A federal court in New York offered a new lease on life to a lawsuit charging some of the nation's largest banks with colluding to force credit card customers into arbitration.

The United States Court of Appeals for the Second Circuit in Manhattan on Friday vacated a lower court decision dismissing class-action claims against all of the major banks—including Bank of America, Capital One Bank, Chase Bank, and Citibank. The court ruled that antitrust claims, based on allegations that the banks colluded to insert such clauses into their credit card contracts, could proceed.

The antitrust claims, which seek to invalidate these mandatory clauses, arose during a class action against the banks involving currency conversion. In the course of that litigation, which involves three different cases, the plaintiffs' lawyers discovered that the bank formed an "arbitration coalition" and held at least 18 meetings, during which they honed their mandatory-arbitration clauses to make it clear that cardholders also waived their right to participate in class actions. The clauses started appearing in contracts in 1999 and 2000.

By a combination of fate and creative lawyering, it seems the banks may have to face up to charges that they colluded to put these clauses into their contracts. The clauses are "almost uniform," according to Merrill Davidoff of Philadelphia's Berger & Montague, lead counsel for the plaintiffs. Because he is seeking an injunction, there are no money damages on the line.

"It was such a travesty of justice, we felt duty bound to bring these cases," says Davidoff.

Bank of America led the charge inserting mandatory-arbitration clauses into the bills of its credit card customers back in 1992.
 
For more than a decade, lawyers for consumers have been pushing claims challenging mandatory arbitration, but none of them has been very successful: The United States Supreme Court gave the green light to mandatory-arbitration clauses in brokerage contracts in 1987, in a case called Shearson/American Express v. McMahon, and the financial-services industry has basically thumbed its nose at consumer complaints ever since.

In the most recent suit, the trial court had dismissed these claims, finding the plaintiffs did not have what is known as "standing" to bring a lawsuit. Standing requires that there be a "case or controversy" for a lawsuit to go forward in federal court, and the trial court found the alleged antitrust injuries of the cardholders to be "entirely speculative."

It all may sound technical, but standing is a chief weapon conservative justices on the U.S. Supreme Court—among them Justice Antonin Scalia—have relied on to halt lawsuits in their tracks. On Friday, the Second Circuit went out of its way to point out that this is a very early victory. "We do not address the question of whether the cardholders' alleged injuries would survive an antitrust standing analysis," according to the unanimous decision from the three-judge panel.

The consumer claims go back to the trial court for further hearings. Meanwhile, Congress has basically stalled on a billed called the Arbitration Fairness Act of 2007, a bid by consumer groups to make mandatory arbitration in consumer and employee contracts null and void.

A spokeswoman for Bank of America said the bank had no comment on the decision. "We haven't even seen the ruling at this point," she said.