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'Scared to Death' by Arbitration: Companies Drowning in Their Own System
Lawyers and a Silicon Valley start-up have found ways to flood the system with claims, so companies are looking to thwart a process they created.
Teel Lidow couldn't quite believe the numbers. Over the past few years, the nation's largest telecom companies, like Comcast and AT&T, have had a combined 330 million customers. Yet annually an average of just 30 people took the companies to arbitration, the forum where millions of Americans are forced to hash out legal disputes with corporations.
Mr. Lidow, a Silicon Valley entrepreneur with a law degree, figured there had to be more people upset with their cable companies. He was right. Within a few months, Mr. Lidow found more than 1,000 people interested in filing arbitration claims against the industry.
About the same time last year, Travis Lenkner and his law partners at the firm Keller Lenkner had a similar realization. Arbitration clauses bar employees at many companies from joining together to mount class-action lawsuits. But what would happen, the lawyers wondered, if those workers started filing tens of thousands of arbitration claims all at once? Many companies, it turns out, can't handle the caseload.
Hit with about 2,250 claims in one day last summer, for example, the delivery company DoorDash was "scared to death" by the onslaught, according to internal documents unsealed in February in federal court in California.
[ . . . . ] But a federal judge in San Francisco wasn't willing to go along with it. The judge, William Alsup, ordered DoorDash in February to proceed with the American Arbitration Association cases and pay the fees.
In a statement, a spokeswoman for DoorDash said the company "believes that arbitration is an efficient and fair way to resolve disputes."
But in a hearing, Judge Alsup questioned whether the company and its lawyers really believed that.
"Your law firm and all the defense law firms have tried for 30 years to keep plaintiffs out of court," the judge told lawyers for Gibson Dunn late last year. "And so finally someone says, 'OK, we'll take you to arbitration,' and suddenly it's not in your interest anymore. Now you're wiggling around, trying to find some way to squirm out of your agreement."
"There is a lot of poetic justice here," the judge added.
Ah! Gotta love judge Alsup. Back in SCO vs Novell, and in Oracle vs Google. Now this.
(Score: 0) by Anonymous Coward on Tuesday April 07 2020, @05:50PM
The idea behind arbitration isn't inherently wrong, the problem is that it's set up in a way that has a bunch of conflicts of interest. As long as the amount of money that the arbitrators agree to pay out affects their ability to get the next arbitration case, there's going to be pressure to inappropriately deny claims and keep awards smaller than they should be.
But, that being said, while arbitration is designed to have fewer protections, it's also designed to be faster and less expensive. Rather than spending money on a lot of lawyers and the like, the process from start to finish can come fast enough that people aren't destroyed, even when they do win their cases.
The issue more than anything else is that the arbitration is not something that people get a say in. All providers of certain types of services requiring arbitration should mean that it's not enforceable for any of them, unless the service is truly optional. For example, telecoms should be barred from doing so unless there's options for the customer that don't require it.