In Re American Exp. Merchants'litigation

06-1871-cv
In Re: American Express Merchants’ Litigation

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

__________

August Term, 2007

Argued: December 10, 2007 Decided: February 1, 2012

Docket No. 06-1871-cv
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__________________________________________________________

IN RE: AMERICAN EXPRESS MERCHANTS’ LITIGATION,

ITALIAN COLORS RESTAURANT, on or behalf of itself and all
similarly situated persons, NATIONAL SUPERMARKETS ASSOCIATION, 492
SUPERMARKET CORP., BUNDA STARR CORP., PHOUNG CORP.,

Plaintiffs-Appellants,

v.

AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, AMERICAN EXPRESS
COMPANY,

Defendants-Appellees.1
___________________________________________________________

POOLER and SACK, Circuit Judges.2

1
The Clerk of the Court is directed to amend the official caption as shown above.
2
The Honorable Sonia M. Sotomayor, originally a member of this panel, was elevated to
the Supreme Court on August 8, 2009. The remaining two panel members, who are in
agreement, have determined the matter. See 28 U.S.C. § 46(d); Second Circuit IOP E(b),
available at http://www.ca2.uscourts.gov/clerk/Rules/IOP/IOP_E.htm; United States v.
DeSimone, 140 F.3d 457, 458-59 (2d Cir. 1998).
 This case returned to us from the Supreme Court, with our judgment vacated and the case
remanded for reconsideration in light of Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct.
1758 (2010). Shortly after we issued our decision in In re American Express Merchants’
Litigation, 634 F.3d 187 (2d Cir. 2011), the Supreme Court addressed the issue of class-action
waivers in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). As we find neither Stolt-
Nielsen nor Concepcion counsels us to alter our original analysis, we again conclude that (1) the
question of the enforceability of the class action waiver provision is properly decided by the court
and (2) the class action waiver provision is unenforceable under the Federal Arbitration Act. See
In re Am. Express Merchs. Litig., 554 F.3d 300 (2d Cir. 2009). REVERSED AND REMANDED.
__________

Appearing for Plaintiffs-Appellants:

Gary B. Friedman, Friedman Law Group LLP (Tracey
Kitzman, Aaron Patton, Warren Parrino, on the brief), New
York, NY.

Appearing for Defendants-Appellees:

Bruce H. Schneider, Stroock & Stroock & Lavan, LLP, New
York, NY.

Julia B. Strickland, Stephen J. Newman, Stroock & Stroock
& Lavan LLP, Los Angeles, CA.

Michael K. Kellogg, Derek T. Ho, Kellogg, Huber, Hansen,
Todd, Evans & Figel, PLLC, Washington, DC.
POOLER, Circuit Judge:

We turn to this case for the third time, as the Supreme Court released its latest views on

class arbitration waivers in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), just

weeks after we issued our decision in In re American Express Merchants’ Litigation, 634 F.3d

187 (2d Cir. 2011) (“Amex II”). Amex II returned to us from the Supreme Court, after defendants

American Express Company and American Express Travel Related Services Co. (together,

“Amex”) sought review from the Supreme Court following our decision in In re American

Express Merchants Litigation, 554 F.3d 300 (2d Cir. 2009) (“Amex I”). In Amex I, we considered

the enforcement of a mandatory arbitration clause in a commercial contract also containing a

2
“class action waiver,” that is, a provision which forbids the parties to the contract from pursuing

anything other than individual claims in the arbitral forum. We found the class action waiver

unenforceable, “because enforcement of the clause would effectively preclude any action seeking

to vindicate the statutory rights asserted by the plaintiffs.” Amex I, 554 F.3d at 304.

The Supreme Court granted Amex’s petition for a writ for certiorari, then vacated and

remanded for reconsideration in light of its decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l

Corp., 130 S. Ct. 1758 (2010). Finding our original analysis unaffected by Stolt-Nielsen, we

again reversed the district court’s decision and remanded for further proceedings. Amex II, 634

F.3d at 199-200. On April 11, 2001, we placed a hold on the mandate in Amex II in order for

Amex to file a petition seeking a writ of certiorari. While the mandate was on hold, the Supreme

Court issued its decision in Concepcion, 131 S. Ct. 1740 (2011). The Concepcion Court held that

the Federal Arbitration Act preempted a California law barring the enforcement of class action

waivers in consumer contracts. Id. at 1750-51. The parties submitted supplemental briefing

discussing the impact, if any, of Concepcion on our previous decisions, and we find oral argument

unnecessary. As discussed below, Concepcion does not alter our analysis, and we again reverse

the district court’s decision and remand for further proceedings.

BACKGROUND

Because the only issue before us is the narrow question of whether the class action waiver

provision contained in the contract between the parties should be enforced, we provide but a brief

recitation of the facts.

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 A. Procedural Posture.

The plaintiffs appealed from the March 20, 2006 judgment of the United States District

Court for the Southern District of New York, which granted Amex’s motion to compel arbitration

pursuant to the Federal Arbitration Act (“FAA”) and Federal Rule of Civil Procedure 12(b). See

In re Am. Express Merchs. Litig., No. 03 CV 9592, 2006 WL 662341 (S.D.N.Y. Mar. 16, 2006)

(Daniels, J.).

B. The Parties.

The amended complaint alleges that Amex “is the leading issuer of general purpose and

corporate charge cards to consumers and businesses in the United States and throughout the

world. It is also the leading provider of charge card services to merchants.” The named plaintiffs

are: (1) California and New York corporations which operate businesses which have contracted

with Amex and (2) the National Supermarkets Association, Inc. (“NSA”), “a voluntary

membership-based trade association that represents the interests of independently owned

supermarkets.”

