Respectfully submitted by Lawrence E. Rafferty (rafflaw)-Guest Blogger
A recent United State Supreme Court decision has made it almost impossible for small businesses and individuals to bring class action lawsuits against large corporations who may be in violation of antitrust laws. Not only did the case fly under the mass media radar, it also may allow corporations to use contractual language to insulate them from many other federal laws. I am talking about the American Express v. Italian Colors case that was decided by a 5-3 margin. What the Supreme Court majority did here was to allow American Express to force its small business customers to sign a contract that included language that precluded those same customers from having any viable access to judicial review of American Express’ business practices.
The Washington Post provides a good synopsis of the case. “In a second case, American Express Co. v. Italian Colors Restaurant , the same five justices ruled that corporations can insulate themselves from liability for violating federal law by inserting clauses in their contracts that prohibit class-action arbitration. A group of small merchants argued that American Express had violated antitrust laws by using its monopoly power to charge credit card fees 30 percent higher than those of its competitors. But American Express had used the same monopoly power to draft a form contract that directed all legal disputes into arbitration — and then forbade arbitration on a class-wide basis. The merchants argued that because antitrust claims are so expensive to prove, they are not worth pursuing on an individual basis and can be vindicated only through collective, class-wide proceedings.
The Supreme Court previously ruled that contracts may require arbitration rather than court litigation only if the arbitration proceeding provides an adequate forum for individuals to vindicate their rights. In Italian Colors, the court’s majority conceded that requiring individual arbitrations would make it too expensive to challenge American Express’s conduct, but, as Justice Elena Kagan paraphrased the majority’s response in her dissent: “Too darn bad.” ‘ Washington Post
Does it surprise anyone at this point when the Roberts Court favors large corporate interests over those of small businesses? The arbitration clause in the American Express contract that all of its customers were required to sign, was a take it or leave it proposition. I think that type of take or leave it contract was referred to in law school as an “adhesion contract”.
Prior to reaching the Supreme Court, the Second Circuit Court of Appeals heard the Italian Colors case three times and each time it found for the merchants based on the expense involved for each individual business or person to bring an individual arbitration case against the behemoth American Express.
“The small businesses’ claims were pretty small individually, not more than around $5,000 per shop. So, to make their case worth enough for a lawyer to take it, they banded together to file a class action on behalf of all small businesses affected by the practice. In response, Amex invoked the small print in its contract with them: a clause that not only banned the companies from suing individually but also prevented them from bringing a class action. Instead, Amex insisted the contract required each little businesses to submit to the decision of a private arbitrator paid by Amex, and individually press their claims. (Arbitration is heavily stacked in favor of the big companies, as you can read more about here and here.)
The restaurants estimated, with good evidence, that because of the market research required to press an antitrust case, arbitration would cost each of them almost $1 million to collect a possible maximum of $38,000, making it impossible to bring their claims at all. After a lot of litigation, the little guys prevailed in the 2nd Circuit Court of Appeals, which found that the arbitration clause was unconscionable because it prevented the plaintiffs from having their claims heard in any forum. The court said the arbitration contract should be invalidated and that the class action should go forward in a regular courtroom. (Sonia Sotomayor sat on one of the appeals before heading to the high court and is recusing herself from the case as a result.)” Mother Jones
If the negative impact on small businesses and individuals was not great enough, the decision in Italian Colors may allow corporations to avoid other Federal laws by merely including language in any contract that prohibits the aggrieved party from filing suit or joining in a class action suit. In fact, AARP filed an amicus brief with the Supreme Court warning about that very concern.
“In an amicus brief submitted in this case on the side of the small businesses, lawyers for AARP, Public Justice, and the American Association for Justice warned that if the court sided with Amex, “statutes intended by Congress to protect weaker parties against stronger parties will essentially be gutted. Small businesses might as well move to a different country where they no longer enjoy the protection of the antitrust laws. At the whim of an employer, workers could be required to prospectively waive their Title VII [anti-discrimination] rights. Consumer protection laws such as the Truth in Lending Act could be silently, but inescapably, repealed by corporations with the stroke of a pen.”
