table of contentsclassaction.kccllc.net/documents/cdc0001/plaintiffs...plaintiffs’ memorandum of...

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iPLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES

IN SUPPORT OF MOTION FOR FINAL APPROVAL OF REVISED CLASS ACTION SETTLEMENT

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TABLE OF CONTENTS

INTRODUCTION AND SUMMARY OF ARGUMENT ........................................................1

FACTUAL AND PROCEDURAL BACKGROUND...............................................................6

I. THE CREDIT/DEBIT CARD LITIGATION.....................................................6

II. THE ATTRIDGE LITIGATION........................................................................9

III. THE PROPOSED SETTLEMENT..................................................................10

IV. PRELIMINARY APPROVAL OF THE SETTLEMENT AND FURTHER NOTICE TO THE CLASS ...........................................................14

ARGUMENT...........................................................................................................................15

I. THE COURT OF APPEAL DIRECTED THIS COURT TO CONSIDER THE FAIRNESS AND ADEQUACY OF THE REVISED SETTLEMENT, IN LIGHT OF THE INCLUSION OF THE ATTRIDGE CLAIMS..............................................................................15

II. THE COURT SHOULD GRANT FINAL APPROVAL OF THE REVISED SETTLEMENT..............................................................................16

A. LEGAL STANDARDS FOR GRANTING FINAL APPROVAL ........................................................................................16

B. FINAL APPROVAL SHOULD BE GRANTED BECAUSE THE REVISED SETTLEMENT IS FAIR, REASONABLE, AND ADEQUATE ..............................................................................18

1. The Proposed Settlement Is the Product of Arms-Length Negotiations.................................................................18

2. Sufficient Investigation and Discovery Has Occurred to Allow Counsel and the Court to Intelligently Determine that the Settlement Is Fair ........................................................20

3. The Settlement Amount Is Reasonable in Light of the Value of All the Claims Asserted and the Substantial Risks of Further Litigation.......................................................21

a. The Settlement Is an Excellent Result for Plaintiffs’ Claims for Restitution of Consumer Overcharges for Goods and Services...........................22

b. The Amount of the Settlement Is Also Reasonable in Light of the Inclusion of the Attridge Claims in the Scope of the Release................25

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c. Objectors’ Allegations about the Value of Hypothetical, Unasserted Claims against Defendants Do Not Establish that the Amount of the Settlement Is Unfair...........................................30

4. The Experience and Views of Counsel Weigh in Favor of Final Approval.....................................................................33

5. The Positive Reaction of the Class Members Suggests that Final Approval Is Appropriate ..........................................33

III. PLAINTIFFS ARE ADEQUATE REPRESENTATIVES OF THE SETTLEMENT CLASS ..................................................................................34

A. THE INTERESTS OF PLAINTIFFS AND ALL CLASS MEMBERS ARE ALIGNED ..............................................................35

B. THERE IS NO BASIS TO CERTIFY A SEPARATE “ATTRIDGE SUBCLASS”..................................................................38

C. CLASS COUNSEL’S REPRESENTATION OF NON-PARTY WELLS FARGO IN UNRELATED CASES DOES NOT CREATE A CONFLICT; PLAINTIFFS’ EXPERT ALSO HAS NO CONFLICT ..........................................................................39

IV. THE RELEASE IS PROPERLY LIMITED TO CLAIMS RELATED TO THE CONDUCT CHALLENGED IN THE CONSOLIDATED COMPLAINT ..................................................................................................42

V. THE PROPOSED PLAN OF DISTRIBUTION IS APPROPRIATE .............45

CONCLUSION........................................................................................................................47

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TABLE OF AUTHORITIES

FEDERAL CASES:

Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997).................................................................................................... 38

Class Plaintiffs v. City of Seattle, 955 F.2d 1268 (9th Cir. 1992) .................................................................................... 44

Embry v. ACER Am. Corp., No. C 09-01808 JW, 2012 WL 3777163 (N.D. Cal. Aug. 29, 2012) ......................... 34

Herfert v. Crayola, LLC, Order, No. C11-1301-JCC (W.D. Wash. Aug. 17, 2012)........................................... 34

In re Deutsche Telekom AG Sec. Litig., 229 F.Supp.2d 277 (S.D.N.Y. 2002)........................................................................... 38

In re Gen. Am. Life Ins. Co. Sales Practices Litig., 357 F.3d 800 (8th Cir. 2004) ...................................................................................... 30

In re Girardi, 611 F.3d 1027 (9th Cir. 2010) .................................................................................... 42

In re Insur. Brokerage Antitrust Litig., 579 F.3d 241 (3d Cir. 2009)........................................................................................ 38

In re Literary Works in Elec. Databases Copyright Litig., 654 F.3d 242 (2d Cir. 2011)........................................................................................ 39

In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454 (9th Cir. 2000) ...................................................................................... 19

In re TFT-LCD (Flat Panel) Antitrust Litig., Supplemental Report and Recommendation, No. M 07-1827 SI, MDL, No. 1827 (N.D. Cal. Dec. 18, 2012) .................................................................................. 19

In re TFT-LCD (Flat Panel) Antitrust Litig., No. M 07-1827 SI, --- F.R.D. ----, 2013 WL 621791 (N.D. Cal. Feb. 19, 2013)....... 34

Jeff D. v. Andrus, 899 F.2d 753 (9th Cir. 1989) ...................................................................................... 15

Lane v. Facebook, Inc., 696 F.3d 811 (9th Cir. 2012), reh’g and reh’g en banc denied, --- F.3d ---, 2013 WL 765140 (9th Cir. Feb. 26, 2013) ................................................................. 46

LiPuma v. American Express Co., 406 F.Supp.2d 1298 (S.D. Fla. 2005) ......................................................................... 44

Negrete v. Allianz Life Ins. Co. of N. Am., 523 F.3d 1091 (9th Cir. 2008) .................................................................................... 19

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Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741 (9th Cir. 2006) ...................................................................................... 44

Salveson v. Western States Bankcard Ass'n, 731 F.2d 1423 (9th Cir. 1984) .................................................................................... 33

Taleff v. Southwest Airlines Co., Order, No. 11-16173 (9th Cir. Aug. 30, 2011), cert. denied, 133 S.Ct. 168 (2012).......................................................................................................................... 42

United States v. City of N.Y., 198 F.3d 360 (2d Cir. 1999)........................................................................................ 37

United States v. Visa U.S.A., Inc., 344 F.3d 229 (2d Cir. 2003), cert. denied, 543 U.S. 811 (2004)............................ 8, 32

Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96 (2d Cir. 2005), cert. denied, 544 U.S. 1044 (2005)......................... passim

STATE CASES:

7-Eleven Owners for Fair Franchising v. Southland Corp., 85 Cal.App.4th 1135 (2000) ................................................................................. 20, 33

City of San Diego v. Haas, 207 Cal.App.4th 472 (2012) ................................................................................. 35, 40

City of San Jose v. Superior Court, 12 Cal.3d 447 (1974) .................................................................................................. 37

Corbett v. Superior Court, 101 Cal.App.4th 649 (2002) ....................................................................................... 46

Dunk v. Ford Motor Co., 48 Cal.App.4th 1794 (1996) ................................................................................ passim

Evans v. Lasco Bathware, Inc., 178 Cal.App.4th 1417 (2009) ..................................................................................... 37

Global Minerals & Metals Corp. v. Superior Court, 113 Cal.App.4th 836 (2003) ....................................................................................... 34

Hopkins v. De Beers Centenary AG, No. CGC-04-432954, 2005 WL 1020868 (S.F. Super. Ct. Apr. 15, 2005) ................ 36

In re Jasmine S., 153 Cal.App.4th 835 (2007) ....................................................................................... 39

In re Microsoft I-V Cases, 135 Cal.App.4th 706 (2006) ....................................................................................... 45

In re Vitamin Cases, 107 Cal.App.4th 820 (2003) ....................................................................................... 45

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Kirk v. First Am. Title Ins. Co., 183 Cal.App.4th 776 (2010) ....................................................................................... 16

Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003) ............................................................................................... 23

Kullar v. Foot Locker Retail, Inc., 168 Cal.App.4th 116 (2008) ................................................................................ passim

Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (2011) ................................................................................................. 23

Liberty Nat'l Enters., L.P. v. Chicago Title Ins. Co., 194 Cal.App.4th 839 (2011) ....................................................................................... 41

Linder v. Thrifty Oil Co., 23 Cal.4th 429 (2000) ................................................................................................. 34

McGhee v. Bank of Am. Nat'l Trust & Sav. Ass'n, 60 Cal.App.3d 442 (1976) .......................................................................................... 35

Medrazo v. Honda of North Hollywood, 166 Cal.App.4th 89 (2008) ......................................................................................... 35

Munoz v. BCI Coca-Cola Bottling Co., 186 Cal.App.4th 399 (2010) ................................................................................. 17, 25

Nordstrom Comm'n Cases, 186 Cal.App.4th 576 (2010) ..................................................................... 16, 17, 30, 32

Richmond v. Dart Indus., Inc., 29 Cal.3d 462 (1981) ............................................................................................ 35, 38

Sargon Enters., Inc. v. University of S. Cal., 55 Cal.4th 747 (2012) ........................................................................................... 26, 27

Sutter Health Uninsured Pricing Cases, 171 Cal.App.4th 495 (2009) ................................................................................. 29, 30

Trotsky v. Los Angeles Fed. Sav. & Loan Ass'n, 48 Cal.App.3d 134 (1975) .......................................................................................... 37

Villacres v. ABM Indus. Inc., 189 Cal.App.4th 562 (2010) ................................................................................. 43, 44

Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224 (2001) .................................................................................. passim

Western Digital Corp. v. Superior Court, 60 Cal.App.4th 1471 (1998) ....................................................................................... 41

STATE STATUTES

Cal. Bus. & Prof. Code § 16700 ............................................................................................... 7

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Cal. Bus. & Prof. Code § 17200 ............................................................................................... 7

Cal. Bus. & Prof. Code § 6068 ............................................................................................... 41

Cal. Civ. Proc. Code § 382 ..................................................................................................... 34

Cal. Civ. Proc. Code § 583.310 .............................................................................................. 20

Cal. Civ. Proc. Code § 664.6 .................................................................................................. 47

OTHER AUTHORITIES

ABA Formal Op. 05-435 ........................................................................................................ 40

Cal. Rules of Court, Rule 3.769.............................................................................................. 16

Cal. Rule Prof. Conduct 5-200................................................................................................ 41

Cal. Rule Prof. Conduct 3-310................................................................................................ 40

Newberg on Class Actions § 11:51 (4th ed. 2002) ................................................................. 19

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INTRODUCTION AND SUMMARY OF ARGUMENT

Plaintiffs submit this Memorandum in support of their motion for final approval of

the proposed Revised Settlement Agreement between Plaintiffs and Defendants Visa U.S.A.

Inc. and Visa International Service Association (collectively “Visa”), and MasterCard

International Incorporated (“MasterCard”) (collectively “Defendants”).

In their Consolidated Complaint, Plaintiffs allege that certain practices of Visa and

MasterCard imposed overcharges on retail businesses in California, in violation of the state’s

antitrust and unfair competition laws, which overcharges retailers in turn passed on to a class

of California consumers in the form of higher prices on retail products and services. The

challenged practices include Defendants’ “honor all cards” rules, tying acceptance of credit

and debit cards by retailers, and their so-called “exclusionary” rules, preventing banks from

issuing American Express or Discover cards. The case was vigorously litigated for many

years. The Honorable Richard A. Kramer sustained a demurrer to Plaintiffs’ Cartwright Act

claims, which eliminated the class’ ability to recover damages, but overruled the demurrer as

to the Unfair Competition Law (“UCL”) claims. The Court also ruled on other dispositive

motions. The parties engaged in extensive discovery.

Nearly five years after this litigation started, James Attridge filed a similar action

against Visa and MasterCard, asserting consumer overcharge claims based on the same

“exclusionary” rules alleged in Plaintiffs’ complaint. Attridge contends that those rules

allowed Defendants to impose excessive network service fees on banks, which were passed

on to those consumers who revolved their credit card balances. As in this action, the Court

sustained a demurrer to Attridge’s Cartwright Act claims but permitted his UCL claims to

proceed. Thus, like Plaintiffs and the other members of the Settlement Class, Attridge does

not have viable damages claims pending against Defendants.

Plaintiffs and Defendants reached a settlement that released all claims arising from

the facts pleaded by Plaintiffs. Judge Kramer approved the settlement, but made no specific

findings as to the Attridge case. The Court of Appeal subsequently held that “it was an abuse

of discretion to approve the settlement without determining whether the evidence in the

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record justified a finding that the settlement’s terms were fair notwithstanding the inclusion

of the Attridge claims in the release.” Opinion at 24 (Declaration of Craig C. Corbitt, Ex.

25). The Court of Appeal remanded for “reconsideration of the fairness and adequacy of the

settlement in light of the inclusion of the Attridge claims in the scope of the release.” Id. at

25. In a footnote at the end of the opinion, the court observed that “this case will proceed to

trial unless the parties agree to revise the settlement agreement and resubmit it for court

approval.” Id. at 25 n.7. Plaintiffs and Defendants had the option of terminating their

settlement and resuming this litigation. They elected to revise their agreement by expressly

releasing the Attridge claims. Pursuant to the explicit holding of the Court of Appeal, this

Court must now determine whether the Revised Settlement Agreement, releasing the Attridge

claims, should be finally approved as fair and adequate.

The Revised Settlement Agreement provides for cash payments of $31 million total

from Visa and MasterCard, and a cy pres distribution of the net settlement funds to a wide

range of non-profit organizations, for the benefit of the class of California consumers. The

revised agreement expressly releases the claims asserted in Attridge’s separate action, given

the Court of Appeal’s conclusion that the release encompassed those claims. It also provides

for further notice to the proposed class, and accounts for the developments in this matter

since the original settlement was executed. This Court granted Plaintiffs’ motion for

preliminary approval of the Revised Settlement Agreement, and the court-approved further

notice plan has been executed.

The Court should grant final approval of the Revised Settlement Agreement. All of

the relevant factors in determining the propriety of a class action settlement weigh strongly in

favor of approval. First, the proposed settlement is the product of arms-length negotiations,

which highly experienced and respected Class Counsel entered after lengthy litigation and

analysis of the strengths and weaknesses of all the class claims, including those asserted in

Attridge. There is no evidence of collusion by the settling parties, or of a “reverse auction.”

Before settling the case, Plaintiffs conducted substantial discovery and expert economic

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analysis, including with respect to the “exclusionary” rules claims, thus allowing counsel and

the Court to intelligently determine that the settlement is fair.

