American Express Co. v. Italian Colors Restaurant

Background

Merchants who accept American Express signed contracts requiring arbitration of disputes and expressly banning class arbitration. The merchants sued for alleged antitrust violations, seeking trebled damages. An economist said proving the claims would require expert work costing hundreds of thousands to over a million dollars, while an individual recovery would be at most about $12,850 (about $38,549 if tripled). Lower courts disagreed about whether the class-waiver should be enforced.

Reasoning

The Court began from the Federal Arbitration Act’s command that arbitration agreements must be enforced according to their terms. It found no clear rule from Congress that overrides those arbitration agreements in the antitrust context. The majority rejected a broad “effective vindication” exception that would void agreements whenever individual arbitration is too expensive to make a claim practical. The Court said that exception, as previously discussed by earlier decisions, applies in limited situations (for example, provisions that literally bar bringing a statutory claim or fees that make the forum inaccessible), but not simply because the cost of proving the claim exceeds the expected recovery. The Court relied on prior rulings that class arbitration is different from bilateral arbitration and that courts should not require class procedures where the parties agreed otherwise.

Real world impact

The decision requires courts to enforce bilateral arbitration and class-waiver terms in contracts like the one here. Small businesses and individual claimants with low-value but complex federal claims may find class or pooled procedures unavailable and may decline to pursue individual arbitration because proof is too costly. The ruling leaves in place arbitration terms that prevent class litigation in many consumer, merchant, and employment disputes.

Dissents or concurrances

Justice Thomas joined the opinion, emphasizing enforcement under the FAA. Justice Kagan’s dissent argued the contract here effectively destroys the ability to vindicate federal rights and would bar enforcement of the waiver.