Savelson et al v. JP Morgan Chase & Co. et al
Filing
112
MEMORANDUM AND ORDER denying 90 motion for reconsideration; granting 97 cross-motion for reconsideration. For the reasons stated in the attached Memorandum and Order, the Court denies Plaintiffs' motion for reconsideration. The Court grants Defendants' cross-motion for reconsideration and, on reconsideration, dismisses Plaintiffs' claim under the Cartwright Act, California Business and Professions Code § 16750(a). Ordered by Judge Margo K. Brodie on 2/24/2016. (Deknatel, Anna)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------------MARVIN SALVESON, EDWARD LAWRENCE,
DIANNA LAWRENCE and WENDY M. ADAMS,
on behalf of themselves and all others similarly
situated,
MEMORANDUM & ORDER
14-CV-3529 (MKB)
Plaintiffs,
v.
JP MORGAN CHASE & CO., J.P. MORGAN
BANK, N.A., BANK OF AMERICA
CORPORATION, BANK OF AMERICA N.A.,
CAPITAL ONE F.S.B., CAPITAL ONE
FINANCIAL CORPORATION, CAPITAL ONE
BANK, HSBC FINANCE CORPORATION, HSBC
BANK USA, N.A., HSBC NORTH AMERICAN
HOLDINGS, INC. and HSBC HOLDINGS, PLC,
Defendants.
--------------------------------------------------------------MARGO K. BRODIE, United States District Judge:
Plaintiffs Marvin Salveson, Edward Lawrence, Dianna Lawrence and Wendy M. Adams
commenced this putative antitrust class action on December 16, 2013, in the United States
District Court for the Northern District of California against Defendants, financial institutions
who issue general purpose payment cards that consumers use to purchase goods and services,
and the affiliates of such institutions.1 On behalf of a putative nationwide class of consumers
using payment cards issued by Defendants, Plaintiffs assert claims pursuant to Sections 4 and 16
of the Clayton Act, 15 U.S.C. §§ 15 and 26, and pursuant to the Cartwright Act, California
1
On June 4, 2014, the Clerk of Court for the Northern District of California entered a
Transfer Order from the United States Judicial Panel on Multi District Litigation, transferring
this case to the Eastern District of New York. (MDL Transfer Order, Docket Entry No. 61.)
Business and Professions Code § 16750(a). Defendants moved to dismiss all of Plaintiffs’
claims, and by Memorandum and Order filed on November 26, 2014, the Court granted
Defendants’ motion (the “November 26, 2014 Decision”).2 The Clerk of Court entered judgment
on December 4, 2014. (Dec. 4, 2014 J., Docket Entry No. 86.)
Plaintiffs now move to vacate the judgment and, pursuant to Local Civil Rule 6.3, for
reconsideration of the dismissal of their federal claim. Defendants cross-move for
reconsideration pursuant to Rule 59(e) of the Federal Rules of Civil Procedure and Local Civil
Rule 6.3, seeking reconsideration of the Court’s refusal to exercise supplemental jurisdiction
over Plaintiffs’ California state law claim. For the reasons set forth below, Plaintiffs’
reconsideration motion is denied. The Court grants Defendants’ reconsideration motion and, on
reconsideration, dismisses Plaintiffs’ state law claim.
I.
Background
The Court assumes familiarity with the facts and procedural background as set forth in
the November 26, 2014 Decision. (Nov. 26, 2014 Memorandum and Order (“M&O”), Docket
Entry No. 83.) The Court summarizes only the pertinent facts.
According to Plaintiffs, in the course of issuing payment cards to consumers, Defendants
and their affiliates knowingly participated in an anticompetitive conspiracy to fix fees related to
those payment cards. (Compl. ¶¶ 26–29.) These fees are known as interchange fees. (See id.
¶¶ 40, 48.) Plaintiffs contend that consumers like Plaintiffs and the putative class used the
payment cards to purchase goods and services and “paid supracompetitive [i]nterchange [f]ees to
Defendants and their co-conspirators.” (Id. ¶¶ 19–20.)
2
On December 18, 2014, the United States Judicial Panel on Multidistrict Litigation,
with the consent of the Court, ordered that the case be reassigned from Judge John Gleeson to the
undersigned. (Order Reassigning Litigation, Docket Entry No. 88.)
2
Plaintiffs allege that each time a consumer uses a payment card, the following sequence
of events occur: the merchant accepts the payment card from the cardholder and relays the
transaction information to the merchant’s “acquiring bank”; the acquiring bank then transmits the
transaction information to the payment card’s network –– either Visa or MasterCard; and the
network then relays the transaction information to the cardholder’s “issuing bank” for approval
of the transaction. (Id. ¶ 49 (quoting United States v. Visa U.S.A., Inc., 344 F.3d 229, 235
(2d Cir. 2003)).) If the issuing bank determines the consumer has sufficient credit and approves
the transaction, it conveys its approval to the acquiring bank and the acquiring bank then relays
its approval to the merchant. (See id.) Finally, the issuing bank –– in this case, one of the
Defendants –– pays the acquiring bank an amount representing the price of the goods or services
purchased by the consumer in the underlying transaction, less an “interchange fee,” the fee at
issue in this case. (See id.)
Plaintiffs allege that Defendants’ participation in an anticompetitive conspiracy has
injured cardholders by causing them to “pa[y] supracompetitive price-fixed [i]nterchange [f]ees
to Defendants” that were higher “than [the fees] they would have paid in the absence
of . . . antitrust violations” by Defendants. (Id. ¶¶ 104–105.) Plaintiffs contend that a cardholder
“pays the gross amount of the transaction, including fees, directly to the [issuing bank], which
keeps the [i]nterchang [f]ee and passes on a separate transaction fee to the [acquiring bank] and
the net amount to the merchant via the Visa or MasterCard network.” (Id. ¶ 38.) According to
Plaintiffs, the interchange fee is paid “directly” by the cardholders. (Id. ¶ 6.) Plaintiffs
specifically allege that the initial payment in the transaction is made by cardholders, that the
issuing bank “keep[s]” the interchange fee from that payment, and that the payments made by
3
cardholders are “comprise[d]” of the “balance” due to the merchant plus the interchange fee and
other fees. (Id. ¶¶ 47–48, 81.)
II. Discussion
a.
Standards of review
i.
Reconsideration
The standard for granting a motion for reconsideration is strict, and “[r]econsideration
will generally be denied unless the moving party can point to controlling decisions or data that
the court overlooked — matters, in other words, that might reasonably be expected to alter the
conclusion reached by the court.” Cedar Petrochemicals, Inc. v. Dongbu Hannong Chem. Co.,
Ltd., --- F. App’x ---, ---, 2015 WL 5999215, at *3 (2d Cir. 2015) (quoting Shrader v. CSX
Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995)); Bank of Am. Nat’l Ass’n v. AIG Fin. Prods.
Corp., 509 F. App’x 24, 27 (2d Cir. 2013) (“The standard for granting such a motion is
strict . . . .” (quoting Shrader, 70 F.3d at 257)), as amended (Apr. 5, 2013); see also Local Civ.
R. 6.3 (The moving party must “set[] forth concisely the matters or controlling decisions which
counsel believes the Court has overlooked.”).
It is thus “well-settled” that a motion for reconsideration is “not a vehicle for relitigating
old issues, presenting the case under new theories, securing a rehearing on the merits, or
otherwise taking a ‘second bite at the apple.’” Analytical Surveys, Inc. v. Tonga Partners, L.P.,
684 F.3d 36, 52 (2d Cir. 2012) (quoting Sequa Corp. v. GBJ Corp., 156 F.3d 136, 144 (2d Cir.
1998)), as amended (July 13, 2012). A motion for reconsideration is “neither an occasion for
repeating old arguments previously rejected nor an opportunity for making new arguments that
could have previously been made.” Simon v. Smith & Nephew, Inc., 18 F. Supp. 3d 423, 425
(S.D.N.Y. 2014) (citation and internal quotation marks omitted). In order to prevail on a motion
4
for reconsideration, “the moving party must demonstrate that the Court overlooked controlling
decisions or factual matters that were put before the Court on the underlying motion.”
Lichtenberg v. Besicorp Grp. Inc., 28 F. App’x 73, 75 (2d Cir. 2002) (citations and internal
quotation marks omitted); see also Stoner v. Young Concert Artists, Inc., No. 11-CV-7279, 2013
WL 2425137, at *1 (S.D.N.Y. May 20, 2013) (“A motion for reconsideration is an extraordinary
remedy, and this Court will not reconsider issues already examined simply because a party is
dissatisfied with the outcome of his case. To do otherwise would be a waste of judicial
resources.” (alteration, citations and internal quotation marks omitted)); Henderson v. City of
New York, No. 05-CV-2588, 2011 WL 5513228, at *1 (E.D.N.Y. Nov. 10, 2011) (“In order to
have been ‘overlooked,’ the decisions or data in question must have been put before [the court]
on the underlying motion . . . and which, had they been considered, might have reasonably
altered the result before the court.” (citations and internal quotation marks omitted)).
ii.
