The U.S. Chamber of Commerce’s recent publication of an 80-page report titled “Mass Arbitration Shakedown: Coercing Unjustified Settlements” has fanned the flames on an already heated debate between consumer advocates and industry lawyers over the propriety of mass arbitrations.
We have addressed mass arbitration issues and potential defenses extensively in our prior blogs. A mass arbitration is the simultaneous filing of hundreds or even thousands of individual arbitration demands against the same company by the same law firm, requiring the company to pay the substantial up-front filing and administrative fees typically charged by arbitration administrators. Because those fees, collectively, can amount to many millions of dollars, companies that are unable or unwilling to pay the fees are faced with the untenable dilemma of promptly settling all of the claims, regardless of their merit, or abandoning arbitration altogether, in which case they will face a class action in court, depriving the consumer claimants and the company respondents of the many benefits that individual arbitration has over class actions.
Mass arbitrations evolved in reaction to U.S. Supreme Court decisions in 2011 and 2018 which upheld the validity of class action waivers in consumer and employment arbitration agreements and Congress’ override of the CFPB’s final arbitration rule in late 2017. The rule would have prohibited businesses from including class action waivers in consumer arbitration agreements.
Pulling no punches, the Chamber’s report characterizes mass arbitration settlements as “blackmail” and “a dangerous abuse of the arbitration process.” It further asserts that “the manner in which mass arbitrations are currently threatened and litigated appears to entail a number of potential ethical violations, including breaches of rules against unauthorized practice of law, rules governing attorney advertising and solicitation, rules protecting the client’s role in the settlement process, and rules against frivolous claims …. [S]tate bar authorities should consider investigating what appear to be the many violations of state rules of professional conduct that likely are occurring in mass arbitrations.” The report also advocates the use of bellwether or batch arbitration procedures to help expedite the resolution of mass arbitration claims.
As expected, consumer advocates are responding vigorously. A recent post on Public Justice’s Consumer Law and Policy Blog argues that “[a]fter years of advocating … forced arbitration provisions that deprive consumers of the option of filing claims in court and bar consumers from pursuing class actions, the Chamber … is now complaining that consumers are using arbitration too much.” The post links to a recent Reuters article which characterizes the Chamber’s report as “extremely provocative” and summarizes interviews conducted with its authors, with some prominent mass arbitration counsel (who allegedly called the report “cynical and hypocritical”) and with Georgetown Professor J. Maria Glover, the author of a lengthy study on mass arbitrations who participated in Part I and Part II of our “deep dive” into mass arbitrations podcast.
Although much has already been written about the pros and cons of mass arbitrations, the debate is obviously likely to continue for the foreseeable future.