Court cuts American Express settlement
Court cuts American Express settlement

Merchants get a new chance to assert claims

Finding “egregious” misconduct by the lead lawyer for a class of American Express merchants, a New York district court rejected a request for final approval of a nationwide antitrust settlement.

The good news? American Express merchants that have not yet sought individual relief likely may do so now despite a probable statute of limitations defense for damages beyond the four-year period under the Sherman Act. The disapproval of the settlement may permit the merchants to get the benefit of American Pipe tolling and, as a result, they could assert damages claims going all the way back to 2000.

The settlement

On February 11, 2014, U.S. District Judge Nicholas G. Garaufis in Brooklyn granted preliminary approval of a mandatory class action settlement on behalf of American Express merchants, who would receive injunctive relief but no money.

The pact tweaked American Express’s rules against merchants’ granting price breaks to customers who pay with (cheaper) debit or proprietary store cards (or cash, check, or ACH transfer) rather than (more expensive) Amex credit and charge cards. Although the deal promised no cash awards to members of the merchant class, it allowed class counsel to ask for up to $75 million in fees and expenses.


All that went for naught. In a 44-page opinion, Judge Garaufis denied final approval of the settlement. In re American Express Anti-Steering Rules Antitrust Litig., No. 11-md-2221 (E.D.N.Y. Aug. 4, 2015). He found that the actions of the lead lawyer for the merchant class, Gary B. Friedman had tainted the settlement process. Friedman had done so by sharing confidential information with, and seeking the advice and guidance of, Keila Ravelo, a defense lawyer and long-time Friedman acquaintance who represented MasterCard in a similar antitrust case.

The shenanigans came to light 10 months after the preliminary approval. The disclosure ensued as a result of the MasterCard lawyer’s arrest on December 22, 2014 for defrauding two law firms of several million dollars. She and her husband used fake vendors to send phony bills to the firms, where she worked as a partner. One of the firms turned over (to lawyers representing other parties in the American Express case) documents reflecting communications between her and the lead class counsel in the American Express case.

Judge Garaufis found lead counsel’s behavior “egregious”. He added:

Whatever his reason for doing so, Friedman’s bringing MasterCard’s counsel into the negotiating process created a conflict between class members and Class Counsel, and specifically a risk that Friedman, with Ravelo in his ear, negotiated settlement terms that are worse for class members than the terms he might have negotiated absent that conflict. This risk requires the Court to deny approval of the Settlement.

Id. at 36-37.

Good news for Amex merchants?

The outcome may prove a boon for members of the merchant class. Some class members with large enough claims have already commenced individual lawsuits or arbitrations against American Express, but many have not. The delay normally would doom their claims for damages from 2011 and before under the Sherman Act’s four-year statute of limitations.

But American Pipe tolling — which gets its name from American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) — halts the running of limitations on individual claims for members of a class that loses a fight for class treatment under Rule 23. See Renee Choy Ohlendorf, “Growing Divide over Class Action Tolling under American Pipe“, Feb. 4, 2015, Litigation News.

The first case that makes up the American Express merchants litigation dates to 2004. The Marcus Corp. v. American Express Co., No. 13-CV-7355 (E.D.N.Y.). Similar cases ensued in the following years. Merchants who fit within the class definitions in those cases and have not previously opted out or filed a lawsuit or arbitration should qualify for American Pipe tolling for purposes of bringing individual (non-class) claims). Tolling should therefore entitle class members who now opt out of the class to pursue claims for up to 15 years of damages.

Will the settlement agreement blow?

The Class Settlement Agreement provides that either American Express or “the Class Plaintiffs as a group” may “terminate” it in the event Judge Giraufis declined to grant final approval. Class Settlement Agreement § 61.

Having lost a bench trial on the merits before Judge Giraufis earlier this year, American Express will not likely want to abandon the settlement. See United States v. American Express Co., No. 10-CV-4496 (E.D.N.Y. Feb. 19, 2015). The ruling last week puts Class Counsel in disarray; Judge Giraufis not only removed Friedman as class counsel but also ordered the other lead counsel to show cause why he should not remove them as well. In re American Express Anti-Steering, slip op. at 44.

But the likelihood that replacement class counsel or Judge Giraufis will allow the Class Settlement Agreement, in light of the government’s victory on the merits and the misconduct that led to the agreement in the first place, to stand seems low indeed.

American Express merchants may wish to consult their lawyers.

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.