In American Express Co. v. Italian Colors Restaurant, the Supreme Court considered an important question regarding the enforceability of arbitration agreements that contain class action waivers. In 2011, the Court held in AT&T Mobility LLC v. Concepcion that state law purporting to invalidate class action waivers in arbitration agreements is preempted by the Federal Arbitration Act. In Italian Colors, however, which involves a Sherman Act class action brought by retailers against American Express for alleged tying violations relating to its credit card agreements, the Second Circuit held that the “federal substantive law of arbitrability” invalidated the class action waiver provision in American Express’s arbitration agreements with merchants that accept its credit cards. The court of appeals reasoned that the class action waiver provision was invalid under federal law because it would “effectively preclude any action seeking to vindicate the statutory rights asserted by” the plaintiff class, given the prohibitive expense of trying to prove an antitrust claim on an individual basis. The Second Circuit concluded that Concepcion was inapposite, because there had been no showing there that “the practical effect of the enforcement would be to preclude [the plaintiff class’s] ability to vindicate their statutory rights.” The Supreme Court will now decide whether its Concepcion decision really did vindicate the ability of business defendants to enforce class action waivers in arbitration agreements, or instead whether plaintiffs can escape such provisions whenever they can show that individual litigation of federal claims would be prohibitively expensive.
Our expert, Thomas G. Hungar of Gibson, Dunn & Crutcher, attended the oral argument and then provided his analysis of the merits of the case and the possible outcomes in light of the oral arguments.
- Mr. Thomas G. Hungar, Partner, Gibson Dunn & Crutcher LLP
- Moderator: Mr. Dean A. Reuter, Vice President & Director of Practice Groups, The Federalist Society