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National ATM Council, Inc. v. Visa Inc.

United States District Court, District of Columbia

May 22, 2017

NATIONAL ATM COUNCIL, INC. et al., Plaintiffs,
VISA INC. et al., Defendants

          MEMORANDUM OPINION (MAY 21, 2017) [DKTS. ## 60, 87, 102]


         Automatic teller machines ("ATMs") all around the country allow individuals to conveniently withdraw cash from their bank accounts without having to locate an open bank branch to consummate their transaction. Although customers will often use ATMs that are owned and operated by their own banks, they will sometimes pay an "access fee" to use an ATM that is not affiliated with their bank, conducting what is referred to as a "foreign" ATM transaction. Whenever a foreign ATM transaction occurs, the ATM terminal must communicate with the customer's bank through an ATM network. The plaintiffs in this putative class action are a group of independent, non-bank-affiliated ATM operators, and defendants Visa and MasterCard operate several of the ATM networks that plaintiffs utilize during foreign ATM transactions. Plaintiffs allege that Visa and MasterCard have imposed contractual provisions-the "ATM Access Fee Rules"-that prevent them from charging a discounted access fee if a customer's transaction can be processed over an alternative network that is less expensive than Visa or MasterCard networks, and they allege that those rules unreasonably restrain trade and therefore violate Section 1 of the Sherman Act, 15 U.S.C. § 1.

         Currently pending before the Court is plaintiffs' Renewed Application for a Preliminary Injunction [Dkt. # 87], which asks the Court to enjoin defendants' enforcement of the ATM Access Fee Rules during the pendency of this litigation. Upon consideration of the pleadings, the record, and the law, I find that plaintiffs have not met their burden of showing likely irreparable harm in the absence of an injunction, and I therefore DENY the Motion.[1]


         Plaintiffs in this case are the National ATM Council, an association of independent ATM operators suing on behalf of its members, and thirteen independent ATM owners and operators. Second Am. Compl., ¶¶ 10-25 [Dkt. # 55]. When an individual uses an independent ATM (or an ATM operated by a bank other than his own), the transaction is referred to as a "foreign transaction."[2] Defs.' Mem. in Opp'n. to Renewed App. for Prelim. Inj. at 4 [Dkt. # 99]. For the purposes of this case, there are four relevant actors in a foreign transaction: (1) the individual accountholder who initiates a transaction by inserting his or her bank-issued ATM card into an ATM; (2) the bank that issued the accountholder's ATM card and maintains his or her accounts; (3) the ATM operator; and (4) the ATM network that connects the "foreign" ATM to the bank. Id. at 4-5.

         Visa and MasterCard operate the "Plus" and "MasterCard" ATM networks respectively, but there are a number of networks that also facilitate foreign ATM transactions. Decl. of Jeff Sachs, ¶ 7 [Dkt. # 99-1]; Decl. of Leland Englebardt, ¶¶ 4, 7 [Dkt. # 99-2]. In any given transaction, the specific network that is utilized is a function of the networks that the ATM can access, the networks with which the customer's bank-issued ATM card will work, and the preferences that are established by the card-issuing bank. At a minimum, the ATM card and the ATM must share at least one common network for the transaction to work. See Defs.' Mem. in Opp'n at 5 [Dkt. # 99].

         As independent ATM operators, plaintiffs can earn revenue in two ways. First, as mentioned before, they can charge customers an "access fee" for using their terminal. Sachs Decl. ¶ 10; Englebardt Decl. ¶ 11. Second, they indirectly receive "net interchange" fees. Id. The card-issuing banks pay an "interchange fee" to ATM networks like Visa and MasterCard, and through a complex system of payments, a portion of the fee eventually gets passed to the end ATM operator. Sachs Decl. ¶¶ 10-12; Englebardt Decl. ¶¶ 11-14. The intricacies of interchange payments do not need to be completely fleshed out here, but plaintiffs assert that Visa and MasterCard pay relatively smaller net interchange rates to ATM operators than alternative networks. See Restated Decl. of John Michael Powell, ¶¶ 3-5 [Dkt. # 92].

