Mastercard Inc. unfairly reduced a £10 billion ($12.6 billion) class action case to a settlement of just £200 million, according to the firm that funded the lawsuit.
The credit-card company “skillfully maneuvered” claimant Walter Merricks and his lawyers by offering an inferior settlement to end the case, according to the litigation funder Innsworth Advisors Ltd. The lawsuit alleged Mastercard charged consumers and businesses too much to use its cards.
“To the extent that Innsworth’s submissions make poorly aimed pot-shots at the negotiation process, they are hopeless,” lawyers for Mastercard countered. “Innsworth’s interests lie in maximizing its commercial recovery even if that entails a high-risk gamble,” they said arguing the settlement is fair and reasonable.
The legal drama follows the settlement in what was once the country’s largest class action claim over the amount Mastercard charged consumers and businesses to use its cards. Merricks’ lawyers have since acknowledged that “there was an overclaim” in his suit.
The case highlights the tension facing courts in cases meant to maximize returns for consumers at a time when litigation funders are betting on a rise in class actions in the UK. The outcome of the case will likely set a precedent for how judges balance fair compensation and returns for those who foot the legal bill.
“The potential settlement raises significant policy questions,” Innsworth’s spokesperson said. The intervention is aimed at getting clarity on the UK’s class action regime for future cases and to ensure scrutiny of the proposed settlement, she said.
“It is notable that none of the over 44 million class members have objected,” Mastercard’s lawyers said in their document. The company declined to comment beyond the legal filing.
The £200 million settlement is a “very significant sum” out of which half is to be paid to consumers, according to lawyers for Merricks.
The funder incurred legal bills worth around £45 million and would double the investment in six years if it gets the remaining £100 million, lawyers for Merricks said. “Mr. Merricks cannot accept that 89.5% of the settlement sum be paid to the funder as this would not be in the best interests of the class,” his lawyers said.
Merricks obtained a £10 million indemnity from Mastercard to cover his expenses to contest a legal case against him started by Innsworth, according to the documents.
A spokesperson for Merricks declined to comment.
Mastercard and its rival Visa Inc. have for years been the focus of civil complaints over the amount they charge consumers and businesses to use their cards. The case stems from an EU ruling that the interchange card fees the company levied for transactions were unfair and breached competition law.
Photograph: Mastercard Inc. signage. Photo credit: Lionel Ng/Bloomberg
Topics Lawsuits