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U.S. Supreme Court Delivers Blow to Future Class Action Claims

When it comes to consumer rights and consumer litigation, sometimes the most effective way to ensure a positive outcome is to file or join a class action.
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A class action case is one in which a larger group of similarly-situated people or businesses collectively band together to file civil action against a defendant or group of defendants for some alleged wrongdoing.

There are a number of advantages to class action cases, including:

  • Lowered cost of litigation;
  • Improved chances that all parties will receive relief;
  • Claims made by a larger group tend to have more credence than those filed by individuals.

But in recent years, and most notably with the June 20th U.S. Supreme Court decision in American Express Co. v. Italian Colors Restaurant, class action status in a tort case is becoming tougher and tougher to obtain.

Here’s what happened in this case:

A number of restaurants, retailers and other merchants filed suit against American Express, alleging that the credit card company violated antitrust laws by strong-arming them into accepting its credit cards.

In case you aren’t familiar, charge cards mandate that the card holder pay the full outstanding balance at the end of each bill cycle. By contrast, credit cards are those for which users are only required to pay a portion of at the end of a billing cycle.

The big issue in the case was an arbitration clause. These are clauses in a contract that stipulate how disputes must be resolved in the event they arise. Most often in consumer law, these clauses tend to be more advantageous to the company or, in this case, the larger company.

The plaintiffs in this case sought class action status, saying that the arbitration clause makes it all but impossible for smaller firms to seek individual redress, due to the cost of litigation. Individual consumers often run up against the same problem, which is why consumer advocates were watching this case very closely.

However, American Express argued that it had acted in accordance with the Federal Arbitration Act, and the Supreme Court ultimately agreed by a margin of 5-4.

Justice Antonin Scalia, in writing for the majority, posited that antitrust laws don’t guarantee that plaintiffs will have an affordable path to vindication of every claim.

This ruling is only the latest to support businesses’ rights to require people or other businesses to sign arbitration clauses, with the intention of keeping disputes out of court.

Back in March, the court sided with Comcast in a case where a group of cable television subscribers in Pennsylvania accused the company of overcharging them as an effort to monopolize the market. The court ultimately ruled that the group couldn’t file the case as a group with class action standing because they couldn’t adequately measure the damages for the class members.

And in 2011, the Supreme court tossed the class action status claim in Wal-Mart Stores Inc. v Dukes, saying that the female members suing for discrimination did not have enough in common to be allowed to file suit together.

The Law Offices of Ira S. Newman provides consumer litigation representation in New York City, Long Island, Great Neck and throughout the area. Call 516-487-7375 or send us an e-mail.

Additional Resources:
Supreme Court clamps down on class actions in merchants’ case, June 20, 2013, By Lawrence Hurley and Andrew Longstreth, Reuters
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