         As a contractual condition for accessing their networks, Visa and MasterCard impose non-discrimination provisions referred to as the "ATM Access Fee Rules." The ATM Access Fee Rules were adopted in 1996, but have remained substantially the same since that time. Id. ¶ 2; Sachs Decl. ¶ 23; Englebardt Decl. ¶ 26. Stated simply, the rules prohibit ATM operators from charging access fees for transactions processed over Visa or MasterCard networks that are higher than any access fee they charge for transactions processed over alternative networks. Powell Decl. ¶ 2; Sachs Decl. ¶ 16; Englebardt Decl. ¶ 21. Plaintiffs allege that without the Access Fee Rules, they would offer discounts and structure their access fees to encourage customers to use ATM cards that are compatible with less expensive networks. Second Am. Compl. ¶ 69. As a result, they argue that they are an illegal restraint of trade that unfairly protects Visa and MasterCard from price competition from less expensive networks and harms the operators' profitability and economic sustainability.

         Plaintiffs filed this civil class action in October 2011. Compl. [Dkt. #1]. In February 2013, one of my colleagues on the District Court concluded that plaintiffs' complaint failed to allege facts to establish standing or concerted activity under the Sherman Act and dismissed the case without prejudice.[3] Nat'l ATM Council, Inc. v. Visa Inc., 922 F.Supp.2d73 (D.D.C.2013). In December 2013, my colleague denied plaintiffs' motion to alter the judgment with leave to re-plead, after concluding that the proposed amended complaint lacked adequate facts to establish standing or concerted activity. Nat'l ATM Council, Inc. v. Visa Inc., 7 F.Supp.3d 51 (D.D.C. 2013). Plaintiffs successfully appealed, and our Circuit Court reversed and remanded for further proceedings. Osborn v. Visa Inc., 797 F.3d 1057 (D.C. Cir. 2015). The case was reassigned to me on August 4, 2015. [Dkt#49].

         Plaintiffs originally moved for a preliminary injunction enjoining enforcement of the ATM Access Fee Rules in 2016, but I stayed consideration of the case when the United States Supreme Court granted certiorari to review the Circuit Court's decision. Plaintiffs' Application for a Preliminary Injunction [Dkt. # 60]; 7/21/16 Minute Order Staying Case. In November 2016, the Supreme Court dismissed defendants' petitions for certiorari as improvidently granted. I thereafter held a status conference at which plaintiffs indicated that they were still seeking preliminary relief. At the status conference, I gave the plaintiffs an opportunity to renew their motion and re-constitute their briefs to account for any changed circumstances arising from the passage of time. Plaintiffs' Renewed Application for a Preliminary Injunction [Dkt. # 87]. After the renewed motion was fully briefed, I held a hearing on April 18, 2017 and took the motion under advisement.

         In their renewed motion, plaintiffs seek a broad injunction that would prohibit Visa and MasterCard from adopting or enforcing any rules that would stop ATM operators from charging higher access fees for transactions over Visa and MasterCard networks; offering customers discounts, incentives, or free services for using specific ATM cards or networks; expressing a preference for or promoting specific networks; communicating the relative costs incurred when different networks are used; or engaging in substantially equivalent practices. Corrected Renewed Application for a Preliminary Injunction at 4 [Dkt. #97].


         A party seeking a preliminary injunction must make a "clear showing" that the following four factors, taken together, merit the granting of such an extraordinary remedy: that there is "likely success on the merits, likely irreparable harm in the absence of preliminary relief, a balance of the equities in its favor, and [the requested injunction is in] accord with the public interest." Cobell v. Norton, 391 F.3d 251, 258 (D.C. Cir. 2004); League of Women Voters of United States v. Newby, 838 F.3d 1, 6 (D.C. Cir. 2016) (quoting Pursuing Am. 's Greatness v. FEC, 831 F.3d 500, 505 (D.C. Cir. 2016)).

         Courts considering these factors tend to apply a "sliding scale" that balances the relative strength of the arguments for each factor. Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1291-92 (D.C. Cir. 2009). However, a movant "must demonstrate at least some injury for a preliminary injunction to issue, " and a "movant's failure to show any irreparable harm is therefore grounds for refusing to issue a preliminary injunction, even if the other three factors entering the calculus merit such relief." Chaplaincy of Full Gospel Churches v. England,454 F.3d 290, 297 (D.C. Cir. 2006). See also Econ. Research Servs., Inc. v. Resolution Econ., LLC,140 ...

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