Decision Alert: Supreme Court Holds Class Action Waiver in Arbitration Agreement is Enforceable

In a 5-3 ruling in American Express Co. v. Italian Colors Restaurant (“Amex”), 570 U.S. ___ (2013), the Supreme Court reversed the Second Circuit and held that an arbitration provision that barred class actions was enforceable.

After originally ruling that the arbitration provision was unenforceable, the Second Circuit twice reconsidered its decision in response to intervening Supreme Court cases that evidenced a strong federal policy favoring the enforcement of arbitration provisions. But on both occasions, the Second Circuit reaffirmed that the provision was unenforceable because the only economically feasible way for plaintiffs to bring their antitrust claim against American Express was to do so as a class. Reversing the Second Circuit, the Supreme Court held that “antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.” (slip. op., at 4). And extending its decision beyond antitrust claims, the Court declared that “the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.” (slip op., at 7) (emphasis in original). Thus, the Court found that the class action waiver “no more eliminates those parties’ rights to pursue their statutory remedy than did federal law before its adoption of class action legal relief in 1938.” Id.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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