United States District Court, S.D. New York
June 16, 2005.
IN RE CURRENCY CONVERSION FEE ANTITRUST LITIGATION.
The opinion of the court was delivered by: WILLIAM PAULEY, District Judge
MEMORANDUM AND ORDER
These class actions are consolidated for pretrial proceedings.
Plaintiffs allege violations of the Sherman Act, 15 U.S.C. § 1
et seq., the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601
et seq., and the South Dakota Deceptive Trade Practices Act
("DTPA"), arising from an alleged price-fixing conspiracy among
VISA, MasterCard and their member banks (collectively
"defendants") concerning foreign currency conversion fees.
Plaintiffs move for reconsideration of this Court's March 9, 2005
Memorandum and Order with respect to those portions that resulted
from defendants' motions to stay litigation pending arbitration.
For the reasons set forth below, plaintiffs' motion is denied.
The factual background underlying these actions is set forth in
this Court's prior opinions. See In re Currency Conversion Fee
Antitrust Litig., 361 F. Supp. 2d 237 (S.D.N.Y. 2005)
("Currency Conversion III"); In re Currency Conversion Fee
Antitrust Litig., 224 F.R.D. 555 (S.D.N.Y. 2004) ("Currency
Conversion II"); In re Currency Conversion Fee Antitrust
Litig., 265 F. Supp. 2d 385 (S.D.N.Y. 2003) ("Currency
Conversion I"). PROCEDURAL HISTORY
On November 12, 2003, plaintiffs moved for class certification.
Defendants opposed plaintiffs' motion, arguing inter alia that
"most putative class members voluntarily signed a binding
arbitration agreement with their credit card issuers" that
precludes their participation in the defined classes. Currency
Conversion II, 224 F.R.D. at 569. Defendants also requested that
cardholders with binding arbitration agreements be estopped from
litigating their claims against other card issuing banks and the
network defendants. Currency Conversion II, 224 F.R.D. at 570.
This Court rejected that request with respect to the non-issuing
banks "because the non-issuing defendant banks were not parties
to those agreements, and the contract provisions did not extend
to them." Currency Conversion II, 224 F.R.D. at 570.
Subsequently, on November 3, 2004, defendants filed a joint
motion for reconsideration, arguing that the Second Circuit's
intervening decision in JLM Industries, Inc. v. Stolt-Nielsen
SA, 387 F.3d 163 (2d Cir. 2004), requires this Court to apply
the estoppel doctrine to claims against non-issuing banks and the
network defendants. In addition, defendants jointly moved to stay
litigation pending arbitration. This Court agreed, holding that
the "arbitration agreements entered into before this litigation
are enforceable against the cardholders by the signatories,
network defendants and the non-signatory banks," based on the
estoppel doctrine enunciated in JLM. Currency Conversion III,
361 F. Supp. 2d at 245. Plaintiffs now move for reconsideration
of only those portions that resulted from defendants' stay
motions. (Plaintiffs' Reply in Support of Motion for
Reconsideration, dated Apr. 27, 2005 ("Pl. Reply") at 5.) DISCUSSION
I. Motion for Reconsideration Standard
Motions for reconsideration are governed by Local Civil Rule
6.3, which is "narrowly construed and strictly applied so as to
avoid repetitive arguments on issues that have been considered
fully by the court." Dietrich v. Bauer, 76 F. Supp. 2d 312, 327
(S.D.N.Y. 1999). A motion for reconsideration must include "a
memorandum setting forth concisely the matters or controlling
decisions which counsel believes the court has overlooked." Local
Rule 6.3; see also Consol. Gold Fields v. Anglo Am. Corp.,
713 F. Supp. 1457, 1476 (S.D.N.Y. 1989); Dietrich,
76 F. Supp. 2d at 327. Thus, a motion for reconsideration cannot assert new
arguments or claims which were not before the court on the
original motion. See, e.g., Kunica v. St. Jean Fin., Inc.,
63 F. Supp. 2d 342, 346 (S.D.N.Y. 1999) ("[A] party in its motion
for reargument may not advance new facts, issues or arguments not
previously presented to the court." (citation and internal
quotation marks omitted)).
