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Wednesday, March 9, 2011

Second Circuit Again Invalidates Amex Class Action Waiver

Amex_logo A group of merchant plaintiffs filed an antritrust class action against Amex.  Based upon a class action waiver in its mandatory arbitration provision, Amex sought to compel individual arbitration.  In February 2009, the Second Circuit (Pooler, Sack and Sotomayor) invalidated the class action waiver on unconscionability grounds.  See In re Am. Express Merchs. Litig., 554 F.3d 300 (2d Cir. 2009).

The case returned to the Second Circuit after the Supreme Court vacated the judgment and remanded for consideration in light of Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp, 130 S.Ct. 175 (2010).  Yesterday, the Second Circuit again concluded (this time without Sotomayor) that "(1) the question of the enforceability of the class action waiver provision is properly decided by the court and (2) the class action waiver provision is unenforceable under the Federal Arbitration Act."

The Circuit Court again rested its decision on the evidence that plaintiffs "would incur prohibitive costs if compelled to arbitrate under the class action waiver."  It held that "[t]he Card Acceptance Agreement therefore entails more than a speculative risk that enforcement of the ban will deprive [the plaintiffs] of substantive rights under the federal antitrust statutes."

In Re: American Express Merchants' Litigation, 06-1871-cv, NYLJ 1202484853954, at *1 (2d Cir., Decided March 8, 2011.

[Meredith R. Miller]

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