Motion to dismiss for failure to state a claim
In reviewing a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, a court must “accept all factual allegations in the complaint as true and draw
inferences from those allegations in the light most favorable to the plaintiff.” Tsirelman v.
Daines, 794 F.3d 310, 313 (2d Cir. 2015) (quoting Jaghory v. N.Y. State Dep’t of Educ., 131
F.3d 326, 329 (2d Cir. 1997)); see also Matson v. Bd. of Educ., 631 F.3d 57, 63 (2d Cir. 2011)
(quoting Connecticut v. Am. Elec. Power Co., 582 F.3d 309, 320 (2d Cir. 2009)). A complaint
must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). A claim is plausible “when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Matson, 631 F.3d at 63 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
5
(2009)); see also Pension Ben. Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v.
Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 717–18 (2d Cir. 2013). Although all allegations
contained in the complaint are assumed true, this principle is “inapplicable to legal conclusions”
or “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements.” Iqbal, 556 U.S. at 678.
b.
Plaintiffs’ motion for reconsideration of the dismissal of the federal claim
In the November 26, 2014 Decision, the Court granted Defendants’ motion to dismiss the
Complaint. The Court determined that Plaintiffs are indirect purchasers and therefore the
dismissal of the federal claim was appropriate because the claim is barred by the rule set forth in
Illinois Brick Company v. Illinois, 431 U.S. 720 (1977), which denies standing to indirect
purchasers’ under Section 4 of the Clayton Act. (M&O 6–8.)
i.
The November 26, 2014 Decision
The Court explained in the November 26, 2014 Decision that, pursuant to the Supreme
Court decision in Illinois Brick, “indirect purchasers –– individuals or entities that do not make
purchases directly from the defendants alleged to have violated antitrust laws –– do not have
standing to sue under § 4 of the Clayton Act.” (Id. at 5.) As the Court stated, “only direct
purchasers have standing under § 4 of the Clayton Act to seek damages for antitrust violations.”
(Id. (internal quotation marks omitted) (quoting Delaware Valley Surgical Supply Inc. v. Johnson
& Johnson, 523 F.3d 1116, 1120–21 (9th Cir. 2008)).) The Court further explained that the
presumption against recovery for plaintiffs who are “not the immediate buyers from the alleged
antitrust violations” includes cases “in which immediate buyers pass on 100 percent of their costs
to their customers.” (Id. (internal quotation marks omitted) (quoting Kansas v. Utilicorp United,
Inc., 497 U.S. 199, 207–208 (1990)).)
6
The Court determined that Plaintiffs failed to allege that they are direct purchasers or that
their federal claim came within an exception to the Illinois Brick doctrine. (Id. at 5–7.) The
Court stated that Plaintiffs’ allegations –– including the allegation that the payments made by
cardholders as part of each credit card transaction represented direct payments of the
“supracompetitive” interchange fees to Defendants –– were insufficient to plead that cardholders
are direct purchasers with standing. (Id. at 6.)
ii.
Plaintiffs’ arguments in support of their reconsideration motion
In seeking reconsideration, Plaintiffs argue, in substance, that the Court overlooked the
standard applicable to a motion to dismiss by failing to accept Plaintiffs’ allegations as true.
(Mem. in Support of Pls. Mot. (“Pls. Mem.”) 4, Docket Entry No. 91.) Plaintiffs argue that,
“[t]here is no question that the cardholders repeatedly alleged that they were the direct payors or
purchasers” and that the allegation that cardholders pay the interchange fee is not only plausible
but also “manifest and self-evident.” (Id.) Plaintiffs further argue that the Court overlooked
their pleadings as to the role of cardholders in the payment transactions containing the
interchange fee.3 (Id. (“[T]his Court explained the structure of the network. . . . Although the
3
In support of their argument that cardholders directly pay interchange fees, Plaintiffs
file a declaration and exhibits in support of their motion. (Decl. of Joseph M. Alioto, Docket
Entry No. 92; see also Pls. Reply 1, Docket Entry No. 103 (arguing that the “dispositive charts”
in the exhibits “showed that the cardholder paid the money, which included the interchange fee”
and that the “charts also showed, in support of the plausibility of the allegations in [P]laintiffs’
complaint, that the cardholder paid the issuing bank, which kept the interchange fee and passed
on the remainder to the acquiring bank, which kept its fee and in turn passed on the remainder to
the merchant”).) The Court declines to consider these documents as they were not attached to
the Complaint and were not otherwise before the Court when it decided Defendants’ motion to
dismiss, and, therefore, these documents are not properly before the Court on Plaintiffs’ motion
for reconsideration. See Drapkin v. Mafco Consol. Grp., Inc., 818 F. Supp. 2d 678, 695
(S.D.N.Y. 2011) (explaining that a moving party seeking reconsideration may “not advance new
facts, issues or arguments not previously presented to the Court” (internal quotation marks and
citation omitted)). Moreover, Local Civil Rule 6.3 specifies that on a motion for reconsideration
“[n]o affidavits shall be filed by any party unless directed by the Court.” Local Civil Rule 6.3.
7
[C]ourt included the so-called ‘issuing bank,’ the ‘acquiring bank,’ and the merchant, the
cardholder consumer was omitted.”).)
iii. Plaintiffs fail to satisfy the standard for reconsideration
The Court neither overlooked Plaintiffs’ allegations that the interchange fees are paid
directly by cardholders nor ignored the obligation to credit Plaintiffs’ factual allegations.
Because Plaintiffs have not shown (1) that the Court overlooked critical facts or (2) that the
Court overlooked any relevant controlling decisions, there is no basis for the Court to reconsider
the dismissal of Plaintiffs’ federal law claim for failure to state a claim. See Shrader, 70 F.3d at
257 (holding that a party seeking reconsideration must identify overlooked “controlling decisions
or data”); Analytical Surveys, 684 F.3d at 52 (explaining that a motion for reconsideration is not
a vehicle for relitigation of issues already addressed by the court); Bey v. City of New York,
No. 13-CV-9103, 2015 WL 5473155, at *1 (S.D.N.Y. Sept. 16, 2015) (construing plaintiff’s
motion for relief from court’s order as a motion for reconsideration).
In the Complaint, Plaintiffs quote United States v. Visa U.S.A., Inc., 344 F.3d 229
(2d Cir. 2003), in describing the structure of the transactions giving rise to the incursion and
payment of the interchange fee. (Compl. ¶ 48.) Plaintiffs specifically quote a portion of the
Second Circuit decision stating “[w]hereas in the market for general purpose cards, the issuers
are the sellers, and cardholders are the buyers, in the market for general purpose card network
services, the four networks themselves are the sellers, and the issuers of cards and merchants are
the buyers.” 4 (Id. ¶ 48 (quoting Visa U.S.A., 344 F.3d at 239).) Thus, based on the allegations,
4
Plaintiffs selectively quote the Second Circuit’s explanation in United States v. Visa
U.S.A., Inc., 344 F.3d 229 (2d Cir. 2003) that, “in the market for general purpose [credit cards],
the issuers are the sellers, and the cardholders are the buyers” to inaccurately plead that this
phrase demonstrates that “the Second Circuit expressly held that Cardholders are ‘direct
8
Plaintiffs recognize that there is a distinction between two markets: one for payment cards (the
“Payment Card Market”), in which consumers participate by purchasing cards from issuing
banks, and another for network services (the “Card Network Services Market”), in which
merchants purchase services to facilitate the use of those cards. Plaintiffs also allege that the
interchange fee is exchanged between financial institutions in the Card Network Services
Market. (Id. ¶ 48.) In rejecting their claim, the Court determined that Plaintiffs’ “facile
contention that cardholders pay interchange fees directly is refuted by their own allegations
about how transactions over these two networks occur” and that Plaintiffs’ conclusory and
contradictory pleadings did not plausibly allege that the cardholders are direct purchasers.
(M&O 6–7.)
