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This case involves the validity of an arbitration provision in contracts with American Express and its credit card network. The provision precluded class action arbitration, and instead required individual proceedings to resolve disputes.

The case was appealed to the Supreme Court in 2009, with the NAM supporting the appeal, and the Court vacated the Second Circuit's ruling and sent the case back for reconsideration in light of its recent decision in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. See our summary of the case here.

Then, the Second Circuit refused to enforce the parties' agreements to arbitrate on an individual basis and allowed the plaintiffs' federal antitrust claims to proceed as a class action. That decision was appealed to the Supreme Court.

The NAM filed an amicus brief 8/29/2012 urging the Supreme Court to hear this latest appeal, which it did. We objected to the lower court's view that the arbitration clause may not be enforced if it would not be "economically feasible" for the plaintiffs to vindicate their federal rights in an individual arbitration. In other words, if the cost of arbitration and the potential reward did not make it feasible, a court could refuse to enforce an otherwise valid arbitration agreement. Our brief urged the Supreme Court to review this decision, because it is the product of an intense effort by the plaintiffs' bar to undermine the Court's decision in the Concepcion case underscoring the validity of arbitration. Such a result would call into question literally millions of arbitration agreements nationwide.

We also argued that the lower court misread the Concepcion case. Nothing in the Federal Arbitration Act makes a distinction based on whether a claim being arbitrated arises under state or federal law. The Supreme Court has already ruled that federal antitrust claims such as those in this case may be resolved through arbitration.

On June 20, 2013, the Court ruled 5 to 3 to overturn the Second Circuit's decision, thus validating arbitration provisions that prohibit class action arbitration. It found nothing in the Federal Arbitration Act that allows courts to invalidate waivers of class action arbitration on the ground that the cost of individual arbitrations exceed the potential recovery. Arbitration is a matter of contract, and neither the antitrust laws nor the rules of civil procedure guarantee an affordable procedural path to the vindication of every claim.

The NAM is committed to supporting arbitration as an effective way to resolve disputes without having to suffer the formalities, cost and delays of litigation in court. When plaintiffs ask the courts to allow class action arbitrations, the costs and risks multiply, often forcing manufacturers to needlessly devote excessive resources to resolving the claims. Instead, the courts should enforce voluntary agreements between manufacturers and their customers to arbitrate their differences individually.

Merchants participating in American Express’s credit card network agree to an arbitration provision that precludes class action arbitration; each dispute must be resolved individually. The Second Circuit ruled that such waivers are invalid because they keep disputes small and less likely to be litigated, thus conferring “de facto immunity from antitrust liability” on American Express. This ruling was appealed to the Supreme Court.

The NAM joined Verizon Communications Inc. in an amicus brief urging the Supreme Court to hear this appeal. We argued that it is a well-established rule that parties are free to waive their constitutional and statutory rights – indeed, arbitration agreements waive the right to proceed in a judicial forum. In limited circumstances waivers are inappropriate, and the lower court considered the effects of class action waivers on antitrust remedies. However, it critically omitted consideration of the negative effects that class actions have on antitrust objectives, including extorted settlements in cases where the legal standards of liability (tying arrangements) are so uncertain.

In addition, we support the important role that class action waivers play in assuring the viability of arbitration as an alternative forum for the resolution of small disputes. Allowing class action arbitration raises costs and diminishes the value of arbitration.

In May, the Supreme Court granted the petition, vacated the ruling, and sent the case back to the Second Circuit to reconsider its decision in light of a recent decision in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp.