UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
May 29, 2012
IN RE: AMERICAN EXPRESS MERCHANTS' LITIGATION, ITALIAN COLORS RESTAURANT, ON BEHALF OF ITSELF AND ALL SIMILARLY SITUATED PERSONS, NATIONAL SUPERMARKETS ASSOCIATION, 492 SUPERMARKET CORP., BUNDA STARR CORP., PHOUNG CORP., PLAINTIFFS-APPELLANTS,
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, AMERICAN EXPRESS COMPANY, DEFENDANTS-APPELLEES.
1 At a stated term of the United States Court of Appeals 2 for the Second Circuit, held at the Daniel Patrick Moynihan 3 United States Courthouse, 500 Pearl Street, in the City of 4 New York, on the 29th day of May, two thousand twelve.
Following disposition of this appeal on February 1,
2012, an active judge of the Court requested a poll
3 whether to rehear the case in banc. A poll having
4 conducted and there being no majority favoring in
5 review, rehearing in banc is hereby DENIED.
7 Rosemary S. Pooler, Circuit Judge, concurs by opinion 8 in the denial of rehearing in banc.
10 Dennis Jacobs, Chief Judge, joined by Jose A. Cabranes 11 and Debra Ann Livingston, Circuit Judges, dissents by 12 opinion from the denial of rehearing in banc.
14 Jose A. Cabranes, Circuit Judge, dissents by opinion 15 from the denial of rehearing in banc.
17 Reena Raggi, Circuit Judge, joined by Richard C. 18 Wesley, Circuit Judge, dissents by opinion from the denial 19 of rehearing in banc.
23 FOR THE COURT:
24 CATHERINE O'HAGAN WOLFE, CLERK
ROSEMARY S. POOLER, Circuit Judge, concurring in the denial of rehearing en banc:
I respectfully concur in the denial of the rehearing en banc. I write briefly to emphasize that the limited holding in this case is not governed by the Supreme Court's reasoning in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011). Concepcion holds that the Federal Arbitration Act ("FAA") preempts state laws hostile to arbitration, and focuses its analysis on preemption issues. In contrast, analysis in Amex III rests squarely on a vindication of statutory rights analysis -- an issue untouched in Concepcion.
Amex III strives to give full effect to the Supreme Court's teachings that where a contractual agreement functions "as a prospective waiver of a party's right to pursue statutory remedies," then the contractual agreement may not be enforced. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637, n. 19 (1985); see also Green Tree Fin. Corp. Alabama v. Randolph, 531 U.S. 79, 90 (2000). Amex III is carefully cabined to hold that this waiver, on this record, is unenforceable. It creates no broad new rights. While Concepcion addresses state contract rights, Amex III deals with federal statutory rights -- a significant distinction. In analyzing Concepcion, the Court reasoned that although the FAA's saving clause, 9 U.S.C. § 2, preserves a generally applicable contract defense, "nothing in it suggests an intent to preserve state-law rules that stand as an obstacle to the accomplishment of the FAA's objectives." 131 S.Ct. at 1748. The Court reasoned that invalidating a class waiver would allow a party to an arbitration agreement to demand a class-wide arbitration that is not consensual, thereby making arbitration slower, more formal and more costly, and greatly increasing risks to defendants. Id. at 750-52. Because its analysis focused wholly on the issue of preemption of state law by federal law, Concepcion is silent on the holdings of the Court's earlier cases which enforce arbitration clauses only when those clauses permit parties to effectively vindicate their federal statutory rights.
In stark contrast, Amex III raises a different issue: whether the FAA always trumps rights created by a competing federal statute, as opposed to rights existing under a common law of unconscionability. At issue here is not the right to proceed as a class, but the ability to effectively vindicate a federal statutory right that predates the FAA. Vindication of statutory rights analysis is the method of analysis proposed by the Supreme Court in Mitsubishi for addressing whether an arbitration clause will be enforced where the dispute implicates a federal statute. 473 U.S. at 637; Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991). This analysis is not foreign to our Court. See, e.g., Brooks v. Travelers Ins. Co., 297 F.3d 167, 168 (2d Cir. 2002) (analysis of arbitration agreement required finding that agreement "provide[d] adequately for vindication of federal statutory rights"). There is no indication in Concepcion that the Supreme Court intended to overrule its previous holdings.
