Jonathan Turley’s blog July 7 2013

A recent United State Supreme Court decision has made it almost impossible for small businesses and individuals to bring class action lawsuits against large corporations who may be in violation of antitrust laws. Not only did the case fly under the mass media radar, it also may allow corporations to use contractual language to insulate them from many other federal laws.  I am talking about the American Express v. Italian Colors case that was decided by a 5-3 margin.  What the Supreme Court majority did here was to allow American Express to force its small business customers to sign a contract that included language that precluded those same customers from having any viable access to judicial review of American Express’ business practices.

The Washington Post provides a good synopsis of the case.  “In a second case, American Express Co. v. Italian Colors Restaurant , the same five justices ruled that corporations can insulate themselves from liability for violating federal law by inserting clauses in their contracts that prohibit class-action arbitration. A group of small merchants argued that American Express had violated antitrust laws by using its monopoly power to charge credit card fees 30 percent higher than those of its competitors. But American Express had used the same monopoly power to draft a form contract that directed all legal disputes into arbitration — and then forbade arbitration on a class-wide basis. The merchants argued that because antitrust claims are so expensive to prove, they are not worth pursuing on an individual basis and can be vindicated only through collective, class-wide proceedings.

The Supreme Court previously ruled that contracts may require arbitration rather than court litigation only if the arbitration proceeding provides an adequate forum for individuals to vindicate their rights. In Italian Colors, the court’s majority conceded that requiring individual arbitrations would make it too expensive to challenge American Express’s conduct, but, as Justice Elena Kagan paraphrased the majority’s response in her dissent: “Too darn bad.” ‘Washington Post

Does it surprise anyone at this point when the Roberts Court favors large corporate interests over those of small businesses?  The arbitration clause in the American Express contract that all of its customers were required to sign, was a take it or leave it proposition.    I think that type of take or leave it contract was referred to in law school as an “adhesion contract”.

Prior to reaching the Supreme Court, the Second Circuit Court of Appeals heard the Italian Colors case three times and each time it found for the merchants based on the expense involved for each individual business or person to bring an individual arbitration case against the behemoth American Express.

“The small businesses’ claims were pretty small individually, not more than around $5,000 per shop. So, to make their case worth enough for a lawyer to take it, they banded together to file a class action on behalf of all small businesses affected by the practice. In response, Amex invoked the small print in its contract with them: a clause that not only banned the companies from suing individually but also prevented them from bringing a class action. Instead, Amex insisted the contract required each little businesses to submit to the decision of a private arbitrator paid by Amex, and individually press their claims. (Arbitration is heavily stacked in favor of the big companies, as you can read more about here and here.)

The restaurants estimated, with good evidence, that because of the market research required to press an antitrust case, arbitration would cost each of them almost $1 million to collect a possible maximum of $38,000, making it impossible to bring their claims at all. After a lot of litigation, the little guys prevailed in the 2nd Circuit Court of Appeals, which found that the arbitration clause was unconscionable because it prevented the plaintiffs from having their claims heard in any forum. The court said the arbitration contract should be invalidated and that the class action should go forward in a regular courtroom. (Sonia Sotomayor sat on one of the appeals before heading to the high court and is recusing herself from the case as a result.)”  Mother Jones

If the negative impact on small businesses and individuals was not great enough, the decision in Italian Colors may allow corporations to avoid other Federal laws by merely including language in any contract that prohibits the aggrieved party from filing suit or joining in a class action suit.  In fact, AARP filed an amicus brief with the Supreme Court warning about that very concern.

“In an amicus brief submitted in this case on the side of the small businesses, lawyers for AARP, Public Justice, and the American Association for Justice warned that if the court sided with Amex, “statutes intended by Congress to protect weaker parties against stronger parties will essentially be gutted. Small businesses might as well move to a different country where they no longer enjoy the protection of the antitrust laws. At the whim of an employer, workers could be required to prospectively waive their Title VII [anti-discrimination] rights. Consumer protection laws such as the Truth in Lending Act could be silently, but inescapably, repealed by corporations with the stroke of a pen.”

Indeed, if the court ruled that Amex could use an arbitration clause in a contract with a much less powerful party to escape punishment under the Sherman Antitrust Act, there’s no reason why a big company couldn’t create contracts that prevent people from filing sex discrimination, consumer fraud, or other similar claims in any venue. Laws that Congress passed to protect the public could simply be voided through artfully written arbitration clauses that create expensive hurdles to pressing a claim.” Mother Jones

Of course, the Supreme Court majority is unconcerned with the little guy losing any viable means to attain justice.  Justice Scalia merely claimed in his majority decision that the law does not guarantee the average person a cheap method of enforcing the law against big corporations.  Once again, does that attitude surprise anyone at this point in the history of the Roberts Court?  Justice Elena Kagan pulled no punches in a blunt dissent.

Her closing sums up the damage done by the majority in their politically designed decision.  “In the hands of today’s majority, arbitration threatens to become more nearly the opposite—a mechanism easily made to block the vindication of meritorious federal claims and insulate wrongdoers from liability. The Court thus undermines the FAA no less than it does the Sherman Act and other federal statutes providing rights of action. I respectfully dissent”  Kagan Dissent

It should be no surprise that the Roberts Court is pro-business, but the road it has traveled to insure that large corporations are sacred cows that are infallible and immune to legal precedents and possibly Federal law is amazing.  It is shocking that a case of this importance was so overlooked by the mass media.  Even by a corporate owned mass media.  Do you think the Roberts majority has gone too far in ignoring precedent?  Do you think that the decision will open the flood gates to corporations using arbitration clauses to avoid other Federal laws?

If you agree with the majority in this decision, how can small businesses ever get a reasonable hearing on their legal complaints if they are forced to sign an adhesion contract with a large supplier of services?  This decision should concern citizens of any political stripe.  What do  you think?