A new breed of contract arbitration provisions may be just around the corner. A divided United States Supreme Court recently decided that antitrust claims arising out of a merchant account contract containing an arbitration provision prohibiting bringing any claim on a class action basis could only be brought individually even though the costs of proving the individual claim through expert testimony would exceed the value of the claim itself. It is widely accepted that expensive economic analysis is a necessary component of successfully proving up an antitrust claim. In rejecting the “effective vindication rule” that one could not be forced to waive class relief if doing so would frustrate one’s ability to effectively vindicate his statutory remedies, the majority drew the distinction that “…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 case is American Express Company v. Italian Colors Restaurant, decided June 20, 2013. http://www.supremecourt.gov/opinions/12pdf/12-133_19m1.pdf.
In a strong dissent, Justice Kagan warned that the Amex contract also contained additional waivers which have the effect of insulating Amex from violations of the antitrust statutes: disallowing any kind of joinder or consolidation of claims or parties; a confidentiality provision preventing Italian Colors from informally arranging with other merchants to share expenses by producing a common expert report; and precluding any shifting of costs to Amex, even if Italian Colors prevailed. Not surprisingly, Amex refused to enter into any stipulations that would avoid or lessen the need for the economic analysis. She stated: “In short, the agreement as applied in this case cuts off not just class arbitration, but any avenue for sharing, shifting, or shrinking necessary costs. Amex has put Italian Colors to this choice: Spend way, way, way more money than your claim is worth, or relinquish your Sherman Act rights.”
What does this court decision mean to you? Litigation expense is a prime consideration in virtually every case. One may expect future contracts of all types to contain more expansive waivers in their arbitration provisions which have the effect of dissuading claimants from vindicating their rights. It will become more and more important that parties fully understand the impact of what they may be asked to give up by agreeing to those provisions.