The plaintiffs’ bar has been trying to kill arbitration for more than a decade. But the courts have repeatedly rejected efforts to invalidate arbitration agreements. These lawyers have therefore switched to a different tactic: mass filing of arbitration demands.
When a single law firm or group of firms files 20,000 or 50,000 or 100,000 demands, does it really intend to resolve those claims on the merits? Or is the goal to use the costs of instituting an arbitration—which are disproportionately borne by companies when consumers or employees initiate arbitration—to coerce a settlement without regard to the merits of the underlying claim? If, for example, a company would immediately have to pay more than $10 million in fees upon the filing of 5,000 arbitration demands, just to be able to contest the merits, and thousands more for each claim that actually goes to arbitration—then paying a hefty settlement can seem like the only realistic option.
The U.S. Chamber of Commerce Institute of Legal Reform just issued a 75-page in-depth analysis of the mass arbitration phenomenon—Mass Arbitration Shakedown: Coercing Unjustified Settlements—that we authored. It documents the rise of mass arbitrations, the abusive consequences of these filings, and the ethical problems they present. We also suggest solutions that preserve the key benefit of arbitration—speedy, less-costly merit-based decisions—while also ensuring access to fair resolution of claims for injured consumers and employees.
Below the fold is a summary of the white paper.