Priceless: The Case That Brought Down the Visa/MasterCard Bank Cartel (24 page)

In the year 2000, we conducted one trial simulation but canceled a full mock trial that had been scheduled for October 2000. After the resumption of trial preparation, we held a multiple-day trial simulation in February 2003 and a six-day mock trial in March 2003. It’s hard to overstate the importance of these trial simulations and of doing them properly. It’s easy to make yourself feel good by clobbering the other side in an unfair contest. It’s hard to spend the time and money necessary to give the other side representation equal to or better than yours. When you do this, you get a real understanding of what a jury thinks about the case, and what each side must and therefore is expected to do in order to improve their chances of success.

I considered assigning myself to defend Visa. This was rejected because the rest of the team bluntly told me I was too closely identified with the merchants’ point of view. They did not trust me to do the best job for the defendants. I disagreed but accepted their judgment.

After I was rejected, we assigned top-flight counsel to the defendants. I chose my partner, Bob Begleiter, the other elder statesman at C&P. Bob is, by far, our best and most experienced trial lawyer and the master litigator in our firm. At one simulation,
we also assigned George Sampson to represent one of the defendants. While working for me in the attorney general’s office, George had won a large jury verdict in a bid-rigging case. Ronnie Mann, our magistrate judge, had been on the losing side. Female jurors liked the tall and good-looking George. We also retained Richard Emery and Andy Celli, two accomplished trial counsel, to represent the defendants. Richard is a famous civil liberties lawyer. In a landmark case, Richard had challenged and overturned the old New York City charter of government in the U.S. Supreme Court. Richard played the role of opposing counsel at two mock trials for our 1998 antitrust case against AOL. We knew that Richard was very effective at making odious and reprehensible business behavior seem common and acceptable.

In addition to providing the defendants with good counsel, we gave them all the other ingredients needed to mount a strong defense. They created expensive trial graphics and had state-of-the-art technology to formulate their presentations. Using these tools, they put together a case that bent and stretched the truth. This was what we expected from Visa/MasterCard at trial, because this is what they had done at the class and summary judgment contests. The defendants’ case proved strong enough for one of the eight mock juries to deadlock, but at a point where a majority of the jurors were on the defendants’ side and were physically threatening the minority of jurors holding out for the merchants.

We treated these simulations as if they were the real thing, especially the six-day mock trial. This was conducted outside New York City, in the town of Lynbrook in Nassau County. We moved to Long Island for a week. We worked through most of the nights in the sleaziest motel I have stayed in since college. The blankets were so cheap that they created a static electricity light show when unfolded. Our clients and witnesses stayed at the fancy Garden City Hotel nearby.

The length and complexity of the mock trial, as well as the use of live and real witnesses, movies, real experts for both sides, fancy interactive trial graphics, and a former federal judge presiding in a wired courtroom, helped the mock jurors to willingly suspend disbelief. By the end of the week, most of the forty jurors seemed to forget that it was a mock trial. This was demonstrated in many ways, including the spectacle of committed Visa/MasterCard jurors seemingly getting ready to assault jurors who were holding out for the merchants. When this happened, we walked into the jury deliberation room, stopped the escalating argument, thanked this panel of jurors, and sent them home.

The jurors had been told that their videotaped deliberations and verdicts would help to shape the real trial. During the deliberations, several jurors speculated that their opinions might force the parties to settle the case, which they recognized would likely be a historic one. It was clear that the jurors had no idea whether Visa/MasterCard or the merchants were staging the mock trial. They liked certain witnesses and lawyers and hated others. Our economist, Frank Fisher, who testified live, was the witness the jurors respected most—even those who sympathized with the defendants.

Business executives and in-house lawyers from some of our giant merchant clients attended the simulations and watched four simultaneous deliberations through one-way glass and on split-screen closed-circuit televisions. The results of the trial simulations were less important than the exercise, which gave us the information needed to fine-tune our presentation. Nevertheless, the results were instructive. The one jury leaning toward Visa/MasterCard (8 to 2) was dismissed before blood was spilled. I was told by our trial consultants and psychologists that the strong feelings on that jury and other panels were an indication of the strength of the presentations and of the jurors’ belief that the case was important to the country and to them as consumers.

The performance of the jury that was deadlocked and close to violence was particularly gratifying because they were one of two “struck” juries. The struck juries comprised jurors who had been surreptitiously dismissed by the plaintiffs, using “peremptory” and “for cause” challenges during the
voir dire.
This struck jury was primarily composed of jurors who we believed would be sympathetic to the defendants’ arguments. In an actual jury selection, we would have overtly exercised our right to dismiss these jurors, most likely using peremptory challenges. Their demonstrated commitment to the defendants during the deliberations confirmed our judgments and the predictive value of the “good” and “bad” juror profiles we were using with the aid of jury specialists, public opinion pollsters, and psychologists.

