At the end of last week, the Supreme Court decided American Express Co. v. Italian Colors Restaurant, which further refined the Court's approach to arbitration of class actions. Most importantly, it eliminated the "vindication of rights" exception to enforcing arbitration clauses. (That was the doctrine that held that a court need not compel arbitration of a putative class action if it would practically prevent the plaintiff from vindicating her rights in a cost-effective manner.)
In Italian Colors, a group of merchants filed an antitrust class action against American Express, alleging that it had violated Sherman Act. American Express invoked its arbitration clause, which included a class-action waiver. The plaintiffs argued that the waiver should not apply to them, because it would cost too much for an individual plaintiff to hire the experts needed to vindicate its rights under federal law. The trial court agreed, and so, over the course of three opinions, did the the Second Circuit.
The Supreme Court granted certiorari to decide whether a class action waiver could be invalidated because of the difficulty the plaintiff would face in vindicating its rights. Justice Scalia wrote the opinion for the 5-3 majority. (Justice Sotomayor abstained from participation.)
As far as the majority was concerned, the question was what the contract actually said.
This text reflects the overarching principle that arbitration is a matter of contract. And consistent with that text, courts must "rigorously enforce" arbitration agreements according to their terms, including terms that "specify with whom [the parties] choose to arbitrate their disputes," and "the rules under which that arbitration will be conducted.
(Internal citations omitted.) Indeed, as the Court pointed out, the question was largely resolved by its decision in Concepcion.
But, just as important as the contractual analysis was Justice Scalia's reasoning in putting aside the vindication argument:
Nor does congressional approval of Rule 23 establish an entitlement to class proceedings for the vindication of statutory rights. To begin with, it is likely that such an entitlement, invalidating private arbitration agreements denying class adjudication, would be an "abridg[ment]" or modif[ication]" of a "substantive right" forbidden to the Rules, see 28 U. S. C. §2072(b). But there is no evidence of such an entitlement in any event. The Rule imposes stringent requirements for certification that in practice exclude most claims. And we have specifically rejected the assertion that one of those requirements (the class-notice requirement) must be dispensed with because the "prohibitively high cost" of compliance would "frustrate [plaintiff's] attempt to vindicate the policies underlying the antitrust" laws."
(Emphasis added, internal citations omitted.)
The holding has obvious importance for defendants. But the language the Court used is also of great use. Leaving aside the reaffirmation of the Rules Enabling Act analysis, defendants should be leading off with the observation that "[t]he Rule imposes stringent requirements for certification that in practice exclude most claims." In the last three Terms, the Court has taken pains to explain that there is no right to have a case proceed as a class action. This may be the clearest expression of that axiom.