The Second Circuit Court of Appeals held that a class action waiver clause is not enforceable where plaintiffs can demonstrate that the practical effect of enforcing the clause would be to preclude plaintiffs from vindicating their federal statutory rights. The court further held that the Supreme Court’s decisions in Stolt-Nielsen and Concepcion do not alter this determination. Plaintiffs alleged that provisions in Amex’s contracts requiring businesses to “honor all cards” issued by Amex and its affiliates constitute an illegal tying arrangement in violation of the Sherman Antitrust Act. Plaintiffs submitted an economist’s report that, in the court’s view, demonstrated that it was not financially feasible for plaintiffs to assert their claims individually. Accordingly, the court held that the class action waiver could not be enforced because it effectively prohibited plaintiffs from pursuing protections provided by federal antitrust law. The parties had not agreed to class arbitration. Thus, in accordance with Stolt-Nielsen, the court held that the case could “proceed in a judicial class action or not at all.” The court remanded the matter to the district court with instruction to deny Amex’s motion to compel arbitration. In re Am. Express Merchants’ Litig., No. 06-1871 (2nd Cir. Feb. 1, 2012).
This post written by Ben Seessel.
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