The settlement is reasonable in light of the value of all the claims asserted and the

substantial risks of further litigation. The most significant obstacles to recovery related to the

necessity of proving the class’ entitlement to restitution from Visa and MasterCard under the

UCL. The analysis submitted by Plaintiffs’ expert economist, Gustavo Bamberger, Ph.D., of

the potential value of the claims asserted in these coordinated actions shows that it would

have been very complicated to calculate what portion of the merchant overcharges caused by

Defendants’ conduct was passed on to consumers. Furthermore, Plaintiffs’ claims for these

overcharge damages had been dismissed, and it would have been even more difficult to

establish the amount of illegal revenue that went to Visa and MasterCard – as opposed to the

banks issuing payment cards to consumers – in the form of network fees. This amount would

be the only restitution that Plaintiffs could potentially recover under their surviving UCL

claims, and according to Dr. Bamberger “likely would have been substantially smaller” than

Plaintiffs’ overcharge damages. There were serious risks that Plaintiffs would have been

unable to establish liability, or succeeded in their motion for class certification. In addition

to these impediments to recovery, the exceptional nature of this settlement is shown by

comparing the result here to the outcomes of similar litigation in other states, where

consumers’ claims have uniformly been dismissed. Judge Kramer rightly described the

previous settlement as “an extraordinary result.” It still is.

The Revised Settlement Agreement is also an excellent result when the Court

considers, as the Court of Appeal directed, “a ‘ballpark’ estimate of the value of the Attridge

claims,” to determine whether the settlement provides adequate compensation for their

release. Opinion at 22 (Corbitt Decl., Ex. 25). Dr. Bamberger specifically analyzed the

potential value of the claims asserted in Attridge, and concluded that the amount of any

inflated finance charges paid by revolving credit cardholders that could be traced to Visa and

MasterCard, and thus recovered as restitution from Defendants, is likely to be de minimis.

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Objector Attridge’s arguments to the contrary are based on a complete disregard for

the fact that his damage claims have been dismissed and thus must be significantly

discounted in any settlement, coupled with a highly inflated estimate of what the Attridge

claim is potentially worth, supported solely by a conclusory declaration of Attridge’s

economist, Dr. Andrew Safir. This opinion is irrelevant because it addresses only the

damages allegedly suffered by the putative Attridge class, despite the fact that the Cartwright

Act claim in that case has been dismissed, and the sole remaining UCL claim only permits

restitution. No aspect of the objection is based upon an analysis of the value of Attridge’s

only viable claims. In addition, even if the relevant analysis were the value of Attridge’s

damage claims, as Dr. Bamberger demonstrates, Dr. Safir’s damage estimates are not

credible evidence that the settlement is inadequate. Dr. Safir’s conclusory opinion lacks any

support in the record and is contrary to real-world events.

Other than launching meritless attacks on Dr. Bamberger’s analysis, based on a gross

mischaracterization of his report, Attridge has supplied no answer to these fatal deficiencies

in Dr. Safir’s analysis. Attridge also completely ignores the risk of continued litigation,

including class certification. In short, there is simply no basis whatsoever for Objector’s

assertion that his claims have significant value that is being ignored in this settlement. Thus,

even after taking into account Attridge’s claims, the amount of the Revised Settlement

Agreement is well within the reasonableness standard required for approval.

Objector Salveson also refuses to acknowledge that any kind of litigation risk stands

between the class and the recovery of millions, if not billions, of dollars in damages. Further,

Salveson’s objection does not seem to go to the value of any of the claims actively

prosecuted in either this matter or the Attridge case, but rather to the value of hypothetical,

unasserted consumer claims against Defendants, apparently involving the setting of

interchange fees. Other than his counsel’s bald assertions of damages based on the total

amount of credit card commerce, Salveson proffers nothing to show that those potential

claims have any significant litigation value. Salveson also fails to explain why, if these

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claims are so strong, he and his counsel have not filed them, which they could have done at

any time. Salveson’s objection does not establish that the amount of the settlement is unfair.

This settlement was negotiated by counsel who include some of the most experienced

and distinguished antitrust and UCL attorneys in California. They have negotiated

settlements in other cases for more than a billion dollars and routinely lead cases that settle

for hundreds of millions of dollars. All strongly support the settlement. The reaction of the

class has been overwhelmingly positive, with only four opt-outs and three objections (one of

them filed by serial objector counsel). This also weighs in favor of final approval.

The Court should certify the Settlement Class. The proposed class satisfies all of the

requirements for certification. Plaintiffs are adequate representatives of the Settlement Class.

There is no conflict of interest between Plaintiffs and that portion of the Settlement Class

(revolving credit cardholders) that forms Attridge’s putative class, because the interests of all

class members are aligned, in that they all seek to prove that Visa and MasterCard’s conduct

– including their “exclusionary” rules – constituted a violation of the UCL, and to obtain

restitution from Defendants arising from that same factual predicate. Plaintiffs made

allegations based on Defendants’ “exclusionary” rules, and rely upon those allegations to

establish Visa and MasterCard’s liability to the class. The class representatives here incurred

finance charges like Mr. Attridge, and are not differently situated. For these reasons, and

because the revised settlement’s terms are fair even with the inclusion of Attridge’s claims in

the release, Plaintiffs adequately represent the interests asserted in the Attridge action.

Lastly, in the absence of a conflict, there is no basis to grant Attridge’s counsel’s request to

certify a separate “Attridge subclass.” The fact that Attridge believes in a different theory of

recovery does not warrant the creation of a subclass.

Objectors Attridge and Salveson also claim that Plaintiffs’ lead counsel Zelle

Hofmann’s representation of non-party Wells Fargo in unrelated matters creates a conflict of

interest. Objectors’ accusations are unprofessional and baseless, and even if true, would not

support the rejection of the settlement. Zelle Hofmann has never represented Wells Fargo or

any other bank in disputes involving “credit card practices.” Objectors’ assertion that a

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conflict arises from Wells Fargo’s purported obligation to indemnify Visa for any judgment

is also meritless. No such duty exists in this case, and the existence of any such duty in

Attridge is entirely speculative. Even if Wells Fargo had a duty to indemnify Visa, this

would not create a conflict under the applicable ethical rules and California law. Objectors

have also waived any right to challenge Class Counsel by their delay in doing so. Similarly,

there is no basis for Attridge’s untimely attempt to disqualify Plaintiffs’ expert, because Dr.

Bamberger was not involved in his firm’s ill-fated engagement by Attridge’s counsel, and did

not receive any confidential information relating to the case.

Objector Salveson also contends that the settlement’s release provision is overbroad.

However, under California law a release may properly include all claims alleged or which

could have been alleged arising from the facts set forth in the complaint. That is, the release

may include claims not presented in a case, as long as those claims arise out of the identical

factual predicate described in the complaint. Salveson does not identify any released claims

against Defendants that do not arise out of the anticompetitive conduct alleged in this case.

The Ninth Circuit has held that claims for price-fixing of interchange fees share the same

factual predicate as the claims asserted in these proceedings.

Finally, the proposed plan for cy pres distribution of the net settlement funds, to a

wide range of non-profit organizations, is appropriate. California law permits cy pres

distribution of the entire net proceeds of a settlement, for the benefit of class members,

where, as here, it would be economically infeasible to distribute the proceeds directly to class

members. Further, as required by state law, the parties’ proposed distribution serves to fulfill

the purposes of the underlying causes of action in this case.

FACTUAL AND PROCEDURAL BACKGROUND

I. THE CREDIT/DEBIT CARD LITIGATION

The first complaint in this coordination proceeding, Johns v. Visa U.S.A. Inc., was

filed in the San Francisco Superior Court on January 26, 2000. Corbitt Decl. ¶ 2.

Subsequently, approximately twelve similar class actions were filed in California state

courts. Id. ¶ 3. On February 11, 2004, Judge Richard A. Kramer was assigned as the

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Coordination Trial Judge. Id. ¶ 3 & Ex. 1. The Court designated the undersigned and Zelle

Hofmann to serve as Plaintiffs’ lead counsel (“Class Counsel”). Id. ¶ 4 & Ex. 2.

Plaintiffs filed the Consolidated Complaint in this case on July 12, 2004. Id. ¶ 6 &

Ex. 3. Plaintiffs are California consumers of products and services from retail businesses that

accepted and/or issued Defendants’ credit and/or debit cards. Id., Ex. 3 at ¶ 2. Defendants

are the two largest network systems in the payment card industry. Id. ¶ 17. Banks issue

credit and debit cards to consumers, and also contract with merchants to “acquire” their card-

paid transactions. Id. ¶ 28. When a consumer uses a Visa or MasterCard payment card to

purchase goods or services, the “acquiring” bank receives a fee from the merchant, known as

the “merchant discount” fee, and the “issuing” bank receives a fee from the acquiring bank,

known as the “interchange” fee. Id. ¶ 29. Visa and MasterCard set the default “interchange”

fees and, in turn, collect network service fees and assessments from the issuing and acquiring

banks. Id.

Plaintiffs allege that Visa and MasterCard violated the Cartwright Act, Cal. Bus. &

Prof. Code § 16700 et seq., and the Unfair Competition Law, Cal. Bus. & Prof. Code

§ 17200, in a number of ways. First, Defendants established “honor all cards” rules that

required businesses accepting their respective credit cards to also accept their debit cards.

Corbitt Decl., Ex. 3 at ¶¶ 66, 69, 117-118. Plaintiffs allege that those rules allowed Visa and

MasterCard to impose supra-competitive “interchange” fees for payment card transactions,

which the banks passed on to retail businesses, and the retail businesses in turn passed on to

California consumers, in the form of higher prices on all retail goods and services sold. Id.

¶¶ 2, 69, 82.

Those allegations are based on the claims made by Wal-Mart and other retailers in a

federal antitrust class action brought against Defendants, In re Visa Check/MasterMoney

Antitrust Litigation, No. 96-CV-5238 (JG) (E.D.N.Y.). The retailers contended that Visa and

MasterCard’s “honor all cards” rules were “an illegal ‘tying arrangement’” that increased the

fixed “interchange” fees paid by banks and retailers, and that Defendants used those rules “in

conjunction with other anti-competitive conduct to monopolize the debit market.” Wal-Mart

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Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 101 (2d Cir. 2005), cert. denied, 544 U.S. 1044

(2005). That retailer litigation settled on the eve of trial in 2003. Id. at 102-103.

The Consolidated Complaint also includes allegations regarding Defendants’

“exclusionary” rules. Plaintiffs claim that those rules restricted the ability of banks to do

business with competing payment networks such as American Express or Discover,

effectively preventing the banks that issued Visa or MasterCard cards from also issuing

American Express or Discover cards. Corbitt Decl., Ex. 3 at ¶¶ 23, 53. That also allegedly

resulted in overcharges to banks and other retail businesses that they passed on to California

consumers. Defendants’ “exclusionary” rules were challenged by the U.S. Department of

Justice. United States v. Visa U.S.A., Inc., 344 F.3d 229, 235-36 (2d Cir. 2003), cert. denied,

543 U.S. 811 (2004). In an opinion affirmed by the Second Circuit, the federal district court

held that Visa and MasterCard’s “exclusionary” rules violated Section 1 of the Sherman Act.

344 F. 3d at 234. Defendants eliminated those rules in 2004.

Visa and MasterCard demurred to the Consolidated Complaint. On October 14,

2004, Judge Kramer entered an order sustaining Defendants’ demurrer to Plaintiffs’

Cartwright Act causes of action but overruling it as to the UCL causes of action. Corbitt

Decl. ¶ 6 & Ex. 4. Judge Kramer concluded that the claimed overcharges on each retail good

and service sold in California were derivative and too remote from the alleged Visa and

MasterCard network rules for banks to provide standing to recover under the Cartwright Act.

Following the passage of Proposition 64, Defendants filed a motion for judgment on the

pleadings against Plaintiffs’ remaining UCL claims, also on standing grounds. Judge Kramer

denied that motion in an order filed on May 3, 2007. Id. ¶ 7 & Ex. 5. Defendants’ Petition

for Peremptory Writ of Mandate or Other Appropriate Relief was summarily denied. Id., Ex.

6. One significant effect of these rulings was to limit Plaintiffs’ remedies to restitution under

the UCL, as their only causes of action for damages were dismissed.

Plaintiffs conducted substantial discovery, and retained an expert to advise on

liability, impact, and restitution issues. Plaintiffs obtained and reviewed hundreds of

thousands of documents relating to Defendants’ liability for both their “honor all cards” and

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“exclusionary” rules, including the extensive discovery record from the Wal-Mart case,

which consisted of millions of pages of party and third-party documents, party discovery

requests and responses, hundreds of days of deposition testimony, dozens of expert reports,

and extensive class certification, summary judgment, and pre-trial filings, the full public trial

testimony and exhibits from the United States v. Visa case, as well as transactional sales and

fee data relating to Plaintiffs’ damages and restitution claims. Id. ¶ 8. In addition, since July

2007, Plaintiffs worked closely with their economic expert, Gustavo Bamberger, Ph.D. Id. ¶

9. As discussed below, Dr. Bamberger provided preliminary opinions on the amount of

restitution to which the class could be entitled, taking into account the difficulties involved in

tracing a flow of money between the Defendants and the class.

Plaintiffs moved to apply collateral estoppel to certain findings made by the federal

district court in granting motions for summary judgment brought by the plaintiffs in Wal-

Mart. Judge Kramer denied that motion in an order dated December 6, 2007, holding that

the rulings were not sufficiently final to establish collateral estoppel. Plaintiffs continued to

review discovery and to prepare for class certification, anticipated summary judgment

motions, and trial. Id. ¶ 10 & Ex. 7. At a status conference in August 2008, Defendants

stated that they were preparing to file a second motion for judgment on the pleadings, while

Plaintiffs stated that they were preparing a motion for class certification. The Court set a

deadline in October 2008 for both sides to file their respective motions. Id. ¶ 12 & Ex. 8.

II. THE ATTRIDGE LITIGATION

The case of Attridge v. Visa U.S.A. Inc., No. CGC 04-0436920 (S.F. Super. Ct.), was

filed on December 8, 2004, nearly five years after the Johns complaint began this litigation,

and five months after Plaintiffs filed their Consolidated Complaint. Corbitt Decl. ¶ 13.

Because Attridge exercised a peremptory challenge to Judge Kramer, id., Ex. 10, his case

was singly assigned to another judge and has proceeded as a non coordinated case ever since.

Many of the allegations in Attridge’s complaint are lifted essentially verbatim from

Plaintiffs’ Consolidated Complaint. See id., Ex. 11 (chart illustrating the overlap between the

facts alleged in the two complaints). Attridge claims that Visa and MasterCard’s

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“exclusionary” rules enabled them to set, fix, and establish “supracompetitive network

service fees.” Id., Ex. 9 at ¶ 18. These purportedly excessive fees to “issuing” banks, which

sell retail services to consumers, were allegedly passed on to those consumers who revolved

their credit card balances rather than paying them in full each month. Id. ¶ 4.

