Class Membership in the Payment Card Settlement Turns on Contractual Intent—not a “Direct Payor” Rule; Settlement Release Bars Later State-Law Indirect-Purchaser Claims

1. Introduction

This Second Circuit decision arises out of the long-running In Re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, a federal antitrust class action in which Visa and Mastercard agreed in 2019 to pay $5.6 billion to resolve claims that interchange fees were supra-competitive. The settlement class was defined broadly as entities that “accepted” Visa- or Mastercard-branded cards in the United States between January 1, 2004 and January 24, 2019, subject to exceptions not relevant here.

The appellants—branded gasoline retailers (the “Old Jericho Plaintiffs”)—did not opt out. In 2020, they nevertheless filed a new putative class action asserting state-law antitrust claims as indirect purchasers, premised on the same alleged interchange-fee conspiracy. Their theory hinged on their “Suppliers” (large oil brands) acting as intermediaries in payment processing, purportedly making the Suppliers the “direct payors” of interchange fees and therefore the proper class members.

Two core issues were presented:

  • Class membership: whether the Old Jericho Plaintiffs fall within the settlement class definition (i.e., whether they “accepted” cards).
  • Release scope and validity: whether the settlement release bars their later state-law indirect-purchaser claims.

2. Summary of the Opinion

The Second Circuit affirmed judgment for Visa and Mastercard. It held:

  • Fikes is not a mandatory “direct payor” membership test. The prior decision in Fikes Wholesale, Inc. v. HSBC Bank USA, N.A., 62 F.4th 704 (2d Cir. 2023) addressed ascertainability and did not require district courts, in later membership disputes, to determine class membership solely by identifying a transaction’s “direct payor.”
  • No clear error in finding intent to include the gas retailers. Applying New York contract principles (as specified in the settlement), the district court permissibly used extrinsic evidence to resolve ambiguity in “accepted” and found the settling parties intended the Old Jericho Plaintiffs— not their Suppliers—to be members of the settlement class.
  • The state-law claims were validly released. Under Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96 (2d Cir. 2005) and TBK Partners, Ltd. v. W. Union Corp., 675 F.2d 456 (2d Cir. 1982), the claims shared the same “identical factual predicate” and were adequately represented, so the settlement could bar later claims even if they were not (or could not have been) asserted in the federal action.

3. Analysis

3.1 Precedents Cited

Interpretation of settlement agreements; ambiguity and extrinsic evidence

  • In re Am. Exp. Fin. Advisors Sec. Litig., 672 F.3d 113 (2d Cir. 2011): The Court reiterated the standard of review—legal conclusions de novo, fact findings (including intent) for clear error.
  • W. Alton Jones Found. v. Chevron U.S.A., Inc., 97 F.3d 29 (2d Cir. 1996): When settlement terms are ambiguous, courts may consult extrinsic evidence to determine intent; appellate deference applies to trial-level intent findings absent clear error.
  • Revitalizing Auto Cmtys. Env't Response Tr. v. Nat'l Grid USA, 92 F.4th 415 (2d Cir. 2024): Reinforced that New York law focuses on construing agreements consistent with parties’ intent, and that ambiguity permits extrinsic evidence.
  • Collins v. Harrison-Bode, 303 F.3d 429 (2d Cir. 2002): Cited for the procedural point that ambiguity can justify remand for an evidentiary record on intent—supporting the approach of resolving meaning via evidence rather than rigid formulas.

Reading prior opinions in context; limits of mandate arguments

  • Brown v. City of New York, 862 F.3d 182 (2d Cir. 2017): The Old Jericho Plaintiffs invoked mandate principles; the Court acknowledged de novo review of a prior mandate’s meaning, but concluded Fikes did not impose the claimed rule.
  • Nat'l Pork Producers Council v. Ross, 598 U.S. 356 (2023): Used to emphasize that judicial language must be read in context and for the “work” it was doing—here, Fikes was solving ascertainability, not rewriting class membership doctrine.

Ascertainability and “objective possibility”

  • Fikes Wholesale, Inc. v. HSBC Bank USA, N.A., 62 F.4th 704 (2d Cir. 2023): In Fikes, the Court upheld ascertainability because membership could be determined objectively, and suggested identifying “direct payor” as a workable means to resolve ambiguity. This decision clarifies that those statements did not convert “direct payor” into an exclusive membership criterion.
  • In re Petrobras Sec., 862 F.3d 250 (2d Cir. 2017): Provided the “objectively possible” benchmark for ascertainability, which Fikes applied and which this case distinguishes from merits-like membership disputes.

