READ: Supreme Court makes it harder to bring class-action lawsuits

June 20, 2013

In American Express Co. v. Italian Colors Restaurant, the Supreme Court ruled 5-3 against businesses who objected to being required to accept American Express debit and credit cards along with the company's charge card.

The merchants had tried to band together in court to sue American Express, while the credit-card company wanted to move the case to arbitration to deal with the cases one by one.

At first glance, it looked like American Express had a point: The contract between the merchants and the credit-card company had said explicitly that there was no right for a class-action arbitration. Lower courts, however, had waived this provision seeing as how it was too costly for the merchants to pursue their cases one by one — the merchants couldn't effectively pursue their rights unless they banded together.

But the Supreme Court decision, written by Antonin Scalia, ruled in favor of American Express and argued that there was no basis for waiving this provision. Here's how Scalia's opinion phrases its main holding: "The [Federal Arbitration Act] does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery."

"In Plain English," writes Tom Goldstein of SCOTUSblog, "this means that if you have a contract with a business in which you agree to arbitrate a dispute but it says you can't get together with other plaintiffs in a 'class action,' that contract will be enforced, even if it may be too expensive for you to pursue your own claim given what you might win."

http://www.washingtonpost.com/blogs/wonkblog/files/2013/06/12-133_19m1.pdf

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Dylan Matthews | June 20, 2013