Mass arbitrations have become the new class actions and a multi-million-dollar headache for many companies. When plaintiffs' lawyers, representing thousands of claimants, submit tens of thousands of mass arbitration claims, companies are traditionally required to front the filing fees even though there may never be an arbitration and the potential damages can be a fraction of these filing fees. Even Amazon was faced with a bill for tens of millions of dollars in filing fees for 75,000 individual arbitration demands.
General counsels and their outside counsel have done legal gymnastics to solve the upfront arbitration filing fees problem. Most leading arbitral firms slowly realized that it was unfair to charge companies millions in filing fees for arbitrations that will probably settle, so they reduced their fees and created procedures that require a mix of "batch arbitrations," mediation and bellwether cases. Unfortunately, these new procedures are still too expensive, too slow and fail to give claimants uniform treatment and quick compensation. They also do nothing to address the problem of the company having to pay filing fees for a substantial number of bogus claimants. Here are a few steps FedArb has made to address some of the issues in this process.
Step 1: Pre-Filing Fee Motion to Dismiss. A common problem is that the list of potential claimants submitted to the company contains a significant percentage of (a) duplicate claimants, (b) claimants who were not customers or employees, or (c) claimants who have failed to comply with the informal dispute procedures agreed to by the parties. Instead of requiring the company to first pay filing fees for such improper claimants and then moving to have the arbitral tribunal dismiss the claimants, FedArb's procedures are geared to eliminate improper claimants before they have to pay any filing fees. Specifically, the company will meet and confer in good faith with claimants' counsel to identify all improper claimants (for example, eliminate all claimants who were not employees). If there are any remaining issues regarding the validity of the claim or the claimants, the company can then bring a motion before FedArb. Only after FedArb rules on the motion will FedArb then invoice the company, consistent with the ruling on the motion to dismiss.
Step 2: Consolidating and Resolving all Common Issues via an "MDL" type process. All individual arbitrations are stayed for a panel of 1-3 former respected former federal court judges selected by the parties to decide all legal, discovery, and other issues that are common to all claimants. These decisions are binding on all claimants.
Step 3: Individual claims resolved through a Claims form or expedited arbitration. In cases involving statutory damages, most mass claims will be resolved when each claimant provides individual information in a claims form. However, if necessary, any individual issues can be arbitrated using FedArb's expedited arbitration procedures.
While we applaud the creativity of other arbitral institutions to fashion new rules with multiple steps, we prefer the advantages of a straightforward system that is familiar to litigants: Motion to Dismiss followed by MDL Procedures decided by a panel of former federal judges; then individual arbitrations if the remaining issues cannot be resolved through a class action type electronic claims form.
The ADR-MDL™ process has numerous advantages. First there is uniformity as all claimants will be treated identically. Second, using a panel of respected former federal judges helps ensure the results are reasoned and based on the law. Third, it provides the opportunity to reduce any individual issues to factual matters that could be addressed in an electronic claims form, as is done in class action litigation. As a result, there may be little need for individual arbitrations, thereby greatly reducing costs and saving millions in arbitration fees. Lastly, by embracing a procedure that back-ends individual issues, the front-end costs and administration expenses are significantly reduced. FedArb's process reduces costs and gets money to a company's employees and customers in a uniform, fair and expeditious manner.
