Yesterday, the Second Circuit Court of Appeals reaffirmed its earlier decision in In re Am. Express. Merchs. Litig., 554 F.3d 300 (2009), that a pre-dispute arbitration clause in a credit card agreement (American Express) was not enforceable because it contained a provision requiring consumers to waive their rights to pursue claims as a class. See
In re Am. Express Merchs Litig., __ F.3d __ (Mar. 8, 2011). In its 2009 decision, the Second Circuit did not find the arbitration clause unconscionable. Rather, it applied the analysis in Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (2000), in which the Supreme Court ruled, in dicta, that a mandatory arbitration clause was not enforceable against a party who proves that the costs of arbitration of a federal statutory claim were so high as to prohibit that party from vindicating those statutory rights in arbitration. The Second Circuit concluded that the American Express card holders could not vindicate their statutory rights under the federal antitrust laws in individual arbitrations because they would be cost-prohibitive, and thus the clause was unenforceable.
After the Supreme Court ruled in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010), that arbitration clauses silent on the issue of class arbitration could not be read by arbitrators as reflecting the parties’ agreement to class arbitration, American Express petitioned the Supreme Court for a writ of certiorari from the Second Circuit’s decision. The Supreme Court granted certiorari, vacated the Second Circuit’s decision, and remanded the case back to the Second Circuit for reconsideration in light of the Court’s opinion in Stolt-Nielsen. The same three-judge Second Circuit panel, minus now-elevated Supreme Court Justice Sonia Sotomayor, concluded that Stolt-Nielsen did not alter its 2009 analysis, and thus once again refused to enforce the arbitration clause for the same reasons as in 2009.
It will be interesting to see whether the Supreme Court’s decision in AT&T v. Concepcion, due sometime this spring, will impact this decision and other courts’ considerations of the enforceability of class action waivers in mandatory arbitration clauses.
Last 5 posts by Jill Gross
- Schwab removes class action waiver from customer agreements - May 17th, 2013
- Arbitration Fairness Act of 2013 introduced in Congress - May 8th, 2013
- Tennessee court invalidates brokerage firm's arbitration clause as unconscionable - May 1st, 2013
- Added Pressure on SEC to Eliminate Mandatory Securities Arbitration - April 30th, 2013
- Rick Bales named Dean at Ohio Northern's Law School - April 3rd, 2013