American Express 2015 Annual Report Download - page 58

Following a non-jury trial in the DOJ case, the trial court found that the challenged provisions were anticompetitive
and on April 30, 2015, the court issued a final judgment entering a permanent injunction. Following our appeal of this
judgment, on December 18, 2015, the Court of Appeals for the Second Circuit stayed the trial court’s judgment as well
as related matters before the trial court pending the issuance of its appellate decision.
In addition to the DOJ case, individual merchant cases and a putative class action, collectively captioned In re:
American Express Anti-Steering Rules Antitrust Litigation (II), are pending in the Eastern District of New York against
us alleging that our anti-steering provisions in merchant card acceptance agreements violate U.S. antitrust laws. The
individual merchant cases seek damages in unspecified amounts and injunctive relief. These matters, including a trial
previously scheduled in the individual merchant cases, have been stayed pending resolution of the appeal in the DOJ
case.
Individual merchants have initiated arbitration proceedings raising similar claims concerning the anti-steering
provisions in our card acceptance agreements and seeking damages. We are vigorously defending against those claims.
In July 2004, we were named as a defendant in another putative class action filed in the Southern District of New
York and subsequently transferred to the Eastern District of New York, captioned The Marcus Corporation v. American
Express Company, et al., in which the plaintiffs allege an unlawful antitrust tying arrangement between certain of our
charge cards and credit cards in violation of various state and federal laws. The plaintiffs in this action seek injunctive
relief and an unspecified amount of damages. In December 2013, we announced a proposed settlement of the Marcus
case and the putative class action challenging our anti-steering provisions. The settlement, which provides for certain
injunctive relief for the proposed classes, received preliminary approval in the United States District Court for the
Eastern District of New York. On August 4, 2015, the court denied final approval of the settlement; further proceedings
are anticipated after resolution of the appeal in the DOJ case.
On March 20, 2015, a shareholder derivative action captioned Lankford v. Chenault, et al., and American Express
Co. was filed in New York State Supreme Court, New York County. The defendants include current and former
Company executives, current and former members of the Company’s Board of Directors and the Company itself, as a
nominal defendant. No demand preceded the filing of the complaint. The complaint alleges that the defendants
permitted and/or caused the Company to violate the antitrust laws through inclusion of its non-discrimination
provisions in merchant contracts, which led to the recent negative result in the DOJ case discussed above. Based on
those allegations, the complaint further alleges: breach of fiduciary duties by disseminating false and misleading
information in our SEC filings and other public statements; failure to maintain internal controls, and failure to properly
oversee and manage the Company; unjust enrichment; abuse of control; and gross mismanagement. The amount of
purported damages is unspecified in the complaint. On October 29, 2015, the court dismissed the action with
prejudice; the plaintiff has filed a notice of appeal.
On November 6, 2015, a putative representative action, captioned People of the State of California, ex. rel. Dennis
Herrera v. American Express Co. et al., was filed in California state court on behalf of the People of California by the
San Francisco City Attorney for the benefit of California merchants that accept American Express cards. The
complaint alleges that certain terms in our merchant agreements violate California law and seeks relief in the form of:
(1) a declaratory judgment; (2) an injunction preventing us from enforcing those terms; (3) statutory civil penalties in
an amount to be determined by the court; (4) restitution for alleged overcharges; and (5) attorney’s fees and cost of
suit. This action has been stayed pending resolution of the appeal in the DOJ case.
Corporate Matters
We are a defendant in a class action captioned Kaufman v. American Express Travel Related Services, which was
filed on February 14, 2007, and is pending in the United States District Court for the Northern District of Illinois.
Plaintiffs’ principal allegation is that our gift cards violated consumer protection statutes because consumers allegedly
had difficulty spending small residual amounts on the gift cards prior to the imposition of monthly service fees. The
Court preliminarily certified a settlement class consisting of (with some exceptions) “all purchasers, recipients and
holders of all gift cards issued by American Express from January 1, 2002 through the date of preliminary approval of
the settlement.” A final fairness hearing to consider approval of a class-wide settlement occurred on January 22, 2016.
On July 30, 2015, plaintiff Plumbers and Steamfitters Local 137 Pension Fund, on behalf of themselves and other
purchasers of American Express stock, filed a suit, captioned Plumbers and Steamfitters Local 137 Pension Fund v.
American Express Co., Kenneth I. Chenault and Jeffrey C. Campbell, for violation of federal securities law, alleging that
the Company deliberately issued false and misleading statements to, and omitted important information from, the
public relating to the financial importance of the Costco cobrand relationship to the Company, including, but not
limited to, the decision to accelerate negotiations to renew the cobrand agreement. The plaintiff seeks damages and
injunctive relief. We intend to vigorously defend against these claims.
On October 16, 2015, a putative class action, captioned Houssain v. American Express Company, et al., was filed in
the United States District Court for the Southern District of New York against the Company and certain officers of the
Company under the Employee Retirement Income Security Act of 1974 (“ERISA”) relating to disclosures of the Costco
cobrand relationship. The complaint alleges that the defendants violated certain ERISA obligations by: allowing the
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