In re: American Express Merchant Litig., No. 06-1871 (2d Cir. 2012)
Annotate this CaseThis opinion or order relates to an opinion or order originally issued on January 30, 2009.
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06-1871-cv In re: American Express Merchants Litig. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT ORDER 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 At a stated term of the United States Court of Appeals for the Second Circuit, held at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, on the 29th day of May, two thousand twelve. - - - - - - - - - - - - - - - - - - - -X IN RE: AMERICAN EXPRESS MERCHANTS LITIGATION, Italian Colors Restaurant, on behalf of itself and all similarly situated persons, National Supermarkets Association, 492 Supermarket Corp., Bunda Starr Corp., Phoung Corp., Plaintiffs-Appellants, -v.- 06-1871-cv American Express Travel Related Services Company, American Express Company, Defendants-Appellees. - - - - - - - - - - - - - - - - - - - -X Gary B. Friedman, Tracey Kitzman, Aaron Patton, Warren Parrino, Friedman Law Group LLP, New York, NY, for Plaintiffs-Appellants. Bruce H. Schneider, Stroock & Stroock & Lavan, LLP, New York, NY, Julia B. Strickland, Stephen J. Newman, Stroock & Stroock & Lavan LLP, Los Angeles, CA, Michael K. Kellogg, Derek T. Ho, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, DC, for Defendants-Appellees. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Following disposition of this appeal on February 1, 2012, an active judge of the Court requested a poll on whether to rehear the case in banc. A poll having been conducted and there being no majority favoring in banc review, rehearing in banc is hereby DENIED. Rosemary S. Pooler, Circuit Judge, concurs by opinion in the denial of rehearing in banc. Dennis Jacobs, Chief Judge, joined by José A. Cabranes and Debra Ann Livingston, Circuit Judges, dissents by opinion from the denial of rehearing in banc. José A. Cabranes, Circuit Judge, dissents by opinion from the denial of rehearing in banc. Reena Raggi, Circuit Judge, joined by Richard C. Wesley, Circuit Judge, dissents by opinion from the denial of rehearing in banc. FOR THE COURT: CATHERINE O HAGAN WOLFE, CLERK 2 ROSEMARY S. POOLER, Circuit Judge, concurring in the denial of rehearing en banc: I respectfully concur in the denial of the rehearing en banc. I write briefly to emphasize that the limited holding in this case is not governed by the Supreme Court s reasoning in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011). Concepcion holds that the Federal Arbitration Act ( FAA ) preempts state laws hostile to arbitration, and focuses its analysis on preemption issues. In contrast, analysis in Amex III rests squarely on a vindication of statutory rights analysis -- an issue untouched in Concepcion. Amex III strives to give full effect to the Supreme Court s teachings that where a contractual agreement functions as a prospective waiver of a party's right to pursue statutory remedies, then the contractual agreement may not be enforced. Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, Inc., 473 U.S. 614, 637, n. 19 (1985); see also Green Tree Fin. Corp. Alabama v. Randolph, 531 U.S. 79, 90 (2000). Amex III is carefully cabined to hold that this waiver, on this record, is unenforceable. It creates no broad new rights. While Concepcion addresses state contract rights, Amex III deals with federal statutory rights -- a significant distinction. In analyzing Concepcion, the Court reasoned that although the FAA s saving clause, 9 U.S.C. § 2, preserves a generally applicable contract defense, nothing in it suggests an intent to preserve state-law rules that stand as an obstacle to the accomplishment of the FAA s objectives. 131 S.Ct. at 1748. The Court reasoned that invalidating a class waiver would allow a party to an arbitration agreement to demand a class-wide arbitration that is not consensual, thereby making arbitration slower, more formal and more costly, and greatly increasing risks to defendants. Id. at 750-52. Because its analysis focused wholly on the issue of preemption of state law by federal law, Concepcion is silent on the holdings of the Court s earlier cases which enforce arbitration clauses only when those clauses permit parties to effectively vindicate their federal statutory rights. In stark contrast, Amex III raises a different issue: whether the FAA always trumps rights created by a competing federal statute, as opposed to rights existing under a common law of unconscionability. At issue here is not the right to proceed as a class, but the ability to effectively vindicate a federal statutory right that predates the FAA. Vindication of statutory rights analysis is the method of analysis proposed by the Supreme Court in Mitsubishi for addressing whether an arbitration clause will be enforced where the dispute implicates a federal statute. 