NYLJ “Second Circuit Rejects Attempt Narrowly to Construe Settlement Agreement”

By Thomas E.L. Dewey

In 2019, Visa and Mastercard reached a class settlement with merchants who had brought claims alleging them federal antitrust violations. Rather than opt out of the settlement, and despite the releases in the settlement agreement, a group of gasoline retail companies filed a separate class action, Old Jericho Enterprise, Inc. et al. v. Visa, Inc. et al., alleging state antitrust violations. On May 4, 2026, the Second Circuit affirmed the district court’s decision dismissing the suit on the ground that the gasoline companies were bound by the class settlement. The decision highlights how courts approach interpretation of class settlements.

Background

The matter stemmed from a 2019 settlement, which followed 15 years of litigation, that Visa, Inc. (Visa) and Mastercard, Inc. (Mastercard) entered into to resolve a federal antitrust class action. The action was brought by a class of merchants that had accepted Visa and Mastercard payment cards during the class period.

The settlement class included “all persons, businesses, and other entities that have accepted any Visa-Branded Cards and/or Mastercard-Branded Cards in the United States [during the class period],” and the claims related to the fees Visa and Mastercard charged these merchants to process transactions.

A key dispute in the initial suit was whether the class plaintiffs were direct or indirect purchasers; if they were indirect, as Visa and Mastercard argued, they lacked standing to bring federal antitrust claims under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) (although, notably, certain states allow indirect purchaser antitrust claims). The issue was never resolved in the initial action, but the district court, in approving the class settlement, noted the litigation risk the indirect purchaser argument presented.

The parties that filed the new lawsuit were gasoline retailers that had accepted Visa and Mastercard payment cards and did business in states that did allow indirect purchasers to file antitrust claims (appellants). The appellants did not opt out of the class settlement in the initial action, but instead filed their own putative class action complaint asserting state-law claims seeking damages for the same alleged antitrust violations by defendants.

On Sept. 5, 2024, Chief Judge Margo K. Brodie of the Eastern District of New York concluded on summary judgment that Appellants were members of the settlement class and thus bound by its release, and entered judgment in favor of Visa and Mastercard. The appeal followed.

The Court’s Decision

Standard of Review

First, the Second Circuit considered what standard to use in reviewing the district court’s decision that appellants were parties to the settlement agreement. Generally, where the terms of a settlement agreement are unambiguous, courts will review a district court’s interpretation de novo. Here, however, the district court had found that the language of the settlement agreement was ambiguous. The court had therefore considered extrinsic evidence, including the parties’ intentions in drafting the settlement agreement, to determine the scope of the settlement class. Such findings are typically considered factual findings, which the Second Circuit reviews for “clear error.”

Appellants nonetheless urged the Second Circuit to review de novo whether the district court had appropriately followed Second Circuit precedent in Fikes Wholsale, Inc. v. HSBC Bank USA, N.A., 62 F.4th 704, 713-14 (2d Cir. 2023), which appellants argued required the District Court to independently determine who the “direct payor” of the challenged fee was for each relevant transaction.

Because appellants were arguably indirect purchasers, as banks typically pay the credit card processing fees, such an analysis might have yielded a conclusion that they were not a part of the settlement class.

The Second Circuit, however, rejected appellants’ argument, holding that Fikes was cabined to ascertainability challenges. That is, the court held that Fikes stood only for the proposition that a district court could determine who the “direct payor” of the challenged fee was in each instance by analyzing each transaction, so a direct purchaser class was ascertainable as a matter of principle.

Scope of Settlement Class

The Second Circuit went on to review for clear error the district court’s holding that appellants were members of the settlement class. The issue turned on whether Appellants, gasoline retailers, themselves “accepted” Visa and Mastercard usage, or whether their gasoline suppliers, who provided authorization for them to accept such payments, did so.

The district court had found that the term “accepted” was ambiguous as drafted in the settlement agreement, but that extrinsic evidence indicated that Appellants themselves accepted Visa and Mastercard payments, given that in a typical transaction, a customer hands a credit card to a retail gas station operator, who then “accepts” it for payment. The Second Circuit “discern[ed] no clear error” in the district court’s determination.

Scope of Releases

The class settlement agreement in the initial action purported to release all claims stemming from the same factual predicate as the initial action. Appellants argued, though, that their claims had a meaningfully distinct factual predicate, due to the presence of their gasoline suppliers, who in many cases had the authority to restrict which credit cards they were allowed to accept.

The district court, and the Second Circuit, rejected this argument, holding that the class plaintiffs in the initial actions all had intermediaries (although typically banks as opposed to gasoline suppliers), and the presence of a second intermediary here was insufficient to create a distinct factual predicate.

Adequacy

Finally, the Second Circuit rejected appellants’ contention that class representation had been inadequate, finding that there was sufficient alignment of interest between the class members, and that the settlement agreement fairly provided each class plaintiff with their pro rata share of the monetary fund.

Conclusion

The court’s decision in Old Jericho highlights the complexity involved in antitrust class settlements, and the counterintuitive options plaintiffs may have to maximize recovery. Appellants here had several paths before them: they could have accepted the settlement and received their pro-rata share, opted out of the settlement and individually litigated their claims (as many other putative settlement class members did), or brought a new case.

Ultimately, appellants’ choice cost them only (possibly) attorneys’ fees, as the Second Circuit’s holding confirmed that Appellants were in fact members of the settlement class, and thus entitled to their pro rata share of the settlement. Thus, while the suit was unsuccessful, appellants’ position remains the same as it was before the suit was brought, while purchasers who opted out of the class still face the risk of recovering nothing at all.

This article first appeared in the New York Law Journal on May 20, 2026. Thomas E.L. Dewey is a partner at Dewey Pegno & Kramarsky. Leon Sunstein, an associate at the firm, assisted in the preparation of the article.