Attridge’s claims based on retail bank overcharges to consumers due to the Visa and

MasterCard “exclusionary” rules are thus a subset of the Plaintiffs’ claims in these

coordinated actions. Plaintiffs assert that the “exclusionary” rules, as well as the “honor all

cards” rules and other practices, resulted in overcharges not to just retail banks but to all

retail businesses, which those retail businesses passed on to California consumers. Further,

several of the class representatives here possess the identical overcharge claims asserted by

Attridge, because they also revolved balances on one or more of Defendants’ credit cards and

“paid credit card loan charges, such as finance charges, to the banks that issued” their credit

cards. See Compendium of Class Representative Declarations ¶¶ 4.

Attridge asserted claims under the Cartwright Act and the UCL. Corbitt Decl., Ex. 9

at ¶¶ 80-126. As in these coordinated actions, the Court sustained defendants’ demurrer to

Attridge’s Cartwright Act claim, on the ground that his alleged injuries were derivative and

too remote to provide him with standing to recover under the Cartwright Act. Id., Ex. 12.

The Court overruled defendants’ demurrer with respect to Attridge’s UCL claims, but limited

them to a claim to recover allegedly inflated finance charges. Id., Ex. 12 at attached Hr’g Tr.

19:20-20:18. As a result, Attridge’s remedies are limited to restitution under the UCL, as his

only claims for damages were dismissed. Attridge has not moved for class certification, and

has not moved for collateral estoppel on the basis of the United States case. A motion for

summary adjudication of all claims is currently pending. See id., Ex. 13.

III. THE PROPOSED SETTLEMENT

In 2008, counsel for Plaintiffs and Visa engaged in discussions concerning a potential

settlement of these coordinated actions. In considering settlement, Plaintiffs’ counsel, with

the assistance of their expert economist Dr. Bamberger, assessed the potential value of the

class members’ claims, taking into account the substantial legal risks and other significant

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hurdles – discussed below – faced by Plaintiffs in this case, which included, perhaps most

significantly, proof of the restitution owed to the class. Corbitt Decl. ¶¶ 18, 22-23.

Plaintiffs’ counsel specifically analyzed the potential value of the claims resulting

from Defendants’ “exclusionary” rules, as well as the obstacles to prevailing on liability and

obtaining a recovery on those claims. Id. ¶ 18. Among other things, Plaintiffs’ counsel

reviewed substantial discovery related to these claims, including the trial testimony and

exhibits from the United States case. Id. ¶¶ 8, 11. In light of this analysis, and Dr.

Bamberger’s economic assessment, Class Counsel concluded that the theory of recovery

pursued by Attridge was not as strong as the theory on which Plaintiffs primarily pursued

their case. Id. ¶ 25. Because a settlement of the Credit/Debit case necessarily would

encompass all claims which were or could have been pleaded based on the facts alleged in

the Consolidated Complaint, including the claims also asserted in Attridge’s separate action,

Attridge’s counsel were invited to participate in the discussions and potential settlement, but

they refused. Id. ¶ 21.

After extensive arms-length negotiations, Plaintiffs reached settlement terms with

Visa. Id. ¶ 19. Plaintiffs then prepared a class certification motion against MasterCard. As

the result of further arms-length negotiations in the subsequent months, Plaintiffs also

reached settlement terms with MasterCard. Id. ¶ 20. In light of the many risks of this

litigation, Plaintiffs’ lead counsel and his co-counsel concluded that the recovery obtained –

$31 million – was an excellent result for the class. Id. ¶¶ 22-24. In the following months, the

parties negotiated the remaining terms of their agreement. The parties met with a number of

experienced non-profit organizations that specialize in providing financial expertise and

education in California, and developed with them a plan for cy pres relief. In addition, the

parties identified non-profit legal aid organizations and law schools in California, as well as

other charities, and agreed to provide funding for their efforts. Id. ¶ 26.

In September 2009, Plaintiffs moved for preliminary approval of the settlement.

Attridge opposed the motion. After several hearings and multiple rounds of briefing, Judge

Kramer granted preliminary approval. Id., Ex. 15. The Notice Administrator then executed

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the comprehensive notice plan ordered by the Court. See id., Ex. 16 at ¶¶ 4-11. In August

2010, Judge Kramer held a final approval hearing, and concluded that, in light of the

difficulties and risks of the case, the settlement amount was fair, reasonable, and adequate,

and that the settlement was indeed “an extraordinary result.” Id., Ex. 19 at 53:24-57:23,

73:24-74:20. Thus, on August 23, 2010, the Court entered an Order Granting Final Approval

of Settlement and a Judgment. Id., Exs. 20-21. That same day, Judge Kramer entered an

Order Granting Plaintiffs’ Motion for Attorneys’ Fees, Expenses, and Incentive Awards. Id.,

Ex. 22 at ¶¶ 1-2. On September 13, 2010, the Court entered an Order Approving Plan for Cy

Pres Distribution of Settlement Fund. Id., Ex. 24.

Several objectors appealed. On January 9, 2012, the Court of Appeal reversed the

judgment, and remanded for this Court “to reconsider the fairness and adequacy of the

settlement in light of the inclusion of the Attridge claims in the release.” Opinion at 2

(Corbitt Decl., Ex. 25). The Court of Appeal found that the submissions to Judge Kramer

included conflicting evidence as to the value of Attridge’s claims, and held that “it was an

abuse of discretion to approve the settlement without determining whether the evidence in

the record justified a finding that the settlement’s terms were fair notwithstanding the

inclusion of the Attridge claims in the release.” Id. at 24. The Court of Appeal noted that

“this case will proceed to trial unless the parties agree to revise the settlement agreement and

resubmit it for court approval.” Id. at 25 n.7. Thus, after further negotiations, the parties

decided to revise their settlement and present it to the Court for approval, rather than

abandoning the settlement and resuming the litigation. Corbitt Decl. ¶ 39.

The parties agreed on the terms of a Revised Settlement Agreement. Id. ¶ 40 & Ex.

26. The agreement provides for an all-cash settlement in the combined amount of

$31,000,000. Id., Ex. 26 at ¶ 5. Defendants paid $590,000 to cover notice costs. Id. at

¶ 5(a). Defendants then paid an additional $30,410,000 into an escrow account (the

“Settlement Fund”). Id. at ¶ 5(b).1 Subject to the Court’s approval, up to 30 percent of the

1 The parties agreed to use up to $100,000 of this fund to pay for further notice of their revised agreement. Id. at ¶ 5(c).

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total fund, or $9.3 million, plus any accrued interest on that amount, can be paid to Class

Counsel for attorneys’ fees and litigation costs, and an additional service fee award of up to

$1,000 can be paid to each of the six Named Plaintiffs. Id. at ¶ 8(b).2

Plaintiffs and Defendants also agreed that, if the Court grants final approval of the

Revised Settlement Agreement, the remainder of the Settlement Fund, approximately $21

million, will be used to make the following cy pres payments for the benefit of the members

of the Settlement Class:

• Fifty percent of the amount would be paid to non-profit organizations that the settling

parties agreed could receive such payments and that were approved by Judge Kramer.

• Thirty percent of the amount would be paid over roughly three years to the American

Association of Retired Persons, the California Council on Economic Education, the

California Jump$tart Coalition, Consumer Action, the National Foundation for Credit

Counseling, the University of California Cooperative Extension, the Future Business

Leaders of America-Phi Beta Lambda and the California Association FHA-HERO, in

the approximate amounts approved by the Court, for additional financial literacy

initiatives described in their respective proposals in Appendix F to the Revised

Settlement Agreement.

• Twenty percent of the amount would be paid to California law schools, legal aid

providers, and other non-profit organizations, in the approximate amounts approved

by the Court, to be used by them for purposes consistent with the promotion of

financial education and advice, or for other purposes consistent with promoting child

advocacy programs or legal services for the indigent.

Id. at ¶¶ 8(a)(i) – 8(a)(iii).

In consideration for the benefits provided by Defendants to the Settlement Class, the

members of the class released all claims “arising out of or relating in any way to any conduct

or failure to act of any Released Party alleged or which could have been alleged in the

2 The agreement also provides that, should counsel for Attridge apply for fees or costs in this case, any amount this Court might award would reduce the cy pres funds. Id.

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Consolidated Amended Complaint or any amendments thereto prior to August 23, 2010,”

including any claims based upon the conduct alleged in the Wal-Mart and United States

cases, and all the claims asserted in Attridge. Id. at ¶ 14. Claims asserted in a different

lawsuit against Visa and MasterCard pending in federal court, claims for settlement funds in

another federal lawsuit, and individual disputes with financial institutions regarding payment

of personal account statements, were expressly excluded from the release. Id.

IV. PRELIMINARY APPROVAL OF THE SETTLEMENT AND FURTHER NOTICE TO THE CLASS

On June 4, 2012, this Court entered an order granting Attridge’s peremptory

challenge to Judge Kramer, and reassigning these proceedings to the Honorable John E.

Munter. Corbitt Decl., Ex. 27. At a Case Management Conference held on July 17, 2012,

the Court allowed the parties to file a motion for settlement approval. Id., Ex. 28 at 6:15-25.

On August 20, 2012, Plaintiffs filed a Motion for Preliminary Approval of Revised Class

Action Settlement. Objectors Attridge and Salveson opposed the motion. On November 20,

2012, this Court held a hearing, ruled that it was “not foreclosed from granting preliminary

approval” by the Court of Appeal’s decision, and granted Plaintiffs’ motion. Id., Ex. 29 at

98:14-22. That same day, the Court entered a Revised Order Preliminarily Approving

Revised Settlement and Providing for Further Notice to the Settlement Class. Id., Ex. 30.

This Court found that the proposed further notice plan met all requirements of

California law and due process. Id. at ¶ 14. The Notice Administrator fully executed the

plan, and the website notice, publication notice, and internet advertising were provided in the

manner directed by the Court. See id., Ex. 31 at ¶¶ 4-9. An extraordinarily small number of

class members, 22, have submitted requests for exclusion from the action and either the

original or the revised settlement agreement. Id. at ¶¶ 10-12. Further, only five members of

the settlement class – three of them acting jointly – have filed objections. Corbitt Decl. ¶ 47.

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ARGUMENT

I. THE COURT OF APPEAL DIRECTED THIS COURT TO CONSIDER THE FAIRNESS AND ADEQUACY OF THE REVISED SETTLEMENT, IN LIGHT OF THE INCLUSION OF THE ATTRIDGE CLAIMS

Objectors argue that, by submitting their Revised Settlement Agreement for court

approval, Plaintiffs and Defendants are ignoring the Court of Appeal’s reversal of Judge

Kramer’s judgment. Attridge Obj. at 2; Salveson Obj. at 4-5. However, this is contradicted

by the Court of Appeal’s explicit directions to this Court at both the beginning and end of its

Opinion:

. . . we must vacate the order approving the settlement, and remand the matter to permit the trial court to reconsider the fairness and adequacy of the settlement in light of the inclusion of the Attridge claims in the release. . . . . . . the matter is remanded for further proceedings consistent with the views expressed in this opinion, including but not limited to reconsideration of the fairness and adequacy of the settlement in light of the inclusion of the Attridge claims in the scope of the release.

Opinion at 2 (“Introduction”), 25 (“Disposition”) (Corbitt Decl., Ex. 25).

Objectors do not even mention these critical directives in the Opinion. They

conveniently ignore the appellate court’s instructions, and rely exclusively on a footnote

stating that “this case will proceed to trial unless the parties agree to revise the settlement

agreement and resubmit it for court approval.” Id. at 25 n.7. However, contrary to

Objectors’ assertions, the Court of Appeal did not conclude that the $31 million class action

settlement was unfair as a matter of fact or law, did not order the parties to abandon the

settlement and go to trial, and did not require the parties to exclude the Attridge claims from

the release or provide additional compensation for those claims. Indeed, these would be

beyond the power of the appellate court since, even with the requirement for class action

settlement approval, “courts are not permitted to modify settlement terms or in any manner to

rewrite agreements reached by parties.” Jeff D. v. Andrus, 899 F.2d 753, 758 (9th Cir. 1989).

Rather, the explicit holding of the Court of Appeal was that the trial court needed to

reconsider whether the settlement was fair and adequate in light of the inclusion of the

Attridge claims in the release, which the Court of Appeal found Judge Kramer had failed to

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do. Footnote 7 is not inconsistent with this holding: the appellate court gave the parties the

option of either revising their settlement or resuming the litigation. The parties chose to do

the former, and entered into a revised agreement that explicitly releases the Attridge claims,

which the prior settlement did not.

Even if, considered in isolation from the rest of the Opinion, footnote 7 were subject

to the strained interpretation the Objectors give it, a judicial opinion “should receive a

reasonable interpretation and an interpretation which reflects the circumstances under which

it was rendered, and its statements should be considered in context.” Kirk v. First Am. Title

Ins. Co., 183 Cal.App.4th 776, 797 (2010) (internal quotations omitted). The only reasonable

interpretation of footnote 7, when viewed in the context of the balance of the Court of

Appeal’s Opinion, is that this Court is now tasked with determining whether the Revised

Settlement Agreement, releasing the Attridge claims, should be finally approved as fair and

adequate to the Settlement Class. This Court correctly held that the appellate court’s

decision did not foreclose it from granting preliminary approval. Corbitt Decl., Ex. 29 at

98:14-22. The Court of Appeal’s decision likewise authorizes the Court to determine

whether the Revised Settlement Agreement is fair, reasonable, and adequate, and thus worthy

of final approval. It clearly is.

II. THE COURT SHOULD GRANT FINAL APPROVAL OF THE REVISED SETTLEMENT

A. LEGAL STANDARDS FOR GRANTING FINAL APPROVAL

A class action may not be settled without the approval of the Court. See Cal. Rules of

Court, Rule 3.769. Public policy “generally favors the compromise of complex class action

litigation.” Nordstrom Comm'n Cases, 186 Cal.App.4th 576, 581 (2010). The Court’s

inquiry in approving a class action settlement “‘must be limited to the extent necessary to

reach a reasoned judgment that the agreement is not the product of fraud or overreaching by,

or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair,

reasonable and adequate to all concerned.’” Dunk v. Ford Motor Co., 48 Cal.App.4th 1794,

1801 (1996). The decision to approve or reject a proposed settlement is committed to the

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trial court’s sound discretion, Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224, 234-35

(2001), and the Court’s approval of a settlement will not be overturned absent “a clear abuse

of discretion.” Dunk, 48 Cal.App.4th at 1802.

