42 Lab. & Emp. L. 1 (2013-2014)

handle is hein.journals/laboemplo42 and id is 1 raw text is: loyment

FALL 2013
VOLUME 42, NUMBER 1
Section of Labor and
Employment Law
American Bar Association

Section of
Labor and Employment Lai
Italian Colors C        ed 2 1 3's Most Sgicant Workplace Case
By eirdre Fox

Describing the 2012-13 term as
light on employment cases,
Professor Martin Malin singled
out a commercial arbitration
case as the most significant
decision for the law governing
the workplace. Malin, director of
the Institute for Law and the
Workplace at Chicago Kent Col-
lege of Law and an arbitrator and
mediator since 1984, explained
the major impact the Supreme
Court's decision in American
Express v. Italian Colors may have
on employer-mandated arbitra-
tion of federal statutory rights.
In Italian Colors, the Supreme
Court held that the Federal Arbi-
tration Act (FAA) precluded
courts from invalidating a con-
tractual waiver of class arbitra-
tion on the ground that a plain-
tiff's cost of arbitrating an
individual federal statutory claim
exceeds the potential recovery.
Malin explained that the Court
had historically adhered to a
principle of procedural fair-
ness, under which an agreement
to arbitrate does not amount to a
waiver of substantive federal
statutory rights but, rather,
merely changes the forum so
long as these rights may be
effectively vindicated in that
forum. In his view, Italian Colors

continues the erosion of that
principle, substituting a newly
discovered federal policy sup-
posedly expressed in the [FAA]
to enforce arbitration agree-
ments according to their terms.
In Italian Colors, a group of mer-
chants who accept American
Express cards brought an action
alleging that American Express
used its monopoly power to com-
pel merchants to pay excessive
fees for transactions with the
cards. Their agreement with Amer-
ican Express mandated arbitration
and excluded class actions.
American Express moved to
compel arbitration, and the plain-
tiffs submitted an economist's
affidavit opining that the cost of
expert antitrust analysis would
greatly exceed the maximum
recovery for an individual plain-
tiff, even after trebling damages.
The Second Circuit held that
such prohibitive costs made the
class action waiver unenforce-
able, relying on the principle that
the arbitral forum must be one in
which the statutory rights may
be effectively vindicated.
The Supreme Court vacated
and remanded for reconsidera-
tion in light of its 2010 decision in
Stolt-Nielson, S.A. v. AnimalFeeds
International Corp. In Stolt-Nielson,

the Court held that an arbitrator
lacked authority to order arbitra-
tion on a classwide basis unless
the parties' agreement conferred
such authority on the arbitrator.
On remand, the Second Cir-
cuit stood by its holding.
Meanwhile, the Court ruled in
AT&T Mobility LLC v. Concepcion
(2010) that the FAA preempted
California state law, under which
class action waivers in consumer
contracts had been found uncon-
scionable. The Second Circuit sua

sponte reconsidered Italian Colors
in light of Concepcion and reaf-
firmed its decision invalidating
the class action waiver.
The Supreme Court reversed.
Justice Scalia, writing for the
majority in Italian Colors, charac-
terized the Court's statements in
prior cases-that the arbitration
forum must provide effective vin-
dication of the statutory right-
as dicta. He wrote: That it is not
worth the expense involved in
continued on page 8

This issue and the next will feature highlights from the 7th Annual
Section Conference held in New Orleans. Included on the program
for the 1,350 lawyers in attendance was a traditional New Orleans
second line parade.                      PHOTO BY JOEL DALBA

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