The decision to grant or deny a motion for reconsideration is
within the sound discretion of the district court. A motion for
reconsideration is an "extraordinary remedy to be employed
sparingly in the interests of finality and conservation of scarce
judicial resources." In re Health Mgmt. Sys., Inc. Sec. Litig.,
113 F. Supp. 2d 613, 614 (S.D.N.Y. 2000) (citation and internal
quotation marks omitted).
II. Waiver of Arbitration Rights
"[T]here is a strong presumption in favor of arbitration[, and]
waiver of the right to arbitration is not to be lightly
inferred." Coca-Cola Bottling Co. v. Soft Drink & Brewery
Workers Union Local 812, 242 F.3d 52, 57 (2d Cir. 2001)
(internal quotation marks omitted); see Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 76 (2d
Cir. 1998). Any doubts regarding the issue of waiver should be
resolved in favor of arbitration. See PPG Indus., Inc. v.
Webster Auto Parts Inc., 128 F.3d 103, 107 (2d Cir. 1997); see
also Leadertex, Inc. v. Morganton Dyeing & Finishing Corp.,
67 F.3d 20, 25 (2d Cir. 1995) (citing Moses H. Cone Mem'l. Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). "The waiver
determination necessarily depends upon the facts of the
particular case and is not susceptible to bright line rules."
Cotton v. Slone, 4 F.3d 176, 179 (2d Cir. 1993).
"A party seeking to prove waiver of a right to arbitrate must
demonstrate (1) knowledge of an existing right to compel
arbitration; (2) acts inconsistent with that existing right; and
(3) prejudice to the party opposing arbitration resulting from
such inconsistent acts." Britton v. Co-op Banking Group,
916 F.2d 1405, 1412 (9th Cir. 1990); see also Ivax Corp. v. B.
Braun of Am., Inc., 286 F.3d 1309, 1315-16 (11th Cir. 2002);
Stifel, Nicolaus & Co. v. Freeman, 924 F.2d 157, 158 (8th Cir.
A. VISA and MasterCard
Plaintiffs argue that this Court should find that defendants
VISA and MasterCard (collectively, the "network defendants")
waived their right to stay litigation pending arbitration under
the equitable estoppel doctrine. (Plaintiffs' Memorandum in
Support of Motion for Reconsideration, dated Mar. 23, 2005 ("Pl.
Mem.") at 1.) Plaintiffs contend that while this Court found that
Chase and Citibank waived their right to stay litigation, it did
not address the issue with respect to VISA and MasterCard. (Pl.
Mem. at 1.) They further argue that the network defendants should
have moved to compel arbitration based on the estoppel doctrine
after this Court's July 7, 2003 opinion. By way of background, on July 7, 2003, this Court ruled on the
motion by defendants Bank One Delaware (f.k.a. First USA), Bank
of America, MBNA and their respective parent corporations to
refer the claims against them by their own cardholders to
arbitration.*fn1 Currency Conversion I,
265 F. Supp. 2d 385. As there were no MBNA cardholder plaintiffs at that time,
this Court did not consider whether their claims belonged in
arbitration. Currency Conversion I, 265 F. Supp. 2d at 398.
However, this Court held that Bank One Delaware (f.k.a. First
USA) and Bank of America cardholders were required to proceed to
arbitration. Currency Conversion I, 265 F. Supp. 2d at 416.