473 U.S. at 637; Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991). This analysis is not foreign to our Court. See, e.g., Brooks v. Travelers Ins. Co., 297 F.3d 167, 168 (2d Cir. 2002) (analysis of arbitration agreement required finding that agreement provide[d] adequately for vindication of federal statutory rights ). There is no indication in Concepcion that the Supreme Court intended to overrule its previous holdings. Mitsubishi holds that parties may agree to prosecute statutory rights via arbitration instead of litigation only where the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum. 473 U.S. at 637. Gilmer reaffirmed that principle. 500 U.S. at 28. Nearly ten years later, the Supreme Court cited the proposition again, in Green Tree Fin. Corp., 531 U.S. at 90; see also 14 Penn Plaza LLC v. Pyett, 129 S. Ct. 1456, 1474 (2009) (recognizing principle and stating that a substantive waiver of federally protected civil rights will not be upheld ). Our sister Circuits also engage in a vindication of rights analysis. See, e.g., Kristian v. Comcast Corp., 446 F.3d 25, 47-48 (1st Cir. 2006) (severing as unenforceable provision of arbitration agreement limiting availability of treble damages under antitrust statute); Hadnot v. Bay, Ltd., 344 F.3d 474, 478 n. 14 (5th Cir. 2003) (severing restriction on available remedies from arbitration agreement after finding that ban on punitive and exemplary damages is unenforceable in a Title VII case ); Morrison v. Circuit City Stores, 2 Inc., 317 F.3d 646, 657-60 (6th Cir. 2003) (en banc) (deciding when cost-sharing deprives employees of substantive statutory rights); Shankle v. B-G Maint. Mgmt. of Colo., Inc., 163 F.3d 1230, 1234 (10th Cir. 1999) ( an arbitration agreement that prohibits use of the judicial forum as a means of resolving statutory claims must also provide for an effective and accessible alternative forum ); Paladino v. Avnet Computer Techs., Inc., 134 F.3d 1054, 1060 (11th Cir. 1998) (holding that arbitration agreement which proscribed award of Title VII damages was unenforceable because it was fundamentally at odds with the purposes of Title VII); Cole v. Burns Int l Sec. Servs., 105 F.3d 1465, 1468 (D.C. Cir. 1997) ( We do not read Gilmer as mandating enforcement of all mandatory agreements to arbitrate statutory claims; rather we read Gilmer as requiring the enforcement of arbitration agreements that do not undermine the relevant statutory scheme. ). Equally unavailing is any reliance on Coneff v. AT&T, Corp.-- F.3d ---, 2012 WL 887598 (9th Cir. 2012). Coneff -- like Concepcion -- examines when the FAA preempts state contract law. Unlike Amex III, the Coneff court was not focused on individual plaintiffs lacking an effective means of enforcing their rights. Rather, the question addressed in Coneff was, given the small damages awards in any individual arbitration, whether the plaintiffs would have an adequate incentive to vindicate their rights. The Ninth Circuit expressly recognized the difference between incentive and ability. Coneff, 2012 WL 887598, at *3 n. 3 (distinguishing Amex III, 667 F.3d 206, 218 (2d Cir. 2012) on the ground that in Amex III the only economically feasible means for plaintiffs enforcing their statutory rights is via a class action. )(emphasis in original). Further, in both Coneff and Concepcion the individual damages awards available to any single plaintiff were small, but fee-shifting provisions ensured that a damaged plaintiff could be 3 made whole. The reason that a plaintiff may not bring suit was not because he would not be likely to recoup his costs, but rather because the small amount of damages was not worth his trouble. In Amex III, however, plaintiffs were faced with substantial upfront expenditures to prosecute their antitrust rights -- costs that were only economically feasible if the plaintiffs prosecuted their claims as a class. Amex I explained why the Clayton Act's treble-damages and fee-shifting provisions would not make an individual plaintiff whole: [Not only is] the trebling of a small individual damages award [] not going to pay for the expert fees Dr. French has estimated will be necessary to make an individual plaintiff's case here, there is an even more important legal consideration that the district court did not consider. In Crawford Fitting Co. v. J.T. Gibbons, Inc., the Supreme Court addressed fee-shifting for expert witnesses under Rule 54(d) of the Federal Rules of Civil Procedure in an antitrust case, holding that when a prevailing party seeks reimbursement for fees paid to its own expert witnesses, a federal court is bound by the limit of [28 U.S.C.] § 1821(b). . . . 