Priceless: The Case That Brought Down the Visa/MasterCard Bank Cartel (16 page)

A second possible explanation for Judge Gleeson’s self-doubt involves his possible reluctance to be the judge to certify the class leading to a huge, even record, damage award. Judge Gleeson, like me, is ambitious. I believe that he wants to be appointed to the bench of the Second Circuit, and perhaps his aspirations go even higher. Presiding over and facilitating the payment by banks of billions of dollars to a class led by Wal-Mart was not the best route to judicial promotion at that moment. The
Wall Street Journal
regularly bashes trial lawyers and “judicial activists” for creating monstrous awards and settlements in class actions. These articles and editorials come from the folks who hang out at the Cato Institute, the Heritage Foundation, the American Enterprise Institute, and especially the Federalist Society. They are
among the people whom Ronald Reagan and later George W. Bush, packed the courts with.

Instead of stepping up to the plate and unequivocally certifying the no-brainer class, Judge Gleeson seemed to want to protect his flank, if not cover his ass. His equivocating plea to the Second Circuit to look over his shoulder and grade his work product made it virtually certain that the Court of Appeals would grant this discretionary appeal. Without Judge Gleeson’s request, the appeal would not likely have been accepted, because the circuit courts treat such requests (for immediate review of a decision on class certification) like the Supreme Court treats a petition for certiorari: They rarely are granted.

Because Judge Gleeson asked it to, the Second Circuit granted Visa/MasterCard’s request and agreed to hear their appeal. The Court of Appeals then allowed the process to advance as slowly as possible. When Visa/MasterCard made their request for an immediate appeal to the Second Circuit on March 8, 2000, that court hadn’t even bothered to establish any rules or procedures for dealing with such a petition or for expediting the process, as we requested. Knowing that Judge Gleeson’s plea for review made acceptance of the defendants’ appeal a forgone conclusion, we had requested an expedited decision on the defendants’ petition. This was our desperate effort to maintain the trial date of November 27, 2000, which Judge Gleeson had established in his scheduling order issued on December 20, 1999. Expedited appeals are supposed to proceed quickly. Making up their new procedure as they went along, the Second Circuit granted our motion to “expedite” on April 5, 2000. However, under this so-called expedited procedure, the court didn’t actually hear the appeal until February 5, 2001, and didn’t decide it until October 17, 2001.

This glacial schedule obviously killed the November 27, 2000 trial date. Seemingly oblivious to the advisory accompanying the new appeals provision, which said that such appeals “should not delay
existing cases” the Court of Appeals, over our objection, granted Visa/MasterCard an extended schedule for filing their appellate briefs. Again, despite our objection, the court also agreed to Visa’s request that the appeal not be argued during certain periods when Larry Popofsky, Visa’s lead lawyer, was scheduled to be in Europe. The circuit court then had difficulty assembling a panel to hear the appeal and rescinded the initial order scheduling an argument in 2000. The court rescheduled the argument for February 5, 2001, nearly a full year after Judge Gleeson’s decision certifying the class. Again, all of this was done by the Second Circuit under an appeals procedure that the Supreme Court of the United States had designed “not to delay existing cases.”

The panel that was finally assembled to hear the appeal comprised Circuit Judge Sonia Sotomayor, District Court Judge Denise Cote—sitting in the Second Circuit by “designation”—and Circuit Judge Dennis Jacobs. Judge Jacobs is a founder of the Federalist Society, a powerful organization that promotes the constitutional and legal agenda of the American right wing. For cases not falling into the Federalist Society’s hit list, Judge Jacobs is a fine and open-minded jurist. But when you go before him with a case presenting an issue on the neo-conservative agenda, Judge Jacobs’s vote is virtually a forgone conclusion. So I assumed that we were starting out with one vote on the panel against us, because our case was the biggest example ever of one of the great
bêtes noires
of American neo-conservatism—”the class action.”

A book can be written about why neo-cons hate class actions, with lots of liberal assertions and rejoinders from the right. And while class actions, like all legal mechanisms, can be abused and sometimes are, the simple truth is that class actions, in many situations, give little guys their only real ability to receive justice and compensation. That is precisely what both Judge Gleeson and a
majority of the Second Circuit said was true in the
Merchants’
case, involving five million mostly small stores. That is why the American right hated the
Merchants’
case.

