Supreme Court's Amex Decision Leads to Reversal of State Supreme Court's Invalidation of Class Action Waiver

Eight days prior to the release of the U.S. Supreme Court’s June 20, 2013 decision in American Express Co. v. Italian Colors Restaurant (“Amex”), the Massachusetts Supreme Judicial Court (“SJC”), in Feeney v. Dell, Inc., invalidated an arbitration agreement containing a class action waiver. The court found the plaintiffs had demonstrated they could not pursue their claims in individual arbitration given the high costs that would be required and relatively small damages that each individual plaintiff could recover. In arriving at its decision, the SJC relied on similar rationale used by the Second Circuit in In re American Express Merchants’ Litigation, which at the time was pending before the U.S. Supreme Court. The SJC expressed its belief that AT&T Mobility LLC v. Concepcion allowed the invalidation of a class-action waiver that “operate[s] in practice to deny a willing plaintiff any and all practical means of pursuing a claim against a defendant.”

In Amex, however, the Supreme Court rejected that analysis, reiterating that courts “must rigorously enforce” arbitration agreements according to their terms, including terms that “specify with whom [the parties] choose to arbitrate their disputes.” In light of the Amex decision, Dell sought rehearing of the SJC’s decision on the grounds that it had been abrogated by Amex, and the SJC reluctantly agreed.

In its reversal, the SJC acknowledged that the Supreme Court interpreted Concepcion very differently, stating in Amex: “Truth to tell, our decision in [Concepcion] all but resolves this case . . . . We specifically rejected the argument that class arbitration was necessary to prosecute claims ‘that might otherwise slip through the legal system.’” The SJC stated it regarded as “untenable” the Supreme Court's view that Concepcion established “the FAA’s command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims.” Nevertheless, the court accepted the Supreme Court’s opinion as controlling and applicable “without regard to whether the claim sought to be vindicated arises under Federal or State law.”

Given the Supreme Court’s continued rejection of challenges to the enforcement of agreed-upon terms in arbitration agreements, state courts, like the Massachusetts SJC, should be wary of refusing to enforce arbitration agreements according to their terms, including class-action waiver provisions.

Image credit: Gunnar Pippel

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.