Opponents of Visa Inc.'s and MasterCard Inc.'s $5.7 billion settlement with merchants over fees want access to documents that may have been disclosed to a lawyer facing federal charges in a fraud scheme unrelated to the credit-card litigation.
Lawyers for Home Depot U.S.A. Inc., Target Corp., and other major retailers, who have argued against the accord, said the disclosure of materials by Gary Friedman, the plaintiffs' attorney, raises questions about the fairness of the negotiations. Keila Ravelo, the lawyer who got the documents and represented MasterCard, was charged in December by federal prosecutors in New Jersey.
While the charges against Ravelo don't have a bearing on the case, the exchange of sensitive documents "may just be the tell-tale sign of a greater compromised position" in the negotiations, Steig Olson, a lawyer for Home Depot, told U.S. Magistrate Judge James Orenstein in Brooklyn, New York. "Was there some loyalty that was compromised here?"
Swipe fees paid by businesses when customers make purchases with credit cards amount to tens of billions of dollars each year and 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 in an antitrust lawsuit over the fees.
Dozens of large retailers, including Home Depot, Target and Wal-Mart Stores Inc., were dissatisfied with the terms of the deal and appealed its approval. The appeal is pending.
Merchants reached a separate settlement in 2013 with American Express Co. over its fee practices. A judge is weighing whether to grant that deal final approval.
Ravelo was arrested in December and charged with conspiring to steal more than $5 million from the law firms that employed her and a client. The firm where she most recently worked, Willkie Farr & Gallagher, conducted an investigation turning up the disclosures of the credit card litigation documents, according to court filings.
Robert Jossen, who is representing the law firm, told Orenstein that a review of files revealed as many as 1,000 documents about the credit card cases were exchanged between Ravelo and Friedman in theVisa and MasterCard cases, as well as the American Express case. The firm also found 1,800 other documents exchanged relating to vacations, personal investments, and other discussions not related to the litigation.
The firm is "simply trying to do the right thing" by coming forward with information about the materials, Jossen said.
Friedman was awarded $32 million for his work on Visa and MasterCard, according to Olson. Fees have yet to be determined in the American Express case, where Friedman plays a greater role.
Samuel Issacharoff, a New York University law professor representing Friedman, told Orenstein that his client had been friends with Ravelo since the 1990s when the two were junior lawyers at another firm.
Their "families know each other," Issacharoff said.
Ravelo resigned from Willkie Farr in November after the firm became aware she was under investigation by federal law enforcement, the firm said in court filings.
A lawyer for Ravelo, Lawrence S. Lustberg, didn't immediately respond to an e-mail and call seeking comment.
Orenstein is weighing how lawyers will determine which documents should be disclosed to objectors and other parties involved in the litigation.
In a brief filed with the U.S. Court of Appeals in Manhattan, lawyers for the objectors called the settlement "breathtaking in scope," binding millions of merchants including big retailers, local restaurants, food trucks, insurers and local governments.
By forcing so many merchants to give up rights to sue in the future over fees, the settlement is "a wrongful deprivation of their fundamental right to protect their interests," the objectors said. They asked the appeals court to throw out the approval of the accord.