Antitrust standing backdrop: direct vs. indirect purchasers

  • Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977): Established the federal bar on damages suits by indirect purchasers, framing why defendants argued merchants might lack federal standing.
  • Apple Inc. v. Pepper, 587 U.S. 273 (2019): Reiterated the “bright-line rule” authorizing direct purchaser suits and barring indirect purchaser suits under federal antitrust law.
  • California v. ARC Am. Corp., 490 U.S. 93 (1989): Confirmed that state antitrust regimes may allow indirect-purchaser recovery even though Illinois Brick bars it federally—central to the Old Jericho Plaintiffs’ state-law strategy.
  • In re Payment Card Interchange Fee & Merch. Disc. Antitrust Litig., No. 05-md-1720, 2019 WL 6888488 (E.D.N.Y. Dec. 16, 2019): Demonstrated that the settlement pricing and fee award reflected litigation risk, including the indirect-purchaser standing defense.
  • In re Payment Card Interchange Fee & Merch. Disc. Antitrust Litig., No. 05-md-1720, 2024 WL 1014159 (E.D.N.Y. Mar. 8, 2024): Noted to underscore that the “direct purchaser” question remains contested in opt-out litigation; the Second Circuit expressly declined to resolve it here.

Settlement releases: identical factual predicate and adequate representation

  • Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96 (2d Cir. 2005): Supplied the governing two-part framework—(1) identical factual predicate and (2) adequacy of representation—authorizing broad releases that can bar later claims.
  • TBK Partners, Ltd. v. W. Union Corp., 675 F.2d 456 (2d Cir. 1982): Reinforced that settlements may bar claims not asserted (and even those that could not have been asserted), so long as the factual predicate is the same and representation is adequate.

Judicial estoppel (rejected argument)

  • New Hampshire v. Maine, 532 U.S. 742 (2001): The Court cited the requirement that a party must have succeeded in persuading a court to accept its earlier position; because Fikes did not adopt a binding “direct payor test,” estoppel was unavailable.

Prior litigation context

  • In re Payment Card Interchange Fee & Merchant Discount Antitrust Litigation, 827 F.3d 223 (2d Cir. 2016): Cited as part of the overall procedural history of the MDL and the court’s prior engagement with this litigation.
  • In re Payment Card Interchange Fee & Merch. Disc. Antitrust Litig., No. 05-md-1720, 2024 WL 4224160 (E.D.N.Y. Sept. 18, 2024) (“Old Jericho Order”): The appealed decision; the Second Circuit endorsed its ambiguity finding and evidentiary approach.

3.2 Legal Reasoning

(A) The core clarification: ascertainability vs. class membership interpretation

The opinion’s first and most precedential move is methodological: it separates ascertainability (a class certification/settlement approval concept) from contractual interpretation of an approved settlement (a later enforcement question).

  • In Fikes Wholesale, Inc. v. HSBC Bank USA, N.A., the Court addressed whether the settlement class definition was sufficiently objective to administer (i.e., whether it is “objectively possible” to determine membership). The “direct payor” concept there functioned as an administrable way to resolve a potential ambiguity.
  • Here, by contrast, the question was who the settling parties intended to include when they used the term “accepted” in the class definition—an inquiry governed by New York contract law (per the settlement’s choice-of-law clause) and reviewed deferentially as to factual determinations of intent.

The Second Circuit thus rejected the appellants’ attempt to convert selected phrases from Fikes into a rigid “direct payor” membership rule, emphasizing that judicial statements must be read in context (Nat'l Pork Producers Council v. Ross) and that Fikes itself contemplated further record development on allocation issues.

(B) Resolving “accepted” by extrinsic evidence and real-world transaction structure

The district court found “accepted” ambiguous because both suppliers and stations could plausibly claim to “accept” payment cards. Under W. Alton Jones Found. v. Chevron U.S.A., Inc., ambiguity permits extrinsic evidence to ascertain intent.

The Second Circuit upheld (under clear-error review) the finding that the settlement class was intended to include the gas retailers:

  • Contract language: supplier-station agreements often stated that the supplier authorizes the station to “accept” cards—suggesting the station is the acceptor at point of sale.
  • Transaction reality: consumers physically present a card to the station; the station processes the sale—supporting that the station “accepts” the card as payment in ordinary usage.
  • Mixed processing arrangements: some plaintiffs contracted directly with acquirers for non-fuel businesses (convenience stores/restaurants), reinforcing that these merchants “accept” cards in the common settlement sense, even if suppliers intermediate some fuel transactions.