Indeed, if the court ruled that Amex could use an arbitration clause in a contract with a much less powerful party to escape punishment under the Sherman Antitrust Act, there’s no reason why a big company couldn’t create contracts that prevent people from filing sex discrimination, consumer fraud, or other similar claims in any venue. Laws that Congress passed to protect the public could simply be voided through artfully written arbitration clauses that create expensive hurdles to pressing a claim.” Mother Jones
Of course, the Supreme Court majority is unconcerned with the little guy losing any viable means to attain justice. Justice Scalia merely claimed in his majority decision that the law does not guarantee the average person a cheap method of enforcing the law against big corporations. Once again, does that attitude surprise anyone at this point in the history of the Roberts Court? Justice Elena Kagan pulled no punches in a blunt dissent.
Her closing sums up the damage done by the majority in their politically designed decision. “In the hands of today’s majority, arbitration threatens to become more nearly the opposite—a mechanism easily made to block the vindication of meritorious federal claims and insulate wrongdoers from liability. The Court thus undermines the FAA no less than it does the Sherman Act and other federal statutes providing rights of action. I respectfully dissent” Kagan Dissent
It should be no surprise that the Roberts Court is pro-business, but the road it has traveled to insure that large corporations are sacred cows that are infallible and immune to legal precedents and possibly Federal law is amazing. It is shocking that a case of this importance was so overlooked by the mass media. Even by a corporate owned mass media. Do you think the Roberts majority has gone too far in ignoring precedent? Do you think that the decision will open the flood gates to corporations using arbitration clauses to avoid other Federal laws?
If you agree with the majority in this decision, how can small businesses ever get a reasonable hearing on their legal complaints if they are forced to sign an adhesion contract with a large supplier of services? This decision should concern citizens of any political stripe. What do you think?
Come on. Its Sunday. That ugly photo!
I come back from church service at the Church of the Latter Day Saint Bernards and open the computer and have to look at this schmuck on the Lard’s day.
Darrel C. Carlson(Son of S/Sgt Carl Edwin Carlson, K.I.A. 22June1944), rafflaw, others:
What those that wish to keep ratcheting up all this authoritarian fascism don’t realize is that it is already having negative cost associated to it.
The German people, German officer core & German LE figured it out the hard way in the 40’s.
I’d hate to be a AMEX card holder or a SCJ & the restaurant management knowing it.
There is no telling what will be in that special sauce next time.
When people can’t get justice one way & they’re really PO many will often find other means.
I keep hoping/posting thinking maybe real leaders will emerge & start diffusing this open warfare/hustle actions against the people & main street.
It hasn’t happened yet.
Stop & think about this below.
Forget Chili’s & LE for just a moment.
Many waitress/waiters around the world are seeing stories like this below.
These people themselves & their family/friends have been/or know someone that has been riped off by the Wallst Banks, had their kids/grandma molested/raped/beat up/killed by TSA at the airports or on the streets by LE, their dogs shot, poisoned by Monsanto cancer causing roundup/GMOs/air/water food, & vaccine flipper babies.
The people have every reason to be angry.
Business leaders, LE leadership, polecat & the courts, the smarter ones anyway, had better stand up now & start diffusing this building situation of public outrage.
Firing this lady below did not help. The local sheriff should have manned up, went & spoke with her/Chili’s in private & then announced some sort of reconciliation in public.
Instead, now the situation is 10,000 time worst!
I don’t need this BS War from either side!!!
OKLAHOMA CITY –
A local waitress is causing a national uproar over a picture and comment she posted about some Oklahoma sheriff’s deputies.
http://www.newson6.com/story/22263606/oklahoma-waitress-fired-over-facebook-post
“So if I understand this posting and related comments, AMEX offers a valuable service, but somehow it is wrong for AMEX to set the terms with which the purchasers of that service must comply? And allowing a corporation to set its own terms is Fascist?”
Yep. If those terms of service deny otherwise available legal remedy to redress any wrong held by AMEX – who are abusing their superior relationship to coerce said limitations in the contract – and this operates to AMEX’s benefit at the sacrifice of legal protections put in place to protect consumers?
