Court Opinion

ID: 4170743
Source: CourtListenerOpinion
Date Created: 2017-05-22 16:04:05.753144+00
Date Added: 2024-06-11T13:24:58.454812
License: Public Domain

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

NATIONAL ATM COUNCIL, INC. et al., )

)

Plaintiffs, )

)
v. ) Civil Case N0. 11-1803 (RJL)

)

VISA INC. et al., )
) FILED

Defendants )

MAY 22 2017
MEMoRANDUM oPINIoN

M U.S. midst & Blll
(May§, 2017) [Dkts. ## 60, 87, 1021 mmmommcwh

Automatic teller machines (“ATMS”) all around the country allow individuals to
conveniently withdraw cash from their bank accounts without having to locate an open
bank branch to consummate their transaction. Although customers will often use ATMS
that are owned and operated by their own banks, they will sometimes pay an “access fee”
to use an ATM that is not affiliated with their bank, conducting what is referred to as a
“foreign” ATM transaction Whenever a foreign ATM transaction occurs, the ATM
terminal must communicate with the customer’s bank through an ATM network. The
plaintiffs in this putative class action are a group of independent, non-bank-affiliated ATM
operators, and defendants Visa and MasterCard operate several of the ATM networks that
plaintiffs utilize during foreign ATM transactions Plaintiffs allege that Visa and
MasterCard have imposed contractual provisions-the “ATM Access Fee Rules”--that
prevent them from charging a discounted access fee if a customer’s transaction can be

processed over an alternative network that is less expensive than Visa or MasterCard

networks, and they allege that those rules unreasonably restrain trade and therefore violate
Section l ofthe Sherman Act, 15 U.S.C. § l.

Currently pending before the Court is plaintiffs’ Renewed Application for a
Preliminary Injunction [Dkt. # 87], which asks the Court to enjoin defendants’ enforcement
of the ATM Access Fee Rules during the pendency of this litigation. Upon consideration
of the pleadings, the record, and the law, I find that plaintiffs have not met their burden of
showing likely irreparable harm in the absence of an injunction, and I therefore DENY the
Motion.l

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs in this case are the National ATM Council, an association of independent
ATM operators suing on behalf of its members, and thirteen independent ATM owners and
operators Second Am. Compl., M 10_25 [Dkt. # 55]. When an individual uses an
independent ATM (or an ATM operated by a bank other than his own), the transaction is
referred to as a “foreign transaction.”2 Defs.’ Mem. in Opp’n. to Renewed App. for Prelim.
Inj. at 4 [Dkt. # 99]. For the purposes of this case, there are four relevant actors in a foreign

transaction: (l) the individual accountholder who initiates a transaction by inserting his or

 

' Also pending before the Court are defendants’ Motion to Strike Independent ATM Operator Plaintiffs’
Supplemental Declaration [Dkt. #102], as well as plaintiffs’ earlier Application for a Preliminary Injunction
[Dkt. # 60], which was superseded by the renewed application and is therefore moot.

2 As mentioned above, many banks own and operate their own ATMS. When an individual uses an ATM
that is owned and operated by their own bank, the transaction is referred to within the banking industry as
an “on-us” transaction. Decl. of Jeff Sachs, il 8 [Dkt. # 99~1]. The only parties involved in the transaction
are the individual customer and the bank. The transaction does not require an ATM network, and the bank
does not normally charge the customer an access fee for using an ATM. Defs.’ Mem. in Opp. to Renewed
App. for Prelim. Inj. at 4 [Dkt. # 99-1]. Those transactions are not at issue in this case,

her bank-issued ATM card into an ATM; (2) the bank that issued the accountholder’s ATM
card and maintains his or her accounts; (3) the ATM operator; and (4) the ATM network
that connects the “foreign” ATM to the bank. Ia’. at 4-5.

Visa and MasterCard operate the “Plus” and “MasterCard” ATM networks
respectively, but there are a number of networks that also facilitate foreign ATM
transactions Decl. of Jeff Sachs, il 7 [Dkt. # 99-1]; Decl. of Leland Englebardt, ‘M 4, 7
[Dkt. # 99-2]. In any given transaction, the specific network that is utilized is a function
of the networks that the ATM can access, the networks with which the customer’s bank-
issued ATM card will work, and the preferences that are established by the card-issuing
bank. At a minimum, the ATM card and the ATM must share at least one common network
for the transaction to work. See Defs.’ Mem. in Opp’n at 5 [Dkt. # 99].