The named plaintiffs seek to represent the following class:

all merchants that have accepted American Express charge cards
(including the American Express corporate card), and have thus been
forced to agree to accept American Express credit and debit cards,
during the longest period of time permitted by the applicable statute
of limitations . . . throughout the United States. . . .

C. The Plaintiffs’ Substantive Claims.

The plaintiffs’ dispute with Amex rests upon the distinction between “charge cards” and

“credit cards.”3 The district court explained the distinction:

3
1 Plaintiffs bring claims pursuant to both the Sherman and Clayton Acts, 15 U.S.C. § 1 et
2 seq., which bar certain anticompetitive conduct in trade.

4
 A charge card requires its holder to pay the full outstanding balance
at the end of a standard billing cycle. A credit card, by contrast,
allows the cardholder to pay a portion of the amount owing at the
close of a billing cycle, subject to interest charges. In plain terms, the
credit card is a means of financing purchases, the charge card is a
method of payment.

In re Am. Express Merchs., 2006 WL 662341, at * 1, n. 6.

According to the plaintiffs, Amex had until recent years centered its business on the

issuance of corporate and personal charge cards to corporate clients and affluent consumers. The

plaintiffs further assert that “[h]olders of charge cards are more affluent than credit cardholders,

and a vastly higher percentage of charge cards than credit cards are held by businesses and used

for business travel and other corporate purposes.” In fact, the plaintiffs allege that Amex itself

contends that “the average purchase on an American Express card is 17% higher than the average

purchase made on a credit card.” Thus, the holder of a charge card is likely to be “a higher class

of customer” and, as such, is particularly attractive to merchants such as the plaintiffs.

As a result of this distinction, Amex has traditionally been able to charge high “merchant

discount fees,” which are the fees a card issuer withholds as a percentage of each purchase made

with its card at the merchant’s establishment. These fees, the plaintiffs aver, “are at least 35%

higher than competitive rates” applicable to mass-market credit cards such as Visa, MasterCard,

and Discover. Over the last decade, the plaintiffs allege, Amex’s “business in the markets for

credit card issuance and credit card services has grown dramatically.” By leveraging its market

power in corporate and personal charge cards, however, plaintiffs allege that American Express

was able to compel merchants to accept “its new revolving credit card product[s] at the same

elevated discount rate, which vastly exceeded the rate for comparable Visa, MasterCard or

Discover products.”

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 According to the plaintiffs, the vehicle of this compulsion is the “Honor All Cards”

provision contained in the Card Acceptance Agreement. Under the Agreement, a merchant does

not contract to accept any one Amex product as a form of payment. Rather, the Agreement

applies:

to your acceptance of American Express© Cards . . . . American
Express Card(s) ... shall mean any card or other account access device
issued by American Express Travel Related Services Company, Inc.,
or its subsidiaries or affiliates or its or their licensees bearing the
American Express name or an American Express trademark, service
mark or logo.

The plaintiffs assert that, by means of the “Honor All Cards” provision, merchants are faced with

the choice of paying supracompetitive merchant discount fees (i.e., fees above competitive levels)

on Amex’s new mass-market products or “inevitably los[ing] a significant portion of the sales

they receive from businesses, travelers, affluent consumers, and others” who are the traditional

users of Amex charge cards. This, the plaintiffs claim, amounts to an illegal “tying arrangement,”

in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.4

D. The Card Acceptance Agreement.

The basic contractual relationship between Amex and the plaintiffs was set forth in an

affidavit of an Amex executive:

4
1 In a definition that has become classic, the Supreme Court has defined a tying
2 arrangement as “an agreement by a party to sell one product but only on the condition that the
3 buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that
4 product from any other supplier.” Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 5-6 (1958).
5 A tying arrangement will violate Section 1 of the Sherman Act if “the seller has appreciable
6 economic power in the tying product market and if the arrangement affects a substantial volume
7 of commerce in the tied market.” Eastman Kodak Co. v. Image Technical Servs., 504 U.S. 451,
8 462 (1992) (internal quotation marks omitted).
9

6
 American Express issues card products to its cardmembers, which
cardmembers then use in making purchases from participating
merchants. Participating merchants with annual charge volume
expected to be less than $10 million agree that, by submitting charges
for payment by American Express, their relationship will be governed
by the “Terms and Conditions for American Express© Card
Acceptance” (“the Card Acceptance Agreement”).

The Card Acceptance Agreement is a standard form contract issued by Amex. It may be

terminated by either party “at any time by sending written notice to the other party.” Further,

Amex reserves the right:

to change this Agreement at any time. We will notify you of any
change in writing at least ten (10) calendar days in advance. If the
changes are unacceptable to you, you may terminate this Agreement
as described in the section entitled “TERMINATING THIS
AGREEMENT.”

According to Amex, the Card Acceptance Agreement has “expressly permitted amendments upon

notice” for more than twenty-five years. The Card Acceptance Agreement also contains a choice

of law provision designating New York law as governing and, as Amex states, there is no dispute

that the agreement “has always” contained this provision.

By contrast, it is only since 1999 that the Card Acceptance Agreement has contained a

mandatory arbitration clause:

For the purpose of this Agreement, Claim means any assertion of a
right, dispute or controversy between you and us arising from or
relating to this Agreement and/or the relationship resulting from this
Agreement. Claim includes claims of every kind and nature including,
but not limited to, initial claims, counterclaims, cross-claims and
third-party claims and claims based upon contract, tort, intentional
tort, statutes, regulations, common law and equity. We shall not elect
to use arbitration under this arbitration provision for any individual
Claim that you properly file and pursue in a small claims court of your
state or municipality so long as the Claim is pending only in that court.
...

