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United States District Court, S.D. New York

July 1, 2005.


The opinion of the court was delivered by: GEORGE DANIELS, District Judge


Plaintiff, a merchant who accepts defendants' payment card products, brought suit alleging antitrust violations of the Sherman Act. Defendants move to dismiss plaintiff's complaint pursuant to Fed.R.Civ.P. 12(b)(6), contending that plaintiff's claims are barred by the relevant statute of limitations.*fn1 For the reasons stated below, defendants' motion is denied.

Plaintiff Marcus Corporation ("Marcus") is a Wisconsin corporation that owns and operates movie theaters and hotels in thirty-two states. Marcus, which has accepted American Express payment card products as a merchant consumer ("merchant") for more than four years prior to filing suit,*fn2 brings suit under section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, and section 16 of the Clayton Act, 15 U.S.C. § 26.*fn3 Visa, MasterCard, American Express, and Discover collectively control the bulk of the payment card industry.*fn4 Visa and MasterCard operate as joint ventures with the banks that issue their payment cards to consumers. American Express, by contrast, has until recently issued payment cards directly to the consumer, without partnering with banks. When a consumer presents a card to a merchant, the merchant submits a request for payment to American Express or, in the case of Visa and MasterCard, to the card-issuing bank. Both the Visa/MasterCard and American Express models derive revenue by withholding a "merchant discount fee" from each transaction submitted. Marcus alleges that American Express charges a merchant discount fee of approximately 3%, considerably higher than the 1.8% that merchants pay to Visa or MasterCard. (Compl. ¶ 20, 21). Marcus contends that the merchant discount fee levied by American Express is supracompetitive, and can be sustained only by the unlawful tying of American Express charge card*fn5 and credit card services in violation of § 1 of the Sherman Act. (Compl. ¶ 2).*fn6

  Marcus alleges that American Express unlawfully ties its charge card and credit card services through an Honor All Cards policy ("HAC") included in its merchant contract. Merchants who choose to accept the charge card must agree to accept all American Express cards.*fn7 Marcus concedes that it has accepted American Express personal and corporate charge cards for more than four years prior to the filing of the first class action complaint challenging the alleged tying arrangement, and further admits to having accepted an unidentified number of American Express-issued credit cards in that period. (Plaintiff's Statement of Material Facts ¶ 1). Marcus does not allege that Honor All Card policies are per se illegal, but contends that American Express exploited its market power in the charge card market to build a credit card presence through its HAC policy.

  This litigation is set against the backdrop of an eight-year Department of Justice lawsuit against Visa and MasterCard. In 2003, the Second Circuit affirmed a ruling that Visa and MasterCard violated antitrust statutes by colluding to require that their credit card-issuing bank partners refuse to issue American Express products; this collusion had effectively barred American Express from the credit card market.*fn8 At the time, Visa and MasterCard collectively controlled upwards of 90% of the credit card market. As a result of the Second Circuit's decision, American Express has made major inroads into the bank-issued credit card market while maintaining its position as the leading issuer of corporate and consumer charge cards in the United States. Since the resolution of the DOJ litigation, American Express has negotiated card-issuing agreements with two of the nation's largest card-issuing banks. Plaintiff contends that in enforcing its Honor All Cards policy to require merchants to accept bank-issued credit cards at a supracompetitive merchant discount rate, American Express has committed antitrust violations causing injury to plaintiff in the form of overcharges on each credit card transaction. Specifically, plaintiff alleges that American Express:

Launched entire new credit and debit card brands, such as Blue, the MBNA-issued Amex-branded credit card, the Amex-Fidelity debit card and others; [s]ubjected most of these new products to the Honor All Cards rule; [s]et the merchant discount rate on these new products at supra-competitive levels that exceed market rates by 40% or more; [i]ssued tens of millions of its new credit cards to consumers, and processed hundreds of millions of transactions, resulting in billions of dollars in new and accumulated overcharge being inflicted upon merchants; [i]nstituted a program whereby it accretes market share in the tied product market by kicking back to cardholders a portion of the overcharge it extracts from merchants through the tying arrangement; [s]olicited the nation's largest banks to allocate their unparalleled resources to the distribution of these new, tied credit cards; [a]nnounced agreements with two of the three largest credit card issuing banks in the U.S., thereby forcing MasterCard and Visa to either price their own services to merchants at inefficiently high levels, or risk losing all of the banks, and the U.S. credit card market, to American Express.
(Plaintiff's Memo at 18-19).

