Priceless: The Case That Brought Down the Visa/MasterCard Bank Cartel (22 page)

The magnitude of this result is not adequately conveyed by this 0 for 14 versus 6 for 8 scorecard. It is difficult to get summary judgment in any complex case, because courts are extremely reluctant to make a decision that juries are normally supposed to make. It becomes much harder to get summary judgment when the discovery record is large because, no matter how much proof is marshaled by the side seeking summary judgment, the party opposing summary judgment can usually point to some evidence in the record contradicting it. And just a little contrary evidence will defeat the motion. When there is conflicting evidence, it is hard for the judge to say that “no rational juror” could disagree with the court’s finding on that issue. Our case had produced more than a big discovery record—the pretrial
documentation and deposition testimony was mammoth. The 400 deposition transcripts alone revealed some conflicting evidence on virtually every imaginable issue in the case.

Summary judgment has become a tool used almost exclusively by defendants in antitrust cases, not by plaintiffs. This is now so ingrained in the law that Judge Gleeson began his decision with the observation and citation that
“. . . plaintiffs
are not required to overcome any ‘special burden’ when
‘opposing
summary judgment in an antitrust case’ and ‘can defeat the motion by coming forward with specific facts to show a genuine issue exists requiring a trial.’” Judge Gleeson’s clerk probably couldn’t find a quote framing the legal issue in the other way—that is, how little evidence is necessary for a
defendant
to defeat a plaintiff’s motion for summary judgment. Why? Because plaintiffs rarely try to get summary judgment in antitrust cases, and when they try, the effort is not taken seriously. When the defendants perceived that the threat Judge Gleeson made after oral argument on January 10, 2003, was directed at the plaintiffs, they were reasoning conventionally. Visa/MasterCard hadn’t paid enough attention to the mountain range of evidence we had accumulated during the discovery process.

Finally, and more important than the scorecard or our beating the odds, was the extraordinary content of the ruling. On top of all the key issues that we went into trial having already won, the judge had sowed a minefield for Visa/MasterCard. On the other hand, he had laid out a gentle golf course with a series of “tap-ins” awaiting us at each green.

In granting our credit card market power motion against Visa, but leaving this decision to the jury with respect to MasterCard, Judge Gleeson had set up such a tap-in. By 2003, MasterCard had virtually pulled even with Visa in credit card statistics. MasterCard selectively publicized certain numbers that made MasterCard look even bigger than it was. We would show the jury MasterCard documents, where they proclaimed that they had replaced Visa as the number-one credit
card network. Convincing the jury that MasterCard had market power, when they had already been instructed by Judge Gleeson that Visa had market power, was a tap-in. If MasterCard were to resist this too much, after publicly claiming that they were number one, they would risk further eroding their credibility with the jury.

Judge Gleeson constructed another minefield/tap-in situation in denying Visa/MasterCard’s summary judgment motion concerning the issue of defendants’ “dangerous probability” of getting monopoly power in the debit card market. Gleeson observed that Visa’s debit card market share, by itself, was enough to defeat their motion and that if the jury found that Visa and MasterCard had acted in concert, he would direct a verdict against the defendants on this issue.

On the issue of acting conspiratorially, Judge Gleeson fired numerous warning shots. He perfunctorily and impatiently denied the defendants’ motion to dismiss the conspiracy-to-monopolize claim with two words: “I disagree.” Similarly, in denying MasterCard’s motion to dismiss our claim that MasterCard along with Visa was attempting to monopolize the debit card market, Judge Gleeson cited “common ownership, a lack of competition, and incidents of concerted activity by the two defendants. . . .” And in rejecting the defendants’ motion to throw out our attempt and conspiracy to monopolize claims for lack of standing, Judge Gleeson pointed to the “direct and circumstantial evidence” from which a jury could find conspiracy.

