2nd Circuit Reverses Dismissal of American Express Class Action Lawsuit

ST. PAUL, Minn., Jan. 30, 2009 (LAWFUEL) — The United States
Second Circuit Court of Appeals today reversed the dismissal of a
massive antitrust class action brought by merchants against the
American Express Company (“Am Ex”). The case alleges that American
Express in 1999 began a massive effort to take a share of the standard
commodity credit card business away from Visa and MasterCard. However,
Am Ex wished to partner with banks in issuing these credit cards. The
merchants alleged that Am Ex understood that a high merchant fee would
be attractive to the banks; therefore Am Ex illegally forced merchants
to pay excessive rates equal to Am Ex’s more attractive business and
personal charge cards by tying the acceptance of the credit and charge
cards together. As a condition of accepting Am Ex’s credit and charge
cards, Am Ex required merchants to sign away their ability to pursue
claims as a class (known as a “class action waiver”).

The U.S. District Court in the Southern District of New York granted Am
Ex’s motion to dismiss the case and send it to arbitration. The small
merchants appealed the decision to the Second Circuit Court of Appeals,
which found that “the class action waiver . . . cannot be enforced in
this case because to do so would grant Amex de facto immunity from
antitrust liability by removing the plaintiffs’ only reasonably
feasible means of recovery.”

The policy of putting anti-class action rules in consumer and merchant
agreements has been growing enormously in recent years. This case was
the first case decided by a U.S. Appellate Court in which it was held
that the high costs of the case itself voids such rules because the
case could only proceed if all the plaintiffs were allowed to share the
costs in a class action. The decision will no doubt be used by
plaintiffs in dozens of other cases where defendants have attempted to
ban class actions by inserting such a clause in a standard agreement.

The plaintiffs in the case were represented by Friedman Law Group of
Manhattan, NY, Reinhardt Wendorf and Blanchfield of St. Paul, MN and
Patton Boggs of Washington, DC.

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