The Supreme Court has just granted certiorari in American Express Co. v. Italian Colors Restaurant, No. 12-133. Earlier today, my colleague Andy Pincus previewed the issue presented to the Court, which is (in a nutshell) whether plaintiffs may avoid their agreements to arbitrate on an individual rather than class-wide basis by contending that they cannot “effectively vindicate” their federal claims without the use of the class device.
Since AT&T Mobility LLC v. Concepcion, the majority of courts have enforced arbitration agreements that waive class actions. But a distinct minority of courts, relying on the Second Circuit’s decision in In re American Express Merchants’ Litigation (the decision under review by the Supreme Court), have refused to enforce such agreements. According to the Second Circuit (and courts adopting its reasoning), a plaintiff who can show that it would be “economically irrational” to pursue his or her federal claims without resort to class actions may avoid the Federal Arbitration Act’s command that arbitration agreements be enforced according to their terms. Depending on how the Supreme Court rules, the ability of the plaintiffs’ bar to evade Concepcion may be sharply limited.
We’ll have more to say about American Express in coming days, but it’s clear that this the most important post-Concepcion arbitration case to come before the Supreme Court. One interesting note: Because Justice Sotomayor was on the original Second Circuit panel to hear the first iteration of the American Express appeal, she has recused herself from this case. Because a 4-4 tie results in affirmance, however, American Express will still need to persuade five Justices.