Consumers turn tables against corporate defense in compelled arbitration of information privacy claims

Image via www.vpnsrus.com by Mike MacKenzie CC BY 2.0

Consumer plaintiffs turned the usual tables on corporate defense in the fall when a federal court in Illinois ordered Samsung Electronics to pay millions of dollars in arbitration fees in a biometric privacy case.

In the underlying arbitration demand, 50,000 users of Samsung mobile devices accuse the company of violating the Illinois Biometric Information Privacy Act (BIPA). BIPA is a tough state privacy law that has made trans-Atlantic waves as it fills the gap of Congress's refusal to regulate the American Wild West of consumer privacy.

Typically of American service providers, Samsung endeavored to protect itself from tort liability through terms and conditions that divert claims from the courts to arbitration. The (private) U.S. Chamber of Commerce champions the strategy. Arbitration is reliably defense-friendly. Rumor has it that arbitrators who don't see cases corporations' way don't have long careers. And companies bask in the secrecy that shields them from public accountability. (Read more.)

Resistance to compelled arbitration has been a rallying cause of consumer advocates and the plaintiff bar. For the most part, resistance has been futile. But consumer plaintiffs appear to have a new strategy. The Chamber is not happy.

In the instant case, consumers alleging BIPA violation were aiming for arbitration. Arbitration rules, endorsed by Samsung's terms, require both sides to pay toward initial filing fees, a sum that adds up when 50,000 claims are in play. The consumers' attorneys fronted their share, but Samsung refused. The company weakly asserted that it was being scammed, because some of the claimants were deceased or not Illinois residents, both BIPA disqualifiers.

Samsung must pay its share of arbitration filing fees for living Illinois residents, the district court answered, at least those living in the court's jurisdiction. Many of those consumer claimants were identified with Samsung's own customer records. A few whom Samsung challenged, the claimants dropped from their number. Even when the court pared the list to consumers in Illinois's federal Northern District, roughly 35,000 were still standing.

"Alas, Samsung was hoist with its own petard," the court wrote, quoting Shakespeare. The court opined:

Samsung was surely thinking about money when it wrote its Terms & Conditions. The company may not have expected so many would seek arbitration against it, but neither should it be allowed to “blanch[] at the cost of the filing fees it agreed to pay in the arbitration clause.” Abernathy v. Doordash, Inc., 438 F.Supp. 3d 1062, 1068 (N.D. Cal. 2020) (describing the company’s refusal to pay fees associated with its own-drafted arbitration clause as “hypocrisy” and “irony upon irony”).

The American Arbitration Association, the entity with which the claimants filed pursuant to Samsung's terms, estimated Samsung's tab at $4.125 million when the number was still 50,000 claims.

Attorneys Gerald L. Maatman, Jr., Rebecca S. Bjork, and Derek Franklin for corporate defense firm DuaneMorris warned:

As corporations who employ large numbers of individuals in their workforces know, agreements to arbitrate claims related to employment-related disputes are common. They serve the important strategic function of minimizing class action litigation risks. But corporate counsel also are aware that increasingly, plaintiffs’ attorneys have come to understand that arbitration agreements can be used to create leverage points for their clients. Mass arbitrations seek to put pressure on respondents to settle claims on behalf of large numbers of people, even though not via the procedural vehicle of filing a class or collective action lawsuit. As a result, corporate counsel should carefully review arbitration agreement language with an eye towards mitigating the risks of mass arbitrations as well as class actions.

Samsung wasted no time appealing to the Seventh Circuit. The case has drawn a spate of amici with dueling briefs from the Chamber and associates, favoring Samsung, and from Public Justice, et al., favoring the consumer claimants.

The district court case is Wallrich v. Samsung Electronics America, Inc. (N.D. Ill. Sept. 12, 2023), opinion by Senior U.S. District Judge Harry D. Leinenweber. The appeal is Wallrich v. Samsung Electronics America, Inc. (7th Cir. filed Sept. 25, 2023).

International arbitration, U.S. common law collide in skilled student note

I have been remiss not to mention earlier an incisive work on arbitration law by Chad Yates, '19. "Manifest Disregard in International Commercial Arbitration: Whether Manifest Disregard Holds, However Good, Bad, or Ugly" is available online from 13:2 UMass Law Review.  Here is the abstract.

