MasterCard 2008 Annual Report Download - page 136

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except percent and per share data)
On June 9, 2006, MasterCard answered the complaint and moved to dismiss or, alternatively, moved to
strike the pre-2004 damage claims that were contained in the First Amended Class Action Complaint and moved
to dismiss the Section 2 claims that were brought in the individual merchant complaints. On September 7, 2007,
Magistrate Judge Orenstein issued a report and recommendation that MasterCard’s motion to dismiss the
pre-2004 damages claims should be granted in its entirety. On January 8, 2008, the district court adopted the
magistrate judge’s report and recommendation and dismissed the plaintiffs’ pre-2004 damage claims. On
January 11, 2008, the magistrate judge issued a report and recommendation that MasterCard’s motion to dismiss
the individual merchant defendants’ Section 2 claims should be denied. On February 15, 2008, MasterCard filed
objections to the magistrate judge’s report and recommendation. On May 14, 2008, the court issued an order
rejecting MasterCard’s objections and adopted the magistrate’s recommendation denying MasterCard’s motion
to dismiss. Fact discovery has been proceeding and was generally completed by November 21, 2008. Briefing on
class certification was completed on January 29, 2009, and briefing on case dispositive motions is to be
completed by March 8, 2010. No trial date has been scheduled. On July 5, 2006, the group of purported class
plaintiffs filed a supplemental complaint alleging that MasterCard’s initial public offering of its Class A
Common Stock in May 2006 (the “IPO”) and certain purported agreements entered into between MasterCard and
its member financial institutions in connection with the IPO: (1) violate Section 7 of the Clayton Act because
their effect allegedly may be to substantially lessen competition, (2) violate Section 1 of the Sherman Act
because they allegedly constitute an unlawful combination in restraint of trade and (3) constitute a fraudulent
conveyance because the member banks are allegedly attempting to release without adequate consideration from
the member banks MasterCard’s right to assess the member banks for MasterCard’s litigation liabilities in these
interchange-related litigations and in other antitrust litigations pending against it. The plaintiffs seek unspecified
damages and an order reversing and unwinding the IPO. On September 15, 2006, MasterCard moved to dismiss
all of the claims contained in the supplemental complaint. On February 12, 2008, Magistrate Judge Orenstein
issued a report and recommendation that granted in part and denied in part MasterCard’s motion to dismiss.
Specifically, Magistrate Orenstein recommended that MasterCard’s motion to dismiss plaintiffs’ fraudulent
conveyance claims be granted but he allowed plaintiffs leave to replead those claims. Magistrate Orenstein
otherwise recommended the denial of all other aspects of MasterCard’s motion to dismiss plaintiffs’ Section 7
and Section 1 claims described above. On April 4, 2008, MasterCard filed objections to Magistrate Orenstein’s
report and recommendation. On November 25, 2008, the court agreed with MasterCard’s objections and reversed
the portion of Magistrate Orenstein’s report that had recommended the denial of MasterCard’s motion to dismiss.
As such, the court granted MasterCard’s motion to dismiss the plaintiffs’ supplemental complaint in its entirety
with leave to file an amended complaint. On January 29, 2009, the class plaintiffs repled their complaint that is
directed at MasterCard’s IPO by filing a First Amended Supplemental Class Action Complaint. The causes of
action in the complaint generally mirror those in the plaintiffs’ original IPO-related complaint although the
plaintiffs have attempted to expand their factual allegations based upon discovery that has been garnered in the
case. The class plaintiffs seek unspecified damages and injunctive relief including, but not limited to, an order
reversing and unwinding the IPO. MasterCard’s time in which to answer or move to dismiss the complaint is
currently running. The parties have also entered into court-recommended mediation.
On October 10, 2008, the Antitrust Division of the DOJ issued a CID to MasterCard and other payment
industry participants seeking information regarding certain rules relating to merchant acceptance, particularly
with respect to merchants’ ability to steer customers to payment forms preferred by merchants. The CID seeks
documents, data and narrative responses to several interrogatory and document requests which focus on reasons
merchants may have decreased their acceptance of certain cards, information on penetration rates by merchant
category, co-brand cards and transactions in various countries. MasterCard is cooperating with the DOJ in
connection with the CID.
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