American Express Co. v. Italian Colors Restaurant

The California Supreme Court has a long history of inventing new rules—either from common law or as “glosses” on statutes—to invalidate arbitration agreements entered into by consumers and employees. For example, in 2005, that court announced a new unconscionability rule—the“Discover Bank” doctrine, which was named after one of the parties to the case—that

The Supreme Court’s decision today in American Express Co. v. Italian Colors Restaurant (pdf), No. 12-133, eliminated the last significant obstacle to adoption of fair, efficient arbitration systems that increase access to justice for consumers while reducing transaction costs for everyone, particularly the huge legal fees of both plaintiffs’ lawyers and defense lawyers.

In AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the Supreme Court held that the Federal Arbitration Act (FAA) prohibits courts from refusing to enforce arbitration agreements on the ground that they do not provide for class actions. Today’s ruling in American Express makes clear that Concepcion’s determination applies to claims under federal law as well. Mayer Brown represented AT&T Mobility in Concepcion and filed an amicus brief (pdf) for the Chamber of Commerce of the United States of America and Business Roundtable in American Express.

American Express has significant implications both for courts’ consideration of attempts to invalidate arbitration agreements and for the policy debate over the enforceability of those agreements. We discuss both, after explaining the grounds for the Supreme Court’s ruling.


Continue Reading Supreme Court Rejects Challenge to Arbitration Agreements