Second Circuit Court of Appeals says Concepcion Does not apply to AMEX arbitration clause
On February 1, 2012, The United States Court of Appeals for the Second Circuit reversed, for the third time, the District Court’s decision granting American Express’ (“Amex”) motion to compel arbitration pursuant to the Federal Arbitration Act (“FAA”).
The plaintiffs included merchants who were required to pay above-market-rate fees in order to accept payments from customers using American Express cards. The plaintiffs sued in the Southern District of New York, alleging that the fees resulted from a “tying arrangement,” an antitrust violation pursuant to the Sherman Act. In re Am. Express Merchs. Litig., No. 03 CV 9592, 2006 WL 662341 (S.D.N.Y. 2006).
The District Court concluded that plaintiffs’ substantive antitrust claims, as well as the question of whether or not the class action waivers were enforceable, were subject to arbitration and dismissed plaintiffs’ claims.
The plaintiffs appealed.
In In re American Express Merchants Litigation (“Amex I”) the Court of Appeals held that the class action waiver in Amex’s Card Acceptance Agreement was a matter for the court to decide and not subject to arbitration and also held that the class action waiver in the agreement was unenforceable “because enforcement of the clause would effectively preclude any action seeking to vindicate the statutory rights asserted by the plaintiffs.” 554 F. 3d. 300 (2d Cir. 2009).
In Amex I the Court of Appeals ruled that the class action waiver could not be enforced because to do so would grant Amex “de facto immunity from antitrust liability by removing the plaintiffs’ only reasonably feasible means of recovery.” Citing Green Tree Financial Corp.-Alabama v. Randolph 531 U. S. 79 (2000).
Amex appealed to the Supreme Court.
The Supreme Court vacated the Court of Appeals’ decision and remanded the case in light of Stolt-Nielsen S.A. v. Animal Feeds Int’l Corp. In Stolt-Nielsen the Supreme Court held that parties could not be forced to submit to class-action arbitration unless they had specifically agreed to do so. On remand, the Court of Appeals held that Stolt-Nelson did not require it “to depart from [its] original analysis” and again reversed the District Court’s decision and remanded the case for further proceedings. In re Am. Express Merchs. Litig, 634 F. 3 187 (2d Cir. 2011) (“Amex II”)
Undeterred, Amex appealed again following the Supreme Court’s decision in AT&T Mobility v. Concepcion.
In Concepcion, the Supreme Court held that the Federal Arbitration Act preempted state laws that prevented defendants from enforcing most class-action waivers found in arbitration clauses. Amex argued that Concepcion overruled the Second Circuit’s prior holding and that the plaintiffs were not entitled to class-action status under the Card Acceptance Agreement.
Once again, the Court of Appeals rejected Amex’s arguments finding that neither
Concepcion, nor Stolt-Nielsen required it to find that all class action waivers to be “per se” enforceable. The Court of Appeals said that the question on appeals was “whether a mandatory class action waiver clause is enforceable even if the plaintiffs are able to demonstrate that the practical effect of enforcement would be to preclude their ability to bring federal antitrust claims.”
The Second Circuit found if the plaintiffs “are not permitted to proceed in a judicial class action, then, they will have been effectively deprived of the protection of the federal antitrust-law.”
Finding that each “class action waiver must be considered on its merits” is a good decision for plaintiffs; however, we believe that this is not the final word in this case and that the Court of Appeals’ decision will likely be reviewed by the Supreme Court.
Nicholas Turner is a third year law student at New York Law School. He is a Notes & Comments editor of Law Review and a John Marshall Harlan Scholar. Mr. Turner came in second in the 2011 ABA Torts, Insurance, and Compensation Law Section Writing contest. He was a 2011 Review Editor of the school’s Global Human Rights Bulletin. Mr. Turner is proficient in French.
Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.