Case 12-4671, Document 1556-1, 06/30/2016, 1806077, Page1 of 41

124671cv(L)
InrePaymentCardInterchangeFeeandMerchantDiscountAntitrustLitigation

UNITEDSTATESCOURTOFAPPEALS

FORTHESECONDCIRCUIT

AugustTerm,2015

(Argued:September28,2015 Decided:June30,2016)

DocketNos.124671cv(L);124708(CON);124765(CON);134719(CON);
134750(CON);134751(CON);134752(CON);1432(CON);14117(CON);
14119(CON);14133(CON);14157(CON);14159(CON);14192(CON);
14197(CON);14219(CON);14241(CON);14250(CON);14266(CON);
14303(CON);14331(CON);14349(CON);14404(CON);14422(CON);
14443(CON);14480(CON);14497(CON);14530(CON);14567(CON);
14584(CON);14606(CON);14663(CON);14837(CON)

INREPAYMENTCARDINTERCHANGEFEE
ANDMERCHANTDISCOUNTANTITRUST
LITIGATION

Before:
WINTER,JACOBS,andLEVAL,CircuitJudges.

Thisantitrustclassactionwasbroughtonbehalfofapproximately12
millionmerchantsagainstVisaandMasterCard,whicharethetwolargestcredit
cardissuingnetworksintheUnitedStates,aswellasagainstvariousissuingand
acquiringbanks,allegingaconspiracyinviolationofSection1oftheSherman

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Act. Afternearlytenyearsoflitigation,thepartiesagreedtoasettlementthat
releasedallclaimsinexchangefordisparaterelieftoeachoftwoclasses:upto
$7.25billionwouldgotoanoptoutclass,andanonoptoutclasswouldget
injunctiverelief. Thedistrictcourtcertifiedthesetwosettlementonlyclasses,
andapprovedthesettlementasfairandreasonable. Onthisappeal,numerous
objectorsandoptoutplaintiffsarguethatthisclassactionwasimproperly
certifiedandthatthesettlementwasunreasonableandinadequate. Weconclude
thattheclassplaintiffswereinadequatelyrepresentedinviolationofRule23(a)(4)
andtheDueProcessClause. Accordingly,wevacatethedistrictcourts
certificationofthisclassactionandreversetheapprovalofthesettlement.
Vacated,reversed,andremanded.
JudgeLevalconcursinaseparateopinion.
THOMASC.GOLDSTEIN(EricF.Citron,
onthebrief),Goldstein&RussellP.C.,
Washington,DC;StephenR.Neuwirth,
SanfordI.Weisburst,SteigD.Olson,and
ClelandB.WeltonII,QuinnEmanuel
Urquhart&Sullivan,LLP,NewYork,NY;
JeffreyI.Shinder,GaryJ.Malone,andA.
OwenGlist,ConstantineCannonLLP,New
York,NY;MichaelJ.Canter,RobertN.
Webner,andKennethJ.Rubin,Vorys,
Sater,SeymourandPeaseLLP,Columbus

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OH;GregoryA.Clarick,ClarickGueron
ReisbaumLLP,NewYork,NY,for
ObjectorsAppellantsand
PlaintiffsAppellants(Merchant
Appellants).

PHILIPC.KOROLOGOS,Boies,Schiller&
FlexnerLLP,NewYork,NY,for
ObjectorsAppellantsAmericanExpress
Company,etal.

JENNIFERM.SELENDY(WilliamH.Pratt,
onthebrief),Kirkland&EllisLLP,New
York,NY,forObjectorsAppellants
DiscoverBank,etal.

JASONA.YURASEK(AnahitSamarjian,on
thebrief),PerkinsCoieLLP,SanFrancisco,
CA,forObjectorsAppellantsFirstData
Corporation,etal.

AndrewG.Celli,Jr.andDebraL.
Greenberger,EmeryCelliBrinckerhoff&
AbadyLLP,NewYork,NY,for
ObjectorsAppellants(MerchantTrade
Groups).

JerroldS.ParkerandJayL.T.Breakstone,
ParkerWaichman,LLP,PortWashington,
NY;ThomasP.ThrashandMarcusN.
Bozeman,ThrashLawFirm,P.A.,Little
Rock,AR;PhillipDuncanandRichard
Quintus,DuncanFirm,P.A.,LittleRock,
AR,forAppellantRetailersandMerchants
Objectors.

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ElizabethWolstein,SchlamStone&Dolan
LLP,NewYork,NY,for
ObjectorsAppellantsU.S.PIRGand
ConsumerReports.

AnthonyF.Shelley,AdamP.Feinberg,
LauraG.Ferguson,MichaelN.Khalil,and
KatherineE.Pappas,Miller&Chevalier
Chartered,Washington,DC,forAppellants
BlueCrossandBlueShieldEntitiesand
WellpointEntities.

SteveA.Miller,Denver,CO,forAppellant
TheIronBarleyRestaurantLLC.

JohnJ.Pentz,Sudbury,MA,forAppellants
UnlimitedVacationsandCruises,Inc.,etal.

N.AlbertBacharach,Jr.,Gainesville,FL,for
AppellantOpticalEtc.LLC.

ChristopherA.Bandas,CorpusChristi,TX,
forObjectorsAppellants1001Property
Solutions,LLC,etal.

PAULD.CLEMENT(JeffreyM.Harrisand
CandiceC.Wong,onthebrief),Bancroft
PLLC,Washington,DC;K.Craig,Wildfang,
ThomasJ.Undlin,RyanW.Marth,and
BernardPersky,RobinsKaplan,Miller&
CiresiL.L.P.,Minneapolis,MN;H.Laddie
Montague,MerrillG.Davidoff,and
MichaelJ.Kane,Berger&Montague,P.C.,
Philadelphia,PA;BonnyE.Sweeney,

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JosephD.Daley,andAlexandraS.Bernay,
RobbinsGellerRudman&DowdLLP,San
Diego,CA;JosephGoldberg,Freedman
BoydGoldbergUrias&Ward,P.A.,
Albuquerque,MN,forPlaintiffsAppellees.

CARTERG.PHILIPS(DavidF.Graham,
RobertN.Hochman,BenjaminR.Nagin,
EamonP.Joyce,andMarkD.Taticchi,on
thebrief),SidleyAustinLLP,Washington,
DC;RobertC.Mason,Arnold&PorterLLP,
NewYork,NY;RobertJ.Vizas,Arnold&
PorterLLP,SanFrancisco,CA;MarkR.
MerleyandMatthewA.Eisenstein,Arnold
&PorterLLP,Washington,DC;RichardJ.
Holwell,MichaelS.Shuster,andDemian
Ordway,HolwellShuster&GoldbergLLP,
NewYork,NY;MatthewFreimuthand
WesleyR.Powell,WillkieFarr&Gallagher
LLP,NewYork,NY;KennethA.Gallo,
Paul,Weiss,Rifkind,Wharton&Garrison
LLP,Washington,DC;MarkP.Ladnerand
MichaelB.Miller,Morrison&FoersterLLP,
NewYork,NY;AndrewJ.Frackmanand
AbbyF.Rudzin,O=Melveny&MyersLLP;
JamesP.Tallon,Shearman&SterlingLLP,
NewYork,NY;RichardL.Creightonand
DrewM.Hicks,KeatingMuething&
KlekampPLL,Cincinnati,OH;JohnP.
PassarelliandJamesM.Sulentic,Kutak
RockLLP,Omaha,NE;PeterE.Greene,
BorisBershteyn,andPeterS.Julian,
Skadden,Arps,Slate,Meagher&FlomLLP,
NewYork,NY;JonathanS.Masseyand
LeonardA.Gail,Massey&Gail,

