We’ve been deluged with news about challenges to mandatory arbitration clauses over the last few months, ever since the U.S. Supreme Court issued its AT&T Mobility v. Concepcion opinion last April. So it’s refreshing to read a decision on arbitration provisions with a twist: in this case a good old-fashioned (alleged) conspiracy.
A federal judge in Manhattan on Wednesday denied a bid by Citigroup Inc. and Discover Bank to dismiss a long-running antitrust suit accusing them of conspiring with American Express and Wells Fargo to impose mandatory arbitration clauses on credit card holders from 1999 to 2003. And as detailed in the decision, much of the alleged conspiracy unfolded alongside the banks’ in-house and outside counsel.
Citi and Discover are the two remaining defendants in the suit, which Berger & Montague filed in 2005. (American Express, which continues to face similar claims, was sued separately in 2004.) As a result of settlement agreements with Bank of America, HSBC, Capital One, and JPMorgan Chase, hundreds of millions of arbitration clauses have been eliminated from those banks’ customer agreements, Merrill Davidoff of Berger & Montague told us.
“Obviously they viewed it sensible to settle these cases two years ago,” said Davidoff, whose firm also recovered at least $385.6 million in settlements over related claims that the banks manipulated foreign exchange conversion fees. “We think we have a strong case [against Citi and Discover] and we’ll take the case to trial.”
Various in-house and outside lawyers feature heavily, at least extras, in the banks’ allegedly conspiracy. According Wednesday’s ruling by Manhattan federal district court judge William Pauley III, Wilmer Cutler Pickering Hale and Dorr began hosting meetings in 1999 in which the banks discussed (and allegedly coordinated) their plans to incorporate mandatory arbitration provisions. Judge Pauley saw an e-mail by another lawyer, Alan Kaplinsky of Ballard Spahr Andrews & Ingersoll, as evidence of the banks’ may have collaborated to stave off class actions. In a June 1999 draft e-mail to attendees of a Wilmer Cutler meeting, Kaplinsky encouraged them to be “well networked” because “the plaintiffs’ bar is engaged in a ‘take no prisoners assault’ on consumer arbitration programs.”
Citi and Discovery deny sharing Kaplinsky’s sentiments or receiving the e-mail, but Judge Pauley concluded that the facts were in dispute. Kaplinsky, a frequent commentator on the impact of the Supreme Court’s Concepcion ruling, “pioneered the use of pre-dispute arbitration provisions in consumer contracts,” according to his firm biography. (Kaplinsky declined to comment; Wilmer didn’t respond to a request for comment.)
“While we’re disappointed that our motion for summary judgment wasn’t granted, we’re confident in the outcome of the case,” said Citi counsel David Graham of Sidley Austin. “There was absolutely no collusion here, and the evidence will fully demonstrate that.” Discover counsel Robert Sperling of Winston & Strawn declined to comment, as did a bank representative.