American Express v. Italian Colors Restaurant

Case Updates

The Supreme Court held that the 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 U.S. Chamber urged the Supreme Court to reverse a decision by the U.S. Court of Appeals for the Second Circuit that improperly refused to enforce the parties’ agreements to arbitrate their disputes on an individual basis, rather than on a classwide basis, because the court determined — on the basis of a single affidavit from an expert witness retained by plaintiffs’ counsel — that “the practical effect of enforcement would be to preclude [plaintiffs’] ability to vindicate their federal statutory rights.” In this case, a proposed class of merchants claimed that American Express violated antitrust laws with respect to its merchant fees for credit and charge card transactions. Each merchant in the proposed class action had previously entered into an agreement with American Express that included an arbitration clause precluding class-wide resolution of disputes in favor of mandatory, bilateral arbitration. On three separate occasions, a Second Circuit panel refused to enforce the arbitration agreements on the theory that arbitration agreements are not enforceable if they do not allow classwide arbitration of federal statutory claims.

The Chamber argued in its amicus brief that courts lack authority to deny enforcement of arbitration agreements based on a policy concern that arbitration might not be cost effective. The Chamber argued that the Second Circuit's rule is not administrable and frustrates the objectives of the FAA. Further the court's assumption that it is not possible to vindicate modest-sized claims on an individual basis in arbitration is mistaken. The Chamber warned that if Second Circuit’s decision is allowed to stand, many businesses—as well as consumers and the market generally—will be deprived of the benefit of arbitration as a fast, fair, and efficient alternative to litigation.

Click here to view the Chamber's brief.