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Washington,DC;AliM.Stoeppelweth,
WilmerCutlerPickeringHaleandDorr
LLP,Washington,DC;JohnM.Majorasand
JosephW.Clark,JonesDay,Washington,
DC;TeresaT.Bonder,ValarieC.Williams,
andKaraF.Kennedy,Alston&BirdLLP,
Atlanta,GA;JonathanB.Orleansand
AdamS.Mocciolo,Pullman&Comley,
LLC,Bridgeport,CT;RobertP.LoBueand
WilliamF.Cavanaugh,PattersonBelknap
Webb&TylerLLP,NewYork,NY,for
DefendantsAppellees.

DENNISJACOBS,CircuitJudge:
Thisantitrustclassactionwasbroughtonbehalfofapproximately12
millionmerchantsagainstVisaU.S.A.Inc.(Visa)andMasterCardInternational
Incorporated(MasterCard),whicharethetwolargestcreditcardissuing
networksintheUnitedStates,aswellasagainstvariousissuingandacquiring
banks(collectivelywithVisaandMasterCard,thedefendants),alleginga
conspiracyinviolationofSection1oftheShermanAct. Afternearlytenyearsof
litigation,thepartiesagreedtoasettlementthatreleasedallclaimsinexchange
fordisparatereliefforeachoftwoclasses:upto$7.25billionwouldgotoan
optoutclass,andanonoptoutclasswouldgetinjunctiverelief. Thedistrict
courtcertifiedthesetwosettlementonlyclasses,andapprovedthesettlementas

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fairandreasonable. Onthisappeal,numerousobjectorsandoptoutplaintiffs
arguethatthisclassactionwasimproperlycertifiedandthatthesettlementwas
unreasonableandinadequate. Weconcludethattheclassplaintiffswere
inadequatelyrepresentedinviolationofRule23(a)(4)andtheDueProcess
Clause. Accordingly,wevacatethedistrictcourtscertificationofthisclass
actionandreversetheapprovalofthesettlement.
BACKGROUND
Detailedinformationabouthowthecreditcardindustryoperatesissetout
inthedistrictcourtopinionapprovingthesettlementinthiscase,InrePayment
CardInterchangeFeeandMerchantDiscountAntitrustLitig.(PaymentCardI),
986F.Supp.2d207,21415(E.D.N.Y.2013),andinourpreviousopinionsdealing
withpastantitrustlawsuitsagainstVisaandMasterCard,WalMartStores,Inc.v.
VisaU.S.A.,Inc.,396F.3d96,10102(2dCir.2005);UnitedStatesv.VisaU.S.A.,
Inc.,344F.3d229,23437(2dCir.2003);InreVisaCheck/MasterMoneyAntitrust
Litig.(VisaCheck),280F.3d124,12931(2dCir.2001). Thissectionofthe
opinionlaysoutonlythefactsandproceduralhistoryneededtoexplainour
analysisandresult.

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Ingeneralterms,aVisaorMasterCardcreditcardtransactionisprocessed
asfollows:thecustomerpresentsacreditcardtopayforgoodsorservicestothe
merchant;themerchantrelaysthetransactioninformationtotheacquiringbank;
theacquiringbankprocessestheinformationandrelaysittothenetwork(here,
VisaorMasterCard);thenetworkrelaystheinformationtotheissuingbank;ifthe
issuingbankapprovesthetransaction,thatapprovalisrelayedtotheacquiring
bank,whichthenrelaysittothemerchant. Ifthetransactionisapproved,the
merchantreceivesthepurchasepriceminustwofees:theinterchangefeethat
theissuingbankchargedtheacquiringbankandthemerchantdiscountfeethat
theacquiringbankchargedthemerchant.
Inagiventransaction,theinterchangefeethattheacquiringbankpays
(andisinturnpaidbythemerchant)variesdependingonthecreditcardnetwork
andthetypeofcreditcard. Thus,theAmericanExpresscreditcardnetwork
generallychargesahigherinterchangefeethantheVisaorMasterCardnetworks.
AndVisaandMasterCardhavedifferentproductlevelswithintheircreditcard
portfolios,suchascardsthatgiveconsumersgenerousrewards,andtypically
chargeahigherinterchangefeethancardsthatofferfewrewardsornone. The
differenceininterchangefeebetweenAmericanExpressandVisaorMasterCard

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isoneatthebrandlevel,whilethedifferencebetween,e.g.,arewardscardfrom
VisaandanorewardscardfromVisaisoneattheproductlevel.
PlaintiffsareallmerchantswhoacceptVisaandMasterCardbranded
creditcardsandarethereforeboundbytheissuersnetworkrules. Plaintiffs
challengeasanticompetitiveseveralofthefollowingnetworkrules(whichare
effectivelyidenticalasbetweenVisaandMasterCard). Thedefault
interchangefeeappliestoeverytransactiononthenetwork(unlessthemerchant
andissuingbankhaveenteredintoaseparateagreement). The
honorallcardsrulerequiresmerchantstoacceptallVisaorMasterCardcredit
cardsiftheyacceptanyofthem,regardlessofthedifferencesininterchangefees.
Multiplerulesprohibitmerchantsfrominfluencingcustomerstouseonetypeof
paymentoveranother,suchascashratherthancredit,oracreditcardwitha
lowerinterchangefee. Theseantisteeringrulesincludethenosurcharge
andnodiscountrules,whichprohibitmerchantsfromchargingdifferentprices
atthepointofsaledependingonthemeansofpayment.
PlaintiffsallegethattheseVisaandMasterCardnetworkrules,workingin
tandem,allowtheissuingbankstoimposeanartificiallyinflatedinterchangefee
thatmerchantshavelittlechoicebuttoaccept. Theargumentisthatthe

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honorallcardsruleforcesmerchantstoacceptallVisaandMasterCardcredit
cards(fewmerchantscanaffordtoacceptnoneofthem);theantisteeringrules
prohibitthemfromnudgingconsumerstowardcheaperformsofpayment;the
issuingbanksarethusfreetosetinterchangefeesatasupracompetitiverate;and
thatrateiseffectivelylockedinviathedefaultinterchangefeebecausetheissuing
bankshavelittleincentivetodeviatefromitunlessagivenmerchantishuge
enoughtohavesubstantialbargainingpower.
Thefirstconsolidatedcomplaintinthisactionwasfiledin2006.
Developmentssincethenhavealteredthecreditcardindustryinimportantways.
BothVisaandMasterCardconductedinitialpublicofferingsthatconvertedeach
fromaconsortiumofcompetitorbanksintoanindependent,publiclytraded
company. TheDurbinAmendmenttotheDoddFrankWallStreetReform
andConsumerProtectionActof2010limitedtheinterchangefeethatissuing
bankscouldchargefordebitcardpurchases,andallowedmerchantstodiscount
debitcardpurchasesrelativetocreditcardpurchases. Finally,pursuanttoa
consentdecreewiththeDepartmentofJusticein2011,VisaandMasterCard
agreedtopermitmerchantstodiscounttransactionstosteerconsumersaway

