Ross v. Citigroup, Inc.

Opinion

14-1610 (L) Ross v. Citigroup, Inc., et al.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

CORRECTED SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

1 At a stated term of the United States Court of Appeals 2 for the Second Circuit, held at the Thurgood Marshall United 3 States Courthouse, 40 Foley Square, in the City of New York, 4 on the 24th day of November, two thousand fifteen. 5 6 PRESENT: DENNIS JACOBS, 7 PIERRE N. LEVAL 8 GERARD E. LYNCH, 9 Circuit Judges. 10 11 - - - - - - - - - - - - - - - - - - - -X 12 ROBERT ROSS, on behalf of himself and 13 all others similarly situated, ANDREA 14 KUNE, WOODROW CLARK, S. BYRON 15 BALBACH, JR., MATTHEW GRABELL, PAUL 16 IMPELLEZZERI, on behalf of themselves 17 and all others similarly situated, 18 RICHARD MANDELL, RANDAL WACHSMUTH, 19 Plaintiffs-Appellants, 20 21 -v.- 14-1610 (L) 22 14-1616 (Con) 23 CITIGROUP, INC., CITIBANK (SOUTH 24 DAKOTA), N.A., CITICORP DINERS CLUB, 25 CITIBANK USA, N.A., UNIVERSAL BANK, 26 N.A., UNIVERSAL FINANCIAL CORPORATION, 27 DISCOVER FINANCIAL SERVICES, INC., 28 DISCOVER BANK, AMERICAN EXPRESS CO.,

1 1 AMERICAN EXPRESS TRAVEL RELATED 2 SERVICES CO., INC., DB SERVICING 3 CORPORATION, 4 Defendants-Appellees. 5 - - - - - - - - - - - - - - - - - - - -X 6 7 FOR APPELLANTS: MERRILL G. DAVIDOFF (with DAVID 8 A. LANGER on the brief), Berger 9 & Montague, P.C., Philadelphia, 10 Pennsylvania, for Plaintiffs- 11 Appellants. 12 13 FOR APPELLEES: EAMON P. JOYCE (with DAVID F. 14 GRAHAM, T. ROBERT SCARBOROUGH, 15 PATRICK E. CROKE, and DAVID W. 16 DENTON, JR., on the brief), 17 Sidley Austin LLP, New York, New 18 York, for Defendants-Appellees 19 Citigroup Inc., Citibank, N.A. 20 (as successor-in-interest to 21 Citibank (South Dakota), N.A., 22 for itself and as successor-in- 23 interest to Citibank U.S.A., 24 N.A., Universal Bank, N.A., and 25 Universal Financial Corp.), and 26 Citicorp Diners Club Inc. 27 28 ELIZABETH P. PAPEZ (with ROBERT 29 Y. SPERLING and CHRISTOPHER J. 30 LETKEWICZ, on the brief), 31 Winston & Strawn LLP, 32 Washington, D.C., for 33 Defendants-Appellees Discover 34 Financial Services, DB Servicing 35 Corporation, and Discover Bank. 36 37 ROWAN D. WILSON (with EVAN R. 38 CHESLER and GARY A. BORNSTEIN on 39 the brief), Cravath, Swaine, & 40 Moore LLP, New York, New York, 41 for Defendants-Appellees 42 American Express Company, 43 American Express Travel Related 44 Services Company, Inc., and 45 American Express Centurion Bank. 46

2 1 Appeal from a judgment of the United States District 2 Court for the Southern District of New York (Pauley, J.). 3 4 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED 5 AND DECREED that the judgment of the district court be 6 AFFIRMED. 7 8 Plaintiffs appeal from the judgment of the United 9 States District Court for the Southern District of New York 10 (Pauley, J.), which entered judgment in favor of defendants- 11 appellees following a five-week bench trial. At issue are 12 agreements between defendants (credit card issuing banks1) 13 and plaintiffs (classes of individual cardholders). These 14 agreements include provisions that specify arbitration as 15 the sole method of resolving disputes relating to the credit 16 accounts and disallow (among other things) class actions. 17 We assume the parties’ familiarity with the underlying 18 facts, the procedural history, and the issues presented for 19 review. 20 21 1. Plaintiffs challenge the finding that defendants did 22 not collusively adopt class-action-barring arbitration 23 clauses in violation of the Sherman Act, 15 U.S.C. § 1. The 24 standard of review for a district court’s findings of fact 25 following a bench trial is clear error.2 Fed. R. Civ. P.

