The 2nd U.S. Circuit Court of Appeals, albeit a divided one, dug
in its heels on Tuesday when it refused to rehear en banc a
panel decision over the enforceability of American Express's
The court opted not to reconsider its February opinion that
the arbitration clause, which prohibits class actions, is
unenforceable in this case. Those planted heels could mean this
case winds up, once again, in the U.S. Supreme Court.
This is the third time the 2nd Circuit has addressed the
same issue in an antitrust case brought by AmEx merchants. The
court first decided the AmEx case in 2009, when it ruled the
arbitration clause was unenforceable because the high cost of
pursuing such claims individually would effectively preclude
plaintiffs from bringing them. The U.S. Supreme Court, however,
sent the AmEx case back to the 2nd Circuit to reconsider its
decision, in light of the high court's 2010 Stolt-Nielsen v.
AnimalFeeds Int'l decision.
Upon re-examination, the 2nd Circuit reached the same
conclusion it had the first time. But before that order went
into effect, the high court issued its 2011 decision in AT&T Mobility v. Concepcion, the landmark ruling which favored
arbitration clauses and made it easier for companies to use
those clauses to avoid class-action suits.
In February 2012, a 2nd Circuit panel consisting of judges
Robert Sack and Rosemary Pooler, reviewed the AmEx case for the
third time, in light of Concepcion. Again, the court was
unmoved. Concepcion did not apply in the AmEx lawsuit, the panel
ruled, because that decision offered "a path for analyzing
whether a state contract law is preempted by the (Federal
Arbitration Act)." The issue in AmEx instead deals with the fate
of a plaintiff's statutory rights in a lawsuit based on
antitrust principles, said the panel.
On Tuesday, five of the 2nd Circuit judges, including Chief
Judge Dennis Jacobs, publicly dissented from the decision not to
rehear. In his dissent, Jacobs said the panel's decision
"impairs" the Federal Arbitration Act's policy favoring
arbitration agreements. Further, he argued, the 2nd Circuit has
caused a split with the 9th Circuit Court of Appeals. In a
succinct one-paragraph dissent, Judge Jose Cabranes aligned
himself with the chief justice and stated that the rehearing
denial "can only be explained as a signal that the matter can
and should be resolved by the Supreme Court."
Though several arbitration cases are working their way
through the appeals process, the vigorousness of those dissents
and Cabranes's statement will be "a huge factor in interesting
the Supreme Court," said Mayer Brown's Andrew Pincus, a frequent
Supreme Court advocate and AT&T's lawyer in the Concepcion case.
But consumer advocate and public justice attorney Paul Bland
thinks this is one the Supreme Court might leave be. "If the
Supreme Court overturns this decision, it will be forced to say
that it believes that the Arbitration Act is just more important
than antitrust laws," he told On the Case via email. "I wouldn't
be surprised to see the Supreme Court refuse to hear this case."
Either way, we'll get a chance to see how the Supreme Court
feels. A representative for American Express said the company
intends to file a petition for certiorari. Bruce Schneider of
Strook & Strook & Lavan and Michael Kellogg of Kellogg, Huber,
Hansen, Todd, Evans & Figel represent American Express.
The plaintiffs are represented by Gary Friedman of Friedman
Law Group. Friedman was unavailable for comment.
(Reporting by Erin Geiger Smith)
Follow us on Twitter: @erin_gs, @AlisonFrankel, @ReutersLegal | Like us on Facebook