US Court of Appeals Upholds Approval of Swipe Fee Settlement

The United States Court of Appeals for the Second Circuit upheld the lower court’s approval of the $5.6 billion settlement in the Visa/Mastercard swipe fee litigation. The approval of the settlement was challenged by the Energy Marketers of America (EMA) and other associations, as well as scores of branded wholesalers and retailers of gasoline and diesel fuel. EMA and the other challengers argued that the settlement should not have been approved until a decision was made as to whether the tens of thousands of branded motor fuel wholesalers and retailers were eligible to receive settlement funds.

EMA argued that the US District Court should have decided whether branded marketers would be entitled to receive any settlement funds before marketers had to choose whether to remain in the settlement class or to opt out of the class to challenge the settlement. Many branded marketers chose to remain in the settlement class, thus giving up their right to challenge the settlement, even though their ability to share in the settlement proceeds has not yet been decided. The decision on this issue will be decided by a special master appointed by the court, who will decide whether major oil companies or their branded wholesalers and retailers will be the ones entitled to funds based on sales of gasoline at branded sites. EMA also asked the Court of Appeals to preempt a decision by the court-appointed master by deciding now that branded marketers are eligible to receive the funds. The Court of Appeals declined, however, to make that determination, and its decision contributed to the uncertainty that now exists as to the fate of branded marketer claims against the settlement fund.

As matters now stand, the lower court will appoint a special master to determine whether branded jobbers and retailers will be eligible. Visa and Mastercard contend that only branded refiners (i.e., those who process the credit card transactions made at branded sites) are eligible, that the branded suppliers have already been paid in separate settlements, and that their wholesaler and retailer franchisees are ineligible as indirect payers of credit card fees. Branded marketers, on the other hand, contend that they are the only entities that accepted the cards and, thus, the only eligible recipients of settlement funds based on transactions at their sites. Now that the case has been remanded back to the lower court, EMA expects the court to appoint a master in due course. EMA General Counsel will advise marketers of the masters’ appointment when it occurs. EMA will also continue to press the issue on behalf of branded marketers by seeking permission to weigh in on this extremely important matter. And, of course, EMA will keep its members abreast of the progress of the proceedings before the special master and all other major developments in the case.