Merchant objections to the proposed $7.25 billion swipe-fee settlement are likely to mount following another delay in an appeal ruling.

The U.S. Court of Appeals for the Second Circuit in Washington, D.C. was expected to rule last week on an appeal to the settlement that would end an eight-year, class-action lawsuit against Visa Inc., MasterCard Inc. and other financial institutions alleging anti-trust law violations. Instead, the court ruled an appeal should wait until objections to the settlement are filed and heard leading up to the Sept. 12 final ruling in a New York district court.

The final hearing in September would mark exactly a year from when various merchant groups filed a letter to Congressional leaders outlining objections to the settlement.

Lawyers for the merchants and card companies crafted that settlement in July, 2012 and it received preliminary approval by U.S. District Judge John Gleeson on Oct. 24, 2012.

The court denied a previous appeal in December, 2012, one that was filed right on the heels of the preliminary approval.

With last week's appeals court decision, merchants now face a good-news, bad-news scenario, says Doug Kantor, a lawyer representing the National Association of Convenience Stores in the appeal.

"The merchants will have their chance in the fall to appeal the settlement and hopefully the court will listen and take them seriously at that time," Kantor says.

Merchant groups will now inform members about settlement details and the fact that they essentially have to re-sign to object to the settlement, or opt out of it, Kantor says.

"This notice restarts things, and the settlement is a long, complex document and we have to get it out there for people to understand," he adds.

The NACS explains on its website that a merchant who opts out is excluded from the past damages settlement class, but keeps the right to sue Visa or MasterCard for past damages for conduct prior to Nov. 27, 2012. Opting out does not exclude a merchant from following any changes in Visa or MasterCard rules as a result of the settlement, NACS says.

NACS tells its members they can both object to and opt out of the settlement as a way to show dissatisfaction with the preliminary ruling, while also preserving a right to sue for more damages.

MasterCard declined to comment on the appeal process. Visa did not respond to inquiries.

However, Visa did note in a filing to the U.S. Securities & Exchange Commission that its share of the settlement will be $4 billion. Other defendants include nearly a dozen banks, including Citigroup Inc., HSBC Bank Holdings Plc, PNC Bank, Wells Fargo & Co., and Bank of America Corp.

Byron Pollitt, Visa's chief financial officer, confirmed during this week's fourth-quarter earnings conference call that Visa made a $4 billion cash payment from the company's litigation escrow account to the class plaintiffs settlement funding.

"This was in addition to $350 million paid out in October to the individual merchants," Pollitt said.

More than 1,200 merchants objected to the preliminary terms last year, mostly miffed that the settlement takes away their ability to sue the card brands or banks in the future regarding anything related to card rules or rates, Kantor says.

The preliminary deal, which would cover damages to about 7 million retailers, also included the card brands dropping their "no surcharge" rules, in effect allowing merchants to charge consumers for using credit cards. The ability for merchants to surcharge went into effect Jan. 27.

Through the surcharge concession, "the banks and card brands are making the merchants publicly share the blame for high fees," he says. One of the rules related to surcharging calls for merchants to publicly display a notice at the store entrance and point of sale announcing their intent to add a "checkout fee" to consumers.

About six years ago a few merchants felt surcharging might be a good idea, Kantor says, and the lawyers representing them pushed it as a centerpiece of the settlement.

But since the settlement blocks merchants from suing card companies or banks over their rates, "that 'shield' is more like a sword and allows the banks and card brands to jack up fees with impunity," Kantor says.

When merchants first began opposing the settlement, the Electronic Payments Coalition, which serves banks and credit unions and supports the settlement, posted a response to retailers' objections on its website.

The coalition pointed out that some retailer groups are at odds with the class representative plaintiffs. It also cited a letter from the plaintiffs that called out the NACS for "highly questionable conduct" related to distorting details of the settlement process.

The coalition contends the current arguments against the preliminary settlement are not new and, as such, have been thoroughly studied by Judge Gleeson, who has experience in credit card cases, having ruled on the Walmart-initiated "Honor All Cards" lawsuit in 2003.

The coalition calls the objections "simply noise" and insists the settlement will ultimately win final approval.

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