The "Effective Vindication" Doctrine is a Virtual Dead Letter After American Express Co. v. Italian Colors Restaurant

On June 20, 2013, the U.S. Supreme Court, in American Express Co. v. Italian Colors Restaurant, No. 12- 133, held that the Federal Arbitration Act (FAA) requires courts to enforce a contractual waiver of class action procedures in an arbitration clause, even where the practical effect of such a waiver is to bar claimants from asserting claims under federal law because they have no economic incentive to arbitrate them on an individual basis. Some courts, including the U.S. Court of Appeals for the Second Circuit in Italian Colors, had refused to enforce such class action waivers on the ground that they prevent the “effective vindication” of a federal statutory right. The Court rejected that argument, declaring that “the FAA’s command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims.”

The groundwork for the Italian Colors decision was laid two years ago, in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). In that case, the Court held that the FAA preempted a California state court rule invalidating class arbitration waivers where the plaintiff alleged that the defendant had “carried out a scheme to deliberately cheat large numbers of consumers out of small amounts of money.” Some commentators speculated that the impact of that holding might be limited by two factors. First, Concepcion involved claims under state, not federal, law, and there was speculation that the Supreme Court might be more willing to strike down a class action waiver if it barred enforcement of a federal claim. Second, the arbitration clause in Concepcion included several consumer-friendly provisions, including provisions that required AT&T to pay a minimum amount of $7,500 plus twice the amount of the claimant’s attorney’s fees in the event that the claimant were to win an award larger than AT&T’s final written settlement offer. Some commentators wondered whether the Court would refuse to enforce a class action waiver that did not contain these or other features that preserved a financial incentive to arbitrate individual claims.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

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.

© Schnader Harrison Segal & Lewis LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.
×
Loading...
×
×