Manifest disregard is a common law reason for not enforcing an arbitration award. This principle applies when the arbitrator knew and understood the law, but the arbitrator disregarded the applicable law. Presently, the United States Supreme Court has not made a definite decision on whether manifest disregard is still a valid reason for vacating the award (known as “vacatur”), and the Court is highly deferential to arbitrator decisions. Consequently, the lower courts are split on the issue. For international commercial arbitration awards, manifest disregard can only apply to a foreign award that is decided under United States law or in the United States. This Note will argue that manifest disregard should still apply to arbitration awards. However, arbitration contract clauses would be improved with the addition of language for appeals based upon manifest disregard to an arbitration appeals tribunal. The customary goal of arbitration is to provide a confidential, cost effective and expedited resolution of contract disputes. Therefore, an arbitration contract clause requiring that an appeals tribunal decide all manifest disregard questions would further these traditional arbitration goals.

Mr. Yates excelled in my 1L Torts class two years ago and also in Comparative Law (co-taught by the better regarded Dean Peltz-Steele).  I admit that my delay in reading this article is owed to my own shortcoming, as I suffer from commercial legis MEGO disorder.  I nevertheless recognize this article as well worth the, uh, investment, especially if commercial arbitration is your jam. Moreover, I am hopeful that Chad will get around to publishing some of the excellent research he's done on India in comparative law.  You can get a flavor of that work from his January entry on the UMass Law Review blog, "Comparative Law for India: The U.S. Digital Media Sales Company’s Destination for Business Process Outsourcing."  See also more on the blog.

A shout out of gratitude to Perry S. Granof, of Granof International Group, contributor of the chapter, "Introduction to Alternative Dispute Resolution in International Business Transactions," to the book, Resolving Insurance Claim Disputes Before Trial (ABA TIPS 2018).  The consummate colleague and an exceptional lawyer, Perry generously lectured my Comparative Law class via Zoom, on the subject of international arbitration, and fueled Chad's interest in the area.

EEOC withholds records in arbitration matters; corporate frustration with secret justice is ironic

Janet Dhillon

According to employers' lawyers, the Equal Employment Opportunity Commission (EEOC) is denying public access to investigation files in matters committed to arbitration, even while conceding that files in litigation matters must be disclosed under the federal Freedom of Information Act (FOIA).

Yesterday the Labor and Employment Law Practice Group of the Federalist Society held a teleforum with the provocative title, "Is the EEOC misusing the Freedom of Information Act to penalize employers that adopt mandatory employment arbitration programs?" Here is the description:

The EEOC is denying employers' FOIA requests for the EEOC's charge investigation files when resulting employment claims are proceeding in arbitration rather than litigation. Our panel will discuss whether the EEOC's justifications for denying such FOIA requests are consistent with FOIA and other governing federal statutes. We will consider a number of related issues. What is the EEOC's basis for treating litigation and arbitration differently in responding to employers' FOIA requests?  How long has the EEOC been making this distinction between litigation and arbitration? In light of the increasing prevalence of employment arbitration, should employers challenge the EEOC's FOIA practices and, if so, how?

Speakers included EEOC Commissioner Janet Dhillon and Jones Day attorney Eric Dreiband.

I regret, I didn't make it. My guess is that the EEOC is denying access on basis of the various exemptions for law enforcement investigation records, besides deliberative process. Without having heard either side of the debate, my inclination, probably like Dreiband's, is to doubt seriously the viability of any asserted distinction between arbitration and litigation.

What I find compelling about the case, though, is less the effort at FOIA exemption and more the irony of corporations being stymied on transparency and accountability when mandatory arbitration is a choice of their own design.

I wrote just yesterday about the problem of arbitration superseding litigation as our principal means of dispute resolution. And the fact that arbitration happens in secrecy is a big part of that problem. In litigation, the tort system achieves the important objectives of norm-setting and deterrence, besides the anti-vigilantism I mentioned yesterday. Norm-setting and deterrence, in turn, avert tortious conduct by the same respondent and other actors in the future. Secret justice undermines these objectives. Even the same bad actor can persist in its misconduct without risk of punitive consequences.

I don't approve of selective opacity by EEOC. But there's a scrumptious hypocrisy in companies wanting transparency and accountability in public enforcement mechanisms while they jealously secret their own dirty laundry against the public functions of the courts.

The Death of Civil Justice: It Was a Good Run, 900 years

Opening panel at Anglia Ruskin University Sports Law 2016: Leonardo Valladares Pacheco de Oliveira, Ian Blackshaw, Tom Serby, Andrew Smith, and Antoine Duval

Last week I was privileged to attend a tremendous one-day Sports Law program at Anglia Ruskin University in Cambridge, UK, focusing on the question, “the future of ‘the legal autonomy’ of sport.”  Experts in the academy and in practice gave timely and informative commentary on contemporary sport governance from perspectives of contract law, politics, and dispute resolution. 

