Priceless: The Case That Brought Down the Visa/MasterCard Bank Cartel (19 page)

The Shark also showed that our theory of how the merchants were monetarily damaged was correct. We said that without the tying arrangements, Vi-sa/MasterCard would have had to lower their prices to maintain merchant acceptance. Visa/MasterCard told the court that this theory was absurd and that its proponents, Professors Frank Fisher and Dennis Carlton, were practicing junk science. However, The Shark agreed with Fisher and Carlton. This Andersen analysis confirmed Fisher’s methodology and made it highly unlikely that the defendants would be able to get Judge Gleeson to reject our damage theory. Had Frank Fisher testified at trial, he would have pointed to The Shark as confirming his analysis.

The Shark delivered his last great gift on his last page. Andersen predicted that Visa By-law 2.10(e), the Visa rule that targeted competitors but blatantly shouted “MasterCard is not our competitor,” would be declared illegal. Coming in December 1997, this prediction occurred ten months before the United States had even filed suit to invalidate that Visa by-law and MasterCard’s similar “Competitive Programs Policy.” Our complaint said that Visa By-law 2.10(e) and MasterCard’s CPP harmed competition in both the credit card and debit card markets. But the apparent assignment of Andersen was to analyze what would happen to Visa if the tying arrangement were invalidated. Andersen’s seemingly gratuitous prediction that another
Visa rule would be found illegal was likely to offend Judge Gleeson. Judge Gleeson would probably infer that Visa was enforcing a rule that it knew was illegal, that Visa knew that Gleeson would invalidate it, or that the rule would be the subject of yet another suit by the United States or maybe all of these. These were the logical inferences I asked Judge Gleeson to take away when I showed him The Shark and projected his image on a giant video screen during my summary judgment argument on January 10, 2003.

T
HE CLASS CERTIFICATION contest involved more work than the entirety of many large and complex commercial cases. But that effort was dwarfed by the battle over the summary judgment motions. Summary judgment is primarily a defendant’s tool in antitrust cases. The defense asks the judge to prevent some or all of the plaintiff’s case from going to trial. My style of litigating, however, is to avoid, whenever possible, going into any battle where only my side has something to lose. I try to turn any contest, including summary judgment, into one involving reciprocal jeopardy. I do this unless my chances of success are inconsequential.

In this case, despite the skepticism of many lawyers on our side, I decided to put the defendants in jeopardy when they moved to throw out our case. We had uncovered so much compelling evidence during the discovery process that I believed that this was the rare antitrust case in which the judge might find for the plaintiff before trial on some of the disputed issues. If Judge Gleeson were to do this, he would instruct the jury that certain facts and issues, which we normally would have
the burden to prove, were already proven. Regardless of our chance of success, I wanted the psychological and emotional lift that going on the offensive would give our team. The size of the discovery record and the ferocity of defendants’ opposition to the class motion made me certain that the summary judgment proceedings would involve an enormous effort. I didn’t want my team to work that hard with the only possible outcomes being that all or part of our case would be dismissed or, at best, we would stay right where we were. We needed to have something big to win and had to give the defendants something big to lose.

The hardest part of the summary judgment contest was that it came directly after, and actually overlapped, three other crucial and withering battles. These were the class motion, the final weeks of fact discovery, and the short, in tense period of expert discovery. I argued the class motion on February 4, 2000. The class was certified on February 22, 2000. From February 1 through March 27, 2000, which included only forty days when depositions could be taken, the parties took exactly 200 depositions. As soon as fact discovery ended, Judge Gleeson required the expert reports and expert depositions to be completed by April 4, 2000. During a forty-three day window, twenty-one experts filed reports and/or rebuttal reports and were deposed for as long as four days each.

