The Federal Arbitration Act (FAA) “is a congressional declaration of a liberal federal policy favoring arbitration agreements.”1 But parties may reach an agreement that a court finds unenforceable as a matter of public policy. In this column, we revisit In re: American Express Merchants’ Litigation, a case that confronts such a situation and identifies an exception to the general enforceability of arbitration agreements.
In 2009, the U.S. Court of Appeals for the Second Circuit (American Express I) held that a class action waiver in the mandatory arbitration clause of a commercial contract is unenforceable under the FAA when a plaintiff can demonstrate that the costs of pursuing non-class arbitration are so high that they effectively foreclose any reasonably feasible means of recovery.2 American Express I was the subject of our March 25, 2009, column.
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