AmEx Wins Motion to Compel Arbitration and Motion to Dismiss Putative Antitrust Class Action Suits

On January 15, 2020, the U.S. District Court for the Eastern District of New York ruled in favor of Cravath client American Express Company (“AmEx”) in an antitrust suit brought by two putative classes of merchant plaintiffs: one purporting to represent a class of merchants that accept AmEx-branded cards and one purporting to represent a class of merchants that do not accept AmEx cards but accept Visa, Mastercard and Discover cards. On AmEx’s motion, the Court compelled arbitration of claims asserted by the putative class of AmEx-accepting merchants. The Court also granted AmEx’s motion to dismiss the claims of the non-AmEx accepting merchants.

The merchant plaintiffs alleged that AmEx’s anti-steering provisions, which contractually prohibit merchants from discouraging customers from using an AmEx card at the point of sale, violated the Sherman Act and California’s antitrust and unfair competition laws. AmEx and Cravath had previously prevailed in 2018 in the U.S. Supreme Court in an antitrust lawsuit brought by the United States Department of Justice and 17 state attorneys general challenging the same anti-steering provisions, although the class action plaintiffs attempted to allege a theory that survived the Supreme Court’s ruling.

The District Court granted AmEx’s motion to compel individual arbitration as to the AmEx-accepting merchants, finding that the U.S. Supreme Court’s prior 2013 decision in American Express v. Italian Colors Restaurant controlled. Italian Colors held that AmEx’s arbitration provisions in its agreements with merchants are enforceable under the Federal Arbitration Act.

The Court also dismissed the non-AmEx accepting merchants’ claims for failure to allege antitrust standing. In the opinion, U.S. District Judge Nicholas G. Garaufis found that “the Non-AmEx Class has not established federal antitrust standing” because “all four of the efficient-enforcer factors”—directness of the injury, the existence of an identifiable class of other injured parties, the speculative nature of the injury and the risk of duplicative recovery—“cut against Plaintiffs”. The Court also dismissed the non-AmEx accepting merchants’ California state law claims for substantially the same reasons.

The Cravath team included partners Evan R. Chesler, Peter T. Barbur and Kevin J. Orsini and associates David H. Korn, Allison C. Davido, Molly M. Jamison, Bradley R. Niederschulte, Hannah Dwyer and Derek K. Mong.

The case is In re American Express Anti-Steering Rules Antitrust Litigation, No. 11-MD-2221 (E.D.N.Y.).