Opinion
04 Civ. 7844 (BSJ).
June 30, 2005
MEMORANDUM ORDER
The defendants have moved to dismiss Discover's claims of injury and damages based on the defendants' "Honor All Cards" rules (the "HAC Rules").
Four of Discover's five antitrust claims rely, in part, on the HAC Rules: Claim Two, for conspiracy to restrain trade in relevant markets, Claim Three, for monopoly maintenance, Claim Four, for attempt to monopolize, and Claim Five, for conspiracy to monopolize. The complaint also makes a number of allegations regarding the HAC Rules, including that "[w]ithout the supra-competitive Visa/MasterCard debit interchange enabled by the HAC tying arrangements, Discover would have been able to compete on the merits for debit issuance against Visa and MasterCard on a level playing field," (Compl. at ¶ 71), and that "certain merchants . . . would have contracted with Discover for acceptance — exclusive or otherwise — of a lower priced, signature and/or PIN debit product" (Compl. at ¶ 72). Discover alleges that both it and competition have been harmed by the HAC Rules because without those rules, "debit transactions that settled on the Visa and MasterCard networks would have settled over the Discover and other competing networks at lower, competitive prices." (Compl. at ¶ 73.) In summary, Discover alleges that the HAC Rules, "both independently and in conjunction with 2.10(e) and the CPP, were exclusionary and were used for the purpose of restraining trade in and monopolizing the relevant markets," and that the HAC Rules "reinforced the insuperable barriers to Discover's entry into the debit market erected by the exclusionary rules and exacerbated their effect." (Compl. at ¶¶ 75, 76.)
Discover has conceded, both at oral argument and in its opposition papers, that it "is not making a tying claim." (4/14/05 Tr. at 51.) Consistent with that position, Discover's first claim, for a restraint of trade, is not based on the HAC Rules.
The defendants direct their motions to dismiss, however, at precisely such a tying claim. Visa's motion sets forth three primary arguments: (1) Discover fails to allege the elements of a tying claim based on the HAC Rules; (2) Discover fails to allege an antitrust injury from the HAC Rules; and (3) Discover lacks standing to assert claims for damages based on the HAC Rules. (Visa Br. at 18-23.) As to the first of these arguments, Discover makes no tying claim, and therefore it need not allege the elements of such a claim. Visa concedes that its second argument, based on Discover's failure to allege the requisite antitrust injury, relies on the assumptions that "Discover is now alleging a tying claim based on the HAC rule," and that "any such claim is independent of Discover's Rule 2.10(e) claims." (Visa Br. at 18.) Finally, Visa's standing argument targets an "HAC claim" based on "HAC injuries," which Discover does not assert. (Visa Br. at 21, 22.) MasterCard, for its part, also calls for dismissal of the "HAC claims of injury and damages based on the [HAC Rules]" because the complaint fails "to allege that MasterCard, individually, has sufficient market power in the tying product market — the general purpose card network services market." (MC Br. at 24.) MasterCard similarly presses this argument "to the extent that Discover is relying on its allegations that the HAC rules are an unlawful tie." (MC Br. at 25.)
MasterCard likewise argues that Discover fails to allege the elements required for a tying claim. (MC Br. 21-24.)
Discover does not bring a tying claim based on the HAC Rules. The defendants' motions to dismiss are therefore moot, as they seek dismissal of a non-existent claim. Because the defendants do not move to strike Discover's HAC allegations under Federal Rule of Civil Procedure 12(f), the Court does not reach the issue of whether those allegations are "irrelevant under any state of facts which could be proved in support of the claims being advanced." Yankees Entertainment Sports Network, LLC v. Cablevision Sys. Corp., 224 F.Supp.2d 657, 677 (S.D.N.Y. 2002) (internal citation omitted).
SO ORDERED.