7
 Any Claim shall be resolved upon the election by you or us, by
arbitration pursuant to this arbitration provision and the code of
procedure of the national arbitration organization to which the Claim
is referred in effect at the time the Claim is filed. Claims shall be
referred to the National Arbitration Forum (NAF), JAMS/Endispute
(JAMS), or the American Arbitration Association (AAA), as selected
by the party electing to use arbitration. If a selection by us of one of
these organizations is unacceptable to you, you shall have the right
within thirty (30) days after you receive notice of our election to select
one of the other organizations listed to serve as arbitrator
administrator.

At the heart of the instant appeal is the following provision contained in the Agreement:

IF ARBITRATION IS CHOSEN BY ANY PARTY WITH RESPECT
TO A CLAIM, NEITHER YOU NOR WE WILL HAVE THE RIGHT
TO LITIGATE THAT CLAIM IN COURT OR HAVE A JURY
TRIAL ON THAT CLAIM. . . . FURTHER, YOU WILL NOT
HAVE THE RIGHT TO PARTICIPATE IN A REPRESENTATIVE
CAPACITY OR AS A MEMBER OF ANY CLASS OF
CLAIMANTS PERTAINING TO ANY CLAIM SUBJECT TO
ARBITRATION. THE ARBITRATOR’S DECISION WILL BE
FINAL AND BINDING. NOTE THAT OTHER RIGHTS THAT
YOU WOULD HAVE IF YOU WENT TO COURT MAY ALSO
NOT BE AVAILABLE IN ARBITRATION.

There shall be no right or authority for any Claims to be arbitrated on
a class action basis or on any basis involving Claims brought in a
purported representative capacity on behalf of the general public, other
establishments which accept the Card (Service Establishments), or
other persons or entities similarly situated. Furthermore, Claims
brought by or against a Service Establishment may not be joined or
consolidated in the arbitration with Claims brought by or against any
other Service Establishment(s), unless otherwise agreed to in writing
by all parties.

(emphasis in the original). The Card Acceptance Agreement thus not only precludes a merchant

from bringing a class action lawsuit, it also precludes the signatory from having any claim

arbitrated on anything other than an individual basis.

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 E. The District Court’s Decision.

Amex moved to compel arbitration pursuant to the terms of the Card Acceptance

Agreement. In its March 16, 2006 opinion, the district court granted Amex’s motion, first

holding that the arbitration clause in the Agreement was “a paradigmatically broad clause” which

was certainly applicable to the dispute between the parties. In re Am. Express Merchs. Litig.,

2006 WL 662341, at *4. The district court also held that “[t]he enforceability of the collective

action waivers is a claim for the arbitrator to resolve. Issues relating to the enforceability of the

contract and its specific provisions are for the arbitrator, once arbitrability is established.” Id. at

*6. Thus, the district court concluded that all of the plaintiffs’ substantive antitrust claims, as

well the question of whether or not the class action waivers were enforceable, were subject to

arbitration. Having so decided, the district court dismissed plaintiffs’ cases against Amex. Id. at

*10.

F. Our Original Decision, Amex I.

The plaintiffs filed a timely appeal. We first decided that the issue of the class action

waiver’s enforceability was a matter for the court, not the arbitrator. Amex I, 554 F.3d at 310.

Neither party takes issue with that holding, which we find survives Stolt-Nielsen and Concepion.

Turning to the question of whether the class action waiver in the Card Acceptance

Agreement was enforceable, we found that Green Tree Financial Corp.-Alabama v. Randolph,

531 U.S. 79 (2000), controlled our analysis:

to the extent that [Green Tree] holds that when “a party seeks to
invalidate an arbitration agreement on the ground that arbitration
would be prohibitively expensive, that party bears the burden of
showing the likelihood of incurring such costs.” 531 U.S. at 92, 121
S. Ct. 513. We find that the district court erred in ruling that the
plaintiffs had failed to bear this burden because they had “ignore[d]

9
 the statutory protections provided by the Clayton Act.” In re American
Express Merchants Litigation, 2006 WL 662341, at *5. On the
contrary, the record abundantly supports the plaintiffs’ argument that
they would incur prohibitive costs if compelled to arbitrate under the
class action waiver. The Card Acceptance Agreement therefore
entails more than a speculative risk that enforcement of the ban will
deprive them of substantive rights under the federal antitrust statutes.

Amex I, 554 F.3d at 315-16. Based in part on plaintiffs’ submission of an affidavit from an

economist detailing the fiscal impracticality of pursuing individual claims, we concluded that:

[since] Amex has brought no serious challenge to the plaintiffs’
demonstration that their claims cannot reasonably be pursued as
individual actions, whether in federal court or in arbitration, we find
ourselves in agreement with the plaintiffs’ contention that enforcement
of the class action waiver in the Card Acceptance Agreement “flatly
ensures that no small merchant may challenge American Express’s
tying arrangements under the federal antitrust laws.” The effective
negation of a private suit under the antitrust laws is troubling because
such “private suits provide a significant supplement to the limited
resources available to the Department of Justice for enforcing the
antitrust laws and deterring violations.” Reiter v. Sonotone Corp., 442
U.S. 330, 344, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979).

