The U.S. Supreme Court yesterday reaffirmed and expanded upon its prior rulings concerning arbitration agreements which require the parties to waive any rights they may have to participate in a class action. In Am. Express Co. v. Italian Colors Rest., 2013 U.S. LEXIS 4700 (U.S. June 20, 2013), the Supreme Court ruled that an arbitration agreement’s inclusion of a class action waiver was enforceable under the Federal Arbitration Act (FAA), even if it can be shown that the potential cost of pursing a claim in arbitration individually is economically not viable. This decision rejects what has become known as the “effective vindication” doctrine, which was used to invalidate class action waiver provisions in arbitration agreements where it was shown that the waiver effectively barred the ability of an individual to pursue a claim, as pursuit of such a claim on an individual basis would be cost prohibitive.
"The Supreme Court has made it clear that judicially crafted arguments which undermine the parties’ intent to waive class claims will not be viewed with favor in light of Concepcion and the FAA’s clear and unambiguous language limiting judicial review of arbitration agreements,” observed Jackson Lewis Partner and arbitration agreement expert, David Block. Mr. Block went on to say that as “substantially all arbitration agreements will be governed by the FAA, now is the time for every employer to analyze whether class action waivers and arbitration are right for it.”
As with other major Supreme Court decisions, their application to the employment context and the response of legislators and the plaintiff’s bar remains to be seen.