Arbitration

  • June 20, 2013

    by Jeremy Leaming

    During her featured remarks at the 2013 ACS National Convention, Sen. Elizabeth Warren (D-Mass.) ripped the federal bench, and the Supreme Court in particular, for a pro-corporate trend. Today the high court issued an opinion in American Express Company v. Italian Colors Restaurant that buttresses Warren’s sharp critique.

    In the American Express case, the Court’s right-wing justices found that the Federal Arbitration Act (FAA) blocks courts from invalidating contractual waivers of class arbitration, another blow to individuals hoping to band together to hold corporations accountable for malfeasance. A group of merchants who accept American Express cards had lodged a class action against the financial giant arguing that its rate on accepting American Express cards violated federal antitrust laws. The high court led by Justice Antonin Scalia, however, essentially held that a clause in the American Express agreement barring class action arbitration trumped antitrust laws.

    Scalia maintained that the FAA was enacted by Congress as a “response to widespread judicial hostility to arbitration” and that its text “reflects the overarching principle that arbitration is a matter of contract. There is no ‘contrary congressional command’ that “requires us to reject the waiver of class arbitration here,” Scalia wrote.

    Scalia notes the merchants argued that forcing them to litigate individually would prove too costly, but concluded “the antitrust laws do not guarantee an affordable path to the vindication of every claim.” Later in the opinion, Scalia writes, “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.”

    As Media Matters’ Senior Counsel & Director of its Courts Matter project Lara Schwartz noted, “In other words, Scalia essentially was saying it’s OK if the rules make it impossible to win as long as they don’t make it impossible to play.

    Justice Elena Kagan lodged a dissent, joined by Justices Ruth Bader Ginsburg and Stephen Breyer. (Justice Sonia Sotomayor recused herself in this case). Kagan wrote, that the “owner of a small restaurant (Italian Colors) thinks that American Express (Amex) has used its monopoly power to force merchants to accept a form contract violating the antitrust laws.” But that same agreement with Amex barred the restaurateur from bringing the claim.

    “And here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.”

  • March 12, 2013

    by Jeremy Leaming

    While President Obama has advanced some eloquent calls for expanding equality, his administration must take more action to ensure equality in the workforce, according to a new ACS Issue Brief.

    Landmark measures such as Title VII of the Civil Rights Act of 1964 and President Lyndon Johnson’s executive order banning federal contractors from employment discrimination have been undermined by federal judges far too eager to protect the rights of employers, write Ellen Eardley and Cyrus Mehri in “Defending Twentieth Century Equal Employment Reforms in the Twenty-First Century.” 

    Citing Simon Lazarus, an attorney with the Constitutional Accountability Center, Eardley and Mehri write that lower federal court judges “have been ‘aggressively activist in narrowing, undermining, and effectively nullifying an array of progressive statutes,’ including statutes involving civil rights and affirmative action.” Eardley and Mehri, attorneys with Mehri & Skalet, PLLC, also note that former federal court judge Nancy Gertner has “recently declared that ‘changes in substantive discrimination law since the passage of the Civil Rights Act of 1964 [are] tantamount to a virtual repeal.’”

    The authors also cite a study from the Harvard Law & Policy Review, the official journal of ACS, which reveals data showing that from 1979 through 2007 judges have increasingly sided with employers in employment discrimination cases and that the rare victories for workers are frequently invalidated at the appellate level. The study by Stewart J. Schwab and Kevin Clermont “found that the anti-plaintiff effect on appeal particularly disturbing because employment discrimination cases are fact-intensive and often turn on the credibility of witnesses.”

    And it’s not just the lower courts that have made it difficult for workers to challenge employer malfeasance, the authors add, noting that the U.S. Supreme Court has issued opinions making it tougher to bring class actions claims and providing federal courts with greater power to quickly dismiss workers’ employment discrimination cases.

    “The Draconian view of Title VII, distortion of the basic principles of civil procedure, and the new hurdles to class certification adopted by the federal judiciary make it difficult for employees to vindicate their rights,” Eardley and Mehri write.

