On June 20, 2013, the US Supreme Court issued a decision in American Express Co. v. Italian Colors Restaurant. The Supreme Court held that an agreement waiving the right to class arbitration must be enforced, even if the cost to individual claimants of arbitrating their claims separately would outweigh any potential recovery.

Merchants who accept American Express cards brought a class action against American Express for violations of the federal antitrust laws. The merchants alleged that American Express used its monopoly power in the charge card market to pressure them to accept credit cards at rates that were approximately 30% higher than the fees for competing credit cards. According to the merchants, American Express's conduct violated Section 1 of the Sherman Act, and they sought treble damages under Section 4 of the Clayton Act.

The agreement between American Express and the merchants required that all disputes be resolved through arbitration and stated that there "shall be no right or authority for any Claims to be arbitrated on a class action basis." On the basis of the agreement, American Express moved to compel individual arbitration under the FAA. The merchants opposed the motion, arguing that the expert analysis needed to prove the individual antitrust claims would cost more than the maximum individual recovery, even if damages were trebled.

The district court granted the motion and dismissed the lawsuits, but the US Court of Appeals for the Second Circuit reversed. The Second Circuit held that because the costs to each claimant would be prohibitive, the waiver of class arbitration was unenforceable. The US Supreme Court vacated the Second Circuit's ruling and remanded for further consideration given its decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., which held that a party cannot be compelled to submit to class arbitration absent an agreement to do so (130 S.Ct. 1758 (2010)). The Second Circuit stood by its initial decision. The US Supreme Court granted certiorari to consider whether the FAA empowers courts "to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal law claim."

The Supreme Court noted that arbitration is a matter of contract and that courts must "rigorously enforce" the terms of arbitration agreements. Claims that allege a violation of a federal statute must be adjudicated according to the terms of any relevant agreement unless statutory authority directs otherwise. The Supreme Court rejected the merchants' argument that requiring them to arbitrate their claims individually would conflict with the policy behind the antitrust laws. The Supreme Court stated that the antitrust laws do not guarantee that the pursuit of a claim will be affordable or demonstrate an intent to prohibit class-action waivers. Moreover, the Sherman and Clayton Acts were enacted before FRCP 23, which provides a mechanism for class action litigation but does not guarantee non-waivable access to class proceedings for the enforcement of statutory rights.

The Supreme Court also rejected the merchants' argument that their agreement should be invalidated because it would prevent the "effective vindication" of a statutory right. According to a judge-made exception to the FAA, courts may reject arbitration agreements when they prevent claimants from enforcing their statutory rights. The merchants argued that enforcement of the agreement would prevent vindication of their rights because they would have no economic incentive to pursue their claims in individual arbitration. The Supreme Court clarified that the "effective vindication" exception only applies where an arbitration agreement would operate as a waiver of a party's right to pursue statutory remedies. In this case, the fact that it would not be financially beneficial to prove the statutory remedy did not mean that the merchants did not have the right to pursue their claims.

Finally, the Supreme Court expressed concern at the implications of the Second Circuit's decision. For a waiver of class arbitration to be enforced, a federal court would need to determine the legal requirements for success on the merits and the cost of developing evidence to meet those requirements. The court would then need to weigh the cost of proving the plaintiffs' claims against the potential recovery. Forcing courts to undergo a preliminary analysis of the estimated costs of proof versus the estimated recovery would add time and cost to the consideration of whether an arbitration agreement should be enforced. This extra step would undermine the FAA's goals of creating a speedier, lower cost and less formal resolution of disputes. Therefore, the Supreme Court reversed the Second Circuit's ruling and held that class arbitration waivers must be enforced absent a statutory directive otherwise.

Arbitration agreements will be rigorously enforced as written. Therefore, when an agreement explicitly waives the right to arbitrate any claims on a class basis, class arbitration will not be permitted.