Litigation over arbitration clauses is as ubiquitous as Marc Jacobs frocks at Lincoln Center during New York's Fashion Week. (Not a fashionista? Then let's just say we here at On the Case can'tstop writing about plaintiffs trying to get around mandatory arbitration clauses.) But rarely do we stop to think about how such clauses became standard in consumer contracts.

An order issued Wednesday by U.S. District Judge William Pauley of Manhattan federal court tells the story -- or, at least, plaintiffs' version of the story -- of how arbitration clauses ended up in the contracts governing all those credit cards in your wallet. Pauley seems to believe it's an important tale. He refused to grant a motion for summary judgment by Citigroup and Discover, who asked him to dismiss class action claims that credit card companies engaged in collusion to make arbitration clauses the industry standard. If lead class counsel Merrill Davidoff of Berger & Montague continues to have things go his way, the post-trial outcome could be a removal of the credit-card arbitration clauses altogether.

The case is part of a decade-old MDL that arose from the conversion fees credit card companies impose on cardholders for international purchases. A settlement of more than $325 million was finalized in 2011. In the present action, filed in 2005, the plaintiffs' accuse the credit card companies of violating antitrust laws in an alleged conspiracy to include mandatory arbitration clauses in their customer contracts. Most of the banks settled, leaving Citigroup and Discover as the last companies standing.

Between 1999 and 2003, the class asserted, representatives from several credit card companies met to discuss arbitration clauses, often at the Washington offices of the firm now named Wilmer Cutler Pickering Hale and Dorr. Exactly what was said at the various meetings (and who attended which ones) remains under debate, but the plaintiffs cited meeting agendas and other documents to support their claims of an antitrust conspiracy. These included an email indicating that, after a July 1999 meeting, a Citi attorney recommended to a colleague that she "compare notes" with an attorney for GE Capital. A September 1999 draft agenda recommended topics such as "how to set up an arbitration program" and "plain language vs. fine print and overkill." And on Valentine's Day 2001, a Citi in-house attorney attended a "Class Action Working Group" meeting whose topics allegedly included strategies to reduce "class action abuse."

Though the relevant motions were filed under seal, the order notes that the Citi and Discover officials who ultimately decided to include mandatory arbitration clauses in consumer contracts said in depositions they didn't even know the Wilmer meetings ever occurred. Discover said it had already decided to adopt an arbitration clause by April 1, 1999; Citi made the final decision to require arbitration in consumer contracts in September or October 2000.

Pauley agreed that mere attendance at the Wilmer meetings didn't amount to participation in an antitrust conspiracy. He proceeded to evaluate whether other "plus factors" tied Citi and Discover to antitrust violations. Pauley concluded that the defendants may have acted against their own self-interest by sharing sensitive business information with competitors. He also pointed to a deposition of a Citi in-house lawyer, who (according to the plaintiffs) revealed that Citi was concerned that customers would cancel their cards if the bank unilaterally adopted an arbitration clause.

Pauley repeatedly noted that the parties' interpretations of actions were questions of fact to be addressed by the jury. " his Court will not weigh competing inferences in resolving Defendants' summary judgment motions and must view the facts in the Plaintiffs' favor."

Berger & Montague isn't asking for damages in the antitrust case, but is instead seeking an injunction that would force Citi and Discover to remove mandatory arbitration clauses from their credit card contracts. That may sound a little far-fetched, but according to Pauley's order, some of the defendants that have already settled out of the litigation, including Bank of America, Capital One and Chase, have already "agreed to remove their arbitration clauses for three and a half years."

Citi counsel David Graham of Sidley Austin did not respond to a request for comment. Discover lawyer Robert Sperling of Winston & Strawn referred us to a Discover spokesperson, who declined comment.

(Reporting by Erin Geiger Smith)

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