Priceless: The Case That Brought Down the Visa/MasterCard Bank Cartel (11 page)

Before I filed the case (in important cases, I personally do this chore), I knew that a class action complaint by Wal-Mart and The Limited would attract plaintiffs’ class action firms to file virtually identical cases on behalf of clients whom they would come to represent, in a process that I neither understood nor particularly wanted to. The plaintiffs’ class action bar, lead by firms such as Milberg Weiss and Hagens Berman, characteristically jump on a case filed by a government antitrust or securities agency. They quickly find a client with the same grievance as the plaintiffs in the first-filed case, and file nearly identical private lawsuits. They get organized and have lead counsel appointed through their own mechanisms or by court order. They then generally wait for the government case to develop facts and legal rulings, which they use to clean up in a process, which our judge, United States District Judge John Gleeson, later described as playing “jackals to the government’s lion.”

Knowing that the Wal-Mart/Limited complaint would attract these class action firms, just like a government lawsuit does, I brought Hagens Berman into my confidence a month before our filing. I chose Hagens Berman, a firm based in Seattle, because one of its partners, George Sampson, was a person I could trust. George had been my deputy when I ran the New York attorney general’s Antitrust Bureau. Before that, George had worked with me in a Legal Services office in Brooklyn, where we represented poor people. My plan was for George’s firm to file the first copycat case and then help us organize, control, and utilize the resources of the other firms who would tag along.

Six days after we filed for Wal-Mart and The Limited, George’s firm filed a copycat complaint on behalf of Bernie’s Army Navy Store, located in
Vineland, New Jersey. Eventually, three additional firms, none from New Jersey, joined in the representation of Bernie’s, a sole proprietorship. Later, twenty-five additional firms joined in copycat filings on behalf of other stores. Most of these “law firms” were very small, and several had only one lawyer. Two of the copycat suits were filed for big retailers by larger plaintiffs’ firms: Miller, Faucher filed for Burlington Coat Factory, and Milberg Weiss filed for Payless Shoe Source, the nation’s largest shoe chain.

After the fourteen copycat lawsuits were consolidated with C&P’s lawsuit on behalf of Wal-Mart and the four other giant retailers, C&P was appointed lead counsel for the consolidated group of cases, which was a forgone conclusion. At my request, George’s firm was appointed co-lead counsel to assist us. With George’s help, we assigned very basic, but very important, work to the twenty-nine other firms during the next seven years.

Constantine & Partners took care of the high-level work, a huge load for a small firm. We took or defended 80 percent of the roughly 400 depositions, where the litigants question likely trial witnesses and other people who have important evidence. This questioning is done under oath and stenographically recorded. Sometimes, with very important witnesses, the deposition is also videotaped. In many circumstances, these transcripts and videotapes are used at trial instead of live witness testimony. Six C&P partners—Gordon Schnell, Mitch Shapiro, Jeff Shinder, Matt Cantor, Stacey Mahoney and I—took or defended 270 of the 400 depositions. Other C&P partners and associates did many others. C&P wrote all the briefs in the district court, circuit court and United States Supreme Court. C&P argued all of the 350 motions. These motions involve pretrial disputes, such as whether a particular document can be withheld from the other side because it is asserted to be privileged. Some motions can completely end the case very early, such as a motion to dismiss the complaint. Other motions can end or reduce the size of the case before trial, such as a motion for “summary judgment.”

C&P also prepared or responded to all fifty-four expert reports filed by the parties and deposed all sixteen experts retained by Visa/MasterCard. As the Commander in Chief of our army, I took or defended many of the crucial depositions, and did most of the major court arguments, including those resulting in our victories on the class action motion, the Second Circuit appeal of class certification; the summary judgment motions in the district court; and the defense of the settlement in the U.S. Court of Appeals for the Second Circuit.

On April 12, 1997, we filed the “operative” consolidated complaint in the
Merchants’
case. This document added C&P’s new clients (Sears, Safeway, Circuit City, and the three large trade associations) to the complaint we had previously filed on behalf of Wal-Mart and The Limited. It also consolidated the copycat plaintiffs and their law firms with our lead case and completed the team for a contest that would last six more years and beyond.

At that moment, I paused to assess what had taken ten years to coalesce from the epiphany about the Visa/MasterCard cartel on March 11, 1987, and six years to actively assemble from the time in 1991 when I had been retained by The Limited. This thing I had created scared me. That wasn’t because I was afraid of losing, a result that viscerally never seemed likely to me. The fear came from investing so much time, past and future, in something I had planned.

At the age of fifty, I had always taken pride in my ability to adapt to the unknown, and pleasure in not knowing what was just around the next curve. Confronting so much of my own, uncharacteristic, planning was unsettling to my self-image. For a moment, I thought of asking Jan and the kids to fulfill one of our frequently discussed fantasies of moving abroad for five years—maybe to London, Paris, Rome, or Sydney. The thought and the fear soon passed. I had built a law firm and a coalition of clients for this event, and I had promises to keep.

A
MONG THE THOUSANDS of skirmishes, six major battles, all won by the merchants, made the defendants’ capitulation at the beginning of the trial a forgone conclusion. With each of these battles, a case that at the outset was widely viewed as impossible for the merchants to win, moved relentlessly toward a trial that virtually everybody thought Visa/MasterCard would not only lose, but might also well result in their extinction. The defendants could never have paid the likely money verdict that would have been rendered by the jury after a trial that was shaped by these six defeats. The defeats left Visa/MasterCard virtually defenseless for the seventh battle, the trial itself.