482 U.S. 437, 439 (1987). We note that figure is now set at a $40 per diem. Further, as the plaintiffs assert, there are no provisions in the rules of any of the arbitral bodies designated [in the Card Acceptance Agreement] that would allow such costs to be awarded where they are not authorized by the applicable fee shifting statute. Even with respect to reasonable attorney's fees, which are shifted under Section 4 of the Clayton Act, the plaintiffs must include the risk of losing, and thereby not recovering any fees, in their evaluation of their suit's potential costs. 554 F.3d 300, 317-18 (2d Cir. 2009) (footnotes omitted); see also 15 U.S.C. § 15. We need not tarry long in addressing a final concern: that Amex III permits plaintiffs to evade enforcement of class action arbitration waivers simply by manufacturing an affidavit or choosing pricey attorneys. The business plaintiffs here are prosecuting antitrust claims that will likely require complex discovery and expert testimony. Other statutory claims may not require such extensive proof. The courts are perfectly capable of doing the analysis necessary to determine if the plaintiffs have made the necessary showing. See, e.g., Adkins v. Labor Ready, 4 Inc., 303 F.3d 496, 502 (4th Cir. 2002) (refusing to strike class arbitration waiver where plaintiff failed to make required showing that he would incur prohibitively high expenses in prosecuting claim individually); Ornelas v. Sonic-Denver T, Inc., 2007 WL 274738, at *6 (D. Colo. Jan. 29, 2007) (refusing to strike class arbitration waiver because the evidence did not demonstrate the costs of pursuing arbitration would effectively preclude the plaintiff from pursuing his claims ); see also Bonanno v. Quizno s Franchise Co., LLC, 2009 WL 1068744, at *16 (D. Colo. April 20, 2009) (enforcing contract clause barring class actions where plaintiffs failed to demonstrate they would incur excessively high costs in proceeding individually). Amex III specifically admonishes that each case will need to stand on its own merits. Amex III gives full effect to a long line of Supreme Court precedent preserving plaintiffs ability to vindicate federal statutory rights, rather than eviscerating more than 120 years of antitrust law by closing the courthouse door to all but the most well-funded plaintiffs. For these reasons, I concur in the denial of rehearing en banc. 5 1 DENNIS JACOBS, Chief Judge, with whom Judge CABRANES and 2 Judge LIVINGSTON join, dissenting from the denial of 3 rehearing in banc: 4 5 6 7 I respectfully dissent from the denial of rehearing in banc. In 1968, it became law in this Court that, for public 8 policy reasons, federal antitrust claims could not be 9 arbitrated. See Am. Safety Equip. Corp. v. J.P. Maguire & 10 Co., 391 F.2d 821, 827-28 (2d Cir. 1968). 11 rejected that public policy approach in Mitsubishi Motors 12 Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 636 13 (1985). 14 claims can be subject to valid arbitration agreements. 15 Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 16 (1991). 17 The Supreme Court And in 1991, it reiterated that federal statutory See Now the panel opinion in this case uses public policy 18 to hold that arbitration agreements containing class-action 19 waivers are unenforceable when applied to federal statutory 20 claims if (as is always so easy to assert) a claim would not 21 be economically rational to pursue individually. 22 Am. Express Merchs. Litig., 667 F.3d 204, 214 (2d Cir. 1 In re 1 2012) (Amex III). 2 Federal Arbitration Act s strong federal policy favoring the 3 enforcement of arbitration agreements, and frustrates the 4 goals of arbitration by multiplying claims, lawsuits, and 5 attorneys fees. 6 arbitration agreements, Gilmer, 500 U.S. at 24, is 7 undiminished. The panel opinion thus impairs the [T]he longstanding judicial hostility to 8 * * * 9 At issue is a provision, of a kind commonly used in 10 arbitration agreements, that bars class actions. The 11 underlying arbitration involves an antitrust claim. 12 re American Express Merchants Litigation, 554 F.3d 300 (2d 13 Cir. 2009) (Amex I), the panel held that such a bar ran 14 afoul of the federal substantive law of arbitration because 15 the litigation expense of the antitrust suit--expert 16 testimony, in particular--would render separate arbitrations 17 too expensive. 18 proceed in court notwithstanding the agreement to arbitrate. 19 Id. at 320. 20 vacated Amex I in light of Stolt-Nielsen S.A. v. AnimalFeeds 21 Int l Corp., 130 S. Ct. 1758 (2010). 