Score one for the little guy. The 2^nd Circuit has just ruled that merchants that accept American Express cards can pursue class action lawsuits against the credit giant. The ruling voids American Express’ Card Acceptance Agreement, which previously made it mandatory for retailers to resolve any contractual claims through individual arbitration.

Merchants sued American Express in a 2007 class action lawsuit, In re: American Express Merchants’ Litigation, claiming the company’s Card Acceptance Agreement unfairly prevented retailers from challenging American Express. The merchants challenged American Express’ “honor all cards” policy, which they say illegally forces them to accept all cards issued by American Express and the transaction fees Amex charges the merchants for their use.

Historically merchants have been willing to pay the higher fees attached to Amex cards because it attracts a higher class of customers because they are required to pay off monthly balances. However, American Express recently started issuing “revolving” credit cards, which allow cardholders to only pay minimum fees on their monthly balances. These cards, the merchants claimed in their suit, are issued to less desirable customers, yet merchants are still charged the same rate for these cards as they are charged for the signature cards.

Despite the individual arbitration clause, Amex merchants banded together in 2007 because the cost to litigate the “honor all cards” policy as individual claims was too high compared to the small recovery they would receive.

The Manhattan-based appellate court agreed, denying American Express’ appeal to an earlier similar ruling in 2009.

“As we did earlier, we find ‘Amex has brought no serious challenge to the plaintiffs’ demonstration that their claims cannot be reasonably pursued as individual actions, whether in federal court or in arbitration,” Judge Rosemary Pooler wrote for the court. “We again conclude that enforcement of the class action waiver in the Card Acceptance Agreement flatly ensures that no small merchant may challenge American Express’ tying arrangements under the federal antitrust laws.”