It's not exactly news that the Republican majority on the Supreme Court has been the consistent agent of powerful corporate interests. On Thursday, however, the Court provided us with a particularly striking example of this well-established phenomenon. In American Express v. Italian Colors the Court's five Republican appointees bizarrely twisted the Court's precedents to give powerful corporations a license to violate the rights of small businesses and consumers with impunity.
Italian Colors concerns a claim that American Express was using its monopoly power to extract higher prices from small businesses in violation of the Sherman Antitrust Act. Since establishing an antitrust claim requires extensive evidence that would require hundreds of thousands dollars to litigate, it would be irrational for any individual business or consumer to seek redress (either from the courts or from an arbitrator). For this reason, Italian Colors brought their antitrust claim as a class action, joining with other businesses to bring their suit. American Express sought to have the case dismissed, on the basis that their customers entered into a contract that agreed to settle all claims through arbitration and that there shall be no right or authority for any claims to be arbitrated on a class action basis." The Court's majority opinion today agreed that the contract foreclosed the ability to bring a class action suit.
While the language of the contract seems clear, it is well-established Supreme Court precedent that such waivers cannot be applied if they prevent rights from being effectively redressed by the courts. Justice Kagan's coruscating dissent clearly explains the "effective vindication" rule previously established by the Court:
"Our decisions have developed a mechanism—called the effective-vindication rule—to prevent arbitration clauses from choking off a plaintiff’s ability to enforce congressionally created rights. That doctrine bars applying such a clause when (but only when) it operates to confer immunity from potentially meritorious federal claims. In so doing, the rule reconciles the Federal Arbitration Act (FAA) with all the rest of federal law—and indeed, promotes the most fundamental purposes of the FAA itself. As applied here, the rule would ensure that Amex’s arbitration clause does not foreclose Italian Colors from vindicating its right to redress antitrust harm."
The majority's opinion creates a Catch-22. Antitrust law makes it illegal to use monopoly power to exploit customers—but corporations can use their monopoly power to compel customers to waive their right to bring an antitrust challenge. This is exactly the kind of perverse outcome the effective vindication rule was intended to prevent.
This absurd result is not well-defended by Scalia's shoddy opinion, although in fairness, the argument was probably defended about as well as it could be. (As Kagan observes, "[t]he majority is quite sure that the effective-vindication rule does not apply here, but has precious little to say about why.") Scalia's argument essentially boils down to the proposition that effective vindication does not really require an effective vindication—the formal existence of a remedy is sufficient even if it would be practically impossible to obtain redress in practice. "[T]he antitrust laws," Scalia asserts, "do not guarantee an affordable procedural path to the vindication of every claim."
The most remarkable part of the majority opinion is its claim that the Court's 2011 "decision in AT&T Mobility all but resolves this case." AT&T Mobility v. Concepcion is certainly instructive as an example of the sometimes ludicrous pro-corporate bias of the Roberts Court, as it used a transparently erroenous reading of federal law to prevent consumers who had been prevented from suing the companies that stole from them in court. But, as Kagan notes, it is far from clear how the holding in the prior case could possibly compel any outcome in Thursday's case. AT&T Mobility was about whether federal law preempted a state law that made requirements to waive class-action suits illegal. Italian Colors concerns federal statutory rights, making the pre-emption holding of Concepcion irrelevant. Moreover, AT&T Mobility also had nothing to say about the effective vindication rule today's case turns on. As Kagan acidly notes, "[h]ere is a tip-off: AT&T Mobility nowhere cited our effective-vindication precedents."
And yet, Scalia's invocation of AT&T Mobility as controlling the outcome of today's case reflects admirable candor. Granted, the technical holdings of the 2011 case are of little relevance to Thursday's ruling. But, in a sense, both cases were indeed decided by the same rule: "if there is a dispute between a corporations and its customers, the corporation wins." If this requires utterly nonsensical arguments such as "state laws are preempted by a federal requirement that litigation and arbitration be placed on equal footing even if the state law leaves arbitration and litigation on equal footing" or "the effective vindication rule does not require an effective vindication based on any known reading of the term 'effective,'" so be it. You can't become the most pro-business court in at least 7 decades by letting legal niceties get in the way of upholding the ability of companies to violate the rights of their customers.
Today's holding has potential implications that go well beyond the ability of small businesses to bring antitrust claims against monopolies. Based on this ruling, for example, employers could require employees to sign employment contracts requiring them to waive their ability to bring class actions, making laws such as the Civil Rights Act, Fair Labor Standards Act, and Americans with Disabilities Act in many cases impossible to enforce in any case where the damages are exceeded by the cost of individual litigation.
To a majority of the Supreme Court, of course, this insulation of powerful interests from legislation intended to protect the rights of individuals and small businesses is a feature rather than a bug. In addition, both Italian Colors and AT&T Mobility make it clear that elections matter: both cases split along strict party lines (although Justice Sotomayor recused herself from today's opinion.) Justice Kagan's brilliant dissent today reminds us that decisions that desperately strain to protect the powerful against the relatively weak are not inevitable. At the time of her nomination, I asked whether Kagan would be able to win over liberals. At this point, it seems safe to say that the answer is "yes."