Welcome back for another week of What's Next, where we report on the intersection of law and technology. This week, we look at how the world is reacting to mass arbitration. Plus, Congress considers another federal privacy bill. And the Ninth Circuit prepares to pare down the millions of plaintiffs in the class action against Qualcomm. Let's chat: Email me at [email protected] and follow me on Twitter at @a_lancaster.

Judge William Alsup, U.S. District Court for the Northern District of California

Mass Attacks on Arbitrations

A legal strategy of filing hordes of individual arbitration claims against a company at once—essentially turning a company's own arbitration agreements against it—is being tested in the U.S. District Court for the Northern District of California. Around 6,000 DoorDash couriers are pursuing mass arbitration against the third-party delivery company in two separate actions over employee misclassification claims. Whether DoorDash folds under the pressure of mounting arbitration fees could determine mass arbitration's fate as a failed experiment or a new litigation tactic.

Chicago plaintiffs' firm Keller Lenkner asked for a temporary restraining order against DoorDash after it required couriers to accept the terms of a new arbitration agreement in the app before picking up another gig. The new click-through agreement was rolled out one day after the American Arbitration Association closed out thousands of cases against DoorDash for failure to pay $4.275 million in filing fees. The updated contracts are governed by the International Institute for Conflict Prevention & Resolution, which recently released guidelines dictating it will select 10 "test" arbitrations when companies face more than 30 individual claims from employees over the same issue, and put the rest on hold.

In the end, Keller Lenkner withdrew its TRO motion after Gibson Dunn & Crutcher's James Fogelman clarified that couriers who opted out of the agreement could still bring their claims before AAA. Instead, U.S. District Judge William Alsup of the Northern District called DoorDash's attempt to "squirm out" of its own arbitration agreements "poetic justice," and granted expedited discovery to the parties.

Deborah Hensler, a dispute resolution expert and director of Stanford Law School's Law and Policy Lab, said mass arbitration is a trend she's seeing domestically and abroad. Long-term, Hensler expects corporations might decide the risks and costs of moving forward with mass claims in arbitration are greater than they are in court. In her view, that's a wise decision given courts' long history of figuring out how to deal with mass claims while providing due process and protections to both parties.

Companies might also attempt to change the mass claims processes within ADR services. "The large corporations that have invested so heavily in relying on arbitration might work with ADR providers and other groups to come up with a working set of procedures for mass claims, whether that looks like a class action or multidistrict litigation in federal courts," she said.

The growth of mass arbitration could depend on how initial cases such as the DoorDash proceedings go, Hensler said. Corporations are likely calculating the precedent they would set by settling a case like this in mass, she said. "They have to be worrying if they settle in this case, doesn't that suggest that in the future they would be willing to settle as well, so they'll see more of these claims?" she said.

Like Hensler, Jonathan Patchen, a Baker Botts partner in San Francisco specializing in technology, complex litigation and arbitration, said large businesses that use arbitration agreements might decide class actions are the lesser of two evils in a world where the alternative is mass arbitration.

Patchen said he could foresee this mass arbitration strategy as part of a larger challenge against arbitration as an institution.

"Mass arbitrations could potentially be a large revenue source for ADR service providers and that could create competition amongst providers to get that business, for example by developing a specialty for such arbitrations or changing rules and procedures in a way favorable to the party which selects the ADR service provider—which is usually the business," he said.

When combined with the U.S. Court of Appeals for the Ninth Circuit's decision in Monster Energy Co. v. City Beverages—a ruling that outlined what counts as a "substantial business relationship" between neutrals and ADR participants, and that requires neutrals to disclose their ownership stake in their ADR organizations with parties before them—companies' ability to control the forum could unleash a host of fairness challenges, he said.

"One big benefit of arbitration, the finality, is suddenly a lot less final if the existence of mass arbitration raises the risk of impartiality challenges," he said. "If 97 matters over a five year period is a 'substantial business relationship,' in Monster, one can imagine the bias arguments to be mounted against an arbitration award when the number of matters is in the hundreds or thousands, even if the specific arbitrator is not an owner of the service provider. While those awards might not be vacated, there's certainly a higher level of uncertainty around them than normally would exist.

Congress Attempts to Patch Up America's Privacy Problem

Last week, lawmakers floated yet another possible privacy reform law, and today, senators will weigh the merits of this legislation and other proposals intended to help lock down consumers' user data.