We informed Judge Gleeson that we would be moving for summary judgment when the defendants moved. We requested that the briefs for both sides be filed on the same dates, making it necessary for both sides to attack and defend simultaneously and intensifying the double jeopardy dynamic. Judge Gleeson obliged, initially requiring the opening briefs on June 2, 2000, opposition briefs on June 30, 2000, reply briefs on July 17, 2000, and oral argument on August 4, 2000. By cramming so much work into such a short period of time, Judge Gleeson was giving himself the opportunity to reduce the size of the case before trial, which was scheduled for November 27, 2000.

Each of our summary judgment briefs tried to summarize and synthesize the affidavits and evidence that accompanied our briefs, and each totaled more than 50,000 pages. The briefs and exhibits were our distillation of a discovery record of roughly 5,000,000 pages of documents and 150,000 pages of deposition testimony. So while it was appropriate and smart for Judge Gleeson to set this vicious schedule, it was somewhat like directing the parties to seat six elephants in a VW Beetle, by putting three in the back and three in the front.

I gave my young partner, Gordon Schnell, the job of being our elephant installer. Gordon is a diminutive, quiet, reserved, and extremely affable lawyer. He does not look like a player in the blood sport of complex commercial litigation. However, as a kid, Gordon had been New Jersey’s 60-pound scholastic wrestling champion. Anyone who has watched a match involving middle-school and high-school wrestlers in the miniature weight categories knows their tenacity. As a decent, but overweight, high-school unlimited weight class wrestler, I had seen these vicious Lilliputians wrestle at close range. Gordon had been our summary judgment chief in a number of big cases, most recently in a successful antitrust case where we had represented one of Rupert Murdoch’s Internet companies against AOL.

Gordon began the brutal summary judgment project while he was still in San Francisco finishing off numerous high-level depositions of Visa and Andersen executives. He had to take some of the depositions originally assigned to me because Visa/MasterCard were playing games to prevent me from deposing certain executives. By the end of the three-year discovery period, the defendants had finally realized that their executives were treating me like their father-confessor. With this tardy realization, the games began.

For example, in San Francisco, less than an hour prior to the scheduled deposition of Visa’s “Debit Czar,” Tony McEwen, I was informed that Mr. McEwen was apparently having a heart attack. When I had
to return to New York to finalize our expert reports, another lawyer was left to depose a quickly and miraculously recovered McEwen. The games continued during expert discovery, with defendants refusing to set a schedule where I could depose their economists, Ben Klein and George Benston, and also defend our economist, Frank Fisher. I chose to take the depositions of the defendants’ experts, leaving Professor Fisher’s defense to George Sampson.

Both sides moved for summary judgment. When a party asks for partial summary judgment, it is asking the court to take away certain claims or defenses from the other side before trial. A party seeking total summary judgment is asking the court to declare it the winner and cancel the trial. A party can ask for total summary judgment but also say that if the court won’t do that, then at least please strip the other side of certain claims or defenses before the case goes to trial. Visa and MasterCard moved for both total and partial summary judgment. We asked Judge Gleeson to grant judgment for the merchants on the tying claim and most of the attempt-to-monopolize claim, leaving for the jury a little of that second claim and the big question of how much in damages should be awarded to the merchants. Though there was virtually no chance that our extreme and brazen request would be granted (and, according to popular opinion, little chance of our winning anything on summary judgment), I was concerned that Judge Gleeson might give us exactly what we asked for.

