Duane Morris Class Action Review - 2023 - Report - Page 82
G.
Enforceability Of Mass Arbitration Provisions
When arbitration agreements include class action waivers, some plaintiffs’ attorneys
have opted to pursue mass arbitration by filing hundreds if not thousands of claims in
arbitration. Companies defending such claims are thus compelled to incur the costs of
defending not just a single class proceeding, but rather a multiplicity of actions, and to
pay associated steep arbitration fees. Adding a mass arbitration provision to an
arbitration agreement may serve to streamline those proceedings, facilitate resolution,
and limit exposure, if the provision is well crafted.
One such mass arbitration provision was found substantively unconscionable in
MacClelland, et al. v. Cellco Partnership, 2022 U.S. Dist. LEXIS 116895 (N.D. Cal. July
1, 2022). Twenty-seven plaintiffs instituted arbitration proceedings, alleging that Verizon
Wireless was deceptively tacking on administrative fees to their monthly wireless bills.
Plaintiffs’ counsel represented nearly 2,700 additional plaintiffs all intending to pursue
similar claims. Verizon’s consumer contract mandated that if more than 25 customers
who are represented by the same plaintiffs’ firm file similar demands for arbitration, the
cases are to be arbitrated in batches of only 10 at a time, five picked by plaintiffs’
lawyers and five by Verizon. Critically, cases not yet filed could not be filed until the
initial ten claims were resolved, and the arbitrator could enjoin mass filing of arbitration
demands. In denying Verizon’s motion to compel arbitration, the court held this mass
arbitration provision was substantively unconscionable because it required consumers
to wait months, or years, before they could submit a demand for arbitration. Indeed, the
court noted that, if all 2,700 plus claims proceeded in batches of 10 cases at a time, it
would take 156 years to give them all a hearing. The court was all the more concerned
because there was no tolling provision in the agreement, and thus some claims would
become time-barred during the delay. The court contrasted Verizon’s mass arbitration
provision with a mass arbitration provision modeled off the Employment-Related Mass
Claims Protocol of the International Institute for Conflict Prevention & Resolution, which
courts have enforced. The court noted that “[i]t is one thing to set up a bellwether
system to adjudicate a group of cases with the purpose of facilitating global or
widespread resolution via ADR. It is another to formally bar the timely adjudication of
cases that do not settle.” Id. at *10.
Of note, Verizon has appealed the ruling to the Ninth Circuit, and filed its opening brief
in November 2022. The mass arbitration provision was just one of five clauses in the
contract that the court found substantively unconscionable and thus there is no
guarantee the Ninth Circuit will even reach Verizon’s arguments on this particular issue.
H.
The FAA’s Intersection With Other Statutes That Implicate Class Actions
Finally, courts issued rulings in two cases of note in 2022 that explore the FAA’s
protection of the right to arbitrate disputes in light of other federal statutes that provide
for the right to pursue class action and other representative forms of litigation.
First, the Sixth Circuit considered the intersection between the Class Action Fairness
Act (CAFA) and the FAA. The CAFA provides rules for when class actions brought in
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Duane Morris Class Action Review – 2023