Plaintiffs argue that the Court failed to credit the allegations that cardholders are the
direct payors of interchange fees and, in so doing, overlooked controlling law, namely the
standard applicable to a motion to dismiss. Although the Court may not have expressly
referenced the pleading standard in stating that Plaintiffs failed to allege that cardholders are
direct purchasers, the Court’s determination was based on its rejection of the direct purchaser
allegations as conclusory, contradictory and insufficient to support an inference that cardholders
are the payors of interchange fees. (Id. at 6–7.) “Although factual allegations of a complaint are
normally accepted as true on a motion to dismiss, . . . that principle does not apply to general
purchasers’ for antitrust purposes.” (Compl. ¶ 50 (quoting Visa U.S.A., 344 F.3d at 239).) The
Visa U.S.A decision contains no such holding. The standing of cardholders to bring antitrust
claims, as direct or indirect purchasers, was not at issue in Visa U.S.A. In the phrase cited by
Plaintiffs, the Second Circuit was explaining its determination that the district court had correctly
found that the payment card networks “compete with one another in a market for ‘network
services.’” Visa U.S.A., 344 F.3d at 239. In doing so, the Second Circuit described that
consumers are “buyers” of payment cards, not payers of interchange fees, and did so to provide
an explanatory contrast. Id. (emphasis in original).
9
allegations that are contradicted ‘by more specific allegations in the Complaint.’” DPWN
Holdings (USA), Inc. v. United Air Lines, Inc., 747 F.3d 145, 151–52 (2d Cir. 2014) (citations
omitted); see also Sherman v. Town of Chester, 752 F.3d 554, 568 n.5 (2d Cir. 2014) (declining
to credit allegation that an appeal was timely filed where the complaint also “explicitly state[d]”
contradictory allegations); Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1095 (2d Cir. 1995)
(“[T]he [c]omplaint’s attenuated allegations of control are contradicted both by more specific
allegations in the Complaint and by facts of which we may take judicial notice . . . .”).
The Court accepted Plaintiffs’ factual allegations and drew “all reasonable inferences in
[P]laintiffs’ favor.” (M&O 5 (citing Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir. 1994)).
However, the Court was not obligated to credit Plaintiffs’ allegation that cardholders are the
direct payors of interchange fees, as this allegation is directly contradicted by the specific
allegations about the Payment Card and Card Services Markets and the transactions involving
the interchange fee. DPWN Holdings, 747 F.3d at 152. The Court considered the applicable
standard and determined that Plaintiffs’ allegations did not permit a reasonable inference that
cardholders are direct payors, given that such a conclusion is at odds with the allegations
regarding the structure of the relevant transactions. (M&O 5); see also Matson, 631 F.3d at 63
(A claim is plausible “when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” (quoting Iqbal, 556
U.S. at 678)). Plaintiffs have not identified any controlling law that the Court overlooked.
Plaintiffs also argue that the Court specifically overlooked allegations that cardholders
pay interchange fees directly by initiating the chain of events that occurs as part of each
transaction. The Court considered and rejected this claim. See, e.g., Boyd v. J.E. Robert Co.,
No. 05-CV-2455, 2013 WL 5436969, at *2 (E.D.N.Y. Sept. 27, 2013) (denying reconsideration
10
where “[p]laintiffs’ motion . . . merely attempts to relitigate and rehash arguments already
considered and rejected by the court”), aff’d, 765 F.3d 123 (2d Cir. 2014); PAB Aviation, Inc. v.
United States, No. 98-CV-5952, 2000 WL 1240196, at *1 (E.D.N.Y. Aug. 24, 2000) (“Because
PAB’s motion involves only reformulations of arguments already considered and rejected,
reconsideration is not warranted.”), aff’d, 169 F. App’x 61 (2d Cir. 2006). Plaintiffs disagree
with the Court’s outcome and are attempting to “relitigat[e] old issues,” which is not a basis for
reconsideration. See Analytical Surveys, 684 F.3d at 52.
Plaintiffs have failed to identify controlling law or allegations that the Court overlooked.
The Court therefore declines to reconsider its determination that Plaintiffs are barred from
asserting claims under § 4 of the Clayton Act by the Illinois Brick doctrine. Plaintiffs’
reconsideration motion is denied.
c.
Defendants’ cross-motion for reconsideration of the state law claim
In the November 26, 2014 Decision, the Court declined to exercise supplemental
jurisdiction over Plaintiffs’ state law claim and dismissed the claim without prejudice. (M&O 8.)
Defendants seek reconsideration of this determination, arguing that the Court overlooked the fact
that it had original jurisdiction over Plaintiffs’ state law claim pursuant to the Class Action
Fairness Act, 28 U.S.C. § 1332(d), (“CAFA”), and that the Court should therefore have
addressed the merits of the state law claim. (Defs. Opp’n & Mem. 5, Docket Entry No. 98.)
Defendants further argue that on reconsideration of the underlying motion to dismiss, the Court
should dismiss the Cartwright Act claim because Plaintiffs have failed to allege a cognizable
antitrust injury. (Id. at 7–8.)
11
i.
The Court’s jurisdiction pursuant to CAFA
Defendants argue that CAFA provides the Court with original jurisdiction over Plaintiffs’
Cartwright Act claim because the claim is asserted on behalf of a nationwide class against
diverse Defendants and the damages sought are sufficient that “no permissive or mandatory
exceptions apply.” (Id. at 5.) Plaintiffs oppose Defendants’ motion primarily by arguing against
the dismissal of the state law claim on the merits. (Pls. Mem in Opp’n to Defs. Mot. (“Pls.
Opp’n”) 8–9, Docket Entry No. 104.) Plaintiffs do not address Defendants’ argument that
CAFA provides original jurisdiction over the state law claim. (Id. at 8.) Plaintiffs also fail to
address the argument that because the Court overlooked this controlling law, there are grounds to
reconsider Defendants’ motion to dismiss. (Id.) Instead, Plaintiffs argue that “a federal court has
discretion whether to entertain a supplemental state claim, after dismissing federal claims,” and
appear to argue that the Court should not exercise its discretion to exercise jurisdiction. (Id.)
CAFA provides federal district courts “with ‘original jurisdiction’ to hear a ‘class action’
if the class has more than 100 members, the parties are minimally diverse, and the ‘matter
in controversy exceeds the sum or value of $5,000,000.’” Standard Fire Ins. Co. v. Knowles,
562 U.S. ---, ---, 133 S. Ct. 1345, 1348 (2013) (quoting 28 U.S.C. § 1332(d)(2), (d)(5)(B)); see
also Estate of Pew v. Cardarelli, 527 F.3d 25, 30 (2d Cir. 2008) (“CAFA amends the diversity
jurisdiction statute by adding § 1332(d), which confers original federal jurisdiction over any
class action with minimal diversity (e.g., where at least one plaintiff and one defendant are
citizens of different states) and an aggregate amount in controversy of at least $5 million
(exclusive of interest and costs).”).
CAFA provides three exceptions to original jurisdiction: “the so-called ‘local
controversy,’ ‘home state controversy,’ and ‘interests of justice’ exceptions.” Mattera v. Clear
12
Channel Commc’ns, Inc., 239 F.R.D. 70, 77 (S.D.N.Y. 2006). The local controversy and home
state exceptions to CAFA jurisdiction mandate that district courts decline jurisdiction if certain
elements are present that identify a case with primarily in-state class members seeking relief
principally for in-state harm by citizens of the same state.5 Id. (citing 28 U.S.C. § 1332(d)(4)(A)
and (d)(3)); see also Hart v. Rick’s N.Y. Cabaret Int’l, Inc., 967 F. Supp. 2d 955, 962 (S.D.N.Y.
2014) (“The mandatory exceptions are designed to draw a delicate balance between making a
federal forum available to genuinely national litigation and allowing the state courts to retain
cases when the controversy is strongly linked to that state. . . . [T]hese exceptions are intended
to keep purely local matters and issues of particular state concern in the state courts.” (internal
quotation marks and citation omitted)). A district court may also, in the “interest of justice,”
decline jurisdiction after considering a set of factors “designed to address similar concerns
regarding truly local controversies in cases where neither mandatory exception applies.”
Sorrentino v. ASN Roosevelt Ctr., LLC, 588 F. Supp. 2d 350, 355 (E.D.N.Y. 2008); see also
Mattera, 239 F.R.D. at 77 (listing the statutory factors); Hart, 967 F. Supp. 2d at 962–69 (finding
that neither mandatory exception applied to class claims asserted under New York state law, and
declining to invoke the interest of justice exception).
Plaintiffs allege that the Court has original jurisdiction over their state law claim pursuant
to section 1332(d) and that the claim is asserted on behalf of a nationwide class against diverse
Defendants, seeking damages in excess of $5,000,000. (Compl. ¶ 8.) While Plaintiffs do not
expressly plead that the class would number more than 100 members, the parties appear to
5
The local controversy and home state exceptions have distinct requirements, but both
are similarly tailored to address claims involving in-state harms. Plaintiffs have not argued
either of these exceptions, and it is clear that this is not a state or local issue, thus the exceptions
are not applicable.
13
concede that a nationwide class of Visa and Mastercard cardholders would exceed 100 members.
