In his 21-year career as an antitrust lawyer, Lloyd Constantine has prosecuted the likes of Panasonic, Mitsubishi, Aetna, and Allstate and has settled suits against giants like Time Warner and America Online. But his largest case to date is still being fought: a class action against Visa U.S.A. and MasterCard International.
The lawsuit was filed in 1996 by Wal-Mart Stores Inc. and subsequently joined by other merchants and retailing associations. Its scope is dizzying: The class that has been certified includes more than four million U.S. retailers, who are seeking damages that could total $50 billion. More than 400 depositions have been taken compared with 80, for example, in the Justice Departments case against Microsoft Corp.
Its really the Super Bowl for us, said Mr. Constantine, 53, who estimates that the 11 lawyers on his firms team assigned to this case have already dedicated thousands of hours to preparing it. A trial will be scheduled after a panel of appellate judges rules on Visas and MasterCards challenge to the plaintiffs class status.
At issue is the honor all cards rule of Visa and MasterCard, which stipulates that merchants who accept their credit cards must accept all other cards with the association logos, including debit cards. The merchants contend the interchange rates charged by the associations for these debit cards are too high, particularly when compared with the analogous fees on other debit cards that do not bear the Visa or MasterCard names. They would like lower fees and the ability to choose whether to accept these debit cards at all.
The retailers contend that the tying of one product to another in this case, credit cards to debit cards violates antitrust law. They seek to recover what they consider to be overpayments. As Mr. Constantine put it, the damages being sought are based on the difference between the interchange paid and the interchange that would have been paid but for the practices we are calling illegal.
These fees have long been controversial. Some opponents have likened them to a tax imposed on the retail industry. But Mr. Constantine does not make that argument. That is for another day and another case, he said. Were not challenging the concept of interchange fees.
In a recent interview in his office, Mr. Constantine touched on what he termed the aesthetics of the case. He dashed from a couch to a high stack of papers, patting the pile to call attention to the magnitude of the effort, the number of things that have been done, the quality and intellectual level at which its been done by the judge, by the opponents, by us.
The Wal-Mart case, he said, is likely to be the most professionally satisfying case Ive ever been involved in. It will be the case Ive put the most work into, for sure. By the time its over, there will have been one or two very important appellate arguments, a long complicated trial, and terrific motions made in court.
Though Mr. Constantine, who founded his New York firm Constantine & Partners in 1994, has made a business of both representing and pestering large companies, he does so with the idealistic fervor of a public defender, which is how he started his career.
Mr. Constantine said his outlook was shaped by graduating from a lefty school during the height of counterculture ferment Williams College, 1969. After earning his law degree at Columbia University in 1972, he went to work in the civil rights and civil liberties division of the Brooklyn Legal Services Department a job he described as the most important work I ever did and will ever do in law.
Eight years into his career there, Mr. Constantine won a case for a class of 59,000 elderly and disabled people who had sued the government after failing to get benefits owed them. Mr. Constantine went up against lawyers from the New York attorney generals office and the Justice Department. A few days later, he got a call from the representatives of the then-attorney general, Robert Abrams, who approached him about a job based on his victory in court.
Mr. Constantine recalled, I said, You guys are the last people I would ever want to work for. I represent the people. You are the oppressors.
Thinking it over, Mr. Constantine began to see a philosophical tie between civil rights law and antitrust work. Both have to do with freedom, he said. So he scheduled an interview with Mr. Abrams, bought himself a business suit, and marched in to ask the New York attorney general to hire him as head of the antitrust division.
I interviewed him, and I said, Mr. Constantine, am I crazy? Mr. Abrams recalled recently. Youre a Brooklyn Legal Services lawyer. I, as attorney general, should appoint you to be the chief of the antitrust bureau of the New York State Attorney Generals office? And he said, Without question.
Mr. Abrams hired him.
During his tenure, Mr. Constantine led the antitrust task force for the National Association of Attorneys General, an organization spearheaded by Mr. Abrams. The post amounted to a second job for Mr. Constantine. At the state level, he continued to prosecute ambulance companies, road-paving companies, snow removal companies, milk companies, and as the lead prosecutor for the association task force, he brought cases against the largest corporations in the media, health insurance, and electronics industries, also setting a nationwide guideline for mergers and product-tying practices.
George W. Sampson, a partner in the Seattle firm Hagens & Berman and co-counsel for the plaintiffs in the Wal-Mart suit, met Mr. Constantine while working for Brooklyn Legal Services and subsequently followed him to Mr. Abrams office. He said the work Mr. Constantine undertook in the attorney generals office, especially in organizing a national task force, helped to counter a general laxness in antitrust enforcement, which had set in at the federal level.
By this time, it was the 1980s, and antitrust enforcement on the federal level was shrinking back and being less aggressive under Ronald Reagan. The states stepped in to fill that vacuum, Mr. Sampson said.
The antitrust task force became nearly as formidable an opponent as the federal government would have been, Mr. Constantine said. These were the kind of cases you expected the federal government to do, and they werent doing any of it, he said. If antitrust had been a pizza pie, youd be left with an M&M.
Eliot Spitzer, the current New York attorney general and a co-founder of Constantine & Partners, said Mr. Constantines work for the state and for the National Association of Attorneys General earned him a reputation as a kind of antitrust guru.
