May 29 (Reuters) - A federal appeals court on Tuesday opted
not to reconsider its February opinion allowing American Express
merchant customers to file an antitrust lawsuit against the
A two-judge panel at the 2nd U.S. Circuit Court of Appeals
had ruled that American Express cannot use an arbitration clause
to prevent its merchant customers from banding together in an
antitrust lawsuit against the company.
On Tuesday five appeals court judges said that the case had
been wrongly decided and should have been granted an en banc
"The panel opinion thus impairs the Federal Arbitration
Act's strong federal policy favoring the enforcement of
arbitration agreements, and frustrates the goals of arbitration
by multiplying claims, lawsuits, and attorneys' fees," Chief
Judge Dennis Jacobs wrote. His dissenting opinion was joined by
judges Debra Ann Livingston and Jose Cabranes.
Judge Cabranes and Judge Reena Raggi also issued separate
dissenting opinions. Judge Richard Wesley dissented as well.
Since 1999 American Express has included a mandatory
arbitration clause requiring merchants to waive the right to sue
the company in a class action. The clause is unenforceable,
however, because it encroaches on merchants' rights under
federal antitrust laws, the February panel ruled.
That opinion honored Supreme Court precedent in "preserving
plaintiffs' ability to vindicate federal statutory rights,
rather than eviscerating more than 120 years of antitrust law by
closing the courthouse door to all but the most well-funded
plaintiffs," Judge Rosemary Pooler said on Tuesday, writing for
A group of California and New York merchants, including
restaurants and retailers, and the National Supermarkets
Association sued American Express in 2003. They accused the
company of using numerous tactics to force merchants to pay
inflated fees for AmEx charge card transactions in violation of
federal antitrust laws.
American Express argued that, under their contracts, the
merchants were required to resolve their disputes individually
in private arbitration. The district court agreed in 2006,
upholding the arbitration clause.
But the 2nd Circuit, reviewing the case for a third time in
light of successive Supreme Court rulings, refused to send the
parties to arbitration.
The enforceability of arbitration clause became a hot-button
issue after the Supreme Court's 2011 decision in AT&T Mobility
v. Concepcion, which allowed companies to enforce class action
waivers in consumer contracts. The decision appeared to be a
windfall for companies, allowing them to thwart consumer class
actions by adding arbitration clauses to their contracts.
But the circuit in February concluded that the Concepcion
ruling did not apply to the merchants' antitrust claims. Relying
on testimony from the plaintiffs' economics expert, the court
found that the merchants would have no economic incentive to
pursue an individual arbitration. The cost of hiring an
antitrust expert to prove the case would dramatically outweigh
the individual damages, the court noted.
Judge Cabranes in his opinion said the circuit split was a
sign the case was ripe for the Supreme Court.
The case is In Re: American Express Merchants' Litigation,
U.S. Court of Appeals for the 2nd Circuit, No. 06-1871.
For the merchants: Gary Friedman of the Friedman Law Group.
For American Express: Bruce Schneider, Julia Strickland and
Stephen Newman of Stroock & Stroock & Lavan; Michael Kellogg of
Kellogg, Huber, Hansen, Todd, Evans & Figel.
(Reporting By Basil Katz)
Follow us on Twitter @ReutersLegal | Like us on Facebook