RECENT DEVELOPMENTS IN MANDATORY ARBITRATION WARFARE: WINNERS AND LOSERS (SO FAR) IN MASS ARBITRATION.
|Glover, J. Maria
TABLE OF CONTENTS INTRODUCTION I. THE ARBITRATION REVOLUTION AND THE EMERGENCE OF MASS ARBITRATION: A BRIEF SUMMARY II. THE VIEW FROM 2023: RESPONSES (SO FAR) TO MASS ARBITRATION A. Quit: Defendants Drop Mandatory Arbitration Clauses Altogether B. Ignore the Rules: Defendants Balk on Arbitral Fees, Seek Relief from Their Own Agreements. C. Squeeze Your Opponent: Defendants Try to Cut Mass-Arbitration Counsel, and the Mass-Arbitration Model, Out of the Picture D. Blame the Ref: Defendants Sue the Arbitrators. III. LOOKING FORWARD FROM 2023: ATTEMPTS TO CHANGE ARBITRATION A. Hate the Game, Not the Player: Defendants Change the Terms of Their Arbitration Agreements 1. Eliminate "Friendly" Provisions. 2. Switch Direction: Require Aggregation of Individual Claims. 3. Switch Fields: Designate a New Arbitral Forum. 4. Limit Access to the Field: Defendants Insert "Notice" and Other Similar Provisions into Their Arbitration Agreements. B. Return to the Glory Days: The Architects of the Arbitration Revolution Seek to Restore the Post-Revolution, Pre-Mass Arbitration Landscape IV. TAKING STOCK: WINNERS AND LOSERS (SO FAR) IN MASS ARBITRATION CONCLUSION INTRODUCTION
Mass arbitration has sent shock waves through the civil justice system and unnerved the defense bar. To see how quickly and dramatically this phenomenon has entered both the civil justice landscape and the public discourse, one need look no further than the January 2023 filings of hundreds of individual arbitration demands by former Twitter employees against Elon Musk, (1) along with threats to file hundreds more--threats that were announced, no doubt intentionally, on Twitter itself. (2) Plaintiffs are increasingly more aware of mass arbitration as a tool in their arsenal, and defendants are, perhaps for the first time in decades of mandatory arbitration warfare, on the defensive.
From 2018 to 2021, I conducted a large study of this relatively new phenomena and published the results. (3) In Mass Arbitration, the first and only case study of the phenomenon, I detailed the history of mandatory arbitration warfare, whereby a coalition of defense-side interests waged a decades-long effort to retrench aggregate dispute resolution through arbitration agreements and class-action waivers imposed in contracts of adhesion. (4) This mandatory arbitration warfare achieved nothing short of an arbitration revolution--it eliminated scores of legal claims across the civil landscape and saved corporations billions of dollars. (5) Yet, just when everyone expected the defense interests to take a victory lap, prominent defendants started to abandon the hard-fought war against class actions and, instead, began to take refuge in them. The study chronicled the genesis of mass arbitration, the transformation of mandatory arbitration from a windfall for defendants to a weapon for the plaintiffs' bar. Mass Arbitration concluded by capturing early responses from the defense coalition and offered predictions for the future of mass arbitration. (6)
This Article updates and expands the original study of Mass Arbitration. Of course, mass arbitration is constantly evolving. Neither the initial study nor an updated analysis in 2023 here mean that investigation and study is complete. However, as with the initial study, this Article provides important snapshots of what is now one of the most substantial developments in the civil justice landscape. (7)
Part 1 of this Article summarizes the rise of mandatory arbitration, the emergence of mass arbitration, and what my prior study identified as the key elements of the mass arbitration model. Part II updates and expands on the original study, with a particular focus on responses to the phenomenon that have emerged. Specifically, Part II catalogs and briefly analyzes an array of responses to mass arbitration that have arisen in the past two years--both those that were anticipated in the Mass Arbitration study and those unanticipated. Part III takes a step back and considers who, so far, can be described as "winners" and "losers" in the mass arbitration landscape. Among other things, taking this step back reveals arbitration warfare's arbitrariness, which has important implications for claiming by way of mandatory arbitration in particular and in our civil justice system more generally.
