Supreme Court rules for American Express in arbitration dispute with merchants

WASHINGTON – The Supreme Court ruled against merchants Thursday who object to having to accept American Express debit and credit cards along with the company’s iconic charge card.

The justices said in a 5-3 decision that the merchants could not band together, but rather must use arbitration to resolve their claims against American Express one by one.

The decision fell along ideological lines, common in cases involving arbitration, with Justice Antonin Scalia writing for the conservative-leaning majority.

Scalia said the merchants should be held to their agreements with American Express, which contained a waiver of class action, preventing multiple parties from joining together to press a common claim. He said it didn’t matter if “it is not worth the expense involved” to the merchants to proceed individually.

The case involved the merchants’ effort to sue American Express in court and the company’s move to force the businesses to use arbitration individually.

A party that is being sued often prefers arbitration, where a third party settles the dispute, to a more time-consuming and costly lawsuit. Defendants in civil cases also typically resist class actions, which increase the pressure to settle because of the cost of defending them and the potential for very large judgments.

Justice Elena Kagan filed a dissent that was joined by Justices Ruth Bader Ginsburg and Stephen Breyer. The contracts between American Express and the merchants effectively deprive the merchants of any legal recourse, Kagan said.

“And here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad,” she said.

Justice Sonia Sotomayor took no part in the case.

The case is American Express v. Italian Colors Restaurant, 12-133.