Mitsubishi holds that parties may agree to prosecute statutory rights via arbitration instead of litigation only where "the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum." 473 U.S. at 637. Gilmer reaffirmed that principle. 500 U.S. at 28. Nearly ten years later, the Supreme Court cited the proposition again, in Green Tree Fin. Corp., 531 U.S. at 90; see also 14 Penn Plaza LLC v. Pyett, 129 S. Ct. 1456, 1474 (2009) (recognizing principle and stating that "a substantive waiver of federally protected civil rights will not be upheld"). Our sister Circuits also engage in a vindication of rights analysis. See, e.g., Kristian v. Comcast Corp., 446 F.3d 25, 47-48 (1st Cir. 2006) (severing as unenforceable provision of arbitration agreement limiting availability of treble damages under antitrust statute); Hadnot v. Bay, Ltd., 344 F.3d 474, 478 n. 14 (5th Cir. 2003) (severing restriction on available remedies from arbitration agreement after finding that "ban on punitive and exemplary damages is unenforceable in a Title VII case"); Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 657-60 (6th Cir. 2003) (en banc) (deciding when cost-sharing deprives employees of substantive statutory rights); Shankle v. B-G Maint. Mgmt. of Colo., Inc., 163 F.3d 1230, 1234 (10th Cir. 1999) ("an arbitration agreement that prohibits use of the judicial forum as a means of resolving statutory claims must also provide for an effective and accessible alternative forum"); Paladino v. Avnet Computer Techs., Inc., 134 F.3d 1054, 1060 (11th Cir. 1998) (holding that arbitration agreement which proscribed award of Title VII damages was unenforceable because it was fundamentally at odds with the purposes of Title VII); Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465, 1468 (D.C. Cir. 1997) ("We do not read Gilmer as mandating enforcement of all mandatory agreements to arbitrate statutory claims; rather we read Gilmer as requiring the enforcement of arbitration agreements that do not undermine the relevant statutory scheme.").
Equally unavailing is any reliance on Coneff v. AT&T, Corp.-- F.3d ---, 2012 WL 887598 (9th Cir. 2012). Coneff -- like Concepcion -- examines when the FAA preempts state contract law. Unlike Amex III, the Coneff court was not focused on individual plaintiffs lacking an effective means of enforcing their rights. Rather, the question addressed in Coneff was, given the small damages awards in any individual arbitration, whether the plaintiffs would have an adequate incentive to vindicate their rights. The Ninth Circuit expressly recognized the difference between incentive and ability. Coneff, 2012 WL 887598, at *3 n. 3 (distinguishing Amex III, 667 F.3d 206, 218 (2d Cir. 2012) on the ground that in Amex III "the only economically feasible means for plaintiffs enforcing their statutory rights is via a class action.")(emphasis in original).
Further, in both Coneff and Concepcion the individual damages awards available to any single plaintiff were small, but fee-shifting provisions ensured that a damaged plaintiff could be made whole. The reason that a plaintiff may not bring suit was not because he would not be likely to recoup his costs, but rather because the small amount of damages was not worth his trouble. In Amex III, however, plaintiffs were faced with substantial upfront expenditures to prosecute their antitrust rights -- costs that were only economically feasible if the plaintiffs prosecuted their claims as a class. Amex I explained why the Clayton Act's treble-damages and fee-shifting provisions would not make an individual plaintiff whole:
[Not only is] the trebling of a small individual damages award  not going to pay for the expert fees Dr. French has estimated will be necessary to make an individual plaintiff's case here, there is an even more important legal consideration that the district court did not consider. In Crawford Fitting Co. v. J.T. Gibbons, Inc., the Supreme Court addressed fee-shifting for expert witnesses under Rule 54(d) of the Federal Rules of Civil Procedure in an antitrust case, holding that "when a prevailing party seeks reimbursement for fees paid to its own expert witnesses, a federal court is bound by the limit of [28 U.S.C.] § 1821(b). . . ." 482 U.S. 437, 439 (1987). We note that figure is now set at a $40 per diem. Further, as the plaintiffs assert, there are no provisions "in the rules of any of the arbitral bodies designated [in the Card Acceptance Agreement] that would allow such costs to be awarded where they are not authorized by the applicable fee shifting statute." Even with respect to reasonable attorney's fees, which are shifted under Section 4 of the Clayton Act, the plaintiffs must include the risk of losing, and thereby not recovering any fees, in their evaluation of their suit's potential costs. 554 F.3d 300, 317-18 (2d Cir. 2009) (footnotes omitted); see also 15 U.S.C. § 15.