Though justifiably through the lens of sport, the program raised a broader and important question concerning the future of civil justice.  Dispute resolution in international sport today is the province of the Court of Arbitration for Sport (CAS), in Lausanne, Switzerland, under the very loose supervision of the Swiss Federal Tribunal.  CAS has a complicated relationship with international sport governance organizations such as the IOC and FIFA.  Certainly the court is not their stooge.  At the same time, through the magic of contract law, the mandatory use of the arbitration system carries down through the echelons of world sport from the IOC to the national sporting federation, and all the way to the athlete.

Transnational sport governing bodies, such as the IOC and FIFA, want their disputes handled in this single channel, because it renders them largely immune to oversight by the democratic instrumentalities of the world’s governments, especially the courts.  The transnationals have legitimate and less legitimate motivations.  They fairly worry about potential liability in multitudinous courts, each national judiciary applying its unique domestic law anchored in local priorities and prejudices.  Bypassing national legal systems, the transnationals can conserve resources for objectives in the public interest, such as sport for development and peace, and the promotion of human health and competitive achievement.  The logic supporting consolidation of international dispute resolution under one supra-national banner is the same by which the U.S. Constitution places interstate commercial disputes in U.S. federal courts, supervening the potential vagaries and favoritisms of the states.

But international arbitration has its dark side—in fact, nearly literally, as CAS operates in the opacity that typically surrounds arbitration.  Observers, including journalists and NGO watchdogs, grow frustrated and skeptical, as secrecy breeds unfairness and unaccountability.  This problem is the same that has generated angst within the United States over the “secret justice” system that has so thoroughly superseded the civil trial—see the excellent work of the Reporters Committee for Freedom of the Press in its Secret Justice series, linked from here. 

Further threatening the integrity of these proceedings, the contracts that bind parties to arbitration, and are then construed in arbitration, generally are adhesion contracts: drawn up by the transnationals themselves, weighted to their favor, and presented as fait accompli to young athletes with Olympic gold medals dancing in their dreams.  Barrister Andrew Smith, Matrix Chambers, conceded that these contracts are not meaningfully negotiated.  Their acceptance at the international level apparently marks the same phenomenon that has been documented with alarm, but as yet no serious reform, at the consumer level within the United States in works such as Nancy Kim’s Wrap Contracts and Margaret Jane Radin’s Boilerplate.

Upon my inquiry, Smith pointed out that for many reasons, athletes, given the choice, would themselves prefer arbitration to redress in the courts.  A plaintiff often desires secrecy as much as a defendant.  An expert arbiter might be more likely than a civil court to reach a conclusion that recognizes the nuances of divided merits, rather than erring in favor of dismissal as against the plaintiff’s burden of proof.  Though affordable representation for claimants has been a problem for the CAS system, organized arbitration systems still do a better job looking out for claimant’s access to representation than the usual civil court.  And most important to potential litigants are the time and costs of civil justice, often prohibitive deterrents that make faster and cheaper arbitration more appealing.

Nevertheless, panelists agreed that for the arbitration system to work fairness, stakeholders including athletes must take part in developing the process.  Conference organizer Tom Serby of Anglia Law School emphasized the need for democratization of sport governing bodies.  Smith said that organization of athletes into representative bodies is essential, noting with approval that “the United States is farther along with collective bargaining.”

With disparate levels of enthusiasm for the merits of judicial abstention, three speakers—Serby; Antoine Duval of the Asser Institute,Den Haag; and Simon Boyes of the Centre for Sports Law atNottingham Law School—all opined that national courts have been generously deferential to private dispute resolution in international jurisdiction.  Quotes from the iconic British jurist Lord Denning were offered both for and against the position.  Denning on the one hand bemoaned the courts’ relative lack of expertise in matters of private regulation, respecting the brightly formalist lines of conserved judicial power.  On the other hand, he declared, as quoted in Baker v. Jones, [1954] 1 W.L.R. 1005, “‘If parties should seek, by agreement, to take the law out of the hands of the courts and put it into the hands of a private tribunal, without any recourse at all to the courts in case of error of law, then the agreement is to that extent contrary to public policy and void.’”  Duval and Boyes mapped the ground between, where court intervention seems justified.  Boyes boiled down viable grounds to the protection of natural justice, human rights, and free competition and trade.

Incidentally the same autonomy question was taken up in similar dichotomy by Judge Richard Matsch and then the Tenth Circuit in Hackbart v. Cincinnati Bengals, Inc., 435 F. Supp. 352 (D. Colo. 1977), rev’d & remanded, 601 F.2d 516 (10th Cir. 1979).  Asked to intervene after an on-field altercation, Judge Matsch opined, on the “larger question” of “the business of professional football” and “the business of the courts,” that “the courts are not well suited” to allocate fault or probe causation.  For fear of excessive litigation and inconsistent rulings, any “government involvement” in the “self-regulated industry” of professional football was, in Matsch’s view, “best considered by the legislative branch”—Denning-like formalism.  Instead applying the law of recklessness to the dispute at hand, the Tenth Circuit disagreed.  Persuasive was the oft quoted reasoning of the Illinois Appellate Court in Nabozny v. Barnhill, 334 N.E.2d 258, 260—if a decision about teen athletes playing that other kind of football—that “some of the restraints of civilization must accompany every athlete onto the playing field.”

