RESPONDENT: Italian Colors Restaurant
LOCATION: The United States District Court for the Southern District of New York
DOCKET NO.: 12-133
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Second Circuit
CITATION: 570 US (2013)
GRANTED: Nov 09, 2012
ARGUED: Feb 27, 2013
DECIDED: Jun 20, 2013
Michael K. Kellogg - for the petitioners
Malcolm L. Stewart - Deputy Solicitor General, Department of Justice, for the United States as amicus curiae supporting the respondents
Paul D. Clement - for the respondents
Facts of the case
American Express Company provides charge card services to supermarkets and other merchants throughout the United States. When a store decides to accept American Express cards, it must enter into a Card Acceptance Agreement. This standard form contract outlines the basic relationship between American Express and the merchant. A clause within the agreement requires arbitration of all claims brought against American Express and prohibits merchants from bringing any class action claims.
Several merchants, including Italian Colors Restaurant, brought individual lawsuits against American Express, claiming that the Card Acceptance Agreement violates U.S. antitrust laws. The United States District Court for the Southern District of New York consolidated the cases and American Express moved to dismiss in order to force the merchants to arbitrate. The district court enforced the arbitration clause and dismissed the case. The merchants appealed and the United States Court of Appeals for the Second Circuit held that the arbitration clause, in particular the class action waiver, is unenforceable because it would essentially protect American Express from antitrust suits. American Express further appealed and the United States Supreme Court granted certiorari. The Court vacated the ruling and remanded for further proceedings in light of its decision in Stolt-Nielsen v. Animalfeeds International. The appellate court reevaluated its decision and still found the class action waiver to be unenforceable. The Supreme Court granted certiorari again to resolve this issue.
Is American Express Company's arbitration clause prohibiting class action suits enforceable, even though it would compel arbitration of antitrust claims?
Media for American Express Co., et al. v. Italian Colors RestaurantAudio Transcription for Oral Argument - February 27, 2013 in American Express Co., et al. v. Italian Colors Restaurant
Audio Transcription for Opinion Announcement - June 20, 2013 in American Express Co., et al. v. Italian Colors Restaurant
John G. Roberts, Jr.:
Justice Scalia has our opinion this morning in case 12-133, American Express versus Italian Colors Restaurant.
This case is here on writ of certiorari to the United States Court of Appeals for the Second Circuit.
The respondents are merchants who accept the American Express cards.
Their agreement with petitioners, American Express and a wholly owned subsidiary of American Express, contains a clause that requires all disputes between the parties to be resolved by arbitration.
That agreement also prohibits “any claims to be arbitrated on a class-action basis.”
Despite this arbitration agreement, respondents brought a class-action in Court against petitioners for violations of the federal antitrust laws.
Petitioners moved to compel individual arbitration under the Federal Arbitration Act.
In resisting the motion, respondents argued that the cost of an expert analysis necessary to prove the antitrust claims would greatly exceed the maximum recovery for any individual plaintiff.
The District Court granted the motion to compel individual arbitration and dismissed the lawsuit.
The Court of Appeals reversed and remanded for further proceedings.
It held that because respondents had established that they would incur prohibitive costs if compelled to arbitrate under the class-action waiver, the waiver was unenforceable and the arbitration could not proceed.
The Court of Appeals stood by its reversal when we remanded in light of Stolt-Nielsen versus AnimalFeeds International Corporation which held that a party may not be compelled to submit the class arbitration absent in agreement to do so.
We granted certiorari and today reversed.
The Federal Arbitration Act 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.
Courts must rigorously enforce arbitration agreements according to their terms unless the act's mandate has been overridden by a contrary congressional command.
No contrary congressional command requires us to reject the waiver of class arbitration here.
The antitrust laws do not guarantee an affordable procedural path to the vindication of every claim or evince an intention to preclude a waiver of class-action procedure.
Respondents invoke a judge-made exception to the Federal Arbitration Action, which they say, allows courts to invalidate agreements that prevent “effective vindication” of a federal statutory right.
That exception finds its origin in the desire to prevent “prospective waiver of a party's right to pursue statutory remedies,” but the fact that it is not worth the expense involved improving a statutory remedy does not constitute elimination of the right to pursue that remedy.
The class-action waiver merely limits arbitration to the two contracting parties.
It no more eliminates the parties' rights to pursue their statutory remedy than did federal law before its adoption of the class-action for damages.
Our decision in AT&T Mobility versus Concepcion all but resolves this case.
There, in finding that a law that conditioned the enforcement of arbitration on the availability of class procedure interfered with fundamental arbitration attributes, we specifically rejected the argument that class arbitration was necessary to prosecute claims that “might, otherwise, slip through the legal system.”
The regime established by the Court of Appeals' decision would require before a plaintiff could be held to contractually agreed bilateral arbitration that a federal court determine and the parties litigate the legal requirements for -- for success on the merits claim-by-claim and theory-by-theory, the evidence necessary to meet those requirements, the cost of developing that evidence, and the damages that would be recovered in the event of success.
Such a preliminary litigating hurdle would undoubtedly destroy the prospect of speedy resolution that arbitration in general and bilateral arbitration in particular was meant to secure.
The Federal Arbitration Act does not sanction such a judicially created superstructure.
Accordingly, the judgment of the Court of Appeals for the Second Circuit is reversed.
Justice Thomas has filed a concurring opinion.
Justice Kagan has filed a dissenting opinion in which Justices Ginsburg and Breyer joined.
Justice Sotomayor took no part in the consideration or decision of the case.