A couple days before many of us were stuffing ourselves with turkey and mashed potatoes, Sen. Maria Cantwell, D-Washington, introduced a bill that would give the Federal Trade Commission more latitude to hold Big Tech's feet to the fire for its privacy sins. The senator's press release said the bill would provide a sort of "Miranda Rights" for privacy, and quoted Georgetown Law professor and former FTC Bureau of Consumer Protection director David Vladeck.

"The bill not only codifies privacy as a right—a measure long overdue—but it also recognizes that 'rights' that are unenforceable are empty gestures," Vladeck said in the release. "For that reason, the bill not only restores control of personal information to consumers, but equally important, the bill gives consumers and the Federal Trade Commission real tools to hold companies accountable when they collect information without permission, when they fail to reasonably safeguard consumers' information, or when they misuse that information."

Cantwell's proposal departs from an October bill from Reps. Anna Eshoo and Zoe Lofgren of California, which would establish a federal agency charged with protecting consumer privacy.

Both bills will be up for discussion this morning at 10 a.m. ET in front of the Senate Committee on Commerce, Science, and Transportation, where Cantwell is the top-ranking democrat.

We'll be hearing from Laura Moy, professor and executive director of Georgetown Law Center on Privacy & Technology; Michelle Richardson, the Center for Democracy and Technology's director of privacy and data, as well as in-house counsel for Walmart and Microsoft.

Meanwhile in California, lobbyists, attorneys and trade groups opined on the lack of clarity in the state's Consumer Privacy Act as the Jan. 1 enforcement date looms, reports Law.com's Cheryl Miller. At a Sacramento hearing for public comment on the law, some members of the business community took issue with vague language that disclosures must be "easy to read and understandable to an average consumer."

"This is subjective and does not contemplate a method or metric to ensure readability," Mark Vinella, vice president of compliance and risk management at Travis Credit Union, said Monday.

Check out Cheryl Miller's Higher Law dispatch, a weekly briefing untangling compliance issues and regulatory developments around marijuana legalization.

Nationwide Qualcomm Class Action Likely Doomed

Federal judges didn't sound too keen on the scope of a nationwide class action against chip manufacturer Qualcomm encompassing a cool 250 million cell phone users.

A panel for the U.S. Court of Appeals for the Ninth Circuit suggested the possibility of narrowing the class to California, reports Skilled in the Art's Scott Graham.

"It seems like this argument does not undermine a statewide action in California, and perhaps even a larger class action that included other states whose law [is] similar," Ninth Circuit Judge Ryan Nelson told Keker, Van Nest & Peters partner Robert Van Nest, who represents Qualcomm.

Reducing the class would unravel an order from U.S. District Judge Lucy Koh of the Northern District of California certifying the class after deciding plaintiffs presented "compelling" evidence that Qualcomm used its position in the modem chip market to demand inflated royalties for its standard-essential patents, which the class members argue were eventually passed along to them.

Van Nest said Koh federalized California's antitrust policies by allowing them to apply to a national class of consumers.

Nelson agreed. "You have multiple state law issues that make uniformity of the law in one nationwide class action impracticable," he said.

On the Radar

Using Metrics to Fight Megaverdicts Some in-house legal departments are wielding artificial intelligence and predictive analytics to duck "nuclear verdicts." The insurance industry in particular is using these high-tech tools to sidestep unexpectedly high jury awards. However, as legal departments develop a metrics-based approach, law firms might have to follow suit. "For me, a meeting with a firm not using any tools is kind of a disqualifier. No matter how great a firm is, they are working with a small data set and if they are not using the tools it is unlikely I would add them," said Damon Hart, Liberty Mutual senior vice president and deputy general counsel for litigation. Read more from MP McQueen here.

What You Don't Want to Know, But Should Know About Ransomware When it comes to ransomware attacks, the legal and security communities have to confront some ugly realities on a daily basis. Negotiations can buckle when bad actors aren't true to their word, and cities and law firms, whose records are brimming with sensitive data, have giant red targets on their backs. Allow these five ugly truths gleaned from ransomware experts to sink in. Read more from Frank Ready here.

Lawyers Could Make Bank on Mexico's Fintech Boom Attorneys with financial technology experience were in high demand in Mexico this fall, as companies scrambled to meet a September regulatory licensing deadline. However, nearly half of the 515 fintech firms in Mexico might still require an operating license, according to the Mexican banking commission called CNBV. Some lawyers say fintech could take off in parts of Latin America with remote communities and limited access to traditional banking methods. And Mauricio Ocampo, founding partner of law firm Techno Law Geek in Mexico City, said the country's fintech boom has just begun. Read more from Amy Guthrie here.

Thanks for reading. We will be back next week with more What's Next.