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The Supreme Court Strengthens Forced Arbitration

In American Express Co. v. Italian Colors Restaurant, Italian Colors Restaurant and a class of other small businesses challenged American Express’ requirement that merchants that accept American Express cards have any and all disputes and claims be resolved through arbitration.  American Express further prohibited classes of companies from joining together to bring claims.  Italian Colors and the other small businesses ignored American Express’ requirements, formed a class and brought suit against American Express.  In response, American Express moved to compel each company to arbitrate its claims individually.

In the case before the Court, the companies argued that arbitration was not reasonable, as the costs of proving their claims at arbitration would be greater than what they could recover through arbitration.  Thus they argued that arbitration was cost-prohibitive and would dissuade companies from bringing claims against American Express, insulating them from any liability.

In its decision on last Thursday, the Supreme Court rejected the businesses’ arguments and upheld American Express’ arbitration requirement.  Essentially, the Court stated that while arbitration may prove more costly than what could be recovered, the requirement was still enforceable because it did not eliminate a company’s ability to try to make that recovery.  In other words, no one cares if you would be forced to spend more to enforce your rights than you could ever hope to recover.  There’s justice for you.

The potential effect of the Court’s decision is great, particularly when we are seeing an increasing number of arbitration agreements in employee handbooks, contracts, and pre-employment agreements.

The National Employment Lawyers Association (NELA), of which Attorneys Walcheske and Luzi are members, summed it up well when it issued the following statement in the wake of the Court’s decision:

U.S. Supreme Court Decision Will Embolden Companies To Flout Workplace Laws—Congress Must Act
(San Francisco, CA) – Terisa E. Chaw, Executive Director of the National Employment Lawyers Association (NELA), issued the following statement on today’s 5-3 decision by the U.S. Supreme Court in American Express Co. v. Italian Colors Restaurant (Case No. 12-133) eliminating the ability of small businesses to join together to vindicate their statutory rights under antitrust laws in arbitration:

“Today the U.S. Supreme Court, as Justice Kagan wrote in dissent, ‘betray[ed]’ decades of its own caselaw and gave a pass to big businesses when they violate our nation’s laws. The family who owned Italian Colors Restaurant was forced to accept American Express’ arbitration clause in order to transact credit card payments. By allowing large corporations to use forced arbitration clauses to prevent small businesses from enforcing their rights under the antitrust laws, a narrow majority of the Supreme Court has ‘insulated wrongdoers from liability.’ Forced arbitration is anathema to our public justice system and is being used by companies to trump substantive legal rights.

Like the family who owns Italian Colors, millions of employees—from minimum wage workers to servicemembers to highly compensated executives—are being forced to submit to pre-dispute binding arbitration to get or keep their jobs. This decision by a divided Court will give companies license to try to deny their workers access to our country’s civil justice system when they violate our nation’s employment and civil rights laws. Congress never intended the Federal Arbitration Act (FAA) to be used against America’s workers or to invalidate their substantive legal rights.

The National Employment Lawyers Association calls upon Congress to enact the Arbitration Fairness Act (AFA) of 2013 (S. 878/H.R. 1844). The AFA would amend the FAA by making it unlawful for employers to impose arbitration on employees except whenknowingly and voluntarily agreed to after the dispute arises or pursuant to a collective bargaining agreement.”
For more from NELA on forced arbitration, visit its website at: www.nela.org/forcedarbitration.

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