Court won’t rehear AmEx’s arbitration clause case

2nd Circuit panel ruled in February that arbitration clause could not prevent class actions

The 2nd Circuit said yesterday that it would not rehear a case centered on an arbitration clause that would prevent American Express merchant customers from filing antitrust lawsuits against the company.

For 13 years, AmEx has included a clause in its customer agreements mandating its merchant customers to agree to arbitration and waive their rights to sue the company in a class action. The two-judge panel ruled in February that the clause is unenforceable because it violates the customers’ rights under federal antitrust laws. A group of merchants in California and New York initiated the lawsuit in 2003.

On Tuesday, five appeals court judges said, however, that the case should have been granted an en banc hearing.

"The panel opinion thus impairs the Federal Arbitration Act's strong federal policy favoring the enforcement of arbitration agreements, and frustrates the goals of arbitration by multiplying claims, lawsuits, and attorneys' fees," Chief Judge Dennis Jacobs wrote. Judges Debra Ann Livingston, Jose Cabranes and Reena Raggi also issued dissenting opinions in the case.

But Judge Rosemary Pooler, writing for the majority, said the opinion honored Supreme Court precedent in "preserving plaintiffs' ability to vindicate federal statutory rights, rather than eviscerating more than 120 years of antitrust law by closing the courthouse door to all but the most well-funded plaintiffs."

Read more about this case on Thomson Reuters.

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Cathleen Flahardy

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