It is a lesser-known fact but most businesses usually cover most, if not all, of the costs associated with the arbitration of their disputes with consumers or employees. This boosts the accessibility and viability of this form of dispute resolution for all the parties involved as it is often a less expensive alternative to litigation before the courts. In recent times, we can observe a change in this space with a rise in “mass arbitrations,” a strategic practice being used by plaintiff attorneys to force businesses to steer away from arbitration. Mass arbitration involves plaintiff-side attorneys submitting numerous nearly identical arbitration claims against a single defendant, usually a business or an organization, compelling the latter to settle due to the substantial financial burden of filing fees which the business has often committed to pay.
Mass arbitrations have become quite common in recent years with Uber being subject to around 12,500 such arbitration demands in 2018, for example.1 The arbitration fees for this were expected to exceed $18 million. Uber eventually settled for an amount between $146 million and $170 million rather than paying filing fees or challenging the mass arbitration in the courts.2 In 2019, Doordash received around 5,000 to 6,000 arbitration demands.3 Many other companies such as Postmates, TurboTax,4 Amazon,5 Chegg,6 Dollar Tree,7 and Peloton8 have also faced similar demands. In 2022, Samsung faced 50,000 arbitration demands for alleged violation of Illinois’ Biometric Information Privacy Act.9 The Federal District Court in Illinois granted an order requiring Samsung to pay around $4 million in arbitration fees. On November 16, 2023, the Seventh Circuit ordered a stay on the District Court’s order, pending appeal.
This increasing shift to mass arbitral demands has led many companies to modify their arbitration clauses, change their arbitration services provider such as AAA or JAMS, and even to drop their arbitration clauses entirely. In 2020, Doordash changed its arbitration provider from AAA to ADRServices, Inc., which has a lower filing fee due to thousands of delivery workers initiating mass arbitration. In 2021, Amazon removed its mandatory arbitration provision and class action waiver from its terms of service.10 As mentioned in my previous Ticketmaster article, Ticketmaster LLC moved away from JAMS and opted for New Era ADR, a legal-tech startup based out of Chicago. In a more recent case, although Samsung did not take the drastic step of eliminating the arbitration clause, it laid out new arbitration rules instead.11 Through these new rules, Samsung has made it mandatory for consumers to engage in a process involving several stages of batch arbitrations and mediations before the consumer can bring an action in small claims court. A detailed description of these changes is provided below.
Samsung’s New Mass Arbitration Rules:
These rules apply if more than 50 similar arbitration claims are asserted against Samsung through the same or coordinated counsel or are otherwise coordinated. This process involves several stages, as follows:
Stage 1: Both the counsel for the claimant and the counsel for Samsung must each pick 25 claims to go through individual arbitration. After this selection, the parties will engage in global mediation12 for all the remaining claims.
Stage 2: If there are any unresolved claims after Stage 1, the counsel for the claimants and the counsel for Samsung each pick up to 50 claims to go through individual arbitration. After this stage is complete, the parties associated with all the remaining unresolved claims will engage in global mediation.
Stage 3: If there are any claims still left unresolved after Stage 2, both parties must discuss ways to streamline the process to increase efficiency and save costs. Unless the parties agree otherwise, the counsel for the claimants and the counsel for Samsung each pick up to 75 claims to go through individual arbitration. After this stage is complete, parties of all the remaining claims will engage in global mediation.
At each stage, each of the claims being arbitrated will be assigned to a different, single arbitrator aiming to issue their award within one hundred twenty (120) days after their appointment. If the claim is not resolved even after the three stages, then the parties have two options as follows:
As we can observe, Samsung has adopted a “batch arbitration” process to resolve its consumer disputes. This is not a standalone move, as there has been a trend in businesses and corporations shifting towards conducting arbitration in small batches to tackle mass arbitrations and the enormous upfront costs associated with it.
Early this year, U.S. The Chamber of Commerce Institute for Legal Reforms published a comprehensive study of the current mass arbitration trend.13 This study makes a bold statement that “Abusive mass arbitrations are the 21st century equivalent of the abusive class actions that characterized the last part of the 20th century—claims that can be brought solely for the purpose of extracting a settlement unrelated to the merits by leveraging the threat of huge costs.” The U.S. Chamber of Commerce strongly advocates for batch arbitration as a remedy to what it asserts is an abusive strategy by plaintiff attorneys specializing in mass arbitration cases.
Reflections on Samsung’s new Dispute Resolution Process and the increase in Mass Arbitrations
A multi-stage batch arbitration process like the one incorporated by Samsung does have an impact on consumers engaging in dispute resolution with Samsung. While Samsung’s new approach does make an effort to streamline batch arbitrations, the prolonged nature of the multi-stage process is likely to delay the time it takes for an individual to resolve a claim and, in turn, slow down access to justice. On a positive note, batch arbitration might have a positive influence by enhancing the consistency and the predictability of outcomes for similar claims. This will empower businesses and consumers to better assess the trends and outcomes, allowing them to make informed decisions about exercising their rights to dispute resolution. From a business perspective, multi-staged batch arbitration helps manage mass arbitration more efficiently by reducing the upfront costs and distributing them more evenly over a period of time.
The increase in mass arbitration demands has led to a significant change in how businesses approach dispute resolution. Faced with the financial burden and operational challenges posed by thousands of arbitration claims at once, companies like Uber, Doordash, Amazon, and Samsung have felt the need for new solutions and approaches. These evolving strategies, which have included modifications to arbitration clauses and providers and the adoption of batch arbitration as exemplified by Samsung’s structured three-stage process, also reflect a broader trend in the corporate landscape. As businesses navigate these complexities, the trend towards batch arbitration signals a concerted effort to counter what is viewed as an abusive strategy by plaintiff attorneys.
In the near future, we are likely to see more such innovative solutions by businesses in a quest to find a balance between efficiency and fairness in the context of mass arbitration. Does this leave the consumer in a better place than before? That is a question that only time can answer.
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