Amex Swipe Fee Settlement Rejected by Judge

BROOKLYN, N.Y. — A district court judge tossed the proposed class-action settlement between American Express Co. and merchants who sued the financial company over swipe fees, ruling that a lawyer for the merchants compromised the fairness of the agreement.

In his decision, U.S. District Judge Nicholas Garaufis, sitting in Brooklyn, ruled that Gary Friedman, a lawyer for the merchants, acted improperly by talking about the case and sharing confidential information with a friend who represented MasterCard Inc. in a parallel class-action suit against MasterCard and Visa Inc., according to Reuters.

Garaufis wrote that Friedman repeatedly violated court rules meant to protect confidential information and created a conflict of interest. In at least two emails, Friedman wrote to his friend, "burn after reading," the news agency reported.

Garaufis ordered Friedman removed as co-lead counsel for the merchants and ordered a new round of written briefs to be filed in the case by Sept. 8.

Two lawyers who represent Friedman could not immediately be reached for comment, Reuters reported.

In late 2013, American Express agreed to settle two class-action suits that allege the credit card processor's policies have increased the costs retailers must pay to accept its credit and charge cards. The company also agreed to alter some rules to make conditions more favorable for merchants, as CSNews Online previously reported.

Under the proposed settlement, which needed court approval, American Express would ease rules that limit merchants' ability to surcharge customers who pay with the company's cards. It would also pay as much as $75 million in attorneys' fees in both cases.

According to Reuters, American Express said in a statement that it was disappointed in the ruling because it considered the settlement agreement fair. 

"We believe we have strong defenses against the merchants’ claims and will continue to fight our case in court," the company stated.