In the battle for consumer rights, class action lawsuits have served as the sling and stone for our world's metaphorical "Davids” taking on corporate "Goliaths." Class actions have rendered justice in numerous cases, such as the tobacco litigation of the 1990s, the 2010 BP oil spill, and the Volkswagen emissions scandal, enforcing a new era of corporate responsibility and accountability.
Today, however, we’re seeing a momentum shift in the dispute resolution arena. Here’s the landscape as we see it. Arbitration has been used ubiquitously by corporate interests to dodge litigation in courtrooms open to the public. Arbitrations are done behind closed doors, not subject to public scrutiny typical in a courtroom. But consumers are fighting back.
But now we have something called another recent phenomenon, "mass arbitration.” This is an inventive method that consumers and workers use to fight back against the onslaught of forced arbitration clauses in the contracts we are all forced to sign for services and products that include cell phones, cable, mobile homes, or doctor services. Furthermore, to add insult to injury, employees are being asked to give up their right to sue through these forced arbitration clauses. Mass arbitration has some similarities to class actions, but it operates in the sandbox that corporations created with their forced arbitration clauses.
But as this strategy unfolds, specific cases help us to understand its real-world implications.
The majority of companies offering services or contracts have integrated arbitration clauses into their contracts. Now they are being hoisted on their own petard, so to speak, because the very same companies who once advocated for arbitration are claiming that it brings cost saving and efficiency to consumers (not true) are now dragging their feet by adopting delay tactics to avoid defending the onslaught of arbitration cases consumers are bringing. So ironically, the very system they championed is now one they are refusing to engage with and trying to paint it as cumbersome when consumers leverage it to their own advantage.
In 2020, a well-known ride-sharing company faced its own arbitration issue when a New York appeals court supported the American Arbitration Association's (AAA) $92 million fee to begin the arbitration process. This fee was in response to a multitude of claims surrounding a contentious policy, which some viewed as racially discriminatory. This ruling drove home the point that due to the company’s own practices, they could not sidestep their obligations to engage in the arbitration process when consumers came to them with valid complaints.
Another renowned company in 2022 refused to process legal claims brought in arbitration from former employees. Having managed to transition class action claims to arbitration, the company appears to now be deliberately stalling the arbitration proceedings, potentially pushing many individual claims back into the courtroom. Ironies abound!
Lastly, a cell phone and computer maker, Samsung, breached the Illinois Biometric Information Privacy Act (BIPA). Accused of unauthorized biometric data collection from its users, the tech giant sought to channel the case into individual arbitration. However, their efforts were rebuffed by a federal judge. In a subsequent twist, almost 50,000 users contended the company was backtracking on its pledge to foot the bill for individual arbitration proceedings. Consumer Reports magazine put it this way: “mass arbitration amounts to a kind of legal bluff-calling. If companies insist that consumers arbitrate their complaints individually—never expecting more than a handful of people to do it—the lawyers behind mass arbitrations are simply saying, fine, let’s arbitrate, over and over and over again.”
Typically, according to the contract they create and force customers to enter into, companies pay most, or all of the fees associated with arbitration proceedings against them. These fees can range from a couple hundred to a few thousand dollars per individual claim—not much for a large company facing a small handful of cases, but potentially massive when thousands of such cases are brought in short order.
Samsung customers approached the court to force the company into arbitration after it declined to pay certain filing fees laid out by their own terms of service. The company sought to dismiss the petition based on the claim of improper venue and opposed the merits of the petition. Ultimately, the court ruled in favor of a majority of the petitioners, granting their request to arbitrate and ruled that Samsung “may not have expected so many would seek arbitration against it, but neither should it be allowed to blanch at the cost of the filing fees it agreed to pay in the arbitration clause.” The court concluded that Samsung made a business decision adding forced arbitration into their contracts, and “for better or for worse, the time calls for Samsung to pay for it.”
The National Consumers League (NCL) addressed the issue of companies trying to dodge paying the fees when mass arbitration claims are filed in a comprehensive letter to Illinois Attorney General Kwame Raoul. NCL's letter argues for the urgent need for reforms in the current arbitration system.
The emergence of mass arbitration not only challenges the very arbitration systems set in motion by companies, but also showcases the enduring spirit of the 'Davids' against the corporate 'Goliaths.' As the momentum shifts, consumers will be forced to develop innovative strategies to fight back, and when they do, companies cannot be allowed to further delay, evade, or “duck and parry” to dodge accountability from the very systems they foisted on us. We didn’t ask for arbitration clauses, but now that they are here, mass arbitrations are but one effective way to ensure fairness, justice, and equity for consumers.
Sally Greenberg is the Executive Director of the National Consumers League.
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