Rise of Mass Arbitration Tactics Defeats Corporations at Their Own Game

In 2011, the United States Supreme Court transformed the field of class action litigation in the landmark case AT&T Mobility v. Concepcion. In a 5-4 decision, the Supreme Court held that agreements requiring consumers’ and employees’ claims to be arbitrated individually, as opposed to a class-wide basis, were enforceable and preempted state laws to the contrary. Following that decision, class action waivers requiring individual arbitration have become ubiquitous, with corporations launching an avalanche of successful motions to compel arbitration.

Forced to operate in an environment where their claims for collective relief are severely limited, consumers and employees have devised a creative tactic to fight against these limitations. As most arbitration agreements require companies to pay arbitration fees, plaintiffs have begun to file arbitration claims en masse as a litigation tactic. Notably, in 2018, over 12,000 drivers for Uber filed claims for arbitration, resulting in Uber becoming liable for $18.7 million solely in arbitration fees. Under this massive pressure, Uber and its drivers ultimately settled for $146 million.

Two recent decisions in California’s district courts signal that courts will likely be receptive to this tactic. In Abernathy v. Doordash, a putative class action brought by food-couriers alleging they were improperly classified as independent contractors rather than employees, the food-couriers filed over 5,000 claims for arbitration. Collectively, their claims triggered nearly $12 million in arbitration fees. Doordash refused to pay, leading to a motion to compel the arbitrations by the couriers. In a scorching decision compelling arbitration, U.S. District Court Judge William Alsup noted that such arbitration provisions have long been “taking away [plaintiffs] right to go to court” and have “tak[en] away their ability to join collectively to vindicate common rights.” A copy of Judge Alsup’s order granting the plaintiffs’ motion to compel can be found here.

In a similar litigation brought by food-couriers working for the delivery-based company Postmates, U.S. District Court Judge Philip Gutierrez rejected Postmates’ attempt to halt arbitration proceedings for over 10,000 couriers, holding that the proceedings must move forward. A copy of Judge Gutierrez’s order rejecting Postmates’ attempt to halt the arbitration proceedings can be found here.

Given the pervasiveness of class action waivers in consumer and employment agreements, as well as the judiciary’s recent receptivity to this litigation tactic, it is likely that courts will be seeing more of this tactic.