Specifically, this Court held that cardholders with enforceable
arbitration clauses were estopped from litigating their claims
against "the issuing banks as well as entities bearing a `close
relationship' with the issuing banks, such as the issuing banks'
parent or subsidiary corporations." Currency Conversion II,
224 F.R.D. at 570; Currency Conversion I, 265 F. Supp. 2d at 403.
This Court noted that cardholders with enforceable arbitration
clauses were not estopped from bringing antitrust claims against
non-issuing defendant banks. See Currency Conversion I,
265 F. Supp. 2d at 410. That is, this Court found that the estoppel
doctrine did not extend to the non-issuing defendant banks,
because they were not parties to those agreements. Currency
Conversion II, 224 F.R.D. at 570; Currency Conversion I,
265 F. Supp. 2d at 410. Indeed, even plaintiffs recognize that:
The Court . . . only stayed a narrow subset of
specific claims: a cardholder who was held subject
to a valid arbitration clause must arbitrate the
antitrust claim only against that cardholder's
issuer Defendant. [Currency Conversion I,
265 F. Supp. 2d at 410.] This Court held that cardholders of
these moving Defendants are free to assert their antitrust conspiracy claims against any
co-conspirator Defendant, just as other cardholders
may assert an antitrust claim against one of the
moving Defendants. Id. at 410, 415 (stating that
arbitrating plaintiffs' "claims against the other
coconspirators remain here before the court").
(Plaintiffs' Reply Memorandum in Support of their Motion for
Class Certification, dated Apr. 2, 2004, at 47 (emphasis in
original) (internal alterations omitted).) Thus, cardholders
remained free to bring antitrust claims against defendants other
than their issuing banks, because this Court rejected the
non-issuing banks and network defendants' reliance on the
estoppel doctrine to compel arbitration.
As this Court had already decided that estoppel would only
extend in certain circumstances, see Currency Conversion I,
265 F. Supp. 2d at 410, it would have been futile for the network
defendants to move to compel arbitration based on the estoppel
doctrine. Thus, the network defendants' failure to file such a
motion after Currency Conversion I does not amount to a waiver.
See Conover v. Dean Witter Reynolds, Inc., 837 F.2d 867, 868
(9th Cir. 1988) (finding no waiver where defendants' earlier
motion to compel would have been futile in light of the
then-existing law); Ilan v. Shearson/American Express, Inc.,
632 F. Supp. 886, 890 (S.D.N.Y. 1985) (finding no waiver where
"defendants properly perceived little basis for a motion to
compel arbitration" until after the Supreme Court recognized a
right to do so); see also Adams v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., No. Civ-84-2645-P, 1988 WL 90834, at *2
(W.D. Okla. Apr. 21, 1988) (finding no waiver where defendants
waited three years after filing suit to move to compel
arbitration, because earlier law did not allow arbitration of
claims based on the Securities Act of 1933).
In any event, defendants' opposition to plaintiffs' class
certification motion was their next pre-scheduled opportunity to
file papers with the Court. In that submission, defendants argued
that estoppel principles required exclusion of all cardholders
with enforceable agreements from any class. (Defendants' Joint Memorandum in Opposition to
Plaintiffs' Motion for Class Certification, dated Feb. 18, 2004,
at 58-63.) Despite defendants' argument, this Court reiterated
that cardholders' arbitration clauses did not extend beyond their
issuing defendant banks and their corporate parents. Currency
Conversion II, 224 F.R.D. at 570. Indeed, it was after the
Second Circuit's ruling in JLM Industries that this Court
reconsidered its prior holdings and found the estoppel doctrine
applicable to plaintiffs' claims against non-issuing banks and
network defendants. Currency Conversion III, 361 F.3d at 260.
As already noted, there is a strong presumption in favor of
arbitration, and waiver of the arbitration right may not be
lightly inferred. See Coca-Cola Bottling Co., 242 F.3d at 57;
see also Cotton, 4 F.3d at 179. Thus, because a motion to
compel arbitration by the network defendants would have been
futile, a finding that the network defendants waived their right
to arbitrate based on the estoppel doctrine is unwarranted. See,
e.g., Ackerberg v. Johnson, 892 F.2d 1328, 1333 (8th Cir.
1989) ("[W]e cannot `require a litigant to engage in futile
gestures merely to avoid a claim of waiver.'" (quoting Benoay v.
Prudential-Bache Sec., Inc., 805 F.2d 1437, 1440 (11th Cir.
