Arbitration Case To Be Heard By US Supreme Court May Strip Citizens’ Rights

03/06/2013 // Keller Grover LLP (Press Release) // Eric Grover // (press release)

In the two years since the United States Supreme Court issued its historic decision in AT&T v. Concepcion allowing the enforcement of class action waivers, millions of consumers and employees have lost the ability to effectively pursue their legal rights. In the next few months, the Supreme Court will decide an appeal from the Second Circuit Court of Appeals in another class action case. This time, even business interests are worried that the Supreme Court is going too far in its zeal to protect big business at all costs by ending class actions. The Second Circuit ruled that American Express was barred from enforcing a class action waiver in its merchant agreement, saying such waivers would unfairly limit the ability to privately enforce antitrust laws. Several weeks ago, a number of merchant groups filed a “friend of the court” brief asking the Supreme Court to uphold the Second Circuits decision, arguing that “without the class procedures…that enable plaintiffs to efficiently share these costs with class members, these businesses would have foregone, on multiple occasions, enforcement of actions that have resulted in substantial public interest benefits.” The brief was filed by the National Community Pharmacists Association and was joined by the National Grocers Association and the National Association of Convenience Stores. “Denying the appeal filed by American Express would be a first step by the Supreme Court in returning some balance to a system that has been tipped all too far in favor of business interests over the past few years,” says San Francisco employment and consumer rights attorney Eric Grover. A decision is expected by early summer.

Public Justice filed its own friend of the court brief in the case, urging the Supreme Court not to take the radical step of enforcing an arbitration clause even where it has been proven to strip federal statutory rights. On behalf of Public Justice Paul Bland has requested that the following message be passed on so that the Supreme Court can hear how real people feel about this case.

…Consumer and plaintiffs lawyers know that there have been a long string of cases where the Supreme Court has enforced arbitration clauses. In the course of doing that, though, the has always said that enforcing arbitration clauses won’t cause any harm, because (the Court has insisted and promised), arbitration is a forum where anyone with a valid legal claim can be heard fairly. The Supreme Court has always said that arbitration is only acceptable where parties can “effectively vindicate their substantive rights.” About 8 SCOTUS cases make that statement.

In re American Express Merchants Litigation, we’ll learn if the Court actually MEANT any of those promises. This is the most important and most pro-consumer case involving a challenge to an arbitration clause that has come down since Concepcion. In the case, a number of small business merchants brought a class action in court alleging that Amex is violating the Sherman Act with a Tying Arrangement (using its monopoly power over charge cards to force merchants to take all Amex-branded credit cards — and pay higher fees). AmEx moved to force the case into individual arbitration (with no class action possible). The plaintiffs PROVED, with admissible evidence that was never controverted, that it would be impossible for them to pursue their antitrust claims, in court or arbitration, if they had to go forward on an individual basis. It would cost them hundreds of thousands of dollars to prove their cases in each case, even though their claims are typically only worth about $5,000.

But AmEx, backed by the Chamber of Commerce, wants the Court to abandon the “effective vindication” doctrine, or more likely to re-define it in a way that would make it completely meaningless. They want the Supreme Court to enforce AmEx’s arbitration clause, and class action ban, even though it means that small business plaintiffs will lose all their substantive rights under the antitrust laws.

Public Justice filed today an amicus brief objecting to AmEx’s radical position. Our brief explains that if the Court severs the link between arbitration and the opportunity to be heard and obtain justice, then statutes that Congress enacted to protect consumers, small businesses, and workers from more powerful corporations will be gutted. We point out that the small-business plaintiffs suing Amex in this case may as well move to a nation that has no antitrust laws. We point out that arbitration will become nothing more than a convenient way for stronger parties to immunize themselves from the law. It will have no arguable legitimacy, it will just be an exercise in power.

In our conclusion, we say “Petitioners’ proposal would change the underlying statute from the Federal Arbitration Act to the Federal Corporate Immunity Act, and would rob it of its legitimacy.”

Here’s the brief:

Our brief was written by Paul Bland, Public Justice Staff Attorney Leslie Bailey, Brayton-Thornton Attorney Spencer Wilson, with input from our Executive Director Arthur Bryant. We were joined on the brief by the American Association for Justice and AARP. John Vail of AAJ’s Center for Constitutional Litigation and Julie Nevpau of AARP both provided valuable input.

For more information on class action consumer rights cases, please contact Keller Grover, LLP at 415.659.9937.

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