First Data Corp. has broken ranks with Visa (NYSE:V) and banks in the escalating interchange war. The card-processing giant formally objected to the $7.25 interchange settlement last Friday (May 24), saying the fact that it accepted credit cards in its cafeteria would make it a "merchant" under the settlement and prevent First Data from protecting itself against unfair dealings by the card brands. Bottom line: First Data wants the settlement changed, which could open the door to the whole deal unraveling.Also on Friday, Visa and MasterCard (NYSE:MA) sued a group of merchants and trade groups who have opted out of the settlement—but that's less impressive than it looks. The card brands' suit is a mirror image of the lawsuit that Target (NYSE:TGT) and 16 other retail chains filed last Thursday (May 23), which claimed the card brands' entire rule structure violates antitrust laws. The card brands are asking a court to declare that its rules don't violate antitrust laws.If that seems like a lot more action than the interchange settlement has seen in the past year, it is. It may also signal the collapse of the settlement itself, now that parties on both sides of the settlement have launched new lawsuits just days before the deadline for merchants to opt out of the settlement.The dueling Visa/MC and Target-led lawsuits reopen an issue that's at the core of the string of interchange lawsuits that the settlement is intended to end: Is the way the card brands do business illegal? If it is, then the settlement is unfair at its core, because it grants Visa and MasterCard amnesty to keep breaking the law.But if the card brands' rules aren't breaking antitrust law, the settlement could move forward—though probably not on its current schedule, which calls for things to be wrapped up with a "fairness hearing" on Sept. 12.Just to be clear about Visa and MasterCard suing all those retailers and trade groups: It's not what you usually think of as a lawsuit. The card brands aren't claiming they've been harmed by the retailers. Instead, these retailers have opted out and also threatened to sue the card brands—but haven't yet. The card brands are suing for a "declaratory judgment," which asks a court to force the issue by proceeding as if the retailers already have filed a lawsuit about these antitrust issues.In addition, Target, Macy's (NYSE:M), TJX (NYSE:TJX), Kohl's (NYSE:KSS), Staples (NASDAQ:SPLS), JCPenney (NYSE:JCP), Office Depot (NYSE:ODP), L Brands (NYSE:LTD), OfficeMax (NYSE:OMX), Big Lots (NYSE:BIG), Abercrombie & Fitch (NYSE:ANF), Ascena Retail Group (NASDAQ:ASNA), Saks (NYSE:SKS), The Bon-Ton Stores (NASDAQ:BONT), Chico's (NYSE:CHS), Luxottica (NYSE:LUX) and American Signature Furniture actually have filed an antitrust lawsuit against the card brands. Walmart (NYSE:WMT) and 18 other chains have threatened their own antitrust lawsuit. Merging all those antitrust claims and counterclaims will be the first order of business for whatever judges end up with this mess.But all that is probably not as big a deal as First Data's defection from the cards/banks/processors ranks. Technically, First Data isn't opting out of the settlement as a card processor—it's opting out as a merchant, as defined by the settlement. That's the first sign of how badly the wheels are coming off this situation.In its filing, First Data says it is "not here by choice. Non-merchant entities like FDC are nothing like the retail merchant plaintiffs. They are not in the business of accepting credit cards, and to the extent they do accept them it is incidental to their core business. As is shown below, FDC and its affiliates generate less than half a percent of their revenues on credit card transactions. Indeed, some of their acceptance of credit cards relates to employees buying lunch in the company cafeteria, paying for shipping services in the company mailroom, or making charitable donations to the company's charitable foundation."First Data, the filing continues, "was thrust into this case by virtue of an overly broad class definition" and "a release that could forever bar it from questioning hundreds upon hundreds of rules and regulations that affect more than half of its multi-billion dollar business. The settlement could eliminate all future antitrust and other claims FDC and its affiliates might have against defendants, depriving them of due process."The filing goes on to offer examples of what the card brands might do to First Data if the processor has no legal recourse—such as effectively blackballing First Data's STAR PIN-debit network, which competes directly with Visa's Interlink. "Waiver of all future antitrust claims against Visa and MasterCard—which is what the releases amount to—means something very different for FDC than it does for the merchant class members," First Data argues.And First Data argues that it was never properly represented by the lawyers who designed the settlement on the merchants' side, and that even if barring conventional retailers from future antitrust suits against Visa and MasterCard is a good idea, it will block First Data from a much larger set of potential claims.Can this settlement be saved? U.S. District Judge John Gleeson could change the settlement to specifically exclude First Data, but that might open the door to new claims, or to demands that the clock be reset for conventional retailers to opt out of the settlement since it had changed. Or Judge Gleeson could decide not to act, which could lead to an appeal on constitutional grounds, since First Data has raised the issue of due process.And these issues—whether the definition of "merchants" is too broad and whether those affected by the settlement were properly represented—are completely separate from the antitrust issues that the freshly launched Visa and Target lawsuits are about. Even if those can be resolved by September (and they probably can't), they won't resolve the problems First Data raised.That means the interchange settlement fight has shifted from "Who's on board?" to "Can this settlement actually go forward at all without violating the Constitution?" That's a very bad sign for the settlement in its current version—and for the possibility that there are still more unintended consequences buried in the settlement, too.