(Id. ¶¶ 1, 8.) Plaintiffs do not seek relief for primarily in-state class members to remedy in-state
harm by citizens of the same state, and thus, the claim does not fall within either of the
mandatory exceptions to CAFA’s grant of original jurisdiction. 28 U.S.C. § 1332(d)(4)(A),
(d)(3). Neither party argues to the contrary. Finally, it is not in the interests of justice to
consider declining jurisdiction, as it is apparent that Plaintiffs’ allegations relate to the
nationwide practices of national financial institutions affecting consumers in every state, as
opposed to allegations regarding to a “truly local” controversy. Sorrentino, 588 F. Supp. 2d
at 355.
In declining to exercise supplemental jurisdiction in the November 26, 2014 Decision, the
Court overlooked controlling law, specifically, CAFA’s provision of original jurisdiction over
the state law Cartwright Act claim. The Court therefore grants reconsideration of Defendants’
motion to dismiss Plaintiffs’ state law claim.
ii.
Reconsideration of Defendants’ motion to dismiss Plaintiffs’ state law
claim
Plaintiffs allege that Defendants violated California’s Cartwright Act, which “enumerates
a relatively broad array of anticompetitive and conspiratorial conduct” and “provides a private
right of action to ‘[a]ny person who is injured in his or her business or property by reason of
anything forbidden or declared unlawful by this chapter.’” (Compl. ¶ 112–121); AT&T Mobility
LLC v. AU Optronics Corp., 707 F.3d 1106, 1110 (9th Cir. 2013) (quoting Cal. Bus. & Prof.
Code § 16720(a)); see also Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 986 (9th Cir.
2000) (The Cartwright Act “prohibits, among other things, any combination ‘[t]o prevent
competition in [the] sale or purchase of . . . any commodity’ or to ‘[a]gree in any manner to keep
the price of . . . [any] commodity . . . at a fixed or graduated figure.’” (quoting Cal. Bus. & Prof.
14
Code § 16720(c) and (e)(2))); Clayworth v. Pfizer, Inc., 49 Cal. 4th 758, 770 (2010) (stating that
the Cartwright Act “authorizes anyone injured in his or her business or property by actions
forbidden” by the statute to seek to recover treble damages (internal quotation marks and citation
omitted)); Asahi Kasei Pharma Corp. v. CoTherix, Inc., 138 Cal. Rptr. 3d 620, 625 (Ct. App.
2012) (explaining that the Cartwright Act “generally outlaws any combinations or agreements
which restrain trade or competition or which fix or control prices” (citations omitted)). Stating a
claim under the Cartwright Act requires a plaintiff to allege: “(1) the formation and operation of
the conspiracy; (2) illegal acts done pursuant thereto; and (3) damage proximately caused by
such acts.” In re High-Tech Employee Antitrust Litig., 856 F. Supp. 2d 1103, 1126 (N.D. Cal.
2012) (internal quotation marks omitted) (quoting Kolling v. Dow Jones & Co., 187 Cal. Rptr.
797, 803 (Ct. App. 1982); Asahi, 138 Cal. Rptr. 3d at 626–27 (same).
1.
Standing to recover as direct purchasers
Defendants move to dismiss Plaintiffs’ Cartwright Act claim, arguing that Plaintiffs have
failed to adequately plead an antitrust injury and thus lack standing to recover. (Defs. Not. of
Mot. and Mem in Support of Mot. to Dismiss (“Defs. MTD”) 12–18, Docket Entry No. 38.) As
with the federal claim, Plaintiffs’ state law claim is based on allegations that cardholders are the
direct payors of interchange fees that were inflated through anti-competitive behavior. (See, e.g.,
Compl. ¶ 114 (alleging that Defendants with their co-conspirators have acted “to create or
carry out restriction of commerce and restraints of trade by agreeing to fix high
non-competitive . . . [i]nterchange [f]ees imposed on [c]ardholders in the Visa and MasterCard
networks”); id. ¶ 115 (stating that Defendants “engaged in a California-based horizontal scheme
to fix [i]nterchange [f]ees paid by [c]ardholders”).) The Complaint alleges that the named
15
Plaintiffs have “been injured by being forced to pay higher [i]nterchange [f]ees than they would
pay in the absence of the price-fixing conspiracy alleged herein.”6 (Id. ¶ 120.)
Defendants contend that Plaintiffs lack standing to bring a Cartwright Act claim because
Plaintiffs cannot satisfy the requirements for an antitrust injury as established by Associated
General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519
(1983) (“AGC ”). Defendants argue that Plaintiffs lack standing to recover because, according to
Plaintiffs’ pleadings, the alleged fixing of interchange fees only occurs in the Card Network
Services Market, in which financial institutions provide services to facilitate card transactions,
while cardholders participate only in the Payment Card Market, in which consumers purchase
payment cards. (MTD Mem. 8.) Defendants argue that cardholders do not purchase network
services or pay interchange fees and thus “any alleged downstream impact on the price of retail
consumer goods is . . . derivative and too remote to confer standing under well-established
antitrust standing principles.” (Defs. Reply in Support of Defs. MTD (“MTD Reply”) 2, Docket
Entry No. 63.) Plaintiffs respond that they have pled a direct, rather than downstream, antitrust
injury that confers standing and disagree that the AGC factors apply to the California claim, an
argument presented for the first time in their motion for reconsideration. (Pls. MTD Opp’n 13;
Pls. Cross Mot. Opp’n 3–4.)
6
Plaintiffs also allege that the anti-competitive conspiracy causes “increased retail prices
for goods and services paid by [c]ardholders.” (Compl. ¶ 101(h)). However, in response to
Defendants’ motion to dismiss, Plaintiffs expressly state that they plead an injury that is
“not . . . damages from the inflated price of goods and services purchased from merchants.” (Pls.
Opp’n to Defs. MTD (“Pls. MTD Opp’n) 13, Docket Entry No. 52). Plaintiffs also state that
construing the Complaint to allege price inflation “is a distortion of the allegations” because the
Complaint “does not allege that Plaintiffs’ damages are based on inflated costs to merchant
which the merchants passed on the Plaintiffs by charging higher prices for goods and services.”
(Id. at 14.)
16
A.
Standard applicable to determining antitrust standing
for a Cartwright Act claim
The Cartwright Act grants a private right of action to “[a]ny person who is injured in his
or her business or property by reason of anything forbidden or declared unlawful by this
chapter.” Calif. Bus. & Prof. Code § 16750(a). The Clayton Act uses similar language, entitling
“[a]ny person who [is] injured in his business or property by reason of anything forbidden in the
antitrust laws” to receive treble damages for those injuries. 15 U.S.C. § 15; see also Gatt
Commc’ns, Inc. v. PMC Assocs., L.L.C., 711 F.3d 68, 75 (2d Cir. 2013). The Supreme Court has
explained that the federal statutory language is limited because “Congress did not intend the
antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to
an antitrust violation.” Gatt Commc’ns, 711 F.3d at 75 (quoting AGC, 459 U.S. at 534); see also
Knevelbaard, 232 F.3d at 987–92 (“The Supreme Court has held that Congress did not intend to
afford a remedy to everyone injured by an antitrust violation simply on a showing of causation.
The plaintiff must have ‘antitrust standing.’” (citing AGC, 459 U.S. at 534–35)). Courts consider
the following factors, identified in AGC, in order to determine whether a federal plaintiff has
antitrust standing:
[W]hether the plaintiff’s alleged injury is of the type that the
antitrust statute was intended to forestall; . . . the directness or
indirectness of the asserted injury; . . . the extent to which the
plaintiff’s asserted damages are speculative; . . . the potential for
duplicative
recovery
or
complex
apportionment
of
damages; . . . and the existence of more direct victims of the alleged
conspiracy . . . .
Gatt Commc’ns, 711 F.3d at 76 (internal quotation marks and citations omitted) (quoting AGC,
459 U.S. at 535, 542, 545); see also Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d
117, 121–22 (2d Cir. 2007). The Second Circuit has “distilled these factors into two
imperatives”: that an antitrust plaintiff allege (1) that “it suffered a special kind of ‘antitrust
17
injury,’” and (2) that “it is a suitable plaintiff to pursue the alleged antitrust violations and thus is
an ‘efficient enforcer’ of the antitrust laws.” Gatt Commc’ns, 711 F.3d at 76 (citations omitted).