The practical consequence is that “acceptance” is not reduced to a single financial-incidence or “direct payor” criterion; it is an interpretive term whose meaning can be fixed by evidence of how the parties used it and what commercial reality they meant to capture.

(C) Enforcing the release: same factual predicate and adequate representation

The Second Circuit then held the Old Jericho Plaintiffs’ state-law claims were barred by the settlement release because both controlling doctrines were satisfied:

Identical factual predicate

Under Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., a settlement can release claims sharing the same “integral facts” as the settled claims. The Old Jericho Plaintiffs sought damages for the same alleged supra-competitive interchange fees based on the same alleged anticompetitive conduct. Their asserted distinction—an additional intermediary (the Supplier)—was not a new factual predicate because all merchants already transact through intermediaries (acquiring banks and processors) in the payment-card chain.

The Court treated the plaintiffs’ theory as a shift in legal characterization (indirect purchaser under state law) rather than a new factual nucleus.

Adequacy of representation

The Court reaffirmed that adequacy focuses on alignment of interests, not whether the specific later-asserted legal theory was “vigorously pursued.” The settlement structure provided pro rata recovery based on “relative economic interests,” and the Court echoed Fikes Wholesale, Inc. v. HSBC Bank USA, N.A. that franchisors and franchisees shared an interest in maximizing overall recovery.

The Court’s bottom line was equitable and procedural: if the Old Jericho Plaintiffs wished to preserve separate state-law remedies, they had an available path—timely opt out—which they did not take.

3.3 Impact

  • Constrains post-settlement end runs via state indirect-purchaser claims: Class members who remain in a settlement class should expect broad releases to bar later suits based on the same alleged conduct, even when plaintiffs reframe themselves as “indirect purchasers” under state law.
  • Clarifies how to use Fikes: Parties cannot treat Fikes as imposing a universal “direct payor” membership rule. The opinion re-centers settlement enforcement on contract interpretation and intent, with extrinsic evidence when needed.
  • Strengthens administrability without sacrificing intent: Courts may use objective standards (including “direct payor” identification) to satisfy ascertainability, while still treating membership disputes as interpretive questions governed by the settlement’s chosen law.
  • Preserves the open federal standing question: The Court expressly declined to decide whether merchants are direct purchasers under federal antitrust law in the payment-card ecosystem, leaving that issue to ongoing litigation (as noted in In re Payment Card Interchange Fee & Merch. Disc. Antitrust Litig., No. 05-md-1720, 2024 WL 1014159).

4. Complex Concepts Simplified

  • Interchange fee: A fee associated with card transactions, typically retained by the issuing bank and built into the flow of funds in the network. Merchants experience it through the pricing of card acceptance (often embedded in the merchant discount).
  • Merchant discount fee: The amount the acquiring bank withholds from the merchant’s transaction proceeds; it generally covers the interchange fee plus the acquirer’s markup.
  • Direct vs. indirect purchaser (Illinois Brick): Under federal law, only direct purchasers can usually seek antitrust damages; indirect purchasers are barred. States may allow indirect-purchaser suits (California v. ARC Am. Corp.).
  • Ascertainability: Whether class membership can be determined by objective criteria. It asks “can we figure out who is in the class?” not “who should win?”
  • Extrinsic evidence: Evidence outside the four corners of the contract (e.g., related agreements, transaction practice) used to interpret ambiguous terms.
  • Identical factual predicate doctrine: A settlement can release different legal claims if they arise from the same core facts as the settled claims.
  • Adequacy of representation: The settlement binds absent class members only if their interests were aligned and protected in the negotiation and structure of the settlement.

5. Conclusion

The Second Circuit’s decision cements two practical rules for settlement administration in complex antitrust class actions. First, language in an earlier ascertainability decision (Fikes Wholesale, Inc. v. HSBC Bank USA, N.A.) does not impose a categorical “direct payor” test for who belongs in a settlement class; membership disputes remain governed by the settlement’s contract law and may be resolved through extrinsic evidence of intent. Second, when a class member stays in the class, a properly structured release will bar later state-law indirect-purchaser claims if they share the same factual predicate and were adequately represented under Wal-Mart Stores, Inc. v. Visa U.S.A., Inc. and TBK Partners, Ltd. v. W. Union Corp..

In the broader legal context, the opinion reinforces the finality of class settlements, channels dissent through the opt-out mechanism, and prevents relitigation of the same alleged anticompetitive conduct through post hoc reframing of purchaser status—while leaving substantive federal standing questions in the payment-card ecosystem for another day.