American Express Co. v. Italian Colors Restaurant
The Supreme Court ruled that a contract's ban on class arbitration must be enforced even though a small merchant showed that arbitrating its antitrust claim alone would cost hundreds of thousands of dollars more than it could ever win.
The decision narrows a judge-made exception that let courts refuse to enforce arbitration clauses when arbitrating would make it too expensive to pursue a claim, reinforcing that arbitration agreements are enforced as written even when individual claims become practically unwinnable.
“But 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.”
The Court's core reasoning for why high litigation costs alone don't void an arbitration agreement.
How it got here: A federal trial court ordered individual arbitration; the Second Circuit reversed three times, holding the arbitration clause unenforceable because of prohibitive costs, before the Supreme Court agreed to review it.
The Case in Depth
What happened
Small merchants who accept American Express cards sued the company, claiming it used its market power to force them into a contract that let it charge card-acceptance fees roughly 30% higher than competitors, violating federal antitrust law. That same contract required all disputes to go to individual arbitration and barred any class arbitration. The merchants argued that arbitrating their claim alone would cost far more than they could ever recover.
The question before the Court
Could a small restaurant get out of its arbitration agreement with American Express because proving its antitrust claim would cost far more than it could ever recover?
The Court's answer
No — the Supreme Court ruled that the arbitration agreement's ban on class arbitration must be enforced, even though the restaurant showed that individually arbitrating its antitrust claim would cost far more than it could ever recover. The Court found no federal law overriding the general rule that arbitration contracts are enforced as written, and it held that the 'effective vindication' exception to that rule only kicks in when a contract eliminates the right to bring a claim entirely — not when it merely makes pursuing the claim economically unattractive.
The Court distinguished this from situations where a contract literally forbids certain claims or imposes fees so high that arbitration itself is inaccessible. Because the restaurant could still technically bring its claim in arbitration, even if doing so wasn't worth the cost, the waiver of class arbitration stood, and the restaurant's antitrust lawsuit had to proceed through individual arbitration rather than in court.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Businesses that sign contracts with mandatory arbitration and class-action bans gain stronger protection from costly group litigation, even for claims like antitrust violations where individual lawsuits can be prohibitively expensive to pursue alone. Consumers and small businesses with low-value claims may find it economically pointless to challenge alleged wrongdoing when the cost of proving the case exceeds any possible recovery.
What changes now
This is a final merits decision, so the case does not return to arbitration or litigation over the antitrust claim in a class format; the merchants must pursue their claims, if at all, through individual arbitration under the contract's terms. The ruling establishes governing law for future cases where plaintiffs argue an arbitration clause makes proving a federal claim economically unworkable.
What this does not decide
The Court did not decide whether a contract that literally forbids asserting certain statutory claims, or one with filing fees so high a claimant cannot access arbitration at all, would still be unenforceable — it left that narrower version of the effective-vindication exception intact and only rejected extending it to cover high proof costs.
Concurrences and dissents
Concurrence — Justice Thomas
Justice Thomas joined the majority in full but wrote separately to argue that the outcome is also compelled by the FAA's plain text, which requires enforcing arbitration agreements unless a party proves a defect in the contract's formation, such as fraud or duress. Since the restaurant's arguments never challenged how the contract was formed, he reasoned the arbitration clause had to be enforced regardless of the effective-vindication doctrine.
Dissent — Justice Kagan
“The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse.”The dissent's warning about the practical effect of enforcing the arbitration clause.
Justice Kagan argued the majority betrayed precedent by shrinking the effective-vindication rule to cover only outright bans on claims or prohibitive filing fees, ignoring that Amex's contract combined a class-action ban with bars on cost-sharing, joinder, and cost-shifting that together made proving the claim impossible. She would have applied the existing rule to invalidate the arbitration clause because it left the merchant no realistic way to vindicate its antitrust rights.
How the Court got there
The legal reasoning, step by step
- The Court started from the premise that arbitration agreements are contracts and must be enforced according to their terms unless Congress has specifically overridden that rule for a particular type of claim, a principle it called the FAA's default of 'rigorous enforcement.'
- The Court asked whether the antitrust laws contain a 'contrary congressional command' overriding that default, and concluded they do not, because the antitrust statutes never mention class actions and Congress adopted class-action procedure (Rule 23) decades after the Sherman Act existed without class devices.
- The Court then considered the 'effective vindication' exception — a doctrine from earlier cases suggesting courts can refuse to enforce an arbitration clause if it operates as a waiver of a party's right to pursue a federal statutory remedy at all.
- The Court held that exception applies only when a contract eliminates the right to bring a claim altogether, such as by barring certain claims outright or imposing filing fees so high the forum is inaccessible — not merely when it makes proving the claim economically unappealing.
- Applying that narrower rule, the Court found that the high cost of expert analysis needed to prove the antitrust claim did not eliminate the merchants' right to pursue the claim, it only made doing so less worthwhile, so the class-arbitration waiver had to be enforced.
- The Court concluded that requiring courts to weigh the cost of proof against the potential recovery before enforcing an arbitration clause would create a burdensome preliminary litigation process that defeats the FAA's goal of speedy, streamlined dispute resolution.
Doctrinal impact
Cases affected by this decision
Limits Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. (473 U. S. 614)
The Court narrowed the 'effective vindication' exception this case originated, confining it to outright bans on claims or inaccessible forums.
Reaffirms AT&T Mobility LLC v. Concepcion
The Court relied on this case's rejection of class-arbitration-necessity arguments as nearly controlling this dispute.