Jun 21 2013
MotherJones: The Supreme Court Just Made It Easier for Big Business to Screw the Little Guy
In a little-known case called American Express v. Italian Colors Restaurant, the Supreme Court today issued yet another decision making it easier for big corporations to use their market power to screw over consumers and small businesses. Thursday’s 5-3 decision affirmed the right of big corporations to use mandatory arbitration clauses in contracts to force small businesses to challenge monopolistic practices in private arbitration rather than through class actions in court. The case shows once again that the conservative majority, led by Chief Justice John Roberts, has no problem with judicial activism when it comes to bolstering corporate power.
Here’s the background on this decision:
The case, Italian Colors v. American Express,was brought by a California Italian restaurant and a group of other small businesses that tried to sue the credit card behemoth for antitrust violations. They allege Amex used its monopoly power to force them to accept its bank-issued knock-off credit cards as a condition of taking regular, more elite American Express cards—and then charging them 30 percent higher fees for the privilege.
The small businesses’ claims were pretty small individually, not more than around $5,000 per shop. So, to make their case worth enough for a lawyer to take it, they banded together to file a class action on behalf of all small businesses affected by the practice. In response, Amex invoked the small print in its contract with them: a clause that not only banned the companies from suing individually but also prevented them from bringing a class action. Instead, Amex insisted the contract required each little businesses to submit to the decision of a private arbitrator paid by Amex, and individually press their claims. (Arbitration is heavily stacked in favor of the big companies, as you can read more about here and here.)
The restaurants estimated, with good evidence, that because of the market research required to press an antitrust case, arbitration would cost each of them almost $1 million to collect a possible maximum of $38,000, making it impossible to bring their claims at all. After a lot of litigation, the little guys prevailed in the 2nd Circuit Court of Appeals, which found that the arbitration clause was unconscionable because it prevented the plaintiffs from having their claims heard in any forum. The court said the arbitration contract should be invalidated and that the class action should go forward in a regular courtroom. (Sonia Sotomayor sat on one of the appeals before heading to the high court and is recusing herself from the case as a result.)
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