Two terms ago, the U.S. Supreme Court dealt a near-death blow to consumer class actions in an arbitration ruling. This term, the justices may finish the job.
Consumer advocacy organizations, such as Public Citizen and Public Justice, as well as AARP and even a number of arbitration law scholars and arbitrators, are facing off against the U.S. Chamber of Commerce, the American Bankers Association, Financial Roundtable and others in American Express Co. v. Italian Colors Restaurant.
American Express is asking the justices to overturn a ruling by the U.S. Court of Appeals for the Second Circuit. That appellate court had held that the company's arbitration agreement, which includes a class action waiver, was unenforceable because it would prevent merchants suing American Express from effectively vindicating their federal statutory rights—here, rights under the antitrust laws.
Representing American Express, Michael Kellogg of Washington's Kellogg, Huber, Hansen, Todd, Evans & Figel, contends that the Supreme Court has never endorsed the "effective vindication of federal statutory rights" as a limit on the Federal Arbitration Act's command that arbitration agreements be enforced according to their terms.
But, citing a 1985 Supreme Court ruling, Paul Clement of D.C.'s Bancroft, counsel to the merchants, argues that the court, for more than 25 years, has recognized that federal statutory rights may be resolved through arbitration only "so long as the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum."
Although the American Express challenge, which will be argued Feb. 27, is a business-to-business arbitration case, it has huge stakes not just for antitrust law but for labor and employment law as well, both sides agree. The United States has filed an amicus brief supporting the merchants.
"American Express is going for a rule that in every case, the class action ban is always enforceable," said F. Paul Bland of Public Justice, who filed an amicus brief supporting the merchants on behalf of his own organization, AARP and the American Association for Justice.
However, referring to the court's ruling two terms ago in AT&T Mobility v. Concepcion, Andrew Pincus of Mayer Brown, amicus counsel to the Chamber of Commerce and the Business Roundtable, countered that a ruling for American Express, "is a ruling that follows almost inevitably from Concepcion. I think to some extent the Rubicon has been crossed."
Disagreeable agreement
American Express' standard card acceptance agreement contains a mandatory arbitration clause. It also states that "there shall be no right or authority for any Claims to be arbitrated on a class action basis," and that "Claims may not be joined or consolidated" with claims brought by other merchants. The prevailing party is not permitted to shift its costs to the other party, and it contains a confidentiality provision that prohibits the disclosure of information obtained in an arbitration proceeding.
A number of small business merchants brought a class action in federal court alleging that American Express was violating Section 1 of the Sherman Act by engaging in an unlawful tying arrangement. The credit card giant, they alleged, used its market power in corporate and personal charge cards to compel them to accept the company's mass-market credit and debit cards at higher merchant-fee rates than charged by other companies.
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