United States District Court, S.D. New York
August 9, 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 and MasterCard (the "network defendants") and their member
banks concerning foreign currency conversion fees. Plaintiffs
move, pursuant to 28 U.S.C. § 1292(b), for certification of an
interlocutory appeal from this Court's Memoranda and Orders dated
March 9, 2005 and June 16, 2005. For the reasons set forth below,
plaintiffs' motion is granted.
The factual background underlying these actions is set forth in
this Court's prior opinions. See In re Currency Conversion Fee
Antitrust Litig., ___ F.R.D. ___, 2005 WL 1405993 (S.D.N.Y. June
16, 2005) ("Currency Conversion IV"); 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 contended that
cardholders with binding arbitration agreements are contractually
bound to arbitrate with their card issuing banks and should be
estopped from litigating their claims against other card issuing
banks and the network defendants. Currency Conversion II,
224 F.R.D. at 570. On October 15, 2004, this Court granted class
certification and declined to estop plaintiffs from proceeding
against the non-issuing banks because they "were not parties to
those agreements, and the contract provisions did not extend to
them." Currency Conversion II, 224 F.R.D. at 570.
On November 3, 2004, defendants moved for reconsideration of
this Court's class certification ruling, arguing that the Second
Circuit's intervening decision in JLM Industries, Inc. v.
Stolt-Nielsen SA, 387 F.3d 163 (2d Cir. 2004), required this
Court to apply the estoppel doctrine to claims against the
non-issuing banks and the network defendants. In addition,
defendants jointly moved to stay the litigation pending
arbitration. This Court agreed, holding that based on the
estoppel doctrine enunciated in JLM, the "arbitration
agreements entered into before this litigation are enforceable
against the cardholders by the signatories, network defendants
and the non-signatory banks." Currency Conversion III,
361 F. Supp. 2d at 245. Relying on JLM, this Court held that
cardholders with binding arbitration agreements were estopped
from avoiding arbitration with the network defendants and the
non-issuing banks because: (1) the network defendants and the
non-issuing banks each have a close relationship with the issuing banks; (2) plaintiffs' claims of joint and
several liability concerns that relationship; and (3) the claims
are intertwined with the cardholder agreements. Currency
Conversion III, 361 F. Supp. 2d at 262-65.
With respect to the network defendants, this Court held that
plaintiffs had depicted a "close relationship" between the
network defendants and the issuing banks by alleging, inter
alia, that the networks are "membership corporations created,
owned, governed and operated by their member financial
institutions through a joint venture, and that the issuing bank
defendants are among the banks which owned and controlled the
operations of [the network defendants]." Currency Conversion
III, 361 F. Supp. 2d at 262 (internal quotations omitted).
"Because the networks have no direct contact with cardmembers,
their currency conversion fee is imposed through the issuing
banks," making "the `close relationship' between the issuing
banks and the network defendants . . . integral to plaintiffs'
price-fixing claims against the networks." Currency Conversion
III, 361 F. Supp. 2d at 263. This Court further held that the
plaintiffs' claims against the network defendants were closely
linked to the cardholder agreements because the claims "stem from
the cardholder agreements issued by the bank defendants."
Currency Conversion III, 361 F. Supp. 2d at 263.
Further, "[i]n the same way that the issuing banks and the
network defendants are closely aligned entities, the Complaint
connects the bank defendants to each other through membership in
the network associations." Currency Conversion III,
361 F. Supp. 2d at 264. "The Complaint alleges that the issuing banks
operate collectively through the network associations and that
this relationship incubated the conspiracy." Currency Conversion
III, 361 F. Supp. 2d at 264. Finally, "plaintiffs' claims
against the non-signatory bank defendants [were] `closely linked'
