15‐0015‐cv Salveson v. JP Morgan Chase & Co.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 17th day of October, two thousand sixteen.

PRESENT: DENNY CHIN, SUSAN L. CARNEY, Circuit Judges, BRIAN M. COGAN, District Judge.* ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

MELVIN SALVESON, EDWARD LAWRENCE, DIANNA LAWRENCE, WENDY M. ADAMS, Plaintiffs‐Appellants,

v. 15‐0015‐cv

JP MORGAN CHASE & CO., JP MORGAN CHASE BANK, N.A., BANK OF AMERICA CORP., BANK OF AMERICA N.A., CAPITAL ONE F.S.B., CAPITAL ONE FINANCIAL CORP., CAPITAL ONE BANK, HSBC FINANCE CORP., HSBC

* Judge Brian M. Cogan, United States District Court for the Eastern District of New York, sitting by designation. BANK USA N.A., HSBC NORTH AMERICA HOLDINGS, INC., HSBC HOLDINGS PLC, Defendants‐Appellees.

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FOR PLAINTIFFS‐APPELLANTS: JOSEPH M. ALIOTO, Alioto Law Firm, San Francisco, California.

FOR DEFENDANTS‐APPELLEES BORIS BERSHTEYN, Peter E. Greene, Evan JPMORGAN CHASE & CO AND Kreiner, Luke Taeschler, Skadden, Arps, Slate, JPMORGAN CHASE BANK, N.A.: Meagher & Flom LLP, New York, New York.

FOR DEFENDANTS‐APPELLEES Mark P. Ladner, Michael B. Miller, Morrison & BANK OF AMERICA CORP. AND Foerster LLP, New York, New York. BANK OF AMERICA, N.A.:

FOR DEFENDANTS‐APPELLEES Andrew J. Frackman, Abby F. Rudzin, CAPITAL ONE F.S.B., CAPITAL OʹMelveny & Myers LLP, New York, New ONE FINANCIAL CORP., AND York. CAPITAL ONE BANK:

FOR DEFENDANTS‐APPELLEES David S. Lesser, Wilmer Cutler Pickering Hale HSBC BANK USA N.A., HSBC and Dorr LLP, New York, New York. HOLDINGS PLC, HSBC FINANCE CORP., AND HSBC NORTH AMERICA HOLDINGS, INC.:

Appeal from the United States District Court for the Eastern District of

New York (Gleeson and Brodie, JJ.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment and order of the district court are

AFFIRMED.

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Plaintiffs‐appellants (ʺplaintiffsʺ), representatives of a putative nationwide

class of consumers using payment cards, brought suit against defendants‐appellees

(ʺdefendantsʺ), financial institutions who issue Visa and/or MasterCard payment cards,

asserting claims under §§ 4 and 16 of the Clayton Act,

and 26, and the

Cartwright Act, California Business and Professions Code § 16750(a). Plaintiffs appeal

the district courtʹs December 4, 2014 judgment (Gleeson, J.) granting defendantsʹ motion

to dismiss plaintiffsʹ claims pursuant to Federal Rule of Civil Procedure 12(b)(6) and

declining to exercise jurisdiction over their state law claim. The district court explained

its reasoning in a memorandum and order entered November 26, 2014.1 Plaintiffs also

appeal the district courtʹs February 24, 2015 memorandum and order (Brodie, J.)

denying their motion for reconsideration of the dismissal of their claims, granting

defendantsʹ motion for reconsideration, and, on reconsideration, dismissing plaintiffsʹ

state law claim on the merits.2 We assume the partiesʹ familiarity with the underlying

facts, the procedural history of the case, and the issues on appeal.

1 The memorandum and order is dated September 26, 2014, but the docket reflects that it was entered November 26, 2014. 2 On December 18, 2014, the United States Judicial Panel on Multidistrict Litigation reassigned the case from Judge John Gleeson to Judge Margo K. Brodie. 3

I. Clayton Act

A. Motion to Dismiss

We review de novo the dismissal of a complaint pursuant to Rule 12(b)(6),

accepting all factual allegations as true and drawing all reasonable inferences in favor of

the plaintiff. Caro v. Weintraub,

(2d Cir. 2010). ʺTo survive a motion to

dismiss, a complaint must contain sufficient factual matter, accepted as true, to ʹstate a

claim to relief that is plausible on its face.ʹʺ Ashcroft v. Iqbal,

(2009)

(quoting Bell Atl. Corp. v. Twombly,

(2007)).

