Last week’s Supreme Court decision in American Express Co. v. Italian Colors Restaurant builds on a recent line of pro-arbitration rulings – including Stolt-Nielsen, S.A. v. Animal Feeds Int’l Corp. and AT&T Mobility LLC v. Concepcion – and reaffirms the Court’s commitment to enforcing arbitration agreements. In a 5-3 opinion by Justice Scalia, the Court held in Italian Colors that a contractual provision mandating individual arbitration by means of a class action waiver is enforceable under the Federal Arbitration Act (FAA), even if the costs of individual arbitration outweigh the potential recovery. Plaintiffs had argued that the costs of individual arbitration were so high that they would not be able to “effectively vindicate” their federal statutory rights under the antitrust laws. But the Supreme Court shut the door on plaintiffs’ repeated efforts to push for the application of this “effective vindication” exception that had been crafted by lower courts (including those in the Second Circuit). That exception had its origins in dicta and had never been applied by the Supreme Court.
In sum, it just got even harder to invalidate mandatory arbitration provisions. The Supreme Court’s decision is an “and we really mean it” message to the lower courts when it comes to mandatory arbitration provisions.
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