to their claims against their issuing banks because both are
intertwined with the cardholder agreements. Because plaintiffs allege that
non-signatory banks conspired with plaintiffs' issuing banks
concerning the fees charged, those claims arise under the
`subject matter' of the underlying agreement between plaintiffs
and the issuing banks." Currency Conversion III,
361 F. Supp. 2d at 264-65 (internal quotations and alterations omitted).
Plaintiffs moved for reconsideration of certain portions of
Currency Conversion III. This Court denied plaintiffs' motion
by Memorandum and Order dated June 16, 2005, i.e., Currency
Conversion IV. Plaintiffs now move for certification of an
interlocutory appeal from Currency Conversion III and Currency
I. Standard for Certification of an Interlocutory Appeal
A district court has the power to certify an order for
immediate interlocutory appeal under 28 U.S.C. § 1292(b). See
Padilla ex rel. Newman v. Rumsfeld, 256 F. Supp. 2d 218, 222-24
(S.D.N.Y. 2003); Romea v. Heiberger & Assocs.,
988 F. Supp. 715, 716-18 (S.D.N.Y. 1998). Section 1292(b) permits a district
court to certify an order that is otherwise not eligible for
interlocutory appeal if the district court discerns that "such
order involves a controlling question of law as to which there is
substantial ground for difference of opinion and that an
immediate appeal from the order may materially advance the
ultimate termination of the litigation." 28 U.S.C. § 1292(b). The
determination of whether Section 1292(b) certification is
appropriate lies within the discretion of the district court.
See Ferraro v. Sec'y of U.S. Dep't of Health & Human Servs.,
780 F. Supp. 978, 979 (E.D.N.Y. 1992). Section 1292(b) is to be applied rarely: "Only `exceptional
circumstances [will] justify a departure from the basic policy of
postponing appellate review until after the entry of a final
judgment.'" Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21,
25 (2d Cir. 1990) (quoting Coopers & Lybrand v. Livesay,
437 U.S. 463, 475 (1978)). Such exceptional circumstances exist only
"where an intermediate appeal may avoid protracted and expensive
litigation and [Section 1292(b)] is not intended to open the
floodgates to a vast number of appeals from interlocutory orders
in ordinary litigation." Telectronics Proprietary, Ltd. v.
Medtronic, Inc., 690 F. Supp. 170, 172 (S.D.N.Y. 1987) (internal
quotations omitted). An order may be certified for interlocutory
appeal when the issues raised are novel and complex and where the
practical effect of the order may be dispositive. See
Klinghoffer, 921 F.2d at 25 (granting interlocutory review when
district court certified that issues were "difficult and of first
impression"); Padilla, 256 F. Supp. 2d at 222-24; Romea,
988 F. Supp. at 716-18; Zenith Radio Corp. v. Matsushita Elec.
Indus. Co., 494 F. Supp. 1190, 1244 (E.D. Pa. 1980) ("[O]ur
decision to certify our order is prompted in large part by the
exceptional novelty and complexity of the legal question here
presented. Moreover, a prompt and authoritative disposition of
the question is extremely important to the prudent management of
Finally, a district court must consider the institutional
efficiency of the federal judiciary when considering an
application for Section 1292(b) certification. The efficiency of
both the district court and the appellate court should be
considered. Balancing these efficiencies, the benefit to the
district court of obviating needless trial time must outweigh the
inefficiency to the Court of Appeals in hearing multiple appeals
in the same case. See Harriscom Svenska AB v. Harris Corp.,
947 F.2d 627, 631 (2d Cir. 1991) ("It does not normally advance
the interests of sound judicial administration or efficiency to
have piecemeal appeals that require two (or more) three-judge panels to familiarize themselves with a given case,
instead of having the trial judge, who sits alone and is
intimately familiar with the whole case, revisit a portion of the
case if he or she has erred in part and that portion is
overturned following the adjudication of the whole case.").
Even if this Court certifies an order for interlocutory appeal,
the Court of Appeals may decline the district court's invitation
for review. See 28 U.S.C. § 1292(b); Karaha Bodas Co. v.
Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 313 F.3d 70,
81 (2d Cir. 2002) ("Upon entry of . . . an order [certifying
interlocutory appeal], the court of appeals has the discretion to
accept or decline jurisdiction.").
