Visa 2007 Annual Report Download - page 54

Table of Contents
effect to collateral estoppel on one or more issues in the future, then significant elements of plaintiffs' claims would be established, thereby making it more
likely that Visa U.S.A. and Visa International would be found liable and making the possibility of an award of damages more likely. In the event all issues are
subsequently decided against Visa U.S.A. and Visa International in dispositive motions during the course of the litigation, then there is the possibility that the
sole issue remaining will be whether a damage award is appropriate and, if so, what the amount of damages should be.
Also on April 14, 2005, and in subsequent rulings, with respect to the alleged market for general purpose card network services, the District Court
denied Visa U.S.A.'s motion to dismiss Discover's Section 1 conspiracy to restrain trade claims and Section 2 monopolization, attempted monopolization and
conspiracy to monopolize claims that were based upon the conduct described above. On October 24, 2005, the court granted Visa International's motion to
dismiss Discover's attempted monopolization and monopolization claims against it, because plaintiffs did not allege that Visa International individually had
sufficient market share to maintain these claims. On November 9, 2005, the court denied Visa U.S.A. and Visa International's motion to dismiss Discover's
claims based upon effects in an alleged debit market. Visa U.S.A. and Visa International answered the amended complaint on November 30, 2005. Fact
discovery is complete.
At a hearing on April 25, 2007, the District Court set a trial date of September 9, 2008. The court also established deadlines and procedures for motions
practice and expert discovery. On July 24, 2007, Discover served its expert's report purporting to demonstrate that it had incurred substantial damages. Expert
reports were served jointly by Visa U.S.A. and Visa International on October 9, 2007.
In accordance with SFAS No. 5, "Accounting for Contingencies," Visa U.S.A. recorded a litigation provision of $650 million related to the Discover
matter at September 30, 2007.
The American Express Litigation
On November 15, 2004, American Express filed a complaint against Visa U.S.A., Visa International, MasterCard and eight Visa U.S.A. and Visa
International member financial institutions (JPMorgan Chase & Co., Bank of America Corporation, Capital One Financial Corp., U.S. Bancorp, Household
International Inc., Wells Fargo & Company, Providian Financial Corp., and U.S.A.A. Federal Savings Bank). Subsequently, U.S.A.A. Federal Savings Bank,
Bank of America Corp. and Household International Inc. announced settlements with American Express and were dismissed from the case. The complaint,
which was filed in the U.S. District Court for the Southern District of New York, was designated as a related case to the DOJ litigation and was assigned to
the same judge. See "—Department of Justice Antitrust Case and Related Litigation." The complaint alleged that the implementation and enforcement of Visa
U.S.A.'s bylaw 2.10(e) and MasterCard's CPP violated Sections 1 and 2 of the Sherman Act in an alleged market for general purpose card network services
and an alleged market for debit card network services.
On November 1, 2007, Visa Inc., Visa U.S.A. and Visa International entered into an agreement with American Express to resolve all current litigation
between American Express and Visa U.S.A. and Visa International, and the related litigation between American Express and five other co-defendant banks.
Under the settlement agreement, an initial payment of $1.13 billion will be made on or before March 31, 2008, including $945 million from Visa Inc. and
$185 million from the five co-defendant banks. Beginning March 31, 2008, Visa Inc. will pay American Express an additional amount of up to $70 million
per quarter for 16 quarters, for a maximum total of $1.12 billion. Total future payments discounted at 4.72% over the payment term, or $1.9 billion, are
reflected in the litigation provision on Visa U.S.A.'s consolidated statement of operations for fiscal 2007 and in current and long-term accrued litigation on its
consolidated balance sheet at September 30, 2007 and on the consolidated balance sheet of Visa Inc. at October 1, 2007. We intend to fund our payment
obligations under the American Express settlement with amounts in the escrow account, in accordance with our retrospective responsibility plan. See Item 7
—"Overview of Financial Condition and Results of Operations—Liquidity and Capital Resources—Uses of Liquidity—Litigation."
53