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Having amassed 630,000 lawyer-charged hours, a US appeals court has confirmed that payout from the $5.6bn landmark settlement against Visa and Mastercard should not be delayed further, despite a dispute between gas station franchisors and franchisees.
Last week (March 15), the US Court of Appeals for the Second Circuit rejected an appeal against the historic class action settlement under which the card networks agreed to pay $5.6bn to merchants for excessive interchange fees.
The settlement was approved by the court in 2019, putting an end to an almost 15-year legal battle.
The case affected around 12m merchants that accepted Visa or Mastercard branded cards between 2004 and 2019, excluding around 200 merchants that had opted out of the class action in the hope of negotiating better individual terms with the card giants.
A number of companies, including oil companies Shell and Chevron, challenged the settlement, raising objections against the certification of the class, as well as against the fees paid to the attorneys and lead plaintiffs.
They argued that the district court made an error when it did not define which party in a franchising relationship is part of the class and is entitled to the compensation. Instead, the court said that it would be determined by a special master at a later stage.
Both the oil companies and their branded service stations claim to have been injured by the interchange fees as they all “accepted” Visa and Mastercard branded cards in payment for gasoline sales.
For example, the franchisees were injured by accepting Visa and Mastercard at their service stations, while franchisors also have a claim because they provided operating and processing services on the same set of transactions.
As this issue was set aside for later determination, the companies argued that the class was “unascertainable” with “dire consequences for the settlement”.
This argument was nonetheless rejected by the judges, who said the class was defined with “definite boundaries” for time frame, place and group of entities that suffered the harm.
According to the judges, although the word "accepted" lends itself to ambiguity, it is “objectively possible” to determine class members based on federal antitrust law precedent.
Additionally, judges noted that, in the case of franchising relationships, it is also possible that the interchange fee was not borne alone by either one of the parties but was rather a shared injury, the proportion of which will be set out in future proceedings.
Therefore, the judges wrote they see “no reason why the settlement affecting all claimants other than the franchisors and franchisees of integrated oil companies should not be consummated”.
Legal costs
Attorneys’ fees and the lead plaintiffs’ service fees also came under the spotlight in the appeal.
The $5.6bn settlement amount involved a $523m fee to be paid to the class counsel, equivalent to 9.31 percent of the total settlement amount, and a further $900,000 to be shared between the eight lead plaintiffs.
Objectors claimed that the 630,000 hours of attorney work billed during the legal procedure was excessive.
According to the filing, this works out at more than 300 years of legal work with an average hourly pay of $800 for all those who billed in the plaintiffs’ cause, including lawyers and paralegals.
But judges said that the district court did not act arbitrarily when it decided about the amount of the service award and attorneys fees.
“We cannot say that the district court’s approach was an abuse of discretion,” judges wrote in the court document seen by VIXIO.
Visa said the company is pleased by the decision, adding that the settlement agreement “allows us to continue partnering with merchants in providing consumers with convenient, reliable, and secure ways to pay”.
Mastercard did not respond to a request for comment by the time of publication.
