There is an agreement between American Express and merchants who accept American Express cards. This card acceptance agreement contains a provision requiring all disputes between the two parties to be subject to arbitration on a non-class basis. The owner of a restaurant called Italian Color and other merchants filled a class action arguing that American Express used its monopoly to force them to accept American Express cards at higher rates than other competitors. The merchants claimed that American Express violated section 1 of the Sherman Act by tying them with an unlawful arrangement. They also argued that American Express violated the federal antitrust law.
American Express Company is an American financial company. This company is well known for its credit cards that are involved in a lot of transactions in the United States. Italian Colors restaurant represent a group of merchants that are owners of small stores.
The issue before the court is whether “the Federal Arbitration Act permits courts, invoking the “federal substantive law of arbitrability,” to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim.” (scotusblog) Whether or not the court can refuse to enforce class arbitration waivers and authorize class action lawsuits when the plaintiff individual claim is worth less than the cost of bringing that claim.
In front of the district court, American Express asked the court “to compel arbitration under the Federal Arbitration Act” (Davis Polk & Wardwell,2) The plaintiffs on the other hand argued that the court “should ignore the arbitration clause because a class-action lawsuit was necessary to “effectively vindicate” its antitrust claim.” ( Legal Information Institute). The district court ruled in favor of American Express and dismissed the case. Italian Colors appealed the decision of the district court. The Second Circuit Court of Appeals reversed the decision of the district court. It holded that the plaintiffs showed enough proofs “that arbitration would not allow it to effectively vindicate its antitrust claim” (Legal Information Institute).A long procedural intermezzo ensued: When American Express first sought certiorari, the Supreme Court granted the petition and remanded to the Second Circuit for reconsideration in light of Stolt-Nielsen v. Animal Feeds International (2010), which held that a party may not be compelled to submit to class arbitration absent a contractual basis for concluding that the party agreed to do so. But on remand the Second Circuit stood by its original ruling. (Hogan Lovells)
The antitrust law is the ground on which the plaintiff in this case sued American Express. They based their lawsuit on the Sherman Act and the Clayton Act. According to the section 1 of the Sherman, Act15 U.S. Code § 1,“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with...