Court Rejects Amex Antitrust Settlement over Attorney Collusion

Case: American Express Anti-Steering Rules Antitrust Litigation

Issue: Whether American Express Co.’s (Amex) proposed settlement is tainted due to Amex’s co-lead class counsel allegedly colluding with an attorney for MasterCard Inc. (MasterCard) in a separate case through exchanging confidential information.

Case Summary: A Brooklyn district court rejected American Express Co.’s (Amex) proposed settlement with merchants challenging Amex’s credit card fees in the antitrust litigation due to co-lead class counsel Gary B. Friedman allegedly colluding with an attorney for MasterCard Inc. (MasterCard) in a separate case through exchanging confidential information.

The proposed settlement allowed merchants to impose a surcharge on Amex credit transactions under the condition they apply the same surcharge to all credit cards they accept. The settlement also required Amex to pay up to $75 million in attorneys’ fees for the plaintiffs and $4 million in other costs. Most of the retailers involved in the litigation opposed the fairness of the proposed settlement.

The district court initially approved the settlement in late 2013, but after allegedly discovering that Friedman was frequently exchanging confidential information with MasterCard’s attorney about the negotiations and status of the settlements, the court vacated the settlement agreement and removed Friedman and his law firm from co-lead class counsel.

In describing Friedman’s misconduct as “egregious,” the court concluded that the “procedural unfairness and failure of adequate representation revealed by the communications requires disapproval of the settlement. The court cannot thoughtfully access its substantive fairness without assurance that the class was properly represented in the negotiations.” The court did not address the merits of the retailers’ objections to the agreement because Friedman’s conduct “tainted the settlement process.”

Bottom Line: A conference is scheduled in the district court for October 5, 2015 to decide the next steps in the litigation.