The three initial rounds of our summary judgment submissions are the finest written product I have worked on in thirty-seven years of law practice. Our summary judgment evidence was so deep, so powerful and so skillfully marshaled by Gordon and our team, that I convinced myself that we could be left with only a damage case to put on at trial. This might hurt us because Judge Gleeson would then schedule a much shorter trial and not allow us to show the jury most of the evidence demonstrating Visa/MasterCard’s venality. This included the evidence
that was extensively quoted in newspapers after Judge Gleeson unsealed the record—evidence of the defendants’ treachery and contempt for the welfare of consumers and merchants that might motivate the jury to award the merchants billions of dollars in damages. Without seeing and hearing this evidence, Visa/MasterCard’s already-proven liability might seem technical and lack context for the jury. The jury might make a modest award of damages or, worse, award only nominal damages. Nominal damage awards of $1, or worse, very low figures have frequently been made in antitrust cases. A jury finds that the defendant has violated the antitrust laws but concludes that the plaintiff was not seriously damaged. This happened to the United States Football League when it “won” its antitrust case against the NFL. This can also happen when a jury, in effect, says, “A plague on both your houses.” With Visa/MasterCard expected to scream “big, bad Wal-Mart” early and often, I needed to put on a full trial of the evidence showing how badly Visa/MasterCard had treated consumers and stores, both large and small.

With the briefing schedule for summary judgment in place, C&P went to the mattresses. Gordon moved into C&P’s offices for the duration. He slept and showered at the firm most nights, and I, for several crucial weeks, not only moved out of the office but left the United States for Asia. Sarah, my older daughter, and Isaac, my son, had been studying in different regions of India during the first half of 2000. Isaac was a junior at Williams College, and Sarah was in a gap year between high school and Williams.

Having two kids in India at that time made Jan and me nervous. India and Pakistan were, as usual, on the brink of war. Hindu/Muslim strife was occurring in many regions of the sub-continent. We had planned for almost a year to go there with our younger daughter, Elizabeth, meet Isaac and Sarah in Delhi, travel through India and Nepal, and see that all five of us were returned to what we all complacently thought of as the
safe United States. The unanticipated briefing schedule created one of those moments that pitted work against family.

I opted for family that time, but with several emotional security blankets. I made Gordon give me a complete draft of our opening brief before I departed. I also made him promise that each and every change and comment, which I would send from India, would be reflected in the final work product. While in India and Nepal, I worked at night and sometimes through the night. I worked on trains and in the huts and teahouses of Nepal. In the Annapurna Valley I worked by flashlight, long after the generators were shut off in the middle of the evenings.

The result of all my edits, revisions, and comments was over 700 handwritten pages. These changes, insertions, comments, harangues, and exhortations were faxed in three parts from Delhi, Katmandu, and Pokhara to Gordon at the price of $7 per page. Two years later, when I was in Bentonville, Arkansas, for one of the many meetings with Wal-Mart, I was introduced to several lawyers on what they call “The Wal-Mart Legal Team.” When they heard my name, they said in chorus, “You’re the guy who sent the $5,000 fax.” And I said, “Wal-Mart ought to get on its hands and knees and kiss my feet for having the dedication to work that hard while in Asia so I could send that $5,000 fax.”

I returned from India on June 2, 2000, expecting that the opening summary judgment briefs had been finalized and that ours incorporated the essence of my 700-page annotated tantrum and would be filed later that day. Instead, once again, the defendants had requested, and been granted, another delay by Judge Gleeson. Before all the briefs were filed, the defendants asked for, and were given, two more extensions by Judge Gleeson. The final schedule called for the three rounds of briefing to occur on June 7, July 5 (Judge Gleeson’s revenge), and July 31, with oral argument to occur four days later. By the time these summary judgment submissions were complete, they included more than 60,000 pages of briefs, declarations, affidavits, documents,
deposition testimony, and statements asserting and disputing that certain things were “undisputed.”

But after this Herculean effort, including the renaming of C&P’s changing room to the “Schnell Shower” to commemorate Gordon’s heroic period of residency, the oral argument did not occur on August 4. The Second Circuit had granted the defendants the right to appeal Judge Gleeson’s class-certification order. That made it impossible to begin the trial on November 27, 2000. Under the circuit’s glacial procedures, the appeal wasn’t even argued until February 5, 2001. Judge Gleeson postponed the trial and oral argument dates and said that new dates would not be set until after the class-certification issue had been resolved, including Visa/MasterCard’s expected trip to the United States Supreme Court.