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fromcreditcardsuse. Noneofthesedevelopmentsaffectedthehonorallcards
ornosurchargingrules,ortheexistenceofadefaultinterchangefee.
Notwithstandingthesepromerchantindustrydevelopments,theplaintiffs
pressedon. Discoveryincludedmorethan400depositions,17expertreports,32
daysofexpertdepositiontestimony,andtheproductionofover80millionpages
ofdocuments. Thepartiesfullybriefedamotionforclasscertification,amotion
todismisssupplementalcomplaints,andcrossmotionsforsummaryjudgment.
Beginningin2008,thepartiesparticipatedinconcurrentsettlementnegotiations
assistedbywellrespectedmediators. Attheendof2011,thedistrictjudgeand
themagistratejudgeparticipatedinthepartiesdiscussionswiththemediators.
InOctober2012,afterseveralmoremarathonnegotiationswiththemediators
(includingonemorewiththedistrictcourtandmagistratejudges),theparties
executedtheSettlementAgreement. Thedistrictcourtgrantedpreliminary
approvaloftheproposedsettlementonNovember27,2012,andfinalapprovalon
December13,2013. PaymentCardI,986F.Supp.2dat213,217.
TheSettlementAgreementdividestheplaintiffsintotwoclasses:onethe
Rule23(b)(3)classcoversmerchantsthatacceptedVisaand/orMasterCardfrom
January1,2004toNovember28,2012;theothertheRule23(b)(2)classcovers

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merchantsthataccepted(orwillaccept)Visaand/orMasterCardfromNovember
28,2012onwardsforever. Theformerclasswouldbeeligibletoreceiveupto
$7.25billioninmonetaryrelief;thelatterwouldgetinjunctivereliefintheformof
changestoVisa=sandMasterCardsnetworkrules. Becauseofthedifference
betweenRule23(b)(3)andRule23(b)(2),membersofthefirstclass(which
receivesmoneydamagesinthesettlement)couldoptout,butmembersofthe
second,forwardlookingclass(whichreceivesonlyinjunctiverelief)couldnot.
Themostconsequentialreliefaffordedthe(b)(2)classwastheabilityto
surchargeVisaandMasterCardbrandedcreditcardsatboththebrandand
productlevels. Thatis,amerchantcouldincreasethepriceofagoodatthepoint
ofsaleifaconsumerpresents(forexample)aVisacardinsteadofcash,oraVisa
rewardscardinsteadofaVisacardthatyieldsnorewards. Theincremental
valueandutilityofthisreliefislimited,however,becausemanystates,including
NewYork,California,andTexas,prohibitsurchargingasamatterofstatelaw.
See,e.g.,ExpressionsHairDesignv.Schneiderman,808F.3d118,127(2dCir.
2015)(upholdingtheNewYorkbanoncreditcardsurcharges);Rowellv.
Pettijohn,816F.3d73,80(5thCir.2016)(upholdingtheTexasbanoncreditcard
surcharges). ButseeDanasR.R.Supplyv.AttorneyGen.,Florida,807F.3d1235,

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1249(11thCir.2015)(strikingdownFloridabanoncreditcardsurcharges).
Moreover,underthemostfavorednationclauseincludedintheSettlement
Agreement,merchantsthatacceptAmericanExpresscannotavailthemselvesof
thesurchargingreliefbecauseAmericanExpresseffectivelyprohibits
surcharging,andtheSettlementAgreementpermitssurchargingforVisaor
MasterCardonlyifthemerchantalsosurchargesforuseofcardsissuedby
competitorssuchasAmericanExpress.
VisaandMasterCardalsoagreedtomodifytheirnetworkrulestoreflect
thattheywill:negotiateinterchangefeeswithgroupsofmerchantsingoodfaith,
lockinthebenefitsoftheDurbinAmendmentandDepartmentofJusticeconsent
decree,andpermitamerchantthatoperatesmultiplebusinessesunderdifferent
namesorbannerstoacceptVisaorMasterCardatfewerthanallofitsbusinesses.
TheSettlementAgreementprovidesthatalloftheinjunctivereliefwill
terminateonJuly20,2021.
Inreturn,theplaintiffsareboundbyareleasethatwaivesanyclaimsthey
wouldhaveagainstthedefendantsfor:alloftheconductchallengedinthe
operativecomplaint,allotherpoliciesandpractices(concerningcreditcard
transactions)thatwereinplaceasofNovember27,2012,andanysubstantially

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similarpracticestheyadoptinthefuture. Whiletheinjunctivereliefforthe
(b)(2)classwillexpireonJuly20,2021,thisreleasehasnoenddate. Itoperates
inperpetuity,providedonlythatVisaandMasterCardkeepinplacetheseveral
rulesthatweremodifiedbytheinjunctivereliefprovidedtothe(b)(2)class
(including,interalia,permittingmerchantstosurcharge),orimposerulesthatare
substantiallysimilartothemodifiedrules. Thatis,afterJuly20,2021,foraslong
asVisaandMasterCardelecttoleaveinplacetheirnetworkrulesasmodifiedby
theSettlementAgreementoradoptrulessubstantiallysimilarthereto,the
defendantscontinuetoenjoythebenefitofthereleaseastoallclaimstheplaintiffs
potentiallyhadagainstthedefendantsforanyofthenetworkrulesexistingasof
November27,2012.
If,afterJuly20,2021,theVisaorMasterCardnetworksrulesarechanged
suchthattheyarenolongersubstantiallysimilartotheirformasmodifiedbythe
SettlementAgreement,thenmerchantsarefreedfromthereleaseastoclaims
arisingoutofthatnewnetworkrulebutonlyastosuchclaims. Forexample,if
VisaorMasterCardreverttotheirpreSettlementAgreementrulesbyforbidding
merchantsfromsurcharging,thenthereleasewillnotbarfuturemerchants
includedinthe(b)(2)classfrombringingantitrustclaimsarisingoutofthe

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prohibitiononsurcharging;buttherestofreleasewouldremainineffect,sothata
suitbythefutureplaintiffcouldnotchallengeanyoftheunchangednetwork
rules,suchasthehonorallcardsruleorimpositionofdefaultinterchangefees.
Insum,regardlesswhatVisaorMasterCarddowiththeirnetworkrulesafterJuly
20,2021,nomerchantwilleverbepermittedtobringclaimsarisingoutofthe
networkrulesthatareunaffectedbythisSettlementAgreement,includingmost
importantly,thehonorallcardsruleorexistenceofdefaultinterchangefees.
Appellants,includingthosethatoptedoutfromthe(b)(3)classand
objectedtothe(b)(2)class,arguethatthe(b)(2)classwasimproperlycertifiedand
thatthesettlementwasinadequateandunreasonable.
DISCUSSION
Certificationofaclassisreviewedforabuseofdiscretion,i.e.,whetherthe
decision(i)restsonalegalerrororclearlyerroneousfactualfinding,or(ii)falls
outsidetherangeofpermissibledecisions. InreLiteraryWorksinElec.
DatabasesCopyrightLitig.(LiteraryWorks),654F.3d242,249(2dCir.2011).
Thedistrictcourtsfactualfindingsarereviewedforclearerror;itsconclusionsof
lawarerevieweddenovo. Charronv.Wiener,731F.3d241,247(2dCir.2013).

