Supreme Court clamps down on class actions in merchants' case

Thu Jun 20, 2013 12:52pm EDT
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By Lawrence Hurley and Andrew Longstreth

WASHINGTON/NEW YORK (Reuters) - The U.S. Supreme Court delivered its latest blow to class action lawsuits on Thursday when it enforced an arbitration agreement that prevents merchants from banding together to make antitrust claims against American Express Co (AXP.N: Quote).

The nine-member court ruled on a 5-3 vote, with liberal Justice Sonia Sotomayor recused.

The merchants had challenged the legality of an arbitration clause in a contract with American Express that prevented them from coming together to pursue disputes against the credit card company.

The Supreme Court's majority opinion is the latest to make it harder to bring class actions. In March, the court ruled 5-4 in favor of Comcast Corp in an antitrust class action.

Class-action lawsuits typically are filed by individuals or small businesses acting on behalf of large groups.

The American Express shares were weaker at $73.73 in above-average trading volume at midday on Thursday, after closing at $74.23 the previous day.

In Thursday's case, the merchants, including restaurants, retailers and others, sued in 2003 alleging that American Express violated antitrust law by forcing them to accept its credit cards as a condition of accepting its charge cards.

Charge cards require their holders to pay the full outstanding balance at the end of a billing cycle; credit cards require payment of only a portion, with the balance subject to interest.   Continued...

American Express and American Express corporate cards are pictured in Encinitas, California October 17, 2011. REUTERS/Mike Blake