As independent ATM operators, plaintiffs can earn revenue in two ways. First, as
mentioned before, they can charge customers an “access fee” for using their terminal.
Sachs Decl. il 10; Englebardt Decl. ii ll. Second, they indirectly receive “net interchange”
fees. Id. The card-issuing banks pay an “interchange fee” to ATM networks like Visa and
MasterCard, and through a complex system of payments, a portion of the fee eventually
gets passed to the end ATM operator. Sachs Decl. 111 10-12; Englebardt Decl. M ll-l4.
The intricacies of interchange payments do not need to be completely fleshed out here, but
plaintiffs assert that Visa and MasterCard pay relatively Smaller net interchange rates to
ATM operators than alternative networks, See Restated Decl. of John Michael Powell, M
3-5 [Dkt. # 92].

As a contractual condition for accessing their networks, Visa and MasterCard

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impose non-discrimination provisions referred to as the “ATM Access Fee Rules.” The
ATM Access Fee Rules were adopted in 1996, but have remained substantially the same
since that time. Ia’. ‘H 2; Sachs Decl. 1 23; Englebardt Decl. il 26. Stated simply, the rules
prohibit ATM operators from charging access fees for transactions processed over Visa or
MasterCard networks that are higher than any access fee they charge for transactions
processed over alternative networks, Powell Decl. il 2; Sachs Decl. il 16; Englebardt Decl.
il 21. Plaintiffs allege that without the Access Fee Rules, they would offer discounts and
structure their access fees to encourage customers to use ATM cards that are compatible
with less expensive networks. Second Am. Compl. il 69. As a result, they argue that they
are an illegal restraint of trade that unfairly protects Visa and MasterCard from price
competition from less expensive networks and harms the operators’ profitability and
economic sustainability.

Plaintiffs filed this civil class action in October 2011. Compl. [Dkt. #l]. In
February 2013, one of my colleagues on the District Court concluded that plaintiffs’
complaint failed to allege facts to establish standing or concerted activity under the
Sherman Act and dismissed the case without prejudice3 Nat’l ATM Council, Inc. v. Visa
Inc., 922 F. Supp. 2d 73 (D.D.C. 2013). In December 2013, my colleague denied plaintiffs’

motion to alter the judgment with leave to re-plead, after concluding that the proposed

 

3 This case is related to two putative class actions raising substantially similar claims on behalf of individual
consumers who have paid ATM access fees. Second Am. Compl., Stoumbos v. Visa Inc., Case No. ll-cv-
1882-RJL (D.D.C. Nov. 23, 2015) [Dkt. # 44]; Second Am. Compl., Bartron v. Visa Inc., Case No. ll-cv-
1831-RJL (D.D.C. Nov. 23, 20l5) [Dkt. # 84]. Although the plaintiffs in both cases intervened in this
matter for purposes of addressing discovery and other matters related to the Motion, they have not taken a
position as to whether the Court should grant or deny the Motion. See Consumer Pl.-Intervenors’ Resp. to
the Nat’l ATM Council, Inc.’s App. F or Preliminary Injunction at l [Dkt. # 66].

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amended complaint lacked adequate facts to establish standing or concerted activity. Nat ’l
ATM Council, Inc. v. Visa Inc., 7 F. Supp. 3d 51 (D.D.C. 2013). Plaintiffs successfully
appealed, and our Circuit Court reversed and remanded for further proceedings Osborn v.
Visa Inc., 797 F.3d 1057 (D.C. Cir. 2015). The case was reassigned to me on August 4,
2015. [Dkt # 49].

Plaintiffs originally moved for a preliminary injunction enjoining enforcement of
the ATM Access Fee Rules in 2016, but 1 stayed consideration of the case when the United
States Supreme Court granted certiorari to review the Circuit Court’s decision. Plaintiffs’
Application for a Preliminary Injunction [Dkt. # 60]; 7/21/ 16 Minute Order Staying Case.
In November 2016, the Supreme Court dismissed defendants’ petitions for certiorari as
improvidently granted. 1 thereafter held a status conference at which plaintiffs indicated
that they were still seeking preliminary relief. At the status conference, 1 gave the plaintiffs
an opportunity to renew their motion and re-constitute their briefs to account for any
changed circumstances arising from the passage of time. Plaintiffs’ Renewed Application
for a Preliminary Injunction [Dkt. # 87]. After the renewed motion was fully briefed, 1
held a hearing on April 18, 2017 and took the motion under advisement

1n their renewed motion, plaintiffs seek a broad injunction that would prohibit Visa
and MasterCard from adopting or enforcing any rules that would stop ATM operators from
charging higher access fees for transactions over Visa and MasterCard networks; offering
customers discounts, incentives, or free services for using specific ATM cards or networks;
expressing a preference for or promoting specific networks; communicating the relative

costs incurred when different networks are used; or engaging in substantially equivalent

