Supreme Court refuses to halt class-action status in suit over credit cards

Monday, June 10th 2002, 12:00 am
By: News On 6

WASHINGTON (AP) _ The Supreme Court refused Monday to stop a multibillion-dollar battle over credit card rules, a defeat for Visa and MasterCard.

Justices passed up a chance to rewrite rules for class-action lawsuits. Their refusal means no protection for the credit card companies from a suit that pits them against 4 million merchants that accept the credit cards.

Banking groups unsuccessfully argued that the huge antitrust lawsuit could threaten the stability of the country's plastic-friendly marketplace. Many Americans rely on credit cards to pay utility bills, order goods over the phone and shop on the Internet and in stores.

The court could have reviewed rules for allowing large groups of people or companies to team up in a lawsuit, known as a class action.

The potential financial impact apparently did not catch the court's attention. Justices were given competing numbers of potential damages, ranging from $39 billion to $100 billion.

A divided panel of the New York-based 2nd U.S. Circuit Court of Appeals had given its blessing to the way a judge handled the lawsuit against Visa and MasterCard.

A trial is pending in Brooklyn, N.Y., and businesses around the country could seek damages if the case is successful.

Chains like Wal-Mart, Sears and Circuit City joined smaller stores in suing Visa USA Inc. and MasterCard International Inc., accusing the companies of having a monopoly in credit cards and trying to extend that dominance to debit cards.

The stores claim that excessive transaction fees are being charged for the debit card clearing process.

The retailers were given class-action status in 2000, and the credit card companies challenged that.

Carter Phillips, the Washington attorney for the credit card companies, told the court that with more than 3,000 class-actions filed in federal courts every year, judges need more direction from the Supreme Court on when to allow them.

"So long as there is uncertainty about this bedrock issue, it will frequently recur and consume scarce judicial resources," Phillips wrote in court papers. "It is no exaggeration to say that a class certification can result in financial devastation for employers, industries, and entire segments of the economy and alter policies and practices whose legality has never been adjudicated."

New York attorney Lloyd Constantine, representing the merchants, said the credit cards' "predicament is not a product of coercion or blackmail. It is the product of their conduct" and current rules for the suits.

The merchants are fighting the credit card companies' "honor all cards" policy, which requires that if businesses accept any Visa or MasterCard credit cards, they have to accept all cards, including debit cards.

Car-makers, chemical companies, insurers, bankers and other groups urged the court to review the case. The American Bankers Association warned that without new rules lawyers can engineer costly lawsuits and have "whole industries face off in the district court, rather than in legislative chambers or in the marketplace."

The case is MasterCard International v. Wal-Mart, 01-1464.