  In reviewing defendant's motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court must accept the factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Patel v. Searles, 305 F.3d 130, 134-35 (2d Cir. 2002). A court determining the sufficiency of a plaintiff's claim must limit its inquiry to the facts stated in the complaint; the complaint includes any written instrument attached as an exhibit and any statements or documents incorporated by reference into the complaint. Paulemon v. Tobin, 30 F.3d 307, 308-309 (2d Cir. 1994).

  Defendants move to dismiss plaintiff's claims as time-barred pursuant to section 4B of the Clayton Act, which requires that private antitrust litigants bring claims within "four years after the cause of action accrued." 15 U.S.C.A. § 15b. Guiding this court's inquiry is the Supreme Court's admonition that "[a]ny period of limitation . . . is understood fully only in the context of the various circumstances that suspend it from running against a particular cause of action." Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 463 (1975). Plaintiff argues that under the traditional Clayton Act limitations standard, known as the "injury accrual rule," its claims remain viable, as the injuries alleged occurred within the four-year period prior to filing suit.*fn9 Defendant contends that any injury plaintiff allegedly suffered would have accrued years before the limitations period,*fn10 since Marcus signed its contract with American Express, including the HAC provision, well before the four-year limitations period preceding the filing of this suit.*fn11

  Generally, "a cause of action accrues and the statute begins to run when a defendant commits an act that injures a plaintiff's business." Zenith v. Hazeltine, 401 U.S. 321, 338 (1971). Thus, two events must occur in order to begin the running of the limitations period: the act and the injury. Id. at 339 (identifying the accrual of a cause of action as the point at which "a plaintiff feels the adverse impact of an antitrust [violation]").

  After the Second Circuit's decision in Visa U.S.A., American Express contracted with MBNA and Citicorp, "two of the nation's three largest credit card issuing banks," to issue American Express credit cards. (Plaintiff's Memo at 5). Marcus alleges that these contracts have given rise to a "radical realignment" of the U.S. credit card market, (Plaintiff's Memo at 3), resulting in injuries to plaintiff in the form of overcharges that could not have occurred prior to the resolution of Visa U.S.A. Defendants suggest that, even were the alleged tying arrangement violative of antitrust laws, Marcus should have brought its complaint within four years of accepting its first American Express credit card pursuant to the HAC policy. This, defendants argue, occurred in 1986 with the release and subsequent acceptance by Marcus of the American Express Optima credit card. Defendants argue that any injury plaintiff currently alleges would necessarily have accrued upon the issuance of the Optima card. Plaintiff asserts, however, that Optima was issued through a subsidiary of American Express, not a major card-issuing bank, and performed poorly in the credit card market. (Compl. ¶ 29). Thus, plaintiff contends that the overcharges it sustained as a result of American Express's post-Visa U.S.A. imposition of bank-issued credit cards at supracompetitive merchant discount rates are different in kind and degree than any which might have occurred during the Optima period.

  In Berkey Photo, the Second Circuit found that, in a limitations period-based challenge to a suit brought under § 2 of the Sherman Act, injuries to purchasers do not accrue until a monopolist "actually exercises its illicit power to extract an excessive price," otherwise "the purchaser has no cause of action." Berkey Photo, Inc. v. Eastman Kodak, 603 F.2d 263, 295 (2d Cir. 1979) (finding that "[u]ntoward consequences would follow were we to hold that the anticompetitive conduct itself triggered the running of the limitations period."). The overcharges that Marcus alleges it suffered pursuant to the tying arrangement did not accrue until American Express exercised this allegedly "illicit power" to compel acceptance of millions of bank-issued credit cards, a field in which it had been allegedly inactive for the entirety of its contract with Marcus. See Higgins v. NYSE, 942 F.2d 829, 832 (2d Cir. 1991) (concluding that plaintiff's claim was barred when his last alleged injury occurred more than four years prior to filing suit); see also Telectronics Proprietary, Ltd. V. Medtronic, Inc., 687 F. Supp 832, 843 (S.D.N.Y. 1988) (holding that antitrust injury accrued not when defendants unlawfully purchased disputed patents, but when the patents were asserted against plaintiffs). Accepting the facts alleged in the complaint as true for the purpose of this motion, and construing all inferences in favor of plaintiff, Marcus has alleged that, after the resolution of Visa U.S.A., American Express committed an anticompetitive act resulting in injury within the limitations period. Defendants' motion is therefore denied.


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