Large merchants are sharpening one of their arguments against a class-action lawsuit settlement with Visa and Mastercard over card fees: the pact might be unconstitutional.

In objecting to the proposed settlement with the two largest card networks, big merchants – including Walmart and Circle K Stores – argue that forcing their inclusion in the settlement class violates their due process rights under the Fifth and Fourteenth amendments.

Millions of merchants have been battling the two card networks for 21 years, seeking relief from what they consider excessive fees they pay every time a customer swipes a credit card. The case is being overseen by U.S. District Judge Brian Cogan in Brooklyn, New York.

Merchants and the National Association of Convenience Stores, also known as NACS, are asking Cogan to allow them to opt out of the plaintiffs’ class, or to decertify the class entirely given its enormous size and diversity. 

For the big retailers, the settlement’s constitutional “infirmities” rest on the fact that the court has declined to permit class members to quit a mandatory class seeking injunctive relief from fee practices of the card networks and large card-issuing banks, according to their court filings last week. 

“Before an absent class member is compelled to participate in a vast reordering of significant economic relationships to which it is a party, due process requires that it be afforded the right to opt-out,” Walmart wrote Sept. 14 in its 299-page objection, citing the Fifth and Fourteenth amendments’ clauses against restricting due process. 

The Fourteenth Amendment to the constitution and the Fifth Amendment both pertain to U.S. citizens having the right to due process in court.

Walmart’s concerns over due process and government seizure of its claims are “fairly novel arguments,” said Eugene Rome, the founder of Rome LLP, a Los Angeles law firm that handles payments disputes and other fintech litigation. “You’ve got vastly different merchants here, which I think is a critical component” of the class action, he added Monday in an interview.

A mandated injunctive-relief class negotiated by lawyers for the two sides “was not intended to impose on class members anything like the deprivations of rights — engineered by Class Plaintiffs and Defendants together — that would be created here,” Walmart wrote in its objection.

“NACS and its members who oppose the settlement have a right to their day in court, and a settlement approval they cannot opt out of violates the Fifth Amendment’s Due Process Clause,” that association said Sept. 14 in its separate filing. 

Beyond the issue of merchant opt-outs and whether the class should remain intact, last week hundreds of merchants who don’t like the settlement asked Cogan to deny final approval of the settlement. Two prior settlements were nixed by courts, most recently in June 2024.

An attorney for Walmart, Jesse Panuccio, a partner with law firm Boies Schiller Flexner, also wrote that “ensnaring” the retail giant in a mandatory class “would raise serious Takings Clause concerns” under the Fifth Amendment. 

That’s because, “when the government extinguishes a private legal claim, it ‘transfer[s] ownership of [that] cause of action to itself’ and commits ‘a Fifth Amendment taking,’” Walmart’s lawyers argued, citing a 2015 decision by the U.S. Court of Federal Claims. 

This issue of constitutional defects isn’t new to the card-fee litigation, which originated in 2005. 

Panuccio raised them at an April hearing before Cogan during arguments at the preliminary approval stage. Cogan, who is overseeing the case in the Eastern District of New York, granted preliminary approval in June.

Walmart’s “slightly stronger” due-process argument rests on the idea that courts don’t allow parties to exit a class seeking injunctive relief from a defendant, Rome said. 

“The unique thing about an injunctive class is that you cannot opt out,” he said. As a result, the court is “in effect extinguishing valuable future claims” that Walmart and other large merchants would likely pursue.

Walmart’s right to leave the settlement comes from “the atypical nature” of the particular settlement, which is “like no other ever approved under” Rule 23, the company wrote, referring to the section of the Federal Rules of Civil Procedure pertaining to class actions.

“A small number of named Plaintiffs seek to entrench, through the judicial process, critical commercial terms governing the future economic relationship between each of millions of class members and the Defendants, encompassing trillions of dollars in financial transactions,” Walmart wrote in a Sept. 14 motion filed with the court. 

The class counsel have until Oct. 14 to respond to the filings.