Arbitration Clause Stricken By Court of Appeals

The 2nd U.S. Circuit Court of Appeals has issued a ruling which begins to chip away at the anti-consumer arbitration clauses used by many credit card companies to deny justice to consumers. The court held that plaintiffs could not be forced into arbitration because American Express was not a signatory to the MasterCard, Visa and Diners Club credit card agreements that
In the multidistrict currency conversion case, cardholders are claiming that card companies and major issuing banks have engaged in a Sherman Act conspiracy to fix higher fees for transactions involving foreign currency. The plaintiffs charged in their complaint that American Express conspired with other major card companies “to fix, maintain, and conceal the artificially inflated” foreign currency fees. They alleged that American Express conspired against them in part by holding a series of meetings on including compulsory arbitration agreements to thwart consumer litigation.
The 2nd Circuit reversed a lower court decision in favor of American Express. It held that arbitration is a matter of contract, but the plaintiffs did not enter into a contract with American Express, let alone any contract containing an arbitration clause.
The question for the court then became whether it would employ any one of a number of common law principles that would allow a nonsignatory to enforce an arbitration agreement, including equitable estoppel. The Court held that this was not allowable.
American Express spokesperson Joanna Lambert said the company was disappointed in the decision and was reviewing its options. American Express has recently become a bank holding company under the “bailout plan” in order to recoup losses from taxpayers for poor business practices it has employed in the past.