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Classactionsareanexceptiontotherulethatonlythenamedparties
conductandareboundbylitigation. SeeHansberryv.Lee,311U.S.32,4041
(1940). Inordertojustifyadeparturefromthatrule,aclassrepresentativemust
bepartoftheclassandpossessthesameinterestandsufferthesameinjuryasthe
classmembers. WalMartv.Dukes,131S.Ct.2541,2550(2011)(internal
quotationmarksandcitationsomitted). ThatprincipleissecuredbyRule
23(a)(4)andtheDueProcessClause. Rule23(a)(4),whichrequiresthatthe
representativeparties...fairlyandadequatelyprotecttheinterestsoftheclass,
servestouncoverconflictsofinterestbetweennamedpartiesandtheclassthey
seektorepresent,aswellasthecompetencyandconflictsofclasscounsel.
AmchemProds.,Inc.v.Windsor,521U.S.591,625,626n.20(1997). [T]heDue
ProcessClauseofcourserequiresthatthenamedplaintiffatalltimesadequately
representtheinterestsoftheabsentclassmembers. PhillipsPetroleumCo.v.
Shutts,472U.S.797,812(1985). Classactionsandsettlementsthatdonotcomply
withRule23(a)(4)andtheDueProcessClausecannotbesustained.
Weconcludethatclassmembersofthe(b)(2)classwereinadequately
representedinviolationofbothRule23(a)(4)andtheDueProcessClause.
Proceduraldeficienciesproducedsubstantiveshortcomingsinthisclassaction

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andthesettlement. Asaresult,thisclassactionwasimproperlycertifiedandthe
settlementwasunreasonableandinadequate.
I
UnderRule23(a)(4),[a]dequacyistwofold:theproposedclass
representativemusthaveaninterestinvigorouslypursuingtheclaimsofthe
class,andmusthavenointerestsantagonistictotheinterestsofotherclass
members. Denneyv.DeutscheBankAG,443F.3d253,268(2dCir.2006);see
alsoRobinsonv.MetroNorthCommuterR.R.Co.,267F.3d147,170(2dCir.2001)
(TwofactorsgenerallyinformwhetherclassrepresentativessatisfytheRule
23(a)(4)requirement:(1)absenceofconflictand(2)assuranceofvigorous
prosecution.)Toassurevigorousprosecution,courtsconsiderwhethertheclass
representativehasadequateincentivetopursuetheclasssclaim,andwhether
somedifferencebetweentheclassrepresentativeandsomeclassmembersmight
underminethatincentive. Id.at171. Toavoidantagonisticinterests,any
fundamentalconflictthatgoestotheveryheartofthelitigation,Charron,731
F.3dat24950(internalcitationsomitted),mustbeaddressedwithastructural
assuranceoffairandadequaterepresentationforthediversegroupsand
individualsamongtheplaintiffs. Amchem,521U.S.at627. Onecommon

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structuralprotectionisdivisionoftheclassintohomogenoussubclassesunder
Rule23(c)(4)(B),withseparaterepresentationtoeliminateconflictinginterestsof
counsel. Ortizv.FibreboardCorp.,527U.S.815,856(1999).
Adequacymustbedeterminedindependentlyofthegeneralfairness
reviewofthesettlement;thefactthatthesettlementmayhaveoverallbenefitsfor
allclassmembersisnotthefocusinthedeterminationwhetherproposed
classesaresufficientlycohesivetowarrantadjudication. Denney,443F.3dat
268(quotingOrtiz,527U.S.at858). ThefocusoftheRule23(a)inquiryremains
oninequityandpotentialinequityattheprecertificationstage. Ortiz,527U.S.
at858. Sowhen(ashere)thedistrictcourtcertifiestheclassatthesametimeit
approvesasettlement,therequirementsofRule23(a)demandundiluted,even
heightened,attention. Amchem,521U.S.at620.
A
TheSupremeCourtwrotethegroundrulesforadequaterepresentationin
thesettlementonlyclasscontextinAmchemandOrtiz,twoasbestoscases. Our
recentdecisioninLiteraryWorkscontributedaglossonthesubject.
ThesingleclassproposedsettlementinAmchempotentiallyencompassed
millionsofplaintiffswhohadbeenexposedtoasbestos,withoutdistinction

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betweenthosewhohadalreadymanifestedasbestosrelatedinjuriesandsought
generousimmediatepayments,andthosewhohadnotmanifestedinjuryand
soughtanample,inflationprotectedfundforthefuture. Amchem,521U.S.at
626. Asingleclassrepresentativecouldnotadequatelyrepresentbothinterests.
Thetwosubgroupshadcompetinginterestsinthedistributionofasettlement
whosetermsreflectedessentialallocationdecisionsdesignedtoconfine
compensationandtolimitdefendantsliability. LiteraryWorks,654F.3dat
250(quotingAmchem,521U.S.at627). Theantagonisticinterestswereso
pronounced,onanissuesocrucial,thatthesettlementrequiredastructural
assuranceoffairandadequaterepresentationforthediversegroupsand
individuals. Amchem,521U.S.at627.
Twoyearslater,theSupremeCourtagainconsideredasettlementonly
classactionthatjoinedpresentandfutureclaimantsinasingleclass,and
emphasized:itisobviousafterAmchemthataclassdividedbetweenholdersof
presentandfutureclaims...requiresdivisionintohomogenoussubclasses
underRule23(c)(4)(B),withseparaterepresentationtoeliminateconflicting
interestsofcounsel. Ortiz,527U.S.at856. Asecondfataldeficiencyinthe
Ortizsettlementwasthatallpresentclaimantsweretreatedequally,

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notwithstandingthatsomehadclaimsthatweremorevaluable. Itisnoanswer
tosay...thattheseconflictsmaybeignoredbecausethesettlementmakesno
disparateallocationofresourcesasbetweentheconflictingclassesforthevery
decisiontotreatthemallthesameisitselfanallocationdecisionwithresults
almostcertainlydifferentfromtheresultsthat[thedisparateclaimants]would
havechosen. Id.at857. Thesefaultlinesbetweenpresentandfuture
plaintiffs,andamongplaintiffswithdifferentlyvaluedclaims,wereso
fundamentalthattheyrequiredstructuralprotectionintheformofsubclasses
withseparatecounsel. Id.
LiteraryWorkscontainedthesameingredientsofconflictidentifiedin
AmchemandOrtiz. LiteraryWorks,654F.3dat251. Thesettlementdivided
classclaimsintothreecategories,cappeddefendantsoverallliabilityat$18
million,andusedaformulaforsplittingthisamount. Thesettlementwasless
generoustothethirdcategory,andrequiredtheholdersofthoseclaimsto
exclusivelybeartheriskofoversubscription,i.e.,theirrecoveryalonewouldbe
reducedtobringthetotalpayoutdownto$18million. Theclassrepresentatives
ofthesingleclassincludedindividualswithclaimsineachcategory;nevertheless,
weheldthat(ataminimum)classmemberswithclaimsonlyinthethirdcategory