Well intentioned aspirations for meaningful athlete-as-stakeholder involvement and debate about the selective intervention of courts all gloss over the broader and more troubling trend of public, civil justice eclipsed by the private sphere.  I confess that what troubled me most about the sports lawyers’ commentaries on arbitration and autonomy was a problem beyond the scope of their charge: the disappearance of civil justice in our society at large.

Plenty has been written at the national level about vanishing civil justice and the rise of private dispute resolution.  But as the realities of globalization decree that every dispute becomes an international one—whether a youthful athlete against an international federation, or a homeowner against a floorboard maker—it it seems that public civil justice is dying.  Blind deference to adhesion contracts is hastening the trend, and the courts seem plenty eager to stand by and cede power.  They purport to further the laudable aims of deference to experts or freedom of contract.  But courts have always been in the business of second-guessing professed experts, and the contemporary commercial contract is hardly a product of free choices.

Dystopian science fiction in popular culture has in recent years flourished upon an obsession with burgeoning social angst over the corporatization of public life.  In 2013 and 2014, the Canadian TV series Continuum traced the personal struggle of an anti-terrorism agent who came to doubt the virtue of the corporate-dominated future she was sent back in time to protect.  Themes of abusive corporate supremacy and submissive, corrupted government dominate the visions of current hits, such as Killjoys and The Expanse, the latter based on the novels of James S.A. Corey.  The next year will see the premieres of Incorporated, a dark Matt Damon-Ben Affleck project, and the plainly titled Dystopia, which imagines 2037: “Governments are now powerless puppets for the biggest corporations.”

Western democracy has 900 years of experience developing a public system of civil justice to patrol the boundaries of right and wrong among us.  We ought not jettison that system so readily, nor so casually.  We ought not capitulate to the conveniences of globalization, nor certainly to the burdens of transaction costs.  Would that we spend more time and energy trying to fix the public system that we have rather than ushering it into the past and replacing it with the corporatized private justice of our nightmares.

Whitehouse laments mandatory arbitration, civil jury woes; SCOTUS-nominated Jackson does not engage

Senator Sheldon Whitehouse (D-R.I., one of my state senators) just questioned U.S. Supreme Court nominee Judge Ketanji Brown Jackson on the importance of the civil jury.

(I wrote recently about Judge Jackson's trial court record, here and here.)

Tort law does not usually figure much into U.S. Supreme Court confirmation hearings, so when it does, it's worth paying attention. While tort law can be implicated directly in the work of the U.S. Supreme Court, for example, in the application of federal common law in admiralty, tort law is more likely to make an appearance ancillarily to constitutional law, the area of senators' greatest interest in the confirmation process.  

Those appearances of tort law usually are indicative of the interests of the day.  When gun control and the Second Amendment were hot topics in the 20-aughts, tort law made cameos in questioning about the defenses of self and property.  Senators have been interested periodically in the scope of civil rights law to combat gender discrimination.  Dialog on that point has imported principles of causation, because civil rights law, especially in private remedies, borrows both procedural and substantive machinery, including limiting principles, from common law tort.

At about quarter to one in the extended morning of today's confirmation hearings, Senator Whitehouse sought Judge Jackson's endorsement, which she gave, of statements on the importance of the civil jury.  The Seventh Amendment to the U.S. Constitution guarantees a right, if qualifiedly, to a civil jury, and the mechanism was famously admired by Alexis de Tocqueville in Democracy in America (1835).  Yet the institution has been a waning feature of American civil justice, largely as an incidental function of the dramatic decline in civil trials during the 20th century, but also as a deliberate effect of corporate America's embrace of mandatory arbitration.

Mandatory arbitration, removing cases from the courts upon the purported consent of consumers and victims of tortious wrongdoing and breach of contract, has been a preoccupation of consumer protection advocates and anti-tort reformers (or plaintiff-side "tort reformers"), such as Ralph Nader.  (The issue was among those addressed by the documentary Hot Coffee in 2011, particularly in the painful context of purported consent to dispute resolution in event of criminal sexual assault.  Unfortunately, because the point hardly diminishes the problem on the merits, the story highlighted in the film was later challenged as a possible fabrication.)  Among the many shortcomings of arbitration as a mechanism in the service of justice that rub me the wrong way, besides its overwhelming favoritism for corporate respondents, is the lack of transparency, which allows wrongdoers to persist in misconduct in defiance of public accountability.

