Court Rules for American Express in Class Action Case

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The Supreme Court ruled Thursday that an arbitration agreement prevents merchants from bringing class action claims against American Express.

In a 5-3 vote, the court ruled that American Express' arbitration agreement did not preclude merchants from effectively vindicating their rights.

The case stemmed from a 2003 class action suit filed by restaurants, retailers and other merchants that alleged American Express violated antitrust law by forcing them to accept its credit cards as a condition of accepting its charge cards.

Charge cards require holders to pay the outstanding balance in full at the end of a billing cycle; credit cards require payment of only a portion, with the balance subject to interest.

The opinion was written by Justice Antonin Scalia and joined by the other four conservatives. Justice Elena Kagan wrote the dissent for the three liberals who heard the case, with Justice Sonia Sotomayor recused,

American Express argued that the lawsuit was barred by the arbitration agreement signed by the merchants. They countered that the agreement should not be enforced because it would not be economically feasible for many of them to bring individual claims in arbitration.

The case has been closely watched by major corporations, which have increasingly relied on arbitration agreements to settle disputes with consumers and other parties.

Arbitration clauses also frequently prohibit plaintiffs from uniting to bring a single action on behalf of a larger class.

Consumer advocates claim the clauses give companies unfair advantages. But in recent yearsthe Supreme Court has upheld their enforcement under the Federal Arbitration Act, which was intended to encourage their use.