Last week, the Second Circuit relied on the Supreme Court’s recent American Express case to reverse a district court’s denial of a motion to compel arbitration. See Sutherland v. Ernst & Young, No. 12–304–cv (2d Cir. Aug. 9, 2013) (Click here for a copy of the decision). The plaintiff in Sutherland filed a putative class action against her employer to recover overtime wages, and the defendant employer asked the district court to enforce an arbitration agreement containing a class action waiver. The district court refused to compel arbitration because the plaintiff could not effectively vindicate her statutory rights. The plaintiff had submitted evidence that to collect her damages of about $2000 in an individual arbitration would cost her about $200,000 in attorney’s fees and expert witnesses expenses.
The Second Circuit, in a per curiam opinion, easily reversed the district court’s decision because of the Supreme Court’s narrow construction of the effective vindication doctrine in American Express v. Italian Colors Restaurant. (Click here to see my earlier blog post about the Supreme Court’s American Express decision.) Under the American Express ruling, if an arbitration clause prohibited the assertion of statutory claims or set filing and administrative fees that were so high to make access to the arbitration forum impractical, such situations may trigger the effective vindication doctrine under which an arbitration clause may not be enforceable. However, the high cost of proving a claim does not trigger the effective vindication doctrine. Here, the plaintiff had demonstrated that proving her claim in an individual arbitration would be prohibitively expensive, and the Second Circuit found that such evidence no longer triggers the effective vindication doctrine.