570 U.S. 228 (2013)
Respondents Italian Colors Restaurant and other merchants who accept American Express cards entered into agreements with petitioners American Express and its subsidiary.1 These agreements required that all disputes be resolved by arbitration and provided that there shall be no right or authority for any claims to be arbitrated on a class action basis.2 The agreements also included a jury trial waiver and specified that New York law would govern.3
Respondents filed a class action complaint in the United States District Court for the Southern District of New York.4 They alleged that American Express violated section 1 of the Sherman Act by using monopoly power in charge cards to force acceptance of credit cards at rates about 30 percent higher than competitors, seeking treble damages under section 4 of the Clayton Act for the class.5
Petitioners moved to compel individual arbitration under the Federal Arbitration Act.6 The district court granted the motion and dismissed the lawsuits.7 On appeal, the Court of Appeals for the Second Circuit reversed, holding the class-action waiver unenforceable because respondents had shown through an economist's declaration that expert analysis costs would be at least several hundred thousand dollars while individual recovery would be at most $38,549 after trebling.8
The Supreme Court granted certiorari, vacated the judgment, and remanded for consideration in light of Stolt-Nielsen S.A. v. AnimalFeeds International Corp.9 The Second Circuit stood by its reversal, then reconsidered sua sponte in light of AT&T Mobility LLC v. Concepcion but again reversed.10 It denied rehearing en banc, after which the Supreme Court granted certiorari to address whether the FAA permits invalidation of arbitration agreements that do not permit class arbitration of federal claims.11
Whether a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act when the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery?12
Section 2 of the Federal Arbitration Act provides that arbitration agreements shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.13 Courts must rigorously enforce arbitration agreements according to their terms, including agreements that prohibit the use of class procedures.14 The effective vindication exception applies only when the arbitration agreement operates to waive a party’s right to pursue statutory remedies by forbidding the assertion of statutory rights or imposing filing and administrative fees so high as to make access to the forum impracticable. It does not apply when it is not worth the expense involved in proving a statutory remedy.15
Yes. The Federal Arbitration Act requires courts to enforce the arbitration agreement according to its terms even if that means the plaintiffs cannot effectively vindicate their federal statutory rights in arbitration.16 In this case, the agreements between American Express and the merchants required all disputes to be resolved by arbitration without class actions.17 Although the merchants established through an economist's affidavit that the cost of expert analysis would exceed their potential recovery, this fact does not constitute the elimination of the right to pursue the antitrust remedy.18
The class-action waiver does not forbid the assertion of the Sherman Act claim but simply requires that it be pursued in individual arbitration rather than as a class action or in court.19 Therefore, the agreement is enforceable under the FAA.20
The contractual waiver of class arbitration is enforceable under the Federal Arbitration Act.21
Related opinions on this issue
Justice Thomas joined the opinion of the Court but wrote separately to note that the result is also required by the plain meaning of the Federal Arbitration Act.22 He explained that the FAA requires enforcement of an arbitration agreement unless a party successfully challenges its formation, such as by proving fraud or duress.23 Italian Colors' arguments about antitrust policies and effective vindication do not concern whether the contract was properly made.24
Because Italian Colors voluntarily entered a contract with a bilateral arbitration provision, it cannot escape its obligations merely because the claim might be economically infeasible.25
Joined by Justices Ginsburg And Breyer
Justice Kagan dissented, joined by Justices Ginsburg and Breyer.26 She argued that the effective vindication rule, originating in Mitsubishi, prevents arbitration clauses from conferring immunity from meritorious federal claims by making vindication impossible.27 Here the agreement's class-action waiver, combined with bans on joinder, cost-shifting, and informal coordination plus the confidentiality clause, rendered arbitration prohibitively expensive given the expert costs far exceeding the maximum recovery.28
She maintained that the majority's approach allows companies to insulate themselves from antitrust liability and undermines both the Sherman Act and the FAA's purpose of facilitating actual dispute resolution rather than de facto immunity.29