In the first battle, a key argument and piece of evidence shifted the viewpoint of the magistrate judge from leaning to the defendants toward the arguments made by the merchants. That battle also resulted in Judge John Gleeson becoming active in the case, which, until then, had been primarily supervised by the assisting magistrate judge.

In the second battle, won by the merchants less than three weeks after the first, Judge Gleeson, now firmly in control of the case, granted the United States’ motion to intervene in the
Merchants
’ case so the government could get the benefit of the pretrial discovery and analyses that C&P had done. This created a legal and factual alliance between the merchants and the United States.

In the third battle, the five merchant-plaintiffs that had started the case became five million as first Judge Gleeson, then the U.S. Court of Appeals for the Second Circuit, and finally the U.S. Supreme Court decided that the case should proceed as a class action on behalf of most of the country’s merchants.

In the fourth battle, a key piece of evidence was made available to the merchants after a fight lasting twenty-seven months. This single fifty-page Visa document, whose cover was decorated with a shark, was almost as damaging to Visa/MasterCard as all the other documentary evidence culled from a record of some five million pages.

In the fifth battle, involving both sides’ motions for summary judgment before trial, the merchants consolidated and capitalized on everything they had won in the first four battles. Judge Gleeson rejected all fourteen motions made by Visa/MasterCard, granted most of the motions made by the merchants, and sent the plaintiffs into a trial in which most of the important disputes had already been decided in their favor.

The sixth battle, whose outcome was determined on the day a jury was picked and trial was about to begin, involved a series of “Hail Mary” passes hurled by Visa/MasterCard on the eve of trial. These desperate efforts were made in an attempt to rake back in most of what they had lost in the first five key battles. These frantic attempts were defeated.

Certainly, there were other important battles, some involving the defendants’ consistent success at getting the district court, circuit court, and Supreme Court to delay the case to the point where it went to trial three and a half years after it should have. Another major contest resulted in the district court’s rejection of the defendants’ attempt to sanction Wal-Mart and dismiss it from the case for what the defendants alleged was Wal-Mart’s destruction of relevant evidence during the discovery process. Nevertheless, these six battles were the most crucial.

I
N DECEMBER 1999, the parties were ordered to attend a so-called “settlement conference” supervised by Magistrate Judge Roanne Mann, who was Judge Gleeson’s helper for this case. John Gleeson, our judge, was a tough, handsome (I am told by my wife) former chief of the U.S. Attorney’s Criminal Division in the Eastern District of New York, whose main courthouse is located in downtown Brooklyn. John Gleeson is the man who put mafia boss John Gotti behind bars after a relentless, but previously futile, pursuit by federal prosecutors. The failed prosecutions before the successful one led by Gleeson had earned Gotti the nickname “the Teflon Don.” Gleeson, like many federal judges, relies heavily on magistrate judges to assist him and handle the many pretrial disputes that arise in big commercial cases.

Magistrate Judge Roanne (“Ronnie”) Mann, is a very smart, but humorless jurist whom I never caught smiling (at least at me) in the seven active years of the
Merchants’
case. She was assigned the task of managing the pretrial discovery process in which each party can obtain documents and other evidence from the opposing party and from non-parties
who have relevant information. Magistrate Judge Mann also handled the mundane disputes that arose frequently during that tedious process. The parties briefed and argued an astounding 350 motions during the course of the litigation. Most of these motions involved discovery disputes. Mediating and, when necessary, ruling on these disputes was an important task that Mann did well.

In early 1997, Magistrate Judge Mann established a schedule for discovery, involving the exchange of documents, the taking of depositions and the asking and answering of written questions called “interrogatories” and “requests for admission.” She also scheduled a settlement conference for December 15, 1998. She picked this date to coincide with the expected final days of discovery. Mann did this so the parties would come to the settlement conference with a serious and sober understanding of how much evidence each side had to support its case.

The settlement conference was delayed one full year until December 1999, because Mann extended the fact discovery deadline from December 1998 until March 2000. Despite the obvious fact that the defendants had enough lawyers to fill an arena, the magistrate judge consistently granted their requests for more time to take discovery and perform other pretrial tasks. Her accommodation of the defendants’ requests for delay made the case years longer and much more expensive and raised the question of whether we could ever prevail. “Justice delayed is justice denied,” as the saying goes.

Even more troubling than these delays was the magistrate judge’s ruling on the parties’ competing motions about the scope of discovery. The guidelines for discovery in federal civil cases set the presumptive limit on depositions at ten for each side. The guidelines for complex litigation—and our case was nothing if not complex—suggests the number can be doubled to twenty depositions for each side. We knew that Heller Ehrman, A&P, and Clifford Chance were trying to bury
us and would try to get the court’s approval for many more than the presumptive forty depositions. We also realized that some expansion beyond twenty per side was not only likely but also reasonable, given the virtually unprecedented size of the case. So to preempt the defendants, we proposed a shocking number of depositions—300, almost eight times the presumptive limit, to be divided equally. We also proposed that most depositions be limited to one day. To give the reader some frame of reference on our proposal, consider that in the massive
Microsoft
antitrust case being litigated in the same time frame, and sharing some of the same experts and theories as our earlier-filed case, the judge limited the number of depositions to ninety-three.

The defendants opposed our proposal, saying 300 depositions were not enough. Frankly, I thought that Magistrate Judge Mann would chastise all the parties—us for proposing an excessive number, and the defendants for rejecting it. To our amazement, Mann agreed with the defendants and refused to put any limit on the number of depositions. She also rejected our proposed one-day limitation on the duration of most depositions. The result was 400 depositions, a number astounding to any lawyer who has heard it. Many of these depositions lasted two or three days, and one went on for almost six.