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Visa Inc. has two big challenges ahead. The first was all over the news last week: The company is launching the biggest initial public offering in U.S. history, with a record $18 billion in the works. The other, however, becomes clear in the Securities and Exchange Commission documents the financial giant filed in preparing for its IPO: Visa is awash in high-stakes litigation. The company lists more than 70 cases in its SEC filing � from class actions filed by merchants to fights with competitors like American Express and Discover. That’s not such great news for the company, of course. But it’s been a boon for outside counsel � particularly at Arnold & Porter.

DISCOVER FINANCIAL SERVICES INC. V. VISA INC.: Antitrust case alleging that Visa prohibited competition by not allowing member banks to sell competing cards. Status: Both sides have filed motions for summary judgment. Counsel for plaintiff: Kirkland & Ellis and Constantine Cannon. Counsel for Visa: Arnold & Porter and Keker & Van Nest.

AMERICAN EXPRESS TRAVEL RELATED SERVICES CO. V. VISA INC.: Antitrust case alleging Visa prohibited competition by not allowing member banks to sell competing cards. Status: Settled in November 2007 for around $2 billion. Counsel for plaintiff: Boies, Schiller & Flexner. Counsel for Visa: Arnold & Porter and Keker & Van Nest.
IN RE PAYMENT CARD INTERCHANGE FEE AND MERCHANT DISCOUNT ANTITRUST LITIGATION: About 50 class actions and individual lawsuits alleging that Visa, Mastercard, and member banks conspired to set interchange rates. Status: Preparing for class certification. Counsel for plaintiffs: Robins, Kaplan, Miller & Ciresi and Kenny Nachwalter. Counsel­ for Visa: Arnold & Porter.

Since 2005, the firm has been handling three of the biggest antitrust matters facing Visa. The work has enlisted a core group of 30 lawyers and a host of staff and contract attorneys when the work heats up. The firm won’t say exactly how much of its overall litigation practice is dedicated to Visa matters, but Thomas Milch, the firm’s chairman, acknowledges that it is a “significant” percentage of the group’s work. The Visa cases have also boosted a litigation practice that was drooping just two years ago after other large cases, such as Wyeth’s fen-phen product liability dogfight, died down. The cases go “to the sweet spot of the intersection of antitrust � which has been a large part of our practice � and litigation,” Milch says. The upcoming IPO may actually help the company pay off plaintiffs and its lawyers. John Coffee, a securities expert and Columbia University law professor, says the offering is a good way to raise money for litigation and settlements. And Visa has said it will set aside $3 billion from the IPO to cover litigation costs. That’s a lot of cash � and from the looks of things Visa is going to need every penny of it. IN THE WORKS Arnold & Porter is working on one of the biggest cases facing Visa: A consolidated mass of about 50 class actions and individual suits, In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, that is gearing up for class certification in the U.S. District Court for the Eastern District of New York. The suits were brought by merchants who allege that Visa, Mastercard, and their member banks conspired in setting rates for interchange fees � the amount the merchant’s bank pays to the card holder’s bank for each credit card transaction � and violated antitrust regulations every time a customer used a credit card. At stake is more than $50 billion if the merchants are successful. Arnold & Porter has 15 attorneys working on the interchange case. Three litigators, counsel Bob Vizas and partners Susan Lee and Robert Mason are leading the representation. “The interchange litigation involves quite a number of plaintiffs and a number of defendants. It’s a very complicated piece of litigation, and so managing that type of litigation has its challenges,” says Lee, who has been working on Visa litigation for three years. “But it’s also what makes it interesting.” Among the other firms working on the case are Paul, Weiss, Rifkind, Wharton & Garrison for Mastercard; Skadden, Arps, Slate, Meagher & Flom for J.P. Morgan; Sidley Austin for Citigroup; and Morrison & Foerster for Bank of America. K. Craig Wildfang of Robins, Kaplan, Miller & Ciresi is the lead attorney for the class, and Richard Arnold, a partner with Kenny Nachwalter, is the lead attorney for the individual merchants. Visa has also been fighting competitors. In November, Arnold & Porter attorneys, along with lawyers from the San Francisco litigation boutique Keker & Van Nest, negotiated a settlement with American Express Co. over claims that Visa had prohibited its member banks from offering competitors’ credit cards. The settlement, which will be paid out by the member banks, is around $2 billion. (Visa had worked out an agreement with its member banks to fund the settlement through money set aside from the IPO.) David Gersch, head of business litigation, was the lead Arnold & Porter partner for Visa on the American Express case. David Boies, chairman of Boies, Schiller & Flexner, represented American Express. “It involved more documents than I’ve ever seen,” Gersch says � around 200 million pages. And American Express turned over 33 million pages just in one day. Also working on the American Express litigation were partners Daniel Cantor and Daniel Pariser. The firm had to amass an army to handle the mountains of paper. It hired an outside vendor to create an electronic database, and at its peak, the firm used more than 100 staff and contract attorneys for the litigation. Despite the settlement, the paperwork isn’t about to end. Discover Financial Services Inc. filed a similar antitrust case in 2004, and that one is still marching along. Attorneys from Kirkland & Ellis and New York’s Constantine Cannon are representing Discover, and both sides have filed motions for summary judgment. A trial date has been set for September in the U.S. District Court in the Southern District of New York. Arnold & Porter partner M. Sean Laane and counsel Michael Rubin are heading up that suit in addition to attorneys from Keker & Van Nest. (Partners Jonathan Gleklen and Mark Merley are the antitrust counsel for all the suits.) The amount that Discover is asking for is under seal, and according to the S-1 filing, if Visa is held liable, the damages against the company will be trebled. Mastercard, represented by Simpson Thacher & Bartlett, is also a co-defendant in the case. THE FLOODGATES OPEN This litigation stems from two prior cases that did not go well for Visa. A suit filed in 1996 by a class of merchants, including Wal-Mart, led to a $2 billion settlement and a change to Visa’s “honor all cards” rule so that a business can choose to accept only Visa debit cards or credit cards or both. And Visa lost a Justice Department antitrust case in 2004 that forced the company to stop prohibiting its member banks from offering cards issued by its competitors. Heller Ehrman represented Visa in both cases. The firm confirmed that it does work for Visa but declined to comment further. When those two cases wrapped up, the litigation floodgates opened. And Arnold & Porter picked up a substantial chunk. Visa was looking for counsel to represent it in the American Express and Discover suits, and the company approached Arnold & Porter to take the cases. What does the IPO mean for future work at Arnold & Porter? Visa has been a client in the firm’s bank regulatory practice for years, and Gersch says he doubts that the company going public will change that. “We look forward to a strong relationship with them after they go public,” Gersch says. And, the firm now has even closer ties to Visa (which is in its mandated “quiet period” before the IPO). Julie Rottenberg, a litigation partner, recently left Arnold & Porter to join Visa. She is the associate general counsel � and head of U.S. litigation.

Attila Berry can be contacted at [email protected].

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