1986))); Conover, 837 F.2d at 868; Adams, 1988 WL 90834, at
*2; Ilan, 632 F. Supp. at 890; see also Richard Nathan Corp
v. Diacon-Zadeh, 101 F. Supp. 428, 429 (S.D.N.Y. 1951) ("In
order to constitute a waiver there must be an intentional
relinquishment of a known right with both knowledge of its
existence and an intention to relinquish it." (emphasis
added)).*fn2 B. Non-issuing Defendant Banks
Plaintiffs next argue that non-issuing defendant banks waived
their right to compel arbitration and/or stay litigation based on
equitable estoppel. (Pl. Mem. at 9.) Plaintiffs did not present
this argument to the Court in their opposition to defendants'
stay motions. (See Plaintiffs' Opposition to Defendants'
Motions to Stay Litigation, dated Jan. 18, 2005, at 6-7; see
also Plaintiffs' Opposition to Defendants' Joint Motion for
Reconsideration, dated Nov. 22, 2004, at 1-8.) Accordingly, this
Court denies plaintiffs' motion for reconsideration on this
issue. See Caribbean Trading & Fidelity Corp. v. Nigerian
Nat'l Petroleum Corp., 948 F.2d 111, 115 (2d Cir. 1991) (holding
that a court may not entertain "arguments raised for the first
time on a motion for reconsideration"), cert. denied,
504 U.S. 910 (1992); Wiesner v. 321 W. 16th St. Assocs., No. 00 Civ.
1423 (RWS), 2000 WL 1585680, at *4 (S.D.N.Y. Oct. 25, 2000)
("Plaintiffs' motion for reconsideration is denied because the
Plaintiffs raise new arguments and cite to case law not
previously put before the Court."); Kunica,
63 F. Supp. 2d at 346. Moreover, even assuming this argument was timely raised, for
the reasons set forth with respect to the network defendants,
this Court finds that non-issuing defendant banks did not waive
their right to arbitrate based on the estoppel doctrine. See
supra section II.A.
III. Creation of Subclasses
Next, plaintiffs request a separate subclass of cardholders
whose cardholder agreements contain valid arbitration clauses.
(Pl. Mem. at 11.) Plaintiffs concede, however, that they did not
raise this issue prior to their motion for reconsideration. (Pl.
Mem. at 11; Pl. Reply at 6.) Accordingly, this Court denies
plaintiffs' motion for reconsideration on this issue. See
Caribbean Trading, 948 F.2d at 115; Wiesner, 2000 WL 1585680,
at *4; Kunica, 63 F. Supp. 2d at 346. IV. Membership of the Chase and Citibank Subclasses
Plaintiffs seek reconsideration of this Court's previous ruling
that three categories of Chase and Citibank cardholders are
excluded from the relevant subclasses: (1) cardholders who opened
new credit card accounts after this suit began; (2) cardholders
whose accounts were acquired by Chase or Citibank after this
litigation began; and (3) cardholders whose first foreign
exchange transaction on their credit card occurred after the
arbitration clause was added to their cardholder agreement during
this litigation. (Pl. Mem. at 13.) See Currency Conversion
III, 361 F. Supp. 2d at 258.
Plaintiffs have failed to satisfy their burden of showing that
cardholders in the first two categories were members of the
certified subclasses when this litigation commenced. See
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997)
(holding that the party seeking class certification bears the
burden of establishing the requisites of Rule 23); accord
Caridad v. Metro-North Commuter R.R., 191 F.3d 283, 291 (2d
Cir. 1999). Cardholders who obtained Chase or Citibank credit
cards after this litigation commenced could not have been
putative class members at the outset of this action. (See
Second Consolidated Amended Class Action Complaint ("Compl.") ¶¶
139-41 (defining the putative classes to include the
then-existing cardholders).) Thus, those cardholders had no
rights in this action when this litigation commenced. Cf.
Currency Conversion III, 361 F.3d at 251 ("The putative class
members' rights in this litigation were protected as of the
filing date of the complaint."). Accordingly, this Court rejects
plaintiffs' contention that cardholders in the first two
categories should be included in the certified subclasses.
