Supreme Court to review Amex arbitration case

Fri Nov 9, 2012 5:07pm EST

American Express and American Express corporate cards are pictured in Encinitas, California October 17, 2011. REUTERS/Mike Blake

American Express and American Express corporate cards are pictured in Encinitas, California October 17, 2011.

Credit: Reuters/Mike Blake

(Reuters) - The Supreme Court on Friday agreed to consider whether American Express Co (AXP.N) may invoke an arbitration clause to prevent merchant customers from banding together in an antitrust lawsuit against the company.

The court accepted the credit card and travel services company's appeal from a February ruling by the 2nd U.S. Circuit Court of Appeals in New York that voided the clause, and allowed merchants including the Italian Colors Restaurant in Oakland, California to pursue a class-action lawsuit.

A decision could determine the extent to which companies might rely on arbitration clauses to fend off class-action lawsuits, which can allow litigants to obtain larger recoveries at lower cost.

Since 1999, American Express has required merchant customers to waive their right to sue the company in a class action.

But a group of restaurants, retailers and other customers sued in 2003, saying the New York-based company violated antitrust law in its effort to force them to pay inflated fees on charge card transactions.

A two-judge panel of the 2nd Circuit said the company's mandatory arbitration clause violated antitrust law, because many merchants would find it economically unfeasible to pursue their claims individually.

American Express said that ruling created a "sweeping, unwritten loophole" in federal arbitration law that should be overturned.

The Supreme Court has in recent years shown deference to arbitration clauses, while narrowing the ability of various plaintiffs to bring class-action lawsuits.

In a 2011 case involving AT&T Inc (T.N), the court gave businesses a big victory by upholding contracts that required customers to submit to individual arbitrations to resolve disputes, and waive their right to pursue class-action litigation. A California law had prohibited such waivers.

The same year, the court decertified a class of as many as 1.5 million female workers at Wal-Mart Stores Inc (WMT.N) who alleged gender bias in pay and promotions.

The Supreme Court will likely hear oral arguments in the American Express case early next year, with a decision to follow by the end of June.

Justice Sonia Sotomayor, who was involved with the case when she was a federal appeals court judge, did not take part in the decision to accept American Express' appeal.

The case is American Express Co et al v. Italian Colors Restaurant et al, U.S. Supreme Court, No. 12-133.

(Reporting by Terry Baynes and Jonathan Stempel in New York; Editing by Kevin Drawbaugh and Nick Zieminski)

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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