More than 5 million claim forms and letters of explanation about the process will go out in the mail on Sept. 19, according to the lead counsel for the class affected by the Visa-MasterCard class-action settlement that will return an expected $3.383 billion to merchants overcharged by the credit card networks.
Adult businesses that processed transactions through Visa and MasterCard online and in the brick-and-mortar world between October 1992 and June 2003 may be owed part of the record compensation.
Lloyd Constantine, founding partner and chairman of law firm Constantine Cannon and lead counsel for the class, said all letters will be mailed no later than Sept. 29, and merchants will have 60 days from the date noted on their letters to file a claim with settlement administrator The Garden City Group Inc. In some cases, settlements may range up to tens of millions of dollars per merchant, he said, though most will be much smaller.
He also said the claims process is not tedious or complicated, composing one multipage form that should require about one hour to complete. “It’s a very, very simple form,” Constantine said.
According to a merchant advisory issued by Constantine Cannon on July 20, “There will be free help available so that no merchant will need to hire any outside vendor to assist in filling out the claim form or collecting the settlement money to which that merchant is entitled.”
Merchants who believe they should be part of the class but haven’t received a settlement application package by the end of the first week in October should call The Garden City Group’s toll-free help line at (888) 641-4437 or visit the website at InReVisaCheck-MasterMoneyAntitrustLitigation.com for assistance.
Constantine outlined a rough breakdown of funds distribution: 70 percent of the $3.383 billion will be awarded to merchants who accepted signature debit cards, 21 percent will go to those who processed Visa and MasterCard credit card transactions, and the remaining 9 percent will reimburse overcharges on PIN-debit transactions.
Howard Yellen, chairman of Spectrum Settlement Recovery, a company that provides claim filing and recovery services in class action matters, begs to differ with Constantine’s appraisal. He said the forms may not be complex, but in order to collect, people not only must be able to complete the forms and submit them on time, but also be able to navigate a system he says can be confusing and even treacherous to the uninitiated. His firm takes the burden off its class-member clients – who currently include retailers like booksellers Barnes & Noble and Borders Inc. and insurance giant GEICO – in exchange for 25 to 30 percent of any compensation the clients receive.
"This isn't going to be the slam dunk that businesses were promised," Yellen said. "There appear to be big holes in the claims administrator's data that many large and small businesses are going to fall through."
The missing data, provided primarily by Visa, includes the names and addresses of companies that are eligible for refunds under the settlement, as well as their credit-card transaction volumes, Yellen said.
That’s a particularly vexing problem, especially when statistics indicate that only 10 to 20 percent of eligible claimants who know about a given settlement file to retrieve their portion of it. Yellen said a large part of his company’s mission is to make sure the uninformed realize they may be members of the class.
“If the system was well enough set up and working as it’s supposed to be, [companies like Spectrum] wouldn’t be needed,” Yellen said. “But we are needed, as evidenced by the fact that most class members don’t participate.”
The attorneys for the class disagree. On Sept. 9, they filed a petition with the court asking that Spectrum be barred from representing members of the class and that existing contracts between Spectrum and class members be voided because Spectrum employed “fraudulent and misleading solicitations to entice class members to retain Spectrum. … Spectrum is also intentionally spreading misinformation to confuse class members and complicate the allocation process in an attempt to create a need for its ‘services.’ Class members that fall prey to Spectrum’s tactics have agreed to cede a substantial portion of their cash payment from the settlement fund in return for a promise that Spectrum will increase their recovery. The likelihood that the actual recovery of any class member will increase because it contracts with Spectrum is significantly diminished by the fact that Spectrum’s fee is 30 percent of the class member’s payment.”
Among the allegations included in the court documents are that Spectrum has misrepresented the payment process, the integrity of the administrator’s database, and the amount of refund to which some class members are entitled. Constantine said that by challenging the settlement process and the amounts offered to its clients, as Spectrum has said it will do, the only thing Spectrum will be doing is interfering with the court’s jurisdiction and causing injury to the class as a whole.
On Sept. 12, U.S. District Judge John Gleeson referred the petition to a special master for a report and recommendation. In addition, Gleeson decreed that relationships between Spectrum and its clients remain intact and all letters of agency presented to the administrator by Spectrum on behalf of its clients be honored until the special master submits his findings. Constantine, who neglected to mention the judge’s order to AVN Online, said he did not know when to expect a final ruling from the court.
Yellen, an attorney himself, said his company is considering legal action against Constantine Cannon. “All that has happened [because of the Constantine Cannon petition] is that [Constantine] has smeared us with our clients,” he said. “Simultaneously, he asked for permission to send notice of this action to our clients, and then he did it without waiting for the court to grant permission.” That action has harmed Spectrum’s reputation and current relationships, Yellen said.
Yellen declined to name any adult industry clients his firm has signed without getting permission from the clients first. However, a Spectrum recovery specialist told AVN Online that both Epoch Systems and CCBill, two leading third-party payment processors for the adult Internet industry, had contracted with Spectrum. Both companies deny any such relationship exists.
The settlement, styled Visa Check/MasterMoney Antitrust Litigation, CV 96-5238, resulted from three lawsuits filed against the credit card giants by mainstream, brick-and-mortar merchants and the U.S. Department of Justice between 1996 and 2003. Disbursements from the fund are expected to begin in 2006.