22 Italian Colors Rest., 130 S. Ct. 2401 (2010). In In So the panel ruled that a class action may The Supreme Court granted certiorari and 2 Am. Express Co. v. 1 Stolt-Nielsen holds that a party to an arbitration 2 agreement cannot be compelled to submit to class arbitration 3 absent a contractual basis for concluding that the party 4 agreed to do so . . . because class-action arbitration 5 changes the nature of arbitration to such a degree that it 6 cannot be presumed the parties consented to it by simply 7 agreeing to submit their disputes to an arbitrator. 8 Ct. at 1775. 9 reached the same conclusion as in Amex I. 130 S. On remand the (by then) two-judge panel See In re Am. 10 Express Merchs. Litig., 634 F.3d 187, 199 (2d Cir. 2011) 11 (Amex II). 12 Shortly after Amex II was published but before the 13 mandate issued, the Supreme Court decided AT&T Mobility LLC 14 v. Concepcion, 131 S. Ct. 1740 (2011), which holds that 15 state law may not be used to invalidate a class-action 16 waiver in an arbitration agreement on the ground that the 17 only economical way to litigate the claim is through a class 18 action. 19 impact of Concepcion, the panel issued its third opinion. 20 In Amex III, the panel yet again concludes that the class- 21 action waiver is unenforceable on the ground that the only 22 effective way to litigate the antitrust claims was by a 23 class action in court. Id. at 1748. After soliciting briefing on the Amex III, 667 F.3d at 218-19. 3 1 As I undertake to show, the public policy rationale 2 which Amex III relies upon is wrong because: [1] it runs 3 counter to the public policy that the Supreme Court has made 4 paramount in the context of the Federal Arbitration Act 5 ( FAA ); [2] it employs a dubious ground of distinction to 6 overcome Concepcion, which teaches that the FAA does not 7 allow courts to invalidate class-action waivers even if 8 class proceedings are necessary to prosecute small-dollar 9 claims that might otherwise slip through the legal system, 10 Concepcion, 131 S. Ct. at 1753; and [3] the dicta on which 11 the panel precariously relies--that large arbitration 12 costs cannot be allowed to prevent a plaintiff from 13 effectively vindicating a statutory right--is pulled out 14 of context and distorted. 15 16 17 I Amex III cannot be squared with the FAA, as it has been 18 applied and explained by the Supreme Court. 19 is needed because [A] the panel opinion is unbounded and can 20 be employed to defeat class-action waivers altogether; [B] 21 it makes the district court the initial theater of arbitral 22 conflict on the merits (how else does a district court 23 estimate the cost of a litigation?); and [C] it is already 24 working mischief in the district courts. 4 In banc review 1 2 3 A Amex III is a broad ruling that, in the hands of class 4 action lawyers, can be used to challenge virtually every 5 consumer arbitration agreement that contains a class-action 6 waiver--and other arbitration agreements with such a clause. 7 While it purports to require a case-by-case approach, its 8 wording is categorical: Supreme Court precedent recognizes 9 that the class action device is the only economically 10 rational alternative when a large group of individuals or 11 entities has suffered an alleged wrong, but the damages due 12 to any single individual or entity are too small to justify 13 bringing an individual action. 14 Thus every class counsel and every class representative who 15 suffers small damages can avoid arbitration by hiring a 16 consultant (of which there is no shortage) to opine that 17 expert costs would outweigh a plaintiff s individual loss. 18 The breadth of the holding is illustrated in the Amex III, 667 F.3d at 214. 19 opinion. Amex III uncritically adopts the affidavit of a 20 paid consultant to find that expert costs would be so high 21 relative to potential damages, that the only economically 22 feasible means for plaintiffs enforcing their statutory 23 rights is via a class action [in court]. 5 667 F.3d at 218. 1 However, Section 4 of the Clayton Act provides for the 2 recovery of costs, including expert costs, and attorneys 3 fees. 4 injured in his business or property by reason of anything 5 forbidden in the anti-trust laws . . . shall recover 6 threefold the damages by him sustained, and the cost of 7 suit, including a reasonable attorney's fee. ). 8 panel is evidently of the view that the incentivizing fees 9 and cost afforded by the statute would not fully compensate See 15 U.S.C. § 15(a) ( [A]ny person who shall be The Amex 10 plaintiffs for the costs of pursuing their claims. 11 III, 667 F.3d at 218. 12 sufficient to encourage private suits. 13 Congress in such a matter is entitled to deference, not the 14 panel opinion s dismissive treatment. 15 See Amex But Congress deems these incentives The judgment of Amex III does not vouchsafe what is meant for a suit to 16 be economically feasible, or when a hypothetical 17 economically rational plaintiff might be willing to pursue 18 a claim. 