Consistent with standing more generally, “antitrust standing is a threshold, pleading-stage
inquiry and when a complaint by its terms fails to establish this requirement,” the claim must be
dismissed as a matter of law. Id. at 75 (internal quotation marks omitted) (quoting NicSand,
Inc. v. 3M Co., 507 F.3d 442, 450 (6th Cir. 2007) (en banc)); see also Port Dock, 507 F.3d at
121, 126–27 (dismissing Clayton Act Section 4 claim for lack of antitrust standing); Paycom
Billing Servs., Inc. v. MasterCard Int’l, Inc., 467 F.3d 283, 290–95 (2d Cir. 2006) (evaluating the
suitability of an antitrust plaintiff by “efficient enforcer” factors, the second through fifth factors
articulated in AGC). The importance assigned to these factors “will necessarily vary with the
circumstances of particular cases.” Daniel, 428 F.3d at 443.
Where a plaintiff asserts a state law antitrust claim, the “threshold question presented” is
whether the AGC factors also apply to establish the antitrust injury. In re Flash Memory
Antitrust Litig., 643 F. Supp. 2d 1133, 1151 (N.D. Cal. 2009). In the absence of a clear rule
provided by state law, federal courts analyzing “unsettled areas of state law” must “carefully
predict how the state’s highest court would resolve the uncertainties,” so as to avoid “distort[ing]
established state law.” Runner v. N.Y. Stock Exch., Inc., 568 F.3d 383, 386 (2d Cir. 2009)
(quoting Travelers Ins. Co. v. Carpenter, 411 F.3d 323, 329 (2d Cir. 2005)); see also Empire
City Capital Corp. v. Citibank, N.A., No. 10-CV-2601, 2011 WL 4484453, at *2 (S.D.N.Y. Sept.
28, 2011) (explaining that the court “construe[s] and appl[ies] state law as it believes the state’s
highest court would” (quoting Liddle & Robinson, LLP v. Garrett, 720 F. Supp. 2d 417, 424
(S.D.N.Y. 2010)).
18
In predicting how a state’s highest court would resolve the issue, courts must “give the
fullest weight to pronouncements of the state’s highest court . . . while giving proper regard to
relevant rulings of the state’s lower courts.” Runner, 568 F.3d at 386 (quoting Carpenter, 411
F.3d at 329); see also Reddington v. Staten Island Univ. Hosp., 511 F.3d 126, 133 (2d Cir. 2007)
(explaining that lower state court’s decisions, while not “strictly” binding, may be “helpful
indicators of how the [state’s highest court] would decide” an issue), certified question accepted,
9 N.Y.3d 1020, and certified question answered, 11 N.Y.3d 80 (2008); New York v. Nat’l Serv.
Indus., Inc., 460 F.3d 201, 210 (2d Cir. 2006) (“[T]he judgment of an intermediate appellate state
court ‘is a datum for ascertaining state law which is not to be disregarded by a federal court
unless it is convinced by other persuasive data that the highest court of the state would decide
otherwise.’” (quoting Comm’r v. Estate of Bosch, 387 U.S. 456, 465 (1967))); Ryman v. Sears,
Roebuck and Co., 505 F.3d 993, 994 (9th Cir. 2007) (If “there is relevant precedent from the
state’s intermediate appellate court, the federal court must follow the state intermediate appellate
court decision unless the federal court finds convincing evidence that the state’s supreme court
likely would not follow it.”). While decisions of federal courts construing state law may also be
considered, “no deference” is owed to a “district court’s interpretation” of state law. Reddington,
511 F.3d at 133.
California’s highest court has not directly addressed whether the AGC factors should be
applied to determine whether a plaintiff has alleged antitrust injury under California law. In Re
Flash Memory, 643 F. Supp. at 1151–52. The California Supreme Court has recently stated that
“‘[i]nterpretations of federal antitrust law are at most instructive, not conclusive, when
construing the Cartwright Act, given that the Cartwright Act was modeled not on federal
antitrust statutes but instead on statutes enacted by California’s sister states around the turn of the
19
20th century.’” 7 Aryeh v. Canon Bus. Solutions, Inc., 55 Cal. 4th 1185, 1195 (2013); see also In
re Cipro Cases I & II, 61 Cal. 4th 116, 142 (2015).
At least one California intermediate appellate court has applied the AGC factors to a state
antitrust claim. Vinci v. Waste Mgmt., Inc., 43 Cal. Rptr. 2d 337, 338–39 (Ct. App. 1995). This
decision is due particular weight. See Schoenefeld v. New York, 748 F.3d 464, 469 (2d Cir.)
(explaining that “the absence of authority from New York’s highest court does not provide us
license to disregard lower court rulings nor to analyze the question as though we were presented
with a blank slate”), certified question accepted, 23 N.Y.3d 941 (2014) and certified question
answered, 25 N.Y.3d 22 (2015); Statharos v. N.Y. City Taxi & Limousine Comm’n, 198 F.3d
317, 321 (2d Cir. 1999) (“[T]he ruling of an intermediate appellate state court . . . is not to be
disregarded by a federal court unless it is convinced by other persuasive data that the highest
court of the state would decide otherwise.” (internal quotation marks and citation omitted)). In
Vinci, a California intermediate appellate court observed that “the Cartwright Act has objectives
7
Plaintiffs argue, for the first time in seeking reconsideration, that the application of the
AGC factors to claims under the Cartwright Act is precluded by the California Supreme Court’s
decision in Clayworth. (Pl. Opp’n to Defs. Cross Mot. for Reconsideration (“Pls. Cross Mot.
Opp’n”), 3–4, Docket Entry No. 104.) Plaintiffs argue that in Clayworth, the California Supreme
Court “departed” from AGC’s “principles in interpreting the Cartwright Act.” (Id. at 3.)
Because Plaintiffs did not rely on this authority in their initial motion, they cannot do so on
reconsideration. Lichtenberg, 28 F. App’x at 75 (explaining that a Court on reconsideration
considers only overlooked decisions “that were put before the Court on the underlying motion”).
In any event, the issue addressed by the California Supreme Court in Clayworth is not before this
Court. The issue in Clayworth involved the assertion of the so-called “pass-through defense” by
alleged antitrust conspirators, who asserted that claims brought by manufacturers were barred
because the manufacturers conceded that they had passed the cost of the direct antitrust injury on
to their customers. Clayworth, 49 Cal. 4th at 774. In deciding the case, the California Supreme
Court did not address antitrust standing or the sufficiency of an antitrust injury under the
Cartwright Act. Id. (noting that AGC and Vinci, as cases that dealt with antitrust causation, have
“nothing to say on the general topic that concerns us: when (as here) causation has been properly
alleged, how are antitrust damages to be measured?” (first citing AGC, 459 U.S. at 535; and then
citing Vinci, 43 Cal. Rptr. 2d at 338)).
20
identical to the federal antitrust acts,” and noted that, in the past, California courts construing the
Cartwright Act have looked to cases construing federal antitrust laws for guidance. Vinci,
43 Cal. Rptr. 2d at 338 n.1.
It is also instructive that the Ninth Circuit, although without explanation, has applied the
AGC factors to an antitrust claim brought under the Cartwright Act. Knevelbaard, 232 F.3d at
987 (holding, after applying the AGC factors, that “all elements of antitrust standing are satisfied
on the face of the present complaint”). However, despite applying the AGC factors, the Ninth
Circuit has noted that, “California law grants antitrust standing more liberally than does federal
law.” Theme Promotions, Inc. v. News Am. FSI, 35 F. App’x 463, 466–67 (9th Cir. 2002) (citing
Knevelbaard, 232 F.3d at 987) (reversing the dismissal of federal antitrust claims for failure to
allege injury to competition and thus “also revers[ing] the dismissal of the broader, more liberal
state antitrust claims”); see also In re ATM Fee Antitrust Litig., 686 F.3d 741 (9th Cir. 2012). In
Knevelbaard, the Ninth Circuit applied the “directness of the injury” AGC factor and explained
that the “extent to which antitrust injury is recognized under the Cartwright Act is enlarged, by
statute, in comparison to federal law.” Knevelbaard, 232 F.3d at 991 (As a result of the Illinois
Brock repealer statute, “the more restrictive definition of ‘antitrust injury’ under federal law does
not apply” to the Cartwright Act. (quoting Cellular Plus, Inc. v. Superior Court, 18 Cal. Rptr. 2d
308 (Cal. Ct. App. 1993))).
District courts presented with the issue of whether to apply the AGC factors in a
Cartwright Act case have reached differing conclusions. See In re Dairy Farmers of Am., Inc.
Cheese Antitrust Litig., No. 9-CV-3690, 2015 WL 3988488, at *8 (N.D. Ill. June 29, 2015)
(applying the AGC factors to antitrust claims brought under the Cartwright Act); In Re Flash
Memory, 643 F. Supp. at 1151–52 (finding the AGC factors to be applicable to an analysis of
21
antitrust standing for a Cartwright Act claim); In re TFT–LCD (Flat Panel) Antitrust Litig., 586
F. Supp. 2d 1109, 1120–24 (N.D. Cal. 2008) (stating that a clear directive from state legislature
or high court was necessary to apply the AGC factors, but nevertheless finding that plaintiffs had
standing by considering factors); In re Graphics Processing Units Antitrust Litig., 540 F. Supp.
