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AmEx Wins Appeal of Trial Decision in DOJ Antitrust Suit over Merchant Acceptance Rules

On September 26, 2016, the United States Court of Appeals for the Second Circuit ruled in favor of Cravath client American Express Company in its appeal of a decision in a civil lawsuit filed by the United States Department of Justice and 17 state attorneys general in the United States District Court for the Eastern District of New York against AmEx, MasterCard and VISA. The three‑judge panel reversed district court judge Nicholas G. Garaufis’s determination in February 2015, after a seven‑week trial, that AmEx’s merchant acceptance rules violated federal antitrust law and remanded the case “with instructions to enter judgment in favor of Amex.” MasterCard and VISA had settled with the government in 2010.

In its opinion, the Second Circuit held that the District Court “erroneously elevated the interests of merchants above cardholders.” The Court explained that this approach failed “to advance overall consumer satisfaction” and held: “Given the District Court’s explicit finding that neither party provided reliable evidence of Amex’s costs or profit margins accounting for consumers on both sides of the platform, and given evidence showing that the quality and output of credit cards across the entire industry continues to increase, we conclude that Plaintiffs failed to carry their burden to prove a [Sherman Act] § 1 violation.”

This reversal was presaged in December 2015 by the Second Circuit’s decision, made on its own accord one day after hearing argument on the appeal, to stay the District Court’s April 2015 permanent injunction barring AmEx from enforcing its merchant acceptance rules. The Second Circuit had also ordered a stay of “any and all matters related to this litigation” in the district court until a decision on appeal was made.

Cravath partner Evan R. Chesler argued AmEx’s appeal before the Second Circuit. The Cravath team also included partners Peter T. Barbur and Kevin J. Orsini, now‑retired partner Stuart W. Gold, senior attorney Jesse M. Weiss and associates Rory A. Leraris, Justine V. Beyda, Ryan B. Finkel, M. Deke Shearon, Lauren Roberta Kennedy, Patrick G. Foley, Jun Li, R. Maxwell Tanner, Alexandra N. Rothman, Martha E. Fitzgerald, Peter H. Fountain and Alyssa M. Pompei. The case is United States v. American Express Co., et al., No. 10-cv-4496 (E.D.N.Y.), No. 15-1672 (2d Cir.).