Id. at 319. Thus, we held that:

the class action waiver in the Card Acceptance Agreement 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. As already set forth, Section
2 of the [Federal Arbitration Act], 9 U.S.C. § 2, provides that an
agreement to arbitrate “shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the revocation
of any contract.” Given that we believe that a valid ground exists for
the revocation of the class action waiver, it cannot be enforced under
the FAA.

Id. at 320. Amex timely filed a petition for a writ of certiorari. Am. Express Co. v. Italian Colors

Rest., 130 S. Ct. 2401 (2010). The Supreme Court granted Amex’s petition, vacated our original

decision, and remanded for further consideration in light of its holding in Stolt-Nielsen.

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 G. The Stolt-Nielsen Decision.

In Stolt-Nielsen, petitioners were shipping companies. See 130 S. Ct. at 1764. The charter

party – a maritime contract governing the relationship between the parties – provided, in relevant

part

Arbitration. Any dispute arising from the making, performance or
termination of this Charter Party shall be settled in New York, Owner
and Charterer each appointing an arbitrator, who shall be a merchant,
broker or individual experienced in the shipping business; the two thus
chosen, if they cannot agree, shall nominate a third arbitrator who
shall be an Admiralty lawyer. Such arbitration shall be conducted in
conformity with the provisions and procedure of the United States
Arbitration Act [ i.e., the FAA], and a judgment of the Court shall be
entered upon any award made by said arbitrator.

Id. at 1765. Respondent AnimalFeeds, along with other charterers, sued Stolt-Nielsen, alleging

price fixing, and eventually served a demand for class arbitration. Id. The parties agreed to have

an arbitration panel decide the threshold issue of whether the charter party permitted class

arbitration, and stipulated before the panel that the arbitration clause was silent on the issue of

class arbitration. Id. at 1765-66. The panel concluded that the expert testimony offered did not

demonstrate an “inten[t] to preclude class arbitration.” Id. (alteration in original). After finding

that the issue was controlled by the Supreme Court’s decision in Green Tree Fin. Corp. v. Bazzle,

539 U.S. 444, (2003), the panel concluded Bazzle and policy considerations dictated finding the

clause permitted class arbitration. Id.

The Supreme Court found that the arbitration panel “imposed its own policy choice,”

rather than “identifying and applying a rule of decision derived from the FAA or either maritime

or New York law,” and “thus exceeded its powers.” 130 S. Ct. at 1770. Tackling the issue itself,

the Court found the FAA controlling, id. at 1773, and reaffirmed that “arbitration is simply a

11
matter of contract between the parties.” Id. at 1774 (alterations omitted). The Court concluded

that “a party may not be compelled under the FAA to submit to class arbitration unless there is a

contractual basis for concluding that the party agreed to do so.” Id. at 1775 (emphasis in the

original).

H. Our Decision in Amex II.

On remand from the Supreme Court, we found Stolt-Nielsen did not require us to depart

from our original analysis. The key issue, we concluded, was whether the mandatory class action

waiver in the Card Acceptance Agreement is enforceable even if the plaintiffs are able to

demonstrate that the practical effect of enforcement of the waiver would be to preclude their

bringing Sherman Act claims against Amex. In re American Express Merchants’ Litigation, 634

F.3d 187, 196 (2d Cir. 2011). We concluded enforcement of the class action waiver would indeed

bar plaintiffs from pursuing their statutory claims because the “record evidence before us

establishe[d], as a matter of law, that the cost of plaintiffs’ individually arbitrating their dispute

with Amex would be prohibitive, effectively depriving plaintiffs of the statutory protections of the

antitrust laws.” Id. at 197-98.

We relied on detailed testimony from Gary L. French, Ph.D., an economist associated with

Nathan Associates Inc., a financial consulting firm retained by the plaintiffs. Dr. French

submitted a detailed affidavit to the district court, in which he opined, inter alia, that “[i]n my

experience, even a relatively small economic antitrust study will cost at least several hundred

thousand dollars, while a larger study can easily exceed $1 million. . . . . after reviewing the

complaint and doing some preliminary research in this case, it is my opinion that . . . the cost for

this case will fall in the middle of the range . . . .” (Joint Appendix at p. 362-63, ¶ 4). Dr. French

12
then opined that it was not economically rational to pursue an individual action against Amex in

light of these substantial expert witness costs. (Joint Appendix at p. 365, ¶10-11). Amex II, 634

F.3d at 198. We found that “Dr. French’s affidavit demonstrates that the only economically

feasible means for enforcing their statutory rights is via a class action,” and remanded the case to

the district court. Id.

ANALYSIS

Shortly after we issued our opinion in Amex II, the Supreme Court handed down its

opinion in Concepcion, 131 S.Ct. at 1740. In Concepcion, the Supreme Court held that the FAA

preempted California common law deeming most class-action arbitration waivers in consumer

contracts unconscionable. Id. at 1746. Amex argues that Concepcion applies a fortiori here,

requiring reversal of our holding in Amex II. It is tempting to give both Concepcion and Stolt-

Nielsen such a facile reading, and find that the cases render class action arbitration waivers per se

enforceable. But a careful reading of the cases demonstrates that neither one addresses the issue

presented here: whether a class-action arbitration waiver clause is enforceable even if the

plaintiffs are able to demonstrate that the practical effect of enforcement would be to preclude

their ability to vindicate their federal statutory rights.

