Corporate & Securities Law

The Second Circuit Refuses to Enforce Bar to Collective Action Provision in Arbitration Agreements

By Matthew S. Wild

In a significant victory to antitrust victims, the United States Court of Appeals for the Second Circuit refused to enforce a bar in arbitration contracts that prohibited collective actions.  In re American Express Merchants? Litigation, No. 06-1871-cv (2d Cir. Jan. 30, 2009) (Amercian Express Merchants Litigation attached).  Plaintiffs were merchants who alleged that American Express tied acceptance of its charge card to its credit cards ? it required merchants to accept both cards rather than allowing them to choose to accept only the charge card.  The merchants claim that this tying scheme allowed American Express to charge them supracompetitive fees on American Express credit card purchases in violation of Section 1 of the Sherman Act.  The merchant agreements had an arbitration provision, which also barred class or collective actions whether in arbitration or otherwise.  The Second Circuit held that such clauses are unenforceable where as here the amount of the potential claims are so small that it would effectively preclude plaintiffs from bringing antitrust actions or arbitration proceedings on their own.  The Court expressly chose not to address whether such restrictions are per se unenforceable in antitrust actions.

Full post as published by Antitrust Commentary on February 06, 2009 (boomark / email).