American Express Co. v. Italian Colors Restaurant
570 U.S. 228
| SCOTUS | 2013Background
- Merchants (respondents) who accepted American Express (Amex) brought a putative class action alleging Amex violated §1 of the Sherman Act by forcing acceptance of higher-fee charge cards (tying); they sought treble damages under the Clayton Act.
- Merchant cardholder contracts contained an arbitration clause that required bilateral arbitration and expressly waived any right to class arbitration; it also barred joinder/consolidation and contained confidentiality and cost-shifting terms.
- Respondents submitted an economist affidavit estimating that the expert economic analysis needed to prove the antitrust claim would cost several hundred thousand to over $1 million, while individual trebled recovery would be at most about $38,549.
- Amex moved to compel individual arbitration under the Federal Arbitration Act (FAA); the District Court granted the motion and dismissed; the Second Circuit reversed, holding the class-waiver was unenforceable because individual arbitration would be prohibitively expensive.
- The Supreme Court granted certiorari to resolve whether the FAA permits courts to invalidate arbitration agreements on the ground they do not permit class arbitration and whether the "effective vindication" doctrine bars enforcement where arbitration of federal statutory claims would be economically infeasible.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAA permits courts to invalidate class-arbitration waivers for federal-law claims | Class-waiver prevents "effective vindication" of antitrust rights because individual arbitration is prohibitively costly | FAA requires enforcement of arbitration agreements as written; no congressional command overrides enforcement | The FAA requires enforcement of the bilateral arbitration clause; courts may not refuse enforcement solely because class arbitration is unavailable |
| Whether antitrust statutes or Rule 23 create a right to class adjudication that overrides an arbitration waiver | Antitrust policy and effective enforcement require class mechanisms when individual recovery is inadequate | Sherman/Clayton Acts do not mention class actions; Rule 23 is procedural and does not create a nonwaivable right to class adjudication | No implied congressional command in antitrust law or Rule 23 to invalidate class-waivers; no entitlement to class procedure that overrides FAA |
| Whether the "effective vindication" exception invalidates the waiver when individual arbitration is economically infeasible | A contract that makes enforcement of statutory rights futile (e.g., by making necessary proof unaffordable) operates as a prospective waiver and is unenforceable | Effective-vindication applies to clauses that bar assertion of statutory rights or make access impracticable (e.g., prohibitive filing fees); mere cost/expense of proving the claim does not eliminate the right | The exception does not extend to situations where proving the claim would be uneconomical; prohibitive costs of litigation do not automatically render an arbitration agreement unenforceable |
| Whether AT&T Mobility controls (preemption of state rule barring class-waiver) | N/A (plaintiff distinguishes) | AT&T holds FAA preempts rules conditioning arbitration enforcement on availability of class procedure; suggests FAA favors enforcing class-waivers | AT&T supports enforcing arbitration agreements according to their terms and rejects the notion that class arbitration is necessary to prevent claims from "slipping through" the system |
Key Cases Cited
- Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (2010) (class arbitration cannot be compelled absent an agreement to allow it)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preempts state rules that condition enforcement of arbitration agreements on availability of class arbitration)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (federal statutory claims are presumptively arbitrable so long as claim can be effectively vindicated in arbitration)
- Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79 (2000) (party alleging arbitration will be prohibitively expensive bears burden to show likelihood of such costs)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (statutory claims may be subject to arbitration; statutory permission of collective actions does not preclude individual arbitration)
- Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995) (inconvenience and cost of forum do not alone show that arbitration/foreign forum reduces substantive liability)