Mass Arbitration.

AuthorGlover, J. Maria

Table of Contents Introduction I. The Arbitration Revolution and the Class-Action Counterrevolution A. The Arbitration Revolution B. The Class-Action Counterrevolution C. The Aftermath II. Can't Stop The Revolution: Public-Reform Pitfalls, Private-Reform Possibilities A. The Failure of Public Procedural-Ordering Efforts B. The Possibility of Private Procedural Counteroffensives III. Mass-Arbitration Case Study A. Background 1. Definitions 2. Methodology B. Overcoming the Principal Obstacles to Mass Arbitration 1. Competing with the defense bar 2. Overcoming substantial startup costs C. Key Elements of the Mass-Arbitration Model 1. Leveraging arbitration fees and fee-shifting provisions in arbitration agreements 2. Arbitrating claims individually, or credibly threatening to do so 3. Selecting higher-threshold-value claims 4. Generating aggregate settlements from individual claims IV. Contemporaneous and Future Developments A. Scaled-Up Mass-Arbitration Firms B. Scaled-Up Arbitral Fora C. Revised Agreements 1. Eliminating fee provisions 2. Inserting "batching" provisions 3. Provisions that change the arbitral forum V. Case-Study Findings and Limitations A. Mass-Arbitration Taxonomy B. Study Limitations C. Study Takeaways VI. Applications, Expansions, and Implications A. Claim Facilitation and Merits-Based Claim Resolution B. Informal Aggregate Dispute Resolution C. Mass Arbitration and the Civil Justice System Introduction *

In 2018, the minimum wage in Massachusetts and California was S11.00. (1) In Illinois, S8.25. (2) In New Jersey it was $8.60, up from $8.44 the previous year. (3) And in New York it was $10.40, up from a previous $9.70. (4) Drivers in these states for the rideshare service Uber, however, alleged that they had routinely been paid less than those minimum wages--often far less. (5) The Fair Labor Standards Act of 1938 (FLSA) (6) seemed like a good candidate to combat what appeared to be fairly blatant wage theft. Indeed, Congress included a collective-action provision in the FLSA because most wage-theft claims by wage-and-hour workers are not economically viable on an individual basis. (7) According to their employment agreements with Uber, however, drivers were required to arbitrate any claims individually. Putative FLSA collective-action claims by many Uber drivers were therefore stayed pending arbitration. (8)

To any individual driver--and, just as importantly, to any individual driver's lawyer--pursuing an individual claim in arbitration appeared to be a nonstarter. Under the applicable fee schedule for Judicial Arbitration and Mediation Services (JAMS), the nonrefundable filing fee for arbitration was SI,500 per demand. (9) Given the value of a single driver's claim for unpaid or underpaid wages, the up-front investment to advance this filing fee (10) would not be an economically rational proposition for either individual claimants or their attorneys. (11) In effect, then, the arbitration agreement eliminated drivers' FLSA claims, just as similar agreements had done to hundreds of thousands of legal claims for decades. But then a funny thing--an improbable, near-impossible thing--happened. In a series of filings, the Uber drivers served more than 12,500 individual arbitration demands on Uber. (12) And their lawyers demanded that Uber reimburse the filing fees--SI8.75 million in total--just as Uber had agreed to do in its arbitration agreement. (13) This was not a collective action, or a class action, or even class arbitration. This was mass arbitration.

By mass arbitration (14) 1 mean the following. Some enterprising and (highly) capitalized attorneys file arbitration demands on behalf of individual claimants subject to mandatory arbitration agreements. The claims are brought against the same defendant for the same course of conduct. The attorneys then do this again. And again. And again. Mass arbitration is a new model of claiming that is at once entirely individualized (one-on-one arbitration) and aggregate. The individual claims that make up the multifarious one-on-one arbitrations are brought against a single defendant, arising out of similar alleged misconduct.