THE ARBITRATION REVOLUTION AND THE EMERGENCE OF MASS ARBITRATION: A BRIEF SUMMARY
Today, nearly every American is subject to forced arbitration agreements with class action waivers--over 50% of nonunionized employee contracts, 76% of consumer contracts, and 99.9% of mobile-wireless contracts contain a forced arbitration clause, and "virtually all" consumer contracts also include class-action waivers. (8) Despite its modern pervasiveness, the inclusion of arbitration provisions in contracts of adhesion is a relatively recent practice.
Early American jurisprudence disfavored private procedural ordering and, up to the early twentieth century, the federal judiciary was seen as skeptical, if not hostile, toward arbitration. (9) When Congress passed the Federal Arbitration Act (FAA) in 1925, proponents of the bill argued that it was 'intended to facilitate the enforcement of freely and fully negotiated agreements between merchants of equal bargaining power." (10) For decades after the FAA's enactment, the Supreme Court's arbitration jurisprudence was consistent with that objective and disallowed ex ante arbitration agreements between parties with unequal bargaining power. (11)
This changed in the 1980s when the defense bar, corporate entities, and related interest groups commenced the arbitration revolution, a "campaign to expand the universe of permissible contexts for mandatory arbitration agreements." (12) They succeeded. Through a series of litigation victories, the defense coalition convinced the Supreme Court to permit the use of forced arbitration for an immense array of substantive claims, and, in lower courts, they secured approval to enforce arbitration agreements ostensibly created by notice via mail inserts, shrink-wrap licenses, and even "add-ons" to contracts consumers had already entered. (13) Emboldened by these successes, the defense coalition pursued an even more ambitious agenda: eliminate the class action by combining arbitration agreements with class action waivers. (14) Again, they prevailed. The Court blessed the enforcement of arbitration agreements with class action waivers, which eliminated both class actions and the underlying claims that could not be viably pursued without the device. (15)
As civil rights, wage-theft, sexual-harassment, and consumer-fraud claims are often only economically viable through aggregation, eliminating access to the class action device effectively eliminated the ability of plaintiffs to bring these claims altogether. (16) The resultant windfall to the defense coalition was enormous. Forced arbitration is estimated to have eliminated "more than 98% of employment claims," and in 2019 alone, employers pocketed $9.2 billion from workers via wage theft without fear of litigation. (17) The arbitration revolution was "a resounding victory for corporate interests" and a "tremendous loss for consumers and employees, particularly those ... already vulnerable based on race, gender, and class." (18)
Public reform efforts have not yet provided a meaningful response to the arbitration revolution. While the narrowly tailored Ending Forced Arbitration of Sexual Harassment Act passed with bipartisan support in February 2022, the broader Forced Arbitration Injustice Repeal Act languishes in the Senate Judiciary Committee in the face of staunch opposition by the Chamber of Commerce and the defense coalition. (19) Though there have been a few modest arbitration-reform successes at the state level, they have not significantly changed the arbitration landscape. (20) While state Attorneys General could, in theory, fill the void left by the elimination of class actions, political and resource constraints limit their ability to bring actions on behalf of their citizens, and private attorneys general acts that would allow citizens to bring these suits on the state's behalf have struggled to gain passage. (21)
To date, the most meaningful response to the arbitration revolution has come in the form of private procedural warfare. Indeed, an opportunity for rejoinder to the arbitration revolution brought about by way of private arbitration contracts was lurking, in no small part, in those private arbitration contracts themselves. "That opportunity was mass arbitration." (22)
Mass arbitration (23) is the latest step in private procedural warfare and a direct response to the proliferation of forced arbitration. It is a new model of claiming that is both "entirely individualized ... and aggregate," in the sense that "the individual claims that make up ... multifarious one-on-one arbitrations are brought against a single defendant, arising out of similar alleged misconduct." (24) At a very basic level, the claiming model works like this: (often highly) capitalized attorneys file arbitration demands on behalf of individual claimants that are subject to arbitration agreements against the same defendant for the same or substantially similar course of conduct. These attorneys do this repeatedly for hundreds, thousands, or more claims, and by doing so, they can generate enormous settlement pressure. (25)
As my study explained, mass arbitration became possible for three core reasons:
First, civil litigation in the United States, a bit like nature, abhors a vacuum. Eliminating one mechanism for individuals to aggregate their claims will not eliminate the widespread legally cognizable harms nor the mass of individuals that suffered those harms. (26) Without settlement, some other resolution, or some other regulation, the claims will continue to exist--and a mechanism to resolve those claims will be forced to evolve to meet the need.
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