Senator Whitehouse has been focused lately on what he perceives to be politicization of the judiciary through the use of "dark money," that is, money of unknown or vague origin, to influence the appointment (and in some states, election) of judges, typically to further the interests of big business.  Whitehouse wrote about the problem in the Yale Law Forum in 2021, and I recently wrote about Whitehouse writing about the problem.  He talked about that issue both in his opening remarks on the Judiciary Committee yesterday and at the start of his questioning today.  This focus is a natural extension, and broadening, of his concern over civil juries, about which he wrote also, in a law review article for William & Mary in 2014.

I created a C-SPAN clip from today's hearing.  C-SPAN has a transcript below it, but be warned, the automated system made some egregious errors, e.g., reading "civil juries" as "simple majorities."

Frankly, I didn't care for Judge Jackson's response.  Her initial reflection about citizens sitting in judgment over one another seemed to speak to the criminal trial.  She failed to acknowledge the separate, separately important and separately threatened, civil dimension on which Whitehouse was focused.  When he pressed her again on the question, in relation to the risk of jury tampering, her response, again, was painfully generic and indicated no recognition of the particular problem of the vitality of the civil jury.  On a third go, Whitehouse explicitly cited mandatory arbitration, the Seventh Amendment, the employment context, and corporate power.  Judge Jackson had no opportunity to respond.

I simply can't tell whether Judge Jackson was unclear on what it is Whitehouse is worried about, or she was simply trying, presumably upon handlers' instructions, to remain utterly bland and uncontroversial in any declaration.  Whitehouse thanked Jackson for answering his questions with clarity and expressly recognizing the importance of the civil jury.  But she had not. 

After the exchange, Senator Dick Durbin (D-Ill.) noted pending legislation that would override purported consent to mandatory arbitration in sexual assault matters.  The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 was signed by the President on March 3: a welcome change, a long time coming (since Hot Coffee; #MeToo revived the appetite), though redressing only a sliver of the mandatory arbitration problem.  Durbin was talking about, I assume, the Forced Arbitration Injustice Repeal (FAIR) Act, which, as H.R. 963, narrowly passed in the House, 222-209, just last week.  Its companion S.505 has been long pending in the Judiciary Committee.  The FAIR Act would apply to employment and consumer disputes.

Incidentally, just before the jury discussion, Senator Whitehouse asked Judge Jackson whether it is ever appropriate for an appellate court to do fact-finding outside the record.  She said that she knew of no such occasion.  Neither of them referred to, nor, doubtless, even thought about, the latitude afforded appellate courts to research the law of foreign jurisdictions, which is treated for most purposes as a question of fact.  I note the issue only because American appellate courts' unwillingness to investigate foreign law in cases in which it is implicated often impedes the attainment of justice in the jurisdictionally transnational cases increasingly generated by globalization, not only in corporate matters such as business contract disputes, but in family law and civil rights.

The Sullivan question has come up today, too, this afternoon by Senator Klobuchar (D-Minn.).  She seemed to suggest that journalists' lives will be put at risk without the "actual malice" standard.  Never mind the reputations and careers that have been ruined in the name of protecting press negligence and blissful ignorance.  I don't have the stomach today to tackle such uninformed melodrama.  As one might expect, Judge Jackson stuck close to tried-and-true principles of stare decisis.

Uber suffers high court loss, but binding arbitration, blanket disclaimers still devastate consumer rights

Image by Mike Lang CC BY-NC-SA 3.0

Signs of life were spotted on the dead planet of consumer rights in click-wrap agreements. But don't get too excited; the life is microbial and already has been exterminated by the corporatocracy.

A blind man who was refused Uber service because he had a guide dog was successful in the Massachusetts Supreme Judicial Court last week in voiding loss of his disability discrimination claim because Uber failed to give him sufficient notice of its terms and conditions compelling defense-friendly arbitration.

Uber can easily correct its notice problem—and likely has already; this plaintiff signed up in 2014—so the rest of us are out of luck if we have an Uber problem.  But the plaintiff's rare win exposes the abject failure of federal and state law to protect consumer rights against gross overreach by online service providers.  And the case arises amid a deluge of reported ride-share sexual assaults, from which service providers have been widely successful in washing their hands of legal responsibility.

In the instant case, the Massachusetts high court followed 2018 precedent in the First Circuit, also applying Massachusetts law to the same Uber interface, to conclude that Uber's means of obtaining the plaintiff's consent to the app's terms and conditions (T&C) in 2014 fell short of the notice required to bind a consumer to a contract.

