Thursday, June 20, 2013
Today the Supreme Court issued its decision in American Express Co. v. Italian Colors Restaurant (No. 12-133), another important arbitration case. The Court divides 5-to-3, with Justice Scalia writing the majority opinion (joined by Roberts, Kennedy, Thomas and Alito), and Justice Thomas writing a brief concurring opinion. Justice Kagan writes a dissenting opinion (joined by Ginsburg and Breyer). Justice Sotomayor took no part.
Justice Scalia’s majority opinion begins: “We consider whether a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act when the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery.” The answer: yes. The FAA’s mandate that arbitration provisions are “valid, irrevocable, and enforceable” applies [p.3], and “[n]o contrary congressional command requires us to reject the waiver of class arbitration here.” [p.4]. The opinion continues: “Respondents argue that requiring them to litigate their claims individually—as they contracted to do—would contravene the policies of the antitrust laws. But the antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.” [p.4]
Wednesday, June 19, 2013
Plaintiff, a Florida limited liability company, filed a diversity suit against Sheraton in the Southern District of New York. After three years and much discovery, the action was dismissed without prejudice for lack of subject matter jurisdiction when it was revealed that at least one of the members of plaintiff's limited liability company was a New York citizen, as was Sheraton. Plaintiff then tried to cure the jurisdictional defect by dropping the non-diverse member of its company and filing a new action alleging the same claims.
The district court also dismissed the second action for lack of subject matter jurisdiction, ruling that 28 U.S.C. §1359 prohibited such "engineering" of diversity jurisdiction. The court also granted Sheraton's motion for "just costs," including $200,000 in attorney's fees, under 28 U.S.C. §1919 ("Whenever any action or suit is dismissed in any district court . . . for want of jurisdiction, such court may order the payment of just costs.")
The Second Circuit reversed, holding that Section 1919's allowance of "just costs" did not include attorney's fees, and that the invocation of the common-law "bad faith" exception to the American Rule on attorney's fees was not appropriate in the case. Castillo Grand, LLC v. Sheraton Operating Corp., No. 11-2457 (2d Cir. June 18, 2013).
In Budinich v. Becton Dickinson & Co., 486 U.S. 196 (1988), this Court held that a district court’s decision on the merits that left unresolved a request for statutory attorney’s fees was a “final decision” under 28 U.S.C. § 1291. The question presented in this case, on which there is an acknowledged conflict among nine circuits, is whether a district court’s decision on the merits that leaves unresolved a request for contractual attorney’s fees is a “final decision” under 28 U.S.C. § 1291.
You can find a link to the First Circuit’s decision below and the cert-stage briefing at SCOTUSblog’s case file.