1 Several other credit card issuing banks that allegedly conspired and colluded with defendants have either settled those claims or are otherwise not a part of this appeal. 2 Plaintiffs argue that certain language in United States v. General Motors Corp., should be used to adopt a rule that the existence of a conspiracy is a legal conclusion subject to review de novo. See 384 U.S. 127, 141 n.16 (1966) (“the ultimate conclusion by the trial judge, that the defendants' conduct did not constitute a combination or conspiracy in violation of the Sherman Act, is not to be shielded by the 'clearly erroneous' test”). However, in the very same paragraph, the Supreme Court continues: “the question here is not one of 'fact,' but consists rather of the legal standard required to be applied to the undisputed facts of the case." Id. (emphasis added). Here, by contrast, the facts were hotly disputed, especially on the ultimate question whether certain conduct by defendants warranted an inference that a conspiracy existed. 3 1 52(a)(6); Ceraso v. Motiva Enters., LLC, 326 F.3d 303, 316 2 (2d Cir. 2003); see also Anderson v. City of Bessemer City, 3 N.C., 470 U.S. 564, 573-74 (1985) (“If the district court's 4 account of the evidence is plausible in light of the record 5 viewed in its entirety, the court of appeals may not reverse 6 it even though convinced that had it been sitting as the 7 trier of fact, it would have weighed the evidence 8 differently.”). The district court’s conclusion that there 9 was no conspiracy was not clearly erroneous. 10 11 An antitrust conspiracy in violation of Section 1 of 12 the Sherman Act requires proof of joint or concerted action 13 as opposed to unilateral action. Anderson News, L.L.C. v. 14 Am. Media, Inc., 680 F.3d 162, 183 (2d Cir. 2012). 15 Plaintiffs concede that they have no direct evidence of 16 conspiracy; so the conspiracy here “must be proven though 17 ‘inferences that may fairly be drawn from the behavior of 18 the alleged conspirators.'" Id. (quoting Michelman v. 19 Clark-Schwebel Fiber Glass Corp., 534 F.2d 1036, 1043 (2d 20 Cir. 1976)). 21 22 As the district court recognized, parallel conduct can 23 be probative evidence of unlawful collusion. Apex Oil Co. 24 v. DiMauro, 822 F.2d 246, 253 (2d Cir. 1987). An agreement 25 among competitors "may be inferred on the basis of conscious 26 parallelism, when such interdependent conduct is accompanied 27 by circumstantial evidence and plus factors." Todd v. Exxon 28 Corp., 275 F.3d 191, 198 (2d Cir. 2001). These "plus 29 factors" may include (but are not limited to) "a common 30 motive to conspire, evidence that shows that the parallel 31 acts were against the apparent individual economic 32 self-interest of the alleged conspirators, and evidence of a 33 high level of inter-firm communications." Twombly v. Bell 34 Atl. Corp., 425 F.3d 99, 114 (2d Cir. 2005) (internal 35 citations omitted), rev'd on other grounds by Bell Atl. 36 Corp. v. Twombly, 550 U.S. 544 (2007); see also Mayor & City 37 Council of Baltimore, Md. v. Citigroup, Inc., 709 F.3d 129, 38 136 (2d Cir. 2013). 39

Our Circuit has never applied General Motors as expansively as plaintiffs urge, and we see no reason to depart from well-settled principles of “clear error” review of factual determinations. 4 1 Having found that there was “conscious parallel action 2 in the adoption and maintenance of arbitration clauses,”3 3 the district court thoroughly analyzed various “plus 4 factors,” including (1) whether defendants had a motive to 5 collude, (2) the quantity and nature of inter-firm 6 communications between defendants and other issuing banks, 7 (3) whether the acts were contrary to the self interest of 8 the defendants, (4) whether the arbitration clauses were 9 “artificially standardized” as a result of an illegal 10 agreement, (5) whether communications about a separate 11 conspiracy to fix foreign currency exchange fees helped 12 prove the instant conspiracy, (6) whether the lack of notes, 13 internal work product, or recollection regarding meetings 14 may suggest a conspiracy, (7) the documentation of the 15 meetings, and (8) recollections of the meetings. After 16 “weighing all the ‘plus factors’ evidence” and the 17 “extensive record of inter-firm communications,” the 18 district court found that the “final decision to adopt 19 class-action-barring clauses was something the Issuing Banks 20 hashed out individually and internally.” Ross v. Am. Exp. 21 Co., 35 F. Supp. 3d 407, 452-53 (S.D.N.Y. 2014).4 That 22 conclusion is plausible in light of the record viewed in its 23 entirety, and we cannot say that the district court was 24 “clearly erroneous” in reaching this conclusion. See 25 Anderson, 470 U.S. at 574.5 26

3 This conclusion was well supported by the record: the district court credited expert testimony that the credit card industry “is an oligopoly in which conscious parallelism is the norm” and noted that “the temporal connection between the meetings and the adoption of the clauses suggests parallel conduct.” 4 The district court then, “for the sake of assisting appellate review,” concluded that the alleged conduct would have been an unreasonable restraint on trade. Because we affirm the district court’s conclusion that the clauses were not adopted as the result of a conspiracy, we need not consider whether this conclusion was sound. 5 The district court also held that there was no antitrust standing because there was no antitrust injury. Because we affirm the finding that there was no antitrust conspiracy, we need not reach the issue of whether plaintiffs had antitrust standing. 5 1 2. Defendant American Express argues separately that 2 the district court’s judgment should be affirmed for lack of 3 Article III standing because plaintiffs are not American 4 Express cardholders. To demonstrate standing, a plaintiff 5 must show (1) injury-in-fact; (2) causation; and (3) 6 redressibility. Lujan v. Defenders of Wildlife, 504 U.S. 7 555, 560 (1992). As to injury, the mere existence of the 8 clauses diminishes the cards’ value by foreclosing the 9 opportunity for cardholders to go to court and address 10 grievances through class action litigation. See Ross v. 11 Bank of Am., 524 F.3d 217, 224 (2d Cir. 2008). 12 Additionally, it is undisputed that consumer choice was 13 reduced when banks who collectively held between 79 and 87% 14 of the transaction volume and outstanding balances in the 15 credit card market from 1999 to 2009 each adopted a class 16 action barring clause, and it is of no moment that those 17 banks may have since deleted the clauses from their 18 cardholder agreements as part of settlements of these very 19 same cases. As to causation, it is obvious that the 20 adoption of the clauses is linked to the injury claimed by 21 the cardholders. As to redressibility, an injunction 22 invalidating the arbitration clauses would arguably redress 23 the injuries to the market. Thus, we agree with the 24 district court that plaintiffs satisfy Article III’s 25 standing requirements. 26 27 For the foregoing reasons, and finding no merit in 28 plaintiffs’ other arguments, we hereby AFFIRM the judgment 29 of the district court. 30 31 FOR THE COURT: 32 CATHERINE O’HAGAN WOLFE, CLERK 33