The specific preemption question addressed by the Supreme Court in Concepcion was

“whether the FAA prohibits States from conditioning the enforceability of certain arbitration

agreements on the availability of classwide arbitration procedures.” Id. at 1744. Under

California’s common law, class action waivers contained in arbitration clauses were regularly

found unconscionable, especially in consumer contracts. Id. at 1746. The Supreme Court began

its analysis by reaffirming the “liberal federal policy favoring arbitration agreements,

13
notwithstanding any state substantive or procedural policies to the contrary.” Id. at 1749 (internal

quotation marks). By requiring the “availability of classwide arbitration,” the Court held, the

California rule “interfere[d] with fundamental attributes of arbitration and thus create[d] a scheme

inconsistent with the FAA.” Id. at 1748. In response to the dissent’s discussion of the benefits of

class-arbitration as a means of addressing multiple small claims, the majority concluded that

“[s]tates cannot require a procedure that is inconsistent with the FAA, even if it is desirable for

unrelated reasons.” Id. at 1753.

Concepcion plainly offers a path for analyzing whether a state contract law is preempted

by the FAA. Here, however, our holding rests squarely on “a vindication of statutory rights

analysis, which is part of the federal substantive law of arbitrability.” Amex I, 554 F.3d at 320;

see also 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”); Paladino v. Avnet Computer Techs., Inc., 134 F.3d 1054,

1062 (11th Cir. 1998) (holding that “[w]hen an arbitration clause has provisions that defeat the

remedial purpose of the statute . . . the arbitration clause is not enforceable” and language

insulating employer from damages and equitable relief rendered clause unenforceable).

Concepcion and Stolt-Nielsen, taken together, stand squarely for the principle that parties

cannot be forced to arbitrate disputes in a class-action arbitration unless the parties agree to class

action arbitration. Concepcion, 131 S.Ct. at 1750-51 (“class arbitration, to the extent it is

14
 manufactured by [state law] rather than consensual, is inconsistent with the FAA”)5; Stolt-

Nielsen, 130 S.Ct. at 1775 (“a party may not be compelled under the FAA to submit to class

arbitration unless there is a contractual basis for concluding that the party agreed to do so.”). We

plainly acknowledged in Amex II that we could not, and thus were not, ordering the parties to

participate in class arbitration. 634 F.3d at 200 (“Stolt-Nielsen plainly precludes us from ordering

class-wide arbitration.”).

What Stolt-Nielsen and Concepcion do not do is require that all class-action waivers be

deemed per se enforceable. That leaves open the question presented on this appeal: whether a

mandatory class action waiver clause is enforceable even if the plaintiffs are able to demonstrate

that the practical effect of enforcement would be to preclude their ability to bring federal antitrust

claims. While we cannot rely on Concepcion or Stolt-Nielsen to answer the question before us,

we continue to find useful guidance in other Supreme Court decisions addressing the issue of

vindicating federal statutory rights via arbitration.

5
1 In Compucredit Corp. v. Greenwood, 10-948, – S.Ct. –, 2012 WL 43517 (Jan. 10,
2 2012), the Supreme Court addressed whether the Credit Repair Organizations Act, 15 U.S.C. §
3 1679, et seq., precluded enforcement of an arbitration agreement. The Court concluded that
4 because the Act is silent on whether claims brought under the Act can be arbitrated, the FAA
5 requires that the arbitration agreement be enforced according to its terms. Id. at *4 -* 6. To
6 support its analysis, the Court cited to a number of statutes that “restrict[] the use of arbitration.
7 Id. Plaintiffs here do not allege that the Sherman Act expressly precludes arbitration or that it
8 expressly provides a right to bring collective or class actions, but instead argue that enforcement
9 of the class arbitration waiver would effectively deprive them of their ability to vindicate their
10 statutory rights.
11 As aptly noted by Justice Sotomayor’s concurrence in Compucredit, the majority’s
12 opinion does not “hold that Congress must speak so explicitly in order to convey its intent to
13 preclude arbitration of statutory claims.” Id. at *8. Indeed, the Supreme Court has “on
14 numerous occasions . . . held that proof of Congress' intent may also be discovered in the history
15 or purpose of the statute in question.” Id. at *8. Although the Sherman Act does not provide
16 plaintiffs with an express right to bring their claims as a class in court, forcing plaintiffs to bring
17 their claims individually here would make it impossible to enforce their rights under the
18 Sherman Act and thus conflict with congressional purposes manifested in the provision of a
19 private right of action in the statute.

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 We begin our analysis with the well-settled rule that class action lawsuits are suitable as a

vehicle for vindicating statutory rights. Supreme Court precedent recognizes that the class action

device is the only economically rational alternative when a large group of individuals or entities

has suffered an alleged wrong, but the damages due to any single individual or entity are too

small to justify bringing an individual action. The Court made the point forcefully more than

thirty years ago in the context of an antitrust action:

A critical fact in this litigation is that petitioner’s individual stake in
the damages award he seeks is only $70. No competent attorney
would undertake this complex antitrust action to recover so
inconsequential an amount. Economic reality dictates that petitioner's
suit proceed as a class action or not at all.

Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 161 (1974). As the Court later opined, “‘[t]he policy

at the very core of the class action mechanism is to overcome the problem that small recoveries

do not provide the incentive for any individual to bring a solo action prosecuting his or her

rights.’” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997) (quoting Mace v. Van Ru

Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997)); see also Deposit Guar. Nat’l Bank v. Roper,

445 U.S. 326, 338 (1980) (“[A class action] may motivate [plaintiffs] to bring cases that for

economic reasons might not be brought otherwise . . . [,thereby] vindicating the rights of

individuals who otherwise might not consider it worth the candle to embark on litigation in which

the optimum result might be more than consumed by the cost.”) (footnote omitted); Carnegie v.

Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2004) (“[T]he realistic alternative to a class

action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic

sues for $30.” (emphasis omitted)).

16
 Arbitration is also recognized as an effective vehicle for vindicating statutory rights, but

only “so long as the prospective litigant may effectively vindicate its statutory cause of action in

the arbitral forum.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 632

(1985) (emphasis added). Indeed, in dicta the Mitsubishi Court noted that should clauses in a

contract operate “as a prospective waiver of a party’s right to pursue statutory remedies for

antitrust violations, we would have little hesitation in condemning the agreement as against public

policy.” Id. at 637, n.19. As we observed in Amex II:

While dicta, it is dicta based on a firm principle of antitrust law that
an agreement which in practice acts as a waiver of future liability
under the federal antitrust statutes is void as a matter of public policy.
More than a half-century ago, the Supreme Court stated that “in view
of the public interest in vigilant enforcement of the antitrust laws
through the instrumentality of the private treble-damage action,” an
agreement which confers even “a partial immunity from civil liability
for future violations” of the antitrust laws is inconsistent with the
public interest. Lawlor v. Nat'l Screen Serv. Corp., 349 U.S. 322, 329
(1955); see also Minnesota Mining and Mfg. Co. v. Graham-Field,
Inc., No. 96 cv 3839, 1997 WL 166497, at *3 (S.D.N.Y. Apr. 9, 1997)
(“GFI could not have waived [its antitrust] claim in the releases
because a prospective waiver of an antitrust claim violates public
policy.”).

634 F.3d at 197.

Applying its rule regarding the arbitrability of federal statutory claims from Mitsubishi, in

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), the Supreme Court permitted the

arbitration, rather than litigation, of a plaintiff’s Age Discrimination in Employment Act claim.

Id. at 28 (quoting Mitsubishi Motors, 473 U.S. at 637). In Gilmer, the Court concluded that the

plaintiff in that case could effectively vindicate his asserted rights in the arbitral forum. The

plaintiff, a manager at a brokerage firm, asserted that he had been terminated by the firm in

violation of the ADEA. Id. at 23. After the plaintiff filed suit in federal district court, the

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 defendant firm moved to compel arbitration pursuant to a mandatory arbitration provision

contained in the rule of the New York Stock Exchange (“NYSE”), to which the plaintiff had

agreed to be bound when he became a registered securities representative. Id. at 23-24. The

Gilmer Court held that because “[i]t is by now clear that statutory claims may be the subject of an

arbitration agreement,” the arbitration clause was enforceable “unless Congress itself has evinced

an intention to preclude a waiver of judicial remedies for the statutory rights at issue.” Id. at 26

(quoting Mitsubishi, 473 U.S. at 628).

The Court rejected plaintiff’s contention that “arbitration procedures cannot further the

purposes of the ADEA because they do not provide for broad equitable relief and class actions.”

Id. at 32. Rather, the Court found that:

arbitrators do have the power to fashion equitable relief. Indeed,
the NYSE rules applicable here do not restrict the types of relief an
arbitrator may award, but merely refer to “damages and/or other
relief.” The NYSE rules also provide for collective proceedings.
But even if the arbitration could not go forward as a class action or
class relief could not be granted by the arbitrator, the fact that the
ADEA provides for the possibility of bringing a collective action
does not mean that individual attempts at conciliation were intended
to be barred.

Id. (citations, internal quotation marks, and brackets omitted).6

Gilmer’s conclusion that where the plaintiff’s statutory rights could effectively be

vindicated through arbitration does not affect the case before us, because here plaintiffs have

6
1 The Amex plaintiffs do not proffer the argument rejected in Gilmer – namely, that the
2 class action waiver in the Card Acceptance Agreement is enforceable because the relevant
3 statute allows class actions. “Rather, the conundrum presented by the instant appeal is more
4 nuanced: whether the mandatory class action waiver in the Card Acceptance Agreement is
5 enforceable even if the plaintiffs are able to demonstrate that the practical effect of enforcement
6 of the waiver would be to preclude their bringing Sherman Act claims against Amex in either an
7 individual or collective capacity.” Amex II, 634 F.3d at 196.

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demonstrated that their statutory rights cannot be vindicated through individual arbitrations.

Nearly a decade after Gilmer, in Green Tree Financial Corp.-Alabama v. Randolph, the Supreme

Court acknowledged in dicta “that the existence of large arbitration costs could preclude a litigant

. . . from effectively vindicating her federal statutory rights in the arbitral forum.” 531 U.S. 79,

90 (2000). Among the costs at issue were “payment of filing fees, arbitrators’ costs, and other

arbitration expenses.” Id. at 84. In the end, the Green Tree Court found plaintiff failed to submit

sufficient evidence to demonstrate the costs of arbitration would effectively prohibit her from

vindicating her statutory rights, dooming her attempt to have the arbitration clause declared

unenforceable:

It would also conflict with our prior holdings that the party resisting
arbitration bears the burden of proving that the claims at issue are
unsuitable for arbitration. We have held that the party seeking to
avoid arbitration bears the burden of establishing that Congress
intended to preclude arbitration of the statutory claims at issue.
Similarly, we believe that where, as here, a party seeks to invalidate
an arbitration agreement on the ground that arbitration would be
prohibitively expensive, that party bears the burden of showing the
likelihood of incurring such costs. Randolph did not meet that burden.
How detailed the showing of prohibitive expense must be before the
party seeking arbitration must come forward with contrary evidence
is a matter we need not discuss; for in this case neither during
discovery nor when the case was presented on the merits was there
any timely showing at all on the point.