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requiredseparaterepresentationbecausetheirinterestswereantagonistictothe
othersonamatterofcriticalimportancehowthemoneywouldbedistributed.
Id.at254.
Sincesomenamedrepresentativesheldclaimsacrossallthreecategories,
theclassdidnotencompassmutuallyexclusivegroupsasinAmchem;still,each
impermissiblyservedgenerallyasrepresentativeforthewhole,notfora
separateconstituency. Id.at251(quotingAmchem,521U.S.at627). Class
representativeswithclaimsinallthreecategoriesnaturallywouldwantto
maximizetheiroverallrecoveryregardlessofallotmentacrosscategories,
whereasclassmemberswithclaimsonlyinthethirdcategorywouldwantto
maximizethecompensationforthatcategoryinparticular. Agreatriskthus
arosethatclassrepresentativeswouldselloutthethirdcategoryofclaimsfor
termsthatwouldtilttowardtheothers. Asittranspired,theresultingsettlement
awardedthethirdcategoryless,andtaxedthatlesserrecoverywithalltherisk
thatclaimwouldexceedtheliabilitycap.
Wedidnotconcludethatthethirdcategorysinferiorrecovery[w]as
determinativeevidenceofinadequaterepresentation. Id.at253. Theclaimsin
thirdcategorywereobjectivelytheweakest. Theproblem,ofcourse,[wa]sthat

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weha[d]nobasisforassessingwhetherthediscountappliedtoCategoryCs
recoveryappropriatelyreflect[ed]thatweakness. Id. Wecouldnotknowthe
rightvalueofthecategoryCclaimswithoutindependentcounselpressingits
mostcompellingcase. Id. Whilethesettlementwastheproductofan
intense,protected,adversarialmediation,involvingmultipleparties,including
highlyrespectedandcapablemediatorsandassociationalplaintiffs,these
featuresofthenegotiationcouldnotcompensatefortheabsenceofindependent
representationbecausetherecouldbenoassurancethatanyoneadvancedthe
strongestargumentsinfavorofthedisfavoredclaims. Id.at25253. The
eventualsettlementprovedthat[o]nlythecreationofsubclasses,andthe
advocacyofanattorneyrepresentingeachsubclass,canensurethattheinterests
ofthatparticularsubgroupareinfactadequatelyrepresented. Id.at252.
Dividedloyaltiesarerarelydivideddownthemiddle.
B
LikethesettlementonlyclassesinAmchem,Ortiz,andLiteraryWorks,the
unitaryrepresentationoftheseplaintiffswasinadequate. Classrepresentatives
hadinterestsantagonistictothoseofsomeoftheclassmemberstheywere
representing. Thefaultlineswereglaringastomattersoffundamental

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importance. Suchconflictsandabsenceofincentiverequiredasufficient
structuralassuranceoffairandadequaterepresentation,Amchem,521U.S.at
627,butnonewasprovided.
Theconflictisclearbetweenmerchantsofthe(b)(3)class,whichare
pursuingsolelymonetaryrelief,andmerchantsinthe(b)(2)class,definedas
thoseseekingonlyinjunctiverelief. Theformerwouldwanttomaximizecash
compensationforpastharm,andthelatterwouldwanttomaximizerestraintson
networkrulestopreventharminthefuture. Amchemtellsusthatsuch
divergentinterestsrequireseparatecounselwhenitimpactstheessential
allocationdecisionsofplaintiffscompensationanddefendantsliability.
Amchem,521U.S.at627. TheSettlementAgreementdoesmanifesttensionon
anessentialallocationdecision:merchantsinthe(b)(3)classwouldshareinup
to$7.25billionofdamages,whilemerchantsinthe(b)(2)classwouldenjoythe
benefitofsometemporarychangestothedefendantsnetworkrules. Thesame
counselrepresentedboththe(b)(3)andthe(b)(2)classes. Theclasscounseland
classrepresentativeswhonegotiatedandenteredintotheSettlementAgreement
wereinthepositiontotradediminutionof(b)(2)reliefforincreaseof(b)(3)relief.
However,itisobviousafterAmchemthataclassdividedbetweenholdersof

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presentandfutureclaims...requiresdivisionintohomogenous
subclasses...withseparaterepresentation. Ortiz,527U.S.at856.
Moreover,manymembersofthe(b)(3)classhavelittletonointerestinthe
efficacyoftheinjunctivereliefbecausetheynolongeroperate,ornolongeraccept
VisaorMasterCard,orhavedecliningcreditcardsales. Bythesametoken,
manymembersofthe(b)(2)classhavelittletonointerestinthesizeofthe
damagesawardbecausetheydidnotoperateoracceptVisaorMasterCardbefore
November28,2012,orhavegrowingcreditcardsales. Unitaryrepresentationof
separateclassesthatclaimdistinct,competing,andconflictingreliefcreate
unacceptableincentivesforcounseltotradebenefitstooneclassforbenefitsto
theotherinordersomehowtoreachasettlement.
Classcounselstoodtogainenormouslyiftheygotthedealdone. The(up
to)$7.25billioninreliefforthe(b)(3)classwasthelargestevercashsettlementin
anantitrustclassaction. PaymentCardI,986F.Supp.2dat229. Fortheir
services,thedistrictcourtgrantedclasscounsel$544.8millioninfees. Inre
PaymentCardInterchangeFeeandMerchantDiscountAntitrustLitig.
(PaymentCardII),991F.Supp.2d437,440(E.D.N.Y.2014). Thedistrictcourt
calculatedthesefeesbasedonagraduatedpercentagecutofthe(b)(3)classs

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recovery;thuscounselgotmoremoneyforeachadditionaldollartheysecuredfor
the(b)(3)class. Butthedistrictcourtscalculationoffeesexplicitlydidnotrely
onanybenefitthatwouldaccruetothe(b)(2)class,id.at442n.4,andclass
counseldidnotevenasktobecompensatedbasedonthesizeorsignificanceof
theinjunctiverelief. Id. TheresultingdynamicisthesameasinOrtiz. Asthe
SupremeCourtrecognizedinthatcase:whenthepotentialforgiganticfeesis
withincounselsgraspforrepresentationofonegroupofplaintiffs,butonlyif
counselresolvesanothergroupofplaintiffsclaims,acourtcannotassumeclass
counseladequatelyrepresentedthelattergroupsinterests. Ortiz,527U.S.at
852. Weexpresslydonotimpugnthemotivesoractsofclasscounsel.
Nonetheless,classcounselwaschargedwithaninequitabletask.
Thetroublewithunitaryrepresentationhereisexacerbatedbecausethe
membersoftheworseoff(b)(2)classcouldnotoptout. The(b)(2)merchantsare
stuckwiththisdealandthisrepresentation. Wedonotdecidewhether
providingtheseclassmemberswithoptoutrightswouldbeasufficient
structuralassuranceoffairandadequaterepresentation,Amchem,521U.S.at
627,toovercomethelackofseparateclasscounselandrepresentative. Cf.Visa

