In American Express Co. et al. v. Italian Colors Restaurant et al., the U.S. Supreme Court will decide whether an arbitration agreement can legitimately include a waiver of the right to class adjudication. The Department of Justice, Antitrust Division, and the Federal Trade Commission have filed a brief arguing that the provision improperly prevents parties from obtaining relief under federal antitrust laws.
Although arbitration provisions have substantial value, the agencies argue that they should not be used to effectively limit substantive rights. By prohibiting class adjudication, they contend, the provisions before the court “extract what are in substance prospective waivers of substantive federal rights, . . . subverting the purposes of the relevant rights-conferring statutes, without furthering the [Federal Arbitration Act’s] purpose of encouraging actual arbitration.”
The Supreme Court is reviewing a decision by the Second Circuit Court of Appeals holding that an arbitration agreement compelling merchant customers of a credit card company to forego class claims effectively blocked antitrust challenges because no single customer could justify the expense.