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Judge Nixes Proposed Amex-Merchant Settlement

Document sharing between two rival attorneys on a multimillion dollar class action suit between American Express and millions of merchants led a federal judge to strike down the $79 million settlement reached last year.

The Wall Street Journal reported the news on Tuesday (Aug. 4) and said that correspondence between attorney Gary Friedman and Keila Ravelo – whom Friedman shared thousands of documents with, and who in turn worked with the firm representing MasterCard in a separate case – led the U.S. District Judge Nicholas Garaufis to block the settlement and boot Friedman from the case for “improper and disappointing conduct” that “fatally tainted the settlement process.”

As has been widely reported, Friedman represented merchants in the American Express case but also in a separate suit that brings many of those same retailers up against MasterCard and Visa.

Though Ravelo was not involved in the Amex case, she did “sit across the table,” as The Journal reported, in the Visa-MasterCard litigation, which was housed in the same court but before another judge. The relationship between Friedman (who now heads the Friedman Law Group) and Ravelo, who had been at Willkie Farr & Gallagher, stretches back several years when the pair worked together at another firm.

Ravelo has separately been charged by the U.S. Attorney’s Office with conspiracy to commit wire fraud, after allegedly trying to get $5 million from her former firm, Willkie Farr, MasterCard and another law firm.

The stakes in the Visa and MasterCard case may be significantly higher as it resulted in a $6 billion settlement, already under final approval. But, as The Journal noted, some of the retailers in that settlement want to undo that agreement, due to the subsequent discovery of the communications between the two attorneys.

The Journal termed the rejection of the smaller settlement “particularly significant” because Garaufis granted preliminary approval to the $79 million Amex settlement last year.

Amex said it was “disappointed” by the judge’s ruling and said it would continue to fight the case. Under the terms of the settlement, in addition to the $79 million payment, the deal allows retailers to surcharge their customers if they opt to use an Amex card.

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