November 9, 2012
Today the Supreme Court granted certiorari in one case of interest to the business community:
Federal Arbitration Act—Arbitration of Federal Statutory Claims
Two terms ago, the Supreme Court held in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), that the Federal Arbitration Act prohibits states from refusing to enforce arbitration agreements that require disputes to be resolved on an individual rather than class-wide basis. Today, the Court granted certiorari in American Express Co. v. Italian Colors Restaurant, No. 12-133, to decide whether a different rule applies when the claim to be arbitrated arises under federal rather than state law.
Mayer Brown, which served as lead counsel for AT&T Mobility in Concepcion, filed an amicus brief on behalf of major business groups, urging the Supreme Court to grant certiorari in American Express.
In American Express, the plaintiffs—retail businesses that entered into contracts with American Express to allow their customers to make purchases using American Express credit and charge cards—filed a class action alleging that certain provisions in those contracts violate federal antitrust law. The contracts require the parties to arbitrate their disputes with American Express on an individual basis rather than as part of a class or representative action. The plaintiffs argue that their arbitration agreements should be invalidated, however, because, in the plaintiffs’ view the cost of proving each plaintiff’s claim would exceed the expected recovery and thereby make it impracticable for the plaintiffs to vindicate their claims.
The district court enforced the arbitration agreements and ordered the parties to arbitrate their claims on an individual basis. A panel of the Second Circuit reversed, however, holding that courts can refuse to enforce an arbitration agreement if it would be “economically irrational” for the plaintiff to pursue its federal statutory claims in arbitration. As evidence of the expected cost of arbitration, the court of appeals pointed to an affidavit submitted by the plaintiffs’ expert witness, who contended that it would take hundreds of thousands of dollars’ worth of his expert work to help each plaintiff prove its individual claim. The Second Circuit recognized that the Supreme Court in Concepcion had rejected the argument that arbitration clauses are invalid where “class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system,” but the court nevertheless concluded that Concepcion’s holding is limited to state-law defenses to the enforcement of arbitration agreements and does not apply when a plaintiff’s claim arises under federal law. The Second Circuit refused to rehear the case en banc, over the strong dissents of five judges.
American Express is the most important arbitration case to come before the Supreme Court since Concepcion, and the Court’s decision will be significant for all businesses that include arbitration provisions in their agreements with customers or employees. Since Concepcion was decided, the plaintiffs’ bar has fought aggressively to limit the reach of that decision. Most of those efforts have been unsuccessful. But if the Second Circuit’s decision in American Express is upheld by the Supreme Court, it could undermine Concepcion to a significant degree because virtually any class-action complaint can be framed to include at least one federal claim, and plaintiffs’ lawyers can readily retain an expert to opine that the costs of proving a single plaintiff’s claim would outweigh the expected recovery.
For more on American Express, please see recent posts here and here on Mayer Brown’s Class Defense Blog by the Mayer Brown lawyers who represented AT&T Mobility in Concepcion and authored the amicus brief on behalf of business groups in American Express.
Absent extensions, amicus briefs in support of the petitioner (or neither party) will be due on December 31, and amicus briefs in support of the respondents will be due on January 30. Any questions about this case should be directed to Andrew J. Pincus (+1 202 263 3220) or Archis A. Parasharami (+1 202 263 3328) in our Washington, DC office.
Earlier this week, the Supreme Court invited the Solicitor General to file a brief expressing the views of the United States in the following case of interest to the business community:
BG Group PLC v. Argentina, No. 12-138: The question presented is whether, in disputes involving a multi-stage dispute-resolution process, a court or the arbitrator determines whether a precondition to arbitration has been satisﬁed.
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Mayer Brown's Supreme Court & Appellate practice distributes a Docket Report whenever the Supreme Court grants certiorari in a case of interest to the business community and distributes a Docket Report-Decision Alert whenever the Court decides such a case. We hope you find the Docket Reports and Decision Alerts useful, and welcome feedback on them (which should be addressed to Andrew Tauber, their general editor, at email@example.com or +1 202 263 3324).
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