The other seven juries in the two trial simulations held in 2003 found for the merchants on the tying claim. Six of these juries also found for the merchants on the attempt-to-monopolize claim. Among the seven juries that reached a verdict, most but not all awarded damages in the billions. There was a lot of discussion in all of the juries about whether awarding damages to the merchants was fair, because the merchants and their expert, Dr. Fisher, had clearly told the jurors that the merchants were forced to charge shoppers higher prices as a result of the defendants’ practices. One jury that found liability refused to award damages. I was glad that two of the eight juries gave us something to worry about and work on as we refined the case in the six weeks before trial. During that month, I watched the videotaped trial simulations over and over again and watched the deliberations of each of the eight juries twice. My written impressions of the simulations, added to consultants’ evaluations and a poll conducted by yet another consultant, led to further refinements in our trial plan and in my opening statement.

My closing argument had sealed the deal at the March 2003 mock trial. At each trial simulation, I ended my closing argument
by showing and quoting from a 1987 document where MasterCard angrily lashed out at Visa and Booz Allen Hamilton, a consulting firm that was advising both associations on their joint debit card strategy. Back then, while discussing the exact same Visa/MasterCard conduct, which later would form the core of the
Merchants’
case, MasterCard contrasted what it and Visa had been able to get away with in the United States with the angry merchant backlash in the United Kingdom when Visa and its partner, Barclays Bank, had tried to do the same thing to U.K. merchants:

If BAH really wanted to see what will likely happen on such a large scale they need only look to the United Kingdom where the merchant resistance caused Barclays to distinguish between debit and credit at the point of sale and price them differently. Additionally, that’s exactly what will happen were we to try it anywhere else in Europe or Canada. We have been able to get away with it in America. . . .

The MasterCard document then accurately predicted, “We should point out that this matter will likely go to the courts. . . .” My closing argument always ended with this incredible document, and my plea: “Don’t let them get away with it in America anymore.” This closing visibly moved each jury. That was my powerful closing. But my opening statement was much too long and too complicated. Gene Cerruti, a law professor and friend whom we had hired to help with evidence issues, called my opening “Lloyd’s Version of Shock and Awe.” I constantly refined and shortened the opening statement during those last six weeks and constantly demanded that an audience critique each successive version. My opening was going to set the tone for the trial, and everybody had to be on board and to refine their own parts to harmonize with the promises I made to the jury at the beginning of trial. We
were working eighteen-hour days, seven days a week until the last ten days before trial. Then the distinction between night and day lost any significance. The team would have been happy to just refine, polish and prepare until the morning of April 28, 2003, but for the April 1 summary judgment decision. That decision forced us to joyfully rework the entire trial script and my opening statement. We had to remove most of the evidence needed to prove the parts of the case that Judge Gleeson had just awarded us on the basis of his summary judgment decision. Judge Gleeson’s decision also gave a jolt to what until then had been pro forma and futile settlement negotiations.

T
HE
MERCHANTS’
case was very unlikely to settle before trial. I was firmly convinced of this from the earliest stages of the case in 1996, and I know that Visa’s counsel shared my conviction. The case wouldn’t settle because something more important than money was at stake. Visa and MasterCard’s “Honor All Cards” rules, which required merchants that accepted one type of card to accept them all, was a fundamental business practice for both bank associations. Their arrangements for tying debit card acceptance to credit card acceptance were the foundation of their business models in the past as well as the basis of their plans for the future.

As joint ventures owned by nearly all (and all the same) U.S. banks, Visa/MasterCard operated as a bank cartel that had monopoly power in the credit card market. Using the “Honor All Cards” policies, Visa and MasterCard used their monopoly power to dominate the newer debit card market—amounting to hundreds of billions of dollars in annual transactions and projected to soon be a bigger market than credit cards. And if other types of payment cards had emerged, Visa and MasterCard would have enforced “Honor All Cards” to extend their monopoly into those markets as well.

At stake for Visa and MasterCard in the
Merchants’
case then was not just so many dollars in damages but the lynchpin of their business strategy. Larry Popofsky, Visa’s lead counsel, stated at the very first court hearing that it was “probably a waste of the court’s time” to try to get the parties to settle anytime before the summary judgment motions were decided. That did not occur until more than six years later.

The discovery in our case showed numerous analyses done by and for Visa that stressed that the tying arrangement was to be defended at all costs. One of these was The Shark. Another listed numerous concessions that could be made to end the litigation without eliminating the tying arrangement. That Visa analysis stressed that ending “Honor All Cards” was not something that could be agreed to. I knew that only two scenarios would force Visa and MasterCard to give up these policies. They would do this under court order or in the face of extinction. Conjure the late Charlton Heston vowing that the only way to take his gun would be “from my cold dead hands,” and you get some sense of Visa and MasterCard’s emotional attachment to these rules.

My conviction that the case would go to trial was based not only on the importance of the tying arrangements to the defendants, but also on my own needs and desires. I needed to believe that the case would not settle in order to get myself and my team to work hard enough to win. I wanted to try this case. I had envisioned a great trial from day one. Although the case took many different turns during its long course, everything that occurred confirmed and reinforced that image for me. The “rather theatrical” summary judgment hearing on January 10, 2003, in a “standing room only” courtroom, was a good preview of the glorious trial I had already played out in my mind. Our mock trials produced a fascinating clash of evidence, ideas, and
values, inciting some jurors to nearly assault one another and to treat certain lawyers like rock stars. These were good rehearsals. The paradox, of course, is that when you work so hard and so well that you are likely to win at trial, you force your adversary to capitulate and never get to actually try the case.