In examining the propriety of a class action settlement, courts should consider several

relevant factors, including “the strength of plaintiffs’ case, the risk, expense, complexity and

likely duration of further litigation, the risk of maintaining class action status through trial,

the amount offered in settlement, the extent of discovery completed and the stage of the

proceedings, the experience and views of counsel, . . . and the reaction of the class members

to the proposed settlement.” Dunk, 48 Cal.App.4th at 1801. Settlement agreements are

presumed to be fair when: “(1) the settlement is reached through arm’s-length bargaining;

(2) investigation and discovery are sufficient to allow counsel and the court to act

intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of

objectors is small.” Id. at 1802; see also Nordstrom, 186 Cal.App.4th at 581. These factors

are “not exclusive and the court is free to engage in a balancing and weighing of factors

depending on the circumstances of each case.” Wershba, 91 Cal.App.4th at 245. Here, all of

the relevant factors weigh strongly in favor of final approval.

For the court to “satisfy itself that the class settlement is within the ‘ballpark’ of

reasonableness,” the record must contain “basic information about the nature and magnitude

of the claims in question.” Kullar v. Foot Locker Retail, Inc., 168 Cal.App.4th 116, 133

(2008). However “evidence in the form of an explicit statement of the maximum amount the

plaintiff class could recover on all its claims” is not required. Munoz v. BCI Coca-Cola

Bottling Co., 186 Cal.App.4th 399, 409 (2010). Rather, the record must simply “allow[] ‘an

understanding of the amount that is in controversy and the realistic range of outcomes of the

litigation.’” Id. This requirement is also amply met in this case.

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B. FINAL APPROVAL SHOULD BE GRANTED BECAUSE THE REVISED SETTLEMENT IS FAIR, REASONABLE, AND ADEQUATE

1. The Proposed Settlement Is the Product of Arms-Length Negotiations

The first factor giving rise to a presumption of fairness is whether the settlement was

“reached through arm’s-length bargaining.” Dunk, 48 Cal.App.4th at 1802. The agreement

here is the result of extensive negotiations between seasoned defense counsel and

experienced class action attorneys who are highly familiar with the legal and factual issues of

this case. Corbitt Decl. ¶¶ 19-20, 39-40. Importantly, before agreeing to the settlement,

Plaintiffs’ counsel analyzed the strengths and weaknesses of not only the claims based on

Defendants’ “honor all cards” rules, but also of the claims arising out of the “exclusionary”

rules which are the subject of the Attridge action. Id. ¶¶ 18, 22-25. While Attridge

complains that Plaintiffs failed to investigate “his” claims, see Attridge Obj. at 7, the record

evidence is undisputed that, “[p]rior to reaching a settlement,” Class Counsel “analyzed the

potential value” of those claims. Corbitt Decl. ¶ 18. Of course, the claims Attridge and his

counsel regard as proprietary are based on facts alleged in the Credit/Debit complaint, which

was largely copied by Attridge’s counsel, see id., Ex. 11.

Attridge contends that the settlement is a collusive attempt to release the claims

brought in his separate case. Attridge Obj. at 14-15. However, the declarations submitted by

counsel for the settling parties establish that there was no collusion here. See Corbitt Decl.

¶ 50 & Exs. 34-36. In particular, settlement of the Attridge case was never a condition for

settling this coordinated proceeding. Defendants expressly agreed to settle this litigation,

regardless of whether Attridge decided to participate or to continue to pursue his case. Class

Counsel never agreed, and neither Visa nor MasterCard requested, that the settlement of the

Credit/Debit matter would be contingent on settlement of the Attridge case. Id. ¶ 51 & Exs.

35-36. After reaching an agreement to settle with Visa, Class Counsel notified Attridge’s

attorneys and invited them to join, but they declined. Id. ¶ 21. Plaintiffs are submitting

declarations from other counsel for the class, who are also experienced and well-respected

members of the bar, attesting to the outstanding result obtained in this case and lead

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counsel’s reputation for integrity. See Declaration of Tracy R. Kirkham ¶¶ 7-9; Declaration

of Kimberly A. Kralowec ¶¶ 4, 10-13; Declaration of R. Alexander Saveri ¶¶ 4-6.

Courts “respect the integrity of counsel and presume the absence of fraud or collusion

in negotiating the [class action] settlement, unless evidence to the contrary is offered.”

Newberg on Class Actions § 11:51 (4th ed. 2002). Here, no evidence supports Attridge’s

wild, irresponsible allegations of collusion. His claims should therefore be rejected. See,

e.g., In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 459-60 (9th Cir. 2000).

Objector’s argument that the settlement is an improper “reverse auction,” see Attridge

Obj. at 15, must also fail. A reverse auction occurs “when ‘the defendant in a series of class

actions picks the most ineffectual class lawyers to negotiate a settlement with in the hope that

the district court will approve a weak settlement that will preclude other claims against the

defendant.’” Negrete v. Allianz Life Ins. Co. of N. Am., 523 F.3d 1091, 1099 (9th Cir. 2008).

That is plainly not the case here. Class Counsel’s effectiveness in class actions and other

complex litigation cannot be questioned. See Corbitt Decl. ¶¶ 52-56. Indeed, the

performance of lead counsel Zelle Hofmann, along with counsel for both the Attridge and

Salveson objectors, has recently been carefully evaluated in another pending class action, In

re TFT-LCD (Flat Panel) Antitrust Litigation. Special Master Martin Quinn made a

recommendation for the amount of attorneys’ fees to award indirect-purchaser plaintiff (IPP)

counsel, and found that “[i]t was primarily the Zelle firm that led the strategy and made it

possible to obtain the victories that enabled the case to be successfully settled,” and “were the

indispensable force that made the IPP effort all work cohesively.” Supplemental Report and

Recommendation of Special Master re Allocation of Attorneys’ Fees in the Indirect-

Purchaser Class Action, at 24-25 (N.D. Cal. Dec. 18, 2012) (Ex. 1 to Plaintiffs’ Request for

Judicial Notice in Support of Motion for Final Approval of Revised Class Action Settlement

(“RJN”)).3

3 In stark contrast, counsel for Attridge and Salveson were criticized. Regarding Mr. Winters, the Special Master stated “I cannot discern any meaningful contribution that Mr. Winters brought to the IPP effort.” Id. at 17:8-9, 26. Likewise, the Special Master determined that Mr. Alioto’s “allocation must also reflect his failings as a co-lead counsel,” which “include his lack of cooperation with, and repeated intransigence towards, co-lead counsel, . . .” Id. at 8:24–27.

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Objector’s only basis for contending that this coordinated proceeding is “weaker”

than Attridge (his purported entitlement to collateral estoppel, see Attridge Obj. at 7), is

refuted thoroughly in Defendants’ brief. Ironically, despite criticizing Plaintiffs’ counsel on

this basis, in the many years of litigation, Attridge’s attorneys have never filed a motion

seeking to establish the collateral estoppel they say is key to their case. Although Dr. Safir

stated that he needed information from third-party banks and other sources to do his damage

calculations, Attridge’s counsel never sought to obtain it. Safir Decl. ¶ 12 (Corbitt Decl.,

Ex. 14). Counsel for Attridge never moved to certify a class, even though he claimed –

falsely, as this Court discovered – that he only had a few days left to bring his case to trial

under the five-year deadline of Cal. Civ. Proc. Code § 583.310. See Corbitt Decl., Ex. 29 at

41:13-43:3, 97:12-98:10. These omissions raise serious doubts about Attridge’s counsel’s

competency. There is simply no basis for a finding that Defendants targeted this case for

settlement because it is being prosecuted by ineffectual counsel asserting weaker claims than

those in Attridge.

2. Sufficient Investigation and Discovery Has Occurred to Allow Counsel and the Court to Intelligently Determine that the Settlement Is Fair

The substantial amount of discovery conducted herein, and the extensive motion

practice before Judge Kramer, also weigh in favor of granting final approval, because they

ensure that the parties and the Court are able to fairly evaluate the case. 7-Eleven Owners for

Fair Franchising v. Southland Corp., 85 Cal.App.4th 1135, 1152 (2000). Plaintiffs have

engaged in extensive fact discovery, obtaining and reviewing the full discovery record from

the Wal-Mart case, the trial record from the United States v. Visa case, and transactional sales

and fee data. Corbitt Decl. ¶ 8. In addition, well before settling the case, Plaintiffs retained

and worked closely with an economic expert, Dr. Bamberger, and analyzed the potential

value of the class members’ claims, and the factual and legal issues that Plaintiffs would have

to overcome in order to prevail. Id. ¶¶ 9, 18. Contrary to Objector’s argument that Plaintiffs

failed to investigate and pursue the claims asserted in his case, see Attridge Obj. at 8, 11,

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Plaintiffs’ discovery and analysis was not limited to the credit/debit card tying issues, but

included the United States v. Visa case and the “exclusionary” rules. Corbitt Decl. ¶¶ 11, 18.

At the time the settlements were reached, the case had been litigated for many years.

The Court had ruled on several of Defendants’ dispositive motions and Plaintiffs’ request to

apply collateral estoppel, Plaintiffs were preparing to file their class certification motion, and

Defendants were preparing to file their second motion for judgment on the pleadings. Id. ¶¶

6-7, 10, 12.

3. The Settlement Amount Is Reasonable in Light of the Value of All the Claims Asserted and the Substantial Risks of Further Litigation

The amount offered in settlement, and the risks associated with continuing litigation,

are relevant factors to consider in determining whether a settlement should be approved.

Dunk, 48 Cal.App.4th at 1801. The Court must “satisfy[] itself that the consideration being

received for the release of the class members’ claims is reasonable in light of the strengths

and weaknesses of the claims and the risks of the particular litigation.” Kullar, 168

Cal.App.4th at 129 (emphasis added). That is, the Court has to “ensure that the recovery

represents a reasonable compromise, given the magnitude and apparent merit of the claims

being released, discounted by the risks and expenses of attempting to establish and collect on

those claims by pursuing the litigation.” Id.

Here, the Court of Appeal held that, because Attridge’s claims “are included within

the scope of the release,” the relief provided in the Revised Settlement Agreement must be

“adequate to compensate not only for the inflated retail prices allegedly paid to merchants as

a result of the credit/debit acceptance policies, but also the inflated interest and fees allegedly

paid to card-issuer banks by those credit card holders with revolving balances, as a result of

the exclusion policies.” Opinion at 22 (Corbitt Decl., Ex. 25). The monetary value obtained

in the settlement satisfies this requirement.

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a. The Settlement Is an Excellent Result for Plaintiffs’ Claims for Restitution of Consumer Overcharges for Goods and Services

Plaintiffs believe strongly in their case; however, this litigation presents numerous

and substantial risks to achieving a recovery, primarily due to the dismissal of Plaintiffs’

damages claims and the complex nature of their remaining unfair competition claims and

restitution theory. Plaintiffs have submitted the Declaration of Gustavo Bamberger, Ph.D.,

an expert economist with experience in the payment card industry and in litigation against

Defendants, who analyzed the potential value of the class members’ restitution claims and

provided testimony on the range of outcomes of the litigation.

After explaining how the flow of payments works in the Visa and MasterCard

networks, see Bamberger Decl. ¶¶ 4-9, Plaintiffs’ expert testifies that during the class period,

the issuing and acquiring banks were able to collect inflated merchant discount fees as a

result of Defendants’ anticompetitive conduct as alleged in the Consolidated Complaint. Id.

¶¶ 10-11. Dr. Bamberger calculates what the merchant fees would have been in the “but for”

world. Using post-conspiracy fee levels as a benchmark, he concludes that, but for the

alleged anticompetitive conduct, “total merchant fees would have been lower by $390.6

million during the relevant period.” Id. ¶¶ 12-15 & Table 2.4 In other words, Defendants’

anticompetitive conduct resulted in merchant fee overcharges of $390.6 million.

The next question was what portion of the inflated merchant fees was passed on to

consumers, in the form of higher prices for goods and services. Dr. Bamberger explains that

“lower merchant costs in the but-for world would be reflected, at least to some extent, in

lower consumer prices,” but that the impact on consumers would be “too small to detect

using available statistical techniques.” Id. ¶¶ 16-17; see also id. ¶ 17 (explaining that

Reserve Bank of Australia concluded in a similar context that “there are no statistical

techniques with fine enough calibration to separately identify” the impact on consumers, but

4 Dr. Bamberger provides two alternative estimates of “but for” merchant fees. First, based on a study prepared by the National Retail Federation, he estimates the merchant fee overcharge at $404.6 million. Id. ¶ 20 & Table 3. Second, incorporating Visa and MasterCard’s argument in the federal litigation that credit card merchant fees would have been higher in the “but for” world to offset the lower debit card fees, Dr. Bamberger estimates that “total merchant discount fees would have been lower by $287.0 million.” Id. ¶¶ 21-22 & Table 4.

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this “does not mean that it has not happened”). Dr. Bamberger estimates that, assuming in

the “but for” world that merchants would have passed on one-third of their cost savings to

consumers, the consumers would have realized savings in the amount of $130.2 million

during the class period (based on the $390.6 million retailer fee overcharge figure). Id. ¶¶

18-19.5 That is, California consumers suffered damages of $130.2 million as a result of Visa

and MasterCard’s conduct.

That analysis would have been sufficient for purposes of a damages calculation under

the Cartwright Act. However, Judge Kramer had dismissed Plaintiffs’ Cartwright Act claim.

In the current procedural posture of the case, Plaintiffs’ damage claims have a value of $0.

Plaintiffs’ only viable claim was for violation of the UCL. Monetary relief under the UCL is

limited to restitution; damages are not recoverable. Korea Supply Co. v. Lockheed Martin

Corp., 29 Cal.4th 1134, 1144 (2003). Accordingly, Dr. Bamberger next estimated the

portion of the consumer overcharges, if any, that could be traced from retail businesses to

banks, and then to inflated network service fees that banks paid to Defendants Visa and

MasterCard – the only portion recoverable as restitution under the UCL. See Kwikset Corp.

v. Superior Court, 51 Cal.4th 310, 336 (2011) (“A restitution order against a defendant …

requires both that money or property have been lost by a plaintiff, on the one hand, and that

it have been acquired by a defendant, on the other” (emphasis added)).

Dr. Bamberger explains that, while “the evidence shows that abolishing the Visa and

MasterCard tying practices reduced [merchant] fees substantially,” the effect on the network

fees collected by Visa and MasterCard, “if any, likely would be many times smaller.”

Bamberger Decl. ¶¶ 23-24. In fact, Dr. Bamberger observed no reduction in network fees in

the post-conspiracy period. Id. ¶¶ 25-26 & Tables 5-6. Accordingly, Dr. Bamberger is

unable to quantify any restitution potentially recoverable from Visa and MasterCard, except

to say that “potential restitution of such revenues to class members likely would have been

substantially smaller than the excess payments by consumers to merchants (i.e., ‘overcharge’

5 Under Plaintiffs’ economist’s alternative estimates, consumer savings would have amounted to $134.9 and $95.7 million respectively. Id. ¶¶ 20, 22.

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damages).” Id. ¶ 2. In other words, if provable at all, the restitution recoverable from Visa

and MasterCard would have amounted to some small fraction of the $130.2 million of

consumers’ damages.

