After reading the Supreme Court’s decision in AT&T Mobility v. Concepcion, I found it hard to believe the Court could do a worse job. Boy was I wrong.
To briefly summarize American Express Co. v. Italian Colors Restaurant, several merchants, including Italian Colors Restaurant, brought individual lawsuits against American Express, claiming that the American Express’ Card Acceptance Agreement violated U.S. antitrust laws. The United States District Court for the Southern District of New York consolidated the cases and American Express moved to dismiss in order to force the merchants to arbitrate. The district court enforced the arbitration clause and dismissed the case. The merchants appealed and the United States Court of Appeals for the Second Circuit held that the arbitration clause, in particular the class action waiver, is unenforceable because it would essentially protect American Express from antitrust suits. American Express further appealed and the United States Supreme Court granted certiorari. The Court vacated the ruling and remanded for further proceedings in light of its decision in Stolt-Nielsen v. Animalfeeds International. The appellate court reevaluated its decision and still found the class action waiver to be unenforceable. The Supreme Court granted certiorari again to resolve this issue.
The Court held that the prohibitively high cost of arbitration is not a sufficient reason for a court to overrule an arbitration clause that forbids class action suits. The Court reasoned that federal law does not guarantee that a claim will be resolved affordably. In fact, the fact that it can be more expensive to litigate individual arbitrations than they are worth does not negate the right to pursue a statutory remedy. Therefore, no exception to the Federal Arbitration Act (FAA) can be applied.
After reading American Express Co. v. Italian Colors Restaurant, I refused to believe that a state court would decline to comment on the Court’s holding. After shepardizing American Express Co. v. Italian Colors Restaurant, I was able to locate a case from the Massachusettes Supreme Judicial Court that criticizes the Court’s holding. An excerpt from that case is provided below.
In Feeney II, supra, we were asked to interpret and apply Concepcion, which held that the FAA preempted a California rule that "classif[ied] most collective-arbitration waivers in consumer contracts as unconscionable" because it stood "as an obstacle to the accomplishment and execution of the full purposes and objectives of [the FAA]" to ensure the enforcement of agreements to arbitrate according to their terms. Id. at 1746, 1753. Our holding in Feeney II derived, at least in part, from our belief that Concepcion, while severely constraining the grounds on which a court could invalidate a class waiver in an arbitration agreement as unconscionable or against public policy, permitted the invalidation of a class waiver where that waiver "operate[s] in practice to deny a willing plaintiff any and all practical means of pursuing a claim against a defendant." Feeney II, supra at 491. After all, we observed, Concepcion went "to great length to demonstrate the overall fairness of [the parties' arbitration agreement] and the Court's belief that a consumer could successfully pursue a remedy under the regime it established." Feeney II, supra at 495, citing Concepcion, supra at 1753.
In Amex, the Supreme Court explicitly rejected our reading of Concepcion. As we observed in Feeney II (based on an earlier decision of the United States Court of Appeals for the Second Circuit in the Amex case), apart from the fact the plaintiffs in Amex asserted Federal statutory rights, the one critical difference between Amex and Concepcion was that the plaintiffs in Amex had actually demonstrated that "the cost of . . . individually arbitrating their dispute with Amex would be prohibitive, effectively depriving [them] of the statutory protections of the antitrust laws." Feeney II, supra at 500, quoting In re Am. Express Merchants' Litig., 634 F.3d 187, 197-198 (2d Cir. 2011), aff'd en banc, 667 F.3d 204 (2d Cir. 2012), rev'd sub nom. Amex, supra. Yet when Amex reached the Supreme Court, the Court remarked: "Truth to tell, our decision in [Concepcion] all but resolves this case. . . . We specifically rejected the argument that class arbitration was necessary to prosecute claims 'that might otherwise slip through the legal system.'" Amex, supra at 2312, quoting Concepcion, supra at 1753. The Court went on to state that Concepcion "established . . . that the FAA's command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims." Amex, supra at 2312 n.5. "Accordingly, the FAA . . . favor[s] the absence of litigation when that is the consequence of a class-action waiver, since its 'principal purpose' is the enforcement of arbitration agreements according to their terms." Id., quoting Concepcion, supra at 1748.
Rejecting the Amex plaintiffs' argument that the class action waiver in question must be invalidated because, when combined with other terms of the arbitration agreement, it required an individual plaintiff to spend "between several hundred thousand and one million dollars" to recover at most, $38,000 in damages, id. at 2316 (Kagan, J., dissenting), the Court stated that "the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy" (emphases in original). Id. at 2311. In doing so, the Court essentially held that as long as an arbitration agreement does not expressly "forbid[] the assertion of certain [Federal] statutory rights" or "perhaps" require the payment of "filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable," a plaintiff is not deprived of his or her right to pursue statutory remedies. Id. at 2310-2311.5 The Court went so far as to characterize as "dictum" its statement in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985), that "so long as the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent function."6 Amex, supra at 2310. The Court thus made clear that its discussion in Concepcion of the likelihood that those plaintiffs' claims could be resolved in individual arbitration did not contribute to its holding in that case, and in doing so, thwarted our reliance in Feeney II on that discussion.
Ultimately, in Amex, the Supreme Court makes clear both that Concepcion is not entitled to the reading we afforded it in Feeney II and that the analysis the Court set forth in Concepcion (and reinforced in Amex) applies without regard to whether the claim sought to be vindicated arises under Federal or State law. See Amex, supra at 2312 & n.5. Although we regard as untenable the Supreme Court's view that "the FAA's command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims," id. at 2312 n.5, we are bound to accept that view as a controlling statement of Federal law.
As the foregoing excerpt proclaims, it is indeed a shame that the Court ruled that “the FAA’s command to enforce arbitration agreements trumps any interest in ensuring the prosecution of law-value claims.” Maybe it’s time to call your Congressman.
Which side do you support? Do you think the Supreme Judicial Court of Massachusetts’ reading of Concepcion was fair?
Sources:
AT&T Mobility v. Concepcion
30 Hofstra Lab. & Emp. L.J. 355, 383
Feeney v. Dell Inc.
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