U.S. Supreme Court Validates Class Action Waiver

On June 20, 2013, the Unites States Supreme Court in American Express Co. et al. v Italian Colors Restaurant et al., upheld class arbitration waiver clauses even if the cost of pursuing a federal claim on an individual basis – in this case, the Sherman and Clayton anti-trust Acts– greatly exceeds the potential recovery. The freedom of contract principle “enshrine[d]” in the Federal Arbitration Act  “must [be] rigorously enforced” and may only be overridden  by a contrary “congressional command”. The antitrust laws do not preclude a waiver of class arbitration. Furthermore, the Court declined to apply the “effective vindication” rule which permits courts to invalidate arbitration agreements on public policy grounds if they operate as a “prospective waiver of a party’s right to pursue statutory remedies.” Cost/benefit analysis of whether pursuing individual federal statutory claims is “worth the expense” does not fall within the ambit of the effective vindication rule because a negative outcome “does not constitute the elimination of the right to pursue that remedy.”


American Express et al. v. Italian Colors Restaurant et al.