The New York Times writes about a way to get around the collective choice problem inherent in binding arbitration clauses — in effect turning them into class actions by combining forces.
Driven partly by a legal reformist spirit and entrepreneurial zeal, Mr. [Ted] Lidow and Mr. [Travis] Lenkner are leaders in testing a new weapon in arbitration: sheer volume. And as companies face a flood of claims, they are employing new strategies to thwart the very process that they have upheld as the optimal way to resolve disputes. Companies, in a few instances, have refused to pay the fees required to start the arbitration process, hoping that would short-circuit the cases.
Travis Lenkner’s law firm filed about 2,250 arbitration claims against DoorDash in one day.
“There is no way that the system can handle mass arbitrations,” said Cliff Palefsky, a San Francisco employment lawyer who has worked to develop fairness standards for arbitration. “The companies are trying to weasel their way out of the system that they created.”
Even as Supreme Court rulings over the last two decades have enshrined arbitration as the primary way that companies can hash out disputes, giving them enormous sway, consumer advocates and labor rights groups have criticized its inequities.
One of the biggest obstacles for consumers and workers is that payouts on individual arbitration judgments don’t justify the costs of mounting a complex case against a big company.
Some of the mass arbitration strategies may be changing that calculus.