Merchants have long sought to change how the card networks charge fees, and are getting a new chance after more than a decade of court squabbles.

A three-judge panel in U.S. appeals court on June 30 rejected the controversial $5.7 billion swipe fee settlement, saying that some of the retailers were not properly represented in the case. The ruling throws everything back to square one, especially for those merchants who opted out of the previous settlement and did not accept any monetary relief for what they felt has been antitrust violations from card networks. 

"Merchants have a chance to really do something now that everything is back on the table, as opposed to just taking the crumbs at the table that Visa and MasterCard wanted to offer," said Doug Kantor, a partner at Steptoe & Johnson LLP who has represented merchants in the interchange fight.

The next move is now in the hands of Judge Margo K. Brodie, a New York justice who has been involved in the case since late 2014 when taking over on a reassignment for U.S. District Court Judge John Gleeson. Gleeson initially approved the settlement in December of 2013 in hopes of closing out a legal fight that first began in 2005.

"This is a very good decision that vindicates what merchants have said about the settlement for years — that it is unfair, it doesn't reform the system, and it compromises their rights," Kantor said, referring to a stipulation in the settlement in which merchants had to agree not to sue the card networks again in the future. "It's a great thing that the second circuit recognized that, and the case will have the opportunity now to actually change the illegal practices that card companies engage in."

MasterCard and Visa did not expand upon statements made June 30. Visa declined comment, saying it was continuing to review the case. MasterCard spokesman Seth Eisen said his company was disappointed in the ruling because it believes it "presented a clear case to the court that the settlement was fair and appropriate based on more than four years of negotiation and the close involvement of the district court."

Brodie's ruling recognized that the case was divided into two classes of merchants, Kantor said.

"One was seeking monetary relief because of antitrust practices of the card companies, and the other was looking for injunctive relief and changes to the rules and the practices the card companies engage in," Kantor said, adding the court found the rights of those seeking injunctive changes to the way the card companies do business had their rights "essentially sold out" for monetary gain only.

"Given the two different classes and the way they were defined, they really needed separate counsel to make sure each class had its interests and rights properly represented — and that didn't happen here," Kantor added.

Merchant groups were quick to praise Brodie's ruling. “This ‘settlement’ was never a settlement on behalf of the retail industry but rather a backroom deal that failed to represent the interests of retailers,” Mallory Duncan, National Retail Federation senior vice president and general counsel, said in an e-mail statement. “It would have given merchants pennies on the dollar for the price-fixing they have suffered at the hands of the big credit card companies and would have done nothing to end price-fixing or to lower swipe fees going forward."

Merchants now have the chance to seek "real reform of these still-skyrocketing fees" in court or through Congress, Duncan added. Merchants are seeking relief from transaction fees through other channels as well, hoping a recent Federal Reserve Bank report about the harmful effects of the Durbin amendment on smaller banks opens the door to reduce debit transaction fees even more. 

The Merchant Advisory Group and Retail Industry Leaders Association both echoed the NRF sentiments toward the original settlement and the U.S. Second Circuit Court of Appeals rejection.

"While the Merchant Advisory Group strives to work constructively with all stakeholders in the payments chain, many existing card network rules and practices make payments acceptance more challenging than it should be for both businesses and consumers," said Mark Horwedel, CEO of the MAG. The court's decision to throw out the settlement "is monumental" and represents a broad legal release of future claims whereby merchants would have struggled to challenge what they consider unfair and free-enterprise-inhibiting card network rules, Horwedel added.

Movement of the case at this juncture faces some complexities that even the legal teams on both sides can't be sure of how to approach. The original settlement allowed merchants to opt-out, which in this case would mean not accept any monetary compensation.

The district court will have to make a ruling on whether those merchants can opt back into the case, now that it has, in essence, been thrown out.

Those who opted out in the past may be able to amend their claims to seek the injunctive relief that would potentially alter Visa and MasterCard rules regarding interchange in the future.

And despite many saying the $5.7 billion settlement wasn't nearly enough, there are merchants who accepted the settlement and received monetary relief. Because those individual settlements were confidential, it is not clear whether any of them had language written that addressed any future potential change in the status of the ruling. If not, those merchants likely would not be involved in what will revert back to an ongoing case, though they would benefit if any type of changes to interchange rules or processes took hold.

The court rejection was not entirely surprising to those involved. It took only a few days after the original settlement on Dec. 13, 2013 for merchants to plant the seeds for what ultimately became this week's appeals court ruling. They came out in large numbers in filing appeals that specifically sought to protect their rights, with many saying the settlement cut off their ability to challenge any Visa or MasterCard rules or seek legal channels for any future monetary losses because of antitrust practices.   

Bringing the swipe-fee case back to the forefront comes at a time when the card networks are engaged in separate battles with mega retailers over debt transaction routing and PIN authorization practices.

In a scenario that illustrates why a mega retailer like Walmart would never agree to a settlement that took away its opportunity to file future lawsuits against the card brands, the retailer and Visa have engaged in a series of legal volleys the past two weeks. Home Depot and Kroger food stores have also joined the fray over debit routing.

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Corrected July 1, 2016 at 11:31AM: This updated version of the story clarifies the ruling process that resulted in rejection of the previous swipe fee settlement.