Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Federal Legislation Introduced Prohibiting Mandatory Arbitration of Certain Antitrust Disputes , (May 13, 2013)

By Jeffrey May, J.D.

Under the proposed "Arbitration Fairness Act of 2013," a predispute arbitration agreement would be unenforceable if it required an antitrust plaintiff seeking to bring a class action to submit to arbitration. The measure (S. 878) also would prohibit the enforceability of certain predispute arbitration agreements in employment, consumer, or civil rights disputes.

According to the bill's sponsor, Senator Al Franken (Minnesota), the legislation is intended to address recent U.S. Supreme Court rulings that have broadened the reach of the Federal Arbitration Act (FAA), "ignoring evidence that the FAA was never intended to apply to consumer or employment disputes, or supersede all other federal laws protecting consumers, workers, and small businesses." Franken contends that S. 878 "restores the original intent of the FAA by clarifying the scope of its application." The measure will "ensure that people and small businesses maintain their right to their day in court when they are cheated," Franken stated.

Specifically, the legislation states that "no predispute arbitration agreement shall be valid or enforceable if it requires arbitration of an employment dispute, consumer dispute, antitrust dispute, or civil rights dispute." An antitrust dispute refers to a dispute: involving a claim for damages allegedly caused by a violation of the federal and/or state antitrust laws, in which the plaintiffs seek class certification. Under the proposal, the validity and enforceability of a relevant arbitration agreement would be determined by a court, rather than an arbitrator.

If enacted, the law would not restrict the use of agreements when two parties choose to arbitrate after a dispute arises, and would not "ban arbitration."

The measure was introduced on May 7. The measure was referred to the Judiciary Committee.

The issue of arbitration agreements in antitrust disputes is currently pending before the Supreme Court. The Court is considering whether merchants alleging an antitrust violation by American Express Company are able to vindicate their rights under the Sherman Act if they are required to pursue individual arbitration (American Express Co. v. Italian Colors Restaurant, Dkt. 12-133).

At issue in that case is a decision of the U.S. Court of Appeals in New York City (667 F.3d 204, 2012-2 Trade Cases ¶78,125), holding unenforceable a class action waiver contained in the mandatory arbitration clause of their commercial contracts with American Express. American Express had invoked the clause in response to a lawsuit by the merchants challenging a purported illegal tying arrangement requiring merchants who accepted American Express’s charge card to also accept all of American Express’s credit cards. The complaining merchants had argued that the arbitration agreement would prevent them from pursuing their Sherman Act claims against American Express because they would have to pay prohibitively high costs to engage in individual arbitration when compared to their possible recoveries.

News: Antitrust