U.S. Supreme Court Delivers Body-Blow To Employee Class Action Litigation

Employers seeking to avoid class action litigation should be encouraged by the U.S. Supreme Court’s recent counter-punch delivered in American Express Co. v. Italian Colors Restaurant. The U.S. Supreme Court delivered the first shot in AT&T Mobility v. Concepcion in 2011 by holding that the Federal Arbitration Act trumped the California Supreme Court’s prior rule voiding contracts containing class action waivers. Employers cheered and quickly inserted provisions in their employment contracts requiring that “any claims must be brought in a parties’ individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.”

Following Concepcion, several State and Federal courts counter-punched by holding that Concepcion did not apply if the class action waiver “precluded a party from vindicating its statutory rights.” Not so fast, replied the Supremes. In response to Italian Colors’ contention that because the projected cost ($1,000,000) of litigating its individual claim against American Express based upon the contention that Amex’s conduct violated various anti-trust provisions far exceeded its potential damages (perhaps $40,000), that any class action waiver operated to preclude it from vindicating its statutory rights, the U.S. Supreme Court replied, “too bad.” In reversing the Court of Appeal’s decision that the subject class action waiver was unenforceable because Italian Colors would incur prohibitive costs, the Supremes noted that “antitrust laws do not guarantee an affordable procedural path to the vindication of every claim,” and neither do arbitration provisions. Bam!

This legal uppercut may have the effect of knocking out any number of potential employee class action claims-for the moment anyway. But employers should not get too cocky. Undoubtedly, State and Federal judges are already combing through the American Express opinion looking for the “glass jaw” that they can exploit to knockout such waivers in the future.