Drafting Arbitration Clauses May Be Probative Of Antitrust Conspiracy

Drafting Arbitration Clauses May Be Probative Of Antitrust Conspiracy

by Ed O'Connor

In In re Currency Conversion Fee Antitrust Litig., Judge William H. Pauley III denied a motion for summary judgment by Defendants Discover and Citigroup after finding that a handful of meetings over four years by Defendants' in-house counsel related to drafting and implementing arbitration clauses was probative of an antitrust conspiracy. This was despite Plaintiffs' admitted paucity of evidence, overall weak circumstantial evidence, the absence of discussions of pricing terms, and the lack of knowledge about such meetings by Defendants' decision-makers.

Background Claims and Facts

Plaintiffs, holders of credit or charge cards, alleged that the issuing bank Defendants violated Section 1 of the Sherman Act by conspiring to include mandatory arbitration clauses in cardholder agreements and participating in a group boycott by refusing to issue cards to individuals who did not agree to arbitration.

From 1999 through 2003, in-house counsel from Defendants allegedly met several times and discussed arbitration clauses. Moving Defendants Citigroup and Discover allegedly only attended 3-5 meetings, possibly adopted their arbitration clauses prior to such meetings, and their executives with decision-making authority to implement the arbitration clauses had "no knowledge" of such meetings. These two remaining Defendants moved for summary judgment, but the Court denied the motion because there were genuine issues of fact to be resolved at trial.

Legal Standards

The Court summarized the familiar antitrust summary judgment standards stated in Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) [an enhanced version of this opinion is available to lexis.com subscribers] ("antitrust law limits the range of permissible inferences from ambiguous evidence in a § 1 case. ... [Thus, t]o survive a motion for summary judgment ... a plaintiff [alleging] a violation of § 1 must present evidence that tends to exclude the possibility that the alleged conspirators acted independently.") and Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984) [enhanced version] (to survive summary judgment, Plaintiffs must proffer "direct or circumstantial evidence that reasonably tends to prove the [defendants] had a conscious commitment to a common scheme designed to achieve an unlawful objective."). [footnote omitted]

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This Emerging Issue Analysis was authored by attorneys from the Antitrust Practice Group of Sheppard, Mullin, Richter & Hampton LLP.

Eric O'Connor is an associate in the Business Trial and Antitrust Practice Groups in the firm's New York office.

Mr. O'Connor specializes in complex litigation, with particular expertise in antitrust, unfair competition, intellectual property, and class actions. He has first-chair trial experience in federal court, including a successful trial to verdict in a copyright matter. Mr. O'Connor's practice includes all forms of Alternative Dispute Resolution, focusing particularly on international arbitration and also is a Court-appointed mediator for the U.S. District Court for the Southern District of New York.