Lawyers To Interchange Judge: Tell Our Clients To Shut Up

All those noisy complaints about the interchange settlement are apparently having an effect. A federal judge will hear arguments today (April 11) to decide whether some retailer groups can continue to blast away at the proposed class-action settlement on websites designed to convince retailers to opt out of it. And it's the lawyers representing those groups who are trying to shut them up.

On March 29, lawyers officially representing the class—that's merchants who have accepted Visa (NYSE:V) and MasterCard (NYSE:MA) payments since 2004, which means virtually all retailers—complained to U.S. District Judge John Gleeson about the websites set up by the National Association of Convenience Stores (NACS) and the National Grocers Association. Such sites as MerchantsObject.com offer both arguments against the settlement and tools to let merchants automatically send opt-out letters to the court, so they won't be covered by the settlement.

"These unauthorized and misleading communications from the trade association plaintiffs pose a real threat of confusing class members and undermining the court-approved notice processes," the attorneys alleged in a filing.

In case you're having trouble keeping track: NACS and the other trade groups are plaintiffs in the lawsuit against Visa and MasterCard. The lawyers who are complaining are officially representing the plaintiffs. They're supposed to be on the same side. But NACS and most of the other named plaintiffs are objecting to the settlement that their lawyers negotiated, and that Judge Gleeson gave preliminary approval to last November. In other words, the lawyers really are asking the judge for what amounts to a gag order against their own clients.

At any rate, Judge Gleeson has ordered the anti-settlement groups to show why they shouldn't have to change the websites and send corrective information to every class member who opted out of the settlement "based on the false or misleading information." That's what the hearing today is about.

For their part, the anti-settlement trade groups say their sites aren't misleading. "Proponents of the settlement are afraid of allowing contrary views to be disseminated to the class," said Jeff Shinder, a lawyer for the trade groups. "They are attempting to impose some form of regulation on the ability of the objecting plaintiffs to communicate with their members and that raises First Amendment issues."

The fact that objections to the settlement have escalated to the point of gag orders says a lot about how completely things have fallen apart on the plaintiff side of this case. To be clear, some big plaintiffs—most notably Kroger (NYSE:KR)—still support the settlement's terms. Other big chains that weren't named plaintiffs but will be covered by some terms of the settlement even if they opt out, include Walmart (NYSE:WMT), Target (NYSE:TGT) and Home Depot (NYSE:HD), all of whom say they oppose the settlement.

But when class lawyers and named plaintiffs are at each others' throats this way, it's pretty obvious that this settlement is much further from being a certainty than it appeared last summer. And it's going to be a very long five months before the final "fairness hearing" to decide whether the settlement will get final approval will be on Sept. 12.

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