With less confidence than our prediction about Judge Jacobs, we counted Judge Sotomayor as a likely vote to affirm the class certification order. Our confidence was based on the overwhelmingly clear and simple legal principles in our favor. Our knowledge of and research into Judge Sotomayor’s judicial opinions showed she was a pragmatist and followed established precedent, unless there was some compelling reason to depart from it. Another factor that suggested that Judge Sotomayor would vote to affirm the class certification was her generally populist orientation. Nevertheless, our prediction on Sotomayor was less confident than with Jacobs because Judge Gleeson, in his own way a populist, had telegraphed his self-doubt by making his decision far more complicated than necessary, and by pleading for the Second Circuit to review his work. As important to me as the likelihood that Judge Jacobs would seek to reverse the class certification, and that Judge Sotomayor vote to uphold it, was whether she would actively engage him over their assumed diverging positions and fight for an ally and deciding vote in the third member of the panel, U.S. District Judge Denise Cote.

Denise Cote, from the Southern District of New York, was perceived by virtually everybody on both sides as the swing vote. I say “virtually” because I was mildly confident that she would vote to affirm. My prior contact with her was minimal, but I knew she was very smart, had been taught by the best, and was a good judge of men. In the mid-1970s, Denise Cote had clerked for Eastern District Judge Jack Weinstein. Weinstein was the author of the Federal Rules of Evidence, a preeminent master of federal procedure and an intellectual giant. His clerks went into his chambers among the brightest and left having learned at the feet of one of the truly great jurists
of the twentieth century. Weinstein had skillfully handled some of the most difficult class actions, including the Agent Orange, tobacco, asbestos, and handgun cases.

Denise Cote had clerked for Judge Weinstein in 1976 when I had a case before him. The case required me to argue before a “three-judge constitutional court,” an arcane procedure used back then, involving a mixed panel of circuit court and district court judges to hear challenges to the constitutionality of state laws. After the hearing, Denise came out to express Judge Weinstein’s praise for my “brilliant, but likely futile” argument challenging the constitutionality of a New York welfare statute that discriminated against the working poor. The three judges were Weinstein, Circuit Judge Tom Meskill (the former governor of Connecticut), and District Judge Mark Cosentino, a judge annually ranked among the “10 Worst” by lefty columnist Jack Newfield of the
Village Voice.

Judge Weinstein or Cote, or likely both, wrote a 46-page dissent from the majority opinion, which Weinstein later told me had been written to reward my “Quixotic effort.” Denise Cote paid me an even higher compliment by sending a message, through an intermediary, that I should ask her out on a date. Through the same go-between, I truthfully responded that I thought she was very attractive and would ask her out in my next life, because I had recently gotten married. It was the smarts and the Weinstein tutelage on class actions more than the ancient spark, which I was sure she had forgotten, that gave me confidence in Denise Cote’s vote.

Others thought that Judge Cote could go either way. She had spent part of her career doing antitrust work at the Kaye Scholer law firm. That firm was almost always on the defense side. Mark Popofsky, who was a Kaye Scholer partner and the son of Visa’s lead lawyer Larry Popofsky, sent an e-mail to every lawyer at Kaye Scholer asking for information about Judge Cote so Visa might
shape its argument to her liking, or at least sharpen the prediction of her vote. When I found out about this poll, I was mostly amused. I did, for a moment, fear that Cote might have been at Kaye Scholer in 1989 and involved in their representation of MasterCard at the time of the Rusty Staub’s incident. I was afraid that she might recuse herself, requiring that she be replaced on the appeals court panel. That didn’t happen.

On the evening of February 4, 2001, the night before my oral argument of the class certification appeal in the Second Circuit, I checked into a hotel near the courthouse. This has always been custom when I have a very important argument. I checked into the Millenium Hotel in downtown Manhattan, where certain rooms have a view of the majestic United States Courthouse in Foley Square, home to the United States Court of Appeals for the Second Circuit. My view that night was not of the courthouse but of the World Trade Center, where I had worked for seven years. The Twin Towers were directly in front of me—so close, I felt, that I could have touched them. I stared at the Trade Center for a long time that night as I rehearsed my argument in the dark of my hotel room. That is my last and abiding image of the World Trade Center.