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Check,280F.3dat147. ItisenoughtosaythatthisfeatureoftheSettlement
Agreementcompoundedtheproblem.
OneaspectoftheSettlementAgreementthatemphaticallycannotremedy
theinadequaterepresentationistheassistanceofjudgesandmediatorsinthe
bargainingprocess. True,acourtappointedmediatorsinvolvementin
precertificationsettlementnegotiationshelpstoensurethattheproceedings
werefreeofcollusionandunduepressure. DAmatov.DeutscheBank,236
F.3d78,85(2dCir.2001). Butevenanintense,protected,adversarialmediation,
involvingmultipleparties,includinghighlyrespectedandcapablemediators
andassociationalplaintiffs,doesnotcompensatefortheabsenceofindependent
representation. LiteraryWorks,654F.3dat25253. Themissionofmediators
istobringtogetherthepartiesandintereststhatcometothem. Itisnottheirrole
toadvancethestrongestargumentsinfavorofeachsubsetofclassmembers
entitledtoseparaterepresentation,ortovoicetheinterestsofagroupforwhich
nooneelseisspeaking.
Noristheproblemcuredbythepartialoverlapofmerchantswhogetcash
asmembersofthe(b)(3)classandbecomemembersofthe(b)(2)classasthey
continuetoacceptVisaorMasterCard. TheforceofAmchemandOrtizdoesnot

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dependonthemutuallyexclusivityoftheclasses;itwasenoughthattheclasses
didnotperfectlyoverlap. WeheldasmuchinLiteraryWorks,reasoningthat
namedplaintiffswithclaimsinmultiplesubgroupscannotadequatelyrepresent
theinterestsofanyonesubgroupbecausetheirincentiveistomaximizetheirown
totalrecovery,ratherthantherecoveryforanysinglesubgroup. Amchem
observedthatwheredifferencesamongmembersofaclassaresuchthat
subclassesmustbeestablished,weknowofnoauthoritythatpermitsacourtto
approveasettlement...onthebasisofconsentsbymembersofaunitaryclass,
someofwhomhappentobemembersofthedistinctsubgroups. Amchem,521
U.S.at627(quotingInreJointE.andS.Dist.AsbestosLitig.,982F.2d721,74243
(2dCir.1992),modifiedonrehg,993F.2d7(2dCir.1993)).
Moreover,whateveroverlappresentlyexistsispartialandshrinkingwith
time. AsoftheSeptember12,2013fairnesshearing,classcounselreportedthat
theclasswascomposedofabout12millionmerchants. Thatfigureofcourse
doesnotincludemerchantsthathavecomeintobeingsincethen,orthosethat
willcomeintobeinginthefuture,allofwhomwillbemembersofonlythe(b)(2)
class. Themembershipofthe(b)(3)class,ontheotherhand,isfixedandfinite.

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Overtime,theinitialoverlapwillbereduced,andthegapbetweentheinterestsof
the(b)(3)and(b)(2)classeswillcontinuetowiden.
Noneofthisistosaythat(b)(3)and(b)(2)classescannotbecombinedina
singlecase,orthat(b)(3)and(b)(2)classesnecessarilyandalwaysrequire
separaterepresentation. Problemsarisewhenthe(b)(2)and(b)(3)classesdonot
haveindependentcounsel,seekdistinctrelief,havenonoverlapping
membership,and(importantly)arecertifiedassettlementonly. The
requirementsofRule23(a)areappliedwithaddedsolicitudeinthe
settlementonlyclasscontextbecausethecertificationofamandatorysettlement
classeffectivelyconcludestheproceedingsaveforthefinalfairnesshearing,and
thereisthusaheightenedriskofconflatingthefairnessrequirementsofRule
23(e)withtheindependentrequirementofrigorousadherencetothose
provisionsoftheRuledesignedtoprotectabsentees,suchasRules23(a)and(b).
Charron,731F.3dat250(quotingOrtiz,527U.S.at849). AsinAmchem,Ortiz,
andLiteraryWorks,settlementsthatareapprovedsimultaneouslywithclass
certificationareespeciallyvulnerabletoconflictsofinterestbecausethe
imperativesofthesettlementprocess,whichcometobearonthedefendants,the
classcounsel,andeventhemediatorsandthecourtitself,caninfluencethe

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definitionoftheclassesandtheallocationofrelief. Forthisreason,wescrutinize
suchsettlementsmoreclosely.
Ofcoursewehaveblessedmulticlasssettlementsthatweretheproductof
unitaryrepresentation,butthosewereenteredintoafterclasscertification. For
example,weapprovedasettlementnegotiatedbyunitarycounselinCharron;but
beforedoingso,wenote[d]thatunlikethesituationinAmchem,Ortiz,and
LiteraryWorks,thesettlementherewasnotbeingapprovedatthesametimethat
theclasswasbeingcertified. Charron,731F.3dat250. Accordingly,wewere
moreskepticalofallegationsthatsubclassconflictsrequiredseparate
representation. Id. True,Charronobserved[a]llclasssettlementsvaluesome
claimsmorehighlythanothers,basedontheirperceivedmerits,andstrike
compromisesbasedonprobabilisticassessments,id.,butthatobservationhas
lessforceinthesettlementonlycontext. Charronalsospokeofcounseltrading
oneclaimforanother(whichmaybepermissible);inthesettlementonlyclass
action,weareconcernedthatcounselwilltradetheinterestsofoneclassfor
another(whichisnot).
Wehavereasontothinkthatthatoccurredhere. Structuraldefectsinthis
classactioncreatedafundamentalconflictbetweenthe(b)(3)and(b)(2)classes

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andsappedclasscounseloftheincentivetozealouslyrepresentthelatter.
Apparently,theonlyunifiedinterestsservedbyherdingthesecompetingclaims
intooneclassaretheinterestsservedbysettlement:(i)theinterestofclasscounsel
infees,and(ii)theinterestofdefendantsinabundledgroupofallpossible
claimantswhocanbeprecludedbyasinglepayment. Thislatterinterest
highlightsthenextproblemwiththeSettlementAgreement.
II
Thisopinionalreadyconcludesthatclassplaintiffswereinadequately
represented. Accordingly,thesettlementandreleasethatresultedfromthis
representationarenullities. SeeStephensonv.DowChem.Co.,273F.3d249,260
(2dCir.2001),affdinpartbyanequallydividedcourtandvacatedinpart,539
U.S.111(2003)(Resjudicatagenerallyappliestobindabsentclassmembers
exceptwheretodosowouldviolatedueprocessand[d]ueprocessrequires
adequaterepresentationatalltimesthroughoutthelitigation.). Thisoutcomeis
confirmedbythesubstanceofthedealthatwasstruck. LiketheSupremeCourt
inAmchem,weexamineasettlementssubstanceforevidenceofprejudicetothe
interestsofasubsetofplaintiffswhenassessingtheadequacyof
representation. LiteraryWorks,654F.3dat252. Here,thebargainthatwas

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struckbetweenreliefandreleaseonbehalfofabsentclassmembersisso
unreasonablethatitevidencesinadequaterepresentation.
Itisfamiliardoctrineofthefederalcourtsthatmembersofaclassnot
presentaspartiestothelitigationmaybeboundbythejudgmentwheretheyare
infactadequatelyrepresentedbypartieswhoarepresentconsistentwiththe
requirementsofdueprocessandfullfaithandcredit. Hansberry,311U.S.at
4243(emphasisadded);seealsoStephenson,273F.3dat261(Partofthedue
processinquiry(andpartoftheRule23(a)classcertificationrequirements)
involvesassessingadequacyofrepresentationandintraclassconflicts.).
Similarly,[p]laintiffsinaclassactionmayreleaseclaimsthatwereorcouldhave
beenpledinexchangeforsettlementrelief;butthisauthorityislimitedbythe
identicalfactualpredicateandadequacyofrepresentationdoctrines.
WalMartStores,396F.3dat106. [W]hereclassplaintiffshavenotadequately
representedtheinterestsofclassmembers,any[c]laimsarisingfromashared
setoffactswillnotbeprecluded. Id.at108.
A
Asdiscussedabove,LiteraryWorksconcludedthatinadequate
representationwasdemonstratedbythereliefaffordedtoasubsetoftheclass.

