In Re Swipe Fee Litigation
Visa Inc., MasterCard Incorporated, and a group of credit card–issuing banks agreed on July 13 to pay an estimated $7.25 billion to settle claims that their credit card swipe-fee practices are anticompetitive. A trio of firms representing the nationwide class of merchants—Robins, Kaplan, Miller & Ciresi, Berger & Montague, and Robbins Geller Rudman & Dowd—say the proposed deal includes reforms that will benefit retailers, such as a temporary reduction in interchange fees and possible new "checkout" surcharges on customers.
The accord, on behalf of a class of about 7 million merchants, comes after a seven-year legal battle and two months ahead of a scheduled trial. In their complaint, originally filed beginning in 2005 and later consolidated as a multidistrict litigation in federal district court in Brooklyn, New York, merchants claimed that the credit card companies and issuing banks—including Citigroup Inc., Bank of America Corporation, and four others—colluded to fix prices on the interchange or "swipe" fees charged to retailers every time a consumer makes a purchase.
But opposition by some of the 19 lead plaintiffs threatens to undermine the accord. Target Corporation and Wal-Mart Stores Inc. both issued statements opposing the deal. They argue that the settlement is just window dressing and won’t offer a long-term respite from the fees, which news reports say cost merchants about $40 billion a year. And some retailer trade groups also announced plans to fight the settlement in court. Under the settlement, merchants wouldn’t be able to opt out of the litigation release or the injunctive portion of the deal, according to a trade group lawyer.
Plaintiffs have until October 19 to file their motion for preliminary approval of the settlement.
For Plaintiffs Jetro Holdings LLC (College Point, New York) et al.
Robins, Kaplan, Miller & Ciresi: Thomas Hatch, Stacey Slaughter, Thomas Undlin, K. Craig Wildfang, and associate Ryan Marth. (They are in Minneapolis.) The firm was court-appointed co–lead counsel.
For Plaintiffs NuCity Publications Inc. (Albuquerque) et al.
Robbins Geller Rudman & Dowd: Jonah Goldstein, Bonny Sweeney, counsel Patrick Coughlin, and associate Carmen Medici. (They are in San Diego.) The firm was also court-appointed co–lead counsel.
For Plaintiffs Tabu Salon and Day Spa (Costa Mesa, California) et al.
Berger & Montague: Bart Cohen, Michael Kane, and H. Laddie Montague Jr. (They are in Philadelphia.) The firm was also court-appointed co–lead counsel.
For Defendants MasterCard International Incorporated (Purchase, New York) et al.
In-House: General counsel, corporate secretary, and chief franchise integrity officer Noah Hanft and managing litigation counsel James Masterson.
Willkie Farr & Gallagher: Wesley Powell , Keila Ravelo, counsel Matthew Freimuth , and associates Shireen Hilal and Estee Konor . (They are in New York.) The firm was cocounsel. Ravelo and Powell have represented MasterCard in antitrust and litigation matters since 1996.
Paul, Weiss, Rifkind, Wharton & Garrison: Andrew Finch, Kenneth Gallo, Joseph Simons, counsel Gary Carney, and associates Karen Berenthal and Alexandra Clark. (Finch and Carney are in New York; the rest are in Washington, D.C.) The firm was cocounsel. Gallo has represented MasterCard since 1998.
For Defendants Visa U.S.A. Inc. (Foster City, California) et al.
Arnold & Porter: Robert Mason, Mark Merley, and counsel Bob Vizas. (Mason is in New York, Merley is in Washington, D.C., and Vizas is in San Francisco.) The firm did not respond to a request for comment.
For Defendant JPMorgan Chase & Co. (New York)
In-House: Senior vice presidents and associate general counsel Jill Centella and Patricia Kelly and executive director and assistant general counsel Linda Cenedella.
Skadden, Arps, Slate, Meagher & Flom: Peter Green, counsel Peter Julian, and associate Kamali Willett. (They are in New York.)
For defendants Citigroup Inc. (New York) et al.
In-House: Associate general counsel Monika Selmont and former associate general counsel Julie Nelson. Nelson retired while the litigation was under way.
Sidley Austin: David Graham, Eric Grush, Benjamin Nagin, David Schiffman, and associates Kevin Kim, Claire Korenblit, and Jennifer Novoselsky. (Graham, Grush, Schiffman, Korenblit, and Novoselsky are in Chicago; the rest are in New York.) Graham was lead counsel. The firm has long represented Citigroup in antitrust and credit card matters.
For Defendants Bank of America
Corporation (Charlotte) et al.
In-House: Deputy general counsel and director of litigation Jana Litsey and associate general counsel Cynthia Guerin.
