The Supreme Court has granted review to an FLSA case that raises several critical arbitration questions such as whether a court will enforce an employee's express agreement that 1) prohibits class action employment claims and 2) waives class action arbitrations. American Express Co. v. Italian Colors Restaurant.
American Express provides card services to retail merchants, including supermarkets. To be an American Express merchant, retailers sign a Card Acceptance Agreement, which contains a clause requiring all claims to be submitted to arbitration and another clause which prohibits merchants from bringing class action claims. While both parties to the Agreement can terminate the contract at any time, American Express reserved the right to change the Agreement at any time.
While American Express initially only provided charge cards to holders, in recent years the company has also offered credit cards. Charge cards require a holder to pay off the balance each month, while credit cards allow the holder to maintain a revolving balance.
In 2009, several retail merchants, including Italian Colors Restaurant, brought individual lawsuits against American Express, claiming that the Card Acceptance Agreement violates U.S. antitrust laws. Specifically the merchants were upset that though the American Express card was becoming more akin to other credit cards, such as Visa and Mastercharge, American Express was still charging the merchants a merchant discount fee 35% higher than the competitive rates for Visa and Mastercharge.
The U.S. District Court for the Southern District of New York consolidated the cases. American Express moved to dismiss citing the arbitration clause, and the district court granted the dismissal. On appeal, the Second Circuit Court of appeals held the arbitration clause; in particular the class action waiver was unenforceable because it essentially protected American Express from antitrust suits. American Express appealed and the U.S. Supreme Court vacated the ruling and remanded for further proceedings. The appellate court still found the class action waiver to be unenforceable, so the high court again granted certiorari to determine if the appellate court's decision was consistent with the high court's decision in AT&T Mobility LLC v. Concepcion, where the Supreme Court held that California's refusal to enforce arbitration agreements on similar grounds was preempted by the Federal Arbitration Act.
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