Court Opinion

ID: 3155989
Source: CourtListenerOpinion
Date Created: 2015-11-19 15:00:20.423191+00
Date Added: 2024-06-11T12:08:28.450478
License: Public Domain

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

                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                     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 19th 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.,FIN 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. STERLINE 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
34

                                  6