In sum, tracing the flow of money between Defendants and the class would have been

difficult at best, and Plaintiffs’ proof might well not have been sufficiently precise to survive

a legal challenge by Defendants. First, it would have been difficult enough to establish the

portion of the increased merchant costs caused by Defendants’ practices that would have

been passed on to consumers in the form of overcharge damages. It would have been even

more difficult to prove what amount of illegal revenue went to Visa and MasterCard (in the

form of network fees), as opposed to remaining with the banks issuing the cards to

consumers. Based on this evidence, the $31 million settlement achieved in this case—

representing 24 percent of Dr. Bamberger’s estimated consumer damages—is clearly fair,

reasonable and adequate.6

In addition to the hurdles related to proving restitution, there was a very serious risk

that Plaintiffs would have been unable to establish liability. Judge Kramer had dismissed

Plaintiffs’ damages claims and denied their collateral estoppel motion. Class certification,

which Plaintiffs were preparing to brief at the time of the settlements, was by no means

certain, and a denial of that motion would have effectively eliminated any settlement value in

the case. Plaintiffs would have also had to defeat Defendants’ announced motion for

judgment on the pleadings, in which they intended to argue that the settlements in the Wal-

Mart case had already provided restitution to consumers. Assuming they made it that far, at

trial Plaintiffs would have had to overcome Visa and MasterCard’s defenses that their

practices were lawful and did not harm consumers.

Indeed, in comparison to the outcomes of similar litigation against Visa and

MasterCard in other parts of the country, the result in this case is unique. As Defendants

explain, California was the only state in which litigation challenging this unlawful conduct

6 Courts routinely approve settlements that amount to a fraction of the claimed damages. See Wershba, 91 Cal.App.4th at 250 (citing City of Detroit v. Grinnell Corp., 495 F.2d 448, 455 (2d Cir. 1974)).

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was successful. In twenty-two other such matters asserting state-law consumer claims

arising out of a similar set of facts in other jurisdictions, the plaintiffs’ claims were dismissed

and the class members recovered nothing. This stark contrast alone demonstrates the

exceptional nature of the result achieved in this case for the Settlement Class.

Plaintiffs’ failure to prevail on any one of the above issues (at trial or on appeal)

could result in a recovery that is a fraction of the proposed settlement amount, or worse, no

recovery at all, as occurred in every other state law action filed by private plaintiffs. In light

of all of the above, Judge Kramer properly concluded that the $31 million cash settlement

was “an extraordinary result.” Corbitt Decl., Ex. 19 at 73:24-74:20. That remains true when

the Attridge claims are considered.

b. The Amount of the Settlement Is Also Reasonable in Light of the Inclusion of the Attridge Claims in the Scope of the Release

The Court of Appeal held that, to determine the fairness of the Revised Settlement

Agreement, this Court must also consider “a ‘ballpark’ estimate of the value of the Attridge

claims.” Opinion at 22 (Corbitt Decl., Ex. 25). That is, the Court must “satisfy itself” that,

with the claims asserted in Attridge, the settlement still “is within the ‘ballpark’ of

reasonableness.’” Id. (quoting Kullar, 168 Cal.App.4th at 133). To do so, the Court need

only “garner a reasonably adequate ‘understanding of the amount that is in controversy’”

without any “explicit statement of value.” Munoz, 186 Cal.App.4th at 409. Relying on the

declaration of his economist, Dr. Andrew Safir, Attridge argues that damages to the class

under the “exclusion” theory of injury are $257 million, and therefore the proposed

settlement is inadequate. Attridge Obj. at 4-5. This argument fails, for several reasons.

First, Dr. Safir’s damages estimate is irrelevant. His declaration does nothing to

establish the value of the claims currently viable in the Attridge case, which are limited to the

recovery of restitution under the UCL. Attridge does not even attempt to rebut the critical

fact that Dr. Safir provides only an opinion on the damages suffered by the putative Attridge

class, completely ignoring the fact that those Cartwright Act damage claims have been

dismissed with prejudice. See, e.g., Safir Decl. ¶ 8 (“I was asked to calculate the damages

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due . . .”); ¶ 9 (“My preliminary opinion on damages suffered by revolving charge customers

in the Attridge case is that . . .”) (Corbitt Decl., Ex. 14). Dr. Safir does not even try to

estimate what portion – if any – of the overcharges allegedly collected by banks ended up

with Visa or MasterCard, and could thus be recovered as restitution. In contrast, Dr.

Bamberger explains that the amount of any inflated finance charges that could be traced to

Defendants is likely to be de minimis, because “finance charges (e.g., interest rates) paid by

revolving charge customers are determined and collected by issuing banks, not by Visa and

MasterCard.” Bamberger Decl. ¶ 36. There is no evidence to the contrary. Accordingly, Dr.

Safir’s declaration, which stops with his damages estimate, is completely irrelevant to

determining the value for the restitution claims remaining in Attridge, and cannot be a basis

for rejecting the settlement. See Sargon Enters., Inc. v. University of S. Cal., 55 Cal.4th 747,

776 (2012) (trial court properly excluded expert testimony that “relied on data that is not

relevant to the measure of lost profit damages”).

In addition, even as a damages estimate, Dr. Safir’s damages figures have no

evidentiary support whatsoever. His declaration does not provide the basis for his opinion:

there is no discussion of how Dr. Safir arrived at his $257 million damages estimate, and no

reference to any specific materials or data relied upon. See Safir Decl. ¶¶ 8-12 (Corbitt

Decl., Ex. 14). Atridge’s counsel claims that Dr. Safir’s analysis is based on Defendants’

“network service fee agreements with the banks.” Attridge Obj. at 4. However, there is

absolutely nothing in Dr. Safir’s declaration referring to any such agreements, much less

explaining how they support his damages estimate. Objector’s attorneys’ statements that

they obtained and provided to their purported expert certain unspecified “financial

information” and “financial documents,” see Winters Decl. ¶¶ 5-20, or “financial data,” see

Lippsmith Decl. ¶ 6, utterly fail to establish how the economist carried out his analysis and

reached his opinion. Attridge has failed to present to the Court a single document

substantiating Dr. Safir’s “report.” An expert’s opinion “may not be based ‘on assumptions

of fact without evidentiary support, or on speculative or conjectural factors.” Sargon Enters.,

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55 Cal.4th at 770. There is simply no basis in the record for this Court to give any weight to

Dr. Safir’s unsupported damage figures.

Furthermore, Dr. Bamberger’s analysis shows that Dr. Safir’s damages calculations

are based on assumptions about the impact of Defendants’ conduct on network service fees

that are contrary to what happened in the real world after the practices at issue ceased.

Specifically, Dr. Safir assumes that “network service fees charged by [Visa and MasterCard]

to California card issuing financial institutions would have been lower” but for the alleged

anticompetitive conduct – in other words, that Defendants’ “exclusionary” rules increased

network service fees. Safir Decl. ¶ 10 (Corbitt Decl., Ex. 14). This unsupported assumption

is contradicted by what actually took place in the market. As Dr. Bamberger explains, Dr.

Safir’s $257 million damages estimate would make sense only if network service fees had

experienced a massive 20% drop after the “exclusionary” rules were eliminated in 2004 and

any conspiracy ended. Bamberger Decl. ¶¶ 29, 32-33. However, the available empirical data

shows that network service fees did not go down after the restrictions were eliminated. Id. ¶¶

25-26, 28 & Tables 5-6. Dr. Safir cites no empirical data whatsoever. He merely speculates

that such information might be available.

Attridge attempts to attack Dr. Bamberger’s analysis, claiming that he “only

considers ‘publicly available information’ from Visa, Inc.’s 2007 K-1 [sic].” Attridge Obj. at

5. Citing to a single footnote in Dr. Bamberger’s 20-page report, Attridge argues that

Plaintiffs’ expert “admits that he only looked at the public SEC filings of Visa, Inc., starting

with 2007” to analyze the evolution of network service fees over time. Id. But as Dr.

Bamberger explains in his Second Supplemental Declaration, filed herewith, Attridge grossly

mischaracterizes his 2010 report, which shows on its face that Dr. Bamberger analyzed

MasterCard’s network revenues since 2001, and Visa’s network revenues since 2003. See

Bamberger Second Supp. Decl. ¶¶ 3-4. Footnote 33 of Dr. Bamberger’s report, upon which

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Attridge relies, refers to a very specific issue, the breakdown of Visa’s revenue among

multiple categories. Id. ¶ 3 n.2.7 Objector’s attacks on Dr. Bamberger are baseless.

An additional problem with Dr. Safir’s opinion is that he offers no basis for his claim

that the allegedly higher network service fees were “passed on” primarily to those who used

their credit cards as a source of revolving credit, and thus incurred finance charges.

Bamberger Decl. ¶¶ 34-35. Network service fees are a cost to the banks that pay them to

Visa and MasterCard. Dr. Safir’s declaration provides no support for his view that the banks

would have passed on 100 percent of these higher costs to their customers, or that higher

costs would only be passed on to a subset of credit card consumers – i.e., cardholders who

use their cards as revolving credit (“revolvers”) as opposed to those who pay their bills in full

every month but incur annual fees. Id. Dr. Bamberger does not “agree” that banks would

pass on 100 percent of overcharges to consumers, as Attridge falsely asserts, see Attridge

Obj. at 5. Rather, Dr. Bamberger opined that “the specific extent of the ‘pass on’ . . . could

vary substantially across issuing banks.” See Bamberger Second Supp. Decl. ¶¶ 5-6. The

paragraph cited by Objector discusses retail merchants, not banks. Id. ¶ 5 n.4. Finally, Dr.

Safir admits that he would need discovery from non-party issuing banks to calculate the level

of pass-on. Safir Decl. ¶ 12 (Corbitt Decl., Ex. 14). But after many years of litigation, and

with purportedly only four days to bring his case to trial, see Corbitt Decl., Ex. 29 at 97:12-

98:10, Attridge has not tried to obtain that discovery.

Attridge should be well aware of the above flaws in Dr. Safir’s opinion. This is the

same declaration Attridge submitted in October 2009, in connection with his objection to the

original settlement agreement. Since then, Plaintiffs and Defendants have filed numerous

briefs pointing out that, among other things, Dr. Safir’s analysis (i) does not acknowledge

that the Attridge case is limited to a restitutionary remedy, and discusses only damages; (ii) is

contrary to the empirical evidence available; and (iii) does not even attempt to show that

7 Objector further argues that Dr. Bamberger refers to “Visa, Inc., . . . which was not incorporated . . . until May, 2007,” and not Visa U.S.A., Inc., and therefore must be “examining the wrong entity.” Attridge Obj. at 6. However, the data examined by Dr. Bamberger refers to Visa U.S.A. Inc., the operating entity in this country, which became a subsidiary of Visa Inc. as part of Visa’s IPO restructuring. See Corbitt Decl., Ex. 41 at 5.

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some portion of the finance charges Attridge paid to the banks that issued his credit cards

were later paid or transferred to Visa or MasterCard, as Attridge needs to do to establish

entitlement to restitution from Defendants. While Attridge goes to great lengths to

speciously criticize Plaintiffs’ counsel, in opposing this motion, Attridge’s counsel ignored

all these issues, and chose to simply re-submit the same, fatally flawed 2009 declaration of

Dr. Safir.

Kullar repeatedly emphasizes that the “reasonableness” of a settlement must be

evaluated “in light of the strengths and weaknesses of the claim and the risks of the particular

litigation.” 168 Cal.App.4th at 129; see also id. (trial court “bears responsibility to ensure

that the recovery represents a reasonable compromise, given the magnitude and apparent

merit of the claims being released, discounted by the risks and expenses of attempting to

establish and collect on those claims by pursuing the litigation”). Nevertheless, Attridge’s

estimate of the value of his case assumes no weaknesses and no risk of an adverse outcome—

an utterly unrealistic approach, and contrary to California law. In Sutter Health Uninsured

Pricing Cases, the court rejected objections to a class action settlement filed by the plaintiffs

in “an apparently weaker case” involving the defendant’s practices. 171 Cal.App.4th 495,

497-98 (2009). Rejecting the exact same argument Attridge makes here, the court held:

. . . the essence of a settlement is compromise. Even if [objector’s] calculations made any sense, the fact remains that the uninsured [settling] class plaintiffs could have lost the case and received nothing. Thus, the purported fact that the settlement does not provide as much relief as [objector] believes was possible does not mean the settlement was unreasonably low.

Id. at 510 (emphasis in original). See also Wershba, 91 Cal.App.4th at 246 (a proposed

settlement “is not to be judged against a hypothetical or speculative measure of what might

have been achieved had plaintiffs prevailed at trial.”).

Here, as in Sutter Health, Plaintiffs “could have gone to an incredibly lengthy and

expensive jury trial, and the class could have lost the case. . . . [objector] assumes that

establishing liability was simple. . . . [Objector’s] failure to acknowledge the reality that the

case might have been lost undermines his claim that the settlement is unfair.” Sutter Health,

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171 Cal.App.4th at 511 (emphasis in original). In fact, the Attridge case suffers from a

number of weaknesses – described in Defendants’ Memorandum – and the risk of losing is

quite high. Also, Objector’s recovery estimate is grossly inflated, as explained by Dr.

Bamberger. Prior to agreeing to the settlement of this case, Plaintiffs’ counsel considered

those weaknesses and risks in analyzing the potential value of the claims asserted by

Attridge. Corbitt Decl. ¶¶ 18, 22-25. Attridge’s damage claims have value, if at all, only if

he can secure a reversal of their dismissal on appeal. Attridge’s restitutionary claims, at best,

are worth only the “de minimis” amount of the class’ finance charges that can be traced from

the banks back to Visa and MasterCard, and even these amounts have to be discounted for

the risk of not prevailing on liability that is always present in litigation. Accordingly, a

settlement recovery of $31 million in return for all of the claims asserted against Defendants

in both this and the Attridge case is well within the “ballpark” of fairness and adequacy.

Finally, Objector’s complaints that the settlement does not provide “separate

compensation” for his claims, see Attridge Obj. at 11-12, also lack merit. Under California

law, there is no need to attempt to “allocate” a settlement recovery among the multiple claims

covered by the release. Nordstrom, 186 Cal.App.4th at 589 (trial court did not abuse its

discretion in approving a settlement that allocated zero dollars to certain claims for statutory

penalties, because the penalty claims “were at issue, and were resolved as part of the overall

settlement of the case.”). See also In re Gen. Am. Life Ins. Co. Sales Practices Litig., 357

F.3d 800, 805 (8th Cir. 2004) (the representatives of a settlement class adequately

represented the claims asserted in a separate lawsuit, even though “no separately stated

consideration was paid for those claims,” because the settlement release was a benefit

conferred on defendant in exchange for, among other things, a monetary settlement from

which the plaintiff in the separate suit benefitted).

c. Objectors’ Allegations about the Value of Hypothetical, Unasserted Claims against Defendants Do Not Establish that the Amount of the Settlement Is Unfair

Objector Salveson contends that the settling parties have failed to provide the Court

with evidence of the value of other potential consumer claims against Visa and MasterCard.