Id. at 91-92.

As the Tenth Circuit explained:

Thus, Gilmer reaffirmed the Arbitration Act’s presumption in favor of
enforcing agreements to arbitrate-even where those agreements cover
statutory claims. While we recognize this presumption, we conclude
that it is not without limits. As Gilmer emphasized, arbitration of
statutory claims works because potential litigants have an adequate
forum in which to resolve their statutory claims and because the
broader social purposes behind the statute are adhered to. This

19
 supposition[] falls apart, however, if the terms of an arbitration
agreement actually prevent an individual from effectively vindicating
his or her statutory rights.

Shankle v. B-G Maint. Mgmt. of Colo., Inc., 163 F.3d 1230, 1234 (10th Cir. 1990) (citations

omitted); see also 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.”)

Neither Stolt-Nielsen nor Concepcion overrules Mitsubishi, and neither makes mention of

Green Tree. We continue to find Green Tree “controlling here to the extent that it holds that

when ‘a party seeks to invalidate an arbitration agreement on the ground that arbitration would be

prohibitively expensive, that party bears the burden of showing the likelihood of incurring such

costs.’” Amex II, 634 F.3d at 197 (quoting Green Tree, 531 U.S. at 92). Other Circuits permit

plaintiffs to challenge class-action waivers on the grounds that prosecuting such claims on an

individual basis would be a cost prohibitive method of enforcing a statutory right. See, e.g., In re

Cotton Yarn Antitrust Litig., 505 F.3d 274, 285 (4th Cir. 2007) (“[I]f a party could demonstrate

that the prohibition on class actions likely would make arbitration prohibitively expensive, such a

showing could invalidate an agreement.”) (citation omitted); Livingston v. Assocs. Fin., Inc., 339

F.3d 553, 557 (7th Cir. 2003) (“In the present case, the [plaintiffs] have not offered any specific

evidence of arbitration costs that they may face in this litigation, prohibitive or otherwise, and

20
have failed to provide any evidence of their inability to pay such costs . . . .”); Adkins v. Labor

Ready, Inc., 303 F.3d 496, 503 (4th Cir. 2002) (“[Lead plaintiff] makes no showing of the specific

financial status of any of the plaintiffs at the time this action was brought. He provides no basis

for a serious estimation of how much money is at stake for each individual plaintiff.”). In each of

these cases, plaintiffs’ attempts to avoid the waiver clause failed because plaintiffs were unable to

demonstrate the class-action waivers barred them from vindicating their statutory rights. Their

failures speak to the quality of the evidence presented, not the viability of the legal theory. The

fact that plaintiffs so often fail in their attempts to overturn such waivers demonstrates that the

evidentiary record necessary to avoid a class-action arbitration waiver is not easily assembled,

and that the courts are capable of the scrutiny such arguments require.

Thus, we continue to find Green Tree “controlling here to the extent that it holds that

when ‘a party seeks to invalidate an arbitration agreement on the ground that arbitration would be

prohibitively expensive, that party bears the burden of showing the likelihood of incurring such

costs.’” Amex I, 554 F.3d at 315 (quoting Green Tree, 531 U.S. at 92). Since there is no

indication in Stolt-Nielsen or Concepcion that the Supreme Court intended to overturn either

Green Tree or Mitsubishi, both cases retain their binding authority. Rodriguez de Quijas v.

Shearson/Am. Express, Inc., 490 U.S. 477, 484 (1989) (“If a precedent of this Court has direct

application in a case, yet appears to rest on reasons rejected in some other line of decisions, the

Court of Appeals should follow the case which directly controls, leaving to this Court the

prerogative of overruling its own decisions.”).

The evidence presented by plaintiffs here establishes, as a matter of law, that the cost of

plaintiffs' individually arbitrating their dispute with Amex would be prohibitive, effectively

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depriving plaintiffs of the statutory protections of the antitrust laws. Dr. French stated that the

purpose of his affidavit was “to provide an expert opinion concerning the likely costs and

complexity of an expert economic study concerning the liability and damages” relating to this

action, and to “provide my opinion as to whether it would be economically rational for such a

merchant to pursue recovery of damages given the likely out-of-pocket costs of the arbitration or

litigation proceeding.” (Joint Appendix, at p. 362, ¶ 4)

Dr. French continued:

In summary, the cost of [Nathan Associates'] expert assistance in
individual plaintiff antitrust cases has ranged from about $300
thousand to more than $2 million. However, after reviewing the
complaint and doing some preliminary research in this case, it is my
opinion that . . . the cost for this case will fall in the middle of the
range of [Nathan Associates'] experience.

(Joint Appendix at p. 362–63, ¶ 4) Dr. French then considered the economic rationality of

bringing an individual action against Amex in light of these substantial expert witness costs:

The median volume merchant, with half of the named plaintiffs having
more and half having less American Express charge volume, and
having reported $230,343 American Express Card volume in 2003,
might expect four-year damages of $1,751, or $5,252 when trebled....
The largest volume named plaintiff merchant, with reported American
Express Card volume of $1,690,749 in 2003, might expect four-year
damages of $12,850, or $38,549 when trebled.

In my opinion as a professional economist ... it would not be
worthwhile for an individual plaintiff ... to pursue individual
arbitration or litigation where the out-of-pocket costs, just for the
expert economic study and services, would be at least several hundred
thousand dollars, and might exceed $1 million.

