Court Watch

In American Express Co. v. Italian Colors Restaurant, 570 U.S. ___ (2013), the Supreme Court of the United States considered a case that, while not involving franchisors or franchisees as parties, could have a significant impact on the franchise community. In the case, a group of merchants brought a class action suit against American Express asserting that the company had violated antitrust laws by using its monopoly power to force merchants to accept credit cards at rates that were 30% higher than the rates charged by other credit card companies. Italian Colors (the class of merchants) asserted that this constituted an illegal restraint of trade in violation of the Sherman Act, and they sought treble damages. American Express, in turn, sought to enforce the terms of its merchant agreement, which required the merchants to waive the right to bring class actions and to settle all disputes through individual arbitration. Italian Colors argued that the class action waiver was not enforceable because they would incur prohibitive costs if forced to arbitrate individually, rather than as a class. To support their position, they provided evidence that it would cost between several hundred thousand dollars to over a million dollars to obtain the expert analysis necessary to prove their antitrust case, though the maximum recovery that each plaintiff could obtain would be only $38,549.

The case bounced back and forth between courts for several years, with the district court ruling in favor of American Express and dismissing Italian Colors's claims, and the Second Circuit then overruling the decision, holding that the class waiver was unenforceable. After the Supreme Court vacated and remanded that decision, the Second Circuit reaffirmed its decision two more times, leading to the case again being considered by the Supreme Court.