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Similarly,thereleaseinStephensonwasitselfproofofinadequaterepresentation,
wherasthereleaseinWalMartStoresdidnotimpugntheclasssrepresentation.
Consideredtogether,thesecasesillustratewhenthetradeoffbetweenreliefand
releaseasappliedtoaclassmembercanviolatedueprocess.
LiteraryWorksheldthatclassmemberswithclaimsinoneofthecategories
wereinadequatelyrepresentednotonlybecausetheydidnotreceiveseparate
representation,butalsobecausetheysolelyboretheriskthatthetotalamount
claimedwouldexceedapresetliabilitycap. Weobservedthatthisfeatureofthe
settlementcouldnotbejustifiedbytherelativeweaknessofthoseclaimsbecause
thatfactwasalreadyaccountedfor. LiteraryWorks,654F.3dat253. Wecould
discernnoreasonforsubjectingthesinglecategoryofclaimstothewholeriskof
oversubscription;norcouldthesettlementsproponents. Id.at254. When
onecategory[ofclassmembersare]targetedfor[worsetreatment]without
crediblejustificationitstronglysuggestsalackofadequaterepresentationfor
thoseclassmemberswhoholdonlyclaimsinthiscategory. Id.
InStephenson,weconsideredacollateralattackonaclassactionthathad
establishedasettlementfundforindividualsinjuredbyexposuretoAgent
Orange. Theunderlyinglitigationprovidedcompensationonlyforthosewho

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discoveredtheirinjurybefore1994,yetreleasedallfutureclaims. Two
individualswhofellwithintheclassdefinitionofindividualsinjuredbyAgent
Orange,butwholearnedoftheirinjuryafter1994,challengedthereleaseas
appliedtothem. AnalogizingthecasetoAmchemandOrtiz,weconcludedthat
thetwoindividualswereinadequatelyrepresentedinthepriorlitigationbecause
thesettlementpurportedtoresolveallfutureclaimsbutthesettlementfundwas
permittedtoterminatein1994and[n]oprovisionwasmadeforpost1994
claimants. Stephenson,273F.3dat26061. Thetwochallengerscouldnothave
beenadequatelyrepresentediftheirclassrepresentativenegotiatedasettlement
andreleasethatextinguishedtheirclaimswithoutaffordingthemanyrecovery.
Theresultviolateddueprocess;theplaintiffscouldnotbeboundbythe
settlementrelease. Id.at261.
AsimilarchallengewasraisedtothesettlementreleaseinWalMartStores,
whichforeclosedallclaimsarisingfromthesamefactualpredicateasthatalleged
inthecomplaint. Objectorsarguedthattheywereinadequatelyrepresented
becauseclassrepresentativesdidnotpursuecertainclaimsasvigorouslyas
others. Werejectedthisbasisforobjectionbecauseadequaterepresentationofa
particularclaimisdeterminedbythealignmentofinterestsofclassmembers,not

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proofofvigorouspursuitofthatclaim. WalMartStores,396F.3dat113.
StephensonwasnotdirectlyonpointbecauseintheAgentOrangesettlement
(asintheAmchemandOrtizsettlements)futureclaimshadnotbeenconsidered
separatelyfromclaimsinvolvingcurrentinjurydespitethesetwogroupshaving
clearlydivergentinterests. Id.at110. TheobjectorsinWalMartStoresdidnot
allegedivergentinterests;theyhaddisagreementsaboutwhichclaimsweremost
valuableandwhatreliefwasadequate. Moreover,thesettlementinWalMart
Storescoveredonlyapast,finiteperiodanddidnotprecludefuturesuitsover
conductpostdatingthesettlement. Id. Nofutureclaimantsorclaimswere
coveredbytheWalMartStoressettlementorrelease. Finally,everyclaimant
fromtheobjectinggroupsbenefittedfromthesettlement. Id.at112.
B
Merchantsinthe(b)(2)classthatacceptAmericanExpressoroperatein
statesthatprohibitsurcharginggainnoappreciablebenefitfromthesettlement,
andmerchantsthatbeginbusinessafterJuly20,2021gainnobenefitatall. In
exchange,classcounselforcedthesemerchantstoreleasevirtuallyanyclaims
theywouldeverhaveagainstthedefendants. Thoseclassmembersthat

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effectivelycannotsurchargeandthosethatbeginoperationafterJuly20,2021
werethusdenieddueprocess.
NoonedisputesthatthemostvaluablerelieftheSettlementAgreement
securesforthe(b)(2)classistheabilitytosurchargeatthepointofsale. Tothe
extentthattheinjunctivereliefhasanymeaningfulvalue,itcomesfrom
surcharging,notfromthebuyinggroupprovision,orthealloutletsprovision,or
thelockinginoftheDurbinAmendmentandDOJconsentdecree. Forthis
reason,itisimperativethatthe(b)(2)classinfactbenefitfromtherightto
surcharge. ButthatreliefislessvaluableforanymerchantthatoperatesinNew
York,California,orTexas(amongotherstatesthatbansurcharging),oraccepts
AmericanExpress(whosenetworkrulesprohibitsurchargingandincludea
mostfavorednationclause). MerchantsinNewYorkandmerchantsthataccept
AmericanExpresscangetnoadvantagefromtheprincipalrelieftheircounsel
bargainedforthem.
Itmaybearguedthattheclaimsofthe(b)(2)classareweakandcan
commandnobenefitinsettlement. However,thatargumentwouldseemtobe
foreclosedbecauseothermembersofthesameclasswiththesameclaimsthose
thatdonottakeAmericanExpressandoperateinstatesthatpermitsurcharging

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deriveapotentiallysubstantialbenefit. Thereisnobasisforthisunequal
intraclasstreatment:themorevaluabletherighttosurcharge(apointtheparties
vigorouslydispute),themoreunfairthetreatmentofmerchantsthatcannotavail
themselvesofsurcharging.
Thisisnotacaseofsomeplaintiffsforgoingsettlementrelief. A
significantproportionofmerchantsinthe(b)(2)classareeitherlegallyor
commerciallyunabletoobtainincrementalbenefitfromtheprimaryrelief
negotiatedforthembytheircounsel,andclasscounselknewatthetimethe
SettlementAgreementwasenteredintothatthisreliefwasvirtuallyworthlessto
vastnumbersofclassmembers. Alternativeformsofreliefmighthaveconferred
arealandpalpablebenefit,suchasremediesthataffectedthedefaultinterchange
feeorhonorallcardsrule. Thisisnotamatterofcertainmerchants(e.g.,those
basedinNewYorkandthosethatacceptAmericanExpress)arguingthatclass
counseldidnotbargainfortheirpreferredformofrelief,didnotpresscertain
claimsmoreforcefully,ordidnotseekcertainchangestothenetworkrulebooks
morezealously. Thisisamatterofclasscounseltradingtheclaimsofmany
merchantsforrelieftheycannotuse:theyactuallyreceivednothing.

