In another employer-friendly decision, the U.S. Supreme Court reinforced its support for class action waivers, ruling in American Express Co. v. Italian Colors Restaurant that an explicit class action waiver in an arbitration agreement cannot be invalidated simply because the plaintiff’s cost of individually arbitrating a claim exceeds the potential recovery.
Justice Scalia, writing for the five-judge majority, distinguished the right to pursue a claim from the expense involved in proving a claim: “[T]he fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue the remedy.”
The American Express decision clarified that the Court’s earlier decision in AT&T Mobility LLC v. Concepcion was not limited to the Federal Arbitration Act’s preemption of state law, as had been interpreted by some lower courts. Rather, courts must “rigorously enforce” arbitration agreements according to their terms, even for claims alleging violation of a federal statute, unless the FAA’s mandate has been overridden by a contrary congressional command.
Although American Express was decided in the context of an antitrust case, it will assist employers in wage-and-hour litigation, where class waivers frequently have been challenged, and cost of individual arbitration is a common argument invoked by plaintiffs.
American Express is also significant to California employers seeking to enforce waivers of representative Private Attorney General Act (“PAGA”) claims, as the decision makes clear that the right to pursue a claim as a class (or presumably as a group) can be bargained away so long as the ability to pursue the underlying cause of action remains.