Morrison & Foerster: Mark Ladner and Michael Miller. (They are in New York.) —Jan Wolfe, with Tom Coster
Novell v. Microsoft
After more than 12 years battling some 200 state and private antitrust claims over its alleged stranglehold on the software industry, on July 16 Microsoft Corporation appeared to put the last case to rest: an eight-year-old, $3.5 billion suit brought by Novell Inc. related to its WordPerfect word processing software.
The decision, on a motion for judgment as a matter of law, was a big win for Sullivan & Cromwell’s David Tulchin, who has been leading Microsoft’s overall defense in the litigation for 12 years. Novell tapped Jeffrey Johnson of Dickstein Shapiro and Williams & Connolly’s John Schmidtlein .
Novell, like the other private plaintiffs, filed suit in the wake of the U.S. government’s massive antitrust litigation with Micro­soft, which settled in 2002. Subsequently, private suits were consolidated into a multidistrict litigation in Baltimore before U.S. District Judge J. Frederick Motz. In its 2005 complaint, Novell alleged that Microsoft manipulated its Windows operating system to sabotage Novell’s WordPerfect and Quattro Pro programs and to boost sales of Microsoft’s then-new Office line of programs. Novell, now owned by Attachmate Corporation, claimed that Microsoft’s actions forced it to sell WordPerfect for a $1.2 billion loss; under antitrust laws, a verdict for Novell would have resulted in treble damages. Microsoft, citing internal Novell communications, argued that it was Novell’s own delays in finishing its spreadsheet program—and not Microsoft’s actions—that cost WordPerfect market share.
Motz threw out most of Novell’s claims in 2005. But Microsoft still faced a claim that it violated antitrust laws by maintaining a monopoly on the operating systems market. It won dismissal of that remaining claim on a summary judgment motion in 2010.
But the U.S. Court of Appeals for the Fourth Circuit revived the case last May, remanding it to trial court. Last December a mistrial was declared when the jury deadlocked.
In his ruling on Microsoft’s renewed motion for judgment as a matter of law, Motz found that Novell hadn’t shown that Microsoft’s actions harmed the operating system market or forced Novell to delay its products’ release. Novell couldn’t have gotten its competing applications out on time anyway, he wrote.
The judge also found no evidence that Microsoft tried to stifle Novell’s new products by withdrawing support for the application that connected Novell software to an operating system.
For Plaintiff Novell Inc. (Provo, Utah)
In-House: Vice president–legal James Lundberg.
Dickstein Shapiro: Jeffrey Johnson, James Martin, Adam Proujansky, Paul Taskier, Jason Wallach, and asso­ciates Erin Burns, Alex Hassid, Patricia Sindel, Andrew Smith, and Miriam Vishio. (They are in Washington, D.C.) The firm was lead counsel.
Williams & Connolly: John Schmidtlein. (He is in Washington, D.C.) The firm was cocounsel.
Snow, Christensen & Martineau: Maralyn English and Max Wheeler. (They are in Salt Lake City.) The firm was local counsel.
For Defendant Microsoft Corporation (Redmond, Washington)
In-House: Associate general counsel Steven Aeschbacher.
Sullivan & Cromwell: Steven Holley, Sharon Nelles, Adam Paris, David Tulchin, and associates Yavar Bathaee, Heidi Bradley, Elena Coronado, Andrew Finn, Qian Gao, John Oster, David Possick, and John Quinn. (Paris and Bradley are in Los Angeles; the rest are in New York.) The firm was lead counsel.
Ray Quinney & Nebeker: James Jardine, John Mackay, Liesel Stevens, Justin Toth, and asso­ciate Greg Newman. (They are in Salt Lake City.) The firm was local counsel. —Julie Triedman
In Re Chase Bank "Check Loan" Contract Litigation
JPMorgan Chase & Co. agreed July 23 to pay $100 million to resolve claims that the bank improperly jacked up credit card holders’ minimum monthly payments. The case stemmed from a decision by JPMorgan unit Chase Bank USA National Association to increase minimum payments for some cardholders from 2 percent of account balances to 5 percent in 2008 and 2009.
The settlement represents about half of the up-front transaction fees that class members paid to lock in initial interest rates that were later hiked, according to a motion to preliminarily approve the settlement filed in federal district court in San Francisco.
A sextet of plaintiffs firms filed an amended complaint in July 2009, accusing Chase of forcing customers to accept higher-interest credit card fees to maintain the 2 percent minimum monthly payment, or face late payment fees and a penalty interest rate of about 30 percent. The plaintiffs alleged breach of implied covenant, unconscionability, unjust enrichment, and breach of contract; they also claimed that Chase’s actions violated state consumer protection laws and the Truth in Lending Act.
In 2009 U.S. District Judge Maxine Chesney threw out all the claims except one—breach of implied covenant of good faith and fair dealing—which she certified for class treatment in May 2011. Court filings say that the class includes about 1 million credit card customers.
