After being deluged by 75,000+ individual arbitration demands filed by plaintiff’s attorneys on behalf of Echo users, Amazon changed its terms of service to allow customers to file lawsuits. It now faces at least three potential class action suits, one of them brought May 18 that alleges that its Alexa-enabled Echo devices record people without their permission. Arbitration requirements are often inserted in many consumer contracts and the U.S. Supreme Court has repeatedly upheld and underlined the right to mandate arbitration.
The Wall Street Journal reports that arbitrations “mirror court cases in some ways, but take place in private settings paid for by the parties, with less evidence presented and no appeals.” Companies in question “often agree to pay for initial filing fees of between $100 and $2,000,” which consumer advocates and lawyers say “often doesn’t make it financially worthwhile for individuals to pursue a claim.”
A few law firms have signed up huge numbers of consumers or employees to file arbitration claims en masse, thus triggering huge filing fees for targeted companies. “It has the potential to be pretty unfair to the company,” said Seyfarth Shaw employment lawyer Patrick Bannon, who added how the technique puts huge pressure on the company to settle.
But plaintiff lawyer Travis Lenkner at Keller Lenkner has a different point of view. “Companies thought they were getting out of liability altogether,” by adding arbitration clauses, he said. “Now they’re seeing exactly what they bargained for, and they don’t like it.” Amazon made no announcement or comment when it changed its terms of service. Uber Technologies, Lyft and Intuit “have all tried to avoid paying filing fees or direct claims back into court after being hit in recent years with thousands of arbitration claims.”
Few companies have ended arbitration outright like Amazon, with some “requiring employees to speak to a lawyer at the company before filing an arbitration claim … [and] one arbitration provider creat[ing] a mass-claim protocol that calls for handling a few test cases before the full filing fees come due.”
In 2019, Keller Lenkner made arbitration demands against DoorDash on behalf of more than 5,000 drivers “who said they were improperly classified as contractors.” The company “balked at paying the filing fees and tried to resolve the claims in a class-action settlement.”
U.S. District Judge William Alsup wrote in an order that, “in irony upon irony, DoorDash now wishes to resort to a class-wide lawsuit, the very device it denied to the workers, to avoid its duty to arbitrate. This hypocrisy will not be blessed.” DoorDash “reached individual settlements totaling $85 million to resolve worker misclassification claims brought by 35,000 DoorDash and Caviar drivers.”
But, although Keller Lenkner has made $375+ million in settlements for 100,000+ individual arbitration clients in about two years, these mass arbitration claims “takes considerable upfront resources and technology because plaintiffs’ lawyers need to have a relationship with every single client.”