A recent decision by the United States Supreme Court in American Express Co. et al. v. Italian Colors Restaurant et al., __ U.S. __ (June 20, 2013) marks a victory for many seeking to minimize their class action exposure through execution of arbitration agreements with consumers or employees. Reversing the Second Circuit Court of Appeals [In re American Express Merchants’ Litigation, 667 F.3d 204 (2d Cir. 2012)] and finally resolving a dispute between American Express and merchants who accept the credit card that dates back to 2003, the Supreme Court held that the Federal Arbitration Act (“FAA”) does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery. The thrust of the Court’s reasoning relied upon well-established contract principles and stressed that the express terms contained in arbitration agreements must be “rigorously enforced.” The Court further explained that, because the FAA’s mandate in this instance is not overridden by any contrary congressional command requiring rejection of the class action waiver, its invalidation of a private arbitration agreement would likely abridge other federal rights. In response to plaintiffs’ contention that the “prohibitively high cost” of compliance would frustrate policies underlying enforcement of antitrust laws, the Court noted that “antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.” Id. At 4. Finally, the Court distinguished plaintiffs’ assertion that the judge-made “effective vindication” exception to the FAA, the scope of which was intended to prevent the prospective relinquishment of a party’s right to pursue statutory rights or remedies. “The class-action waiver merely limits arbitration to the two contracting parties. It no more eliminates those parties’ right to pursue their statutory remedy than did federal law before its adoption of the class action for legal relief in 1938.” Id. at 7.
A full copy of the United States Supreme Court decision can be found here.