The settlement was reached after the parties held their fifth formal mediation session in May; trial in the case was originally set to begin in early July. JPMorgan’s lead negotiator was Stroock & Stroock & Lavan’s Julia Strickland, and former federal magistrate judge Edward Infante assisted the parties in reaching the proposed deal. Under the terms of the agreement, the plaintiffs lawyers can seek an award of attorney fees of up to 27 percent of the settlement amount—$27 million—plus expenses.
For Plaintiffs Michael Moore et al.
Lieff Cabraser Heimann & Bernstein: Elizabeth Cabraser, Roger Heller, and Michael Sobol. (They are in San Francisco.) The firm was one of six appointed to the plaintiffs’ executive committee and also served as liaison counsel.
Giskan Solotaroff Anderson & Stewart: Oren Giskan. (He is in New York.) Giskan has led numerous class actions against financial institutions. The firm was also on the plaintiffs’ executive committee.
Girard Gibbs: Eric Gibbs and associates Geoffrey Munroe and Amy Zeman. (They are in San Francisco.) The firm, which was also on the plaintiffs’ executive committee, has long represented consumers in class action litigation.
Green & Noblin: Robert Green. (He is in Larkspur, California.) Green has long represented plaintiffs classes in financial litigation. The firm was also on the plaintiffs’ executive committee.
Milberg: Paul Andrejkovics, Jeff Westerman, counsel Nicole Duckett, and associate Christian Keeney. (Andrejkovics is in New York; the others are in Los Angeles.) The firm was also on the plaintiffs’ executive committee.
The Sturdevant Law Firm: James Sturdevant. (He is in San Francisco.) The firm was also on the plaintiffs’ executive committee.
For Defendant Chase Bank USA National Association (Newark, Delaware)
Stroock & Stroock & Lavan: Stephen Newman, Julia Strickland, counsel David Moon, and associates Joseph Escarez and Alexandria Kachadoorian. (They are in Los Angeles.) The firm did not respond to requests for comment. —Ross Todd, with T.C.
In Re Southeastern Milk Antitrust Litigation
Lawyers for a class of dairy farmers got some very welcome news on June 15—and so did creditors of the defunct law firm Howrey. Almost a year after lawyers reached a $140 million class settlement with Dean Foods Company to resolve price-fixing claims on behalf of about 7,500 dairy farmers and cooperatives in the southeast, a federal judge in Tennessee finally signed off on the deal.
U.S. District Judge J. Ronnie Greer granted the settlement final approval, and also approved a separate $5 million deal with defendants Southern Marketing Agency Inc., a milk marketing cooperative, and its general manager, James Baird. According to the judge, the agreements provide for about $13,000 for individual class members—or close to a third of what a plaintiffs expert pegged as the farmers’ damages in the alleged scheme to depress prices for raw milk. The Southern Marketing Agency settlement also includes structural changes to the way milk is marketed in the Southeast.
Plaintiffs lead counsel Robert Abrams originally struck a settlement with Dean’s lawyers at Dechert in July 2011, just four months after he left the failing Howrey to join Baker & Hostetler as antitrust chair. The deal was put on indefinite hold, however, when Greer agreed with Dean that potential conflicts required him to decertify a subclass of farmers that belonged to a cooperative, Dairy Farmers of America Inc., which is also a key defendant in the case. Finally, after appointing new counsel for the DFA members subclass, Greer recertified the class in February and put the settlement back on track.
On July 11 plaintiffs attorneys were awarded $48.3 million in fees and $7.4 million in expenses. Most is expected to go to Baker and to Howrey creditors. Eight other firms, including Cohen Milstein Sellers & Toll; Boies, Schiller & Flexner; and Hausfeld LLP, each estimated their fees at around $500,000 or less.
At press time dairy farmers were still forging ahead with claims against alleged coconspirator Dairy Farmers of America and related defendants. Trial in that case is set to begin next month.
For Plaintiffs Sweetwater Valley Farm Inc. (Philadelphia, Tennessee) et al.
Baker & Hostetler: Robert Abrams, Robert Brookhiser, Gregory Commins Jr., Joanne Lichtman, Terry Sullivan, counsel William DeVinney, Danyll Foix , and associates Carey Busen, Evan Mannering, Bridget Merritt, and Nicole Skolout . (Lichtman and Skolout are in Los Angeles; the rest are in Washington, D.C.) Abrams is also representing northeastern dairy farmers, along with lead counsel from Cohen Milstein, in a parallel federal antitrust class action pending in Vermont.
Jessee & Jessee: Thomas Jessee. (He is in Johnson City, Tennessee.) The firm was local counsel.
For Plaintiffs DFA members subclass Brewer & Terry: Gary Brewer. (He is in Morristown, Tennessee.) The court appointed the firm reinstated class counsel.