We need not tarry long in addressing a final concern: that Amex III permits plaintiffs to evade enforcement of class action arbitration waivers simply by manufacturing an affidavit or choosing pricey attorneys. The business plaintiffs here are prosecuting antitrust claims that will likely require complex discovery and expert testimony. Other statutory claims may not require such extensive proof. The courts are perfectly capable of doing the analysis necessary to determine if the plaintiffs have made the necessary showing. See, e.g., Adkins v. Labor Ready, Inc., 303 F.3d 496, 502 (4th Cir. 2002) (refusing to strike class arbitration waiver where plaintiff failed to make required showing that he would incur prohibitively high expenses in prosecuting claim individually); Ornelas v. Sonic-Denver T, Inc., 2007 WL 274738, at *6 (D. Colo. Jan. 29, 2007) (refusing to strike class arbitration waiver because the evidence did not demonstrate the costs of pursuing arbitration would effectively "preclude the plaintiff from pursuing his claims"); see also Bonanno v. Quizno's Franchise Co., LLC, 2009 WL 1068744, at *16 (D. Colo. April 20, 2009) (enforcing contract clause barring class actions where plaintiffs failed to demonstrate they would incur excessively high costs in proceeding individually). Amex III specifically admonishes that each case will need to stand on its own merits.
Amex III gives full effect to a long line of Supreme Court precedent preserving plaintiffs' ability to vindicate federal statutory rights, rather than eviscerating more than 120 years of antitrust law by closing the courthouse door to all but the most well-funded plaintiffs. For these reasons, I concur in the denial of rehearing en banc.
1 DENNIS JACOBS, Chief Judge, with whom Judge CABRANES and 2 Judge LIVINGSTON join, dissenting from the denial of 3 rehearing in banc:
5 I respectfully dissent from the denial of rehearing in 6 banc.
7 In 1968, it became law in this Court that, for public 8 policy reasons, federal antitrust claims could not be 9 arbitrated. See Am. Safety Equip. Corp. v. J.P. Maguire & 10 Co., 391 F.2d 821, 827-28 (2d Cir. 1968). The Supreme Court 11 rejected that public policy approach in Mitsubishi Motors 12 Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 636 13 (1985). And in 1991, it reiterated that federal statutory 14 claims can be subject to valid arbitration agreements. See 15 Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 16 (1991).
17 Now the panel opinion in this case uses public policy 18 to hold that arbitration agreements containing class-action 19 waivers are unenforceable when applied to federal statutory 20 claims if (as is always so easy to assert) a claim would not 21 be "economically rational" to pursue individually. In re 22 Am. Express Merchs.' Litig., 667 F.3d 204, 214 (2d Cir. 1 2012) (Amex III). The panel opinion thus impairs the 2 Federal Arbitration Act's strong federal policy favoring the 3 enforcement of arbitration agreements, and frustrates the 4 goals of arbitration by multiplying claims, lawsuits, and 5 attorneys' fees. "[T]he longstanding judicial hostility to 6 arbitration agreements," Gilmer, 500 U.S. at 24, is 7 undiminished.
9 At issue is a provision, of a kind commonly used in 10 arbitration agreements, that bars class actions. The 11 underlying arbitration involves an antitrust claim. In In 12 re American Express Merchants' Litigation, 554 F.3d 300 (2d 13 Cir. 2009) (Amex I), the panel held that such a bar ran 14 afoul of the federal substantive law of arbitration because 15 the litigation expense of the antitrust suit--expert 16 testimony, in particular--would render separate arbitrations 17 too expensive. So the panel ruled that a class action may 18 proceed in court notwithstanding the agreement to arbitrate.
19 Id. at 320. The Supreme Court granted certiorari and 20 vacated Amex I in light of Stolt-Nielsen S.A. v. AnimalFeeds 21 Int'l Corp., 130 S. Ct. 1758 (2010). Am. Express Co. v. 22 Italian Colors Rest., 130 S. Ct. 2401 (2010).
