Judge OKs $336M Settlement Over Credit Card Fees

By Nick Malinowski

Law360, New York (October 22, 2009) -- A $336 million settlement a class of consumers reached with credit card companies and banks accused of breaching federal and state antitrust laws by colluding to fix foreign currency fees has been granted approval by a federal judge, three years after the defendants put the money away in escrow to repay the plaintiffs.

Judge William H. Pauley signed the agreement in the U.S. District Court for the Southern District of New York Thursday, acknowledging that the pact was not “perfect” but did “the greatest good for the greatest number of people” in light of more than 10 million individual claimants and expansive multidistrict litigation.

Credit card holders traveling overseas are hit by currency conversion fees of between 1 percent and 3 percent from both the credit card company and the member bank, yet no party adequately discloses the existence and amount of the fees, and consumers are charged whether or not currency actually is converted and exchanged, the plaintiffs alleged.

They further argued that absent collusion in the market, the imposition of fees by member banks would be against their economic self-interest.

The defendants have denied the allegations throughout the litigation, arguing that any cooperation is through legal joint ventures.

While the total credit and debit card foreign transaction fee revenues collected during the class period by the defendants, which include Visa USA, MasterCard International Inc., Diner's Club and banks such as Citigroup Inc., Bank of America Corp., HSBC International and JPMorgan Securities Inc., approached $3.8 billion, only 2,910 class members opted out and just 76 objected to the settlement, according to court documents.

Individual class members will receive between $17 and $270, while corporate accounts will receive an average of $100,000, and a group of about 20 plaintiffs will divide up $83,500 in incentive awards, the order said. Attorneys representing the class members will pocket $51 million in fees.

The claims of travel companies Orbitz LLC, Travelocity.com LP and Priceline.com Inc., totaling $473.8 million, were dismissed because traveling consumers, not the companies, paid the foreign exchange fees at issue, the order said.

Certain injunctive relief, primarily relating to the disclosure of fees, also is included in the settlement agreement, which makes its approval a boon to all consumers, not just class members, plaintiffs' attorney Merrill Davidoff, of Berger & Montague PC, said Thursday.

“It's not everything we hoped for, but it's a very good settlement,” Davidoff said. “As a result ... there is better disclosure of the fees, and consumers are aware of them. I think the settlement will help out anybody who travels overseas.”

Representatives for the defendants did not respond to requests for comment Thursday evening.

The class action settlement had won preliminary approval in November 2006, but an unwieldy claims process, which was altered halfway through to facilitate requests, was responsible for most of the delay, the ruling said. The suit was filed in 2001.

“The court is convinced that it was worth waiting, and any delay was beneficial to the class,” Judge Pauley wrote.

Following Thursday's order, there will be a 30-day appeal window for dissatisfied class members to take the issue to a higher court, Davidoff said.

Because many of the objections were over the attorneys' fees, which Judge Pauley perhaps addressed by reducing them from $86 million to $51 million, there is a chance that no class members will appeal, allowing dispersement of the funds to commence, he said.

The plaintiffs are represented by Steyer Lowenthal Boodrookas Alvarez & Smith LLP, Coughlin Stoia Geller Rudman & Robbins LLP, Milberg LLP, Berger & Montague PC, Kaplan Fox & Kilsheimer LLP, Kohn Swift & Graf PC and others.

The defendants are represented by Heller Ehrman White & McAuliffe, Kasowitz Benson Torres & Friedman LLP, Weil Gotshal & Manges LLP, Sidley Austin LLP and others.

The case is In Re Foreign Currency Conversion Fee Antitrust Litigation, case number 01-md-01409, in the U.S. District Court for the Southern District of New York.