A Fed spokesman said there was no immediate comment on the ruling.
The cap is the first-ever limit on debit card fees. Before it took effect in October 2011, banks had negotiated such fees with merchants. A big chain like Starbucks would likely get a better rate than a local coffee shop because it handles more customers. The fees were typically based on a percentage of the purchase price.
The Fed rule was called for by the 2010 financial overhaul law, which was enacted in response to the 2008 crisis. But Leon said in his ruling that the Fed disregarded Congress's intent in passing the law by "inappropriately inflating all debit-card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit-card transaction."
The retailers' lawsuit maintained that the cap is an "unreasonable interpretation" that exceeds the authority given to the Fed by the 2010 law. It also asserted that the Fed wrongly interpreted a provision of the law that requires that merchants have a choice of which bank network handles their transactions.
The retailers complained that the Fed had deviated from the law's intent by allowing additional costs to be factored into setting the level of the cap, costs which exceeded reasonable expenses incurred by banks in debit transactions.
Sen. Richard Durbin, D-Ill., the author of the provision of the 2010 law mandating a cap on swipe fees, called Leon's ruling a "victory for consumers and small business around the country (that) will lead to lower interchange rates for billions of debit-card transactions each year."
Durbin, who is the assistant majority leader in the Senate, had filed a legal brief supporting the retail groups' suit in the case.