In a ruling likely to be a deep embarrassment for experienced lawyers, the Supreme Court on Thursday refused to decide a major dispute it had agreed to hear because the attorneys for the companies involved had switched their argument as the case moved toward a hearing.
The combined cases of Visa v. Osborn and Visa v. Stoumbos had shaped up as a high-stakes antitrust battle against the two biggest credit card companies, Visa and MasterCard, over fees charged for using ATM machines. The cases were to be heard by the Justices on December 7, but that hearing will now be cancelled.
As a result of the Court’s dismissal of the appeals, the lawyers for Visa and MasterCard lost their chance to have the Justices put an end to three lawsuits against them by consumers and by independent operators of ATM machines located elsewhere than at bank offices.
The cases will now return to a federal trial court in Washington, D.C., where the federal Circuit Court of Appeals had ruled last year that the challengers had the right to go forward with their claims that Visa, MaterCard and the banks with which they are affilidated had joined in an illegal conspiracy to fix prices — that is, the fees charged for using ATM machines at locations other than a user’s own bank.
The Justice Department had entered the case in the Supreme Court to support the challengers to the ATM fee system. The brief filed by the Department and the merits brief filed by the fee challengers had pointed out to the Justices that the lawyers for the credit card companies had all but abandoned the issue on which review had been granted, and were pursuing a different argument.
The Justices, in preparing for the hearing, had undoubtedly noticed that switch. Citing a ruling last year in a San Francisco police raid case, in which the city’s lawyers had switched position and the Court then refused to decide the question at stake, the Court on Thursday afternoon dismissed the Visa and MasterCard appeals as “improvidently granted.” That is the phrase the Court uses when it decides it should not have granted review, after all.
When the Court agreed at the end of last Term to hear the two cases together, the issue that Visa, MasterCard and their bank allies had raised was whether a lawsuit could be pursued under the Sherman Antitrust Act on the theory that members of a business association had simply agreed to abide by the association’s own rules. There is a split in the federal appeals courts, the petitions argued, on whether such a theory could justify a claim of an antitrust conspiracy to restrain trade under the Sherman Act’s Section 1.
But, when lawyers for the credit card companies and their associated banks filed their combined brief on the merits, they chose to argue that, even if those banks had actually agreed to set the levels of ATM user fees at locations other than banks, Visa and its related banks and MasterCard and its related banks were each formed as a “single entity” or “joint venture,” so they had no one with whom they could conspire to fix fee levels.
That merits brief argued that the case involved “a fundamental principle” of antitrust law, which was the basic distinction that the Sherman Act draws between “unilateral and concerted action.” The Visa enterprise and the MasterCard enterprise were each a “joint venture” engaging among themselves in cooperative activity that was necessary to the venture’s operation.
At the heart of the complaint by the consumers and the independent ATM operators is that Visa and MasterCard, together with affiliated banks, agreed to limit the discounted fees that the independent
ATM operators could charge when a user gets cash or makes a deposit from an ATM away from their own bank. Under the fee rules, there are three layers of fees.
The antitrust claim was that the banks affiliated with Visa and MasterCard were competitors for ATM business, and as such, they agreed on what level of fees could be charged in away-from-the-bank ATM transactions. The aim, the three lawsuits contended, was to limit the independent ATM operators’ ability to charge lower fees than those charged by the Visa and MasterCard groupings — a fee structure that the alleged conspiracy was designed to protect.
The dismissal of a case that had been granted review is usually a disturbing thing for the Court to do. It has instituted special procedures to try to assure itself that, when it takes on a case, it is worthy of the Court’s review and will not wash out before a decision can be reached.
Most often, a case washes out because the two sides agree to settle it, or there is a new development in the law that outruns the dispute. But it is very rare for the Court to choose on its own to scuttle a case because the lawyers did not follow through in arguing the point the Justices had agreed to decide.
The calendar of cases scheduled for hearing in the next sitting of the Court had already been a thin one, with only a single hearing set for four of the six days in the session. Now, the December 7 session, on which only the ATM fee cases were scheduled, will be cancelled.