Visa 2013 Annual Report Download - page 26

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subsequent offerings of our shares of class A common stock (or deposits of cash into the escrow
account in lieu of such offerings). They also include a loss sharing agreement and a judgment sharing
agreement. In addition, our U.S. financial institution clients are obligated to indemnify us pursuant to
Visa U.S.A. Inc.‘s certificate of incorporation and bylaws and in accordance with their membership
agreements. These mechanisms are unique, complicated and 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. Since 2005,
approximately fifty-five complaints, all but thirteen of which were styled as class actions, have been
filed on behalf of merchants against us, MasterCard and/or other defendants, including certain financial
institutions that issue Visa-branded payment cards and acquire Visa-branded payment transactions in
the United States. We refer to this as the interchange multidistrict litigation. Among other allegations,
the plaintiffs have alleged that Visa’s setting of default interchange reimbursement rates violated
federal and state antitrust 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 the interchange multidistrict litigation seek damages for alleged overcharges in
merchant discount rates as well as injunctive and other relief. The consolidated class action complaint
alleges that the plaintiffs estimate that 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. See Note 3—Retrospective Responsibility Plan and
Note 20—Legal Matters 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.
On October 19, 2012, we signed settlement agreements in these cases, which included an
agreement to pay approximately $4.0 billion to the class plaintiffs. The court granted preliminary
approval of the settlement agreement with the class plaintiffs on November 9, 2012. However, the
agreement with the class plaintiffs remains subject to final court approval and the adjudication of any
appeals. We cannot assure that the court will provide final approval of the settlement or that we will win
any appeals. On December 10, 2012, Visa paid approximately $4.0 billion from the litigation escrow
account into a settlement fund established pursuant to the definitive class settlement agreement.
A number of merchants have filed opt-out cases in various federal district courts. Some of these
cases have already been transferred by the Judicial Panel on Multidistrict Litigation for coordinated or
consolidated pre-trial proceedings to MDL 1720 and will be covered litigation under 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. See Note 3—Retrospective Responsibility Plan to our
consolidated financial statements included in Item 8 of this report.
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
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