We ask ourselves this question after the 2nd Circuit issued an opinion on Feb. 1, 2012 in In re Am. Express Merchants’ Litigation, No. 06-1871-civ, --- F.3d ----, 2012 WL 284518 (2d Cir. Feb. 1, 2012) (“Amex III”), which reaffirmed its previous ruling that a class action waiver in an arbitration agreement that would prevent plaintiffs from bringing an antitrust class action under the Sherman and Clayton Acts is unenforceable. The 2nd Circuit clarified that it did not hold that class action waivers in arbitration agreements are per se unenforceable in the context of antitrust actions. However, based on the 2nd Circuit’s ruling and other lower courts’ analyses regarding the enforceability of class action waivers in the context of Clayton Act actions, could that be the practical effect of this decision if allowed to stand?
The vindication of federal statutory rights is a critical issue in cases analyzing the application of AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) to waivers that affect federal claims. In the Dec. 29, 2011 column, we discussed that courts have ruled that antitrust actions brought under the Clayton Act are exempt from class action waivers because actions under the Clayton Act are representative actions and cannot be brought on an individual basis. Therefore, courts have seen these class action waivers as preventing individuals from vindicating federal statutory rights when applied to Clayton Act actions. I also discussed the possibility that prohibitively costly arbitration may be considered sufficient grounds to invalidate such a class action waiver based on the U.S. Supreme Court’s decision in Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (2000). While some district courts have recognized that Concepcion foreclosed this argument, other courts questioned that conclusion. At the time, the 2nd Circuit was reconsidering its previous decisions in In re Am. Express Merchs. Litig., 554 F.3d 300 (2d Cir. 2009) and In re American Express Merchants’ Litigation, 634 F.3d 187, 196 (2d Cir. 2011) in light of the U.S. Supreme Court’s decision in Concepcion.
On Feb. 1, 2012, the 2nd Circuit found that Concepcion had no application to the case before it because the case addressed state law preemption. The 2nd Circuit proceeded to rely upon Supreme Court precedent, which recognized that the class action mechanism was meant to address situations when potential damages are too small to motivate plaintiffs to bring individual lawsuits, and Green Tree, which recognized in dicta that prohibitively costly arbitration could preclude enforcement of an arbitration agreement.
The 2nd Circuit recognized that the Sherman Act itself does not provide an express right to bring claims as a class in court. But, faced with expert testimony establishing that the costs of hiring an expert in the antitrust action could range from several hundred thousand to a million dollars, while the individual damages to be recovered ranged from approximately $5,000 to $40,000, the 2nd Circuit ruled that “the evidence presented by plaintiffs here establishes, as a matter of law, that the cost of plaintiffs' individually arbitrating their dispute with Amex would be prohibitive, effectively depriving plaintiffs of the statutory protections of the antitrust laws.” Amex III, at *12.
The question remains: In what case will the expert fees required to establish an antitrust violation not be too costly to preclude bringing an individual antitrust claim? The 2nd Circuit’s statement that its holding is not that these class action waivers are per se unenforceable in antitrust actions may ring hollow. With class action waivers for Clayton Act claims being held invalid under both vindication of rights analyses, and as applied to Sherman Act claims being held invalid under the 2nd Circuit’s application of Green Tree, we will likely see the U.S. Supreme Court being called upon to clarify whether class action waivers can ever be enforced with respect to antitrust claims.