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Plaintiffs' lawyers protect their cartel by bringing antitrust suit

In a class action pending in federal court in Manhattan, plaintiffs' attorneys say that the fact that a Citibank lawyer attended a 2001 meeting "whose topics allegedly included strategies to reduce 'class action abuse'" is evidence of conspiracy with other credit card companies to impose arbitration clauses on consumers. Judge William Pauley has been unwilling to grant summary judgment, even though Citibank decided to include the clauses in 2000. The lawsuit isn't seeking damages (implicitly demonstrating that even plaintiffs' attorneys recognize that arbitration clauses ultimately benefit consumers, rather than harm them), but just an injunction against the clauses. Bank of America, Capital One, and Chase, among others, have already shown their belly and agreed to remove their arbitration clauses for three and a half years in settlement; Citigroup and Discover have not yet settled, though the denial of the summary judgment motion may change that. (Of course, there's little reason to spend a great deal in litigation defending arbitration clauses that are likely to be stricken by the trial-lawyer-lovers at the Consumer Financial Protection Bureau.) It's unclear from the order how much the plaintiffs' attorneys have collected from the banks in the earlier settlements protecting their dispute-resolution cartel. Consumers are, of course, made worse off by the lack of arbitration; ironically, if Citibank and Discover cave, the lawsuit will have the effect of immunizing a tacit agreement by credit-card companies not to compete by offering consumers arbitration clauses that could reduce credit-card expenses. [Reuters]

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Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.