New Supreme Court Class Action Waiver Decision
Class action litigation has long been fertile ground for the plaintiffs’ bar. This is especially true in employment discrimination and wage and hour litigation. Of course, plaintiffs’ attorneys are well aware of the high costs and risks faced by class action defendants and frequently develop strategies focused on driving up costs. Defense costs are often compounded by the likelihood of paying twice, which occurs when the applicable legal principles empower plaintiffs’ counsel with the ability to recover their fees and costs.
There are tools which help shift the burden a bit. One is to require employees, vendors and other entities to sign arbitration agreements. These agreements require that the signatories arbitrate all disputes and waive their right to participate in potential class actions.
Agreements requiring parties to arbitrate disputes are increasingly accepted and enforced by the courts. However, there has been significant legal wrangling over whether individuals or entities can waive their right to participate in a class action. To no one’s surprise, plaintiffs’ attorneys have flooded the courts with lawsuits seeking to invalidate class waivers.
A recent business-friendly Supreme Court decision appears to end the dispute over the enforceability of class waivers in arbitration agreements. In American Express Co. v. Italian Colors Restaurant
, a group of companies sued American Express for alleged antitrust violations. The companies, however, had signed an arbitration agreement with American Express stating that there was “no right or authority” to litigate the dispute on a “class action basis.”
The Supreme Court unanimously reversed the lower court’s decision not to enforce the class action waiver. The Court found that class action waivers in arbitration agreements were enforceable unless the underlying claims arose out of a statute that guarantees the right to participate in class action, or the agreement is so unfair that it is unenforceable under state law.
In general, the use of arbitration agreements and the willingness of the courts to enforce them is a positive trend for sophisticated employers. While arbitration agreements do not suit every employer in every industry, nor can they cover certain types of claims, they can be valuable tools in certain settings. At minimum, many employers now have good cause to examine the benefits of binding arbitration agreements with their counsel.
For additional information, please contact Jim Davidson, David Campbell, or any member of Ice Miller’s Labor and Employment group.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.