American Express Company, et al., Petitioners v. Italian Colors Restaurant, et al.

Questions presented

SCOTUS records, cert granted 9 Nov 2012

Whether the Federal Arbitration Act permits courts, invoking the "federal substantive law of arbitrability," to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim.

Opinion summary

Etalia.ai summary of the majority opinion

The U.S. Supreme Court case American Express Company, et al., v. Italian Colors Restaurant, et al., 2012 revolved around the issue of whether a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act when the plaintiff's cost of individually arbitrating a federal statutory claim exceeds potential recovery. The plaintiffs were merchants who accepted American Express cards and claimed that they were forced to accept them at rates higher than all other credit and charge cards, which violated antitrust laws. They sought to bring a class action despite an arbitration clause in their contract with American Express that required all disputes be resolved by arbitration on an individual basis only. In its decision, the Supreme Court ruled in favor of American Express (5-3), stating that such waivers are indeed enforceable as long as there is no congressional intent to preclude it. The court held that even if it was not economically feasible for individuals to pursue claims separately through arbitration due to high costs compared with potential rewards, this did not invalidate such agreements or allow for class-wide proceedings.

Dissent summary

Etalia.ai summary of the dissenting opinions

In the dissenting opinion for American Express Company v. Italian Colors Restaurant, Justice Kagan, joined by Justices Ginsburg and Breyer, argued that the majority's decision allowed a monopolist to use its monopoly power to insulate itself from antitrust liability. They contended that the arbitration clause in this case effectively foreclosed any avenue for enforcing statutory rights under federal law because it made pursuing individual claims economically irrational. The dissenters believed that such an outcome was inconsistent with both antitrust laws and precedents regarding arbitration agreements' enforceability when they prevent "effective vindication" of statutory rights. They also criticized the majority's reliance on policy arguments about arbitration’s benefits instead of adhering strictly to legislative intent or precedent.