2d 1085, 1097 (N.D. Cal. 2007) (declining to apply AGC because, while “some [state] appellate
courts have used the AGC test,” that “is not the same as showing that AGC has been adopted”).
Giving the “fullest weight to pronouncements of the state’s highest court,” Runner, 568
F.3d at 386, and mindful that the California Supreme Court has not addressed whether the AGC
factors may be applied to a Cartwright Act claim and has recently reiterated that federal law
provides only guidance for state antitrust law, Aryeh, 55 Cal. 4th at 1195, and because there is no
California law contrary to the state appellate court’s application of the AGC factors in Vinci, the
Court applies the AGC factors to Plaintiffs’ claim. The decision of both an intermediary court
and the Ninth Circuit remain the best predictor of the state’s highest court’s action on the issue,
and the Court is not “convinced” to “disregard” this data by any other indication that “the highest
court of the state would decide otherwise.” Nat’l Serv. Indus., Inc., 460 F.3d at 210; see also In
re Dairy Farmers, 2015 WL 3988488, at *8 (applying AGC factors “mindful
that . . . California’s antitrust-standing provision is broader in some respects than federal
antitrust-standing law because of California’s repealer statute”); but see Los Gatos Mercantile,
Inc v. E.I. DuPont De Nemours & Co., No. 13-CV-01180, 2015 WL 4755335, at *19 n.11 (N.D.
Cal. Aug. 11, 2015) (concluding that the California Supreme Court “would not find rationale set
forth in Vinci persuasive and would not apply AGC” given “repeated instruction that federal
antitrust law does not control interpretation of the Cartwright Act”); In re Capacitors Antitrust
Litig., 2015 WL 3398199, at *13 (N.D. Cal. May 26, 2015) (“The application of AGC to
22
California state antitrust claims has recently become murky, and that murkiness persuades the
Court AGC should not be applied.”).
The Court finds that it is appropriate to apply the AGC factors in order to determine
whether Plaintiffs have antitrust standing to assert their Cartwright Act claim and that the factors
are “instructive, not conclusive.” See Aryeh, 55 Cal. 4th at 1195. Consistent with the Ninth
Circuit’s approach in Knevelbaard, this Court will apply the AGC factors “liberally,” and in
concert with the broader antitrust standing requirements under California law, particularly with
respect to the application of AGC’s second factor, the directness of the injury. See Knevelbaard,
232 F.3d at 985, 89 (“[F]ederal antitrust precedents are properly included in a Cartwright Act
analysis, but their role is limited: they are ‘often helpful’ but not necessarily decisive.” (quoting
State of Cal. ex rel. Van de Kamp v. Texaco, Inc., 762 P.2d 385, 395 (1988))).
B.
Plaintiffs lack antitrust standing under the Cartwright
Act as direct purchasers
The Court now applies the AGC factors to determine whether Plaintiffs have antitrust
standing to assert a claim pursuant to the Cartwright Act. The factors for determining “whether a
plaintiff who has borne an injury has antitrust standing” are: “(1) the nature of the plaintiff's
alleged injury, (2) the directness of the injury, (3) the speculative nature of the harm, (4) the risk
of duplicative recovery and (5) the complexity in apportioning damages.” Abbouds’
McDonald’s LLC v. McDonald’s Corp., No. 05-CV-36032, 2006 WL 1877247, at *1 (9th Cir.
July 7, 2006) (citing AGC, 459 U.S. at 535–37); see also Vinci, 43 Cal. Rptr. 2d at 339 (“The
factors identified by the court which favor a finding that the plaintiff is a proper party include the
following: (1) the existence of an antitrust violation with resulting harm to the plaintiff; (2) an
injury of a type which the antitrust laws were designed to redress; (3) a direct causal connection
between the asserted injury and the alleged restraint of trade; (4) the absence of more direct
23
victims so that the denial of standing would leave a significant antitrust violation unremedied;
and (5) the lack of a potential for double recovery.”).
(1) The nature of Plaintiffs’ injury
The first AGC factor considers whether the nature of the injury asserted by a plaintiff is
“the type the antitrust laws were intended to forestall.” Knevelbaard, 232 F.3d at 987 (quoting
Am. Ad Mgmt., Inc. v. Gen. Tel. Co., 190 F.3d 1051, 1055 (9th Cir. 1999)). The Ninth Circuit
has “identif[ied] four requirements that must be met in order to conclude that there is antitrust
injury: (1) unlawful conduct, (2) causing an injury to the plaintiff, (3) that flows from that which
makes the conduct unlawful, and (4) that is of the type the antitrust laws were intended to
prevent.” Id. (quoting Am. Ad Mgmt., 190 F.3d at 1055). “The requirement that the alleged
injury be related to anti-competitive behavior requires, as a corollary, that the injured party be a
participant in the same market as the alleged malefactors.” In re Flash Memory, 643 F. Supp. 2d
at 1153 (internal quotation marks and citation omitted) (quoting Bhan v. NME Hosps., Inc., 772
F.2d 1467, 1470 (9th Cir. 1985)); see also AGC, 459 U.S. at 539 (dismissing claim asserted
where plaintiff “was neither a consumer nor a competitor in the market in which trade was
restrained”); Vinci, 36 Cal. App. 4th at 1816 (dismissing for lack of antitrust standing because
“plaintiff was neither a consumer nor a competitor in the market in which trade was restrained”);
Tanaka v. Univ. of Southern Cal., 252 F.3d 1059, 1063 (9th Cir. 2001) (explaining that the
anticompetitive effects must be felt in the “relevant market”); In re Dynamic Random Access
Memory (Dram) Antitrust Litig., 516 F. Supp. 2d 1072, 1090 (N.D. Cal. 2007) (dismissing
antitrust claims asserted by plaintiffs who were “participants in separate, albeit related,
markets”).
24
Here, Plaintiffs allege that cardholders were injured by the “payment of inflated
[i]nterchange [f]ees by payment cardholders to their [i]ssuer banks” and that cardholders pay
interchange fees directly in the Payment Card Market “because the cardholder is the first and
only person who pays anything.” (Pls. MTD Opp’n 5.) Plaintiffs assert that “by extracting the
price-fixed ‘interchange fee’ directly from the cardholder’s account . . . and keeping it, the
[i]ssuer bank inflicts injury and damage on the cardholder . . . within the [i]ssuer-cardholder
market.” (Pls. MTD Opp’n 7 (citing Compl. ¶¶ 49, 81).)
Defendants’ central argument is that Plaintiffs “are not consumers, competitors, or
participants in the allegedly restrained market,” and that any unlawful conduct by Defendants
was not directed at Plaintiffs. (Defs. MTD 7 (citing Eagle v. Star-Kist Foods, Inc., 812 F.2d 538,
539–43 (9th Cir. 1987) (affirming a district court determination that plaintiffs failed to satisfy the
first AGC factor because they were “neither consumers nor competitors in the relevant market”
and “because the alleged anticompetitive conduct was directed” at a party other than the
plaintiffs)).) In Eagle, fishing boat employees and their union sued their employer for its
allegedly anticompetitive behavior in the market to buy and sell fish, arguing that the employer’s
conspiracy to set artificially low prices for tuna reduced their wages and, ultimately, the dues
paid to their union. Eagle, 812 F.2d at 539. The Ninth Circuit held that the crewmembers
lacked standing because, as non-parties to their employer’s agreements to sell the fish, they were
not participants in the relevant market as either consumers or competitors and the employer’s
conduct was “directed at the vessel owners, not the crewmembers or the union.” Id. at 541.
According to Defendants, Plaintiffs “blur the definition of the relevant market” to
obscure the distinction between the Payment Card Market, in which cardholders participate, and
the Card Network Services Market, in which the interchange fee is paid between financial
25
institutions. (Id. at 8 (citing Compl. ¶ 94 (alleging that “Visa and MasterCard general purpose
Credit cards and Debit cards and Visa and MasterCard credit card network services and Debit
card network services are the relevant markets”)).) Defendants argue that Plaintiffs fail to allege
any participation by cardholders in the Card Network Services Market or any anticompetitive
conduct in the Payment Card Market and thus, like the fishing boat employees in Eagle, there
was no anticompetitive conduct directed at Plaintiffs. (Id.)
