The Supreme Court sided with big corporations Thursday when it ruled 5-3 that companies can write contracts that force small businesses to challenge monopolistic practices on an unaffordable individual arbitration basis rather than through class-action lawsuits, effectively killing the ability of small businesses to defend themselves in court against larger predatory ones.
In the case, called American Express v. Italian Colors Restaurant, the eatery and a group of other small businesses alleging antitrust violations by the credit card giant banded together in a class-action suit to make their cause valuable enough to attract a lawyer. They alleged that American Express “used its monopoly power to force them to accept its bank-issued knock-off credit cards as a condition of taking regular, more elite American Express cards—and then [charged] them 30 percent higher fees for the privilege,” reports Stephanie Mencimer in Mother Jones.
In response, American Express referred to the small print in its contract with the businesses, which blocked the companies from suing both individually and together. The credit card company insisted each business had to submit its claim to a private arbitrator employed by American Express.
The merchants figured that the process would cost each of them $1 million to collect a maximum possible amount of $38,000. The small businesses pressed forward with their case and prevailed in the 2nd U.S. Circuit Court of Appeals, which ruled that the arbitration clause referred to by American Express “was unconscionable because it prevented the plaintiffs from having their claims heard in any forum,” Mencimer writes.
However, the Supreme Court, whose conservative majority is ever the protector of big business, “has made class action litigation much harder to bring, mostly notably in 2011 when it struck down a huge sex discrimination case brought by 1.5 million women working at Walmart,” Mencimer continues.
An amicus brief submitted in the case on behalf of the small businesses, by lawyers for AARP, Public Justice, and the American Association for Justice warned that if the court sided with American Express, “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.”
The decision could have bad consequences for all types of institutions and individuals. Mencimer writes: “[I]f the court ruled that Amex could use an arbitration clause in a contract with a much less powerful party to escape punishment under” an existing 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.”
Justice Antonin Scalia, who wrote the majority opinion in the case, wasn’t impressed. He said the law is not obligated to make court action affordable to all parties. He agreed that “if a big company breaks the law and screws you, but you signed a contract with an arbitration clause giving away your right to sue or bring class action, you don’t have a case, even if federal law says you do.”
Justice Clarence Thomas concurred. He said Italian Colors voluntarily entered into its agreement with American Express. But, as Mencimer points out, “anyone who’s ever tried to open a bank account knows it’s virtually impossible to engage in commerce these days without being forced to sign a contract in which you forgo your right to sue the company if it rips you off.”
That’s justice in our America of the corporations, by the corporations, for the corporations.
—Posted by Alexander Reed Kelly.
Stephanie Mencimer at Mother Jones:
Justice Elena Kagan gets this point. In her biting dissent aimed squarely at Scalia, she called the majority opinion a “betrayal of our precedents and of federal statutes like antitrust laws.” She observed that the court would never uphold an arbitration agreement that explicitly banned merchants from bringing an antitrust claim, yet that’s effectively what the Amex contract does by compelling merchants to give up the option of class actions in court. She noted that by ignoring several precedents, the majority is providing companies “every incentive to draft their agreements to extract backdoor waivers of statutory rights.” That is, they will use contracts to immunize themselves from laws they don’t like.
Kagan was blunt: “If the arbitration clause is enforceable, Amex has insulated itself from antitrust liability—even if it has in fact violated the law. The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse. And here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.”
The Higgs Boson (CC BY 2.0)
Justice Antonin Scalia.