Employment Law Commentary -- Volume 25, Issue 7 July 2013 -- Supreme Court Buttresses Class Action Waivers

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In its recent decision in Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013), the U.S. Supreme Court further buttressed the use of class-action waivers in arbitration agreements, finding such waivers enforceable even if they would effectively prevent vindication of a federal statutory right. The decision both reinforces prior Court rulings involving class actions and arbitration, and removes some uncertainty as to the bounds of those decisions.

Previously, in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), the Court held that a party may not be compelled to submit to class arbitration absent an agreement to do so. In AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the Court held a class action waiver in an arbitration agreement enforceable, notwithstanding state law barring such waivers. In rejecting the argument that the class action waiver amounted to an unlawful exculpatory clause because small claims of the kind involved in the case would not be worth pursuing, the Court in AT&T Mobility noted various provisions in the agreement making such claims worth pursuing, notwithstanding the waiver. This created some uncertainty as to whether such provisions were necessary to make class waivers enforceable. The Am. Express opinion now removes that uncertainty. Class-action waivers are enforceable even if they effectively insulate a party from claims for violation of federal law. While the Court noted some possible limits to its holding, it made clear that preclusion of class procedures is not one of those limits.

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