By Rhett T. Francisco, Trevor R. Hindin, and Andrew J. Sokolowski
Rhett T. Francisco's practice includes both individual actions and class actions in the areas of wage and hour, FLSA, wrongful termination, compliance, and unfair competition, among other areas. Andrew J. Sokolowski has more than a decade of experience with employment law, business law, and class actions. He also advises businesses on compliance with California and national employment and consumer laws. Trevor R. Hindin is a cum laude graduate of Syracuse University College of Law, and an associate with the Law Offices of Rhett T. Francisco. Mr. Hindin has extensive experience litigating consumer class actions and employment class actions (including wage and hour cases).
If you have read the headlines regarding class actions after the Supreme Court's ruling in American Express v. Italian Colors1 (Amex), you may have heard that the sky is falling, and that the end of class actions is imminent.2 Some legal pundits have gone so far as to claim that Amex is the "worst Supreme Court arbitration decision ever," and that it will have "catastrophic" consequences for class actions.3 But the Chicken Little perspective is exaggerated—a product of reports, articles, and blogs that overstate the implications of Amex. In reality, Amex is a ruling in favor of arbitration and against access to the courts, but it is not the death knell for class actions.
Italian Colors Restaurant and other similarly situated merchants sued American Express over merchant fees it charged each time a customer made a purchase using an American Express credit card. The merchants brought suit under the Sherman Act,4 claiming that American Express used its monopoly power to force merchants to accept its standard form agreement, which included rates that were much higher than those of competing credit card companies. American Express's standard form agreement included: (1) an arbitration provision that stated, in relevant part, "[a]ny Claim shall be resolved upon the election by you or us, by arbitration pursuant to this arbitration provision;" and (2) a class action waiver that stated, in relevant part, "[t]here shall be no right or authority for any Claims to be arbitrated on a class action basis."
American Express moved to compel individual arbitration pursuant to the Federal Arbitration Act (FAA). The merchant plaintiffs submitted evidence that the cost of expert analysis needed to prove their antitrust claims "might exceed $1 million," and the maximum recovery to any individual plaintiff would be $12,850, or $38,549 when trebled. The District Court for the Southern District of New York granted American Express's motion and ordered the case to be submitted to arbitration.
On appeal, the Second Circuit Court of Appeals ruled in favor of the merchant plaintiffs three times before the Supreme Court provided the final word.
In Amex I, the Second Circuit reversed the district court's order compelling arbitration and remanded, holding that the merchant plaintiffs proved that their ability to enforce their federal statutory rights would be effectively denied due to the prohibitive costs of bringing individual actions. In reaching its decision, the court relied on the "effective vindication doctrine" which holds that even claims arising under a statute designed to further important...