In attempting to characterize the allegedly anticompetitive conduct of the issuing banks
as being directed at cardholders, Plaintiffs emphasize that cardholders are in privity with issuing
banks in the Payment Card Market. For example, Plaintiffs argue that Defendants’ reliance on
Eagle is misplaced and the facts are distinguishable because, “unlike cardholders” who do have a
contractual relationship with the issuing banks, the fishing boat employees were “not parties to
their employer’s . . . agreement” to sell fish. (Pls. MTD Opp’n 8 (citing Eagle, 812 F.2d at
539).) In Eagle, the fishing boat employees had a contractual relationship with their employer in
a separate and distinct market for the fishing services provided by the fishing boat employees,
but were nevertheless not parties to the agreement relevant to the anticompetitive behavior.
Eagle, 812 F.2d at 539. The same is true here. Plaintiffs allege in the Complaint that
cardholders “participate in the . . . card market in that they are issued payment cards” rather than
in the Card Network Services Market, which facilitates the purchases of goods and services
when cardholders use their payment cards to obtain goods and services from merchants. (Compl.
¶ 81.) Although cardholders and issuing banks transact in the Payment Card Market, that is
insufficient to overcome the fact that the allegedly anticompetitive interchange fee is set and paid
between financial institutions in the Card Network Services Market, not between issuing banks
and cardholders in the Payment Card Market.
26
Plaintiffs also argue that the Ninth Circuit’s decision in Knevelbaard, where the court
found sufficient antitrust injuries despite conduct by the defendants across multiple relevant
markets, supports a finding of sufficient injuries here. (Pls. MTD Opp’n 9 (citing Knevelbaard,
232 F.3d at 987).) Plaintiffs’ reliance on Knevelbaard is misplaced. In Knevelbaard, the
milk-seller plaintiffs asserted a claim against milk-buyer defendants, who the plaintiffs alleged
had rigged the price of bulk cheese with the direct effect of creating “artificially depressed milk
prices.” Knevelbaard, 232 F.3d at 987–88. The Ninth Circuit concluded that the defendants’
actions in the market for bulk cheese caused economic loss to the plaintiffs in the related market
for milk, in which the defendants both participated and sought to fix prices. Id. at 989 (“[T]he
complaint’s allegations unmistakably place all parties in the milk market — the defendants as
buyers and the plaintiffs as sellers — and even have them transacting business with each
other.”). Unlike the milk seller plaintiffs in Knevelbaard, Plaintiffs have not alleged that issuing
banks directed anticompetitive fees at cardholders in the Payment Card Market or that
cardholders suffered any resulting economic harm when issuing banks “kept” the interchange fee
charged within the Card Network Services Market. Although conduct across multiple markets
may result in an antitrust injury, Plaintiffs have not alleged such injury.
Plaintiffs further argue that cardholders suffer an injury analogous to those experienced
by purchasers at the low end of a distribution chain. (Pls. MTD Opp’n 9–10.) Plaintiffs argue
that the Payment Card Market and the Card Network Services Market are “inextricably linked”
because “without the card with its card number, the network is inoperable.” (Id. at 8.) Plaintiffs
contend that, because no transaction could take place without cardholders and their accounts, the
interchange fees are sufficiently “traceable” to cardholders to provide antitrust standing, similar
to damages that are passed along a distribution chain. (Id. at 8–9.) Plaintiffs argue repeatedly
27
that the similarity between their injury and that of secondary purchasers renders the damages to
cardholders traceable. (Id. at 9 (first citing In re Cathode Ray Tube (CRT) Antitrust Litig., 738
F. Supp. 2d 1011, 1024 (N.D. Cal. 2010) (finding an alleged overcharge for cathode ray tubes
significantly intertwined and traceable through market for televisions and computer monitors that
contain cathode ray tubes); then citing In re Flash Memory, 643 F. Supp. 2d at 1150–56 (finding
antitrust injury across markets for NAND flash memory and finished products containing NAND
flash memory); then citing In re TFT-LCD, 586 F. Supp. 2d at 1123–24 (identifying traceable
antitrust injury across market for TFT-LCD panels and market for finished products containing
TFT-LCD panels); and then citing In re Graphics Processing Units, 540 F. Supp. 2d at 1098–99
(finding an antitrust injury traceable from a market for GPUs through a market for computers
that contain GPUs)).) Defendants contend that the “inextricably linked” exception to
participating in the relevant market is a narrow one, and requires a plaintiff to suffer a direct
injury. (Defs. MTD Reply 3.) Defendants argue that Plaintiffs have not alleged any injury,
including one traceable to a secondary market. (Id.)
Plaintiffs have expressly alleged in the Complaint that cardholders are directly injured
when interchange fees are assessed from the funds extracted from cardholders’ accounts, and
have disclaimed the allegation that the cost of supracompetitive interchange fees are passed onto
cardholders through merchants. (Compl. ¶¶ 49, 81; see also Pls. MTD Opp’n 13–14; MTD
Reply 5 (arguing that “plaintiffs expressly disavow reliance on an overcharge pass-through
theory, or a claim that the prices they paid for goods and services were inflated at all”).) As
such, the cases Plaintiffs rely on to argue that their harm is traceable or similar to damages
passed through a distribution change are inapposite.
28
With respect to demonstrating the presence of “unlawful conduct causing an injury to the
plaintiff,” Knevelbaard, 232 F.3d at 987, because Plaintiffs are “neither consumer[s] nor
competitor[s] in the market in which trade was restrained,” anticompetitive behavior by issuing
banks within the Card Network Services Market was not directed at Plaintiffs, AGC, 459 U.S. at
539. Rather, cardholders are “consumer[s] of goods sold by merchants who happen to be part of
the affected market.” Nass-Romero v. Visa U.S.A. Inc., 279 P.3d 772, 778 (N.M. Ct. App. 2012)
(affirming dismissal of federal antitrust claims asserted by cardholders against Visa entities for
lack of standing, including because cardholders are not in the restrained market)). Plaintiffs have
failed to plead that anticompetitive behavior by Defendants, the issuing banks, was directed at
cardholders or caused an economic injury to cardholders, and thus, have failed to allege an
antitrust injury that satisfies the first AGC factor. The failure to satisfy this factor is grounds to
dismiss Plaintiffs’ claim. See, e.g., Crouch v. Crompton Corp., No. 02-CV-4375, 2004 WL
2414027, at *26 (N.C. Super. Ct. Oct. 28, 2004) (“This factor alone would strongly support a
finding of no standing . . . .”). The Court nevertheless addresses the additional factors.
(2) The directness of Plaintiffs’ injury
To assess the directness of a plaintiff’s injury, pursuant to the second AGC factor, the
court “look[s] to the chain of causation between [plaintiff’s] injury and the alleged restraint in
the market.” Knevelbaard, 232 F.3d at 989 (internal quotation marks omitted) (quoting Am. Ad
Mgmt., 190 F.3d at 1058). In AGC, the Supreme Court identified “two separate considerations”
within the directness inquiry: “(1) the chain of causation alleged by the plaintiffs; and (2) the
existence of an identifiable class of persons whose self-interest would normally motivate them to
vindicate the public interest in antitrust enforcement.” In re Dairy Farmers of Am., Inc. Cheese
Antitrust Litig., No. 09-CR-3690, 2013 WL 4506000, at *12 (N.D. Ill. Aug. 23, 2013) (citing
29
AGC, 459 U.S. at 540–42); see also In re Refrigerant Compressors Antitrust Litig., 2013 WL
1431756, at *14–15 (E.D. Mich. Apr. 9, 2013) (explaining that the “causal nexus between the
alleged conspiracy” and the alleged injury cannot be “too remote and attenuated” for it to
provide antitrust standing”). However, as explained above, “[t]he extent to which antitrust injury
is recognized under the Cartwright Act is enlarged, by statute, in comparison to federal law”
because an action “may be brought by any person who is injured in his or her business or
property by reason of anything forbidden or declared unlawful by this chapter, regardless of
whether such injured person dealt directly or indirectly with the defendant.” Knevelbaard, 232
F.3d at 991 (internal quotation marks omitted) (quoting Calif. Bus. & Prof. Code § 16750(a)).
The parties’ arguments with respect to the directness of the injury to Plaintiffs are the
same as their arguments about the nature of the injury to Plaintiffs. Defendants contend that
“any impact on Plaintiffs” through final consumer prices “would be at most derivative” of the
effect on the Card Network Services Market. (Defs. MTD 9.) Plaintiffs assert that Defendants
have misconstrued their allegations, and that the payment of the interchange fee from funds
withdrawn from cardholders’ accounts renders a direct injury to Plaintiffs. (Pls. MTD Opp’n
11.) Plaintiffs argue that the injury is directly incurred from issuing bank to cardholder, rather
than passed along through the merchant and the cost of the good or service purchased by the
cardholder. (Id.) Plaintiffs also reiterate their argument that their injuries are traceable and, thus,
“adequate to show that there is a chain of causation between . . . allegedly anticompetitive
conduct” and the injury to cardholders. (Id. (quoting In re Flash Memory, 643 F. Supp.
at 1155).)
