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IN RE CURRENCY CONVERSION FEE ANTITRUST LITIGATION

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.

BACKGROUND

  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 Conversion IV.*fn1

  DISCUSSION

  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 the litigation.").

  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 ...


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