Under Illinois Brick Co. v. Illinois, indirect purchasers generally do not have

standing to sue for damages for antitrust violations under § 4 of the Clayton Act.

(1977).3 The rationale is twofold: ʺFirst, defendants may otherwise

face multiple liability. Second, there are too many ʹuncertainties and difficulties in

analyzing price and out‐put decisions in the real economic world rather than an

economistʹs hypothetical model.ʹʺ Simon v. KeySpan Corp.,

(2d Cir.

2012) (quoting Ill. Brick, 431 U.S. at 731‐32).

Plaintiffs are a putative class of cardholders of Visa and MasterCard

payment cards issued by defendants who used the cards to purchase goods and

services. Plaintiffs allege that in the course of issuing payment cards to consumers,

3 The Supreme Court recognized an exception, not applicable here, in which an indirect purchaser may have standing if it had a pre‐existing cost‐plus contract with the direct purchaser. Ill. Brick, 431 U.S. at 735‐36. 4

defendants and their affiliates knowingly participated in an anticompetitive conspiracy

to fix fees related to those payment cards, and that consumers have been injured by

paying supracompetitive price‐fixed interchange fees. Plaintiffs assert that they, as

cardholders, directly pay the interchange fees. The district court summarized the

structure of the relevant credit card transactions as follows, cited with approval by

plaintiffs in their brief on appeal:

When a cardholding consumer uses a Visa or MasterCard payment card, the merchant that accepts the card relays the transaction to its ʺacquiring bank,ʺ which in turn transmits it to the network, i.e., Visa or MasterCard, which sends the information to the cardholderʹs ʺissuing bank.ʺ The issuing bank may approve the transaction and the approval is conveyed to the acquiring bank, which relays it to the merchant. The issuing bank then sends the acquiring bank the amount of the purchase price minus an interchange fee.

Special App. at 4. (citing Compl. ¶ 49).

Contrary to plaintiffsʹ allegations, the structure of these transactions

demonstrates that cardholders do not directly pay interchange fees. ʺAlthough factual

allegations of a complaint are normally accepted as true on a motion to dismiss, that

principle does not apply to general allegations that are contradicted by more specific

allegations in the Complaint.ʺ DPWN Holdings (USA), Inc. v. United Air Lines, Inc.,

, 151‐52 (2d Cir. 2014) (citations and internal quotation marks omitted). By way

of example, when a cardholder makes a $100 purchase, the merchant sends notice of the

charge to its acquiring bank, and the acquiring bank in turn sends the information to the

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card issuer bank. If the charge is approved, the issuer bank pays the acquiring bank for

the $100 purchase, retaining a portion as an interchange fee. The issuer bills the

cardholder, who then is bound to pay the issuer according to the terms of the card. The

cardholder has not directly paid the interchange fee, but rather has only paid the full

price for the item or service it has purchased. See United States v. Am. Express Co., No.

15‐1672,

(2d Cir. Sept. 26, 2016) (ʺ[T]he interchange fee . . . is

paid by the acquirer to the issuer as the price for handling its transactions with the

cardholder.ʺ); Wal‐Mart Stores, Inc. v. Visa U.S.A. Inc.,

(2d Cir. 2005)

(defining ʺinterchange feeʺ as a ʺfee the acquiring institution must pay to the card‐

issuing institutionʺ).

In sum, the district court correctly determined that the complaint failed to

plausibly allege that plaintiffs directly pay interchange fees and are directly injured by

their imposition. Accordingly, under Illinois Brick, plaintiffs do not have standing to

bring their Clayton Act claim.

B. Motion for Reconsideration

Plaintiffs argue that the district court abused its discretion by denying

their motion for reconsideration. ʺA district courtʹs denial of a motion for

reconsideration is reviewed for abuse of discretion.ʺ Smith v. Hogan,

(2d Cir. 2015). ʺThe standard for granting such a motion is strict, and reconsideration

will generally be denied unless the moving party can point to controlling decisions or

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data that the court overlooked.ʺ Shrader v. CSX Transp., Inc.,

(2d Cir.

1995). The district court held that plaintiffs had not shown that it had overlooked

critical facts or relevant controlling decisions; therefore, there was no basis to reconsider

its dismissal of the Clayton Act claim. We identify no abuse of discretion in the district

courtʹs conclusion that plaintiffsʹ motion failed to meet the strict criteria for granting

reconsideration.