1 Stolt-Nielsen holds that a party to an arbitration 2 agreement cannot be compelled to submit to class arbitration 3 absent a "contractual basis for concluding that the party 4 agreed to do so . . . because class-action arbitration 5 changes the nature of arbitration to such a degree that it 6 cannot be presumed the parties consented to it by simply 7 agreeing to submit their disputes to an arbitrator." 130 S. 8 Ct. at 1775. On remand the (by then) two-judge panel 9 reached the same conclusion as in Amex I. See In re Am.
10 Express Merchs.' Litig., 634 F.3d 187, 199 (2d Cir. 2011) 11 (Amex II). 12 Shortly after Amex II was published but before the 13 mandate issued, the Supreme Court decided AT&T Mobility LLC 14 v. Concepcion, 131 S. Ct. 1740 (2011), which holds that 15 state law may not be used to invalidate a class-action 16 waiver in an arbitration agreement on the ground that the 17 only economical way to litigate the claim is through a class 18 action. Id. at 1748. After soliciting briefing on the 19 impact of Concepcion, the panel issued its third opinion.
20 In Amex III, the panel yet again concludes that the class- 21 action waiver is unenforceable on the ground that the only 22 effective way to litigate the antitrust claims was by a 23 class action in court. Amex III, 667 F.3d at 218-19.
1 As I undertake to show, the public policy rationale 2 which Amex III relies upon is wrong because:  it runs 3 counter to the public policy that the Supreme Court has made 4 paramount in the context of the Federal Arbitration Act 5 ("FAA");  it employs a dubious ground of distinction to 6 overcome Concepcion, which teaches that the FAA does not 7 allow courts to invalidate class-action waivers even if 8 "class proceedings are necessary to prosecute small-dollar 9 claims that might otherwise slip through the legal system," 10 Concepcion, 131 S. Ct. at 1753; and  the dicta on which 11 the panel precariously relies--that large "arbitration 12 costs" cannot be allowed to prevent a plaintiff from 13 "effectively vindicating" a statutory right--is pulled out 14 of context and distorted.
17 Amex III cannot be squared with the FAA, as it has been 18 applied and explained by the Supreme Court. In banc review 19 is needed because [A] the panel opinion is unbounded and can 20 be employed to defeat class-action waivers altogether; [B] 21 it makes the district court the initial theater of arbitral 22 conflict on the merits (how else does a district court 23 estimate the cost of a litigation?); and [C] it is already 24 working mischief in the district courts.
3 Amex III is a broad ruling that, in the hands of class 4 action lawyers, can be used to challenge virtually every 5 consumer arbitration agreement that contains a class-action 6 waiver--and other arbitration agreements with such a clause.
7 While it purports to require a case-by-case approach, its 8 wording is categorical: "Supreme Court precedent recognizes 9 that the class action device is the only economically 10 rational alternative when a large group of individuals or 11 entities has suffered an alleged wrong, but the damages due 12 to any single individual or entity are too small to justify 13 bringing an individual action." Amex III, 667 F.3d at 214.
14 Thus every class counsel and every class representative who 15 suffers small damages can avoid arbitration by hiring a 16 consultant (of which there is no shortage) to opine that 17 expert costs would outweigh a plaintiff's individual loss.
18 The breadth of the holding is illustrated in the 19 opinion. Amex III uncritically adopts the affidavit of a 20 paid consultant to find that expert costs would be so high 21 relative to potential damages, that "the only economically 22 feasible means for plaintiffs enforcing their statutory 23 rights is via a class action [in court]." 667 F.3d at 218.
1 However, Section 4 of the Clayton Act provides for the 2 recovery of costs, including expert costs, and attorneys' 3 fees. See 15 U.S.C. § 15(a) ("[A]ny person who shall be 4 injured in his business or property by reason of anything 5 forbidden in the anti-trust laws . . . shall recover 6 threefold the damages by him sustained, and the cost of 7 suit, including a reasonable attorney's fee."). The Amex 8 panel is evidently of the view that the incentivizing fees 9 and cost afforded by the statute would not fully compensate 10 plaintiffs for the costs of pursuing their claims. See Amex 11 III, 667 F.3d at 218. But Congress deems these incentives 12 sufficient to encourage private suits. The judgment of 13 Congress in such a matter is entitled to deference, not the 14 panel opinion's dismissive treatment.
