by Paul Bland, Public Justice
Consumer and plaintiffs' lawyers know that there have been a
long string of cases where the Supreme Court has enforced arbitration
clauses. In the course of doing that, though, the Court has always said that
enforcing arbitration clauses won’t cause any harm, because (the Court has
insisted and promised) arbitration is a forum where anyone with a valid legal
claim can be heard fairly. The Supreme Court has always said that
arbitration is only acceptable where parties can “effectively vindicate their
substantive rights.” About 8 Supreme Court decisions make that statement.
In In re American Express Merchants Litigation, we’ll
learn if the Court actually MEANT any of those promises. This is the most
important consumer case involving a challenge to an arbitration
clause since AT&T v. Concepcion. In American Express, a number
of small business merchants brought a class action in court alleging that Amex
is violating the Sherman Act with a tying arrangement (using its monopoly power
over charge cards to force merchants to take all Amex-branded credit cards —
and pay higher fees). Citing its arbitration clause with the merchants, AmEx moved to force the case into individual arbitration
(with no class action possible). The plaintiffs PROVED, with admissible
evidence that was never controverted, that it would be impossible for them to
pursue their antitrust claims, in court or arbitration, if they had to go
forward on an individual basis. It would cost them hundreds of thousands of
dollars to prove each of their cases, even though their claims are
typically only worth about $5,000.
But AmEx, backed by the Chamber of Commerce, wants the Court
to abandon the “effective vindication” doctrine, or more likely to re-define it
in a way that would make it completely meaningless. They want the Supreme Court
to enforce AmEx’s arbitration clause, and class action ban, even though it
means that small business plaintiffs will lose all their substantive rights
under the antitrust laws.
Public Justice filed today an amicus brief objecting to
AmEx’s radical position. Our brief explains that if the Court severs the link
between arbitration and the opportunity to be heard and obtain justice, then
statutes that Congress enacted to protect consumers, small businesses, and
workers from more powerful corporations will be gutted. We point out that, if AmEx wins,
the small-business plaintiffs suing Amex in this case might as well move to a
nation that has no antitrust laws. We point out that arbitration will
become nothing more than a convenient way for stronger parties to immunize
themselves from the law. It will have no arguable legitimacy; it will just be
an exercise of power.
In our conclusion, we say that AmEx's “proposal would change
the underlying statute from the Federal Arbitration Act to the Federal
Corporate Immunity Act, and would rob it of its legitimacy.”
Hi Paul,
I hear your arguments, but my bet is that a majority of Supreme Court justices will rule against the small business owners. I think the judicial avenue to arbitration reform is dead, and the only real opportunity for change is Congress. The Supreme Court will likely to take a look at the vindication of rights idea, dismiss it as dicta, and/or construe the idea narrowly, perhaps by saying the vindication of rights idea focuses solely on the fairness of procedures within a 2 party arbitration, like whether the arbitral discovery procedures are adequate, not whether a case is financially feasible. And/or they will link the vindication of rights idea to unconscionability and rely on Concepcion to give a narrow reading of unconscionability and say that the small business owners’ demand for class wide relief is antithetical to arbitration. The fact that sophisticated parties are involved probably puts the nail in the coffin. I hear your arguments of the need to vindicate important antitrust rights. This is a very legitimate concern, and it should be overriding. But I think only Congress will right this wrong, as Justice Sotomayor recently suggested in a different context regarding the FAA. The Supreme Court has piled mistake upon mistake when construing the FAA, and they have screwed up the statute beyond recognition. The real problem began decades ago when the court allowed for the arbitrability of statutory claims. The FAA was likely intended solely for basic contract disputes to be decided by a business person, like whether the widget that was delivered was the same as the widget that was promised, not insanely complex economic arguments surrounding statutory antitrust claims. I don’t think it was ever the intent of Congress for the FAA to cover statutory claims. Best of luck with preparing for the oral arguments.
Imre Szalai
Loyola University New Orleans College of Law
http://law.loyno.edu/bio/imre-szalai