Judge Gleeson also pointed out that he wasn’t about to waste his time reconsidering Visa/MasterCard arguments about the economic implausibility of our damage case. Gleeson had already rejected these arguments at the class motion stage. The defendants had tried to get another shot at winning this fight. Though they technically had the right to try, the reality was that once these arguments were rejected in the class certification decision, the subsequent defeats were virtually
automatic. Failing to understand this, Visa/MasterCard later tried and failed a third and fourth time.

Finally, in virtually giving us victory on the tying arrangement claims before trial but withholding a complete victory, Judge Gleeson actually gave us everything we needed while denying us something that we half wanted but knew would actually hurt us. Had Judge Gleeson given us complete summary judgment on the tying claims, the trial would have been shortened, and we likely would have been precluded from showing the jury much of the evidence on liability. This evidence was likely to convince the jury that the defendants were not only lawbreakers but venal and responsible for extensive harm to stores and consumers. This was the evidence that would motivate the jury to punish Visa/MasterCard with a massive monetary verdict.

Writing about the decision in the
American Banker
of April 4, 2003, the former general counsel of Citibank’s card business, Duncan MacDonald, said, “It’s hard to imagine that the associations can now win.” However, it was my job to imagine that the defendants could still win, and to prevent it from happening. Adversaries are often most dangerous when they are badly wounded. So we got ready for the defendants’ final pretrial assaults, and they soon came.

O
N APRIL 14, 2003, two weeks after the summary judgment decision and two weeks prior to trial, Visa/MasterCard filed 31 motions. Twenty-eight were
motions inlimine
asking Judge Gleeson to prevent us from using most of the evidence we wanted to present at trial. They also filed three more
Daubert
motions seeking to exclude most of our expert testimony.

Those who have read this far know that both the
motions inlimine
and the
Daubert
motions were a second and, in some instances, a third attempt to prevent us from putting our case before a jury. Most of these motions were particularly silly because they were seeking to exclude the same evidence that Judge Gleeson had relied upon only two weeks earlier in denying all of Visa/MasterCard’s summary judgment requests and granting most of ours. By virtue of their sheer number, these motions also smelled of desperation. On the same day, April 14, 2003, we filed six motions of our own. This number shrank
to five when the defendants conceded the relief requested in one of ours.

Among the most desperate defense motions, and the most revealing to us because they spotlighted precisely what the defendants feared most (and had probably suffered from most, at their recent mock trials), were these: The defendants made a motion to exclude all evidence about consumer confusion over whether a Visa/MasterCard card was debit or credit. The defendants didn’t want a jury (all undoubtedly consumers themselves) to see the MasterCard document showing that 72 to 78 percent of cardholders confused MasterCard credit with debit—and that MasterCard had known this and done nothing to alleviate this confusion, which caused bounced checks and other consumer harm. The Visa bookend was a document showing that the number-one reason cardholders first used a Visa debit card was their belief that it was a credit card. The defendants also made a motion to prevent us from showing the jury how Dean Richard Schmalensee, the economist used by both Visa and MasterCard on the class motion, had contradicted most of their defense.

Visa made two motions seeking to prevent us from using the “Berlin Series” and The Shark. Visa comically referred to these two analyses done by Andersen in 1990 and 1997 as the
“
1990 Accenture Document” and the “1997 Accenture Document.” In 2002, Andersen had been convicted of criminal conduct and surrendered its accounting licenses for its key role in auditing abuses that led to the collapse of Enron. Some 85,000 jobs were lost in this debacle. Visa, probably with the benefit of mock trial results, knew how dangerous it was to allow a jury to hear the hated Andersen name so closely linked with Visa, and to hear Visa witnesses testify that Andersen was Visa’s arms and legs in the debit business. Visa’s solution was to use the “Accenture” name, which Andersen Consulting adopted years after it did these analyses for Visa and years after Andersen Consulting had separated from Arthur Andersen, a name that also appeared on some of these documents.

In an Orwellian fashion, Visa was trying not only to rename these documents, but also to make believe that they never existed.