15 Amex III does not vouchsafe what is meant for a suit to 16 be "economically feasible," or when a hypothetical 17 "economically rational" plaintiff might be willing to pursue 18 a claim. Id. at 218. It cannot mean that a potential 19 plaintiff must have the opportunity to be made whole and 20 happy by recovery of damages, costs, attorneys' fees, expert 21 charges, etc., because such a result is rarely achieved by 22 even the most successful litigants. Moreover, Amex III 23 demands more than such complete victory; it demands a 1 "risk-of-losing" premium. Id. at 218 ("Even with respect to 2 reasonable attorney's fees[,] . . . the plaintiffs must 3 include the risk of losing, and thereby not recovering any 4 fees, in their evaluation of their suit's potential 5 costs."). This formulation betrays a dominant 6 consideration--that, without the class-action vehicle, no 7 lawyer will be incentivized to pursue these claims. That 8 may be; but Concepcion rejected this very policy rationale.
9 See Concepcion, 131 S. Ct. at 1753 (rejecting argument that 10 "class proceedings are necessary to prosecute small-dollar 11 claims that might otherwise slip through the legal system," 12 because rules inconsistent with the FAA cannot be imposed 13 "even if desirable for unrelated reasons"); see also Coneff 14 v. AT&T Corp., 673 F.3d 1155, 1159 (9th Cir. 2012) (rejecting 15 argument that plaintiffs had insufficient incentive to 16 pursue individual claims as "primarily a policy rationale" 17 that "cannot undermine the FAA").
21 Under the panel opinion, arbitration must now begin in 22 federal court--and be litigated there on the merits in many 23 critical respects. The courtroom inquiry that the panel 1 requires to be undertaken before any class arbitration can 2 in fact take place is searching. Whether a dispute may 3 require expert testimony is a question inseparable from the 4 merits (and raises Daubert and other vexed questions). 5 Without a close inquiry into the merits, no court can decide 6 what expert testimony would be required, or how much 7 discovery is needed. And it cannot be decided whether any 8 discovery or testimony is needed at all without deciding if 9 the claim is dismissible--or such prior questions as the 10 statute of limitations and laches, controlling law, res 11 judicata, etc., etc., not to mention little things like 12 whether the putative class is duly constituted and properly 13 represented, without which there is no class claim. 14 Under the FAA, however, all those questions are for the 15 arbitrator to decide. See, e.g., Prima Paint Corp v. Flood 16 & Conklin Mfg. Co., 388 U.S. 395, 403-404 (1967). By 17 requiring the district court to consider this at the 18 threshold, Amex III effectively displaces arbitration with a 19 trial court proceeding whenever lawyers assert a class 20 claim. (And they will, often.) Even if arbitration is 21 given a green light at the end of the judicial proceeding, 22 the party seeking to arbitrate may have already spent many 23 times the cost of an arbitral proceeding just enforcing the 1 arbitration clause. And the partial list of issues above 2 will create fertile ground for appeal, adding yet more 3 delay, expense, and uncertainty. The predictable upshot is 4 that Amex III will render arbitration too expensive and too 5 slow to serve any of its purposes.
6 Amex III is incompatible with the FAA. The FAA 7 "establishes that, as a matter of federal law, any doubts 8 concerning the scope of arbitrable issues should be resolved 9 in favor of arbitration." Moses H. Cone Mem'l Hosp. v. 10 Mercury Constr. Corp., 460 U.S. 1, 24-25 & n.32 (1983). The 11 federal substantive law of arbitration "is a congressional 12 declaration of a liberal federal policy favoring arbitration 13 agreements." Id. at 24. This is particularly true in light 14 of Concepcion's reaffirmance of the "overarching purpose" of 15 the FAA:
16 The overarching purpose of the FAA, evident in the
17 text of §§ 2, 3, and 4, is to ensure the
18 enforcement of arbitration agreements according to
19 their terms so as to facilitate streamlined
20 proceedings. Requiring the availability
21 classwide arbitration interferes with fundamental
22 attributes of arbitration and thus creates a
23 scheme inconsistent with the FAA.