For Defendant Dean Foods Company (Dallas)
Dechert: Carolyn Feeney, Paul Friedman, counsel Paul Frangie, and associate David Stanoch. (Feeney and Stanoch are in Philadelphia. Friedman and Frangie are in Washington, D.C.) The firm has long represented Dean Foods.
For Defendants Southern Marketing Agency Inc. et al.
Winston & Strawn: Gordon Dobie and associates Jared Hasten, Michael Pullos, and Kari Rollins. (They are in Chicago; Hasten has left the firm.)
For Defendant Dairy Farmers of America Inc. (kansas City, Missouri)
Williams & Connolly: Kevin Hardy, Steven Kuney, Carl Metz, John Schmidtlein, and associates Simon Latkovich and Shelley Webb. (They are in Washington, D.C.) —David Bario, with T.C.
In Re Tremont Securities Litigation
It was a rough summer at the U.S. Court of Appeals for the Second Circuit for investors in feeder funds that lost money in Bernard Madoff’s Ponzi megafraud.
On July 10 two sets of investors in funds managed by Tremont Group Holdings Inc., which lost more than $3 billion in client money in Madoff’s scheme, failed in their bid to revive claims against the funds’ auditors at KPMG L.L.P. and Ernst & Young LLP. A three-judge panel issued a summary order upholding dismissal of the plaintiffs’ federal securities claims against the auditors.
Agreeing with rulings by U.S. District Judge Thomas Griesa in Manhattan, the Second Circuit panel found that the plaintiffs’ allegations that the accounting firms had carried out inadequate audits of the Tremont funds were not adequate to support scienter claims that the auditors intended to help Madoff defraud investors or even knew of Madoff’s fraud.
The panel found that the auditors were not responsible for auditing Madoff securities, so they were not liable for missing red flags. The Second Circuit panel also pointed out that these risks were disclosed to plaintiffs in the Tremont offering materials, to investors and auditors of other Madoff feeder funds, and to the Securities and Exchange Commission—all of which were duped by Madoff’s scheme.
The ruling is the third at the Second Circuit since May to quash the efforts of feeder fund investors to recover Madoff losses through litigation. On May 18 a panel affirmed dismissal of fraud and malpractice claims brought against auditor PriceWaterhouseCoopers LLP by an investor in the Greenwich Sentry fund. And in June, the court affirmed the dismissal of auditor claims brought by an investor in feeder fund First Frontier for lack of scienter.
In appellate briefs, KPMG (Cayman), represented by Ira Feinberg at Hogan Lovells, had asked the panel to affirm one of the dismissals in part under the U.S. Supreme Court’s Morrison v. National Australia Bank , which curtailed the overseas reach of federal securities laws. But the court took a pass on the Morrison issues.
For Appellants Meridian Horizon Fund LP (Albany and New York) et al.
Friedman Kaplan Seiler & Adelman: Anne Beaumont , Scott Berman, John Orsini, and associate Steven Frankel. (They are in New York.) The firm has been involved in many recent major hedge fund fraud litigations.
For Appellants Arthur M. Brainson et al.
Bernstein Liebhard: Jeffrey Haber , Christian Siebott, and counsel Stephanie Beige. (They are in New York.) The firm did not respond to a request for comment.
For Defendant KPMG L.L.P. (Montvale, New Jersey)
Sidley Austin: Gregory Ballard, Gary Bendinger, Carter Phillips, Paul Zidlicky, and associates Samuel Choi, Adam McClay, Leslie Regenbaum, Gazeena Soni, and DeNae Thomas. (Phillips is in Chicago and Washington, D.C.; Zidlicky is in Washington, D.C.; and the rest are in New York.) Phillips argued the appeal. Bendinger successfully argued the original motion to dismiss.
Williams & Connolly: David Forkner and John Villa. (They are in Washington, D.C.) The firm has previously represented KPMG in subprime-related class action litigation and was cocounsel on the appeal.
For Defendant KPMG (Grand Cayman, Cayman Islands)
Hogan Lovells: Ira Feinberg, George Salter, and associate Chava Brandriss. (Brandriss has left the firm. The rest are in New York.) The firm has represented KPMG member firms for over 25 years.
For Defendant Ernst & Young LLP (New York)
In-House: Associate general counsel William Hammer.
Morrison & Foerster: Robert Hubbell, Brian Matsui, Deanne Maynard, and associates Natalie Ram and Tiffany Rowe. (Hubbell is in Los Angeles; the rest are in Washington, D.C.) Maynard argued the matter on appeal. Hubbell brought the case with him from Gibson, Dunn & Crutcher in 2011. Morrison & Foerster has represented the client on a number of litigation matters. —Ross Todd, with T.C.
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