You bet it is fascism.
Italian style corporatism.
Extra large.
With extra unequal bargaining power sauce.
“…the restaurants and other businesses do not want to cut off a large segment of their potential business.” So if I understand this posting and related comments, AMEX offers a valuable service, but somehow it is wrong for AMEX to set the terms with which the purchasers of that service must comply? And allowing a corporation to set its own terms is Fascist?
Didn’t the Supreme Court rule that merchants may charge consumers surcharges if credit cards were used? Nothing to say the merchant if this was the case can impose an AMEX surcharge of 1/2 a percent to make up for the difference. Probably would be a good business decision for customers but it might be legal.
mahtso,
as nick suggested earlier, AMEX is used by a lot of businesses and business people and the restaurants and other businesses do not want to cut off a large segment of their potential business. As Darren suggests, maybe legislation can correct this alleged bad decision, but I claim that Congress is in bed with the same large corporations, so that option may not be a realistic one.
As others note AMEX is not a monopoly and the solution is obvious: stop taking AMEX. Why don’t the businesses do that? Presumably, the benefits of taking the card outweigh the costs.
Two possible remedies
1) Don’t accept AMEX cards
2) Legislation
The second would be the most broad, yet I don’t know how much congress is interested in this type of issue.
Ben and Oky1,
the union or collective approach is only good if the contract that the businesses are required to sign is altered and with the Supreme Court imprimatur, why should they?
**The merchants should form a kind of “small business union” and negotiate terms with American Express. **
Nal,
I would add that Small Biz should come up with their own card or something like Bit Coin.
That way they’d be cutting into both the credit & currency monopolies that exist today & that are exploiting everyone.
Every lil step we can each take helps us all regain control over our govt.
It sounds to me like restaurants need a Union to agree contracts with Amex (and possibly other credit or debit card issuers), so that they regain their collective bargaining power, and possibly collective suing power, if needed.
American Express has a monopoly in the charge card business? In the business card sector? I think Visa and MasterCard are bigger.
The merchants should form a kind of “small business union” and negotiate terms with American Express.
There has been an ongoing movement in the restaurant biz to stop using American Express. They charge the most interest to the restaurant owner and are heavy handed in their dealings w/ restaurants. Many businesspeople use AE and restaurants have been reluctant to not accept them. The movement started on the East Coast over a decade ago. It has grown slowly, but grown nonetheless. This may be a win for AE, but I think it will accelerate the boycott. Take note of restaurants that don’t accept AE. However, even in those that do, the wait staff is often told by management to ask if the customer wouldn’t mind using another card, w/ a BRIEF explanation why. Wait staff I know say the response is almost always positive, from the customer. I believe in karma. Everyone here can cut up your AE card. Having grown up in a restaurant family I cut mine up ~10 years ago.
“The arbitration clause in the American Express contract that all of its customers were required to sign, was a take it or leave it proposition”
This sounds like a Hobsons Choice. :o)
When all three Branches of our Government have sold out to the most economically powerful, I wonder whether the Vigilantes they likely will have cultured will be selective or, without conscious, do great collateral damage.
Can we still somehow, “Head that off at the pass”?
I like this guy Greg & want to pump his website so that it might grow & I hope some of you like it also.
This weekly wrap up among other topics he goes over the Wallst Banks settling their massive mortgage frauds for pennies on the dollar & putting the bill for their frauds on the backs of American citizens.
Weekly News Wrap-Up 7.5.13
http://usawatchdog.com/weekly-news-wrap-up-7-5-13/
BK,
Those are a dim and fading memory. Our bought and paid for SCOTUS five have seen to that.
Whatever happened to the anti-trust laws?
Another step on the road towards Fascism.
Over the past 12 years (Bush/Obama) in particular, we have seen an increase in crony capitalism and government power. We have seen a corresponding decline in the rights of the individual.
This trend erodes the concepts that enshrined in the Bill of Rights – what we are getting is a different United States, one that favors corporations and the government – to the detriment of the average citizen.
I think this paves the way for any number of potential future abusive contracting practices by corporations while letting them avoid the penalty of law.
It is fascism writ large.