Relevant Facts: To challenge American Express’ (“AMEX”) practice of charging businesses roughly 30% more than competitors like Visa and MasterCard to accept their cards, a group of small business owners filed a class action antitrust suit against the company. Because their contracts contained a forced arbitration clause with a class action ban, AMEX moved to compel individual arbitration. The small business owners argued that the arbitration clause was unenforceable because the cost of expert analysis required to prove their antitrust claims would greatly exceed the maximum recovery for any individual, leaving them with no way to effectively vindicate their rights.
Question Before The Court: Whether a class action ban in an arbitration clause is enforceable under the Federal Arbitration Act when the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery.
The Opinion: Although the thrust of the business owners’ argument was focused primarily on their inability to hold AMEX accountable for breaking the law if forced into individual arbitration, the Court set its sights on the financial aspects of the case. The Court asserted “the antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.” To many observers’ disbelief, the Court professed, “the FAA’s command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims. The latter interest . . . is unrelated to the FAA. Accordingly, the FAA [favors] the absence of litigation when that is the consequence of a class action waiver, since its principle purpose is the enforcement of arbitration agreements according to their terms.”
In addressing the consequence of this holding on the plaintiffs’ ability to obtain relief, the Court surmised that “[t]he ‘effective vindication doctrine’ [from Mitsubishi Motors] comes from a desire to prevent ‘prospective waiver of a party’s right to pursue statutory remedies’, but 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.” The majority held that “the FAA does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiffs’ cost of individual arbitration of a federal statutory claim exceeds the potential recovery.” Justice Antonin Scalia, writing for the majority, was unmoved by the unavoidable observation that an unaffordable path to justice, practically speaking, is no path at all.
Justice Scalia went to great lengths to frame the case as merely about a number of small-dollar claims, rather than about a large group of people attempting to join forces to hold a massive corporation accountable for widespread fraud under federal antitrust statutes. By avoiding the law enforcement arguments, the Court’s ruling has permitted powerful corporations to put class bans into their boilerplate contracts of adhesion to suppress all consumer claims for willful violations of the law. After all, no sane person is going to spend over six figures of their own money to pursue a claim in individual arbitration for a claim that would at most render an award worth less than $5,000.
Justice Elena Kagan, in her dissent, spoke directly to this problem: “The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse. . . Throughout, the majority disregards our decisions’ central tenant: An arbitration clause may not thwart federal law, irrespective of exactly how it does so.”
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