Concepcion, 131 S. Ct. 1740.
1 In the six years Amex has been pending in this Court, 2 its several iterations have been relied upon no fewer than 3 three times in the Southern District of New York alone. See 4 Raniere v. Citigroup, Inc., No. 11 Civ. 2248, 2011 WL 5 5881926, at *13 (S.D.N.Y. Nov. 22, 2011); Chen-Oster v. 6 Goldman, Sachs & Co., No. 10 Civ. 6950, 2011 WL 2671813, at 7 *2-5 (S.D.N.Y. July 7, 2011); Sutherland v. Ernst & Young, 8 LLP, 768 F. Supp. 2d 547, 550-55 (S.D.N.Y. 2011).*fn1 Given 9 the recurrent influence of Amex, this Court should subject 10 it to in banc review.
11 That responsibility is even more compelling because the 12 panel opinion now splits with a recent holding of the Ninth 13 Circuit Court of Appeals. See Coneff v. AT&T Corp., 673 F.3d 14 1155, 1158 n.2, 1159 n.3 (9th Cir. 2012). In Coneff, a 15 putative class of AT&T wireless customers sued AT&T on a 16 variety of claims, including a violation of the Federal 17 Communications Act. Id. at 1157. The Ninth Circuit held 18 that Green Tree Financial Corp. v. Randolph, 531 U.S. 79 19 (2000), was no obstacle to the enforcement of the 1 arbitration agreement containing a class-action waiver 2 because under the FAA it is irrelevant whether customers 3 "have insufficient incentive" "to vindicate their rights." 4 Id. at 1159. (citing Concepcion, 131 S. Ct. at 1753).
7 Amex III is thus incompatible with the longstanding 8 principle of federal law, embodied in the FAA and numerous 9 Supreme Court precedents, favoring the validity and 10 enforceability of arbitration agreements. It should come as 11 no surprise, then, that the panel opinion finds no support 12 in the Supreme Court's case law. Instead, Amex III proceeds 13 by selective quotation from Supreme Court dicta, and by 14 aggressive measures to distinguish away the Supreme Court's 15 recent holding in Concepcion.
19 Concepcion, decided after the second iteration of Amex, 20 vindicated the FAA against an unconscionability challenge 21 that was materially indistinguishable from the challenge 22 upheld in Amex. In Concepcion, the Supreme Court rejected a 23 common-law rule, developed by the California Supreme Court, 1 that was applied to void class-action waivers in contracts 2 of all types. This is what the discredited California 3 opinion had said:
4 [B]ecause . . . damages in consumer cases are often 5 small and because a company which wrongfully exacts a 6 dollar from each of millions of customers will reap a 7 handsome profit, the class action is often the only 8 effective way to halt and redress such 9 exploitation. . . . Such one-sided, exculpatory 10 contracts in a contract of adhesion, at least to the 11 extent they operate to insulate a party from liability 12 that otherwise would be imposed under California law, 13 are generally unconscionable.
15 Discover Bank v. Superior Court, 36 Cal. 4th 148, 161 (2005) 16 (internal quotation marks, citations, and alterations 17 omitted).
18 The Supreme Court ruled that this attempt by California 19 to police arbitration agreements was inconsistent with the 20 FAA. Concepcion, 131 S. Ct. at 1748. Refuting the 21 dissent's argument that "class proceedings are necessary to 22 prosecute small-dollar claims that might otherwise slip 23 through the legal system," the majority affirmed that rules 24 inconsistent with the FAA cannot be imposed "even if 25 desirable for unrelated reasons." Id. at 1753. 26 After the Amex panel solicited briefing from the 27 parties on the effect of Concepcion, the panel reissued Amex 28 (in the form of Amex III), evading the broad language and 1 clear import of Concepcion. Again in Amex III, the panel 2 found that a class-waiver provision in an arbitration 3 agreement is unenforceable if "the only economically 4 feasible means for plaintiffs enforcing their statutory 5 rights is via a class action." Amex III, 667 F.3d at 218.
