Retailers have been entangled in a legal showdown with Visa and MasterCard over swipe-fee rates for nine years now, and despite the approval of a $5.7 billion settlement in December, the battle is far from over.

The appeals began just three days after the settlement was approved. In all, 25 appeals have been filed, most of them in New York, representing hundreds of businesses, individuals and organizations. An additional 33 three opt-out lawsuits have also been filed, mostly in New York (Walmart filed its opt-out in Arkansas, and Einstein Noah Restaurant Group Inc. filed in Texas).

Those filing opt-out lawsuits decided they would not accept any money from the settlement that was approved. Instead, they filed claims against Visa, MasterCard and some banks covering the time period from Jan. 1, 2004 to November of 2012, when the proposed settlement was established.

Opt-out retailers are essentially saying the anti-trust violations cost them a lot of money during the time the case was being heard and they are seeking more money in damages than they would get through the settlement, says Douglas Kantor, a lawyer who has represented the National Association of Convenience Stores in the case.

Retailers filing appeals also question a condition of the settlement that states the retailer can no longer sue the card brands over interchange in the future, but those filing opt-out suits can seek only money.

However, if the appeals work and the settlement gets thrown out, then the opt-out cases can be amended to express the retailers' desire to be included in all changes in the rules, such as being able to sue again in the future, Kantor says.

If any of the appeals win, then the court could throw out the settlement and the class action would restart, Kantor says. "If the appeals lose, there may be similar appeals to the full second circuit or to the Supreme Court, but eventually your appeals run out," he says.

Visa and MasterCard have declined comment on the settlement case and its appeal process.

The card brands have told their investors that they enter the next phase from a strong position, says Gil Luria, analyst with Los Angeles-based Wedbush Securities.

"The card brands have spent the last few years building their legal case through their settlement," Luria says. "They believe the judge, by accepting the settlement, strengthens that legal stance."
Investors and analysts don't probe the card networks' executives too much about legal matters during earnings calls because they generally expect the settlement ruling to hold up, Luria says.

"But until a judge sees it [an appeal] and rules on it, it will be very hard to tell what the outcome is going to be," Luria adds.

The time to file an appeal has passed, but those who did file have until May 29 to submit their opening briefs. Those supporting the appellants must submit their responding briefs by June 5. In turn, appellees must file final briefs by Aug. 28 and appellants submit replies by Oct. 1.

The appeals process has attracted even First Data, Discover and American Express. Those companies don't want to be lumped into the mix of the retailer class because they accept card payments as "a miniscule part of their business," Kantor says.

For example, American Express accepts other card payments from employees in the company's office cafeterias.

"These companies have filed anti-competitive lawsuits against Visa and MasterCard in the past, so they are saying they don't want to be cut off of their right to go to court if they do something anti-competitive against their business or network in the future," Kantor says.

Walmart's opt-out case in Arkansas targets only Visa, rekindling the retail giant's past feuds with the card brand.

"There has always been a little bit of this [legal] activity, but it is usually just small fires and it's kind of cleanup stuff and complaining about kind of small idiosyncratic things," Kantor says "But here it's a whole different world with an explosion of big opt-out cases."

Walmart's opt-out case seeks $5 billion, which is nearly as much as the entire settlement amount for all retailers who did not opt out, Kantor says. Walmart's case could result in even higher damages because it is an anti-trust case.

"If they win, it's potentially a $15 billion case, and that's just one opt-out case from one company," Kantor says. "Obviously Walmart is a big player but you have other big players involved here as well in these opt-out cases, with Target and 7-Eleven, and even the Minnesota Twins."

The settlement was put in motion more than a year ago, calling for the defendants at that time to pay an estimated $7.25 billion, a number that fell as merchants opted out of the agreement. As part of the settlement, Visa and MasterCard also agreed to allow retailers to impose surcharges on credit-card purchases.

The antitrust case was originally brought to the court in 2005 by a small group of retailers objecting to prices set through Visa, MasterCard and the banks that issue their cards. Since that original filing, Visa and MasterCard have become publicly traded companies rather than operated through a consortium of banks.

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