1. Scholarship by Alexi Pfeffer-Gillett Cited by U.S. District Court

Scholarship by Alexi Pfeffer-Gillett Cited by U.S. District Court Judge Mary S. McElroy of the U.S. District Court for the District of Rhode Island cited both a brief and an article in the resolution of a mass-arbitration case.

By Law Communications
December 16, 2024

On December 2, 2024, Judge Mary S. McElroy of the U.S. District Court for the District of Rhode Island ruled that the failure of a defendant in arbitration to pay its required filing fees amounts to "default" under the Federal Arbitration Act. In reaching her decision, Judge McElroy cited both an amicus brief and scholarship written by Washington and Lee law professor Alexi Pfeffer-Gillett.

Judge McElroy described the case as one involving the "ironic dilemma" of a credit card company, American Express, "not paying its bills." Specifically, American Express owed more than $17 million in filing fees after 5-Star General Store and over 5,000 other small merchants filed arbitration claims against the credit-card company alleging that Amex violates antitrust law by imposing non-discrimination provisions on businesses prohibiting them from encouraging customers to use cards with lower transaction costs than Amex charges. After Amex refused to pay its arbitration fees, the arbitration provider administratively closed the proceedings. Then, despite failing to pay its required fees the first time around, Amex moved the district court to compel the parties back to arbitration.

In denying Amex's motion to compel arbitration, the district court credited Pfeffer-Gillett's amicus brief observation that letting Amex "'simply re-invoke the arbitration clause after closure of arbitration'" threatened to put the merchants' claims "'in perpetual limbo.'" Citing the amicus brief, the court noted that there would be "nothing stopping Amex from refusing pay the [filing] fees (again), and then the parties would end up in court (again)." The court also relied on Pfeffer-Gillett's 2023 University of Pennsylvania Law Review article, "Unfair by Default: Arbitration's Reverse Default Judgment Problem." In the article, Pfeffer-Gillett argued that judicial intervention is required when defendants refuse to pay arbitration fees, because otherwise "arbitration's payment structure and lack of pre-payment default rules actually reward defendants for neglect and gamesmanship."

As a result of the court finding Amex in default in the arbitration proceedings, the merchant plaintiffs can now pursue their claims in court and seek class-action certification. Additional coverage of the decision by Reuters is available here.

The case is 5-Star General Store v. American Express Co, No. 24-cv-106-MSM-LDA (D.R.I., Dec. 2, 2024).

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