6 Amex III tries to narrow Concepcion to (in the words
7 Amex III) a "path for analyzing whether a state contract
8 is preempted by the FAA." Amex III, 667 F.3d at 213. In
9 doing, Amex III conceives the following distinction:
10 Concepcion decided only whether California's doctrine
11 unconscionability was preserved by the FAA's savings
12 for "grounds as exist at law or in equity for the
13 of any contract," 9 U.S.C. § 2, whereas Amex III
14 the arbitration agreement (for the same reason of
15 unconscionability) on the ground that the
16 antitrust claim was federal, a circumstance that the
17 dresses up rhetorically as a "federal substantive law
18 arbitrability," Amex III, 667 F.3d at 213 (quotation
19 omitted). This labored analysis does not rise to
20 distinction, and treats the reasoning of Concepcion as
21 obstacle to be surmounted or evaded. Since, as the
22 Court has held, the FAA preempts even state law that
evasion of a class action waiver clause, it is hard for
1 to see any justification for a rule permitting precisely
2 same sort of evasion as part of the "federal substantive
3 of arbitrability."
6 The panel opinion leans on the distortion of dicta from 7 Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (2000).
8 In Green Tree, a lender sought to compel a borrower to 9 arbitrate claims she had raised under certain federal 10 statutes. Id. at 83. The question was "whether [her] 11 agreement to arbitrate is unenforceable because it says 12 nothing about the costs of arbitration, and thus fails to 13 provide her protection from potentially substantial costs of 14 pursuing her federal statutory claims in the arbitral 15 forum." Id. at 89. The Court reconfirmed "that federal 16 statutory claims can be appropriately resolved through 17 arbitration," id. at 89, and "rejected generalized attacks 18 on arbitration that rest on a 'suspicion of arbitration as a 19 method of weakening the protections afforded in the 20 substantive law to would be complainants,'" id. at 89-90 21 (quoting Rodriguez de Quijas v. Shearson/American Express, 22 Inc., 490 U.S. 477, 481 (1989)). And the challenge failed 1 for want of evidence of the "cost" of the arbitration. Id.
2 at 90.
3 A passage in dicta (relied upon in Amex III) added that 4 "the existence of large arbitration costs could preclude a 5 litigant . . . from effectively vindicating her federal 6 statutory rights." Id. at 90. However, "large arbitration 7 costs" is not a reference to expense generally. Green Tree 8 uses the phrase to reference the cost of access to an 9 arbitral forum and is about the price of admission: "payment 10 of filing fees, arbitrators' costs, and other arbitration 11 expenses." Green Tree, 531 U.S. at 84. Only Amex III has 12 suggested that a claim that may be expensive to litigate-- 13 whether in court or in arbitration--can for that reason be 14 deemed to entail preclusive "arbitration costs." In any 15 event, even if the Green Tree dicta were to have the meaning 16 the panel ascribes to it, it is nonetheless still dicta.
17 And it loses any persuasive power it might once have had in 18 light of the Supreme Court's holding in Concepcion, which is 19 more clear and more recent--and authoritative.
20 Similarly misleading is the panel's quotation of 21 Mitsubishi, for the proposition that "should clauses in a 22 contract operate 'as a prospective waiver of a party's right 23 to pursue statutory remedies for antitrust violations, we 1 would have little hesitation in condemning the agreement as 2 against public policy.'" Amex III, 667 F.3d at 214 (quoting 3 Mitsubishi, 473 U.S. at 637 n.19). The Court was there 4 concerned with a hypothetical arbitral panel that might, 5 relying on provisions concerning choice of forum or choice 6 of law, refuse to apply American law to a federal statutory 7 claim. Mitsubishi, 473 U.S. at 637 n.19.
8 Other circuit cases have excised provisions from 9 arbitration agreements for the precise reasons anticipated 10 by Green Tree and Mitsubishi. See Kristian v. Comcast 11 Corp., 446 F.3d 25, 47-48 (1st Cir. 2006) (severing waiver 12 of treble damages); Hadnot v. Bay, Ltd., 344 F.3d 474, 478 13 n.14 (5th Cir. 2003) (noting that waiver of exemplary and 14 punitive damages is unenforcable); Paladino v. Avnet 15 Computer Techs., Inc., 134 F.3d 1054, 1060 (11th Cir. 1998) 16 (holding that arbitration agreement cannot force a party to 17 arbitrate a statutory right and at the same time bar it from 18 being awarded damages in the arbitral forum). All of these 19 three cases involved an arbitration agreement that entirely 20 foreclosed a remedy to which one of the parties was 21 otherwise entitled to seek at law. None of them invalidated 1 an arbitration agreement on the ground that the claims were 2 costly to litigate individually.*fn2
3 In Amex, there is zero evidence that any "arbitration 4 costs"--within the meaning of Green Tree--would hamper the 5 plaintiffs' ability to vindicate their statutory rights.
