In American Express v. Italian Colors Restaurant (Amex IV),1 the U.S. Supreme Court has ruled that the Federal Arbitration Act (FAA)2 does not permit courts to invalidate arbitration agreements requiring individual arbitration on the ground that plaintiffs lack the economic incentive to pursue claims individually. In so doing, the court dramatically limited the judicially created "'effective vindication' exception" to the FAA, which had been construed in some circuits as a bar to enforcement of arbitration agreements also containing class arbitration waivers, where "the cost of plaintiffs' individually arbitrating their dispute…would be prohibitive."3
After Amex IV, the "economic incentive to pursue…claims individually in arbitration" is no longer relevant in determining the enforceability of a class action arbitration waiver.4 Rather, "courts must 'rigorously enforce' arbitration agreements according to their terms" unless Congress has indicated otherwise.5 In essence, the "effective vindication" doctrine is now limited to express restrictions on statutory rights and forum and arbiter costs under arbitration that would not be present in litigation; it does not refer to the costs of bringing an individual claim in any forum, judicial or otherwise.
Background
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