State securities regulators are up in arms over the Supreme Court’s recent decision upholding American Express’ right to bar customer class-action suits and are pressing Congress to stop forced arbitrations.
The Supreme Court on June 20 issued its opinion in American Express Co. v. Italian Colors Restaurant, which held that a group of merchants were bound by individual arbitration agreements with American Express “even if a class action is the only way to make the claim economically viable,” NASAA says.
According to The Washington Post, a group of California restaurants led by Italian Colors had a dispute with American Express, over fees and other matters, from which each restaurant hoped to recover $40,000 or less. But the analysis necessary to prove their case would have cost the restaurants up to $1 million.
“The Supreme Court’s ruling effectively invites large corporations to use arbitration agreements to disregard effective vindication of consumer claims through class actions,” said Heath Abshure (right), NASAA President and Arkansas securities commissioner, in a statement.
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“It is disappointing that the Supreme Court would turn a blind eye to the injustice of allowing large corporate interests to deny small businesses and individuals their day in court,” Abshure said. “It is now up to Congress to restore some vestige of consumer protection by prompt remedial legislation to restore the scales of justice to balance.”
In a 5-3 opinion by Justice Antonin Scalia, the Court held that a contractual provision mandating individual arbitration by means of a class-action waiver is enforceable under the Federal Arbitration Act (FAA), even if the costs of individual arbitration outweigh the potential recovery, according to attorneys Michael Miller and Adam Hunt of the law firm Morrison Foerster.