6 None of the three panel opinions references the size of the 7 filing fees, or any arbitrators' fees that would befall the 8 plaintiffs. In finding that claim-by-claim litigation would 9 not be "economically feasible," Amex III, 667 F.3d at 204, 1 the panel relies solely on the affidavit of a paid 2 consultant, Gary French, who opined that preparing an 3 antitrust study would cost "at least several hundred 4 thousand dollars, while a larger study can easily exceed $1 5 million." Id. at 212.*fn3 His preliminary review of the 6 particular claim yielded a guess of nearly one million 7 dollars. Id. However, that is beside the point: The 8 ability to spread costs among a class is only a procedural 9 right, the absence of which cannot render arbitration costs 10 prohibitive. Gilmer v. Interstate/Johnson Lane Corp., 500 11 U.S. 20, 25 (1991), is instructive: an employee sought to 12 avoid arbitrating his ADEA claims on the ground that 13 "arbitration is inconsistent with the ADEA." Id. at 30.
14 The Supreme Court characterized that argument as "rest[ing] 15 on suspicion of arbitration as a method of weakening the 16 protections afforded in substantive law to would-be 17 complainants, and as such, . . . far out of step with our 18 current strong endorsement of the federal statutes favoring 19 this method of resolving disputes." Id. (internal quotation 20 marks omitted).
1 Gilmer's argument about the unavailability of class 2 actions was expressly rejected:
3 It is also argued that arbitration procedures 4 cannot adequately further the purposes of the ADEA 5 because they do not provide for broad equitable 6 relief and class actions. . . . But even if the 7 arbitration could not go forward as a class action 8 or class relief could not be granted by the 9 arbitrator, the fact that the [ADEA] provides for 10 the possibility of bringing a collective action 11 does not mean that individual attempts at 12 conciliation were intended to be barred.
13 Id. at 32 (internal quotation marks omitted). As the 14 passage from Gilmer reflects, the ADEA expressly provides 15 for a collective action; a fortiori, the same result obtains 16 under the antitrust laws, which do not. The only right to 17 an antitrust class action is "merely a procedural one, 18 arising under Fed. R. Civ. P. 23, that may be waived by 19 agreeing to an arbitration clause." Johnson v. W. Suburban 20 Bank, 225 F.3d 366, 369 (3d Cir. 2000) (enforcing, due to 21 absence of congressional intent to the contrary, a bilateral 22 arbitration clause "even though [such clauses] may render 23 class actions to pursue statutory claims . . . 24 unavailable").
JOSE A. CABRANES, Circuit Judge, dissenting from the denial of rehearing in banc:
I concur fully in the thorough opinion of Chief Judge Jacobs dissenting from the denial of in banc review. I write separately simply to underscore that the issue at hand is indisputably important, creates a circuit split, and surely deserves further appellate review. This is one of those unusual cases where one can infer that the denial of in banc review can only be explained as a signal that the matter can and should be resolved by the Supreme Court.
REENA RAGGI, Circuit Judge, with whom Judge WESLEY joins, dissenting from the denial of rehearing en banc:
I respectfully dissent from the denial of en banc review in this case. The panel decision to hold a class action waiver unenforceable is at odds with Coneff v. AT&T Corp., 673 F.3d 1155 (9th Cir. 2012). This circuit split appears unwarranted in light of controlling Supreme Court precedent for the reasons forcefully advanced by Chief Judge Jacobs in his opinion dissenting from the denial of rehearing en banc. While I identify much merit in the Chief Judge's analysis, I do not join in his opinion because I think it would be useful to have the issues explored further by the full court in the adversarial context of an en banc argument. To the extent a majority of the court maintains this circuit split without further consideration, I must dissent.