• February 4, 2009

As a rule this blog focuses on Minnesota law but some cases outside the jurisdiction are of such importance that they are worth noting. In re American Express Merchants’ Litigation, Docket No. 06-1871 (2nd Circuit, January 30, 2009) is such a decision.

In a Sherman antitrust class action claim brought against American Express by merchants, the issue on appeal to the U.S. Court of Appeals for the Second Circuit was whether the arbitration clause with a class action waiver should be enforced. The Second Circuit, reversing the District Court, held that it should not be. This is a significant win for the plaintiffs’ bar. The likelihood of a petition for writ of certiorari to the U.S. Supreme Court seems high.

The proposition is of great importance in the consumer class action context because class action waiver clauses have proliferated in “Terms & Conditions” related to all manner of consumer transactions, among others. Therefore it is not surprising that there were armies of law firms and lawyers involved on each side of the American Express case.

The Court of Appeals (Judges Pooler, Sack, Sotomayor) placed heavy emphasis on the fact that the costs of bringing an antitrust claim can be in the hundreds of thousands, if not millions, of dollars (particularly antitrust expert fees). Thus, notwithstanding the fact that the federal antitrust law provides for treble damages and attorneys fees, the Court found that the plaintiffs had established that their antitrust claims could only be brought through the aggregation of individual claims. (Important aside: plaintiffs did NOT oppose class action treatment within arbitration.) (More important aside #2: fee-shifting does not help individual plaintiffs because, under federal law, expert fees are capped at $40/day for experts (who very often charge more than ten-fold that per hour) 28 U.S.C. Sec. 1821(b).)

The Court concludes with some caveats, making clear that it is not holding that class action waivers in arbitration agreements are per se unenforceable; but they do hold they are per se unenforceable in the context of antitrust actions. It is clear that class action plaintiffs’ lawyers will seek to broaden the impact of the holding, if possible.

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