(Reuters) — Morgan Stanley won a key ruling in a lawsuit against Discover Financial Services that could lead to the investment bank receiving close to $800 million from the credit card company.
Discover said it would appeal Monday's ruling by New York State Supreme Court Justice Barbara Kapnick, which called for it to give Morgan Stanley part of its $2.75 billion of winnings from a separate lawsuit it filed against Visa Inc. and MasterCard Inc.
In that lawsuit, Discover accused the rival card networks of harming its business by preventing banks that issue MasterCard and Visa cards from also issuing Discover cards.
Morgan Stanley had argued it was entitled to part of the recover under terms of an agreement under which it spun off Discover in June 2007. It sued Discover the following year.
Discover said it did not have to pay money to Morgan Stanley because the investment bank interfered in its negotiations with Visa and MasterCard, violating an agreement over how to handle that litigation.
The company has countersued Morgan Stanley, accusing it of interfering with the Visa and MasterCard litigation in a way that gave it no choice but to accept a settlement it did not want.
"Throughout these negotiations, Morgan Stanley engaged in unauthorized negotiations with and made a $100 million payment to Visa and MasterCard that negatively affected the outcome of our final settlement," Discover said in its statement.
Morgan Stanley said on Tuesday: "We are pleased with the court's opinion, which confirms that Discover is in breach of contract, and that there was never any basis for Discover to withhold payment to us."
In 2008, Morgan Stanley said it was entitled to $1.2 billion before taxes from the Visa and MasterCard settlement. That equals roughly $785 million after taxes, plus accrued interest, according to a person familiar with the matter.
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