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Court reinforces arbitration-only agreements

June 20, 2013 at 11:28 AM   |   Comments

WASHINGTON, June 20 (UPI) -- The U.S. Supreme Court ruled 5-3 for American Express Thursday, saying expense was not an excuse to avoid arbitration and go to court.

Justice Antonin Scalia wrote the majority opinion. Justice Sonia Sotomayor did not participate in the case.

An agreement between a business coalition and American Express and an Amex subsidiary and the coalition -- merchants who accept American Express cards -- requires all of their disputes to be resolved by arbitration. The agreement says there "shall be no right or authority for any claims to be arbitrated on a class action basis."

The coalition nevertheless filed a class action suit, claiming that American Express violated the Sherman Act. The suit asked for treble damages under the Clayton Act. The class action said American Express used its monopoly power in the market for charge cards to force merchants to accept credit cards at rates approximately 30 percent higher than the fees for competing credit cards.

American Express asked the court to compel arbitration under the Federal Arbitration Act. The coalition responded by saying a cost analysis necessary to prove the antitrust claims would exceed the maximum recovery for an individual business plaintiff.

A federal judge dismissed the coalition's lawsuits, but an appeals court in New York reversed. The appeals court said because of the prohibitive costs of arbitration the waiver of class action suits was unenforceable.

But the Supreme Court reversed the appeals court, saying, "The [arbitration act] does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff's cost of individually arbitrating a federal statutory claim exceeds the potential recovery."

Though Kagan was recused, the court's remaining three liberals dissented.

© 2013 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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