II. Certification of an Interlocutory Appeal of This Court's
Plaintiffs argue that this Court's March 9, 2005 and June 16,
2005 rulings involve a controlling question of law over which
there is substantial ground for difference of opinion. (Letter to
Court from Merrill G. Davidoff, Esq., dated July 18, 2005
("Davidoff Letter") at 1.) They contend that this Court's reading
of JLM was too expansive and also "counter-intuitive" because
it requires arbitration of claims against non-signatories on the
basis of their alleged price-fixing relationship with the
signatory issuing banks, when that relationship was unknown to
plaintiffs at the time of acceptance of the contract. (Davidoff
Letter at 3.)
Defendants oppose certification of an interlocutory appeal.
They contend that "[t]here is no genuine dispute about the
principles of law that govern this case; plaintiffs'
disagreement with this Court's order relates instead to the
application of agreed controlling principles to the specific
facts of this case." (Letter to Court from Christopher R.
Lipsett, Esq., dated July 22, 2005 ("Lipsett Letter") at 1.) They
further argue that this Court's application of JLM was correct, and therefore a certification of an
interlocutory appeal would be inappropriate. (Lipsett Letter at
2-6.) Finally, defendants argue that an interlocutory appeal
would not materially advance the ultimate termination of this
litigation. (Lipsett Letter at 6-7.)
In JLM and, more recently, in Denney v. BDO Seidman,
L.L.P., 412 F.3d 58 (2d Cir. 2005), the Second Circuit examined
the operation of equitable estoppel as to alleged
co-conspirators. However, in neither opinion did the Second
Circuit enunciate the minimum level of intertwined-ness necessary
In JLM, a group of chemical traders ("JLM") claimed that the
shipping companies with whom they contracted had engaged in an
antitrust conspiracy to fix the freight rates they charged for
transporting chemicals. 387 F.3d at 167-68. For each transaction
with the various shipping companies, JLM signed the same
standard-form charter. JLM, 387 F.3d at 167. That contract
contained a broad arbitration clause through which the parties
agreed to arbitrate "[a]ny and all differences and disputes of
whatsoever nature arising out of this Charter." JLM,
387 F.3d at 167. However, the JLM defendants were not the signatories to
the shipping charters but were the parent corporations ("Owners")
of the signatories. JLM, 387 F.3d at 167. Nonetheless, the
Owners moved to compel JLM to arbitrate its claims against them.
The Court of Appeals held that JLM was estopped from avoiding
arbitration based on the agreements it entered with the Owners'
subsidiaries. The Second Circuit concluded that "it is the fact
of JLM's entry into the charters containing allegedly inflated
price terms that gives rise to the claimed injury." JLM,
387 F.3d at 178. In particular, the Second Circuit found that JLM was
estopped from arguing against arbitration because "[t]he
questions the Owners seek to arbitrate are undeniably intertwined
with the charters." JLM, 387 F.3d at 178. While it noted that
the "estoppel inquiry is fact-specific" and that the Second
Circuit has "had no occasion to specify the minimum quantum of `intertwined-ness' required to support a finding of estoppel,"
the court had "no difficulty concluding that [the minimum quantum
of intertwined-ness was] present here." JLM, 387 F.3d at 178.
After JLM, the Second Circuit considered equitable estoppel
again in Denney. The Court of Appeals held that where a
plaintiff alleges concerted misconduct between a signatory and
nonsignatory, such concerted misconduct could be the basis for a
finding of close relationship between the signatory and
nonsignatory. Denney, 412 F.3d at 70-71. In Denney,
plaintiffs asserted RICO claims against BDO Seidman, L.L.P.
