SAN FRANCISCO — Thomas Simeone, an attorney, said major credit card brands have every right to fight antitrust suits like the one brought against Visa by a California restaurant.
California-based restaurant Broadway Grill Inc filed a class-action suit against Visa for "preventing merchants from applying a surcharge for the use of credit cards,” which the restaurant claims is a violation of antitrust laws.
The restaurant originally included in-state and out-of-state residents in its class, but later attempted to modify the class to only include California residents. The U.S. Court of Appeals for the Ninth Circuit blocked the restaurant from making the change, citing the Class Action Fairness Act (CAFA).
Simeone explained why Visa won the May 18 ruling.
Simeone told the Northern California Record that the definition of a class is extremely important because only people who are included in the definition of a class are bound by the case.
“If someone is not included in the class, they are free to bring a separate lawsuit," he said. "Therefore, the defendant in a class action, such as Visa here, has two goals."
He said the first goal is to exclude people who do not have a valid legal claim because the compensation they must pay in a settlement or a court judgment will be larger if it must provide damages to more people.
“Second, the defendant wants the class to include all people who have valid claims," Simeone said. "That way, they can wrap up the legal matter without any more lawsuits or claims for compensation by other people."
The Visa case was also a matter of class definition, Simeone said.
“In this case, the plaintiff class originally included people who lived both inside and outside of California," he said. "Although it was filed in California state court, which the plaintiffs preferred, the 'diversity of jurisdiction' gave Visa the right to 'remove' or transfer the case to federal court, which Visa wanted.”
After removal, the plaintiffs attempted to reduce the class to only people in California, which would allow it to return to state court, but the federal appeals court said it was too late to make that change to the class, Simeone said, adding that Visa’s victory to keep the case in federal court makes it more hospitable to the major credit brand.
“In fact, in the Broadway Grill case, Visa advised the court immediately after removal that there was a similar case pending in New York and suggested that the Broadway Grill case be transferred to that court,” he said.
Simeone said Visa’s argument is that it is providing a very popular service.
“However, if vendors pass Visa’s fee on to consumers, consumers will not use Visa, which will cost Visa income,” he said.
Visa includes in its contract with each vendor a provision that prohibits the vendor from charging consumers more for using Visa, Simeone said.
“These contract provisions are generally enforceable because the vendor is free not to enter the agreement and accept Visa cards," he said. "Again, under federal and most state laws, these provisions are legal."