Supreme Court Sides with American Express on Arbitration

Supreme Court Sides with American Express on Arbitration

“This is a devastating day for justice in America,” said Public Justice Executive Director Arthur Bryant. “The U.S. Supreme Court just issued its decision in American Express Co. v. Italian Colors Restaurant and gave corporations a license to steal.” And in today’s blog post, Senior Attorney Paul Bland calls American Express the “worst ever arbitration decision” from the Supreme Court.

Up until now, the Court has insisted that people and companies can only be forced out of court and into arbitration when they can “effectively vindicate their substantive rights” in arbitration. For that reason, the Court has portrayed arbitration as nothing more than a procedural alternative to litigation in court — one that is cheaper, faster, and more efficient.

In American Express v. Italian Colors, a local restaurant and other small merchants sued the credit card company for violating federal antitrust laws and using its monopoly power to force them to pay excessive fees. AmEx moved to force the case into individual arbitration (with no possibility of a class action), but the small businesses proved 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 case and the claims were worth only about $5,000 apiece. Because enforcement of AmEx’s arbitration clause would bar them from “effectively vindicating their substantive rights,” the U.S. Court of Appeals for the Second Circuit refused to enforce it.

Bu today, in a decision written by Justice Antonin Scalia, the U.S. Supreme Court held that, as long as the plaintiffs have a theoretical “right to pursue” their substantive rights in arbitration, it does not matter whether they can actually vindicate them.

As Justice Elana Kagan writes in her dissenting opinion, the decision is “a betrayal of our precedents, and of federal statutes like the antitrust laws.” The amicus brief Public Justice filed with the Court explained the devastating effects of such a ruling.

“A right without a remedy is just a suggestion,” continued Bryant. “The Court has just given corporations the ability to make many rights of consumers, workers and business meaningless. And it has a message for the corporations: take the money and run.”

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