Uber required ride-share passengers to assent to the T&C by clicking "DONE" after entering payment information.  The court explained that the focus of the app's virtual page was on payment, and the language about the T&C, including the link to the terms themselves, was marginalized in page location and diminished in type size.  (The law gives the plaintiff no special treatment because of his blindness, and the case suggests no contrary argument.)  Uber knew how to do better, the Court reasoned, because drivers signing up with the app plainly must click "I AGREE" to their T&C: an easy fix for app makers.

The Court adopted for the Commonwealth what has become widely accepted as the two-part test for online T&C contract enforcement, "[1] reasonable notice of the terms[,] and [2] a reasonable manifestation of assent to those terms."  It is not necessary that a consumer actually read, or even see, the terms.  The Court acknowledged research (Ayres & Schwartz (2014); Conroy & Shope (2019)) showing that a vanishing number of consumers ever read, much less understand, T&C.  But the law requires only that the consumer be given the opportunity.

This approach to "click-wrap" agreements, kin to "browse-wrap" agreements, dates back to "shrink-wrap" agreements, by which a consumer could be bound to hard-copy license terms upon opening a product box, and earlier to the simple doctrine in analog contract law that a person's mark can bind the person to a contract that she or he has not read.

The rule works well to smooth commerce.  But the problem for consumer rights is that T&C have become unspeakably onerous.  British retailer GameStation made headlines in 2010 when it was reported that 7,500 online shoppers unwittingly(?) sold their "immortal soul[s]" as a term of purchase; that demonstration is not unique.  Legendary cartoonist Robert Sakoryak turned the infamously voluminous iTunes "terms and conditions" into a graphic novel (2017) years after South Park mocked Apple mercilessly (2011).  On a more serious note, the problem has generated ample scholarship, including at least two books (Kim (2013); Radin (2014)), and has been a flashpoint of controversy in European privacy law, which, unlike American law, requires a bit more than a token click-box to signify a person's consent to process personal data, especially when the person is a child.

The Massachusetts Court recognized the scope of Uber's T&C as a factor to be weighed in the sufficiency of notice.  "Indeed," the Court wrote, "certain of the terms and conditions may literally require an individual user to sign his or her life away, as Uber may not be liable if something happened to the user during one of the rides."  Uber's terms "indemnify Uber from all injuries that riders experience in the vehicle, subject riders' data to use by Uber for purposes besides transportation pick-up, establish conduct standards for riders and other users, and require arbitration."

Though arguably subject to a rare override in the interest of public policy, such terms still can prove prohibitive of legal action when a passenger becomes a crime victim.  And that's been happening a lot.  Uber itself reported in 2019 that over the preceding two years, the company had received about 3,000 claims of sexual assault each year (NPR).  The problem is so prevalent that ride-share sex assault has become a plaintiff's-attorney tagline.  Yet recovery is easier promised than won.  Even if a consumer somehow prevails in arbitration, a process hostile to consumer rights, T&C such as Uber's also limit liability awards.

Litigants have struggled to circumvent ride-share app providers' disavowal of responsibility.  In November, the federal district court in Massachusetts rejected Uber liability as an employer, because drivers are set up as independent contractors, a convenience that has summoned some heat on app service providers in the few states where legislators worry about employment rights in the gig economy.  Lyft won a case similarly in Illinois.  Meanwhile a Jane Doe sex-assault claim filed in New York in 2020 takes aim at Uber upon a direct-negligence theory for failure to train or supervise drivers (N.Y. Post).

In 2018, Uber and Lyft relaxed enforcement of compelled arbitration clauses in sex-assault claims (NPR)—if they hadn't, they might eventually have suffered a humiliating blow to their T&C, as unconscionability doctrine is not completely extinct in contract law—so hard-to-prove direct-negligence cases such as N.Y. Doe's are hobbling along elsewhere too.  Oh, Uber also relaxed its gag on sex-assault victims who settle, allowing them to speak publicly about their experiences (NPR).  How generous.

All of this is tragic and avoidable, if routine.  But in the Massachusetts case, I saw a troubling legal maneuver that goes beyond the pale: Uber counter-sued its passenger.

In a footnote, the Massachusetts Court wrote, "In arbitration, Uber brought a counterclaim for breach of contract against the plaintiffs, alleging that they committed a breach of the terms and conditions by commencing a lawsuit and pursuing litigation in court against Uber. Through this counterclaim, Uber sought to recover the 'substantial unnecessary costs and fees' it incurred litigating the plaintiffs' lawsuit."

