Last week, in Pizza Hazel v. American Express Co., No. 1:24-cv-12505-AK (D. Mass Sept. 19, 2025), a federal district court ruled American Express's arbitration agreement unenforceable because it was illusory. The court deemed the arbitration agreement illusory under both Massachusetts and New York law because "one party [Amex] can change it unilaterally without providing notice to the other party." Id. at *6. The court also found the arbitration agreement illusory because it enabled Amex to effect retroactive changes after notice of the plaintiffs' intent to file suit. Id. at *10. These conclusions led the court to deny Amex's motion to compel arbitration.
Although it is tempting for a company to provide itself with as much flexibility as possible when facing potential legal claims, the Pizza Hazel decision shows that an arbitration agreement that grants a company too much flexibility is at risk of being ruled illusory and therefore unenforceable as a whole. Careful drafting is important to ensure your arbitration clause will be enforced by the courts.
Josiah Contarino is counsel at Dhillon Law Group Inc. where he practices commercial litigation, First Amendment, Second Amendment, defamation, employment, and election law matters in state and federal courts.
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