Ironically, Accenture was well on its way to becoming an equally hated name. Accenture’s reincorporation in Bermuda and its much publicized role as the consultant to many American firms outsourcing U.S. workers’ jobs to third-world countries would likely have played badly with most juries.

On April 14, 2003, defendants also made a motion to prevent us from showing the jury two analyses done by Visa and MasterCard during the same week in July 1998, discussing how they could use their rules to destroy the competing STAR and HONOR ATM/debit networks. Various publications had already reported on and quoted from these documents after Judge Gleeson unsealed the court file in November 2002. As we expected, Visa also moved to prevent us from showing the jury documents or testimony relating to “Wes’s Vote,” the vote by a group of banks to “wait and be sued” taken at a 1991 meeting of the Visa debit advisors. The lawsuit that these bank advisors voted to wait and be sued in was the
Merchants
’ case. For some reason, Visa didn’t want the jurors in the
Merchants
’ case to see those documents or testimony.

The schedule provided us with one week to respond to these thirty-one defense motions. We asked Judge Gleeson for three additional days. When he denied this modest request, I was pleased. As painful as it was for the people on our team assigned to oppose these motions, this was another clear signal from Judge Gleeson that as far as he was concerned, we were going to win. If he had had any intention of seriously considering any of the defense motions to limit our prerogatives at trial, he would have given us more time to respond. Judge Gleeson had recently delivered a similar signal by denying our request that the defendants be required to pare down the ridiculous list of trial exhibits they had submitted.

The defendants’ trial exhibit list included more than 7,600 exhibits amounting to more than 180,000 pages. Judge Gleeson’s refusal to make Visa/MasterCard reduce this list of potential evidence, which included 60,000 pages of trial exhibits that they hadn’t provided to us during the discovery period, was his way of saying to us, “Don’t worry.” However, the judge’s rejection of our earlier request and his denial of our request for ten instead of seven days to respond to the thirty-one motions made on April 14, were his version of tough love. Someone had to deal with these grotesquely large and desperate defendant gambits, and it wasn’t going to be me. By that time, I was working around the clock on trial preparation and settlement talks.

To respond to Visa/MasterCard’s final pretrial assault, C&P assembled a team of seventeen lawyers and a few paralegals from our firm and those assisting us. This team not only responded within the one-week deadline but actually made early responses to many of the defendants’ motions. Matt Cantor, C&P’s youngest partner, wrote fourteen opposition briefs in this one week and did not lose a single motion.

Judge Gleeson decided the most important of these motions on April 28, the day trial was scheduled to begin and we actually picked a jury. That day, Gleeson decided eight of the defendants’ motions, denying seven and granting one minor motion. On the same day, Judge Gleeson granted two of our five motions, the only two he decided. As Judge Gleeson read his decisions from the bench at 9:45 AM on April 28, 2003, we knew that our case was completely intact. We had won all six battles. The last two victories—Judge Gleeson’s earlier summary judgment decision and these
inlimine
and
Daubert
decisions—left us a trial with the liability phase virtually over. All we really had to do was use the pretext of the small remaining parts of the liability trial to shower the jury with evidence of Visa/MasterCard’s contempt for merchants, consumers, and the law. This, by and large, was the same evidence that had turned the
tide with Magistrate Judge Mann at her conference in December 1999 and had sealed the defendants’ fate at summary judgment a few weeks before. Then, with this evidence fresh in the jurors’ minds, we would put on our damage case through Professor Fisher, our economic expert, and ask the jury to award the merchants billions in damages. But there was one problem—a good one, but nevertheless a problem: Something had happened at 4:45 AM that morning, which caused the judge to send the seated jury home and tell us to return three days later on the morning of May 1, 2003, to make our opening arguments. My opening statement, the product of three years of personal trial preparation, would have to be redone. The carefully planned trial script would also have to be redone. Numerous changes had to be made in the case that we could and would put before the jury. We had a little over two days to reformulate a case that had taken almost seven years to put together.