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Morgan Stanley wins ruling in $800m Discover case

06 January 2010  |  5173 views  |  0 Morgan Stanley web screen shot

Morgan Stanley has won a ruling in its lawsuit against Discover Financial Services that could see the card company forced to hand over hundreds of millions of dollars to its former owner.

In 2008 Discover agreed a $2.75 million settlement to a long running anti-trust lawsuit that accused rivals MasterCard and Visa of blocking access to the bank-issued card market in the US.

As part of a deal struck when Morgan Stanley spun off the card company in 2007, Discover was set to pay the bank the first $700 million recovered and half of any proceeds above $1.5 billion, up to a total consideration of $1.5 billion.

However, Discover argued it did not have to pay any money to Morgan Stanley because the bank had breached their agreement by engaging in secret talks with Visa and MasterCard, jeopardising the antitrust case.

This prompted the bank to file a suit claiming it was owed $1.2 billion by Discover, which then filed its own countersuit.

New York state Supreme Court Justice Barbara Kapnick has now ruled that Morgan Stanley's alleged breaches cannot excuse Discover's "obligation" to pay a share to the bank.

"Accordingly, plaintiff's motion for partial summary judgement on the fifth cause of action is granted," says the ruling.

According to press reports, Discover plans to appeal the ruling and says the court's decision has no bearing on its own case against Morgan Stanley.
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