants and the card firm may have to renegotiate the deal or possibly go to trial. A conference is scheduled for Oct. 5 in federal court in New York to discuss the next steps.

“We believe we have strong defenses against the merchants’ claims, and will continue to fight our case in court,” Sanette Chao, a spokeswoman for AmEx, said in a statement.

Small merchants support the settlement that required AmEx to change its rules on credit card surcharges, while dozens of large retailers, including Wal-Mart Stores Inc., claimed it didn’t go far enough. Those retailers oppose a separate $5.7 billion swipe fee settlement with MasterCard and Visa Inc., saying it’s not big enough and the terms are too restrictive.

The retailers used an exchange of emails between the plaintiffs’ lead lawyer, Gary Friedman, and Keila Ravelo, who represented MasterCard in a separate case, to support their assertions that the deals were rigged. The retailers sent a notice to Visa and MasterCard lawyers last week that they would seek to throw out that deal as well. No action has been taken on that request.

“Friedman’s bringing MasterCard’s counsel into the negotiating process created a conflict between class members and class counsel,” U.S. District Judge Nicholas Garaufis said Tuesday in the ruling, throwing out the settlement. There was a risk “that Friedman, with Ravelo in his ear, negotiated settlement terms that are worse for class members.”

Garaufis ordered that Friedman be removed as the lead lawyer for the merchants.

Under the settlement announced in 2013, American Express agreed to end a company policy that compelled merchants to charge the same fee regardless of the card that was used. In a separate antitrust dispute, the Justice Department won a ruling in February requiring the company to drop many of its merchant rules. AmEx has challenged that ruling.

The New York-based card company is “disappointed in the court’s decision to deny final approval of the settlement,” Chao said. “We continue to believe the agreement was fair.”

Friedman said in an email Tuesday that he is “deeply disappointed, but I respect the decision of the court.”

“I never took any steps that were contrary to the interest of my clients, the merchants,” he said. “I have always acted to promote their welfare.”

The case is American Express Anti-Steering Rules Antitrust Litigation, 1:11-md-2221, U.S. District Court, Eastern District of New York (Brooklyn).

Categories: Wire stories
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