US Supreme Court to consider fairness of arbitration in In re American Express Merchants Case

January 31, 2013 by

Supreme Court BlogI have noted on this blog that there have been a long string of cases where the Supreme Court has enforced arbitration clauses.  Most notable is the AT&T v. Concepcion decision.  In the course of doing that, though, the Supreme Court has always said that enforcing arbitration clauses won’t cause any harm, because (the Court has insisted and promised), arbitration is a forum where anyone with a valid legal claim can be heard fairly.  The Supreme Court has always said that arbitration is only acceptable where parties can “effectively vindicate their substantive rights.”  About eight cases make that statement.

In In re American Express Merchants Litigation, we’ll learn if the Court actually MEANT any of those promises.  This is the most important and most pro-consumer case involving a challenge to an arbitration clause that has come down since Concepcion.   In the case, a number of small business merchants brought a class action in court alleging that Amex is violating the Sherman Act with a Tying Arrangement (using its monopoly power over charge cards to force merchants to take all Amex-branded credit cards — and pay higher fees). Amex moved to force the case into individual arbitration (with no class action possible). The plaintiffs PROVED, with admissible evidence that was never controverted, that it would be impossible for them to pursue their antitrust claims, in court or arbitration, if they had to go forward on an individual basis. It would cost them hundreds of thousands of dollars to prove their cases in each case, even though their claims are typically only worth about $5,000.

But Amex, backed by the Chamber of Commerce, wants the Court to abandon the “effective vindication” doctrine, or more likely to redefine it in a way that would make it completely meaningless. They want the Supreme Court to enforce Amex’s arbitration clause, and class action ban, even though it means that small business plaintiffs will lose all their substantive rights under the antitrust laws. 

Public Justice filed an amicus brief objecting to Amex’s radical position.  The brief explains that if the Court severs the link between arbitration and the opportunity to be heard and obtain justice, then statutes that Congress enacted to protect consumers, small businesses, and workers from more powerful corporations will be gutted.  The brief also points out that the small-business plaintiffs suing Amex in this case may as well move to a nation that has no antitrust laws.  The brief argues that arbitration will become nothing more than a convenient way for stronger parties to immunize themselves from the law. It will have no arguable legitimacy, it will just be an exercise in power. 

In the conclusion, the brief says: “Petitioners’ proposal would change the underlying statute from the Federal Arbitration Act to the Federal Corporate Immunity Act, and would rob it of its legitimacy.”

Here’s the brief.

Steve Larson
An experienced trial lawyer who handles both hourly and contingent fee cases, Steve has expertise in class actions, consumer cases, antitrust litigation, securities litigation, corporate disputes, intellectual property disputes, unfair competition claims, employment matters, and disputes involving family wealth. Steve regularly represents individuals and businesses in federal and state court and has obtained class-wide recovery in multiple class actions. A veteran practitioner, Steve's clients value his creative approach to resolving complex litigation matters.

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