March 1, 2013
Oral Argument in Italian Colors
The Supreme Court Wednesday heard oral arguments in Italian Colors, a consumer arbitration case that has thepotential to nuke one of the few remaining defenses to employment arbitration agreements. Mark Gerano summarizes oral argument as follows:
On Wednesday, February 27 the Court heard oral arguments in the case American Express v. Italian Colors Restaurant. (No-12-133). The majority of the argument centered on whether the plaintiffs would be able to effectively vindicate their statutory rights under the Sherman Act without filing a class-action lawsuit in federal court. The plaintiffs assert that in order to bring this case, they will have to hire experts at a very high cost – something that would not be cost-effective if they were forced to arbitrate claims individually. Justice Kagan and Justice Ginsburg seemed concerned with the fact that foreclosing such a class action would effectively make the plaintiffs unable to vindicate their statutory rights under the Sherman Act because of the cost.
Justices Scalia, Kennedy and the Chief Justice did not display the same sympathy for the plaintiffs in this case. Justice Scalia pointed out that the Sherman Act was created nearly forty years prior to FRCP Rule 23 allowing class actions. He [suggested that the Sherman Act's enforced without class actions.] Like Justice Scalia, the Chief Justice seemed skeptical that a class action was the only way for these plaintiffs to effectively vindicate their rights. He urged that even without a class action, plaintiffs could still work together to share costs of experts and other parts of the litigation, thus significantly reducing their costs. He repeatedly suggested using trade associations to compile the type of reports needed to show Sherman Act violations. The [plaintiffs] countered by arguing that the cost sharing might be prevented because often times arbitration agreements contain confidentiality provisions that would prevent this type of sharing. Nonetheless, the Justices suggested a number of other ways that the cost be kept to a minimum and did not seem persuaded that class action litigation was the only way this group of plaintiffs could effectively vindicate their rights. Because of this strong push to finding a way other than class action for the plaintiffs to vindicate their rights, I think it is a safe bet that American Express will prevail in its petition.
Given what happened at oral argument, I think the best-case scenario is that the Court rules for American Express on the ground that plaintiffs have not shown an inability to vindicate their statutory rights, but will leave (at least for now) the vindication-of-statutory-rights defense intact.
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