Amex, Citigroup, Discover Win Dismissal Of Card Arbitration Case


American Express Co (NYSE:AXP), Citigroup Inc (NYSE:C) and Discover Financial Services (NYSE:DFS) won the dismissal of a lawsuit accusing them of colluding to force credit card holders to settle disputes through arbitration rather than class action lawsuits.

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U.S. District Judge William Pauley in Manhattan on Thursday said the plaintiffs had failed to show, after roughly a decade of litigation, that the defendants violated the Sherman Act, a federal antitrust law. Several other banks previously settled similar claims.

The plaintiffs argued that banks and their lawyers held dozens of meetings from 1999 to 2003 to discuss how to adopt mandatory arbitration clauses for cardholders, and that most of the card industry ultimately adopted nearly identical clauses.

Pauley said his decision was a close call, noting that of 10 card-issuing banks that had been part of the litigation, just two had such clauses at the start of the alleged collusion.

"It was only by a slender reed that plaintiffs failed to demonstrate that the lawyers who organized these meetings had spawned a Sherman Act conspiracy among their clients," he wrote.

The plaintiffs had not sought damages, but had asked Pauley to order American Express, Citigroup and Discover to remove arbitration clauses from their cardholder agreements and to impose an eight-year ban on such clauses.

Lawyers for the plaintiffs did not immediately respond to requests for comment. The defendants did not immediately respond to similar requests.

The cases are in the U.S. District Court, Southern District of New York. They are Ross et al v. American Express Co, No. 04-05723; and Ross et al v. Bank of America NA et al, No. 05-07116.