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practices. Corrected Renewed Application for a Preliminary Injunction at 4 [Dkt. #97].
STANDARD OF REVIEW

A party seeking a preliminary injunction must make a “clear showing” that the
following four factors, taken together, merit the granting of such an extraordinary remedy:
that there is “likely success on the merits, likely irreparable harm in the absence of
preliminary relief, a balance of the equities in its favor, and [the requested injunction is in]
accord with the public interest.” Cobell v. Norton, 391 F.3d 251, 258 (D.C. Cir. 2004);
League of Women Voters of United States v. Newby, 838 F.3d 1, 6 (D.C. Cir. 2016) (quoting
Pursuing Am. 's Greatness v. FEC, 831 F.3d 500, 505 (D.C. Cir. 2016)).

Courts considering these factors tend to apply a “sliding scale” that balances the
relative strength of the arguments for each factor. Davz`s v. Pension Benefz`t Guar. Corp.,
571 F.3d 1288, 1291-92 (D.C. Cir. 2009). However, a movant “must demonstrate at least
some injury for a preliminary injunction to issue,” and a “movant’s failure to show any
irreparable harm is therefore grounds for refusing to issue a preliminary injunction, even if
the other three factors entering the calculus merit such relief.” Chaplaincy of F ull Gospel
Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006). See also Econ. Research Servs.,
Inc. v. Resolution Econ., LLC, 140 F. Supp. 3d 47, 52 (D.D.C. 2015). Because plaintiffs have
not demonstrated irreparable harm, the Court’s inquiry begins, and ends, with this factor.

ANALYSIS

In order to establish the likelihood of irreparable harm, a movant must show that the

complained-of injury is “certain and great” as well as “actual and not theoretical,” and is

of “such imminence that there is a ‘clear and present’ need for equitable relief to prevent

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irreparable harm.” Wl`sconsl`n Gas Co. v. F.E.R.C., 758 F.2d 669, 674 (D.C. Cir. 1985) .
Additionally, our Circuit has made clear that “[e]conomic harm does not, in and of itself,
constitute irreparable harm.” Id. at 674. 1t is insufficient for a party seeking a preliminary
injunction to point to injuries that can be quantified “in terms of money, time and energy
necessarily expended in the absence of [an injunction],” because “the possibility that
adequate compensatory or other corrective relief will be available at a later date . . . weighs
heavily against a claim of irreparable harm.” Ia’. (quoting Virginia Petroleum Jobbers Ass 'n
v. FPC, 259 F.2d 921, 925 (D.C. Cir. 1958).

Here, the plaintiffs argue that the ATM Access Fee Rules restrict their ability to
exercise discretion when setting ATM access fees and subject them to “continuing financial
and reputational harm during the pendency of this litigation.” Renewed App. at 8 [Dkt. #
97]. This is a recoverable monetary harm, and plaintiffs even concede that the asserted
“losses could be remediable by money damages for . . . individual firm[s].” Ia'.
Nevertheless, plaintiffs argue that the harm is still irreparable because the ATM Access
Fee Rules “harm the entire market” and therefore pose an “existential” threat to the
independent ATM industry. Ia’. at 2, 9. 1 disagree.

Plaintiffs appear to be invoking the exception to the general rule that losses can
establish irreparable harm when the “the loss threatens the very existence of the movant‘s
business.” Wz'sconsl`n Gas Co. v. F.E.R.C., 758 F.2d 669, 674 (D.C. Cir. 1985) (citing
Washington Metro. Area Tmnsit Comm'n v. Holia’ay Tours, Inc., 559 F.2d 841, 843 n. 2
(D.C.Cir.1977)); see also Arrz`va Mea'. LLC v. U.S. Dep't ofHealth & Human Servs., No.

CV 16-2521-JEB, 2017 WL 943 904, at *8 (D.D.C. Mar. 9, 2017). However, plaintiffs fail

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to provide evidence showing that the plaintiffs (or other independent ATM operators) have
been or are likely to be driven out of business as a result of the ATM Access Fee Rules.

Rather than showing that specific plaintiffs have been shut down, or will have to
shut down imminently as a result of the ATM Access Fee Rules, plaintiffs instead point to
an “observable decline in the number of [independent operators] that deploy ATMs” in
recent years. Reply Brief at 2 [Dkt. # 100]. To support this contention, they provide
affidavits from industry actors stating that the number of independent operators and ATM
terminals has declined in recent years. See, e.g., Restated Decl. of Roger Myers, 11 18 [Dkt.
# 91] (“ln the past five years 1 have observed a decline in the number of [independent
operators] that deploy ATMS.”); Restated Decl. of John Michael Powell, 11 1 [Dkt. # 92]
(“In the past four years, we have lost approximately 365 terminals.”); Bart Carter Decl.,
11 2 [Dkt. # 89] (“We have experienced significant decline in the number of terminals
deployed and a severe squeeze on our ability to generate a profit.”)