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Salveson Obj. at 14-19. While Salveson does not describe with any specificity what those

claims are, it appears that he takes issue with the level of the interchange fees set by

Defendants. See id. at 17. These allegations do not provide a basis for denying approval.

First, as explained above, “the purported fact that the settlement does not provide as

much relief as [objector] believes was possible does not mean the settlement was

unreasonably low.” Sutter Health, 171 Cal.App.4th at 510 (emphasis in original). Salveson

falls far short of establishing that the hypothetical claims he fancies but has never pursued

have any significant value. Salveson refers to claims under the federal antitrust laws and the

Cartwright Act, see Salveson Obj. at 19, but fails to explain why a court would not dismiss

those consumer claims as a matter of law on the grounds that they are derivative and too

remote to allow any recovery, as did every other court considering similar issues (see

Defendants’ Memorandum), and in fact, as this Court has done with consumer antitrust

claims in both these coordinated proceedings and the Attridge case. To the extent Salveson is

contemplating claims under the UCL, he ignores that interchange fees are collected by card

issuing banks, not Visa or MasterCard, see Bamberger Decl. ¶¶ 6-8, thus precluding a

restitution claim against them. For these reasons, Objector’s repeated assertions about the

amount of interchange fees paid on credit and debit cards, based on a GAO report and used to

criticize Dr. Bamberger’s analysis, see Salveson Obj. at 16-17, are irrelevant to assess the

fairness of the settlement. In fact, the GAO chart included in Salveson’s brief shows that

Visa and MasterCard receive no portion of the interchange fees. See id. at 6.

Significantly, Defendants’ interchange practices are no secret. Indeed, they are the

subject of a federal lawsuit filed by a nationwide class of retail businesses, which has

recently settled. Nevertheless, no one, including Objector or his counsel (almost three years

after filing his initial Objection), has asserted any consumer claims against Defendants

related to those interchange fees. The hypothetical case that Salveson’s counsel apparently

would like to file could have been filed at any time during the pendency of this litigation.

The proposed settlement would not prevent Salveson from asserting those claims, because

the release only extends to August 23, 2010, and therefore, regardless of its scope (discussed

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later), it would not bar any claims arising within the last two and a half years, assuming they

are not barred by the statute of limitations. See Corbitt Decl., Ex. 26 at ¶ 14. Salveson’s

arguments provide no basis for rejecting this settlement.

The Selvaggio Objectors’ assertion that there is insufficient evidence of the value of

Plaintiffs’ claims, see Selvaggio Obj. at 2-6, is also flawed. But other than reciting legal

standards and stating that they are not met here, these Objectors’ only assertion is that the

settling parties have not quantified the value of the “myriad” claims for fees charged

“through duality.” Id. at 5-6. This argument is hopelessly vague and, moreover, ignores that

the court in the United States v. Visa case held that the alleged common control over Visa

and MasterCard by the member banks that formerly operated them (known in the industry as

“duality”) did not have an adverse effect on competition. United States, 334 F.3d at 234.8

In sum, the evidence submitted by the settling parties provides this Court with “a

substantiated explanation of the strengths and weaknesses of the class’s claims, as well as the

potential total recovery by the class under various damage theories,” and is therefore

sufficient to determine the fairness of the Revised Settlement Agreement. Nordstrom, 186

Cal.App.4th at 588 (distinguishing Clark v. American Residential Servs. LLC, 175

Cal.App.4th 785 (2009)). The $31 million cash settlement obtained by Plaintiffs is an

excellent result, particularly in light of the substantial risks associated with this litigation. In

Judge Kramer’s words, the compromise originally reached here was “an extraordinary

result.” Corbitt Decl., Ex. 19 at 73:24-74:20. The evidence demonstrates that, even with the

inclusion of the claims asserted in Attridge, the value of this settlement “is within the

‘ballpark’ of reasonableness” in light of the realistic range of recovery. Kullar, 168

Cal.App.4th at 133.

8 The Objectors’ additional arguments relating to the value of the Revised Settlement Agreement, based on the amount of the settlements in other cases against Visa and MasterCard, are addressed in Defendants’ Memorandum.

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4. The Experience and Views of Counsel Weigh in Favor of Final Approval

The experience and views of counsel are another relevant factor to consider in

determining the fairness of a proposed settlement. 7-Eleven, 85 Cal.App.4th at 1152-53.

Class Counsel and his co-counsel, many of whom were actively involved in the litigation of

this case and the decision to settle, are highly experienced and respected antitrust and UCL

litigators, and strongly support the settlement. See Corbitt Decl. ¶¶ 4, 24; Kirkham Decl.

¶¶ 4, 7-8; Kralowec Decl. ¶¶ 4, 10; Saveri Decl. ¶¶ 3-4. Their views are entitled to deference

and weigh in favor of final approval here.

5. The Positive Reaction of the Class Members Suggests that Final Approval Is Appropriate

The reaction of the class members to the settlement is another factor that may be

considered in assessing the propriety of final approval. See Dunk, 48 Cal.App.4th at 1801.

The reaction of the class to the original settlement was overwhelmingly positive, with only

18 exclusions and six objections out of tens of millions of class members. Corbitt Decl. ¶ 46,

Ex. 31 at ¶ 10. Similarly, only four persons sought to be excluded from the Revised

Settlement Agreement, see id., Ex. 31 at ¶ 11, and only three objections have been filed – all

by class members or counsel who objected to the original agreement. Corbitt Decl. ¶ 47.

This factor also weighs in favor of final approval. 7-Eleven, 85 Cal.App.4th at 1152-53.

Moreover, at least some of the objectors have their own agenda, separate from the

interests of the Settlement Class. Salveson, the self-proclaimed “inventor of the credit card

system here in issue,” see Salveson Obj. at 3, is a disgruntled litigant who has filed at least

two unsuccessful antitrust lawsuits against Defendants, and is apparently continuing his

personal vendetta here. See Salveson v. Western States Bankcard Ass’n, 731 F.2d 1423,

1425-26 (9th Cir. 1984). The Selvaggio Objectors are represented by serial or “professional”

objector counsel, with a demonstrated history of filing non-meritorious objections in class

actions in order to obtain attorneys’ fees. See Corbitt Decl., Ex. 32 (listing numerous cases

in which the Selvaggio Objectors’ attorneys have filed objections). Darrell Palmer has a

particularly troubling history of conduct in class action settlements. Within the last year, two

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federal judges in the Northern District of California have held Palmer and/or his clients in

civil contempt of court.9 Palmer has also been found to have made false declarations to

obtain pro hac vice admission.10

III. PLAINTIFFS ARE ADEQUATE REPRESENTATIVES OF THE SETTLEMENT CLASS

In its preliminary approval order, this Court provisionally certified a Settlement

Class, comprising of all end-user purchasers in California of retail products or services from

businesses that accepted and/or issued Defendants’ cards during the class period. Corbitt

Decl., Ex. 30 at ¶ 4. Trial courts have “broad discretion” to determine whether certification

of a settlement class is proper. Wershba, 91 Cal.App.4th at 234-35. Under section 382 of the

Code of Civil Procedure, the party seeking certification must “establish the existence of both

an ascertainable class and a well-defined community of interest among the class members.”

Linder v. Thrifty Oil Co., 23 Cal.4th 429, 435 (2000). “The community of interest

requirement involves three factors: ‘(1) predominant common questions of law or fact; (2)

class representatives with claims or defenses typical of the class; and (3) class representatives

who can adequately represent the class.’” Id. Further, “it is well established that trial courts

should use different standards to determine the propriety of a settlement class, as opposed to

a litigation class certification. Specifically, a lesser standard of scrutiny is used for

settlement cases.” Global Minerals & Metals Corp. v. Superior Court, 113 Cal.App.4th 836,

859 (2003).11 The proposed Settlement Class easily satisfies the criteria for certification.

9 See In re TFT-LCD (Flat Panel) Antitrust Litig., No. M 07–1827 SI, --- F.R.D. ----, 2013 WL 621791 (N.D. Cal. Feb. 19, 2013); Embry v. ACER Am. Corp., No. C 09-01808 JW, 2012 WL 3777163 (N.D. Cal. Aug. 29, 2012), (order finding Objector Bandas in contempt and imposing sanctions), and Dkt. 222 (March 12, 2012) (Notice of Appeal showing Mr. Palmer as counsel for Objector Bandas) (Ex. 2 to RJN). 10 See, e.g., Herfert v. Crayola, LLC, No. C11-1301-JCC (W.D. Wash. Aug. 17, 2012) (Ex. 3 to RJN) (“Mr. Palmer falsely declared under penalty of perjury that he had not been disbarred or formally censured by a court of record or by a state bar association” when he had been temporarily suspended from three state bars, including that of California, due to a felony conviction). 11Attridge erroneously contends that certification of a settlement class “requires heightened judicial scrutiny.” Attridge Obj. at 14. Objector relies on federal cases, but California courts have expressly refused to follow the federal approach. Dunk, 48 Cal.App.4th at 1807 n.19.

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A. THE INTERESTS OF PLAINTIFFS AND ALL CLASS MEMBERS ARE ALIGNED

Attridge claims that Plaintiffs cannot adequately represent the so-called “Attridge

putative class,” because the claims at issue in this proceeding are different from those alleged

in Attridge (and thus atypical), and because Plaintiffs have conflicts. Attridge Obj. at 10-13.

This is the only class certification requirement challenged by Objectors. Attridge’s argument

must fail.

Adequacy of representation “depends on whether the plaintiff’s attorney is qualified

to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the

interests of the class.” McGhee v. Bank of Am. Nat’l Trust & Sav. Ass’n, 60 Cal.App.3d 442,

450 (1976). “[O]nly a conflict that goes to the very subject matter of the litigation will defeat

a party’s claim of representative status.” Richmond v. Dart Indus., Inc., 29 Cal.3d 462, 470

(1981). Typicality is a related prerequisite: “The typicality requirement is meant to ensure

that the class representative is able to adequately represent the class and focus on common

issues.” Medrazo v. Honda of North Hollywood, 166 Cal.App.4th 89, 99 (2008). “Typicality

is present when the named class representatives’ interest in the action is significantly similar

to that of the other class members.” City of San Diego v. Haas, 207 Cal.App.4th 472, 501

(2012). In the settlement context, the interests of absent class members are already

“protected by the trial court’s fairness review of the settlement.” Dunk, 48 Cal.App.4th at

1807 n.19.

Plaintiffs, like all Settlement Class members, allege that they paid inflated prices at

retail as a result of Defendants’ unfair “honor all cards” and “exclusionary” rules. Attridge

claims that Visa and MasterCard’s “exclusionary” rules were anticompetitive and resulted in

inflated finance charges passed on by banks to revolving credit cardholders. Corbitt Decl.,

Ex. 9 at ¶ 4. Plaintiffs’ Consolidated Complaint also contains allegations regarding these

rules and their negative effect on competition. Id., Ex. 3 at ¶¶ 23, 53. Further, like Mr.

Attridge, several of the class representatives paid finance charges on their credit cards, and

thus would have suffered the overcharges alleged in the Attridge case. See Compendium of

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Class Representative Declarations ¶ 4. Therefore, Plaintiffs and all members of the

Settlement Class, including the putative Attridge class, share an interest in proving that

Defendants’ conduct constituted a violation of the UCL, and in obtaining restitution from

Visa and MasterCard.

Under these circumstances, there is no conflict. Where, as here, all of the class

members “suffered a common alleged wrong,” there is “a ‘well-defined community of

interest among the class members,’” and the named plaintiffs can adequately represent the

entire class, even if there are “various subgroups” in the class with “differences in situation

or interest” among them. Wershba, 91 Cal.App.4th at 238-39. Further, contrary to

Objector’s assertions, typicality “does not require simultaneous or identical injuries.”

Hopkins v. De Beers Centenary AG, No. CGC-04-432954, 2005 WL 1020868, at *6 (S.F.

Super. Ct. Apr. 15, 2005) (citing Classen v. Weller, 145 Cal.App.3d 27, 46 (1983)). Where a

named plaintiff “alleges that he paid inflated prices . . . as a result of Defendants’ anti-

competitive activity,” the plaintiff “is similarly situated vis-à-vis the Class, and the typicality

requirement is satisfied.” Id. at *7.

Significantly, in the Wal-Mart case, the Second Circuit rejected an objection virtually

identical to Attridge’s argument here. The court held that the named plaintiffs, who were

challenging Visa and MasterCard’s tying arrangements, adequately represented

“exclusionary rules” claims made in a separate class action. Wal-Mart, 396 F.3d at 109-110.

The court found that the interests of the named plaintiffs were aligned with the interests of

the “exclusionary rules” class, because the named plaintiffs were also members of that class

and “stood to gain from damages for the [“exclusionary” rules] claims.” Id. at 112-13. The

Second Circuit’s thorough analysis is equally applicable here. The Revised Settlement

Agreement in this case provides substantial benefits, in the form of approximately $21

million (after payment of fees and costs) in cy pres awards, to all class members, including

Attridge and his proposed class. Tellingly, Objector fails to even address the Wal-Mart

decision, which is fatal to his claims of inadequate representation, even though Plaintiffs

have cited it in numerous briefs.

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The Court of Appeal found that this case and Attridge “involve different

instrumentalities of harm . . . and different types of damage . . .” Opinion at 17 (Corbitt

Decl., Ex. 25). However, the court also acknowledged that the Consolidated Complaint

“alleges that the exclusion policies contributed to placing Visa and MasterCard in the

dominant market position that enabled them to impose the credit/debit acceptance policies on

merchants.” Id.; see also Wal-Mart, 396 F.3d at 107-108 (holding that, pursuant to similar

allegations made by the retailer plaintiffs, the “exclusionary” rules were “central” to their

tying case).

Because the Consolidated Complaint makes allegations based on the “exclusionary”

rules, and Plaintiffs rely upon those allegations to establish Defendants’ liability, see, e.g.,

Corbitt Decl., Ex. 3 at ¶¶ 23, 53, the cases Attridge cites are easily distinguishable, since the

plaintiffs in those cases waived certain claims that were readily available to their proposed

classes.12 Plaintiffs were not required to blindly endorse Objector’s theory of recovery, when

highly experienced Class Counsel, appointed by the Court to represent the class, determined

that it was not as strong as the credit-debit card tying claims, see Corbitt Decl. ¶ 25; see also

Kralowec Decl. ¶¶ 5-7; Kirkham Decl. ¶ 6. Representation is not inadequate simply because

an objector and the settling parties “have different views on the facts, the applicable law, or

the likelihood of success of a particular litigation strategy.” United States v. City of N.Y., 198

F.3d 360, 367 (2d Cir. 1999).

