February 27, 2013
I read with interest the transcript of today’s oral argument in the highly anticipated American Express v. Italian Colors Restaurant case, No. 12-133. As I suspected, though, following oral argument, it would seem unlikely that the Court will decide in the merchants’ favor. Instead, the likely outcome is that the Court will hold that merhcants in this case will have great difficulty showing, pre-arbitration, that bilateral arbitration, as opposed to a class process, precludes them from vindicating their statutory rights. While Justices Kagan and Ginsburg repeatedly identified problems with bilateral arbitration clauses that effectively preclude plaintiffs from financing their own litigation due to the costs of proceeding in arbitration, Justices Breyer, Scalia, Roberts and Kennedy’s questions all suggested that they would vote in favor of American Express. Justice Scalia emphasized that, for the first forty years the Sherman Antitrust Act was in place, no class actions could proceed and yet that was not viewed as problematic. Justice Kennedy suggested that one of the benefits of the arbitration is that a claimant could select an expert arbitrator, such as an antitrust professor, instruct him or her to keep costs down, and have an arbitration process that was cheaper than a class action in court. The Justices also expressed keen interest in the idea that the merchants in the litigation could band together and hire a single expert to prepare a report (which is what the merchants alleged would cost $300,000 per arbitration) that could be shared among all the plaintiffs thus reducing overall costs per plaintiff. While there might be confidentiality objections to that approach (it was unclear whether confidentiality agreements between American Express and the plaintiff merchants precluded this type of sharing), the Justices seemed enamored with finding ways to make the arbitration process more streamline and less expensive, thus avoiding having to rule that the process was simply too expensive to preclude the plaintiffs from vindicating their statutory rights. Rather than focus on the benefits or drawbacks of class arbitration or the need for a class process, the Justices focused instead on ways to ensure that the arbitration process would proceed at a reasonable cost to the prospective claimants. Justice Breyer seemed concerned about courts getting into the business of analyzing the costs of arbitration on a case-by-case basis, noting that it would be “an odd doctrine that just says, plaintiff by plaintiff, you an ignore an arbitration clause if you can get a case that’s expensive enough.” Ultimately, I believe, based on the oral arguments and in light of other recent Supreme Court holdings, that the Justices will emphasize that the claimants’ alleged costs are too speculative (i.e. arbitration would not be that expensive even in an antitrust case) and hold that plaintiffs do not need the ability to bring their claims in a judicial class action in order to vindicate their statutory rights under the Sherman Antitrust Act.
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