19 plaintiff must have the opportunity to be made whole and 20 happy by recovery of damages, costs, attorneys fees, expert 21 charges, etc., because such a result is rarely achieved by 22 even the most successful litigants. 23 demands more than such complete victory; it demands a Id. at 218. It cannot mean that a potential 6 Moreover, Amex III 1 risk-of-losing premium. Id. at 218 ( Even with respect to 2 reasonable attorney s fees[,] . . . the plaintiffs must 3 include the risk of losing, and thereby not recovering any 4 fees, in their evaluation of their suit's potential 5 costs. ). 6 consideration--that, without the class-action vehicle, no 7 lawyer will be incentivized to pursue these claims. 8 may be; but Concepcion rejected this very policy rationale. 9 See Concepcion, 131 S. Ct. at 1753 (rejecting argument that 10 class proceedings are necessary to prosecute small-dollar 11 claims that might otherwise slip through the legal system, 12 because rules inconsistent with the FAA cannot be imposed 13 even if desirable for unrelated reasons ); see also Coneff 14 v. AT&T Corp., 673 F.3d 1155, 1159 (9th Cir. 2012) (rejecting 15 argument that plaintiffs had insufficient incentive to 16 pursue individual claims as primarily a policy rationale 17 that cannot undermine the FAA ). This formulation betrays a dominant That 18 19 20 B 21 Under the panel opinion, arbitration must now begin in 22 federal court--and be litigated there on the merits in many 23 critical respects. The courtroom inquiry that the panel 7 1 requires to be undertaken before any class arbitration can 2 in fact take place is searching. 3 require expert testimony is a question inseparable from the 4 merits (and raises Daubert and other vexed questions). 5 Without a close inquiry into the merits, no court can decide 6 what expert testimony would be required, or how much 7 discovery is needed. 8 discovery or testimony is needed at all without deciding if 9 the claim is dismissible--or such prior questions as the 10 statute of limitations and laches, controlling law, res 11 judicata, etc., etc., not to mention little things like 12 whether the putative class is duly constituted and properly 13 represented, without which there is no class claim. 14 Whether a dispute may And it cannot be decided whether any Under the FAA, however, all those questions are for the 15 arbitrator to decide. See, e.g., Prima Paint Corp v. Flood 16 & Conklin Mfg. Co., 388 U.S. 395, 403-404 (1967). 17 requiring the district court to consider this at the 18 threshold, Amex III effectively displaces arbitration with a 19 trial court proceeding whenever lawyers assert a class 20 claim. 21 given a green light at the end of the judicial proceeding, 22 the party seeking to arbitrate may have already spent many 23 times the cost of an arbitral proceeding just enforcing the (And they will, often.) 8 By Even if arbitration is 1 arbitration clause. 2 will create fertile ground for appeal, adding yet more 3 delay, expense, and uncertainty. 4 that Amex III will render arbitration too expensive and too 5 slow to serve any of its purposes. 6 And the partial list of issues above The predictable upshot is Amex III is incompatible with the FAA. The FAA 7 establishes that, as a matter of federal law, any doubts 8 concerning the scope of arbitrable issues should be resolved 9 in favor of arbitration. Moses H. Cone Mem'l Hosp. v. 10 Mercury Constr. Corp., 460 U.S. 1, 24-25 & n.32 (1983). 11 federal substantive law of arbitration is a congressional 12 declaration of a liberal federal policy favoring arbitration 13 agreements. 14 of Concepcion s reaffirmance of the overarching purpose of 15 the FAA: 16 17 18 19 20 21 22 23 24 25 Id. at 24. This is particularly true in light The overarching purpose of the FAA, evident in the text of §§ 2, 3, and 4, is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings. Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA. Concepcion, 131 S. Ct. 1740. 26 27 The C 9 1 In the six years Amex has been pending in this Court, 2 its several iterations have been relied upon no fewer than 3 three times in the Southern District of New York alone. 4 Raniere v. Citigroup, Inc., No. 11 Civ. 2248, 2011 WL 5 5881926, at *13 (S.D.N.Y. Nov. 22, 2011); Chen-Oster v. 6 Goldman, Sachs & Co., No. 10 Civ. 6950, 2011 WL 2671813, at 7 *2-5 (S.D.N.Y. July 7, 2011); Sutherland v. Ernst & Young, 8 LLP, 768 F. Supp. 2d 547, 550-55 (S.D.N.Y. 2011).1 9 the recurrent influence of Amex, this Court should subject 10 11 See Given it to in banc review. That responsibility is even more compelling because the 12 panel opinion now splits with a recent holding of the Ninth 13 Circuit Court of Appeals. 