Are Mass Arbitrations the New Class Action?
Late in September, the United States Court of Appeals for the 9th Circuit (which covers the West Coast and contiguous states) upheld a trial court decision which held that it is the arbitrator’s purview to determine whether or not there has been a violation of a contractual class action waiver.
By way of background, it has become commonplace (or, perhaps, is becoming commonplace) for businesses to compel their workers to forgo their class action rights under the law. DoorDash is an example, where the company required its drivers to waive their rights to file a class action lawsuit. Postmates is another.
The response? Mass arbitrations.
Basically, rather than filing a class action lawsuit against DoorDash, 5,700 drivers, who took issue with how they were classified by the company (employee v. independent contractor) filed 5,700 arbitration cases against the company. More than 5,000 Postmate drivers did something similar against that company.
“Why?” I hear you asking. Fees.
As the National Law Review notes, “In jurisdictions like California, employers must pay all of the arbitration fees except for the filing fee itself. They must pay the administrative fees, which typically are about $2,000 per case. And they must also pay the fees of the arbitrator, who is often a retired judge. From experience, the arbitrator’s fees alone for a single case are typically about $60,000, at least in California.”
So, doing the math, with 5,700 arbitrations, DoorDash is looking at $342 million in arbitration fees alone. Postmate is looking at $300 million. Then the companies have to pay for their own attorneys to defend them.
Needless to say, the companies are not happy and are contesting whether or not their own waivers are enforceable against them. Deciding that is the arbitrators responsibility, according to the courts.
As the National Law Review said “On September 29, 2020, the Ninth Circuit affirmed Judge Armstrong’s decision, concluding that ‘the district court correctly held that an arbitrator [as opposed to the court] must decide whether [the claimants] have violated the [c]lass [a]ction [w]aiver.’ The Ninth Circuit reasoned that Postmates’ challenge to the claimants’ mass arbitration tactics fell outside the scope of the only exception to the delegation clause, which the Ninth Circuit determined is limited to claims that the class action waiver is ‘unenforceable, unconscionable, void, or voidable.’”
The end result? It may very well be a shift away from class action waivers. But it may also mean A LOT of work for arbitrators in the future. Have not doubt that there will be future arbitrations on this issue, as well as numerous court actions. This merits watching as time moves on.
