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Shehnaz Bhujwala
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Federal Court Reinstates Antitrust Class Action Suit Against Banks

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A federal appeals court on Friday reinstated a class action lawsuit by credit card holders that alleges some of the nation’s biggest banks illegally calluded to force customers to use arbitration instead of the courts to settle disputes. The Associated Press reports: “The 2nd U.S. Circuit Court of Appeals in Manhattan said lawyers for the credit card holders might prove the banks agreed to make it harder for individuals to make legal claims by requiring them to go to arbitration.”  The Court’s order can be found here.

The antitrust class action lawsuit, Ross v. Bank of America N.A. (06-4755-CV), was filed by lawyers back in 2005 against a number of major banking institutions on behalf of tens of millions of cardholders.  The complaint alleges that the defendant banks began communicating with each other in late 1998 or early 1999 to make it mandatory for cardholders to resolve complaints through arbitration.  The named defendants include Bank of America, Capital One Bank, J.P. Morgan Chase & Co., Citigroup Inc., Citibank, Universal Bank and MBNA America Bank.

The gravamen of the plaintiffs’ complaint is that the banks conspired to institute mandatory arbitration agreements and kill off all non-arbitration agreement cards on the market “by refusing to issue cards to individuals who did not agree to arbitration” Plaintiffs allege the banks used “immense market power” to force unwilling or unaware cardholders to accept arbitration clauses and bans on class-action lawsuits, a gross violation of antitrust laws. 

Merrill G. Davidoff, a lawyer for the plaintiffs, explains that the lawsuit does not seek damages. Rather, he hopes it prompts judges to look more skeptically at arbitration clauses at major banks.  Davidoff told AP reporters: “There’s almost no recourse today against a credit card company. If you have a dispute, you are at their mercy, forced into what often times turns out to be a one-sided, so-called arbitration, a little card holder against a powerful bank … [t]he typical consumer dispute is too small to justify the legal cost of a one-on-one arbitration with a major bank armed with a battery of lawyers and unlimited resources.