(Joint Appendix at p. 365, ¶ 10–11)

Dr. French’s affidavit demonstrates that the only economically feasible means for

plaintiffs enforcing their statutory rights is via a class action. As discussed in our earlier opinion,

22
the district court did not directly address Dr. French’s affidavit, focusing instead on the damages

provision of the Clayton Act, 15 U.S.C. § 15(a). See Amex I, 554 F.3d at 317. We found that

while the Clayton Act does provide for treble awards along with the recovery of attorneys’ fees

and expenses, that was unlikely to assist plaintiffs where, as here, “the trebling of a small

individual damages award is not going to pay for the expert fees Dr. French has estimated will be

necessary to make an individual plaintiff’s case.” Id. We also found the Clayton Act’s

fee-shifting provisions inadequate to alleviate our concerns given the low expert witness

reimbursement rate. Id. at 318. “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.” Id.

We again find “Amex has brought no serious challenge to the plaintiffs' demonstration

that their claims cannot reasonably be pursued as individual actions, whether in federal court or in

arbitration.” Amex I, 554 F.3d at 319. The “enforcement of the class action waiver in the Card

Acceptance Agreement ‘flatly ensures that no small merchant may challenge American Express[s

tying arrangements under the federal antitrust laws.’” Id. Eradicating the private enforcement

component from our antitrust law scheme cannot be what Congress intended when it included

strong private enforcement mechanisms and incentives in the antitrust statutes. See Reiter v.

Sonotone Corp., 442 U.S. 330, 344 (1979) (“[P]rivate suits provide a significant supplement to

the limited resources available to the Department of Justice for enforcing the antitrust laws and

deterring violations.”); see also Dando B. Cellini, An Overview of Antitrust Class Actions, 49

Antitrust L.J. 1501, 1506 (1980) (discussing private, class action antitrust lawsuits and observing

that “it is obvious from the experience over the last fifteen years since the 1966 amendments to

23
Rule 23 were adopted that linking an antitrust claim with a class action allegation can be

devastatingly effective.”).

Thus, as the class action waiver in this case precludes plaintiffs from enforcing their

statutory rights, we find the arbitration provision unenforceable. We again emphasize our holding

comes with caveats. See Amex I, 554 F.3d at 320 (“We emphasize two important limitations upon

our holding.”) Our decision in no way relies upon the status of plaintiffs as “small” merchants.

We rely instead on the need for plaintiffs to have the opportunity to vindicate their statutory

rights. See, e.g., Raniere v. Citigroup, Inc., No. 11 Civ. 2248, 2011 WL 5881926, at *13

(S.D.N.Y. Nov. 22, 2011) (“even if AT & T is read broadly to acquiesce to the enforcement of an

arbitral agreement that as a practical matter would prevent the vindication of state rights in the

name of furthering the strong federal policy favoring arbitration, that would not alter the validity

of the federal statutory rights analysis articulated in Mitsubishi, Green Tree [and] American

Express”); Chen-Oster v. Goldman, Sachs & Co., No. 10 CIV 6950, 2011 WL 2671813, at *2-5

(S.D.N.Y. July 7, 2011) (declining to apply Concepcion where the question before the court

involved the plaintiff’s ability to vindicate a federal statutory right); Sutherland v. Ernst &

Young, LLP, 768 F. Supp. 2d 547, 550-55 (S.D.N.Y. 2011)(finding Amex I “retains its persuasive

force” following Stolt-Nielsen).

We do not hold today that class action waivers in arbitration agreements are per se

unenforceable, or even that they are per se unenforceable in the context of antitrust actions.

Rather, as demonstrated by the different outcomes in our sister Circuits, we hold that each waiver

must be considered on its own merits, based on its own record, and governed with a healthy

regard for the fact that the FAA “is a congressional declaration of a liberal federal policy favoring

arbitration agreements.” Moses H. Cone Mem'l Hosp., 460 U.S. at 24.

24
 Our earlier opinion refrained from ordering the parties to submit to class arbitration,

instead permitting Amex the choice between arbitration and litigation. Amex I, 554 F.3d at 321.

Stolt-Nielsen plainly precludes any court from compelling the parties to submit to class-wide

arbitration where the arbitration clause is silent as to class-wide arbitration. 130 S.Ct. at 1775 (a

party does not agree “to submit to class arbitration unless there is a contractual basis for

concluding that a party agreed to do so”).

Which leads to the issue of how to proceed from here. As detailed above, we are

persuaded by the record before us that if plaintiffs cannot pursue their allegations of antitrust law

violations as a class, it is financially impossible for the plaintiffs to seek to vindicate their federal

statutory rights. Since the plaintiffs cannot pursue these claims as class arbitration, either they can

pursue them as judicial class action or not at all. If they are not permitted to proceed in a judicial

class action, then, they will have been effectively deprived of the protection of the federal

antitrust-law. The defendant will thus have immunized itself against all such antitrust liability by

the expedient of including in its contracts of adhesion an arbitration clause that does not permit

class arbitration, irrespective of whether or not the provision explicitly prohibits class arbitration.

Therefore, in light of the fact that the arbitration provision at issue here does not allow for

class arbitration, under Stolt-Nielsen and by its terms, if the provision were enforced it would strip

the plaintiffs of rights accorded them by statute. We conclude that this arbitration clause is

unenforceable. We remand to the district court with the instruction to deny the defendant's motion

to compel arbitration.

25
 CONCLUSION

For the reasons given above, the decision of the district court is reversed. We remand to

the district court for further proceedings consistent with this opinion.

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