Class Action

Class Action Defense Cases–Ross v. Bank of America: Second Circuit Reinstates Antitrust Class Action Holding Cardholders Possessed Article III Standing To Pursue Class Action Claims Against Credit Card Issuers

By Michael J. Hassen

District Court Erred in Dismissing Cardholder Class Action Against Credit Card Issuers, Alleging Conspiracy to Including Mandatory Arbitration Clauses in Credit Card Agreements in Violation of Federal Antitrust Laws, because Class Action Complaint Adequately Alleged Injury in Fact for Article III Standing Second Circuit Holds

Plaintiffs filed a putative class action against various credit card issuing banks for antitrust violations alleging that defendants “illegally colluded to force cardholders to accept mandatory arbitration clauses in their cardholder agreements.” Ross v. Bank of America N.A., ___ F.3d ___ (2d Cir. April 25, 2008) [Slip Opn at 4]. The class action complaint contained two antitrust claims based on violations of Section 1 of the Sherman Act: (1) that defendants “conspired to impose mandatory arbitration clauses,” and (2) that defendants “participated in a group boycott by refusing to issue cards to individuals who did not agree to arbitration.” Id., at 5-6. The class action prayed for an injunction and sought “to invalidate existing mandatory arbitration clauses, and to force the banks to withdraw all pending motions to compel arbitration.” Id., at 6. Defense attorneys moved to dismiss the class action under Rule 12(b)(1) and (b)(6) on the grounds that plaintiffs lacked standing to prosecute the antitrust class action claims, id. The district court granted the motions on the sole ground of lack of standing, and dismissed the class action complaint. See In re Currency Conversion Fee Antitrust Litig., No. 05 Civ. 7116 (WHP), 2006 U.S. Dist. LEXIS 66986 (S.D.N.Y. September 20, 2006). (A copy of the district court order dismissing the class action may be found here .) Plaintiffs appealed; the Second Circuit reversed and reinstated the class action.

The district court dismissed the class action complaint based on its belief that the injuries alleged by plaintiffs were “entirely speculative and, therefore, insufficient to establish Article III standing.” Ross, at 6 (quoting In re Currency Conversion, at *9, *12-13). As the Second Circuit explained at page 6, “Specifically, according to the district court, the cardholders’ injuries are ‘contingent on their speculation that someday (1) Defendants may engage in misconduct; (2) the parties will be unable to resolve their differences; (3) Plaintiffs may commence a lawsuit; (4) the dispute will remain unresolved; and (5) Defendants will seek to invoke arbitration provisions.’” Id., at 6-7 (quoting In re Currency Conversion, at *14-15). The district court also characterized any “alleged anticompetitive effects” as “inchoate.” Id., at 7 (quoting In re Currency Conversion, at *16). The Circuit Court disagreed.

Full post as published by Class Action Defense Blog on April 30, 2008 (boomark / email).