Antitrust case against Citigroup and Discover moves forward
Yesterday, a federal judge told Citigroup Inc. and Discover Financial Services they arent off the hook as defendants in a decade-old nationwide antitrust lawsuit.
February 09, 2012 at 06:36 AM
2 minute read
The original version of this story was published on Law.com
Yesterday, a federal judge told Citigroup Inc. and Discover Financial Services they aren't off the hook as defendants in a decade-old nationwide antitrust lawsuit.
In 2002, credit card holders accused a group of credit card issuers, including Citigroup and Discover, of conspiring to force cardholders to agree to anti-competitive, mandatory clauses in their customer agreements that require disputes to be resolved through arbitration rather than litigation. The companies also allegedly refused to give cards to people who wouldn't agree to the agreements' terms.
While other companies, including Bank of America Corp., Capital One Financial Corp. and JPMorgan Chase & Co., have since settled, Citigroup and Discover have not.
Manhattan U.S. District Judge William Pauley said it was too early to dismiss the cardholders' collusion claims. He reasoned that the card companies' arbitration clauses are too similar, and that the companies attended meetings with their competitors between 1999 and 2003 to discuss arbitration, which “could suggest that defendants used the meetings to concoct a conspiracy to adopt arbitration clauses and boycott consumers who rejected them.”
Judge Pauley's decision contrasts with courts' decisions in recent cases, such as last year's Supreme Court case AT&T v. Concepcion, which inspired many companies to adopt mandatory arbitration agreements and made it easier for them to enforce. However, the New York Times reported last week that the private equity firm Carlyle Group abandoned its plans to require its shareholders to agree to a mandatory arbitration clause after the U.S. Securities and Exchange Commission said it wouldn't approve the company's initial public offering with such a requirement.
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