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Talk of the bay

Massive credit card settlement progress at last

By MARK ALBRIGHT
Published July 25, 2005

Some big national chains are locked in another multibillion-dollar lawsuit with Visa USA over how much stores pay to have credit and debit card transactions processed. But retailers have yet to see the first dime from a similar court challenge that was settled in their favor in 2003.

At $3-billion, it was the biggest class-action and antitrust settlement in U.S. history. So naturally, one of the biggest legal tabs in U.S. history came with it. The lawyers argued for two years over how much of the settlement cash will go to each of the 30 law firms that participated on behalf of the plaintiffs.

This all came after Visa and MasterCard agreed to end a six-year fight by settling. The two big card networks cut their debit card fees by a third and agreed not to force stores to honor both credit and debit cards. Visa is paying $2-billion, MasterCard the remaining $1-billion. But the settlement outlines a 10-year payment plan for the card networks to amass the cash. It would then be split up annually among an estimated 5-million retailers who are expected to file claims saying they had overpaid fees from 1992 to 2003.

But first comes the legal bill. Disputes over how much would go to which firms went all the way to the U.S. Supreme Court, which declined to get involved. The case generated 5-million pages of documents. That included 400 depositions, 21 expert witnesses and a case file with 1,800 exhibits that amassed 230,000 pages.

For their work, the lawyers asked for $609-million plus $18-million in reimbursable expenses. That would have been 18 percent of the award. That's lower than the typical fee of 20 to 30 percent, they argued, adding that they discounted their hourly rates to $280.

That was far too much for U.S. District Judge John Geeson. He cut the legal tab by two-thirds to $220-million, plus $18-million in expenses.

With that settled, claims forms went out last week to more than 8-million retailers who may in for a slice of the settlement.

[Last modified July 23, 2005, 00:28:02]