We Are Open (With Safety Precautions) & Ready To Help:  Click Here To Watched Our Covid-19 Webinar — What Employers Need to Know

Supreme Court Green-Lights Mandatory Arbitration Clauses, Forestalling Class Actions: Could Be Good News For Employers

Written on .

July 7, 2013 -

Will a mandatory agreement to submit disputes to one-on-one arbitration, bypassing class actions, hold up in court? The Supreme Court just said “yes” in a case involving credit cards – and this could be very significant news for employers who want to ensure that disputes with employees are handled confidentially, one at a time, rather than through protracted (and expensive) class actions in court.

 In American Express v. Italian Colors Restaurant, the restaurant wanted to accept American Express credit cards for payment. To do that, it had to enter into an agreement with the company that contained two important conditions. First, any dispute would have to be settled in one-on-one arbitration: no class actions allowed. Second, if it wanted to take American Express credit cards, it also had to agree to take the company’s debit cards. Retailers must pay high fees for both privileges, and the fees for debit card purchases are particularly high.

 The restaurant and a number of other merchants decided to sue American Express, claiming that the debit card requirement was an illegal “tying” arrangement that violated the antitrust laws. But since all of the merchants had signed the one-on-one arbitration agreement as a condition of accepting the cards, American Express said they couldn’t file a lawsuit, let alone a class action. The trial court agreed with American Express and dismissed the case, but the Court of Appeals agreed with the merchants and reversed, in part because enforcing the one-on-one arbitration requirement would make it prohibitively expensive to litigate the antitrust claims. American Express asked the Supreme Court for review.

 The Supreme Court came down squarely in favor of enforcing the arbitration agreement between American Express and the merchants. Justice Scalia, writing for the majority, found that abiding by the agreement between the parties was more important than any other consideration (such as enforcing the antitrust laws). Italian Colors had signed an agreement with American Express that precluded class actions, and was bound by its terms.

 The American Express decision is consistent with the Court’s other recent class action decisions, Dukes v. Wal-Mart and Comcast, which focused on the necessity to look at injuries and damages on an individual level rather than engaging experts to argue collectively. Class actions are where the big money is in litigation, although less for the class members, who often receive coupons entitling them to discounts from wrongdoing retailers, than for the lawyers, who routinely collect 7-or 8-figure fees. The expense of defending a class action, and the risk of financial ruin if you lose, often all but force a company to settle, even if they believe they would win in the end.

 So, what does this mean for employers? Potentially, a lot. All three of these Supreme Court decisions make it more difficult for litigants to bring class action claims in the future. What the American Express decision adds to the mix is that an agreement to arbitrate disputes one-on-one, rather than through a class action, will be honored. Employee-rights organizations will protest, but employers could require the same sort of agreements as a condition of employment, thereby protecting themselves from exposure to class action suits for back wages, discrimination, or other alleged violations. If you don’t think that will be important, just ask any employer who’s been on the receiving end of a class action.

Questions? Need more information? Contact Larry Stine at (404)365-0900 or jls@wimlaw.com;

or Elizabeth Dorminey at bdorminy@bellsouth.net.

Get Email Updates

Receive newsletters and alerts directly in your email inbox. Sign up below.

Recent Content

medical healthcare, indoors

Supreme Court Again Upholds Affordable Care Act

California v. Texas, the Supreme Court has again upheld the provisions of the Affordable Care Act (ACA), often known as ObamaCare. A fede...
sticky notes, wall, indoors

No-match Social Security Letters Discontinued

In the past, the Social Security Administration (SSA) during periods of time has issued so-called "no-match letters" to employers with "a...
cross

Supreme Court Allows Catholic Group to Exclude Foster-care Rights

The public and the courts continue to debate whether there should be religious exemptions to LGBT anti-discrimination laws. In other word...
restroom neon light

EEOC Addresses Controversial LGBT Restroom Policies

A year ago the U.S. Supreme Court ruled in Bostock v. Clayton County that Title VII outlawed workplace bias based on sexual orientation a...
buttons on a table, indoor

Labor Board to Reconsider Employer Restrictions on Wearing Buttons and Other Insignia in the Workplace

Many employers do not like the idea of employees wearing pro-union shirts or buttons on the job. In the past, however, and particularly d...
monopoly houses on a wooden table indoors

Supreme Court Rejects Union Access to Employer's Property in California

A strong ruling for employers' private property rights was issued by the U.S. Supreme Court in June in Cedar Point Nursery v. Hassid, No....
  • Home
  • Alerts
  • 2013
  • Supreme Court Green-Lights Mandatory Arbitration Clauses, Forestalling Class Actions: Could Be Good News For Employers

Wimberly, Lawson, Steckel, Schneider & Stine

3400 Peachtree Road, Ste 400 / Lenox Towers / Atlanta, GA 30326 /404.365.0900

Where Experience Counts


Thank you for visiting the firm's website. Please note that this website is intended for general information purposes only and does not constitute an offer of representation or create an attorney-client relationship with the firm. The firm welcomes receipt of electronic mail but the act of sending electronic mail alone does not create an attorney-client relationship. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include the firm's copyright notice.

© 2020 Wimberly, Lawson, Steckel, Schneider & Stine P.C. | Site By JSM