The Floodgates Have Opened: Mass Arbitrations

A CCA Blog*

A series of U.S. Supreme Court decisions have all but eliminated class arbitrations for consumers, employees, franchisees, and others with common claims against a single company.  The latest, decisive blow came in Lamps Plus, Inc. v. Varela, 587 U.S. __, 203 L. Ed. 2d 636 (2019), with the Court holding that arbitration on a classwide basis could not be compelled based on an arbitration agreement’s ambiguous language.  Most arbitration agreements include a waiver of class arbitrations; some are silent.  There are virtually none explicitly allowing for class arbitration.

The result of these decisions?  The flooding of arbitral institutions with thousands of all but identical individual claims brought against a single company, which in an earlier era would have been brought as class actions or arbitrations.  Because in the employment and consumer context the company typically pays the arbitration fees and expenses (which can be astronomical depending on the number of claimants), companies have sought relief from the courts.  So far, the universal response from the courts?  Too bad. You asked for it; you got it (i.e., individual arbitrations, no matter the cost).  See, e.g., Abernathy v. DoorDash, 438 F. Supp. 1062 (N.D. Cal. 2020); Uber v. American Arbitration Association, 2021-32080 (N.Y. Sup. Ct. Oct. 14, 2021).

Arbitral institutions have grappled with this onslaught in various ways by promulgating new rules to address efficient handling of mass arbitration claims.  The American Arbitration Association’s rules highlight administrative management on the front end designed to achieve efficiencies across all claims, and give the arbitrator discretion at the preliminary hearing.  See https://www.adr.org/sites/default/files/Supplementary_Rules_MultipleCase_Filings.pdf.   CPR’s rules provide for the conduct of bellwether cases, and mediation after ten such cases result in awards.  See  https://www.cpradr.org/dispute-resolution-services/employment-related-mass-claims-documents/emp-mass-claims-protocol.  FedArb’s rules adopt MDL techniques, with a panel of three retired federal judges addressing and resolving common issues before the individual cases go to arbitrators.  https://www.fedarb.com/rules/framework-for-mass-arbitration-proceedings-adr-mdl/ .  JAMS has yet to enact mass arbitration rules, but its panelists manage these cases where the arbitration agreements call for JAMS administration.  

There is little doubt that this is but one chapter in the long and intensely litigated history of class actions and arbitrations.  Companies likely will rewrite arbitration agreements to deal with this deluge.  A “prime” example:  after facing 75,000 individual arbitration demands in the last two years, in 2021 Amazon removed the mandatory arbitration provision and class action waiver from its consumer online terms of service.  More companies are likely to follow suit, with some even reversing course expressly to allow for class arbitrations in their arbitration agreements, which may provide for more efficiencies and certainty in procedures than the current state of play.

*We are using the Aardvark moniker to denote our CCA Blog. The Aardvark will provide content from time to time about cases, developments and issues associated with the practice of Arbitration. We hope you will find the blog entries interesting and useful. We encourage you to watch for the Aardvark and its arbitration content that we hope you will enjoy.