Signing Away Your Rights in the Fine Print

Last week, the U.S. Supreme Court issued a ruling in Amex v. Italian Colors Restaurant that further diminishes the ability of consumers and small businesses to enforce their legal rights against large corporations.

Italian Colors was a restaurant that filed suit against American Express alleging that AmEx was violating antitrust laws by using its monopoly power over charge cards to force merchants into accepting all AmEx-branded credit cards and pay higher fees.  Italian Colors’ contract with Amex had an “arbitration clause,” meaning that any dispute between the parties had to be resolved through informal arbitration rather than civil court.  The arbitration clause also did not allow merchants to shift or share the expenses of arbitrating a claim with other merchants.

The problem with arbitration in this particular instance was that, in order to prove an antitrust claim, Italian Colors would have needed to conduct an antitrust market study at a cost of several hundred thousand dollars.  Italian Colors was only seeking a few thousand dollars in damages, and so this cost prevented them from asserting a claim if they had to bear it all on their own.

Italian Colors therefore sought to invalidate the arbitration clause.  If they could sue in civil court, they could do so via class action and share the cost of the antitrust market study with hundreds or thousands of other similarly aggrieved merchants.  This would have made things affordable and was the only way Italian Colors would have been able to fight against the monopoly of American Express.

However, the Supreme Court refused to invalidate the parties’ arbitration clause, essentially allowing American Express to continue their monopoly without the threat of legal action.  According to the Court, Italian Colors truly did sign away their rights in the fine print.

The impact of this ruling extends far beyond the enforceability of antitrust law.  It affects the ability of consumers and small businesses to enforce any number of rights, such as the rights to equal pay, minimum wage, fair debt collection practices, fair credit reporting practices, and much more, which often time can only be cost-efficiently enforced on a class action basis.  According to the Supreme Court, large corporations can now effectively nullify these rights by using fine print to force consumers and small businesses into binding arbitration, even if binding arbitration makes it impossible for the consumer or small business to actually pursue a legal claim.

What should be taken from this ruling, aside from the realization that the law continues to evolve to favor big business, is the importance of reading and understanding the fine print of any important contract you sign.  Our firm is highly skilled in matters of contract drafting and interpretation and is happy to assist you for this purpose.