The Second Circuit Court of Appeal has held, for the third time, that American Express Co. cannot enforce an arbitration agreement containing a class action waiver against a group of merchants pursuing antitrust claims despite the U.S. Supreme Court’s recent ruling in AT&T Mobility v. Concepcion.
The appeals court found that Concepcion — in which the Supreme Court concluded that the Federal Arbitration Act preempted state laws barring the enforcement of class action waivers — did not require it to overturn its finding that the arbitration clause in AmEx’s contract with merchants was unenforceable because compelling individual arbitration would preclude the plaintiffs’ ability to bring their Sherman Act claims by making it financially impossible for them to do so. The court therefore remanded the case to the district court with instructions to deny AmEx’s motion to compel arbitration.
“It is tempting,” the court explained, “to give both Concepcion and Stolt-Nielsen such a facile reading, and find that the cases render class action arbitration waivers per se enforceable.” “But a careful reading of the cases demonstrates that neither one addresses the issue presented here: whether a class-action arbitration waiver clause is enforceable even if the plaintiffs are able to demonstrate that the practical effect of enforcement would be to preclude their ability to vindicate their federal statutory rights.”
In 2003, the plaintiff merchants filed the proposed antitrust class action alleging that when AmEx decided to get into the standard commodity credit card business, it illegally forced merchants to pay excessive rates equal to those that AmEx charged for its more attractive business and personal charge cards. It did this by tying the acceptance of the credit and charge cards together. In January 2009, the appeals court ruled against AmEx, prompting AmEx to turn to the Supreme Court. That decision was vacated and remanded in light of Stolt-Nielsen SA v. Animalfeeds International Corp., in which the Supreme Court ruled that imposing class arbitration on parties that haven’t agreed to class arbitration conflicts with the FAA. The Second Circuit then found that its original analysis was unaffected by Stolt-Nielsen, but put a hold on its mandate in order to allow AmEx to again petition the Supreme Court. There, AmEx argued that the subsequent Concepcion decision required reversal.
The Second Circuit, however, held that because the evidence presented by plaintiffs established that the cost of individually arbitrating their dispute with AmEx would be prohibitive, effectively depriving plaintiffs of the statutory protections of the antitrust laws, the waiver was unenforceable, even under Concepcion. The appeals court also noted that its decision did not mean that class action waivers are per se unenforceable in the context of antitrust actions but instead that each waiver must be considered on its own merits.