Plaintiffs also argue that the district court abused its discretion in

declining to consider charts purportedly depicting the transfer of fees in a credit card

transaction that they offered in support of their motion for reconsideration. The district

court held that the charts were not properly before it on the motion for reconsideration

because they were not attached to the complaint, they were not before the court when it

decided defendantsʹ motion to dismiss, and plaintiffs violated the district courtʹs Local

Civil Rule 6.3, which prohibits filing affidavits in support of a motion for

reconsideration absent leave of court. Because a motion for reconsideration is ʺnot a

vehicle for relitigating old issues, presenting the case under new theories, securing a

rehearing on the merits, or otherwise taking a second bite at the apple,ʺ we hold that

this ruling was not an abuse of discretion. Analytical Surveys, Inc. v. Tonga Partners, L.P.,

(2d Cir. 2012), as amended (July 13, 2012) (internal quotation marks

omitted).

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C. Leave to Amend

Plaintiffs contend that the district court should have granted them leave to

amend the complaint. ʺWe review denial of leave to amend under an ʹabuse of

discretionʹ standard.ʺ Hutchison v. Deutsche Bank Sec. Inc.,

(2d Cir.

2011). ʺThe rule in this Circuit has been to allow a party to amend its pleadings in the

absence of a showing by the nonmovant of prejudice or bad faith.ʺ Block v. First Blood

Assocs.,

(2d Cir. 1993). This rule, while permissive, still requires a

party to request leave to amend. See Gallop v. Cheney,

(2d Cir. 2011)

(ʺWhile leave to amend under the Federal Rules of Civil Procedure is ʹfreely granted,ʹ no

court can be said to have erred in failing to grant a request that was not made.ʺ (quoting

Fed. R. Civ. P. 15(a))). Plaintiffs did not request leave here. They also failed to include a

proposed amended complaint, which is considered ʺnormal procedure.ʺ Twohy v. First

Nat. Bank of Chi.,

(7th Cir. 1985). Failure to do so ʺindicates a lack of

diligence and good faith.ʺ

Plaintiffs argue that leave to amend is warranted because the charts they

submitted with their motion for reconsideration cure any ʺperceived defectʺ in their

complaint. Appellantsʹ Br. at 22. Even assuming plaintiffs were permitted to

supplement their allegations with these charts, the allegations fail to establish that, as

cardholders, plaintiffs directly pay interchange fees and are directly injured by their

imposition. The charts are merely pictorial representations of the transactions that were

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described in the complaint, and, as discussed above, they do not demonstrate that

cardholders directly pay the interchange fees. Accordingly, in the absence of any

allegations that would make their complaint viable, ʺwe see no reason to grant

appellant[s] relief in this Court which was not requested below.ʺ Wilson v. Merrill Lynch

& Co.,

(2d Cir. 2011) (quoting Natʹl Union of Hosp. & Health Care Emps.

v. Carey,

, 282 (2d Cir. 1977)). We note that plaintiffs explicitly disclaim any

intention of alleging generally elevated prices as the basis for their damages, and we

express no view on whether such a claim would survive a motion to dismiss.

II. Cartwright Act

In their main brief on appeal, plaintiffs do not advance any substantive

argument regarding (1) the district courtʹs determination, on reconsideration, that it had

original jurisdiction over plaintiffsʹ Cartwright Act claim, or (2) the merits of the district

courtʹs dismissal of their Cartwright Act claim. We generally do not consider issues

raised for the first time in a reply brief. McBride v. BIC Consumer Prod. Mfg. Co.,

(2d Cir. 2009); see Norton v. Samʹs Club,

(2d Cir. 1998) (ʺIssues not

sufficiently argued in the briefs are considered waived and normally will not be

addressed on appeal.ʺ). Plaintiffs do not challenge the district courtʹs determination

that it had original jurisdiction over plaintiffsʹ Cartwright Act claim. Although

plaintiffs list their Cartwright claim in their Statement of Issues Presented for Review,

they provide no substantive argument in their main brief and fail to even articulate the

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standards that must be met for such claims to survive a motion to dismiss. ʺ[S]imply

stating an issue does not constitute compliance with [Federal Rule of Appellate

Procedure] 28(a): an appellant or cross‐appellant must state the issue and advance an

argument.ʺ Gross v. Rell,

(2d Cir. 2009) (quoting Frank v. United States,

(2d Cir. 1996)). Moreover, plaintiffs have not offered an explanation as to

why they waited until their reply brief to advance an argument regarding the

Cartwright Act claim. Accordingly, we find that plaintiffs have waived these

arguments and affirm the dismissal of the Cartwright Act claim.

* * *

We have considered all of plaintiffsʹ arguments and find them to be

without merit. Accordingly, we AFFIRM the judgment of the district court.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk

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