14 1155, 1158 n.2, 1159 n.3 (9th Cir. 2012). 15 putative class of AT&T wireless customers sued AT&T on a 16 variety of claims, including a violation of the Federal 17 Communications Act. 18 that Green Tree Financial Corp. v. Randolph, 531 U.S. 79 19 (2000), was no obstacle to the enforcement of the See Coneff v. AT&T Corp., 673 F.3d In Coneff, a Id. at 1157. The Ninth Circuit held 1 These three cases also happen to be the only citations in Amex III that support its vindication of rights analysis. See Amex III, 667 F.3d at 219. This is of course self-referential: the citation of Second Circuit opinions by the district courts of this Circuit is not a form of endorsement. 10 1 arbitration agreement containing a class-action waiver 2 because under the FAA it is irrelevant whether customers 3 have insufficient incentive to vindicate their rights. 4 Id. at 1159. (citing Concepcion, 131 S. Ct. at 1753). 5 6 II 7 Amex III is thus incompatible with the longstanding 8 principle of federal law, embodied in the FAA and numerous 9 Supreme Court precedents, favoring the validity and 10 enforceability of arbitration agreements. It should come as 11 no surprise, then, that the panel opinion finds no support 12 in the Supreme Court s case law. 13 by selective quotation from Supreme Court dicta, and by 14 aggressive measures to distinguish away the Supreme Court s 15 recent holding in Concepcion. Instead, Amex III proceeds 16 17 18 19 A Concepcion, decided after the second iteration of Amex, 20 vindicated the FAA against an unconscionability challenge 21 that was materially indistinguishable from the challenge 22 upheld in Amex. 23 common-law rule, developed by the California Supreme Court, In Concepcion, the Supreme Court rejected a 11 1 that was applied to void class-action waivers in contracts 2 of all types. 3 opinion had said: This is what the discredited California 4 5 6 7 8 9 10 11 12 13 14 15 [B]ecause . . . damages in consumer cases are often small and because a company which wrongfully exacts a dollar from each of millions of customers will reap a handsome profit, the class action is often the only effective way to halt and redress such exploitation. . . . Such one-sided, exculpatory contracts in a contract of adhesion, at least to the extent they operate to insulate a party from liability that otherwise would be imposed under California law, are generally unconscionable. Discover Bank v. Superior Court, 36 Cal. 4th 148, 161 (2005) 16 (internal quotation marks, citations, and alterations 17 omitted). 18 The Supreme Court ruled that this attempt by California 19 to police arbitration agreements was inconsistent with the 20 FAA. 21 dissent's argument that class proceedings are necessary to 22 prosecute small-dollar claims that might otherwise slip 23 through the legal system, the majority affirmed that rules 24 inconsistent with the FAA cannot be imposed even if 25 desirable for unrelated reasons. 26 Concepcion, 131 S. Ct. at 1748. Refuting the Id. at 1753. After the Amex panel solicited briefing from the 27 parties on the effect of Concepcion, the panel reissued Amex 28 (in the form of Amex III), evading the broad language and 12 1 clear import of Concepcion. Again in Amex III, the panel 2 found that a class-waiver provision in an arbitration 3 agreement is unenforceable if the only economically 4 feasible means for plaintiffs enforcing their statutory 5 rights is via a class action. Amex III, 667 F.3d at 218. 6 Amex III tries to narrow Concepcion to (in the words of 7 Amex III) a path for analyzing whether a state contract law 8 is preempted by the FAA. 9 doing, Amex III conceives the following distinction: Amex III, 667 F.3d at 213. In so 10 Concepcion decided only whether California's doctrine of 11 unconscionability was preserved by the FAA's savings clause 12 for grounds as exist at law or in equity for the revocation 13 of any contract, 9 U.S.C. § 2, whereas Amex III invalidates 14 the arbitration agreement (for the same reason of 15 unconscionability) on the ground that the underlying 16 antitrust claim was federal, a circumstance that the panel 17 dresses up rhetorically as a federal substantive law of 18 arbitrability, Amex III, 667 F.3d at 213 (quotation marks 19 omitted). 20 distinction, and treats the reasoning of Concepcion as an 21 obstacle to be surmounted or evaded. 22 Court has held, the FAA preempts even state law that permits 23 evasion of a class action waiver clause, it is hard for me This labored analysis does not rise to a 13 Since, as the Supreme 1 to see any justification for a rule permitting precisely the 2 same sort of evasion as part of the federal substantive law 3 of arbitrability. 