When considering the application of the directness factor to a Cartwright Act claim, the
Court is aware that California law allows recovery for antitrust injuries that result from a more
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attenuated and indirect causal chain than is permitted under federal law. See Knevelbaard, 232
F.3d at 989 (explaining the development of the Cartwright Act in response to Illinois Brick);
In re Dairy Farmers, 2015 WL 3988488, at *8 (explaining that “California’s antitrust-standing
provision is broader in some respects than federal antitrust-standing law because of California’s
repealer statute”). Plaintiffs’ allegations are deficient, not because they fail to assert a direct
injury, but because they fail to plead that the cardholders suffered any plausible economic injury.
Although Plaintiffs argue that the interchange fee is paid from “the cardholder’s account first
before paying the balance to the acquirer bank and the merchant,” their allegations also
acknowledge that the amount withdrawn from a cardholder’s account is due, in its entirety, to a
merchant for goods or services, and thus there is no increased cost to cardholders from the
interchange fee. (Pls. MTD Sur-Reply 2.) Plaintiffs concede that the amount withdrawn from
the cardholder’s account is the price to purchase the goods, rather than the price of the goods
combined with a surcharge for any interchange fee. (Pls. MTD Opp’n 11.) The Court finds that
Plaintiffs cannot satisfy the second AGC factor because, as explained above, the allegedly
anticompetitive conduct of the issuing banks was not directed at cardholders and has not resulted
in an injury for the Court to assess for its directness.
(3) Speculative nature of the harm, the risk of
duplicative recovery, and the complexity in
apportioning damages
The Court considers the final three AGC factors together, as they reflect overlapping
concerns. Under the third factor, courts consider whether a plaintiff’s damages are only
speculative, in that “(1) the alleged injury was indirect; and (2) ‘the alleged effects . . . may have
been produced by independent factors.’” Am. Ad Mgmt., 190 F.3d at 1059 (quoting AGC, 459
U.S. at 542); see also Knevelbaard, 232 F.3d at 991 (Where “the alleged effects on the [plaintiff]
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may have been produced by independent factors, the [plaintiff’s] damages claim” may also be
“highly speculative.”); Eagle, 812 F.2d at 542 (citing these considerations). As to the fourth
factor, “[t]he risk to be avoided . . . is that potential plaintiffs may be in a ‘position to assert
conflicting claims to a common fund . . . thereby creating the danger of multiple liability.’”
Am. Ad Mgmt., 190 F.3d at 1059 (quoting AGC, 459 U.S. at 544); see also Eagle, 812 F.2d at
542. Finally, the court considers whether, “if the plaintiff is allowed standing, any attempt to
ascertain damages would lead to ‘long and complicated proceedings involving massive evidence
and complicated theories.’” Eagle, 812 F.2d at 543 (quoting AGC, 459 U.S. at 544).
Plaintiffs argue that merchants asserting claims arising from the same allegedly
anticompetitive interchange fees “are not better positioned to assert injury to card holders as they
are not direct payers” of the interchange fee, and thus the recovery to Plaintiffs is neither
speculative nor complex to apportion. (Pls. MTD Opp’n 12.) Plaintiffs also argue that the injury
is concrete and simple, and rely on their assertion that cardholders’ injury need not be traced
through inflated costs passed on by merchants. (Id. at 12–13.) Similarly, Plaintiffs state that
because damages are “traceable by cardholder account number, there is no risk of duplicative
recovery.” (Id. at 13.) Defendants counter that other parties “are better positioned to bring these
claims” and have an adequate economic motivation to do so, including both merchants and the
acquiring banks who pay the interchange fees in the Card Network Services Market. (Defs.
MTD 10.)
Assuming that there is harm to Plaintiffs caused by the interchange fees and also that it
would be feasible to determine the amount of such harm, there remains a large and predictable
risk of duplicative recovery against the issuing banks as well as the need for “long and
complicated proceedings” to determine the damages due to cardholders and merchants. Eagle,
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812 F.2d at 543. Plaintiffs do not address the certified class of merchants before the Court who
have asserted essentially identical claims to Plaintiffs, and the fact that duplicative recovery ––
and thus the need to apportion damages –– is not merely hypothetical. Thus, assuming an injury
to cardholders, Plaintiffs have not shown that their claims can be litigated without expensive and
duplicative efforts.
The Court finds that Plaintiffs have failed to assert a direct antitrust injury that confers
standing to bring a claim under the Cartwright Act because Plaintiffs are not in the relevant
market of the alleged antitrust conduct and because allowing such a claim would inevitably result
in duplicative and expensive litigation.
2.
Standing to recover as indirect purchasers
On reconsideration, Plaintiffs for the first time argue that the Court may decline to
dismiss their state law claim on an alternative ground that cardholders are indirect purchasers.
(Pls. Cross Mot. Opp’n 1–2.) In response, Defendants argue that “it is neither in dispute nor
relevant” that California has “no per se bar against actions by indirect purchasers” because
Plaintiffs have “never alleged that they were indirect purchasers” but rather have only alleged
that cardholders are the direct payors of interchange fees. (Defs. Cross Mot. for Reconsideration
Reply 2, Docket Entry No. 106.) Defendants also argue that Plaintiffs are not permitted to
“amend [the] complaint through statements made in moving papers.” (Id. at 3 (quoting
Hernandez v. City of New York, No. 11-CV-3521, 2013 WL 593450, at *4 n.5 (E.D.N.Y.
Feb. 13, 2013)).)
Arguments “raised for the first time in [a] motion for reconsideration” are “not properly
presented to the district court” and, absent a reason to excuse the untimeliness, are waived by the
party. Phillips v. City of New York, 775 F.3d 538, 544 (2d Cir.), cert. denied sub nom.,
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Phillips v. City of New York, N.Y., 136 S. Ct. 104 (2015) (finding that a party had waived
arguments based on documents obtained in discovery and asserted for the first time in a motion
for reconsideration); see also Harris v. Millington, 613 F. App’x 56, 57 (2d Cir. 2015) (“We do
not generally consider claims that were raised for the first time in a motion for
reconsideration.”); Sompo Japan Ins. Co. of Am. v. Norfolk S. Ry. Co., 762 F.3d 165, 188
(2d Cir. 2014) (declining to consider arguments raised without excuse for the first time on a
motion to reconsider); Official Comm. of Unsecured Creditors of Color Tile, Inc. v. Coopers &
Lybrand, LLP, 322 F.3d 147, 159 (2d Cir. 2003) (explaining that the appeals court retains
discretion to consider “issues not timely raised below,” including those raised for the first time
on reconsideration, particularly in instances where “(1) consideration of the issue is necessary to
avoid manifest injustice or (2) the issue is purely legal and there is no need for additional
factfinding”); Goldberg v. UBS AG, 690 F. Supp. 2d 92, 98 (E.D.N.Y. 2010) (“[B]y failing to
timely raise such an argument during the briefing of its motion to dismiss, defendant waived its
right to seek reconsideration of this point.”).
In opposing Defendants’ original motion to dismiss, Plaintiffs argued that cardholders
satisfy the requirements for standing as direct purchasers. Plaintiffs stated that they “sue herein
for direct payment by them to their issuer banks” of the allegedly supra-competitive price-fixed
interchange fees. (Pls. MTD Opp’n 14.) Plaintiffs’ only mention of indirect purchasers prior to
their motion for reconsideration was in a passing reference to the fact that the Cartwright Act
“contains an Illinois Brick repealer for indirect purchasers,” not in connection with an argument
by Plaintiffs that cardholders sought to recover as indirect purchases. (Id. at 5.) Plaintiffs now
direct the Court’s attention to cases concluding that the Cartwright Act is a so-called “Repealer
Act,” which, unlike federal antitrust statutes, provides standing to indirect purchasers to assert
34
claims for antitrust injury. (Pls. June 22, 2015 Ltr 1, Docket Entry No. 109 (citing In re
Capacitors, 2015 WL 3398199, at *13).) These arguments are untimely and “not properly
presented” to the Court, as they were not made prior to the motion for reconsideration. Phillips,
775 F.3d at 544. Plaintiffs have not presented any compelling excuse for the untimeliness of this
argument, and the Court therefore declines to consider whether cardholders could have standing
to assert antitrust claims as indirect purchasers.
III. Conclusion
For the foregoing reasons, the Court denies Plaintiffs’ motion for reconsideration. The
Court grants Defendants’ cross-motion for reconsideration, and, on reconsideration, dismisses
Plaintiffs’ claim under the Cartwright Act.
SO ORDERED:
s/ MKB
MARGO K. BRODIE
United States District Judge
Dated: February 24, 2016
Brooklyn, New York
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