Recent case you might find of interest regarding the United States Supreme Court upholding a contractual waiver of class arbitration.
This case involves merchants filing a class action antitrust suit against American Express. See American Express Co. v. Italian Colors Restaurant, 133 S.Ct. 2304 (2013). Respondents are merchants who accepted American Express cards. The contract between parties contained a clause that required all disputes between said parties to be resolved by arbitration and that no claims could be arbitrated on a class action basis. Respondents brought a class action suit against Petitioners for violation of the federal antitrust laws due to American Express allegedly using its monopoly power in the market for charge cards to force merchants to accept credit cards at rates about 30% higher than the fees for competing credit cards.
The District Court granted Petitioner’s motion to compel arbitration under the Federal Arbitration Act and dismissed the lawsuits. However, the Second Circuit Court of Appeals reversed and remanded for further proceedings due to Respondents establishing that since “they would incur prohibitive costs if compelled to arbitrate under the class action waiver,” the waiver was unenforceable and the arbitration could not proceed. The United States Supreme Court reversed the decision of the Second Circuit Court of Appeals due to Respondents not being able to provide evidence that the contract itself should be revoked. The merchants challenged the allegedly unlawful class action provision but the contract’s arbitration clause prevented them from doing so.
The Supreme Court’s ruling provides businesses with a powerful tool with which to reduce litigation. It appears that a class waiver can be added to arbitration provisions as long as the contract does not prevent a party from pursuing antitrust or other federal claims, or impose excessive fees.
No information in this article is intended to constitute legal advice. For specific legal advice, please contact an attorney.