4 5 6 B The panel opinion leans on the distortion of dicta from 7 Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (2000). 8 In Green Tree, a lender sought to compel a borrower to 9 arbitrate claims she had raised under certain federal 10 statutes. Id. at 83. 11 agreement to arbitrate is unenforceable because it says 12 nothing about the costs of arbitration, and thus fails to 13 provide her protection from potentially substantial costs of 14 pursuing her federal statutory claims in the arbitral 15 forum. 16 statutory claims can be appropriately resolved through 17 arbitration, id. at 89, and rejected generalized attacks 18 on arbitration that rest on a suspicion of arbitration as a 19 method of weakening the protections afforded in the 20 substantive law to would be complainants, id. at 89-90 21 (quoting Rodriguez de Quijas v. Shearson/American Express, 22 Inc., 490 U.S. 477, 481 (1989)). Id. at 89. The question was whether [her] The Court reconfirmed that federal 14 And the challenge failed 1 for want of evidence of the cost of the arbitration. 2 at 90. 3 Id. A passage in dicta (relied upon in Amex III) added that 4 the existence of large arbitration costs could preclude a 5 litigant . . . from effectively vindicating her federal 6 statutory rights. 7 costs is not a reference to expense generally. 8 uses the phrase to reference the cost of access to an 9 arbitral forum and is about the price of admission: payment Id. at 90. However, large arbitration Green Tree 10 of filing fees, arbitrators costs, and other arbitration 11 expenses. 12 suggested that a claim that may be expensive to litigate-- 13 whether in court or in arbitration--can for that reason be 14 deemed to entail preclusive arbitration costs. 15 event, even if the Green Tree dicta were to have the meaning 16 the panel ascribes to it, it is nonetheless still dicta. 17 And it loses any persuasive power it might once have had in 18 light of the Supreme Court s holding in Concepcion, which is 19 more clear and more recent--and authoritative. Green Tree, 531 U.S. at 84. Only Amex III has In any 20 Similarly misleading is the panel s quotation of 21 Mitsubishi, for the proposition that should clauses in a 22 contract operate as a prospective waiver of a party s right 23 to pursue statutory remedies for antitrust violations, we 15 1 would have little hesitation in condemning the agreement as 2 against public policy. 3 Mitsubishi, 473 U.S. at 637 n.19). 4 concerned with a hypothetical arbitral panel that might, 5 relying on provisions concerning choice of forum or choice 6 of law, refuse to apply American law to a federal statutory 7 claim. Amex III, 667 F.3d at 214 (quoting The Court was there Mitsubishi, 473 U.S. at 637 n.19. 8 Other circuit cases have excised provisions from 9 arbitration agreements for the precise reasons anticipated 10 by Green Tree and Mitsubishi. See Kristian v. Comcast 11 Corp., 446 F.3d 25, 47-48 (1st Cir. 2006) (severing waiver 12 of treble damages); Hadnot v. Bay, Ltd., 344 F.3d 474, 478 13 n.14 (5th Cir. 2003) (noting that waiver of exemplary and 14 punitive damages is unenforcable); Paladino v. Avnet 15 Computer Techs., Inc., 134 F.3d 1054, 1060 (11th Cir. 1998) 16 (holding that arbitration agreement cannot force a party to 17 arbitrate a statutory right and at the same time bar it from 18 being awarded damages in the arbitral forum). 19 three cases involved an arbitration agreement that entirely 20 foreclosed a remedy to which one of the parties was 21 otherwise entitled to seek at law. 16 All of these None of them invalidated 1 an arbitration agreement on the ground that the claims were 2 costly to litigate individually.2 3 In Amex, there is zero evidence that any arbitration 4 costs --within the meaning of Green Tree--would hamper the 5 plaintiffs ability to vindicate their statutory rights. 6 None of the three panel opinions references the size of the 7 filing fees, or any arbitrators fees that would befall the 8 plaintiffs. 9 not be economically feasible, Amex III, 667 F.3d at 204, In finding that claim-by-claim litigation would 2 Amex III asserts that [o]ther Circuits permit plaintiffs to challenge class-action waivers on the grounds that prosecuting such claims on an individual basis would be a cost prohibitive method of enforcing a statutory right, Amex III, 667 F.3d at 216-17 (citing In re Cotton Yarn Antitrust Litig., 505 F.3d 274, 285 (4th Cir. 2007); Livingston v. Assocs. Fin., Inc., 339 F.3d 553, 555, 557 (7th Cir. 2003); Adkins v. Labor Ready, Inc., 303 F.3d 496, 502-03 (4th Cir. 2002). Each of those opinions quotes the prohibitive costs passage of Green Tree, but none uses the phrase as Amex III uses it--and all find in favor of the party seeking to enforce the arbitration clause. For one thing, the plaintiffs in each case failed to provide non-conclusory cost evidence. Notably, in Livingston and Adkins (upon which Cotton Yarn relies) the plaintiffs had raised the specter of prohibitive arbitration fees--not expenses incident to litigation. See Livingston, 339 F.3d at 557 ( Tellingly, [plaintiffs ] only evidence of prohibitive arbitration costs is an unsubstantiated and vague assertion that discovery in an unrelated arbitration matter disclosed fees of nearly $2,000 per day. ); Adkins, 303 F.3d at 503 ( [Plaintiff] does not even provide any evidence about the most basic element of this challenge: the size of the allegedly prohibitive arbitration fee itself. ). These cases were thus concerned about the price of admission. 