So it's not enough that our warped American enslavement to corporatocracy allows Uber and its ilk to impose crushing, if industry-norm, T&C on customers, depriving them of rights from Seventh Amendment juries to Fourteenth Amendment life.  Uber moreover reads its own indemnity clause with the breathtaking audacity to assert that it is entitled to recover attorney's fees from a consumer who dares to make a claim—a claim of disability discrimination, no less. This reactionary strategy to chill litigation by weaponizing transaction costs exemplifies my objection to fee-shifting in anti-SLAPP laws.  Uber here shamelessly pushed the strategy to the next level.

Nader (2008)
Photo by Brett Weinstein CC BY-SA 2.5

Compelled consumer arbitration has stuck in the craw of consumer and Seventh Amendment advocates, such as Ralph Nader, for decades.  Nader is widely quoted: "Arbitration is private. It doesn't have the tools to dig into the corporate files. It's usually controlled by arbitrators who want repeat business from corporations not from the
injured person."  As the corporatocracy is wont to do, it pushes for more and more, ultimately beyond reason.  Industry pushing got a boost when the Trump Administration set about dismantling the Consumer Finance Protection Bureau.  Make no mistake that compelled arbitration is somehow about a free market; a free market depends on a level playing field, a fair opportunity to exercise bargaining power, and transparency of transactional information.  The unilateral imposition of an absolute liability disclaimer upon penalty of fee-shifting in a secret tribunal is none of that.

I'm tempted to say something like "enough is enough," but I would have said that 20 years ago, to no avail.  So I can only shake my head in amazement as we double down on the abandonment of civil justice in favor of secret hearings to rubber-stamp rampant venality.

Full disclosure: I use Uber, and I like it.  Taxis got carried away with their market monopolization, and a correction was needed.  Now that's feeling like a Catch-22.

The case is Kauders v. Uber Technologies, Inc., No. SJC-12883 (Jan. 4, 2021) (Justia).  Justice Scott Kafker wrote the opinion for a unanimous Court.  In amicus briefs, the ever vigilant U.S. Chamber of Commerce and the "free market"-advocating New England Legal Foundation squared off against plaintiffs' lawyers and "high impact lawsuit"-driving Public Justice.

Secret civil justice undermines employee rights

Pintera Studios

A story investigated by ProPublica and featured on Planet Money highlights the problem of secret justice in perpetuating the willful abuse of at-home gig workers.

I expected that "Call Center Call Out," reported by Planet Money's Amanda Aronczyk and ProPublica's Ariana Tobin, Ken Armstrong, and Justin Elliott, based on the ProPublica story, would be a sad and frustrating tale of work-from-home gig economy labor being exploited, principally by the misclassification of employees as independent contractors to reap savings in compensation, work conditions, and employee benefits.

Turns out, there is even worse dissimulation afoot.  And there are worrisome implications for the health of the civil justice system.

To work these call-center jobs, for intermediary contractors such as Arise Virtual Solutions, the not-quite-employees are compelled to sign non-disclosure agreements (NDAs), arbitration agreements, and class action waivers.  These all are enforceable, even when the workers do not fully understand their implications.

When a worker has the temerity to commence arbitration proceedings, challenging misclassification as an independent contractor, the worker wins.  In one example in the story, a worker easily qualified as an employee under the labor test applied by the arbiter.  A worker can win thousands of dollars in reimbursement of expenses—they have to pay out-of-pocket for the privilege of their training and then buy their own computers and telecomm equipment—and back wages to bring their compensation history up to minimum wage.  

But here's the rub: the workers already are bound by their NDAs, and the arbitration is secret, too.  So there is no public record of the misdeeds of the employer.  The arbitration-winning complainant cannot even tell other mistreated workers that their labor rights are being violated.

According to the reporters, the secret justice system of arbitration is actually part of the business model for enterprises such as Arise.  They can pay liability to a small percentage of workers while willfully exploiting most others.  Because of the NDAs, arbitration clauses, and, most importantly, class action waivers, a lawyer said in the program, she can fight this abuse only behind a veil of secrecy, one case at a time, amounting to thousands of cases, even though every case is winnable on precisely the same analysis.

There's a classic scene from Fight Club (1999) when the Narrator (Ed Norton) is telling an airliner seatmate about his car company's "formula" for issuing a recall only when it's cost effective, regardless of the cost of human life.  (Think GM ignition switch recall.)

"Which car company do you work for?" the seatmate asks.

The Narrator pauses, staring her in the eyes.  Then, nodding knowingly, he answers,

"A major one."

So what companies use these call centers to take advantage of the cheap and ill-begotten labor forces organized by companies such as Arise?

Major ones.  Ones you've talked to.

Have a magical day.

