They included owners and managers of a photo scanning business, an auto repair shop, an office supplies provider, a furniture retailer and a family-run electronics store.
Without them, U.S. merchants couldnt have reached a record-setting $5.7 billion settlement with Visa Inc. and MasterCard Inc. in an antitrust battle over swipe fees, lawyers representing plaintiffs said.
After about a decade of serving as representatives for merchants throughout the country in the litigation -- providing hundreds, if not thousands of hours of help with the case, supplying millions of pages of documents and risking what they feared might be retribution from the credit card firms -- the group got its reward. A judge in Brooklyn, New York, federal court awarded about $1 million in special payments to nine mostly small businesses that brought the initial cases over interchange fees which culminated in the accord in 2012.
The historic settlement in this lawsuit would not have occurred without the participation and the efforts of the class representatives, lawyers for plaintiffs nationwide said in a court filing this month. The award, just a fraction of a percent of the billions of dollars at issue in the case, is conservative and warranted by extraordinary efforts and sacrifices, the lawyers said.
Incentive fees, sometimes awarded to representative plaintiffs in a class action who invest substantial amounts of time or face risks, are often justified in high-stakes litigation, according to attorneys who specialize in such cases.
People stick their neck out there, Andrew Melzer, a class-action lawyer who isnt involved in the swipe-fee case, said in an interview last year.
Without an incentive payment, there would be a windfall for other members of the class who havent put in the same amount of time and risk.
One of the most active class representatives in the swipe- fee litigation was Mitch Goldstone, the co-founder and president of Irvine, California-based ScanMyPhotos.com. He said in a phone interview that he spent almost 5,000 hours acting as an unofficial publicity machine for the case, including speaking with reporters, blogging and maintaining a Twitter feed.
In effect, he became spokesperson for the little guy, the plaintiffs lawyers said in the court filing. Goldstone was awarded $200,000 in incentives plus about $7,000 for out-of-pocket expenses, according to the judges order filed Jan. 23.
Goldstone said his involvement in the litigation over the years took a toll on his business and personal life. A romantic relationship with a business partner ended in part because of the stress of his work on the case, he said.
The biggest challenge was all of my attention was on this, it became something so much larger than I had anticipated, he said of the case. I couldnt stop. I didnt want to just throw in the towel.
Goldstone said his attention turned to swipe fees, which are deducted from payments merchants receive when customers use their cards, after noticing their costs were rising as his technology-related expenses were falling dramatically. While he wanted a larger payout, he said he hopes his award in the case inspires others to take up such causes.
Swipe fees, amounting to as much as $50 billion a year, have long been a sore point for U.S. merchants. Foster City, California-based Visa and Purchase, New York-based MasterCard reached the settlement with millions of businesses in July 2012. Dozens of large retailers, including Wal-Mart Stores Inc. and Home Depot Inc., were dissatisfied with the terms of the deal and appealed its approval. The appeal is pending.
A lawyer for the plaintiffs, K. Craig Wildfang, said in a declaration filed with the court that many merchants wanted the fees challenged but few were willing to file suit. Wildfang said some worried they might damage relationships with the card companies or banks, which were once accused of helping fix fees.
Goldstone was among the first merchants to agree to file cases, Wildfang said. The other was Michael Schumann, co-founder of Minnesota-based furniture seller Traditions Ltd.
Although they expressed the same fears as the larger merchants -- fears such as retaliation and disruption to their business -- they understood that someone had to be first and that it was necessary for them or someone like them to take the initiative, Wildfang said in the filing.
The case is In Re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation -- Opt Out Cases, 1:14- md-01720, U.S. District Court, Eastern District of New York (Brooklyn).