ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, June 24, 2013

Professor Horton on Italian Colors v. Amex

Horton2UC Davis School of Law Professor David Horton (pictured) has once again agreed to guest post for us on the Supreme Court's most recent arbitration case:

Jeremy was nice enough to ask me to write quick post reacting to American Express Co. v. Italian Colors Restaurants.  Because he’s already provided a good summary of the decision, I’m just going to launch in.

1.  The road not taken.  After oral argument, I expected Amex to be a 6-2 reversal, with Justice Breyer joining the majority.  I thought the rough gist of the decision was going to be something like this: “The plaintiffs argue that they can’t vindicate their antitrust rights without the class action device because the cost of an expert report dwarfs any individual plaintiff’s potential recovery.  But arbitration isn’t subject to the same evidentiary demands as litigation.  Indeed, it’s flexible and casual.  Perhaps each plaintiff can prove up its case without a full-fledged expert report.  Let’s compel bilateral arbitration and see what happens!”  For instance, Justice Breyer repeatedly referred to the prospect of the parties “getting it done cheap” in the extrajudicial forum.  Justice Kennedy also emphasized that arbitration doesn’t “involve the costs and formalities of litigation.”  (This actually prompted Paul Clement to respond, “God bless it, Justice Kennedy”—check out page 35 of the hearing transcript—which I can only imagine  the savvy litigator said with his hand o’er his heart).  But perhaps the anything-goes-in-arbitration approach seemed too dangerous to the majority.  After all, it raised the specter of anything going in arbitration—including antitrust plaintiffs vindicating their rights.      

2.  Does the vindication of rights doctrine survive exist?  Like AT&T Mobility LLC v. Concepcion, Amex’s long-term impact is hard to discern through the fog of results-oriented reasoning.  In Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. and Green Tree Financial Corp.-Ala. v. Randolph, the Court suggested—but did not squarely hold—that judges can invalidate arbitration clauses when plaintiffs prove that they can’t effectively vindicate their federal statutory rights in arbitration.  The primary way plaintiffs met this burden was by offering evidence of prohibitive costs: for instance, hefty filing or arbitrator’s fees.  However, in Amex, Justice Scalia calls the rule “dicta” and opines that “Mitsubishi Motors did not hold that federal statutory claims are subject to arbitration so long as the claimant may effectively vindicate his rights in the arbitral forum.”  According to Justice Scalia, if there is such a thing as the vindication of rights doctrine, it’s not about vindication of rights; instead, it hinges on the narrower inquiry of whether an arbitration clause is the functional equivalent of “a prospective waiver of a party’s right to pursue statutory remedies.”  That is, this mythical but perhaps not mythical rule only applies when a contract literally bars plaintiffs from even asserting a federal statutory claim and “would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable.”  But it doesn’t include the mere “expense involved in proving a statutory remedy.”  That’s a lot of attention lavished upon a doctrine that might not even be real!        

Justice Kagan3.  Distinguishing AmexI don’t know how much good this does, but I read Amex not to govern all arbitration clauses.  Although there seems to be some confusion about the specific provision in Amex, my understanding was that it didn’t just preclude class actions—it also barred plaintiffs from sharing information, consolidating claims, or recovering costs if they won.  In perhaps the most bizarre part of the majority opinion, footnote 4 (1) insists that the Amex clause doesn’t contain these features and then (2) limits its holding to identical provisions.  Arguably, this leaves a window open for future plaintiffs subject to strict arbitration clauses to show that they can’t engage in “other forms of cost sharing” and thus need the class action device to vindicate their federal statutory rights.        

4.  My new favorite Justice.  Something that has always bugged me about Concepcion is the blandness of Justice Breyer’s dissent.  So I was heartened by Justice Kagan’s sarcastic, point-by-point smackdown of the majority.  I know I’m biased, but I found it to be pretty devastating, and I’d be psyched if she became the go-to Justice on the left for arbitration issues.        

[Posted, on David Horton's behalf, by JT]

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glad you can use the words "heartened" and "psyched" in conjunction with this opinion. those of us who actually practice law view this opinion as an unmitigated disaster for the ability of people to obtain justice. but maybe that's just a side issue for all of you folks in the ivory tower

Posted by: anon unimportant trial lawyer | Jun 24, 2013 2:26:45 PM

Your anger is misplaced. Professor Horton wrote an amicus brief in the case, so your "ivory tower" canard is well off the mark. He wrote that he was "heartened" and "psyched" by the dissent. He's pulling for the same side you are, so why don't you put your oar back in the water rather than using it to whack members of your own crew.
More generally, let me note that this blog is a place where scholars and practitioners and scholars/practitioners can interact and learn from one another. That goal is not furthered if the opinions of one group are discounted by the other just because some of us go by Professor and some of us go by Esq.

Posted by: Jeremy Telman | Jun 24, 2013 9:00:04 PM

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