As an initial matter, I am skeptical, to say the least, that a general decline in the
number of independent ATMS and operators constitutes an imminent and “existential threat
to the movant[s’] business[es].” However, plaintiffs’ argument fails for an even more
fundamental reason. Plaintiffs do not marshal any evidence showing that the ATM Access
Fee Rules, which Were adopted in 1996 and have remained substantially the same ever
since, are the cause of the recent decline they describe. Instead, plaintiffs’ affidavits
contain nothing more than conclusory and speculative statements about the cause of the
decline. See Myers Decl. 11 18 [Dkt. # 91] (“1 believe that one of the principal reasons [for

the decline in the number of independent operators who deploy ATMs] is the ATM

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Rules.”); Powell Decl. 11 9 [Dkt. # 92] (“We also estimate that the Access Fee Rules have
caused [us] to decommission many of [our] terminals . . . 1 believe that our volume[s] are
artificially reduced because we must obey the Access Fee Rules.”). If plaintiffs cannot
show that the rules they want to enjoin are causing the harm they complain of, then they
are not entitled to injunctive relief.

In addition, plaintiffs’ extraordinary delay in requesting an injunction only
reinforces my decision that plaintiffs have not established irreparable harm. The ATM
Access Fee Rules were adopted in 1996. Plaintiffs filed suit fifteen years later, in 2011,
but did not seek preliminary injunctive relief then. Only five years later (and four months
after the Circuit Court remanded to the District Court) did plaintiffs then seek a
“preliminary” injunction This protracted delay undermines their argument that that they
are subject to irreparable harm in the absence of a preliminary injunction See Fundfor
Am'mals v. Frl'zzell, 530 F.2d 982, 987 (D.C. Cir. 1976); Guttenberg v. Emery, 26 F.3d 88,
103 (D.D.C. 2014).

Finally, defendants move to strike a supplemental declaration from Mr. Michael R.
Kohner, attached to the plaintiffs’ reply brief for failure to comply with the Local Rules of
this Court. See Mot. to Strike Ind. ATM Operator Plaintiffs’ Supp. Decl. [Dkt. #102]Reply
Declaration of Michael R. Kohner [Dkt. # 100-1]. I agree. The Local Civil Rules state
that applications for preliminary injunctions should be supported by all the affidavits on
which the movant intends to rely, and that supplemental affidavits “may be filed only with
permission of the Court.” LCVR 65.1(c). By filing the declaration with their reply,

plaintiffs precluded the defendants from responding to Mr. Kohner’s declaration in writing.

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They did not seek permission before doing so, and 1 will grant the defendants’ motion to
strike Mr. Kohner’s declaration and will not consider it. John Doe Co. v. CFPB, 17-cv-
()()049-RC, 2017 WL 663528, at *3 n.4 (D.D.C. Feb. 17, 2017); ElkAssocs. Funa’ing Corp.
v. U.S. Small Bus. Aa’mz'n., 858 F. Supp. 2d 1, 26 (D.D.C. 2012).

In the end, however, the presence or absence of Mr. Kohner’s reply declaration
would not have altered my analysis Even though Mr. Kohner declares that plaintiff Mills-
Tel Corp “absolutely could have stayed in business were it not for the networks’ ATM
Access Fee Rules,” this conclusory statement fails to connect the ATM Access Fees to
Mills~Tel financial performance and its decision to sell its assets, and is insufficient to show
that the ATM Access Fee Rules caused the company to go out of business See, e.g. , Nat ’l
Mining Assoc. v. Jackson, 768 F. Supp. 2d 34, 50 (D.D.C. 2011) (holding that declaration
stating that company would be out of business in eighteen months failed to meet the
irreparable harm standard because the projection was too conclusory and failed to “offer a
projection of anticipated future losses, tie that to an accounting of the company’s . . . assets,
or explain with any specificity” how he reached conclusion that he would be forced to close

business).

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CONCLUSION
For the reasons stated above, plaintiffs’ Application for a Preliminary Injunction
[Dkt. # 60] is DENIED as moot, defendants’ Motion to Strike Independent ATM Operator
Plaintiffs’ Supplemental Declaration [Dkt. #102] is GRANTED, and plaintiffs’ Renewed
Application for a Preliminary Injunction [Dkt. # 87] is DENIED. An Order consistent with
this decision accompanies this Memorandum Opinion.
t
Mp.w

RICHARD J.LE!DN
United States District Judge

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