Amex Wins Appeal Affirming Dismissal of Putative Antitrust Class Action

On November 22, 2021, the U.S. Court of Appeals for the Second Circuit affirmed the U.S. District Court for the Eastern District of New York’s dismissal of antitrust litigation brought against Cravath client American Express Company (“Amex”) by a purported class of merchants that do not accept Amex cards but accept Visa, Mastercard and Discover cards.

The merchant plaintiffs alleged that Amex’s anti‑steering provisions, which contractually prohibit merchants from discouraging customers from using an Amex card at the point of sale, violated the Sherman Act and California’s antitrust and unfair competition laws. Although plaintiffs do not accept Amex cards, they claimed to have standing to bring suit under a so‑called “umbrella” theory of liability seeking damages for allegedly inflated fees marketwide.

In January 2020, the U.S. District Court for the Eastern District of New York granted Amex’s motion to dismiss the non‑Amex accepting merchants’ claims for failure to allege antitrust standing. U.S. District Judge Nicholas G. Garaufis found that “the Non‑Amex Class has not established federal antitrust standing” because “all four of the efficient-enforcer factors”—directness of the injury, the existence of an identifiable class of other injured parties, the speculative nature of the injury and the risk of duplicative recovery—“cut against Plaintiffs”. The district court dismissed the non‑Amex accepting merchants’ California state law claims for substantially the same reasons. On appeal, the Second Circuit panel affirmed the district court’s determination, noting, “the efficient‑enforcer factors structure a proximate cause analysis according to which there must be a sufficiently close relationship between the alleged injury and the alleged antitrust violation to establish antitrust standing. Here, that relationship is lacking.”

Amex and Cravath had previously prevailed in 2018 at the U.S. Supreme Court in an antitrust lawsuit originally brought by the U.S. Department of Justice and 17 state attorneys general challenging the same anti-steering provisions. The class action plaintiffs attempted to allege a theory that survived the Supreme Court’s ruling.

The Cravath team included partners Evan R. Chesler, Peter T. Barbur, Kevin J. Orsini and David H. Korn and associates Cristopher Ray and Malavika Madgavkar.

The case is In re American Express Anti‑Steering Rules Antitrust Litigation (NO II), Nos. 11‑md‑2221 (E.D.N.Y.), 20‑1766 (2d Cir.).