The U.S. Supreme Court has ruled that AT&T v. Concepcion wasn’t merely about preemption by the Federal Arbitration Act. It goes all the way — and as long as a statute does not call for or expressly allow class resolution of claims brought under it (which statute does that anyway?), a class arbitration waiver is in principle enforceable, according to yesterday’s 5-3 decision in American Express Co. et al. v. Italian Colors Restaurant et al., case number 12-133.
Class plaintiffs who attempt to rely on the theory that “effective vindication” of their federal statutory rights would be thwarted by upholding a class waiver in arbitration agreements will likely fail, post-Italian Colors. Held Justice Scalia curtly: “[T]he antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.” The judge-made “effective vindication” argument “would certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory rights. And it would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable. But the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.”
The case marks a high point (for some, a low point) in the contra-class trend of the last several years, giving further ammunition to those who had already thought that Concepcion would mark the de facto end of class arbitration of disputes — the expectation there is that every company that had an arbitration clause in its contracts would simply amend it to prohibit class arbitrations, thereby effectively circumventing the often sole affordable mechanism for low-value (but numerous) claims. Credit cards or debit swipe fees (small, but there are billions of them every day) are but one example. And since Italian Colors, antitrust is now explicitly in the mix! In the words of Justice Kagan — whose scorn for the majority opinion is best expressed by her as “a betrayal of our precedents, and of federal statutes like the antitrust laws” — for a plaintiff attempting to vindicate his federal Sherman Act rights to proceed in a low-dollar value case on a non-class basis may well have become a “fool’s errand” post-Italian Colors.
UPDATE: See also the Paul Hastings client alert on American Colors here.
Yesterday’s denial of certiorari in the Eaton v. ZF Meritor litigation rang the temporary death knell for any hope you might have sustained that the Circuit split between the 3d and virtually all other jurisdictions on what amounts to an exclusionary discounting practice would be resolved.
One critique — aside from the nagging Circuit split, which of course hampers country-wide operations of large companies that now must be wary of the lowest-common-denominator rule of the 3d Circuit — has been that the plaintiffs re-labeled the true issue (legality of Brooke Group-type above-cost pricing, even by a monopolist) and framed the crux of the case as something entirely different (partial de facto exclusive dealing).
In spite of the (1) compelling substantive legal arguments and (2) economic rationales for legitimizing discounts that still result in above-cost pricing; despite the (3) stated SCOTUS goal of avoiding Circuit splits on important areas of law (and unilateral-conduct antitrust doctrine should count as one); and in the face of a persuasive amicus curiae brief submitted by 18 of some of the country’s foremost legal and economic scholars and experts** in favor of granting cert, the Supremes decided not to hear the case.
Some (H. Hovenkamp) have interpreted the cert denial as stemming from the already heavily antitrust-laden SCOTUS docket. Others (J. Briggs) have expressed doubt that this particular case was the right vehicle to challenge the 3d Circuit’s outlier position — among other reasons, because only a small group of very-high-market-share companies would be affected by the outcome one way or another.
That said, I wonder when the right time — and what the right set of facts — will be to make a successful run at challenging the Third Circuit’s discounting and loyalty rebate stance. As to the first reason given above (for not granting cert), chances are that antitrust cases won’t disappear from the SCOTUS docket. And as to the second, challenging a Sherman section 2 discounting case will, almost by definition, always involve high-market share parties.
So what’s the conclusion — is the Third Circuit sitting pretty (and safe), as there will never be a good time or a fitting case to contest its now decade-long (since LePage’s v. 3M bundled discount ruling in 2003) lone-rider discount & rebate position?
You tell me… Comments welcome below.
[** Elzinga, Hovenkamp, Kovacic, etc.]