17 1 the panel relies solely on the affidavit of a paid 2 consultant, Gary French, who opined that preparing an 3 antitrust study would cost at least several hundred 4 thousand dollars, while a larger study can easily exceed $1 5 million. 6 particular claim yielded a guess of nearly one million 7 dollars. 8 ability to spread costs among a class is only a procedural 9 right, the absence of which cannot render arbitration costs Id. at 212.3 His preliminary review of the However, that is beside the point: The Id. 10 prohibitive. Gilmer v. Interstate/Johnson Lane Corp., 500 11 U.S. 20, 25 (1991), is instructive: an employee sought to 12 avoid arbitrating his ADEA claims on the ground that 13 arbitration is inconsistent with the ADEA. 14 The Supreme Court characterized that argument as rest[ing] 15 on suspicion of arbitration as a method of weakening the 16 protections afforded in substantive law to would-be 17 complainants, and as such, . . . far out of step with our 18 current strong endorsement of the federal statutes favoring 19 this method of resolving disputes. 20 marks omitted). 3 Id. at 30. Id. (internal quotation It evidently did not occur to French or the panel that the rules of evidence do not govern arbitration, and that an arbitrator can consult treatises and articles for relevant antitrust and economic principles, and should do so in some cases. 18 1 2 3 4 5 6 7 8 9 10 11 12 Gilmer's argument about the unavailability of class actions was expressly rejected: It is also argued that arbitration procedures cannot adequately further the purposes of the ADEA because they do not provide for broad equitable relief and class actions. . . . But even if the arbitration could not go forward as a class action or class relief could not be granted by the arbitrator, the fact that the [ADEA] provides for the possibility of bringing a collective action does not mean that individual attempts at conciliation were intended to be barred. 13 Id. at 32 (internal quotation marks omitted). 14 passage from Gilmer reflects, the ADEA expressly provides 15 for a collective action; a fortiori, the same result obtains 16 under the antitrust laws, which do not. 17 an antitrust class action is merely a procedural one, 18 arising under Fed. R. Civ. P. 23, that may be waived by 19 agreeing to an arbitration clause. 20 Bank, 225 F.3d 366, 369 (3d Cir. 2000) (enforcing, due to 21 absence of congressional intent to the contrary, a bilateral 22 arbitration clause even though [such clauses] may render 23 class actions to pursue statutory claims . . . 24 unavailable ). 19 As the The only right to Johnson v. W. Suburban JOSà A. CABRANES, Circuit Judge, dissenting from the denial of rehearing in banc: I concur fully in the thorough opinion of Chief Judge Jacobs dissenting from the denial of in banc review. I write separately simply to underscore that the issue at hand is indisputably important, creates a circuit split, and surely deserves further appellate review. This is one of those unusual cases where one can infer that the denial of in banc review can only be explained as a signal that the matter can and should be resolved by the Supreme Court. REENA RAGGI, Circuit Judge, with whom Judge WESLEY joins, dissenting from the denial of rehearing en banc: I respectfully dissent from the denial of en banc review in this case. The panel decision to hold a class action waiver unenforceable is at odds with Coneff v. AT&T Corp., 673 F.3d 1155 (9th Cir. 2012). This circuit split appears unwarranted in light of controlling Supreme Court precedent for the reasons forcefully advanced by Chief Judge Jacobs in his opinion dissenting from the denial of rehearing en banc. While I identify much merit in the Chief Judge s analysis, I do not join in his opinion because I think it would be useful to have the issues explored further by the full court in the adversarial context of an en banc argument. To the extent a majority of the court maintains this circuit split without further consideration, I must dissent.
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