"To a Hammer Everything Looks Like a Nail": The Supreme Court's . Misapplication of the Vindication of Rights Doctrine

I. INTRODUCTIONItalian Colors Restaurant, a small merchant in California, decided to contract with American Express to accommodate wealthy consumers and corporate clients who use the American Express personal and corporate charge cards.1 Under the provisions of the American Express agreement, Italian Colors was also forced to accept American Express's general- purpose credit card, which does not attract a similarly affluent and profitable clientele.2 But for American Express's "Honor All Cards" policy, most merchants would not accept the general-purpose credit card because it does not bring in enough profit to justify the higher fees that come with it.3 Nevertheless, American Express charged the same merchant discount fee on both the charge and credit cards, which is about thirty-five percent higher than its competitors at Visa and MasterCard.4 Thus, not only did Italian Colors have to accept a credit card it would not otherwise, it lost an additional seventy cents on every such purchase.5 American Express's policy of conditioning the availability of the corporate charge card on the merchants' agreement to also accept their general-purpose credit card is considered a ?tying? arrangement, which may be per se illegal under the federal antitrust laws.6Italian Colors filed suit and sought to certify a class of similarly aggrieved merchants.7 Unfortunately for Italian Colors, the merchant agreement they signed with American Express included an arbitration clause prohibiting merchants from participating as a class or acting in a representative capacity.8 According to an expert economist, Italian Colors and similar small merchants could only hope to receive less than six thousand dollars in trebled damages for a claim that could cost one million dollars in expert fees.9 Italian Colors was then at a crossroads because it did not have the resources to pay for arbitration, and it could not spread the costs amongst those merchants who could also bring a claim.10 As a result, no merchant could feasibly pursue arbitration and American Express did not have to face consequences for illegal activity.11Italian Colors and its fellow merchants successfully raised this argument in the Second Circuit, which held that a class action waiver that makes individual arbitration prohibitively expensive is unenforceable as a de facto waiver of liability for American Express if the merchants have no suitable forum through which they can vindicate their rights.12 American Express challenged the Second Circuit's holding, posing the question to the Supreme Court of "[w]hether the Federal Arbitration Act permits courts, invoking the 'federal substantive law of arbitrability' to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal statutory claim."13 Based in part on the Court's recent decision in AT&T Mobility LLC v. Concepcion,14 the Supreme Court held that the merchants did not present a legitimate "vindication of rights" claim and that the Federal Arbitration Act (FAA) required the Court to enforce the arbitration agreement.15This Comment argues that an arbitration agreement in an adhesion contract that precludes class arbitration and makes individual arbitration prohibitively expensive is unenforceable under the FAA because it effectively prevents plaintiffs from vindicating their federal statutory rights.16 This Comment also argues that Italian Colors is distinguishable from Concepcion because the merchants demonstrated arbitration was prohibitively expensive, and because the FAA should not be construed to override the substantive rights afforded by other federal statutes.17Part II examines how courts interpret the savings clause of the FAA to hold arbitration agreements unenforceable, specifically when arbitration in a particular plaintiff's case does not provide an adequate forum for the vindication of federal statutory rights.18 Part II also discusses Concepcion and the Supreme Court's recent decision in Italian Colors, rejecting the vindication of rights doctrine as to the merchants' claim that American Express's arbitration agreement was unenforceable. …