Mass arbitration is both a response to and a product of a decades-long, wildly successful campaign by defense-side interests to dismantle the infrastructure for enforcing substantive rights. (15) This campaign, waged by the defense bar, the U.S. Chamber of Commerce, multiple Republican presidential administrations, and various defense-side interest groups, involved a series of procedural offensives in the Supreme Court and before Congress. (16) Many decades and scores of victories after its inception, the campaign achieved wide deregulation across the American legal landscape. (17)

In the crosshairs of the campaign: the class-action device. At the urging of conservative administration officials, President Ronald Reagan's judicial appointees received careful vetting as to their views on the class action. (18) President George W. Bush pushed Congress to examine litigation practices and the perceived explosion of "junk" litigation in nearly every State of the Union address. (19) A group of Fortune 100 corporate lawyers helped draft the Class Action Fairness Act (CAFA)--which aimed to reduce the overall number of class certifications in the litigation landscape (20)--and spent somewhere between $50 to $200 million in support of the bill. (21) Meanwhile, the defense bar secured Supreme Court victories in case after class-action case. The Court (often, but not always, in 5-4 decisions) ratcheted up class-certification standards under Rule 23(a) of the Federal Rules of Civil Procedure; (22) effectively removed the class action from the products liability landscape; (23) made civil rights claims more difficult to pursue on a class-wide basis; (24) and embraced the defense coalition's conception of the class action as procedural pariah. (25)

The campaign's focus on the class action was grounded in conventional wisdom regarding claiming economics. This wisdom holds--and empirical research tends to support (26)--that for an individual with a low-value but potentially meritorious claim, the costs of pursuing an individual case are typically too high for individual claiming to be a rational proposition. (27) The class-action device changes that calculus by allowing cost spreading among claimants, thereby enabling claiming. (28) Destroy the class action, the logic went, destroy the claims.

And indeed, the defense coalition came to bury the class action, not restrict it. None of the coalition's efforts went so far as to eliminate the class action altogether: Doing so would have required upending long-standing precedent or amending the Federal Rules of Civil Procedure. Instead, the coalition waged a forty-year campaign to gain the ability to contract the class action out of existence. Its focus? Mandatory arbitration agreements with class-action waivers in take-it-or-leave-it consumer and employee contracts.

Defendants played the long game. (29) They convinced the Supreme Court to bless arbitration provisions prohibiting class action for state-law claims, (30) for federal claims, (31) and finally for claims under statutes like the FLSA that explicitly provide a right to collective action. (32) The result was a roadmap for corporations to engineer, as a practical matter, contractual immunity against a vast array of claims. The result was also nothing short of a revolution: an arbitration revolution (33)

Yet less than a decade later, some of the very entities that waged and seemingly won the war are abandoning the whole project. Corporations that engineered the arbitration revolution are now "scared to death" of arbitration. (34) So scared, in fact, that some are retreating to the device they spent decades trying to eliminate: the class action. In May 2021, one of the biggest corporations of all--Amazon--dropped the arbitration requirement from its terms of service entirely. "Fine," it essentially declared, "sue us." (35)

How could this total victory transform into a massive retreat not even a decade later? The answer lies in an unforeseen (and largely unforeseeable) counteroffensive by a small subset of the plaintiffs' bar--a counteroffensive that I term mass arbitration. This Article presents a foundational analysis of the subject.

Part I traces the backdrop against which mass arbitration emerged. It first provides a short history of the arbitration revolution (in which the Supreme Court allowed for mandatory arbitration agreements in virtually all take-itor-leave-it contracts) and the concomitant class-action counterrevolution (in which the Supreme Court not only made class certification more difficult but also permitted the use of class-action waivers in mandatory arbitration agreements). (36) It then details the profound consequences of the arbitration revolution for the civil justice landscape. Today, virtually all Americans are subject to mandatory arbitration agreements with class-action waivers. And a broad swath of claims--for consumer fraud, racial discrimination, gender discrimination, wage theft, and workplace sexual harassment--have been all but eliminated.

Decades of attempts at public procedural reform have largely failed. Nonetheless, the analysis of the Supreme Court's arbitration jurisprudence in Part II shows that the arbitration revolution left (narrow) room for private procedural counteroffensives. To be sure, the Supreme Court has made quite clear that neither unconscionability nor the effective-vindication doctrine is sufficient to salvage a representative procedure--the class action--that the Court itself disfavors. But what could happen if defendants "didn't have the class action to kick around anymore"? (37) What did happen--improbably, unexpectedly--was mass arbitration.

The best way to understand mass arbitration is to observe it in a real-world context. Parts III, IV, and V of this Article...

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