Visa 2014 Annual Report Download - page 33

tiered, and if we cannot use one or more of them, this could have a material adverse effect on our
financial condition and cash flows, or even cause us to become insolvent.
The principal remaining covered litigation involves interchange reimbursement rates. See Note
20—Legal Matters to our consolidated financial statements included in Item 8 of this report.Beginning
in 2005, a series of complaints (the majority of which were styled as class actions) were filed on behalf
of merchants against us, MasterCard and/or other defendants, including certain Visa member financial
institutions. We refer to this as the interchange multidistrict litigation or MDL 1720. Among other
allegations, the plaintiffs alleged that Visa’s setting of default interchange reimbursement rates violated
federal antitrust laws and, in some cases, certain state unfair competition laws. The lawsuits were
transferred to a multidistrict litigation in the U.S. District Court for the Eastern District of New York.
The plaintiffs in MDL 1720 seek damages for alleged overcharges in merchant discount rates as
well as injunctive and other relief. The consolidated class action complaint alleges that estimated
damages will range in the tens of billions of dollars. Because these lawsuits were brought under the
U.S. federal antitrust laws, any actual damages would be trebled.
The allocation of any monetary judgment or a settlement among the defendants is governed by an
omnibus agreement dated February 7, 2011, and amended August 26, 2014. See Note 3—
Retrospective Responsibility Plan to our consolidated financial statements included in Item 8 of this
report. Visa’s portion of a settlement or judgment covered by the omnibus agreement would be
allocated in accordance with specified provisions of our retrospective responsibility plan.
We signed settlement agreements in connection with MDL 1720, which included an agreement to
pay approximately $4.0 billion to the class plaintiffs. On January 14, 2014, the court entered a final
judgment order approving the settlement, from which a number of objectors have appealed. Until the
appeals are finally adjudicated, no assurance can be provided that we will be able to resolve the class
plaintiffs’ claims as contemplated by the Settlement Agreement.
A number of merchants have filed opt-out cases in various federal district courts. All of the cases
filed in federal court have been either assigned to the judge presiding over MDL 1720, or have been
transferred by the Judicial Panel on Multidistrict Litigation for inclusion in MDL 1720. The court has
entered an order confirming that MDL 1720 includes: (i) all current and future actions transferred to
MDL 1720 by the Judicial Panel on Multidistrict Litigation or other order of any court for inclusion in
coordinated or pretrial proceedings; and (ii) all actions filed in the Eastern District of New York that
arise out of operative facts as alleged in the cases subject to the transfer orders of the Judicial Panel
on Multidistrict Litigation. Cases that are transferred to or otherwise included in MDL 1720 are covered
litigation for purposes of the retrospective responsibility plan. It is possible that some opt-out cases
may not be transferred or otherwise included in MDL 1720 and will not be covered litigation.
Failure of our retrospective responsibility plan to insulate us adequately from the impact of such
settlements or judgments could result in a material adverse effect on our financial condition and cash
flows. Such a failure could even cause us to become insolvent. The retrospective responsibility plan
addresses only the covered litigation. The plan generally does not cover other pending litigation or any
litigation that we may face in the future, except for cases that include claims for damages relating to the
period prior to our IPO that are transferred for pre-trial proceedings or otherwise included in the
interchange multidistrict litigation. See —If we are found liable in other pending or future lawsuits, we
may have to pay substantial damages. In addition, non-monetary settlement terms and judgments in
the covered litigation may require us to modify the way we do business. See —Limitations on our
business resulting from litigation may materially and adversely affect our revenues and profitability.
Therefore, even if our retrospective responsibility plan provides us with adequate funding to satisfy our
obligations with respect to monetary liabilities from settlements of, and judgments in, the covered
litigation, it will not insulate us from the monetary impact of pending or future litigation.
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