 

The stories are Amanda Aronczyk & Ariana Tobin, Call Center Call Out, Planet Money, Oct. 2, 2020; and Ken Armstrong, Justin Elliott, & Ariana Tobin, Meet the Customer Service Reps for Disney and Airbnb Who Have to Pay to Talk to You, ProPublica, Oct. 2, 2020.

Waiver of negligence precludes later suit by family, high court holds in nursing home, diving death cases

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In two cases at the end of February, the Massachusetts Supreme Judicial Court made clear that a person's express disposal of a negligence claim can preclude a later wrongful death suit by family.  In other words, Massachusetts wrongful death claims are derivative, not independent, of a decedent's rights.

"Wrongful death" and "survival" actions are creatures of 19th-century statute in Anglo-American law, the historic common law having extinguished all causes of action upon death—for curious historical reasons that I won't explicate here.  Formally, "wrongful death" is an action by surviving family for their losses, upon the occasion of the decedent's passing.  "Survival" is an action by the estate on behalf of the decedent, as if the decedent had lived.  However, this distinction is often blurred in law, as the actions are brought together as "wrongful death" under Massachusetts statute, and is often blurred in fact, as a single person may stand as a family member and estate representative at the same time.  However the actions are characterized in court, wrongful death and survival have become so universally entrenched in Anglo-American tort law, often upon sparsely worded and rarely amended statutes, that they function in the courts very much like common law causes of action, subject to interpretation in deep bodies of case law.

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In one of the February cases, Jackalyn Schrader, acting with power of attorney for her mother, Emma, signed a "voluntary and clearly labeled" commitment to arbitrate disputes upon admitting Emma to residence at the Golden Living Center-Heathwood, in Chestnut Hill, Mass., in February 2013.  After Emma died in December 2013, Schrader brought a wrongful death claim under Massachusetts statute, in federal court, alleging that nursing home negligence caused bedsores, leading to Emma's death.  Schrader sought to evade the effect of the arbitration agreement by pointing out that she had not signed it in her personal capacity, and state law vests a wrongful death claim in family.

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In the second of the February cases, Margaret C. Doherty, as representative of the estate and the decedent's statutory beneficiaries, sued in wrongful death upon a 2014 diving accident that took the life of her son-in-law, 37-year-old Gregg C. O'Brien.  O'Brien "was a certified open-water scuba diver [and] drowned while participating in a promotional diving equipment event that was sponsored by [defendants] and held in Gloucester," Mass.  Before participating in the event, O'Brien had signed:

a release from liability which had several subsections that were set forth in all capital letters and underlined, including "effect of agreement," "assumption of risk," "full release," "covenant not to sue," "indemnity agreement," and "arbitration."  In capital letters under the subsection titled "effect of agreement," it said, "Diver gives up valuable rights, including the right to sue for injuries or death." It also told the decedent to read the agreement carefully and not to sign it "unless or until you understand." ... [T]he subsection titled "covenant not to sue" stated that the decedent agreed "not to sue ... for personal injury arising from scuba diving or its associated activities," and that the decedent's "heirs or executors may not sue."

Asserting defendants' negligence, Doherty sought to evade the effect of the release by pointing out that the statutory beneficiaries were not party to any agreement.

Associate Justice David A. Lowy

In Schrader's case, the First Circuit certified a question to the Supreme Judicial Court to determine whether a wrongful death action in Massachusetts is independent of a decedent's action, so Schrader would be free of the arbitration agreement, or bound by the decedent's action, so Schrader would be bound by the arbitration agreement, even though she signed it only on behalf of her mother.  Schrader might have understood that her theory under statute was weak, because she sought to play up the court's power to evolve wrongful death law beyond the text of statute.  The court agreed that it had considerable power to evolve wrongful death as a function of common law.  At the same time, though, the court insisted that its job begins with statutory interpretation.  Resorting to the text of Massachusetts's first-in-the-nation, 1840 wrongful death statute, and in accordance with the weight of authority in other states, the court found the derivative nature of a wrongful death claim inescapable.  Schrader must therefore seek relief under the arbitration agreement.

In Doherty's case, the Supreme Judicial Court cited its decision in Schrader and likewise concluded, affirming, that the claims on behalf of the decedent's statutory beneficiaries were derivative and not independent of the decedent's rights.  "Therefore ... the valid waivers signed by the decedent preclude the plaintiff, as [O'Brien's] 'executor or personal representative,' from bringing a lawsuit ... for the benefit of the statutory beneficiaries."

The cases are GGNSC Admin. Servs., LLC v. Schrader, No. SJC-12714 (Mass. Feb. 27, 2020) (Justia; Suffolk Law), and Doherty v. Diving Unlimited Int'l, Inc., No. SJC-12707 (Mass. Feb. 27, 2020) (Justia).  Justice David A. Lowy wrote both decisions for a unanimous court.