- “Uber Settles ‘Majority’ of Arbitrations for at Least $146M.”
- “DoorDash Ordered to Pay $9.5M to Arbitrate 5,000 Labor Disputes.”
- “Amazon Faced 75,000 Arbitration Demands. Now it Says: Fine, Sue Us.”
Mandatory arbitration provisions, combined with class action waivers, are a common element of consumer-facing terms and conditions. Unfortunately, in recent years, plaintiffs’ counsel have moved from fighting these provisions to leveraging them for multi-million-dollar payouts.
The playbook is simple. Enroll hundreds if not thousands of consumers on a simple, potential claim then threaten to file — or actually file — arbitrations for each of them all at the same time. Under most companies’ terms and conditions, the company is responsible for paying all or virtually all of the arbitration filing fees. As a result, companies must pay millions of dollars in filing fees before they are even able to discuss the most basic merits of the underlying allegations. Not surprisingly, plaintiffs’ counsel leverage these dispute resolution costs to obtain settlements of claims without ever undergoing any scrutiny of their merits.
Courts have largely upheld this practice, holding companies to their mandatory arbitration provisions. Some companies, like Amazon, have decided to eliminate these mandatory arbitration provisions altogether, while others, like Samsung, have simply refused to participate in the arbitration process. While these “all or nothing” approaches are options for your organization, courts have been willing to enforce modifications to these provisions that preserve the goals of mandatory arbitration provisions while reducing, if not eliminating, the risks associated with mass arbitrations.
For example, potential modifications include:
- Incorporating the amended rules implemented by JAMS and AAA to streamline mass arbitrations and reduce or phase associated costs.
- Adopting pre-filing requirements, such as claim submission forms, informal dispute resolution and/or mediation.
- Modifying arbitration process to allow batching or bellwether processes.
- Requiring individualized information as part of filing.
Some of these potential modifications have already been reviewed by courts in early motion practice, while others are being implemented but are yet untested. At a minimum, if your terms and conditions require arbitration you should review your provision to ensure that you can leverage the new JAMS and/or AAA Mass Arbitration Supplementary Rules if and when you choose to.
