The Second Circuit Refuses to Enforce a Class Action Waiver Under the FAA


In the wake of an increasing refusal by courts to enforce class action waivers under state unconscionability law, the Second Circuit has called into question the continued viability of such waivers under the Federal Arbitration Act (“FAA”).

On January 30, 2009, the Second Circuit refused to enforce a class action waiver contained in American Express Company’s merchant agreement. In re American Express Merchants’ Litigation, No. 06-871 (2d Cir. 2009). Filed on behalf of merchants who accept American Express cards, the suit alleges that American Express has engaged in an illegal “tying arrangement” in violation of the Sherman Act by conditioning acceptance of its charge cards on acceptance of its Card Acceptance Agreement, which contains an “Honor All Cards” provision.

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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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