While the Court of Appeal found that Attridge involves a different theory of recovery,

consistent with the above cases, the court did not hold that these variations established the

existence of antagonistic interests within the Settlement Class, as Attridge contends. Rather,

the Court of Appeal concluded that it was necessary to “consider whether Class Plaintiffs had

adequately represented the interests of Visa and MasterCard customers in their capacity as

12 See Attridge Obj. at 11, citing City of San Jose v. Superior Court, 12 Cal.3d 447, 464 (1974) (plaintiffs were effectually “waiving . . . any possible recovery of potentially substantial damages”); Evans v. Lasco Bathware, Inc., 178 Cal.App.4th 1417, 1433-34 (2009) (complaint “expressly waived any recovery beyond the average cost to replace the shower pans, thereby forfeiting recovery of damages to other parts of the house”); and Trotsky v. Los Angeles Fed. Sav. & Loan Ass’n, 48 Cal.App.3d 134, 140-41 (1975) (in the operative complaint, plaintiffs omitted, and no longer sought recovery for, their original allegations that clause 10 of defendant’s trust deed was invalid and resulted in improper charges).

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members of the putative class in the Attridge action . . .” Opinion at 19 (Corbitt Decl.,

Ex. 25). The Court of Appeal thus directed this Court to determine whether the record shows

that the relief provided in the settlement was adequate compensation for the claims asserted

by the putative class in Attridge. Id. at 22-24. For the reasons discussed above, “the

evidence in the record justified a finding that the settlement’s terms were fair

notwithstanding the inclusion of the Attridge claims in the release.” Id. at 24. As also

discussed above, Plaintiffs have suffered the same harms as all members of the proposed

class and they share the same interest in maximizing the recovery for those harms.

Therefore, Plaintiffs adequately represent the interests of all members of the Settlement

Class, including the interests asserted in the Attridge action.

B. THERE IS NO BASIS TO CERTIFY A SEPARATE “ATTRIDGE SUBCLASS”

Attridge also contends that the conflict he alleges requires the certification of a

subclass. Attridge Obj. at 15-16. However, subclasses “are only necessary when members

of the class have divergent interests.” In re Insur. Brokerage Antitrust Litig., 579 F.3d 241,

272 (3d Cir. 2009); see also Richmond, 29 Cal.3d at 470-71 (courts can divide a class into

subclasses “so as to remove any antagonism” within the class). Because the interests of

Plaintiffs and all members of the Settlement Class are aligned, Objector cannot establish the

existence of a conflict requiring subclasses. Ins. Brokerage, 579 F.3d at 272-73 (the district

court properly refused to certify a subclass, since “all of the class members shared a unified

interest in establishing the [settling defendants’] liability for engaging in anticompetitive

conduct . . .”).13

Contrary to Objector’s argument, a class “need not be divided into subclasses merely

because different groups have alternative legal theories for recovery, or because those groups

have different factual bases for relief.” Ins. Brokerage, 579 F.3d at 260; see also In re

13 Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997), cited by Attridge, is clearly inapposite. The Supreme Court held that the interests of those within the class were not aligned because the “critical goal” of class members currently injured by defendants’ asbestos products, generous immediate payments, “tugs against the interest of exposure-only plaintiffs in ensuring an ample, inflation-protected fund for the future.” Id. at 626. There is no similar tension here.

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Deutsche Telekom AG Sec. Litig., 229 F.Supp.2d 277, 283 (S.D.N.Y. 2002) (certification of

subclasses was not warranted, even though “the alleged misconduct relates to two different

disclosures,” where plaintiffs’ claims involved common facts and legal issues). Footnote 4

of the Court of Appeal’s opinion, relied upon by Attridge, does not suggest otherwise. The

court simply held that “the fact that some class representatives have the same claims as those

belonging to the objecting plaintiff class does not necessarily mean that the representatives

will fairly and adequately represent the interest of all class members.” Opinion at 19 n.4

(Corbitt Decl., Ex. 25). In addition, the case cited by the Court of Appeal, In re Literary

Works in Elec. Databases Copyright Litig., 654 F.3d 242 (2d Cir. 2011) is easily

distinguishable.14

C. CLASS COUNSEL’S REPRESENTATION OF NON-PARTY WELLS FARGO IN UNRELATED CASES DOES NOT CREATE A CONFLICT; PLAINTIFFS’ EXPERT ALSO HAS NO CONFLICT

Objectors claim that Class Counsel Zelle Hofmann has a conflict of interest because it

represents Wells Fargo in other matters. Salveson Obj. at 19-21; Attridge Obj. at 13-14.

These allegations are frivolous, and Objectors knew it when they raised them. Prior to the

filing of Objectors’ oppositions to preliminary approval, Class Counsel explained to their

counsel why their claims were factually inaccurate. See Corbitt Decl., ¶ 57 & Ex. 39.

Nevertheless, Objectors’ attorneys forged ahead with their baseless accusations, in complete

disregard of the facts, the applicable law, and the standards of professional conduct.

Zelle Hofmann has never represented a bank in disputes involving “credit card

practices.” The firm website upon which Salveson relies only says that Zelle Hofmann has

experience in the areas listed. Corbitt Decl., Ex. 40. With respect to credit card practices or

antitrust issues, the firm has experience on the plaintiffs’ side, including this case. Id. ¶ 59.

As for Wells Fargo (which is not a party to this case or the Attridge action), Zelle Hofmann’s

14 Literary Works involved three separate categories of claims (A, B, and C), and the conflict arose because the settlement distributed the maximum class recovery of $18 million “by making ‘essential allocation decisions’ among [the three] categories of claims.” Id. at 246, 251. As a result, the named plaintiffs would be inclined “to favor their more lucrative Category A and B claims.” Id. at 252. Moreover, if the total of all claims exceeded $18 million, the settlement reduced the compensation for Category C claims only, a provision that “illustrate[s] a lack of adequate representation of Category C-only plaintiffs.” Id. at 246, 253. Here, in contrast, all members of the Settlement Class are entitled to the same benefits.

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representation has always been in disputes completely unrelated to the subject matter of these

proceedings. Id. ¶¶ 60-61. In negotiating the class action settlement, Class Counsel gave no

consideration to Zelle Hofmann’s representation of non-party Wells Fargo in those unrelated

matters. Id. ¶ 62. Objectors have presented no evidence to the contrary. “‘Speculative

contentions of conflict of interest cannot justify disqualification of counsel.’” In re Jasmine

S., 153 Cal.App.4th 835, 845 (2007).

Objectors’ assertion that Wells Fargo is required to indemnify Visa (the argument

does not apply to MasterCard) is incorrect. As explained in Defendants’ papers, Wells Fargo

has no obligation to indemnify Visa for any settlement or judgment in these coordinated

proceedings. Visa has paid its entire portion of this settlement, and is not entitled to

indemnification from Wells Fargo or any other bank. With respect to other cases, Visa set up

an escrow account, with the proceeds of its initial public offering, to pay any settlements or

judgments in certain litigation, including Attridge. See Corbitt Decl., Ex. 43 at 22. It is only

“[t]o the extent that amounts available under the escrow arrangement and agreements in the

plan are insufficient to fully resolve the covered litigation,” that any indemnification from the

banks would come into play. See id. at 90. Therefore, any duty to indemnify in Attridge is

purely speculative.

Even assuming, arguendo, that Wells Fargo had a duty to indemnify Visa in this case,

this would not create a conflict of interest for Class Counsel, because an attorney

representing a plaintiff against a defendant entitled to indemnification from a third party can

also represent the indemnitor in a separate case. The attorney’s representation of the plaintiff

“is not directly adverse and therefore does not present a concurrent conflict of interest to the

lawyer’s representation of the [indemnitor] in the another action.” ABA Formal Op. 05-435.

California law is in accord, see Cal. Rule Prof. Conduct 3-310(C), Discussion. Additionally,

in California “unnamed class members are not considered to be clients of the proposed class

counsel for purposes of applying the professional rule that restricts representation when there

are concurrent conflicts of interest.” Haas, 207 Cal.App.4th at 502. Not surprisingly,

Objectors cite no authority supporting their argument.

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Further, Objectors have waived any right to challenge Class Counsel’s representation,

by waiting for more than two years after obtaining the information purportedly identifying

the “conflict” to raise the issue. The information from Zelle Hofmann’s website regarding its

representation of banking and financial institutions, upon which Objectors rely, was served

on Objectors on July 30, 2010, as part of Plaintiffs’ application for attorneys’ fees and

expenses in this case. See Corbitt Decl., Ex. 44. Objectors’ arguments should be rejected on

this basis alone. See Liberty Nat’l Enters., L.P. v. Chicago Title Ins. Co., 194 Cal.App.4th

839, 845-48 (2011) (affirming denial of motion to disqualify counsel due to a two-year delay

in bringing the motion).

Finally, Objectors ignore the fact that Plaintiffs’ co-counsel, who are also experienced

and respected practitioners and have no relationship with Wells Fargo, agree with Zelle

Hofmann that the Revised Settlement Agreement represents an extraordinary result for the

class. See Kirkham Decl. ¶¶ 4, 7-8; Kralowec Decl. ¶¶ 4, 10; Saveri Decl. ¶¶ 3-4.

Attridge also argues that Dr. Bamberger has a conflict of interest. Attridge Obj. at 13.

This argument is also meritless. Dr. Bamberger was retained as a consultant by Plaintiffs in

July 2007, six months before Objector’s counsel Girardi & Keese hired Compass Lexecon.

Supplemental Bamberger Decl. ¶ 2. Apparently dissatisfied with the opinions Compass

provided, Girardi refused to pay for its services, forcing Compass to file a lawsuit. See

Corbitt Decl., Ex. 45 ¶¶ 21-25.15 That lawsuit settled almost two months before Dr.

Bamberger filed his declaration in this case. See id., Ex. 47. Dr. Bamberger was not

involved at all in Compass’ engagement for Girardi. Bamberger Supp. Decl. ¶¶ 3-4. The

Attridge matter was handled in a different Compass office, and it was never discussed with

Dr. Bamberger, who has never accessed any materials relating to that matter, other than

public court filings. Id. ¶¶ 5-8. Because Dr. Bamberger did not actually receive any

confidential information relating to Attridge, no conflict exists. Western Digital Corp. v.

Superior Court, 60 Cal.App.4th 1471, 1487-88 (1998). Further, Dr. Bamberger’s declaration

was served on Attridge on July 30, 2010, and Objector has waived any right to challenge

15 In its Answer, Girardi denied entering into an enforceable contract with Compass. See id., Ex. 46 ¶ 27.

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Plaintiffs’ expert by waiting for more than two years to raise the issue. See Liberty Nat’l

Enters., 194 Cal.App.4th at 845-48.

For all the above reasons, Objectors’ counsel’s attacks on Zelle Hofmann and Dr.

Bamberger violate Cal. Rule Prof. Conduct 5-200 (“In presenting a matter to a tribunal, a

member: . . . (B) Shall not seek to mislead the judge, judicial officer, or jury by an artifice or

false statement of fact or law”); see also Cal. Bus. & Prof. Code § 6068(d) (codifying this

duty). The attorneys for both Objectors have previously engaged in this type of conduct; in

fact, the Ninth Circuit recently sanctioned them for doing so.16 Their conduct is equally

deplorable here.

IV. THE RELEASE IS PROPERLY LIMITED TO CLAIMS RELATED TO THE CONDUCT CHALLENGED IN THE CONSOLIDATED COMPLAINT

The Revised Settlement Agreement releases all claims “arising out of or relating in

any way to any conduct . . . alleged or which could have been alleged in the Consolidated

Amended Complaint . . .” Corbitt Decl., Ex. 26 at ¶ 14. The Consolidated Complaint, in

turn, covers in detail Defendants’ alleged anticompetitive conduct and its effects.

The Court of Appeal held that the original settlement’s release provision

“encompasses the claims asserted in the Attridge action.” Opinion at 20 (Corbitt Decl.,

Ex. 25). The appellate court did not find that to be improper. See also Wal-Mart, 396 F.3d at

107-108 (the settlement in the antitrust tying case could release the objector’s “exclusionary

rules” claims). Consequently, the Revised Settlement Agreement expressly releases “all

claims asserted in Attridge.” Corbitt Decl., Ex. 26 at ¶ 14. The Court of Appeal concluded

that the release “would operate as a bar to the further prosecution of the Attridge action, or to

the assertion of the same claims in any other litigation,” and thus directed this Court to

consider the fairness of the settlement in light of the inclusion of the Attridge claims in the

16 See In re Girardi, 611 F.3d 1027, 1034, 1036-39 (9th Cir. 2010) (imposing monetary sanctions and formally reprimanding Attridge’s counsel Thomas Girardi for recklessly making false statements to the court of appeals, in an effort to enforce a foreign judgment through the use of false documents); Taleff v. Southwest Airlines Co., No. 11-16173 (9th Cir. Aug. 30, 2011), cert. denied, 133 S.Ct. 168 (2012) (Ex. 4 to RJN) (granting motion seeking monetary sanctions against Salveson’s counsel Alioto Law Firm for filing an “unreasonable and vexatious ‘emergency motion’” in the context of the firm’s “pattern of filing antitrust strike suits against multi-billion dollar mergers . . . in hopes of extracting a cash settlement”) (see Ex. 5 to RJN at 1-2).

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scope of the release. Opinion at 21-22 (Corbitt Decl., Ex. 25). As demonstrated above, the

Revised Settlement Agreement represents fair, reasonable, and adequate consideration for the

release of the claims prosecuted here and in Attridge.

Salveson contends that, aside from the Attridge issue, the release provision is

overbroad. See, e.g., Salveson Obj. at 1-2. The Court of Appeal did not address Objector’s

arguments. Under California law, “‘[a] clause providing for the release of claims may refer

to all claims raised in the pending action, or it may refer to all claims, both potential and

actual, that may have been raised in the pending action with respect to the matter in

controversy.’” Villacres v. ABM Indus. Inc., 189 Cal.App.4th 562, 586 (2010) (emphasis in

original). That is, “a court may release not only those claims alleged in the complaint and

before the court, but also claims which ‘could have been alleged by reason of or in

connection with any matter or fact set forth or referred to in’ the complaint.”). Id. (emphasis

in original). The Revised Settlement Agreement’s release provision is therefore appropriate.

Objector’s attempt to distinguish Villacres, see Salveson Obj. at 8, is to no avail. Indeed, the

release in that case is strikingly similar to the provision at issue here. See Villacres, 189

Cal.App.4th at 572-73.

Salveson ignores the key language limiting the release to facts alleged or that could

have been alleged in the complaint. See, e.g., Salveson Obj. at 7-8 (“The Release . . . fails to

define with particularity the factual predicate upon which the settlement is premised. . . . [¶] .

