For some companies, apparently even the famously liberal policy favoring arbitration isn’t enough of an assurance that they can avoid defending a consumer class action in court. Or so the plaintiffs in an antitrust bench trial pending in federal court in New York’s Southern District have posited, pointing to 28 meetings between 1999 and 2003, held among senior representatives of leading national banks, about implementing mandatory arbitration for credit card customers. See Ross v. American Express, No. 04-5723 (S.D.N.Y. filed July 22, 2004); Ross v. Bank of America, No. 05-7116 (S.D.N.Y. filed Aug. 11, 2005).
The trial opened in January of 2013, with the plaintiff himself testifying candidly: “I find it particularly abhorrent that all the credit card companies got together under the covers to basically screw the American consumer.” It is alleged that the banks reveled in the favorable quid pro quo likely to result from directing massive filing fees at reliably pro-defendant arbitrators, with the National Arbitration Forum (NAF) receiving particular praise from one of the bank defendants, First USA.
The meetings, with agenda items such as “the end of class actions,” brought together otherwise staunch competitors, including Bank of America, American Express, Capital One, Chase Bank, Discover, HSBC, MBNA, and Providian. Within three years, every major bank had implemented a mandatory arbitration policy for their credit card customers, and on starkly similar terms. The plaintiff is seeking an eight-year ban on arbitration clauses in credit card user agreements.
The antitrust action has already yielded results, as four of the bank defendants — JPMorgan Chase, Bank of America, HSBC and Capital One — settled in 2010, each agreeing to ban arbitration clauses for three-and-a-half years – a measure due to expire this year. The remaining defendants — American Express, Discover and Citigroup — have steadfastly resisted settlement, and in their closing arguments insisted that there was nothing nefarious in the 28 meetings that are the cornerstone of the plaintiff’s case.
If the plaintiff’s antitrust claims prevail before U.S. District Judge William Pauley and the eight-year arbitration clause ban is imposed, the banks will be unable to partake of the fully legal greasing of the arbitration skids provided by decisions like AT&T Mobility v. Concepcion. It appears that the banks did not foresee that the U.S. Supreme Court would undertake a remarkably similar agenda, and without the burden of antitrust compliance.