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Anotherfaultlinewithinthe(b)(2)classrunsbetweenmerchantsthatwill
haveacceptedVisaorMasterCardbeforeJuly20,2021,andthosethatwillcome
intobeingthereafter. Theformerareatleastguaranteedsomeformofrelief,
whilethelatterareatthemercyofthedefendantstoreceivereliefbecausethe
SettlementAgreementexplicitlystatesthatthedefendantsobligationtoprovide
anyinjunctivereliefterminatesonJuly20,2021. Liketheservicemenwithlatent
injuryinStephenson,thepostJuly20,2021merchantsarefutureclaimantswho
hadtheirclaimssettledfornothing. Thereisnoevidencetosuggestthat
merchantsoperatingafterJuly20,2021wouldhaveweakerclaimsthanthose
operatingbeforeJuly20,2021;yet,theSettlementAgreementconsignstheformer
toanunambiguouslyinferiorposition. AsinLiteraryWorks,weconcludethat
sucharbitraryharshertreatmentofclassmembersisindicativeofinadequate
representation.
Merchantsthatcannotsurcharge,andthosethatopentheirdoorsafterJuly
20,2021,arealsoboundtoanexceptionallybroadrelease. TheSettlement
Agreementreleasesvirtuallyanyclaimthat(b)(2)classmemberswouldhavehad
againstthedefendantsforanyofthedefendantsthousandsofnetworkrules.
Andunliketherelief,whichexpiresonJuly20,2021,thereleaseoperates

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indefinitely. Therefore,afterJuly20,2021,the(b)(2)classremainsboundtothe
releasebutisguaranteednothing. Thisreleasepermanentlyimmunizesthe
defendantsfromanyclaimsthatanyplaintiffmayhavenow,orwillhaveinthe
future,thatariseoutof,e.g.,thehonorallcardsanddefaultinterchangerules.
EvenifthedefendantsrevertbacktoalltheirpreSettlementAgreementpractices,
thereleasecontinuestoprecludeanyclaimbasedonanyrulethatwasnotaltered
bytheSettlementAgreement. Thedefendantsneverhavetoworryaboutfuture
antitrustlitigationbasedontheirhonorallcardsrulesandtheirdefault
interchangerules.
ThatisbecausetheonlyclaimsthatmerchantspostJuly20,2021mayhave
areonesrelatingtothosenetworkrulesthatareexplicitlychangedbythe
injunctivereliefintheSettlementAgreement. Thoseclaimswillbecome
actionableonlyifthedefendantselecttoreverttotheirpreSettlementAgreement
rules. Ofcourse,itremainstobeseenhowmuchthemandatedruleswillcost
thedefendantsorbenefitthemerchants,buteitherway,thedefendantswin. If
thedefendantsseethatpermittingsurcharginghadlittleeffectontheirbusiness,
theycandecidetomaintaintheruleschangesprovidedforintheinjunctiverelief
sothatonlymerchantsthatdonotacceptAmericanExpressanddonotoperatein

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stateslikeNewYork,California,andTexaswillbeabletoavailthemselvesofthat
limitedrelief. Ontheotherhand,ifthedefendantsobservethatsurcharging
tookasignificanttollontheirbusiness,theycanreverttoprohibitingsurcharging
andexposethemselvestolawsuitsthatarelimitedtochallengingthesurcharging
ban. Inallevents,merchantsthatcannotsurchargereceivevaluelessreliefwhile
releasingahostofclaimsofunknownvalue.
Thisbargainisparticularlyunreasonableformerchantsthatbegin
acceptingVisaorMasterCardafterJuly20,2021. Theywillbedeemedtohave
releasedalloftheirclaimspertainingtoawholebookofrules,including(perhaps
mostimportantly)thehonorallcardsanddefaultinterchangerules,andin
returnhavethechancethatthedefendantswillpermitsurcharging. Insubstance
andeffect,merchantsoperatingafterJuly20,2021giveupclaimsofpotential
valueandreceivenothingthattheywouldnototherwisehavegotten. Since
therewasnoindependentrepresentationvigorouslyassertingthesemerchants
interests,wehavenowaytoascertainthevalueoftheclaimsforgone. See
LiteraryWorks,654F.3dat253.
Insum,thisreleasehasmuchincommonwiththereleasesinStephenson,
Amchem,andOrtiz. Likethose,thisreleaseappliestofutureclaimsand

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claimants,anddisadvantagedclassmembersareboundtoit. TheSettlement
Agreementwaivesanyclaimany(b)(2)merchantwouldhaveagainstany
defendantarisingoutofanyofthecurrentnetworkrules,orthoseimposedinthe
futurethataresubstantiallysimilarthereto. The(b)(2)classhadnonoticeandno
opportunitytooptoutofthisdeal. (AtleasttheauthorsinLiteraryWorkscould
optoutfromtheirinadequaterepresentation.) ThisSettlementAgreementis
alsodistinguishablefromreleasesthathavepassedmuster. Forexample,the
settlementreleaseinWalMartStores(anothermerchantclassactionagainstVisa
andMasterCard)didnotbindfutureclaimantsanddidnotprecludenewsuitsfor
similarconductinthefuture. WalMartStores,396F.3dat110,113. Andour
approvaloftheCharronsettlementreleaseexplicitlydistinguisheditfromthose
inAmchem,Ortiz,andLiteraryWorksonthegroundthatitdidnotextinguish
claimsotherthanthosethatwerethesubjectofreliefinthesettlement. Charron,
731F.3dat252.
Merchantsthatcannotsurcharge(byreasonofstatelaworrulesof
AmericanExpress)andthosethatbeginoperatingafterJuly20,2021sufferan
unreasonabletradeoffbetweenreliefandreleasethatdemonstratestheir
representationdidnotcomplywithdueprocess. Weofcourseacknowledgethat

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[b]roadclassactionsettlementsarecommon,sincedefendantsandtheircohorts
wouldotherwisefacenearlylimitlessliabilityfromrelatedlawsuitsin
jurisdictionsthroughoutthecountry. WalMartStores,396F.3dat106. Andit
istruethat[p]artiesoftenreachbroadsettlementagreementsencompassing
claimsnotpresentedinthecomplaintinordertoachievecomprehensive
settlementofclassactions,particularlywhenadefendantsabilitytolimithis
futureliabilityisanimportantfactorinhiswillingnesstosettle. Literary
Works,654F.3dat24748. Butthebenefitsoflitigationpeacedonotoutweigh
classmembersdueprocessrighttoadequaterepresentation.
CONCLUSION
Fortheforegoingreasons,wevacatethedistrictcourtscertificationofthe
class,reverseapprovalofthesettlement,andremandforfurtherproceedingsnot
inconsistentwiththisopinion.

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