Amex Forced to Pay Up After Swipe Fee Dispute

A federal appeals court has ruled that American Express Company (Amex) waived its right to compel arbitration in a dispute over swipe fees. The decision stems from a class action lawsuit filed by thousands of small merchants against Amex, alleging that the company's policies unfairly burdened them with high credit card processing fees.

The plaintiffs initially filed over 5,000 demands for arbitration against Amex with the American Arbitration Association (AAA), but the cases were administratively closed in February 2024 due to Amex's refusal to pay its share of the $3,500 filing fee. The First Circuit Court of Appeals held that this deliberate nonpayment constituted 'litigation-related activity' and was inconsistent with an intent to arbitrate.

The court applied the Supreme Court's standard for waiver in Morgan v. Sundance, Inc., which defines it as 'the intentional relinquishment or abandonment of a known right.' The First Circuit found that Amex had been repeatedly warned by the AAA about its nonpayment and had not argued that it failed to understand the consequences.

This ruling sets an important precedent for companies like Amex, which may face increased scrutiny over their arbitration practices in light of this decision.