On the next day, February 5, 2001, oral argument was well presented by both sides. The defendants made one tactical error, and I made one as well. Visa/MasterCard’s error was to divide their argument. It is usually a mistake to divide the short amount of time allotted for oral argument of an appeal. Unless perfectly choreographed, divided argument tends to be disjointed and requires the court to readjust to a new speaker and new salutations. They get to hear “May it please the Court, my name is Joe Blow” for the second time right in the middle of those precious few minutes. Because advocates are constantly responding to questions from the bench, appellate argument rarely permits the perfect choreography necessary to make a mid-argument baton pass work
well. Visa and MasterCard may have divided their argument to symbolically rebut our claim that they jointly fronted for the same bank cartel, or it might have been a matter of professional pride among the defendants. However, because Visa and MasterCard filed a single brief, dividing argument was a tactical error, and it led to an actual error during the argument.

Visa had convinced the Second Circuit to black out certain dates to ensure that Larry Popofsky could make his trips to Europe and still argue the case. However, after all that and the months of delay it caused, Steve Bomse argued the appeal for Visa. MasterCard, apparently convinced that their previous lead lawyers at Clifford Chance had performed badly, inserted Ken Gallo to argue. Substituting Gallo as lead counsel was a smart move. During the previous summer of 2000, the rugged alpha-male had proved himself to be the best trial lawyer in the United States trial against Visa/MasterCard. I had witnessed much of the trial and was struck by the extra attention Judge Barbara Jones seemed to give Gallo’s directs and cross-examinations. However, using a crucial Second Circuit argument as Gallo’s first appearance in our case was foolish. He was coming in after the conclusion of all fact discovery and after all of the expert reports and depositions had been completed. He hadn’t been part of the class proceedings and didn’t yet know the case. Toward the end of his argument, he gave an answer to a pointed question that exposed his unfamiliarity with the record.

In his oral argument, Gallo mounted an attack on Professor Carlton’s supplementary expert report. Judge Cote interrupted and pointedly asked Gallo why the defendants hadn’t deposed Professor Carlton after this second report. Cote was seemingly challenging Gallo on defendants’ misrepresentation, which I had exposed with very specific documentation in our brief.

JUDGE COTE: If it was so flawed, that is, his second affidavit, why did you decline to take his deposition?

Gallo clearly knew nothing about this, and his answer showed it.

GALLO: . . . we made a tactical decision that we could not take his deposition. It was outside of the period allowed for expert discovery. There was a period, and then the deposition period had ended at that point, is my recollection of the record.

To the panel, it probably seemed like the defendants were compounding the blatant misrepresentation in the footnote I had earlier requested of Steve Bomse that he correct. Dissatisfaction with Gallo’s response was reflected in the faces of all three judges, who probably wondered whether Gallo was lying or clueless. As I was watching this play out, so was Steve Bomse, whose time for argument had expired. Nevertheless, when Gallo finished, Bomse jumped up, realizing that it was a big mistake to allow the appellate court’s last impression of Visa/MasterCard to be one of bumblers or liars.

BOMSE: May I ask for the Court’s indulgence, just to respond to the factual question that Judge Cote put to Mr. Gallo that he would not have known the answer to, but that I do.

JUDGE JACOBS: Yes, if you can do that very briefly.

BOMSE: Yes. Why we didn’t take a deposition after the reply. The answer was that we were told—we had, two days in which to take the deposition, and we used those two days going to the opening declaration, therefore, we had no right or no ability to take that deposition.

Although Bomse had now partially come clean, he hadn’t completely, by saying Visa/MasterCard had “no ability.” Bomse certainly hadn’t admitted the blatant misrepresentation in the defendants’ appellate brief. So, I improperly jumped up to correct the record.

constantine: Your Honor, I looked at Mr. Bomse on May 25th, 1999 and I said, “We are going to file a reply declaration. Would you like to take a day of deposition now and a day after the reply?” And Mr. Bomse, and he will obviously admit that, indicated that he would take his full two days then. Thank you.