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Supreme Court rules for American Express in arbitration case

A 5-3 majority upheld a class action waiver in the company’s contract with a group of merchants

Score one more for mandatory arbitration agreements. The Supreme Court ruled 5-3 on Thursday that a class of merchants must individually arbitrate their claims against American Express Co., pursuant to a contract they signed with the credit card company.

The ruling continues a trend of pro-arbitration rulings from the Supreme Court and several appeals courts around the country.

The group of merchants sued American Express for alleged violations of federal antitrust law, claiming that the company forced them to accept its mass-market credit cards—which have higher fees than Visa and MasterCard—before it would let them accept its corporate and premium cards.

American Express denied the charges, and also argued that the plaintiffs should not be allowed to sue as a group, since their contracts with American Express included a class action waiver.

The 2nd Circuit rejected that argument, ruling that the costs of individual arbitration would prevent most of the merchants from pursuing the case. But a majority of the Supreme Court justices ruled this week that the arbitration agreement was enforceable under the Federal Arbitration Act.

Justice Antonin Scalia, who was joined by his fellow conservative-leaning justices, said in his majority opinion that if merchants were allowed to get out of their arbitration agreements, then federal courts would have to review all similar claims before trial, “a preliminary litigating hurdle [that] would undoubtedly destroy the prospect of speedy resolution that arbitration … was meant to secure.”

In her dissent, Justice Elena Kagan opined that the ruling allows “the monopolist … to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse,” the Wall Street Journal reports.

Justice Sonia Sotomayor, who was part of the 2nd Circuit panel that previously ruled on the case, did not take part in Thursday’s decision.

For more InsideCounsel coverage of arbitration issues, see:

Lawyers ask for arbitration in high-profile discrimination case

Supreme Court upholds class arbitration decision

Court expands Concepcion’s reach in employment case

Campaign contributions not enough to establish arbitrator partiality

Alanna Byrne

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