WASHINGTON — The Supreme Court reinforced the ability of corporations to impose arbitration on their customers Thursday, ruling that merchants could not bring a class-action suit against American Express, even if the cost of arbitrating individual claims is prohibitive.
Businesses generally regard arbitration as a cheaper and more efficient way to resolve disputes. Consumer advocates say the terms of the agreements let companies escape accountability. But the courts, initially willing to grant broad exceptions, increasingly have sided with the companies.
The merchants had argued that the arbitration terms imposed by American Express, as part of a credit card contract, were preventing them from seeking damages.
The terms required individual arbitration, but the cost was greater than the potential reward.
The claim, they said, was economically viable only as a class action.
The US Court of Appeals for the 2nd Circuit ruled in their favor. The Supreme Court, in overturning the decision, divided along ideological lines, with the five conservative justices in the majority and three liberal justices in dissent. Justice Sonia Sotomayor, who was a member of the Appeals Court when it ruled on the case, did not participate in the Supreme Court decision.
Justice Antonin Scalia, writing for the majority, said that the basic principle was simple: Congress has established the legality of binding arbitration agreements, and even if American Express is in violation of the law, “The antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.”
Justice Elena Kagan, writing for the dissenters, said the case, American Express Co. v. Italian Colors Restaurant, No. 12-133, was fundamentally about the right to seek redress.
“The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse,” she wrote.
She summarized the majority’s response as, “Too darn bad.”