SCOTUS Grants Review on Enforceability of Arbitration Provisions in the Context of Class Actions Asserting Federal Claims

The U.S. Supreme Court has agreed to review the enforceability of an arbitration agreement containing a class action waiver in which merchants assert federal antitrust claims against American Express. The case, American Express v. Italian Colors Restaurant, No. 12-133, dates back to 2003 when merchants sued American Express, alleging that the company tied acceptance of its new commodity credit cards to acceptance of its established, higher-end business and charge cards. American Express has tried for years to compel arbitration of claims asserted by merchants whose contracts contain arbitration clauses. The district court entered such an order and the merchants appealed. The 2nd U.S. Circuit Court of Appeals held that the arbitration provision could not be enforced because it would be financially impossible for merchants to bring their claims as individuals, which would prevent them from vindicating their federal statutory rights. The Supreme Court will consider whether the Federal Arbitration Act permits courts to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal law claim. This gives the Court an opportunity to clarify its ruling in AT&T Mobility v. Concepcion, in which it upheld AT&T’s right to compel consumers to submit to arbitration even though, under California common law, consumer class action waivers were considered unconscionable.