(Reuters) – Businesses concerned about the possibility of large-scale consumer arbitration should pay close attention to Verizon Wireless Inc’s new lawsuit before the US Court of Appeals for the Ninth Circuit.
Verizon is appealing the July 22 ruling. In that ruling, San Francisco U.S. District Judge Edward Chen dismissed Telecom’s motion to arbitrate a customer’s allegation that the company had fraudulently added an administrative fee to its monthly wireless bill.
As a matter of standard, Chen has determined that the arbitrator, not the arbitrator, has the power to determine whether a consumer contract is enforceable. He concluded that was not the case, as the Verizon contract contains a provision prohibiting consumers from arbitrating their claims together.
Verizon disputes all of Chen’s conclusions, and the contract’s incorporation of the rules of the American Arbitration Association (including the AAA rules, which delegate arbitrators to arbitrators) undermines the terms of the contract. It begins with his ruling that it does not deprive him of jurisdiction to assess. The firm argues that when contracts incorporate his AAA rules, there is overwhelming weight of jurisprudence for arbitrators to determine arbitrability disputes, even in consumer cases.
If Verizon persuades the Ninth Circuit Court of Appeals that Chen was wrong on the threshold issue, the Court of Appeals may not even have to comment on Verizon’s strategy to overturn the mass consumer arbitration. .
But when the Ninth Circuit considers the enforceability of Verizon’s so-called batch arbitration clause, it will be an important early test of the tactics businesses are likely to increasingly deploy in consumer contracts. Such clauses have been blessed by the Court of Appeals.
Verizon’s consumer contract essentially eliminates the ability of consumers to arbitrate en masse and negates leverage from the high initial arbitration fees that businesses are required to pay under the AAA rules. The telecommunications company’s consumer contract mandates that if more than 25 of her customers, represented by the same plaintiff’s company, file similar requests for arbitration, he arbitrates in batches of 10 at a time. It is defendant.
According to Verizon’s agreement, after the first 10 lead arbitrations, 10 more cases will be arbitrated if the parties are unable to reach a global settlement. This contractual process will continue until an overall resolution is reached or all cases are concluded by arbitration.
Verizon’s appeals attorneys for Paul, Weiss, Rifkind, Wharton, and Garrison told the Ninth Circuit Court of Appeals in a Nov. 21 statement that the system, which collectively handles just 10 cases at a time, would: “We have a fair and established process for resolving a large number of similar claims,” it said. In Verizon’s view, it will be the first trial in a multi-district litigation. The company acknowledged that limiting the number of cases to be arbitrated removes the pressure to settle settlements “in terrorism” in millions of dollars in arbitration costs. The batch testing process promotes efficiency and fairness, Verizon said.
Verizon told the Ninth Circuit Court of Appeals: “The pioneering process is designed to provide the parties with the information they need to reach a global settlement.”
The judge in the Verizon case did not view the company’s batching clause in this way. Chen said Hattis & Lukacs, the plaintiff company that filed the class action lawsuit against Verizon, not only seeks to assert consumer law claims against his 27 plaintiffs named in the lawsuit, but also against Verizon. said he represents more than 2,600 of his other customers. Chen says it would take him 156 years to hear all of Hattis & Lukacs’ clients if he was forced to arbitrate claims 10 at a time. .
“It is “unjustifiable” for Verizon to make consumers who have lawyers willing to represent them in such cases wait months or even years before filing a request for arbitration. It’s a win-win,’ says Chen. “The court has concluded that this provision is substantially unconscionable.”
Verizon attorney Kannon Shanmugam of Paul Weiss and plaintiffs attorney Daniel Hattis of Hattis & Lukacs declined to comment on the conscientiousness of the batch arbitration provision. We spoke with Warren Postman of Keller Postman, the pioneer of the campaign. (Postman is in the middle of a lawsuit challenging a similar batch arbitration clause in Live Nation Entertainment Inc’s consumer contract.)
According to Postman, his firm has encountered several versions of the provision that limit the number of arbitration cases that can proceed simultaneously. express. (Maria Glover, professor of law at Georgetown University Law Center, also outlined several types of corporate batch clauses in her final study on mass arbitration in the June 2022 Stanford Law Review. Glover said: We predicted that the lead-through process mandated by the batch clause would eventually resemble a class action or MDL model, after all, defendants “probably would prefer to go to court.”)
Companies appear to be designing provisions to increase the costs of prosecuting consumer claims while reducing their own defense costs, Postman said. “It could take 20 years,” he said. increase.”
Postman and Shannon Liss-Riordan of Lichten & Liss-Riordan said the Verizon lawsuit would send an important signal to companies about the legitimacy of bulk arbitration. “A lot of people are watching,” said Lys Riordan.
Our standards: Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect Reuters News’ commitment to integrity, independence and freedom from bias under its Trust Principles.