  • March 11, 2013

    by E. Sebastian Arduengo

    The Financial Industry Regulatory Authority or FINRA recently found that Charles Schwab, violated FINRA consumer protection rules by including provisions in customer agreements where customers waived their right to assert claims through the class action mechanism. The punishment for trying to structure a customer agreement that effectively allows Schwab to cheat their customers without fear of repercussion? A slap on the wrist.

    FINRA's weak action was a result of the U.S. Supreme Court's opinion in AT&T v. Concepcion. The Court held that arbitration agreements that waived a party’s ability to bring a class action must be enforced, even if they were in “take it or leave it” contracts of adhesion, where the consumer had no choice but to agree if they wanted cell phone service. At the time, The New York Times noted “the decision … appeared to provide businesses with a way to avoid class-action lawsuits in court. All they need do … is use standard-form contracts that require two things: that disputes be raised only through the informal mechanism of arbitration and that claims be brought one by one.”  

    This brings us back to the FINRA decision, which is a perfect application of the litigation strategy outlined by The Times, and shows why Concepcion was such a terrific decision for corporate America (not so much for the rest of us). In direct response to the Supreme Court’s ruling in Concepcion , Schwab put new waiver provisions in their 2011 customer agreements, which covered close to seven million customers. The waivers that they put into the 2011 customer agreements were worded such that any customer claim against Schwab had to be arbitrated “solely on an individual, case-by-case basis.”

  • August 27, 2012

    by Nicole Flatow

    In the wake of the U.S. Supreme Court’s 2011 ruling limiting class actions in AT&T v. Concepcion, the National Labor Relations Board issued a ruling that gave hope to those seeking to hold their employers accountable.

    The ruling invalidated an arbitration agreement that blocked employees from banding together as a class, and it was grounded in a provision of the National Labor Relations Act that protects employees’ right to act collectively. But in the months since the January ruling, all but a few courts have declined to adopt the NLRB’s reasoning, signaling that the administrative decision may not have the impact some had hoped.

    Thompson Reuters’ Nate Raymond looks at 16 federal and state court decisions over the past seven months, and finds that 13 of them disregarded the NLRB’s decision. Some found that the Federal Arbitration Act controlled; others that only the Supreme Court’s Concepcion decision applies.

    The initial NLRB decision, D.R. Horton, is still pending on appeal to the U.S. Court of Appeals for the Fifth Circuit. And in one decision that did adopt the NLRB’s reasoning, the court distinguished Concepcion, which did not involve a conflict with the NLRA. But thus far, courts have signaled that the NLRB’s decision will have little impact on employees’ access to justice.

    D.R. Horton is not the only case with the potential to preserve some limits on arbitration clauses.

  • March 9, 2012

    by Nicole Flatow

    The U.S. Supreme Court’s decision last year in AT&T Mobility v. Concepcion was a major blow to consumers’ ability to file class actions and hold corporations accountable. In the 5-4 decision, the majority rejected a lower court ruling that an arbitration clause was unconscionable because it barred class actions.

    But a recent federal appeals court decision that considered Concepcion as precedent may pave a way forward for litigants seeking to challenge corporate action as a class, writes Philadelphia litigator Joshua D. Wolson on The Legal Intelligencer Blog.

    In In re American Express Merchants Litig., the Second Circuit held that an arbitration clause containing a class action waiver was unenforceable. The case was twice reversed by the U.S. Supreme Court for reconsideration in light of Concepcion and another limiting Supreme Court precedent, and twice more, the court maintained its holding.

    In striking down the class action waiver, the court relied on an affidavit from an economist, which showed that no rational plaintiff would bear the cost alone of winning such a complicated antitrust case, when the potential payout was so comparatively small. 

    “The evidence presented by plaintiffs here establishes, as a matter of law, that the cost of plaintiffs' individually arbitrating their dispute with Amex would be prohibitive, effectively depriving plaintiffs of the statutory protections of the antitrust laws,” the judges wrote.

    If plaintiffs can overcome class action bans by providing affidavits from economic experts, perhaps there is a future for consumer class actions, Wolson writes. But, he cautions, “it seems likely that the Supreme Court will have the last word.”