AmEx Plaintiffs Say E-Mails Shouldn’t Block Antitrust Accord

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Merchants supporting an antitrust settlement with American Express Co. disputed claims by major retailers that the deal should be thrown out over unauthorized e-mails between lawyers associated with the case.

Dozens of retailers including Target Corp., Wal-Mart Stores Inc. and Home Depot Inc. contend Visa Inc. and MasterCard Inc. should pay more than the $5.7 billion they agreed on and AmEx’s settlement doesn’t go far enough to change the rules banning surcharges. The retailers are using the exchange of e-mails to press their opposition by arguing the communications showed the deals were rigged.

The e-mails “contain no suggestion” that an attorney representing merchants, Gary Friedman, “ever took any actions to the detriment” of his clients in his exchanges with the other attorney, according to a filing Wednesday in Brooklyn federal court.

The retailers filed papers in the antitrust case against AmEx case and sent a notice to lawyers in the Visa and MasterCard case Tuesday saying they would seek to throw out those settlements, according to people familiar with the litigation. The papers in the AmEx case remain under seal and the notice in the other case has not been filed publicly.

Visa and MasterCard agreed to pay the $5.7 billion to end years of litigation over credit-card swipe fees. The merchants, which included an auto repair shop and a family-run electronics store, claimed the two card companies conspired to fix the rates.

Retailers’ Appeal

The retailers have appealed the approval of the settlement. AmEx agreed in its accord to lift some of its rules banning surcharges, so that merchants can pass on some of the cost of the card fees.

Friedman, who played a lead role in the AmEx case and a minor role in the Visa and MasterCard case, exchanged thousands of e-mails with a friend who previously represented MasterCard, Keila Ravelo. The communications came to light after Ravelo was arrested on federal criminal charges last year over an alleged theft unrelated to the credit-card litigation.

Merchants in the AmEx case argued in their filing Wednesday that neither the Visa and MasterCard settlement nor their accord was affected by the discussions.

“There is not a single reference in any of the communications to any understanding or arrangement between Mr. Friedman and Ms. Ravelo regarding settlement terms in the two cases,” the merchants said.

Disclosed Contents

Wednesday’s filing by the merchants, signed by Friedman and two other attorneys, disclosed details of some of the communications at issue, which had remained secret since they were brought to the attention of the court earlier this year.

The exchanges included more than 18,000 pages of e-mails, personal text messages and other documents sent over the course of more than 15 years, the merchants said.

Retailers objecting to the settlements highlighted two e-mails in their argument against the AmEx deal, according to the merchants.

In one in November 2011, Friedman speculated to Ravelo that merchants would reject proposed limits on surcharging rights. In another, in December 2013, titled “the sole remaining, vexing issue,” Friedman referred to another proposal under which merchants might have to pay higher fees under the accord.

E-mails turned over to the retailers suggested Friedman’s “duty of loyalty” to merchants in the negotiations “clearly likely was compromised,” Jeffrey Shinder, an attorney for companies challenging the settlements, told a Brooklyn federal judge in May. Shinder said he had indications there was “sharing of strategies” between the lawyers.

Former Colleagues

Friedman and Ravelo, who once worked together as junior lawyers, exchanged professional as well as personal communications, according to Wednesday’s filing. They included records of personal loans Friedman made to Ravelo that were repaid in full, according to the merchants.

A lead lawyer for plaintiffs in the Visa and MasterCard case, K. Craig Wildfang, called the bid to overturn that settlement based on the e-mails “a complete sideshow” unlikely to succeed with judges.

“I can’t imagine circumstances under which the court would disturb the settlement based on this,” Wildfang said Tuesday in a phone interview. “The objectors are grasping at straws.”

Lawyers for Friedman and Ravelo declined to comment.

The case is American Express Anti-Steering Rules Litigation Antitrust Litigation, 1:11-md-02221, U.S. District Court, Eastern District of New York (Brooklyn).

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