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.