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United States v. VISA U.S.A.

August 8, 2007


The opinion of the court was delivered by: Barbara S. Jones United States District Judge

Opinion & Order

I. Background and Procedural History

The Court presumes familiarity with the factual background giving rise to these proceedings. Defendant MasterCard International Incorporated ("MasterCard") moved to enforce the Court's October 9, 2001 judgment in this case, United States v. Visa U.S.A., Inc., 163 F. Supp. 2d 322, 410 (S.D.N.Y. 2001) (the "Final Judgment") against Defendant Visa U.S.A., Inc. ("Visa") on January 10, 2005. (See MC Mot. Enforce, Doc. No. 334.) The Court appointed a special master to determine whether Visa's ByLaw 3.14 -- also known as the "Settlement Service Fee" or "SSF" -- violates the Final Judgment.*fn1 (See Order of Aug. 18, 2005 ("Order of Reference").) The Special Master issued a Report in which he concluded that By-Law 3.14 violates the Final Judgment. (See Report 32-36.) The Court issued an Opinion & Order on June 7, 2007, which it amended on June 15, 2007, adopting the findings of fact and conclusions of law in the Report. In Part VII (the "Remedy") of the Amended Opinion & Order, the Court ordered Visa to repeal By-Law 3.14 and granted termination rights to Visa member banks subject to the SSF that entered into debit issuance agreements with Visa while the SSF was in effect.*fn2

Visa now moves, pursuant to Rule 62(c) of the Federal Rules of Civil Procedure, for a stay pending appeal of the portions of the Court's Amended Opinion & Order that grant termination rights to Visa member banks.*fn3 (Visa Mem. Supp. 4.) For the following reasons, Visa's Motion for a Stay is DENIED.*fn4

II. Discussion

Almost all of the contracts subject to termination will expire during the next year. (See Oral Arg. Tr. 25:15-26:8.) Visa's proposed stay all but guarantees that issuers with contracts subject to termination will never have an opportunity to exercise their termination rights. A stay would permit Visa to avoid this portion of the Court's Remedy altogether.

A. Applicable Law

The Court looks to the following four factors in evaluating Visa's Motion for a Stay:

(1) whether the movant will suffer irreparable injury absent a stay; (2) whether a party will suffer substantial injury if a stay is issued; (3) whether the movant has demonstrated a substantial possibility, although less than a likelihood, of success on appeal; and (4) the public interests that may be affected. Hirschfeld v. Bd. of Elections, 984 F.2d 35, 39 (2d Cir. 1993); accord Cooper v. Town of East Hampton, 83 F.3d 31, 36 (2d Cir. 1996). The Court treats these factors "somewhat like a sliding scale." Thapa v. Gonzales, 460 F.3d 323, 334 (2d Cir. 2006). "[T]he necessary 'level' or 'degree' of possibility of success will vary according to the court's assessment of the other stay factors." Id. (quoting Mohammed v. Reno, 309 F.3d 95, 101 (2d Cir. 2002).

B. Irreparable Harm to Visa

Visa argues that it will suffer irreparable harm because, if Visa debit issuers terminate their agreements early and Visa prevails on appeal, the Court will be unable to restore those agreements to Visa. Visa argues that this is the same irreparable injury analysis that led the Court to stay the Final Judgment pending its appeal. (See Order of Feb. 6, 2002 (Doc. No. 247) ("Of particular concern are the potentially irreversible consequences of Section III.D of the Final Judgment, which permits member banks to rescind dedication agreements.").)

The Final Judgment involved structural changes to the entire card issuance industry, whereas the Remedy here is much less far-reaching. The Remedy here encompasses only Visa debit agreements, almost all of which are set to expire during the next year. Concerns related to credit issuance that existed at the time of the Final Judgment no longer apply. For example, because issuers keep their debit portfolios on one network, there is no concern that a bank would opportunistically enter into a de minimis agreement with MasterCard solely to get out of its agreement with Visa and then shift volume to a third network.*fn5

Visa also argues that it will suffer irreparable injury because (1) pro-rating the incentives to be repaid will not fully compensate Visa for its loss if a bank terminates early, because Visa would have negotiated lower yearly incentive payments for issuance agreements with a shorter term; (2) there is no practical way to identify the benefits tied only to debit, since some incentives were the result of gaining an issuer's business for more than one type of payment product, and (3) disputes will arise as to what counts as an unearned incentive under the Remedy.

None of these concerns establishes irreparable injury, because all these concerns exist regardless of whether the Court grants termination rights. Even without the Court's Remedy, Visa member banks can terminate their issuance agreements with Visa at any time, and a bank that does so must repay unearned financial incentives according to the terms of its issuance agreement. In such a case, Visa would not be entitled to the benefit of its bargain in terms of lost revenue, nor would it be entitled to reimbursement for the difference between its current yearly ...

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