The fate of $170 million in fees sought by lawyers at Grant & Eisenhofer and three other law firms that negotiated an antitrust settlement with Visa and Mastercard is up in the air, after a Brooklyn federal judge rejected the proposed deal last week.
Following nearly 20 years of litigation, the settlement would have required Visa and Mastercard to limit the swipe fees, or interchange fees, paid by millions of merchants when shoppers use credit or debit cards. Merchants have long accused Visa and Mastercard of overcharging them on the fees.
Under the agreement, Visa would have paid up to $113.3 million and Mastercard would have paid up to $56.6 million to compensate the class action lawyers if their fee request was approved.
But the settlement, which the lawyers said would save merchants $30 billion over five years, did not go far enough, U.S. District Judge Margo Brodie said in her 88-page ruling.
Brodie's decision did contain some good news for the class attorneys, who also included lawyers at Hilliard Shadowen, Freed Kanner London & Millen and the Nussbaum Law Group. Brodie did not object to the terms of their $170 million fee request, which the defendants had agreed to pay out within 20 business days of the judge's approval.
The wait will now be much, much longer, however, as the attorneys must now try to extract more concessions from Visa and Mastercard.
The defendants could likely withstand a "substantially greater" settlement, Brodie said in her decision, citing an estimate that merchants paid $100 billion in interchange fees on Visa and Mastercard transactions in 2023 alone.
The accord would have lowered the typical 1.5% to 3.5% swipe fee by 0.04 percentage points for three years, capped fees for five years, and given merchants more room to impose surcharges.
The deal kept fees too high and still required merchants to accept an "Honor All Cards" rule requiring that they take all Visa and Mastercard cards, or none, Brodie said.
Attorneys at the four class counsel firms did not respond to requests for comment on the decision. A Mastercard spokesperson declined to comment, and a Visa spokesperson did not immediately respond to a request for comment. The companies have denied violating antitrust law.
The rejection of a proposed class action settlement in the preliminary stages is relatively rare, class action experts told Reuters.
Brodie's decision cannot be appealed, and even if it could, it would be difficult to overturn given her findings, said Ted Frank of the Hamilton Lincoln Law Institute, who is known for bringing objections to class action settlements.
"You wouldn't be able to show that it's clearly erroneous," Frank said. Frank said he consulted with an objector to a 2013 settlement in the swipe-fee case. He has not done any legal work relating to the 2024 settlement.
The proposed settlement attracted opposition from large retailers like Walmart, Target and GrubHub, as well as the National Retail Federation and the Retail Industry Leaders Association, who said it was inadequate.
The NRF has not yet weighed in on the plaintiffs' fee request, but that's largely due to other concerns over the deal, said Stephanie Martz, the group's chief administrative officer and general counsel.
"It's not 'not a problem,' but it's not our particular problem," Martz said.
Any new settlement would likely include a higher fee request, Vanderbilt Law School professor Brian Fitzpatrick said in an email, based on both the value of a renegotiated deal and the additional time required to reach it.
- In other fee news, Tesla and the legal team that voided Elon Musk's $56 billion in stock options will make their arguments to a Delaware judge on Monday over the lawyers' bid for compensation. The plaintiff's team is seeking 29 million Tesla shares, worth around $7 billion as of Wednesday, which they argued is around 11% of the benefit they achieved for the company.
Tesla has argued that the case obtained virtually nothing for the company and the fee should be around $13.6 million.
- Plaintiffs' firms including Carney Bates & Pulliam, Shamis & Gentile and Edelsberg Law that reached a $48 million deal resolving claims that Progressive undervalued wrecked cars and said they will seek up to $16 million in legal fees.
- Law firms Hagens Berman and Cohen Milstein were awarded $51.6 million for their work representing chicken consumers in a long-running price-fixing case, after an appeals court ordered the Chicago federal judge overseeing the litigation to re-visit his initial $57 million award.
(Legal Fee Tracker is a weekly feature exploring attorney compensation awards and disputes in class actions, bankruptcies and other matters. Please send tips or suggestions to [email protected])