Similarly, with respect to cardholders whose first foreign
exchange transaction occurred after the addition of the
arbitration clause to their cardholder agreement, there was no cognizable injury when this action commenced. See Currency
Conversion III, 361 F. Supp. 2d at 258. For class certification,
"plaintiffs must demonstrate the existence of an `aggrieved
class' [and] that the aggrieved class can be readily identified."
Dunnigan v. Metro. Life Ins. Co., 214 F.R.D. 125, 135 (S.D.N.Y.
2003); see Hnot v. Willis Group Holdings Ltd., No. 01 Civ.
6558 (GEL), 2005 WL 659475, at *2 (S.D.N.Y. Mar. 21, 2005) ("The
class that plaintiffs seek to certify must be readily
identifiable so that the court can determine who is in the class,
and thus, who is bound by the ruling."); People United for
Children, Inc. v. City of New York, 214 F.R.D. 252, 256
(S.D.N.Y. 2003) ("[C]ourts should ensure that the class
definition is `precise, objective, and presently ascertainable.'"
(citation omitted)); Manual for Complex Litigation § 21.222 (4th
ed. 2004); see also Boucher v. Syracuse Univ., 164 F.3d 113,
118 (2d Cir. 1999) ("District judges have broad discretion over
class definition."). While a class may contain future members,
see Ashe v. Bd. of Elections, 124 F.R.D. 45, 47 (E.D.N.Y.
1989), an individual cannot be a putative class member if he
suffers no injury or is not under imminent threat of injury.
See Ashley Meadows Farm, Inc. v. Am. Horse Shows Ass'n,
624 F. Supp. 856, 858 (S.D.N.Y. 1985) ("[I]ndividual injury, whether
past or future, remains the crux of a private action, and where a
plaintiff is unable `to cite to any contemporaneous damages from
which a reasonable inference of future damages could be drawn,'
the `significant threat' of injury that would entitle it to
injunctive relief has not been shown." (quoting Machovec v.
Council for the Nat'l Reg. of Health Serv. Providers in Psych.,
Inc., 616 F. Supp. 258, 267 (E.D.Va. 1985)).
Cardholders whose first foreign exchange transaction occurred
after addition of the arbitration clause to their cardholder
agreement had not suffered an antitrust injury when the
arbitration clause was added. As this Court has previously noted,
any injury at that time was "hypothetical." Currency Conversion
III, 361 F. Supp. 2d at 258; see also 15 U.S.C. § 26 (providing for injunctive relief to protect against "threatened
conduct that will cause loss or damage" (emphasis added)).
Thus, before these cardholders' rights in this action could have
materialized, they agreed to forego those rights in favor of
arbitration. Accordingly, cardholders in the third category may
not be included in the certified classes.
V. Representation of Diners Club and Providian Cardholders
Plaintiffs also request that this Court clarify its ruling to
make clear that the existing class representatives can adequately
represent Diners Club and Providian cardholders in pursuing their
antitrust claims. (Pl. Mem. at 15.)
While Rule 23 must be liberally interpreted and not given a
strict construction, Marisol A. v. Giuliani, 126 F.3d 372, 377
(2d Cir. 1997), the party seeking class certification bears the
burden of establishing the requisites of Rule 23, see Amchem,
521 U.S. at 614; Caridad, 191 F.3d at 291. Further, plaintiffs
must show that each class they seek is manageable as a class
action. Nat'l Asbestos Workers Med. Fund v. Philip Morris,
Inc., No. 98 Civ. 1492, 2000 WL 1364358, at *1 (E.D.N.Y. Sept.
20, 2000) (citing Amchem Prods., 521 U.S. at 616 (finding
"difficulties likely to be encountered in the management of a
class action" pertinent to Rule 23(b)(3) analysis); Blyden v.
Mancusi, 186 F.3d 252, 271 (2d Cir. 1999) (evaluating the
As this Court has previously noted, the Complaint asserts
different factual allegations against Diners Club and the other
defendant issuing banks. (Compare Compl. ¶ 120-21 (noting that
Diners Club only charges one tier of the currency conversion fee,
which it keeps), with Compl. ¶ 100 (noting that Citibank
charges two tiers of currency conversion fees, one for the
network defendants and the other for itself).) The Diners Club
accounts were not part of the VISA or MasterCard networks (Compl.
