Durbin/NACS Oral Arguments: Appellate Court Expresses Skepticism
On Friday, Jan. 17, oral arguments on appeal were heard regarding Judge Richard Leon’s decision to overturn Reg. II, the regulations implementing the Durbin Amendment’s interchange and routing provisions. One observer suggested the panel of judges may reject the district court’s analysis of the seminal Chevron I antitrust case law, on which much of the merchants’ case rides. Another observer called it a “very bad day for the merchants.”
According to a news report, Appeals Judge Harry Edwards told a lawyer for the merchants, “We’re trying to tell you, none of us buys that” (referring to the lower court’s determination that the Federal Reserve Board had not followed the requirements of the Dodd-Frank Act’s Durbin Amendment when it issued the implementing regulations, Reg. II). If the appellate court, in fact, rejects the lower court’s analysis, the merchants’ chances of prevailing in the Circuit Court are significantly diminished—opening up the possibility of overturning Judge Leon’s decisions regarding more restrictive interchange and multiple signature- and PIN-routing options on debit and prepaid cards.
It is, of course, dangerous to predict the course of judicial deliberations and equally dangerous to read too much into one judge’s possibly offhand remark—so the outcome of this appeal is far from certain. As reported yesterday in Pay News, Doug Kantor, an attorney for the National Retail Federation, told Paybefore that it’s too soon to guess which way the appeals court may rule. “Everybody answered questions, but it’s a dubious thing to try to read into oral arguments how a case went,” he said, noting that the judges’ questions only aimed to get deeper information.
A ruling from the circuit court could be issued within the next 30 to 60 days. Some believe that regardless of what happens at the circuit level, the high stakes in this decision guarantee an appeal to the U.S. Supreme Court. But, K. Craig Wildfang—a partner with Robins, Kaplan, and Miller & Cries LLP who was the plaintiffs’ attorney in the merchants’ antitrust case against Visa and MasterCard—tells Paybefore that he believes an appeal to the nation’s top court is unlikely. “The best way to get the Supreme Court to review a case is to point out a split between circuits in the court of appeals, but this Fed interchange suit involves a single statute with one jurisdiction, so that [Supreme Court appeal] would be a long shot,” he says.
The appellate court’s decision is significant for both merchants and the debit/prepaid industry because it will directly affect debit and prepaid card issuers with respect to the amount of interchange that can be charged for debit and prepaid card transactions and the number of routing options that must be available on such cards.