("BDO") and other defendants in connection with certain tax
transactions. Plaintiffs entered into consulting agreements with
BDO that included an arbitration provision. Denney,
412 F.3d at 61-62. On appeal, the Second Circuit held that Deutsche Bank,
which was a nonsignatory to the consulting agreements, had the
close relationship necessary for invoking the BDO arbitration
Having alleged in this RICO action that the Deutsche
Bank and BDO defendants acted in concert to defraud
plaintiffs, . . . and that defendants' fraud arose in
connection with BDO's tax strategy advice, . . .
plaintiffs cannot now escape the consequences of
those allegations by arguing that the Deutsche Bank
and BDO defendants lack the requisite close
relationship, or that plaintiffs' claim against the
Deutsche Bank defendants are not connected to
Deutsche Bank's relationship with BDO.
Denney, 412 F.3d at 70 (citing Grigson v. Creative Artists
Agency, L.L.C., 210 F.3d 524
, 527 (5th Cir. 2000); MS Dealer
Serv. Corp. v. Franklin, 117 F.3d 942, 947 (11th Cir. 1999)).
However, based on the record, the Second Circuit was unable to
address the issue of "whether plaintiffs' claims against the
Deutsche Bank defendants [were] so `intimately founded in' or
`intertwined with' the underlying obligations of the consulting
agreements as to allow the non-signatory Deutsche Bank defendants
to compel arbitration." Denney, 412 F.3d at 70. Thus, the Court
of Appeals remanded the case to determine "whether the issues the
Deutsche Bank defendants seek to arbitrate are indeed intertwined with the
consulting agreements." Denney, 412 F.3d at 70.
Thus, while this Court found "intertwined-ness," the Second
Circuit has not had occasion to "specify the minimum quantum of
`intertwined-ness' required to support a finding of estoppel."
JLM, 387 F.3d at 178. Because the facts relating to the
equitable estoppel issue have been fully developed in this
action, an interlocutory appeal pursuant to 28 U.S.C. § 1292(b)
is warranted.*fn2 See Klinghoffer, 921 F.2d at 25;
Padilla, 256 F. Supp. 2d at 222-24; Romea,
988 F. Supp. at 716-18; Zenith Radio, 494 F. Supp. at 1244.
Further, resolution of the equitable estoppel issue is critical
to the progress of this multi-district litigation. An
interlocutory appeal to obtain appellate guidance on the
threshold issue of class composition would materially advance the
ultimate resolution of this litigation, particularly if the
Court's interpretation of the law is incorrect. See, e.g.,
Mayo v. Hartford Life Ins. Co., 214 F.R.D. 458, 461 (S.D. Tex.
2002). Additionally, in view of Chase and Citibank's appeal of
this Court's denial of their motions to compel arbitration and
stay this litigation, consideration of plaintiffs' appeal would
promote judicial economy.*fn3 See Johnson v. Burken,
930 F.2d 1202, 1206 (7th Cir. 1991) ("Practical considerations well
illustrated by this case show that the standard [for granting
interlocutory appeal] should be kept flexible. If we don't decide
the validity of the first service, the case may go through to
judgment, followed by an appeal that will result (as we are about
to see) in throwing the case out for want of proper service
thus requiring a remand for determination of the validity of the
second attempt at service, followed possibly by another
appeal."); see also Harriscom, 947 F.2d at 631. Certification
of an interlocutory appeal advances "the interests of sound
judicial economy" by having one three-judge panel familiarize
itself with this case, instead of having "piecemeal appeals that
require two (or more) three-judge panels." Harriscom,
947 F.2d at 631. CONCLUSION
This Court's March 9, 2005 and June 16, 2005 Memoranda and
Orders involve a controlling question of law as to which there is
substantial ground for difference of opinion, and an immediate
appeal from the rulings may materially advance the ultimate
termination of this multi-district litigation. Accordingly, this
Court certifies an interlocutory appeal, pursuant to
28 U.S.C. § 1292(b), from this Court's March 9, 2005 and June 16, 2005
Memoranda and Orders. Additionally, because 28 U.S.C. § 1292(b)
states that the prior orders of this Court must themselves
contain the certification, the Memoranda and Orders entered in
this case on March 9, 2005 and June 16, 2005 are deemed amended
to include the discussion set forth above. See Fed.R.App.P.