Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Supreme Court Grants Solicitor General’s Motion to Participate in Oral Argument in American Express Antitrust Case, (Feb 15, 2013)

By Tobias J. Gillett, J.D., LLM.

In a case currently before the Supreme Court involving merchants’ class antitrust claims against American Express, the U.S. Supreme Court has granted the Solicitor General’s motion for leave to participate in oral argument as amicus curiae and for divided argument (American Express Co. v. Italian Colors Restaurant, Dkt. 12-133).

The case raises the question whether the Federal Arbitration Act permits courts, invoking the “federal substantive law of arbitrability,” to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal law claim. The Supreme Court granted American Express’s petition for certiorari from the Second Circuit’s 2012 decision in In re American Express Merchants’ Litigation, 667 F.3d 204.

The Second Circuit in that decision had invalidated an arbitration agreement containing a class action waiver and prohibitions on cost sharing among plaintiffs on the ground that enforcement would deny the plaintiff merchants the ability to pursue their Sherman Act claims against American Express. The merchants would have to pay prohibitively high costs to engage in individual arbitration when compared to their possible recoveries, according to the Second Circuit.

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 Second Circuit observed that American Express would have immunized itself against all such antitrust liability by the expedient of including in its contracts of adhesion an arbitration clause that does not permit class arbitration, regardless of whether or not the provision explicitly prohibits class arbitration.

The FTC and the Justice Department previously filed a joint amicus brief with the Supreme Court in the case, favoring an “effective vindication rule” that would deny enforcement of such agreements where they would amount to a “prospective waiver of substantive rights,” due to the prohibitive costs involved in arbitration.

News: Antitrust