Lloyd is the kind of guy you want to bounce theories off, to ask, Does this work? How does this fit into the larger context of antitrust law? said Mr. Spitzer, who left the firm in 1999 when he took the attorney general post.
Mr. Abrams, who is now a partner in the New York firm Strook & Strook & Lavan LLP, called Mr. Constantine as formidable an adversary as any lawyer can have. Whoever is on the other side: Beware.
Under Mr. Constantines leadership, the antitrust task force of attorneys general began scrutinizing Visa and MasterCard. The 1984 decision in Nabanco (National Bancard Corp.) v. Visa by the 11th U.S. Circuit Court of Appeals established that Visas setting of interchange fees did not constitute price-fixing and did not harm competition as the merchant processor Nabanco had alleged. The Supreme Court declined to hear Nabancos appeal. The ruling effectively legalized interchange fees. Afterward Mr. Constantine designated a team within the antitrust group to keep an eye on Visa and MasterCard.
Mr. Constantine, along with a handful of economists and members of the Federal Trade Commission, remained irritated by the courts reasoning in the Nabanco case. In a hearing before the trade commission, he once referred to the decision as perhaps the most contemporaneously ignorant statement of fact and of the reality of the marketplace that I have ever encountered.
In 1989, five years after the appellate ruling, Mr. Constantines task force of attorneys general sued Visa and MasterCard, alleging an antitrust violation in a joint venture idea known as Entrée, which would have been a national, online debit card system with a unique logo and network. The task force alleged that a unified, national point of sale network would stifle competition. The associations settled the suit by pulling out of the venture.
In 1991, Mr. Constantine entered private practice, joining the New York office of the Chicago law firm McDermott Will & Emery. He had stayed in the attorney generals office longer than he had intended, he said, because the work just kept getting better and better. But in 1988 when the Democrat lost the presidential election, he saw that his ambition of heading the antitrust division in Washington would not be realized.
It also struck him that he had been practicing law for nearly 20 years and had not yet earned a big salary. By that time, he and his wife, Jan Friedman Constantine, who is now general counsel for News America Publishing and Marketing, had three children.
At McDermott Will, he briefly represented Visa U.S.A. in a case that barred Sears, Roebuck & Co. now a plaintiff in the Wal-Mart case from issuing Visa cards to its customers. Far from seeing any conflict of interest, Mr. Constantine said his earlier prosecutorial work against Visa had made him particularly well-qualified to represent it. I remember being asked, Why would Visa or MasterCard hire you, given the recent [Entrée] thing? And I said, Well, if they had their heads screwed on, Id be the first person theyd hire.
McDermott Will was taken off the case after six weeks when it was discovered that the firm had previously done legal work for Dean Witter, then the issuer of the Discover card, which was involved in the allegations Visa was making against Sears. It happened before I had really gotten into it, Mr. Constantine said.
M. Laurence Popofsky, a partner in Heller Ehrman White & McAuliffe LLP of San Francisco, which represents Visa U.S.A., said Mr. Constantines onetime relationship with Visa has not been raised as a problem in the Wal-Mart case. He had expertise in a field which Visa chose to access, said Mr. Popofsky.
Mr. Constantine spent three years at McDermott Will before leaving to form Constantine & Partners, an antitrust boutique. The firm, which has 23 lawyers, both makes antitrust accusations and defends corporations against them. It recently was antitrust counsel to the transaction processor Concord EFS of Memphis, which has been buying up electronic funds transfer networks.
In other recent cases, the firm has reached settlements with the former Time Warner Inc. in a lawsuit alleging that its cable television operations suppressed competition, and with Time Warners merger partner, America Online Inc., in a case involving monopolization claims. In another suit, which is pending, the firm is defending large health maintenance organizations in New York City.
In the Wal-Mart case, Mr. Constantine is merely reapplying his expertise, Mr. Popofsky said. Lloyd is an extremely tenacious litigator, he said. He understands this industry, and hes determined that some inherent antitrust issues regarding Visas and MasterCards organizations make a juicy target, particularly if he can get that target before a jury.
The cast of characters involved in the Wal-Mart case overlaps with the players in the Justice Departments antitrust case against Visa and MasterCard. Mr. Popofsky and his colleagues represented Visa in the latter case, and there may be some witnesses in common.
In 1998, Judge Barbara Jones, who is presiding over the Justice Department suit, gave the government access to all documents produced by Visa and MasterCard in the Wal-Mart case. All depositions for the case were also ordered to be given to the government.
Last year, after a motion by the Justice Department, Judge John Gleeson, who presides in the Wal-Mart suit, ruled that the government could also have access to the plaintiffs lawyers work product, which includes all analysis, notes, and commentaries by Constantine & Partners. The firm complied, with the stipulation that it would not lose its privilege over the documents and have to release them to Visa and MasterCard. And I have to say that weve never gotten a blessed thing from the Justice Department, Mr. Constantine said. Its been a one-way street the whole way.
According to Mr. Spitzer, government lawyers know Mr. Constantines history and reputation. The folks I know on the government side view him as a very useful and a very powerful ally in a lot of antitrust actions that he brings, Mr. Spitzer said.
Back in his midtown Manhattan office, Mr. Constantine is able to let down his guard a bit. The battles against the bank card associations have taken some toll. What youre hearing is a very tired man talking to you, he said.