After recounting the long procedural history of the litigation, the Court proceeds to analyze the latest proposed settlement under the Rule 23(e) and Second Circuit Grinnell Factors.

Among other things, the Court notes that “the range of reasonableness of the settlement in light of the best possible recovery, and the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation, are two Grinnell factors that are often combined for the purposes of analysis,” and, in this case, concludes that these two factors weigh against preliminary approval.

With respect to the equitable treatment of class members consideration, the Court notes that, “where settlement funds are distributed pro rata, courts routinely find that this factor weighs in favor of approval.” At the same time, “the Supreme Court and the Second Circuit have cautioned against class certification and settlement approval where differently situated class members were treated inequitably relative to one another. In Ortiz, for example, the Supreme Court rejected a settlement that treated all claimants equally, although some plaintiffs had claims that were more valuable.”  In this case: “the Court agrees with the objectors that the Settlement does not treat Class Members equitably relative to one another. The Settlement provides the least benefit to the merchants with the most valuable claims. In this respect, it is akin to the inversion of pro rata distribution. The largest merchants who pay the most in interchange fees are also the most likely to have negotiated individual rates with either their Acquirers or the Networks directly. Because these merchants do not pay posted rates, they are unlikely to receive any benefit from the rate caps and rollbacks. Similarly, large national merchants are more likely to accept American Express that do not take American Express and operate in states that permit surcharging derive a potentially substantial benefit. Together, these facts limit the ability of large merchants to benefit from the changes to the surcharge provisions. In addition, large national merchants are unlikely to benefit from the merchant buying group provisions and merchant education fund. Although the Court does not agree with objectors’ contentions that the Settlement is essentially worthless, meaningless, or provides no benefit, the Court finds that the benefits of the Settlement are likely to flow disproportionately and inequitably to small, local merchants like the Class Representatives.”

Finally, the Court finds that the Defendants could likely withstand a much larger judgment: “Plaintiffs argue that this factor is not relevant where the Settlement involves only injunctive relief. However, other courts have considered this factor even when no monetary relief was sought. At one end of the spectrum — as (b)(2) actions were originally conceived — the goal of the action was to have the defendant (or defendants) stop violating the plaintiffs’ civil rights. In such cases, the ability of the defendant to withstand a greater judgment is essentially a non-issue because the defendant need only stop violating the law. At the other end of the spectrum, the resolutions of certain antitrust actions have required the dissolution of the defendant companies. In between these extremes, the vast majority of injunctive relief will impose some costs on the defendant…. Based on the evidentiary record before the Court, the Court finds that Defendants could withstand a substantially greater judgment. The most easily quantifiable ‘cost’ of the Settlement is the rate caps and rollbacks, which Plaintiffs estimate as being worth nearly $30 billion over five years. As the Merchant Trade Groups point out, however, the estimated $6 billion in annual savings to merchants is paltry compared to the $100 billion that merchants paid in interchange fees on Visa and Mastercard transactions in 2023. Further, the four- and seven basis-point rollbacks and rate caps, respectively, are also relatively modest compared to the fact that most of Visa’s and Mastercard’s current rates are 200 basis points or more. Without evidence of Visa’s and Mastercard’s profitability, the Court cannot say with certainty that Defendants can withstand a greater judgment; however, the evidence strongly suggests that they could withstand a substantially greater judgment.”

 

In re Payment Card Interchange Fee Lit., No.05-1720, 2024 WL 3236614 (E.D.N.Y. June 28, 2024).