Consumers suffered a major setback on April 10, when three major credit card issuers won a dismissal of the US lawsuits against them. The lawsuits accused the issuers of working in tandem with the aim that the disputes are settled in arbitration and not through class action lawsuits.
According to William Pauley, the US District Judge for the case, the cardholders could now show that Citigroup Inc (NYSE: C), Discover Financial Services (NYSE: DFS) and American Express Co (NYSE: AXP) conspired to violate Sherman antitrust law.
It has been argued by the plaintiffs that the aforesaid conspiracy was operational in the period starting from May 1999 to October 2003. In this period, it is alleged that 10 banks having card issuing capabilities and the banks’ lawyers held a total of 28 meetings where they discussed the method of imposing compulsory mandatory arbitration clauses when it comes to cardholder agreements. Pauley said that the decision in this 10 year old case was tough to make as there were the “conscious parallel action” among largest shareholders to include clauses.
Pauley wrote in the 92 page long decision that the plaintiffs were unsuccessful in demonstrating that lawyers who organized the meetings had given birth to a Sherman Act conspiracy among the clients and lost by a slender margin. There was no jury in the trial.
Class action litigation permits passengers to cluster resources and to obtain a larger number of recoveries at considerably lower cost compared to individual arbitration.
Defeat of consumer rights
According to Curtis Arnold, founder, CardRatings.com and a consumer advocate, this development is a big blow for consumer rights. He said that class action lawsuits have kept this industry on a leash for many years. Individuals are practically powerless when it comes to tackling the card companies themselves.
Cardholders have tried to force Citigroup, Discover and American Express to remove the arbitration clauses from cardholder agreements for a period of eight years. The plaintiffs were represented by the law firm Berger and Montague. Merrill Davidoff, a partner at the firm expressed disappointment with the decision made by the US District Judge. He said that it is too early to decide whether to make an appeal.
Robert Sperling, Partner, Winston & Strawn, who represented Discover, said that the cardholders never came near to proving any collusion. Emily Collins, the Citigroup spokesman, said that the bank is happy with the decision.