Southern District of New York federal judge U.S. District Judge Willam H. Pauley denied Discover Bank and Citigroup Inc.’s motion to dismiss claims in multidistrict litigation claiming that credit card issuers conspired to insert anti-competitive arbitration clauses in their customer agreements.
Citigroup and Discover are the only remaining defendants in a case alleging that the defendants’ compulsory arbitration clauses prevented cardholders from seeking proper legal recourse for the companies’ anti-competitive and corporate misconduct. The cardholders have argued the arbitration clauses would shield the defendants’ misconduct from public view, as arbitration proceedings are often held privately and the outcomes are often confidential, adding that arbitration administrators are sometimes partial to credit card companies.
The plaintiffs’ conspiracy claim also relies heavily on the defendants’ representatives attending numerous meetings where arbitration was discussed. While the executives at both companies who made the final decisions to add arbitration clauses to the agreements claim they had no knowledge of such meetings, the judge pointed out that the in-house counsel who attended the meetings were not “‘low-level employees’ engaged in mere ‘shop talk.'”
Citigroup and Discover argued that certain evidence relating to a settlement in a similar MDL should not be permitted, but the court determined that because the settlement agreement in the Currency Conversion Fee Antitrust Litigation “expressly preserved [the] plaintiffs’ arbitration-related claims, it makes little sense to read the agreement to preclude [the] plaintiffs from relying on the evidence needed to prove those claims.”