Antitrust, Arbitration Issues Dominate Class Actions

Article excerpt

The American Bankers Association maintains an informal list of important banking cases working their way through the legal system. Of the 42 cases on the list right now, more than one-third are class actions.

That's up from a list of 30 in 1999, of which about one-sixth were class actions, according to Michael F. Crotty, the ABA's deputy general counsel for litigation, who is responsible for maintaining the list.

Banks are widely viewed as inviting targets for class actions because they have deep pockets and are dependent on public trust for their survival. As a result, banks have a low tolerance for the public spectacle of a trial and are perceived as more likely to settle a case.

Right now the class action with the highest profile is an antitrust case, Wal-Mart Stores v. Visa U.S.A. and MasterCard International. The Supreme Court recently allowed a class action filed on behalf of some four million merchants -- led by Wal-Mart -- that claims Visa and MasterCard violated antitrust laws by requiring retailers that accept the two companies' credit cards to accept their debit cards too. The case is expected to go to trial in early 2003 and will probably take several years to litigate.

Many of the cases drawing the attention of banking lawyers involve the enforceability of arbitration clauses. The clauses, a fairly new development in consumer financial services, are typically part of the agreement a credit card holder enters with the issuer. Their primary goal is to reduce the risk of expensive litigation by requiring cardholders to submit any dispute to binding arbitration rather than file a suit as an individual or part of a class.

"The increase in use of arbitration agreements is a phenomenon that really only started about four or five years ago," said Alan S. Kaplinsky, a partner with Ballard Spahr Andrews & Ingersoll in Philadelphia. "I started counseling a lot of my clients that they ought to start thinking about arbitration because they were getting clobbered by lawsuits in very hostile state courts and ... were looking for a way to level the playing field."

Though largely successful from banks' point of view, arbitration clauses themselves have spurred a number of class actions by consumers who claim that they were unjustly deprived of their right to sue. …