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Seeger Weiss Blog: Legal News and Analysis

Let’s See if the Supreme Court Means What it Says

January 31st, 2013

Consumer and plaintiffs lawyers know that there have been a long string of cases where the Supreme Court has enforced arbitration clauses much to the detriment of consumers.  In the course of doing that, though, the Court  has always said that enforcing arbitration clauses won’t cause any harm, because arbitration is a forum where anyone with a valid legal claim can be heard fairly.  The Supreme Court has also maintained that arbitration is only acceptable where parties can “effectively vindicate their substantive rights.”

In In re American Express Merchants Litigation, we’ll learn if the Court actually MEANT any of those promises.  This is the most important and most pro-consumer case involving a challenge to an arbitration clause that has come down in several years.   In the case, a number of small business merchants brought a class action in court alleging that Amex is violating the Sherman Act with a Tying Arrangement (using its monopoly power over charge cards to force merchants to take all Amex-branded credit cards — and pay higher fees). AmEx moved to force the case into individual arbitration (with no class action possible). The plaintiffs PROVED, with admissible evidence that was never controverted, that it would be impossible for them to pursue their antitrust claims, in court or arbitration, if they had to go forward on an individual basis. It would cost them hundreds of thousands of dollars to prove their cases in each case, even though their claims are typically only worth about $5,000.

But AmEx, backed by the Chamber of Commerce, wants the Court to abandon the “effective vindication” doctrine, or more likely to re-define it in a way that would make it completely meaningless. They want the Supreme Court to enforce AmEx’s arbitration clause, and class action ban, even though it means that small business plaintiffs will lose all their substantive rights under the antitrust laws.

We support the efforts of organizations such as Public Justice which  filed  an amicus brief objecting to AmEx’s radical position. The brief explains that if the Court severs the link between arbitration and the opportunity to be heard and obtain justice, then statutes that Congress enacted to protect consumers, small businesses, and workers from more powerful corporations will be gutted.   As the brief explains, AmEx’s proposal would change the underlying statute from the Federal Arbitration Act to the Federal Corporate Immunity Act, and would rob it of its legitimacy.”

The brief may be found here.

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