Second Circuit Holds Class Action Waiver Unenforceable Where Individual Arbitration Would Be Prohibitively Expensive

Originally published February 3, 2012

"[A]s the class action waiver in this case precludes plaintiffs from enforcing their statutory rights, we find the arbitration provision unenforceable." – U.S. Court of Appeals for the Second Circuit

In a shot across the bow of recent Supreme Court precedent in favor of arbitration, the Second Circuit has held that a mandatory class action waiver in an arbitration provision is unenforceable where the plaintiffs established that the practical effect of enforcement of the waiver would be to preclude claims under federal antitrust statutes. In re American Express Litigation, Slip Op. 06-1871-cv (February 1, 2012) (For a copy of the Second Circuit's opinion, click here). This ruling sets up a potential conflict with the Supreme Court's recent decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (U.S. 2011), a decision strongly in favor of the enforceability of class action waivers within arbitration provisions.