The Evolution Continues: Supreme Court Upholds Class Arbitration Waivers

01 July 2013 Labor & Employment Law Perspectives Blog

The landscape of arbitration agreements and their effect on class action matters has been an area of significant evolution in recent years. Indeed, just two weeks ago, we reported on the latest Supreme Court decision that seemed to put a damper on the belief that arbitration agreements might provide a helpful avenue to stemming the tidal wave of employment and wage and hour class actions that has washed over many employers in recent years. And then, at the end of its fall 2012 term, the Supreme Court has now reenergized that hope with its decision in American Express Co. v. Italian Colors Restaurant, where the Court ruled that express class action waivers are enforceable, even where precluding claims from proceeding on a class basis seems to make them economically non-viable.

The “high” cost of arbitration is an oft-relied upon argument put forth by individual plaintiffs when seeking to invalidate an arbitration clause mandating either individual litigation or arbitration, as opposed to class arbitration, of their claims. Not persuaded by this claim, in American Express, the Court ruled that merchants seeking to sue American Express were bound by the terms of their agreements to arbitrate their claims on an individual, non-class basis. The Court reached this conclusion despite the merchants’ arguments that the cost of pursing the antitrust claims on an individual basis was “too high” to vindicate their rights, and the most any could hope to recover in damages is $38,549, far less than the estimated million dollar price tag it would take to gather the experts and evidence to prove their case. The merchants thus claimed that these cost differentials essentially meant they could not “vindicate their statutory rights” and should not be forced to arbitrate on an individual basis.

The Court was not convinced, and in its opinion, it stated, “the antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.” Rather, “courts must ‘rigorously enforce’ arbitration agreements according to their terms.” This is so, the Court further explained, even in the face of “…the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.”

American Express represents an important victory for those seeking to enforce arbitration clauses with class action waivers, which a trending number of employers have adopted since the Supreme Court’s decision in AT&T Mobility v. Concepcion. Questions nevertheless remain as to whether the Supreme Court, and lower courts, would view claims other than antitrust claims in a different light. Would a court be more willing to look at the cost for plaintiffs seeking to recover for unpaid wages or discrimination? As those questions get fleshed out, in the interim, the Supreme Court’s most recent decision is certainly a “win” in terms of employers fighting against cost challenges to arbitration clauses and using such clauses as a potential mechanism to fight off costly class action litigation.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services