The U.S. Supreme Court continued its slow but steady evisceration of collective consumer action, effectively gutting one of the last exceptions allowing consumers to join forces as a class.
In Italian Colors v. American Express, the Court ruled 5-3 (Justice Sonia Sotomayor did not participate) that it doesn’t matter if a consumer’s costs in proving a company’s statutory violation dwarf any potential recovery; that consumer still can’t sue as part of a class.
Most consumer contracts have provisions that go beyond just requiring the resolution of disputes in arbitration, rather than in court. A class action waiver — precluding a consumer from resolving his dispute as part of a class — is one such provision, one that the Supreme Court upheld in 2011 in AT&T v. Concepcion.
Despite that ruling, courts had continued to recognize the prohibitive litigation costs to an individual — the so-called “effective vindication” exception — as a reason to allow consumers to proceed as a group. In Italian Colors, that group consisted of merchants suing American Express for alleged violations of antitrust laws, saying that the company was using its monopoly power to force them to agree to excessive fees. When American Express sought to force the merchants to sue individually, the group countered that the costs in proving any individual claims could exceed a million dollars, while any likely recovery would be in the thousands. Read More…