Second Circuit Splits with Ninth Circuit on Enforcement of Class Action Waivers

by Ballard Spahr LLP

The U.S. Supreme Court may be asked to revisit the issue of class action waivers in arbitration agreements now that the U.S. Court of Appeals for the Second Circuit has refused to reconsider its February 1, 2012, decision in Italian Colors Restaurant v. American Express Travel Related Services Co.

The Second Circuit’s refusal to grant an en banc rehearing prompted dissents by the court’s chief judge and four other judges and creates a split in the circuits by not following the Ninth Circuit.

In Italian Colors, a Second Circuit panel had refused to enforce the class action waiver in the American Express arbitration agreement on the ground that it would effectively preclude the plaintiff from prosecuting its federal antitrust claims. By contrast, the Ninth Circuit recently held in Coneff v. AT&T Corp.—a case involving alleged violations of the Federal Communications Act and state laws—that there is no vindication of statutory rights exception to the Federal Arbitration Act (FAA).

The Second and Ninth circuits thus disagree on whether the so-called vindication of statutory rights theory is viable in light of the U.S. Supreme Court’s landmark decision in AT&T Mobility LLC v. Concepcion, which held that the FAA preempts state laws that refuse to enforce class action waivers in consumer arbitration agreements as unconscionable or against public policy.

In Italian Colors, the three-judge panel concluded that Concepcion did not preclude them from refusing to enforce the class action waiver because the plaintiff had shown that in order to prosecute its claims, it would be required to hire an expert who would charge exponentially more than the plaintiff’s potential recovery, and that those expert fees could not be recovered under the Sherman Act even if the plaintiff prevailed in an individual arbitration.

By contrast, in Coneff, the Ninth Circuit found Concepcion to be “broadly written” and held that the FAA required enforcement of the arbitration agreement’s class action waiver notwithstanding plaintiff’s argument that she would be unable to vindicate her statutory rights without a class action because her claims were worth much less than the cost of litigating them.

The split between the Second and Ninth circuits, as well as the sharp disagreement among the Second Circuit judges, could prompt the Supreme Court to take the issue up again. The Second Circuit’s decision to deny en banc rehearing elicited four opinions—one concurring in the denial and three dissenting opinions that supported rehearing.

Judge Rosemary S. Pooler concurred in the denial of en banc review, stating that the vindication of statutory rights analysis was an issue “untouched by Concepcion” since that decision dealt solely with FAA preemption of state unconscionability law and not whether parties can vindicate their rights under federal statutes. She also found Coneff to be distinguishable because it, like Concepcion, involved a situation in which the plaintiff would be able to vindicate her rights in an individual arbitration because she could recover her attorneys’ fees and costs if she prevailed.

But Second Circuit Chief Judge Dennis Jacobs, vigorously dissenting from the denial of rehearing en banc, found the panel ruling in Italian Colors to be “incompatible with the FAA” and the facts in Concepcion to be “materially indistinguishable.” In Concepcion, he argued, the Supreme Court rejected the vindication of rights theory in holding that arbitration agreements requiring individual arbitration must be enforced under the FAA even if “class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system.”

According to Chief Judge Jacobs, the panel decision would permit class action lawyers to sidestep Concepcion and avoid arbitration simply “by hiring a consultant (of which there is no shortage) to opine that expert costs would outweigh a plaintiff’s individual loss.”

Judge Jose A. Cabranes wrote a separate dissenting opinion “to underscore that the issue at hand is indisputably important, creates a circuit split, and … should be resolved by the Supreme Court.”

Any petition for certiorari filed by American Express would likely not be acted upon until the fall of 2012 at the earliest. We will be following this issue closely and will alert our readers to breaking developments.

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). It also produces the CFPB Monitor, a blog that focuses exclusively on important CFPB developments. To subscribe, use the link provided to the right. The CFPB recently launched a study of pre-dispute consumer arbitration agreements. Ballard Spahr is currently counseling several clients in connection with that study.

For more information, please contact Practice Leader Alan S. Kaplinsky at 215.864.8544 or, or Mark J. Levin at 215.864.8235 or

Written by:

Ballard Spahr LLP

Ballard Spahr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*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. Or, sign up using your email address.