¶¶ 119-121), a fact that makes claims against it atypical of those against the issuing banks. While the Complaint details
the issuing banks' actions taken via the VISA or MasterCard
networks to set the foreign currency conversion fees (Compl. ¶¶
101-118), Diners Club benefited indirectly through "Citibank's
participation in the MasterCard and VISA networks" (Compl. ¶
121). Thus, Diners Club's involvement in the alleged conspiracy
was "markedly different" than the rest of the defendants. See
Burka v. New York City Transit Auth., 110 F.R.D. 595, 602
(S.D.N.Y. 1986) ("[C]lass treatment will be foreclosed if the
representative's legal and factual positions are `markedly
different' from those of other class members, and when those
differences go to the very subject matter of the litigation."
(internal citations and quotations omitted)); see also David
v. Showtime/The Movie Channel, Inc., 697 F. Supp. 752, 757
(S.D.N.Y. 1988) ("[T]he key inquiry of Rule 23(a)(2) is whether
[class members'] claims arise from a common nucleus of facts.");
cf. In re NASDAQ Market-Makers Antitrust Litig.,
172 F.R.D. 119, 126 (S.D.N.Y. 1997) (finding class certification appropriate
where all claims arose from "the same price-fixing conspiracy").
Accordingly, because no named plaintiff is a Diners Club
cardholder, this Court declines to certify Diners Club subclass.
Plaintiffs argue that because Providian cardholders were
injured by the alleged conspiracy, this Court should find the
named plaintiffs, who are Chase and Citibank cardholders,
adequate to represent Providian cardholders' in this litigation.
(Pl. Reply at 9.) However, with the exception of conclusory
statements, plaintiffs have advanced no proof to show that the
Chase and Citibank cardholders would adequately protect the
interests of Providian cardholders. See Amchem,
521 U.S. at 614; In re Am. Med. Sys., Inc., 75 F.3d 1069, 1083 (6th Cir.
1996) (noting that under Rule 23(a)(4), a plaintiff seeking class
certification must establish he or she will fairly and adequately
represent and protect the interests of the class). The
requirement of adequate representation is "essential to due
process, because a final judgment in a class action is binding on all class members." In re Am. Med. Sys, 75 F.3d at 1083
(citing Hansberry v. Lee, 311 U.S. 32 (1940)); In re GMC
Pick-Up Truck Fuel Tank Prod. Liab. Litig., 55 F.3d 768, 783 (3d
Cir. 1995) (Rule 23 requires ensuring that it is fair to bind the
interests of the absent class members).
The interests of the named plaintiffs diverge from those of
Providian cardholders. Specifically, the named plaintiffs need
not show that Providian conspired with any of the issuing banks
for them to recover in this action, while Providian cardholders
must establish a conspiracy between Providian and the other
issuing banks. Should the named plaintiffs fail to establish
Chase and/or Citibank's participation in the conspiracy, they
would have little incentive to prove the case on behalf of
Providian cardholders because they would recover nothing for
their efforts. Accordingly, the named plaintiffs are not adequate
representatives for Providian cardholders.
VI. Plaintiffs' Request for Arbitration-Related Discovery
Lastly, plaintiffs request arbitration-related discovery
"regarding the identification of every general purpose card
portfolio held by defendants during the Class Period." (Pl. Mem.
at 18.) Plaintiffs make this request for the first time.
Plaintiffs' request for discovery is untimely at this juncture of
this litigation. Further, "[f]act discovery has closed and the
trial date looms." Currency Conversion III,
361 F. Supp. 2d at 247. Accordingly, this Court denies plaintiffs' request for
additional discovery at this time. CONCLUSION
For the foregoing reasons, plaintiffs' motion for
reconsideration of this Court's March 9, 2005 Memorandum and
Order is denied.