. . this release covers literally any conceivable illegal conduct related to the entire credit

industry.”). This reveals Salveson’s gross and fundamental misunderstanding or

mischaracterization of the release. During the course of the proceedings before Judge

Kramer, when Salveson’s counsel offered his flawed interpretation of the release at the final

approval hearing, the Court and the parties squarely addressed the proper interpretation of the

release. See Corbitt Decl, Ex. 19 at 26:7-33:4; and see specifically 32:13-17 (“[I]n the

several hearings we had to get the preliminary approval, . . . I [Judge Kramer] raised this

point and we worked on the language to make sure that what Mr. Alioto was suggesting was

not the scope of the release[.]”).

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Once the release provision is properly viewed, Salveson’s arguments that the release

improperly “includes different violations and different conduct,” including “specifically

interchange fees,” see Salveson Obj. at 9-12, necessarily fail. While plaintiffs in a class

action may release claims that were or could have been alleged, Villacres, 189 Cal.App.4th at

586, their “authority to release claims is limited by the ‘identical factual predicate’ and

‘adequacy of representation’ doctrines.” Wal-Mart, 396 F.3d at 106. Plaintiffs’ adequacy to

represent the Settlement Class has already been discussed. Pursuant to the identical factual

predicate doctrine, “class action releases may include claims not presented and even those

which could not have been presented as long as the released conduct arises out of the

‘identical factual predicate’ as the settled conduct.” Id. at 107; see also Class Plaintiffs v.

City of Seattle, 955 F.2d 1268, 1287 (9th Cir. 1992) (same); LiPuma v. American Express

Co., 406 F.Supp.2d 1298, 1317-18 (S.D. Fla. 2005) (approving settlement where the same

underlying factual predicate – the foreign currency conversion practices of American Express

– supported both “rate adjustment” claims pleaded in the complaint and “rate selection”

claims that were not included in the pleading).

Therefore, any claims arising out of the same facts set forth in Plaintiffs’

Consolidated Complaint are properly released, even if the elements of the claims or theories

of recovery are different. Villacres, 189 Cal.App.4th at 586; Wal-Mart, 396 F.3d at 108.

Notwithstanding his repeated protestations about the scope of the release, Salveson does not

identify any released claims against Defendants that do not arise out of the anticompetitive

conduct alleged in this case. Importantly, the Ninth Circuit has squarely held that claims

involving Visa and MasterCard’s interchange fees, which seem to be the focus of Salveson’s

objection, share the same factual predicate as the tying and other claims asserted in these

coordinated proceedings. Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 748-49

(9th Cir. 2006) (the plaintiffs’ claims for price-fixing of Defendants’ interchange rates, while

“positing a different theory of anti-competitive conduct,” arose from the identical factual

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predicate as the claims in Wal-Mart and therefore were extinguished by that settlement). The

release is properly limited to claims related to the conduct challenged in this case.17

V. THE PROPOSED PLAN OF DISTRIBUTION IS APPROPRIATE

Pursuant to the Revised Settlement Agreement, the parties propose a cy pres

distribution of the net settlement funds to a wide range of non-profit organizations, for the

benefit of the members of the Settlement Class. Corbitt Decl., Ex. 26 at ¶¶ 8(a)(i) – 8(a)(iii)

& Appendix F. The parties’ proposal includes a detailed recommendation as to the specific

amounts to be paid as cy pres awards to each non-profit organization, and a description of the

work performed by each organization. See id. This proposal was submitted to Judge Kramer

in connection with the proceedings for approval of the original settlement. At a hearing, the

Court stated that the parties “did an excellent job” of selecting “a wide range of worthy

recipients.” Id., Ex. 23 at 465:17-466:7. Judge Kramer then entered an order adopting the

parties’ recommendation. Id., Ex. 24. This plan of distribution is fair and reasonable.

As explained by the Notice Administrator, it would be prohibitively expensive to

attempt to identify the tens of millions of class members, and to then calculate and distribute

the small dollar amounts that they would receive – even without any attempt to account for

different purchase volumes. Id., Ex. 18 at ¶¶ 3-7. Under these circumstances, California law

permits cy pres distribution of the entire net settlement proceeds. In re Vitamin Cases, 107

Cal.App.4th 820, 826, 830 (2003) (affirming a settlement that awarded the entire consumer

portion of the recovery to charitable and non-profit organizations). Further, California law

permits cy pres awards providing “indirect compensatory effect[s]” for class members. In re

Microsoft I-V Cases, 135 Cal.App.4th 706, 726-27 (2006) (affirming a proposed distribution

in the form of benefits that would further computer literacy in California public schools).18

In assessing a cy pres distribution proposed in a settlement, this Court “is not required

to initiate an investigation to determine other possible cy pres distributions.” Id. at 725.

17 Salveson’s additional arguments concerning the scope of the release are addressed in Defendants’ Memorandum. 18 In light of these well-established legal principles, Selvaggio’s claim that cy pres distributions do not benefit class members, see Selvaggio Obj. at 6-7, lacks any merit.

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Rather, the proper standard for evaluating a proposed distribution is “whether the distribution

[is] useful in fulfilling the purposes of the underlying cause of action.” Id. at 726. The

causes of action in this case, for violations of the Cartwright Act and the UCL, seek to

compensate injured class members and to deter unlawful behavior. Id.; see also Corbett v.

Superior Court, 101 Cal.App.4th 649, 667-68 (2002). The proposed distribution fulfills

these purposes.

Attridge argues that a cy pres distribution is inadequate for his purported subgroup.

Attridge Obj. at 12-13. This argument fails, because it is again entirely based on Dr. Safir’s

damages estimate, which, as explained above, is wholly irrelevant to Attridge’s restitution

claim, ignores the risks of continued litigation, and lacks any evidentiary support. Objectors’

other complaints also fail to provide a basis for rejecting the proposed cy pres plan. The

Selvaggio Objectors do not explain why they believe the parties’ proposal fails to meet the

above legal standard. See Selvaggio Obj. at 8-9. Attridge cites to several federal court

decisions rejecting cy pres awards, but fails to explain how they support his position.

Attridge Obj. at 12-13. To the extent those cases depart from the standards under California

law for evaluating a proposed cy pres distribution, they are irrelevant.19

Lastly, Salveson argues that the parties’ cy pres plan is solely focused on financial

education, “[i]n direct contradiction to [Judge Kramer’s] directives.” Salveson Obj. at 21-22.

This is false. At the final approval hearing, Judge Kramer recommended that the parties

modify their proposed cy pres distribution, so that all of the net settlement proceeds would be

paid directly to non-profit organizations, and no portion of the settlement would be used to

develop a financial literacy toolkit, as originally proposed. Corbitt Decl., Ex. 19 at 61:23-62:

4. Plaintiffs and Defendants agreed to accept the Court’s recommendation. Id. at 64:20-

65:16. The parties revised their agreement accordingly and, at a subsequent hearing, Judge

Kramer discussed, and approved, the distribution to cy pres recipients of the portion of the

19 In any event, the $21 million cy pres remedy approved here would also pass muster under federal standards. Lane v. Facebook, Inc., 696 F.3d 811, 817-18 (9th Cir. 2012), reh’g and reh’g en banc denied, --- F.3d ---, 2013 WL 765140 (9th Cir. Feb. 26, 2013) (affirming the cy pres distribution of an entire net settlement fund of $6.5 million to set up a new charity that would designate fund recipients to promote online privacy and security).

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settlement fund originally allocated to the toolkit. For this revised distribution, in the Court’s

words, the parties “did an excellent job” of selecting “a wide range of worthy recipients,”

which are not limited to financial education organizations. Id., Ex. 23 at 465:17-466:7.

CONCLUSION

For the reasons stated above, Class Counsel respectfully request that final approval be

granted, and that the Court enter an Order:

1. finally approving the Revised Settlement Agreement as fair, reasonable and

adequate;

2. giving final and complete effect to the terms of the settlement, including the

proposed plan of distribution contained within the Revised Settlement

Agreement;

3. certifying the proposed Settlement Class, in accordance with the definitions

and limitations contained in this Court’s November 20, 2012 Order;

4. finding that the Revised Settlement Agreement satisfies the requirements of

all applicable statutory and procedural rules; and

Enter the separately filed [Proposed] Judgment, dismissing the claims of the class

members with prejudice, subject to the terms of the Revised Settlement Agreement, and the

Court’s continuing jurisdiction pursuant to Cal. Civ. Proc. Code § 664.6.

Dated: March 12, 2013 Respectfully submitted, By: /s/ Craig C. Corbitt Craig C. Corbitt

Craig C. Corbitt (No. 83251) José M. Umbert (No. 227318) Heather T. Rankie (No. 268002) ZELLE HOFMANN VOELBEL & MASON LLP 44 Montgomery Street, Suite 3400 San Francisco, California 94104 Telephone: (415) 693-0700 Facsimile: (415) 693-0770 Lead Counsel for Plaintiffs

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Additional Plaintiffs’ Counsel:

Kimberly A. Kralowec THE KRALOWEC LAW GROUP 188 The Embarcadero, Suite 800 San Francisco, CA 94105 Telephone: (415) 546-6800 Facsimile: (415) 546-6801 [email protected] Attorney for Richard S.E. Johns

Guido Saveri R. Alexander Saveri Geoffrey C. Rushing Cadio Zirpoli SAVERI & SAVERI, INC. 706 Sansome Street San Francisco, CA 94111 Telephone: (415) 217-6810 Facsimile: (415) 217-6813 [email protected] [email protected] Attorneys for Richard S. E. Johns

Josef D. Cooper Tracy R. Kirkham COOPER & KIRKHAM, P.C. 357 Tehama Street, 2nd Flr. San Francisco, CA 94103 Telephone: (415) 788-3030 Facsimile: (415) 882-7040 [email protected] [email protected] Attorneys for Amy Miller

Mario N. Alioto Lauren Russell TRUMP, ALIOTO, TRUMP & PRESCOTT, LLP 2280 Union Street San Francisco, CA 94123 Telephone: (415) 563-7200 Facsimile: (415) 346-0679 [email protected] [email protected] Attorneys for Karen Brock

Gordon Ball BALL & SCOTT Bank of America Center, Suite 750 550 Main Ave. Knoxville, TN 37902 Telephone: (865) 525-7028 Facsimile: (865) 525-4679 [email protected] Attorneys for Mark Wallgren, Sury Romero, and Robert Carlos Martinez

Steve W. Berman George W. Sampson HAGENS BERMAN SOBOL SHAPIRO LLP 1301 Fifth Avenue, Suite 2900 Seattle, WA 98101 Telephone: (206) 623-7292 Facsimile: (206) 623-0594 [email protected] [email protected] Attorneys for Ana C. Lossada

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Reginald Terrell THE TERRELL LAW GROUP P.O. Box 13315 Oakland, CA 94661 Telephone: (510) 237-9700 Facsimile: (510) 237-4616 [email protected] Attorneys for Crystal DeFrantz and Marion Anderson

C. Donald Amamgbo AMAMGBO & ASSOCIATES 7901 Oakport Street, #4900 Oakland, CA 94621 Telephone: (510) 434-7800 Facsimile: (510) 434-7804 [email protected] Attorneys for Crystal DeFrantz and Marion Anderson

Robert Schubert SCHUBERT JONCKHEER & KOLBE LLP Three Embarcadero Center, Suite 1650 San Francisco, CA 94111 Telephone: (415) 788-4220 Facsimile: (415) 788-0161 [email protected] Attorneys for Richard S. E. Johns

Maxwell M. Blecher Donald R. Pepperman BLECHER & COLLINS, P.C. 515 S Figueroa Street, Suite 1750 Los Angeles, CA 90071 Telephone: (213) 622-4222 Facsimile: (213) 622-1656 [email protected] Attorneys for Mark Wallgren, Sury Romero, and Robert Carlos Martinez

Emelike I. Kalu LAW OFFICES OF EMELIKE I. KALU, APC 315 W 9th Street, Suite 603 Los Angeles, CA 90015 Telephone: (213) 624-1500 Facsimile: (213) 624-9476 [email protected] Attorneys for Michael I. Kalu

Chief Nnamdi A. Ekenna THE EKENNA LAW FIRM, apc. 4311 Wilshire Boulevard, Suite 612-B Los Angeles, CA 90010-3717 Telephone: (323) 954-1000 Facsimile: (323) 954-1001 [email protected] Attorneys for Wambura N. Mkono, Sebron Johnson, and the Class

Joseph M. Patane LAW OFFICES OF JOSEPH M. PATANE 2280 Union Street San Francisco, CA 94123 Telephone: (415) 563-7200 Facsimile: (415)346-0679 [email protected] Attorneys for Karen Brock

Jonathan W. Cuneo Daniel M. Cohen Jon A. Tostrud CUNEO WALDMAN & GILBERT LLP 317 Massachusetts Ave., N.E., Suite 300 Washington, D.C. 20002 Telephone: (202) 789-3960 Facsimile: (202) 789-1813 [email protected] [email protected] Attorneys for Mark Wallgren, Sury Romero, and Robert Carlos Martinez

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Rosemary Rivas FINKELSTEIN THOMPSON & LOUGHRAN 100 Bush Street, Suite #1450 San Francisco, CA 94104 Tel.: (415) 398-8700 Fax: (415) 398-8104 [email protected] Attorneys for Foad Ahmadi and Iman Sadri

Lionel Z. Glancy Avi N. Wagner GLANCY BINKOW & GOLDBERG LLP 1801 Avenue of the Stars, Suite 311 Los Angeles, CA 90067 Telephone: (310) 201-9150 Facsimile: (310) 201-9160 [email protected] Attorneys for Lindsey Rosenthal

Susan G. Kupfer GLANCY BINKOW & GOLDBERG LLP One Embarcadero Center, Suite 760 San Francisco, CA 94111 Telephone: (415) 972-8160 Facsimile: (415) 972-8166 [email protected] Attorneys for Lindsey Rosenthal

Marc M. Seltzer Amy T. Brantly SUSMAN GODFREY L.L.P. 1901 Avenue of the Stars, Suite 950 Los Angeles, CA 90067 Telephone: (310) 789-3100 Facsimile: (310) 789-3150 [email protected] [email protected] Attorneys for Carmela Chiurazzi

Neal S. Manne Mark Evetts SUSMAN GODFREY L.L.P. 1000 Louisiana Street Houston, TX 77002 Telephone: (713) 651-9366 Facsimile: (713) 654-6666 [email protected] Attorneys for Carmela Chiurazzi

Ali Oromchian DENTAL COUNSEL, P.C. 2603 Camino Ramon, Suite 200 San Ramon, CA 94583 Telephone: (925) 242-2511 Facsimile: (925) 884-1725 [email protected] Attorneys for Foad Ahmadi

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